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Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 S. Rept. No. 100-216 100th Congress, 1st Session H. Rept. No. 100-433 Report of the Congressional Committees Investigating t With Supplemental Minority, and Additional Views November 1987 U.S. Senate Select Committee On Secret Military Assistance to Iran And the Nicaraguan Opposition U.S. House of Representatives Select Committee to Investigate Covert Arms Transactions with Iran Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 C".3 y Union Calendar No. 277 100th Congress, 1st Session S. Rept. No.100-216 H. Rept. No. 100-433 Report of the Congressional Committees Investigating the Iran-Contra Affair With Supplemental, Minority, and Additional Views Daniel K. Inouye, Chairman, Senate Select Committee Lee H. Hamilton, Chairman, House Select Committee U.S. Senate Select Committee On Secret Military Assistance to Iran And the Nicaraguan Opposition U.S. House of Representatives Select Committee to Investigate Covert Arms Transactions with Iran November 17, 1987.? Ordered to be printed. November 13, 1987.?Committed to the Committee of the Whole House on the State of the Union and ordered to be printed. Washington: 1987 For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington. D.C. 20402 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 DANIEL K INOUYE. HAWAII. CHAIRMAN WARREN RUDMAN, NEW HAMPSHIRE, VICE CHAIRMAN GEORGE J. MITCHELL, MAINE SAM NUNN. GEORGIA PAUL S SARBANES, MARYLAND HOWELL T. HEFLIN, ALABAMA DAVID I BOREN. OKLAHOMA ARTHUR L LIMAN, CHIEF COUNSEL PAUL BARBADORO. DEPUTY CHIEF COUNSEL JAMES A. McCLURE. IDAHO ORRIN G. HATCH, UTAH WILLIAM S. COHEN. MAINE PAUL S. TRIBLE. Jet VIRGINIA MARK A. BELNICK, EXECUTIVE ASSISTANT TO THE CHIEF COUNSEL MARY JANE CHECCHI, EXECUTIVE DIRECTOR CH. ALBRIGHT, Jig. DANIEL FINN C.H. HOLMES CHARLES M. KERR JAMES E. KAPLAN ASSOCIATE COUNSELS JOEL P. LISKER RICHARD D. PARRY JOHN D. SAXON TERRY A. SMIUANICH TIMOTHY C. WOODCOCK Honorable John C. Stennis President pro tempore United States Senate Washington, DC lanitEd t$tatts *nate SELECT COMMITTEE ON SECRET MILITARY ASSISTANCE TO IRAN AND THE NICARAGUAN OPPOSITION WASHINGTON, DC 20510 November 17, 1987 Dear Mr. President: We have the pleasure to transmit herewith, pursuant to Senate Resolution 23, the final Report of the Senate Select Committee on Secret Military Assistance to Iran and the Nicaraguan Opposition. We will submit such other volumes of Appendices to the Report as are authorized and as they become available. Sincerely, Daniel K. Inouye Chairman Vice Chairman Warren B. Rudman DKI:WBR:cp Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 LEE H HAMILTON, INDIANA. CHAIRMAN DANTE B FASCELL. FLORIDA, VICE CHAIRMAN THOMAS S FOLEY, WASHINGTON PETER W RODIN?. JR NEW JERSEY JACK BROOKS. TEXAS LOUIS STOKES, OHIO LES ASPIN, WISCONSIN EDWARD P BOLAND, MASSACHUSETTS ED JENKINS. GEORGIA JOHN W NIELDS, JR., CHIEF COUNSEL W NEIL EGGLESTON, DEPUTY CHIEF COUNSEL CASEY MILLER, STAFF DIRECTOR U.S. HOUSE OF REPRESENTATIVES SELECT COMMITTEE TO INVESTIGATE COVERT ARMS TRANSACTIONS WITH IRAN UNITED STATES CAPITOL WASHINGTON, DC 20515 (202) 225-7902 November 13, 1987 The Honorable Jim Wright Speaker of the House U.S. Capitol Washington, D.C. DICK CHENEY, WYOMING WM S. BROOMFIELD, MICHIGAN HENRY J HYDE, ILLINOIS JIM COURTER, NEW JERSEY BILL McCOLLUM, FLORIDA MICHAEL DcWINE, OHIO THOMAS R SMEETON, MINORITY STAFF DIRECTOR GEORGE VAN CLEVE, CHIEF MINORITY COUNSEL RICHARD LEON. DEPUTY CHIEF MINORITY COUNSEL Dear Mr. Speaker: Pursuant to the provisions of House Resolutions 12 and 294, 100th Congress, First Session, I transmit herewith the Report of the Congressional Committees Investigating the Iran-Contra Affair, which the Select Committee to Investigate Covert Arms Transactions with Iran ordered reported to the House on November 5, 1987. The report includes findings, conclusions and recommmendations, together with supplemental, minority and additional views. Within the next 30 days, the Select Committee will file for printing the accompanying appendices to the report. The complete set of appendices will include volumes containing a chronology of events; a testimonial chronology; miscellaneous documents used as sources in the committee report; depositions conducted by the Committees; and an index to the report and appendices. After filing, the appendices will, where appropriate, be declassified before they are printed. If necessary, the Committees will also file an appendix containing classified information. The appendices will be published as soon as possible after declassifica ion. Si ly yours, Lee H. Hamilton Chairman (V) AnnrovedForRelease2011/05/25:CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 United States Senate Select Committee on Secret Military ,Assistance To Iran and the Nicaraguan Opposition Daniel K. Inouye, Hawaii, Chairman Warren Rudman, New Hampshire, Vice Chairman George J. Mitchell, Maine Sam Nunn, Georgia Paul S. Sarbanes, Maryland Howell T. Heflin, Alabama David L. Boren, Oklahoma James A. McClure, Idaho Orrin G. Hatch, Utah William S. Cohen, Maine Paul S. Trible, Jr., Virginia Arthur L. Liman Chief Counsel Mark A. Belnick Executive Assistant To the Chief Counsel Mary Jane Checchi Executive Director Lance I. Morgan Press Officer Paul Barbadoro Deputy Chief Counsel (VI) Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25 : CIA-RDP89T00142R000500610001-7 United States House of Representatives Select Committee to Investigate Covert Arms Transactions with Iran Lee H. Hamilton, Indiana, Chairman Dante B. Fascell, Florida, Vice Chairman Thomas S. Foley, Washington Peter W. Rodino, Jr., New Jersey Jack Brooks, Texas Louis Stokes, Ohio Les Aspin, Wisconsin Edward P. Boland, Massachusetts Ed Jenkins, Georgia Dick Cheney, Wyoming, Ranking Republican Wm. S. Broomfield, Michigan Henry J. Hyde, Illinois Jim Courter, New Jersey Bill McCollum, Florida Michael DeWine, Ohio John W. Nields, Jr. Chief Counsel W. Neil Eggleston Deputy Chief Counsel Kevin C. Miller Staff Director Thomas R. Smeeton Minority Staff Director George W. Van Cleve Chief Minority Counsel Richard J. Leon Deputy Chief Minority Counsel (VII) Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 II II 1....1... Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 United States Senate Select Committee on Secret Military Assistance to Iran and the Nicaraguan Opposition Arthur L. Liman Chief Counsel Mark A. Belnick Paul Barbadoro Executive Assistant Deputy Chief Counsel to the Chief Counsel Mary Jane Checchi Executive Director Lance I. Morgan Press Officer Associate Counsels C. H. Albright, Jr. Daniel Finn C. H. Holmes James E. Kaplan Charles M. Kerr Joel P. Lisker Committee Staff W. T. McGough, Jr. Richard D. Parry John D. Saxon Terry A. Smiljanich Timothy C. Woodcock Assistant Counsels Legal Counsel Intelligence/Foreign Policy Analysts Investigators Press Assistant General Accounting Office Detailees Security Officer Security Assistants Chief Clerk Deputy Chief Clerk Committee Members Steven D. Arkin* Isabel K. McGinty John R. Monsky Victoria F. Nourse Philip Bobbitt Rand H. Fishbein Thomas Polgar Lawrence R. Embrey, Sr. David E. Faulkner Henry J. Flynn Samuel Hirsch John J. Cronin Olga E. Johnson John C. Martin Melinda Suddes* Robert Wagner Louis H. Zanardi Benjamin C. Marshall Georgians Badovinac David Carty Kim Lasater Scott R. Thompson Judith M. Keating* Scott R. Ferguson ' Designated Liaison Senator Inouye Senator Rudman Senator Mitchell Senator Nunn Senator Sarbanes Senator Heflin Senator Boren Senator McClure Senator Hatch Senator Cohen Senator Trible Peter Simons William V. Cowan Thomas C. Polgar Richard H. Arenberg Eleanore Hill Jeffrey H. Smith Frederick Millhiser Thomas J. Young Sven Holmes Blythe Thomas Jack Gerard Dee V. Benson James G. Phillips James Dykstra L. Britt Snider Richard Cullen Staff Assistants Administrative Staff Secretaries Receptionist Computer Center Detailee Part Time* John K. Appleby Ruth Balin Robert E. Esler Ken Foster* Martin H. Garvey Rachel D. Kaganoff* Craig L. Keller Hawley K. Manwarring Stephen G. Miller Jennie L. Pickford* Michael A. Raynor Joseph D. Smallwood* Kristin K. Trenholm Thomas E. Tremble Bruce Vaughn Laura J. Ison Hilary Phillips Winifred A. Williams* Nancy S. Durflinger Shari D. Jenifer Kathryn A. Momot Cindy Pearson Debra S. Sheffield* Ramona H. Green Preston Sweet Assistant Counsel Hearings Coordinator Staff Assistants Interns Document Analyst Historian Volunteers Peter V. Letsou Joan M. Ansheles Edward P. Flaherty, Jr. Barbara H. Hummell David G. Wiencek Nona Balaban Edward E. Eldridge, III Elizabeth J. Glennie Stephen A. Higginson Laura T. Kunian Julia F. Kogan Catherine L. Udell Lyndal L. Shaneyfelt Edward L. Keenan Lewis Liman Catherine Roe Susan Walsh *The staff member was not with the Select Committee when the Report was filed but had, during the life of the Committee, provided services. Approved For Release 2011/05/25: 61;87RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 United States House of Representatives Select Committee to Investigate Covert Arms Transactions with Iran Majority Staff Special Deputy Chief Counsel Staff Counsels Press Liasion Chief Clerk Assistant Clerk Research Director Research Assistants Charles Tiefer Kenneth M. Ballen Patrick J. Carome V. Thomas Fryman, Jr. Pamela J. Naughton Joseph P. Saba Robert J. Havel Ellen P. Rayner Debra M. Cabral Louis Fisher Christine C. Birmann Julius M. Genachowski Ruth D. Harvey James E. Rosenthal John W. Nields, Jr. Chief Counsel W. Neil Eggleston Deputy Chief Counsel Kevin C. Miller Staff Director Systems Administrator Systems Programmer/Analysts Executive Assistant Staff Assistants Minority Staff Catherine L. Zimmer Charles G. Ratcliff Stephen M. Rosenthal Elizabeth S. Wright Bonnie J. Brown Christina Kalbouss Sandra L. Koehler Jan L. Suter Katherine E. Urban Kristine Willie Mary K. Yount Associate Minority Counsel Assistant Minority Counsel Minority Research Director Committee Staff Robert W. Genzman Kenneth R. Buck Bruce E. Fein Thomas R. Smeeton Minority Staff Director George W. Van Cleve Chief Minority Counsel Richard J. Leon Deputy Chief Minority Counsel Investigators Director of Security Security Officers Editor Deputy Editor Associate Editor Production Editor Hearings Editors Printing Clerk Robert A. Bermingham James J. Black Thomas N. Ciehanski William A. Davis, III Clark B. Hall Allan E. Hobron Roger L. Kreuzer Donald Remstein Jack W. Taylor Timothy E. Traylor Bobby E. Pope Rafael Luna, Jr. Theresa M. Martin Milagros Martinez Clayton C. Miller Angel R. Torres Joseph Foote Lisa L. Berger Nina Graybill Mary J. Scroggins David L. White Stephen G. Regan G. R. Beckett (IX) Minority Staff Editor/Writer Minority Executive Assistant Minority Staff Assistant Associate Staff Michael J. Malbin Molly W. Tully Margaret A. Dillenburg Representative Hamilton Representative Fascell Representative Foley Representative Rodino Representative Brooks Representative Stokes Representative Aspin Representative Boland Representative Jenkins Representative Broomfield Representative Hyde Representative Courter Representative McCollum Representative De Wine General Counsel to the Clerk Michael H. Van Dusen Christopher Kojm R. Spencer Oliver Bert D. Hammond Victor Zangla Heather S. Foley Werner W. Brandt M. Elaine Mielke James J. Schweitzer William M. Jones Michael J. O'Neil Richard M. Giza Richard E. Clark Warren L. Nelson Michael W. Sheehy Robert H. Brink Steven K. Berry David S. Addington Diane S. Dornan Dennis E. Teti Tina L. Westby Nicholas P. Wise Steven R. Ross Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 L. I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Contents Origins of This Report xv Section I: Part I Part II Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Part III Chapter 8 Chapter 9 Chapter 10 Chapter 11 Chapter 12 Chapter 13 Chapter 14 Chapter 15 Chapter 16 Part IV Chapter 17 Chapter 18 Chapter 19 Chapter 20 Part V Chapter 21 Chapter 22 Chapter 23 Part VI Chapter 24 The Report Executive Summary Executive Summary 3 Central America Introduction: Background on U.S.-Nicaragua Relations 25 The NSC Staff Takes Contra Policy Underground 31 The Enterprise Assumes Control of Contra Support 59 Private Fundraising: The Channell-Miller Operation 85 NSC Staff Involvement in Criminal Investigations and Prosecutions 105 Keeping "USG Fingerprints" Off the Contra Operation: 1984-1985 117 Keeping "USG Fingerprints" Off the Contra Operation: 1986 137 The Arms Sales to Iran U.S.-Iran Relations and the Hostages in Lebanon 157 The Iran Arms Sales: The Beginning 163 Arms to Iran: A Shipment of HAWKs Ends in Failure 175 Clearing Hurdles: The President Approves a New Plan 193 Arms Sales to Iran: The United States Takes Control 213 Deadlock in Tehran 237 "Taken to the Cleaners": The Iran Initiative Continues 245 The Diversion 269 Summary: The Iran Initiative 277 Exposure and Concealment Exposure and Concealment: Introduction 285 October 1986: Exposure Threatened 287 November 1986: Concealment 293 November 1986: The Attorney General's Inquiry 305 The Enterprise Introduction to the Enterprise 327 The Enterprise 331 Other Privately Funded Covert Operations 361 Conclusions and Recommendations Covert Action in a Democratic Society 375 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 XI 11 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 25 Chapter 26 Chapter 27 Chapter 28 Powers of Congress and the President in the Field of Foreign Policy 387 The Boland Amendments and the NSC Staff 395 Rule of Law 411 Recommendations 423 Section II The Minority Report The Minority Views of Mr. Cheney, Mr. Broomfield, Mr. Hyde, Mr. Courter, Mr. McCollum, Mr. DeWine, Sen. McClure, and Sen. Hatch 431 Part I Chapter 1 Part II Chapter 2 Chapter 3 Chapter 4 Part III Chapter 5 Chapter 6 Chapter 7 Part IV Chapter 8 Chapter 9 Chapter 10 Part V Chapter 11 Chapter 12 Part VI Chapter 13 Part VII Chapter 14 Part VIII Section III XII Introduction Introduction 437 The Foreign Affairs Powers of the Constitution and the Iran-Contra Affair The Foreign Affairs Powers and the Framers' Intentions 457 The President's Foreign Policy Powers in Early Constitutional History 463 Constitutional Principles in Court 471 Nicaragua Nicaragua: The Context 483 The Boland Amendments 489 Who Did What to Help the Democratic Resistance 501 Iran The Iran Initiative Iran: The Legal Issues The Diversion 519 539 549 Disclosures and Investigations The Disclosure and the Uncovering 561 The NSC's Role in Investigations 567 Putting Congress' House in Order The Need to Patch Leaks Recommendations Recommendations 575 583 Appendixes Supplemental and Additional Views The Additional Views of Sen. Inouye and Sen. Rudman 637 The Additional Views of Mr. Rodino, Mr. Fascell, Mr. Foley, Mr. Brooks, Mr. Stokes, Mr. Aspin, and Mr. Boland 639 The Additional Views of Mr. Rodino, Mr. Fascell, Mr. Brooks, and Mr. Stokes 643 The Additional Views of Sen. Boren and Sen. Cohen 651 The Additional and Separate Views of Sen. Heflin 655 The Additional Views of Sen. Boren 657 The Supplemental Views of Sen. McClure 659 The Additional Views of Mr. Broomfield 661 The Supplemental Views of Sen. Hatch 665 The Supplemental Views of Mr. Hyde 667 Approved For Release 29,11/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 The Additional Views of Sen. Cohen 673 The Supplemental Views of Mr. McCollum 675 The Additional Views of Sen. Trible 679 Section IV Appendix Organization and Conduct of the Committees' Investigation 683 XIII Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 11 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 NOTE ON CITATIONS IN THIS REPORT Footnotes appear at the end of the each chapter and refer to a variety of sources available to the Committees. The most common are: 1. Hearings. Refers to The Iran-Contra Investigation: Joint Hearings Before the House Select Committee to Investigate Covert Arms Transactions with Iran and the Senate Select Committee on Secret Military Assistance to Iran and the Nicaraguan Opposition, 100th Cong., 1st Sess. (Washington: Government Print- ing Office, 1987, 13 vols.). Most page references in the footnotes are to these volumes. Because of publication production necessities, however, some references are to the original transcripts of the hearings. A table converting transcript page numbers to hearings page numbers is published in the Hearings. 2. Dep. or Depo. A sworn deposition taken in the presence of one or more Members of the Committees and/or counsel for the Committees, and counsel for the deponent. Please consult other volumes of the Committees' publications for further information. 3. Int. An unsworn interview conducted by one or more Committee Members and/or Committee counsel, with counsel for the interviewee present if the interviewee wished. 4. PROF Notes. Messages generated on a computer system used by the National Security Council staff. The exact time and date of the message are recorded. 5. Tower. Report of the President's Special Review Board, John Tower, Chairman (Washington: Government Printing Office, Feb. 26, 1987). 6. Letter and Number Codes. Source and Document File Codes for materials that have been assigned a Senate letter code and stamped page number. These materials are stored in the Committees' archives in Washington, D.C. Approved For Release 2011/05/25 : CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Preface Origins of this Report On November 3, 1986, Al-Shiraa, a Lebanese weekly, reported that the United States had secretly sold arms to Iran. Subsequent re- ports claimed that the purpose of the sales was to win the release of American hostages in Lebanon. These reports seemed unbeliev- able: Few principles of U.S. policy were stated more forcefully by the Reagan Ad- ministration than refusing to traffic with ter- rorists or sell arms to the Government of the Ayatollah Khomeini of Iran. Although the Administration initially denied the reports, by mid-November it was clear that the accounts were true. The United States had sold arms to Iran and had hoped thereby to gain the release of Ameri- can hostages in Lebanon. However, even though the Iranians received the arms, just as many Americans remained hostage as before. Three had been freed, but three more had been taken during the period of the sales. There was still another revelation to come: on November 25 the Attorney General an- nounced that proceeds from the Iran arms sales had been "diverted" to the Nicaraguan resistance at a time when U.S. military aid to the Contras was prohibited. Iran and Nicaragua?twin thorns of U.S. foreign policy in the 1980s?were thus linked in a credibility crisis that raised serious ques- tions about the adherence of the Administra- tion to the Constitutional processes of Gov- ernment. The public and Members of Congress ex- pressed deep concern over the propriety and legality of actions by the staff of the Nation- al Security Council (NSC) and other officers of the Government regarding both the arms sales and the secret assistance to the Contras. The issue of U.S. support for the Contras was not new. The President and Congress had engaged in vigorous debate over the proper course of U.S. policy, and Congress had barred U.S. support of Contra military operations for almost 2 years. Subsequently, senior Administration officials had assured Committees of Congress repeatedly that the Administration was abiding by the law. The Iran-Contra Affair, as it came to be known, carried such serious implications for U.S. foreign policy, and for the rule of law in a democracy, that the 100th Congress de- termined to undertake its own investigation of the Affair. The inquiry formally began on January 6, 1987, when the Senate, by S. Res. 23, estab- lished the Select Committee on Secret Mili- tary Assistance to Iran and the Nicaraguan Opposition. The next day, the House, by H. Res. 12, established the Select Committee to Investigate Covert Arms Transactions with Iran. The two Chambers charged their re- spective Committees with investigating four major areas: arms sales to Iran, the possible diversion of funds, to aid the Contras, viola- tions of Federal law, and the involvement of the NSC staff in the conduct of foreign policy. The two Committees took the unprece- dented step of merging their investigations and hearings and sharing all the information they obtained. The staffs of the two Commit- tees worked together in reviewing more than 300,000 documents and interviewing or ex- amining more than 500 witnesses. The Com- mittees held 40 days of joint public hearings XV Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 II 11 .1 1 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Preface and several executive sessions. The two Committees then decided to combine their findings in a joint Report. The conclusions in this Report are based on a record marred by inconsistent testimony and failure on the part of several witnesses to recall key matters and events. Moreover, a key witness?Director of Central Intelli- gence William J. Casey?died, and members of the NSC staff shredded relevant contem- poraneous documents in the fall of 1986. Consequently, objective evidence that could have resolved the inconsistencies and over- come the failures of memory was denied to the Committees?and to history. Under the American system, Government is accountable to the people. A public bipar- tisan investigation such as this one helps to ensure that the principle of accountability is enforced for all officials and' policies. It strengthens the national commitment to the democratic values that have guided the United States for two centuries. The President cooperated with the investi- gation. He did not assert executive privilege; he instructed all relevant agencies to produce their documents and witnesses; and xvi he made extracts available from his personal diaries, although he rejected the Committees' request to refer to those entries in this Report on the ground that he did not wish to estab- lish a precedent for future Presidents. The Committees also received unprece- dented cooperation from a sovereign nation, the State of Israel. Although not willing to allow its officials to be examined, the Gov- ernment of Israel assembled and furnished the Committees with extensive materials and information, including information affecting its national security. The Committees' investigation of the Iran- Contra Affair is not the first, following as it does the findings of the Senate Select Com- mittee on Intelligence and the President's Special Review Board (known as the Tower Board); nor will it be the last, for the investi- gation of the Independent Counsel assigned to this matter continues. But the Committees hope this Report will make a contribution by helping to explain what happened in the Iran-Contra Affair, and by helping to restore the public's confi- dence in this Nation's Constitutional system of Government. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Section I The Report Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 11? . .1 . 1 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Part I Executive Summary The full story of the Iran-Contra Affair is complicated, and, for this Nation, profoundly sad. In the narrative portion of this Report, the Committees present a comprehensive ac- count of the facts, based on 10 months of investigation, including 11 weeks of hearings. But the facts alone do not explain how or why the events occurred. In this Executive Summary, the Committees focus on the key issues and offer their conclusions. Minority, supplemental, and additional views are print- ed in Section II and Section III. Summary of the Facts The Iran-Contra Affair had its origin in two unrelated revolutions in Iran and Nicaragua. In Nicaragua, the long-time President, General Anastasio Somoza Debayle, was overthrown in 1979 and replaced by a Gov- ernment controlled by Sandinista leftists. In Iran, the pro-Western Government of the Shah Mohammed Riza Pahlavi was over- thrown in 1979 by Islamic fundamentalists led by the Ayatollah Khomeini. The Kho- meini Government, stridently anti-American, became a supporter of terrorism against American citizens. Nicaragua United States policy following the revolu- tion in Nicaragua was to encourage the San- dinista Government to keep its pledges of pluralism and democracy. However, the San- dinista regime became increasingly anti- American and autocratic; began to aid a left- ist insurgency in El Salvador; and turned toward Cuba and the Soviet Union for politi- cal, military, and economic assistance. By December 1981, the United States had begun supporting the Nicaraguan Contras, armed opponents of the Sandinista regime. The Central Intelligence Agency (CIA) was the U.S. Government agency that assist- ed the Contras. In accordance with Presiden- tial decisions, known as Findings, and with funds appropriated by Congress, the CIA armed, clothed, fed, and supervised the Con- tras. Despite this assistance, the Contras failed to win widespread popular support or military victories within Nicaragua. Although the President continued to favor support of the Contras, opinion polls indicat- ed that a majority of the public was not supportive. Opponents of the Administra- tion's policy feared that U.S. involvement with the Contras would embroil the United States in another Vietnam. Supporters of the policy feared that, without U.S. support for the Contras, the Soviets would gain a dan- gerous toehold in Central America. Congress prohibited Contra aid for the purpose of overthrowing the Sandinista Government in fiscal year 1983, and limited all aid to the Contras in fiscal year 1984 to $24 million. Following disclosure in March and April 1984 that the CIA had a role in connection with the mining of the Nicara- guan harbors without adequate notification to Congress, public criticism mounted and the Administration's Contra policy lost much of its support within Congress. After further vigorous debate, Congress exercised its Con- stitutional power over appropriations and cut off all funds for the Contras' military and paramilitary operations. The statutory provi- sion cutting off funds, known as the Boland Amendment, was part of a fiscal year 1985 omnibus appropriations bill, and was signed 3 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 .l I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Executive Summary into law by the President on October 12, 1984. Still, the President felt strongly about the Contras, and he ordered his staff, in the words of his National Security Adviser, to find a way to keep the Contras "body and soul together." Thus began the story of how the staff of a White House advisory body, the NSC, became an operational entity that secretly ran the Contra assistance effort, and later the Iran initiative. The action officer placed in charge of both operations was Lt. Col. Oliver L. North. Denied funding by Congress, the President turned to third countries and private sources. Between June 1984 and the beginning of 1986, the President, his National Security Adviser, and the NSC staff secretly raised $34 million for the Contras from other coun- tries. An additional $2.7 million was provid- ed for the Contras during 1985 and 1986 from private contributors, who were ad- dressed by North and occasionally granted photo opportunities with the President. In the middle of this period, Assistant Secretary of State A. Langhorne Motley?from whom these contributions were concealed?gave his assurance to Congress that the Adminis- tration was not "soliciting and/or encourag- ing third countries" to give funds to the Contras because, as he conceded, the Boland Amendment prohibited such solicitation. The first contributions were sent by the donors to bank accounts controlled and used by the Contras. However, in July 1985, North took control of the funds and?with the support of two National Security Advis- ers (Robert McFarlane and John Poindexter) and, according to North, Director Casey? used those funds to run the covert operation to support the Contras. At the suggestion of Director Casey, North recruited Richard V. Secord, a retired Air Force Major General with experience in special operations. Secord set up Swiss bank accounts, and North steered future donations into these accounts. Using these funds, and funds later generated by the Iran arms sales, Secord and his associate, Albert Hakim, cre- ated what they called "the Enterprise," a private organization designed to engage in covert activities on behalf of the United States. The Enterprise, functioning largely at North's direction, had its own airplanes, pilots, airfield, operatives, ship, secure com- munications devices, and secret Swiss bank accounts. For 16 months, it served as the secret arm of the NSC staff, carrying out with private and non-appropriated money, and without the accountability or restrictions imposed by law on the CIA, a covert Contra aid program that Congress thought it had prohibited. Although the IA and other agencies in- volved in intelligence activities knew that the Boland Amendment barred their involve- ment in covert support for the Contras, North's Contra support operation received logistical and tactical support from various personnel in the CIA and other agencies. Certain CIA personnel in Central America gave their assistance. The U.S. Ambassador in Costa Rica, Lewis Tambs, provided his active assistance. North also enlisted the aid of Defense Department personnel in Central America, and obtained secure communica- tions equipment from the National Security Agency. The Assistant Secretary of State with responsibility for the region, Elliott Abrams, professed ignorance of this support. He later stated that he had been "careful not to ask North lots of questions." By Executive Order and National Security Decision Directive issued by President Reagan, all covert operations must be ap- proved by the President personally and in writing. By statute, Congress must be noti- fied about each covert action. The funds used for such actions, like all government funds, must be strictly accounted for. The covert action directed by North, however, was not approved by the President in writing. Congress was not notified about it. And the funds to support it were never accounted for. In short, the operation func- tioned without any of the accountability re- quired of Government activities. It was an Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Executive Summary evasion of the Constitution's most basic check on Executive action?the power of the Congress to grant or deny funding for Government programs. Moreover, the covert action to support the Contras was concealed from Congress and the public. When the press reported in the summer of 1985 that the NSC staff was en- gaged in raising money and furnishing mili- tary support to the Contras, the President assured the public that the law was being followed. His National Security Adviser, Robert C. McFarlane, assured Committees of Congress, both in person and in writing, that the NSC staff was obeying both the spirit and the letter of the law, and was neither soliciting money nor coordinating military support for the Contras. A year later, McFarlane's successor, Vice Admiral John M. Poindexter, repeated these assurances to Congressional Committees. Then, with Poindexter's blessing, North told the House Intelligence Committee he was involved neither in fundraising for, nor in providing military advice to, the Contras. When one of Secord's planes was shot down over Nicaragua on October 5, 1986, the President and several administration spokesmen assured the public that the U.S. Government had no connection with the flight or the captured American crew member, Eugene Hasenfus. Several senior Government officials, including Elliott Abrams, gave similar assurances to Congress. Two months later, McFarlane told Con- gressional Committees that he had no knowl- edge of contributions made by a foreign country, Country 2, to the Contras, when in fact McFarlane and the President had dis- cussed and welcomed $32 million in contri- butions from that country. In addition, Abrams initially concealed from Congress? in testimony given to several Committees? that he had successfully solicited a contribu- tion of $10 million from Brunei. North conceded at the Committees' public hearings that he had participated in making statements to Congress that were "false," "misleading," "evasive and wrong." During the period when the Administra- tion was denying to Congress that it was involved in supporting the Contras' war effort, it was engaged in a campaign to alter public opinion and change the vote in Con- gress on Contra aid. Public funds were used to conduct public relations activities; and certain NSC staff members, using the pres- tige of the White House and the promise of meetings with the President, helped raise pri- vate donations both for media campaigns and for weapons to be used by the Contras. Pursuant to a Presidential directive in 1983 the Administration adopted a "public diplo- macy" program to promote the President's Central American policy. The program was conducted by an office in the State Depart- ment known as the Office for Public Diplo- macy for Latin America and the Caribbean, (S/LPD). S/LPD's activities were coordi- nated not within the State Department, but by an interagency working group established by the NSC. The principal NSC staff officer was a former senior CIA official, with expe- rience in covert operations, who had been detailed to the NSC staff for a year with Casey's approval, and who upon retirement from the CIA became a Special Assistant to the President with responsibility for public diplomacy matters. S/LPD produced and widely disseminated a variety of pro-Contra publications and ar- ranged speeches and press conferences. It also disseminated what one official termed "white propaganda": pro-Contra newspaper articles by paid consultants who did not dis- close their connection to the Administration. Moreover, under a series of sole source con- tracts in 1985 and 1986, S/LPD paid more than $400,000 for pro Contra public relations work to International Business Communica- tions (IBC), a company owned by Richard Miller, whose organization was described by one White House representative as a "White House outside the White House." The Administration, like Members of Con- gress, may appeal directly to the people for support of its positions; and government agencies may legitimately disseminate infor- 5 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Executive Summary mation and educational materials to the public. However, by law appropriated funds may not be used to generate propaganda "designed to influence a Member of Con- gress;" and by law, as interpreted by the Office of the Comptroller General, appropri- ated funds may not be used by the State Department for "covert" propaganda activi- ties. A GAO report concluded that S/LPD's white propaganda activities violated the ban on arranging "covert propaganda." Private funds were also used. North and Miller helped Carl R. "Spitz" Channell raise $10 million, most of which went to Chan- nell's tax-exempt organization, the National Endowment for the Preservation of Liberty ("NEPL"). They arranged numerous "brief- ings" at the White House complex on Cen- tral America by Administration officials for groups of potential contributors. Following these briefings, Channell reconvened the groups at the Hay-Adams Hotel, and made a pitch for tax-deductible contributions to NEPL's Central America "public education" program or, in some individual cases, for weapons. Channell's major contributors were given private briefings by North, and were afforded private visits and photo sessions with the President. On one occasion, Presi- dent Reagan participated in a briefing. Using the donated money, Channell ran a series of television advertisements in 1985 and 1986, some of which were directed at television markets covering the home dis- tricts of Congressmen considered to be "swing" votes on Contra aid. One series of advertisements was used to attack Congress- man Mike Barnes, a principal opponent of Contra aid, and one of the Congressmen to whom Administration officials had denied violating the Boland Amendment in Septem- ber of 1985. Channell later boasted to North that he had "participated in a campaign to ensure Congressman Barnes' defeat." Of the $10 million raised by North, Chan- nell and Miller, more than $1 million was used for pro-Contra publicity. Approximate- ly $2.7 million was sent through IBC and off-shore accounts of another Miller-con- 6 trolled company to Secord's Swiss accounts, or to Calero's account in Miami. Most of the remainder was spent on salaries and expenses for Channell, Miller and their business asso- ciates. NEPL's charter did not contemplate rais- ing funds for a covert war in Nicaragua, and the Internal Revenue Service never ap- proved such activity when NEPL was grant- ed exempt status. As a consequence, Chan- nell and Miller have each pleaded guilty to the crime of conspiring to defraud the United States Treasury of revenues "by sub- verting and corrupting the lawful purposes of NEPL." Channell named North as a co- conspirator. In private fundraising, as in the "white propaganda" campaign, the goal of support- ing the Contras was allowed to override sen- sitivity to law and to accepted norms of be- havior. Iran The NSC staff was already engaged in covert operations through Secord when, in the summer of 1985, the Government of Israel proposed that missiles be sold to Iran in return for the release of seven American hostages held in Lebanon and the prospect of improved relations with Iran. The Secre- taries of State and Defense repeatedly op- posed such sales to a government designated by the United States as a supporter of inter- national terrorism. They called it a straight arms-for-hostages deal that was contrary to U.S. public policy. They also argued that these sales would violate the Arms Export Control Act, as well as the U.S. arms embar- go against Iran. The embargo had been im- posed after the taking of hostages at the U.S. Embassy in Tehran on November 4, 1979, and was continued because of the Iran-Iraq war. Nevertheless, in the summer of 1985 the President authorized Israel to proceed with the sales. The NSC staff conducting the Contra covert action also took operational control of implementing the President's deci- sion on arms sales to Iran. The President did Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Executive Summary not sign a Finding for this covert operation, nor did he notify the Congress. Israel shipped 504 TOW anti-tank missiles to Iran in August and September 1985. Al- though the Iranians had promised to release most of the American hostages in return, only one, Reverend Benjamin Weir, was freed. The President persisted. In November, he authorized Israel to ship 80 HAWK anti- aircraft missiles in return for all the hostages, with a promise of prompt replenishment by the United States, and 40 more HAWKs to be sent directly by the United States to Iran. Eighteen HAWK missiles were actually shipped from Israel in November 1985, but no hostages were released. In early December 1985, the President signed a retroactive Finding purporting to authorize the November HAWK transaction. That Finding contained no reference to im- proved relations with Iran. It was a straight arms-for-hostages Finding. National Security Adviser Poindexter destroyed this Finding a year later because, he testified, its disclosure would have been politically embarrassing to the President. The November HAWK transaction had additional significance. The Enterprise re- ceived a $1 million advance from the Israe- lis. North and Secord testified this was for transportation expenses in connection with the 120 HAWK missiles. Since only 18 mis- siles were shipped, the Enterprise was left with more than $800,000 in spare cash. North directed the Enterprise to retain the money and spend it for the Contras. The "diversion" had begun. North realized that the sale of missiles to Iran could be used to support the Contras. He told Israeli Defense Ministry officials on December 6, 1985, one day after the Presi- dent signed the Finding, that he planned to generate profits on future arms sales for ac- tivities in Nicaragua. On December 7, 1985, the President and his top advisers met again to discuss the arms sales. Secretaries Shultz and Weinberg- er objected vigorously once more, and Wein- berger argued that the sales would be illegal. After a meeting in London with an Iranian interlocutor and the Israelis, McFarlane rec- ommended that the sales be halted. Admiral John Poindexter (the new National Security Adviser), and Director Casey were of the opposite opinion. The President decided to go forward with the arms sales to get the hostages back. He signed a Finding on January 6, 1986, author- izing more shipments of missiles for the hos- tages. When the CIA's General Counsel pointed out that authorizing Israel to sell its U.S.-manufactured weapons to Iran might violate the Arms Export Control Act, the President, on the legal advice of the Attor- ney General, decided to authorize direct shipments of the missiles to Iran by the United States and signed a new Finding on January 17, 1986. To carry out the sales, the NSC staff turned once again to the Enter- prise. Although North had become skeptical that the sales would lead to the release of all the hostages or a new relationship with Iran, he believed that the prospect of generating funds for the Contras was "an attractive in- centive" for continuing the arms sales. No matter how many promises the Iranians failed to keep throughout this secret initia- tive, the arms sales continued to generate funds for the Enterprise, and North and his superior, Poindexter, were consistent advo- cates for their continuation. What North and Poindexter asserted in their testimony that they did not know, however, was that most of these arms sales profits would remain with the Enterprise and never reach the Contras. In February 1986, the United States, acting through the Enterprise, sold 1,000 TOWs to the Iranians. The U.S. also provid- ed the Iranians with military intelligence about Iraq. All of the remaining American hostages were supposed to be released upon Iran's receipt of the first 500 TOWs. None was. But the transaction was productive in one respect. The difference between what the Enterprise paid the United States for the missiles and -what it received from Iran was more than $6 million. North directed part of 7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 H 1 1 I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Executive Summary this profit for the Contras and for other covert operations. Poindexter testified that he authorized this "diversion." The diversion, for the Contras and other covert activities, was not an isolated act by the NSC staff. Poindexter saw it as "imple- menting" the President's secret policy that had been in effect since 1984 of using non- appropriated funds following passage of the Boland Amendment. According to North, CIA Director Casey saw the "diversion" as part of a more gran- diose plan to use the Enterprise as a "stand- alone," "off-the-shelf," covert capacity that would act throughout the world while evad- ing Congressional review. To Casey, Poin- dexter, and North, the diversion was an inte- gral part of selling arms to Iran and just one of the intended uses of the proceeds. In May 1986, the President again tried to sell weapons to get the hostages back. This time, the President agreed to ship parts for HAWK missiles but only on condition that all the American hostages in Lebanon be re- leased first. A mission headed by Robert McFarlane, the former National Security Adviser, traveled to Tehran with the first installment of the HAWK parts. When the mission arrived, McFarlane learned that the Iranians claimed they had never promised to do anything more than try to obtain the hos- tages' release. The trip ended amid misunder- standing and failure, although the first in- stallment of HAWK parts was delivered. The Enterprise was paid, however, for all of the HAWK parts, and realized more than an $8 million profit, part of which was ap- plied, at North's direction, to the Contras. Another portion of the profit was used by North for other covert operations, including the operation of a ship for a secret mission. The idea of an off-the-shelf, stand-alone covert capacity had become operational. On July 26, 1986, another American hos- tage, Father Lawrence Jenco, was released. Despite all the arms sales, he was only the second hostage freed, and the first since Sep- tember 1985. Even though McFarlane had vowed at the Tehran meeting not to deliver 8 the remainder of the HAWK parts until all the hostages were released, the Administra- tion capitulated again. The balance of the HAWK parts was shipped when Father Jenco was released. In September and October 1986, the NSC staff began negotiating with a new group of Iranians, the "Second Channel," that Albert Hakim had opened, in part, through prom- ises of bribes. Although these Iranians alleg- edly had better contacts with Iranian offi- cials, they, in fact, represented the same prin- cipals as did the First Channel and had the same arrangement in mind: missiles for hos- tages. Once again, the Administration insist- ed on release of all the hostages but settled for less. In October, after a meeting in London, North left Hakim to negotiate with the Irani- ans. Hakim made no secret of his desire to make large profits for himself and General Secord in the $15 billion-a-year Iranian market if relations with the United States could be restored. Thus, he had every incen- tive to make an agreement, whatever conces- sions might be required. As an unofficial "ambassador" selected by North and Secord, Hakim produced a re- markable nine-point plan, subsequently ap- proved by North and Poindexter, under which the United States would receive "one and one half" hostages (later reduced to one). Under the plan, the United States agreed not only to sell the Iranians 500 more TOWs, but Secord and Hakim promised to develop a plan to induce the Kuwaiti Gov- ernment to release the Da'wa prisoners. (Seventeen Kuwaiti prisoners, connected to "al-Dawa," an Iranian revolutionary group, had been convicted and imprisoned for their part in the December 12, 1983, attacks in Kuwait on the U.S. Embassy, a U.S. civilian compound, the French Embassy, and several Kuwaiti Goverment facilities.) The plan to obtain the release of the Da'wa prisoners did not succeed, but the TOW missiles were sold for use by the Iranian Revolutionary Guard. Following the transfer of these TOWs, a third hostage, David Jacobsen, was released Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Executive Summary on November 2, 1986, and more profit was generated for the Enterprise. Poindexter testified that the President ap- proved the nine-point plan. But other testi- mony raises questions about this assertion. Regardless of what Poindexter may have told the President, Secretary Shultz testified that when he informed the President on De- cember 14, 1986, that the nine-point plan in- cluded a promise about the release of the Da'wa prisoners in Kuwait, the President re- acted with shock, "like he had been kicked in the belly." During the negotiations with the Second Channel, North and Secord told the Iranians that the President agreed with their position that Iraq's President, Saddam Hussein, had to be removed and further agreed that the United States would defend Iran against Soviet aggression. They did not clear this with the President and their representations were flatly contrary to U.S. policy. The decision to designate private parties? Secord and Hakim?to carry out the arms transactions had other ramifications. First, there was virtually no accounting for the profits from the arms deals. Even North claimed that he did not know how Secord and Hakim actually spent the money com- mitted to their custody. The Committees' in- vestigation revealed that of the $16.1 million profit from the sales of arms to Iran only about $3.8 million went to support the Con- tras (the amount representing "the diver- sion"). All told, the Enterprise received nearly $48 million from the sale of arms to the Contras and Iran, and in contributions directed to it by North. A total of $16.5 million was used to support the Contras or to purchase the arms sold to (and paid for by) the Contras; $15.2 million was spent on Iran; Hakim, Secord, and their associate, Thomas Clines, took $6.6 million in commis- sions and other profit distributions; almost $1 million went for other covert operations sponsored by North; $4.2 million was held in "reserves" for use in future operations; $1.2 million remained in Swiss bank accounts of the Enterprise; and several thousand dollars were used to pay for a security system at North's residence. Second, by permitting private parties to conduct the arms sales, the Administration risked losing control of an important foreign policy initiative. Private citizens?whose mo- tivations of personal gain could conflict with the interests of this country?handled sensi- tive diplomatic negotiations, and purported to commit the United States to positions that were anathema to the President's public policy and wholly unknown to the Secretary of State. The Coverup The sale of arms to Iran was a "significant anticipated intelligence activity." By law, such an activity must be reported to Con- gress "in a timely fashion" pursuant to Sec- tion 501 of the National Security Act. If the proposal to sell arms to Iran had been re- ported, the Senate and House Intelligence Committees would likely have joined Secre- taries Shultz and Weinberger in objecting to this initiative. But Poindexter recommend- ed?and the President decided?not to report the Iran initiative to Congress. Indeed, the Administration went to consid- erable lengths to avoid notifying Congress. The CIA General Counsel wrote on January 15, 1986, "the key issue in this entire matter revolves around whether or not there will be reports made to Congress." Shortly thereaf- ter, the transaction was restructured to avoid the pre-shipment reporting requirements of the Arms Export Control Act, and place it within the more limited reporting require- ments of the National Security Act. But even these reporting requirements were ig- nored. The President failed to notify the group of eight (the leaders of each party in the House and Senate, and the Chairmen and Ranking Minority Members of the Intelli- gence Committees) specified by law for un- usually sensitive operations. After the disclosure of the Iran arms sales on November 3, 1986, the American public was still not told the facts. The President sought to avoid any comment on the ground 9 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Executive Summary that it might jeopardize the chance of secur- ing the remaining hostages' release. But it was impossible to remain silent, and inaccu- rate statements followed. In his first public statement on the subject on November 6, the President said that the reports concerning the arms sales had "no foundation." A week later, on November 13, the President conceded that the United States had sold arms, but branded as "utterly false" allegations that the sales were in return for the release of the hostages. The President also maintained that there had been no violations of Federal law. At his news conference on November 19, 1986, he denied that the United States was involved in the Israeli sales that occurred prior to the January 17, 1986 Finding. The President was asked: Mr. President . . . are you telling us tonight that the only shipments with which we were involved were the one or two that followed your Janu- ary 17 Finding and that . . . there were no other shipments which the U.S. condoned? The President replied: That's right. I'm saying nothing, but the missiles we sold. And, on November 25, 1986, the Attorney General?with the President at his side?an- nounced at a press conference that the Presi- dent did not know of the Israeli shipments until after they had occurred. He stated that the President learned of the November 1985 HAWK shipment in February 1986. In fact, however, the Israeli sales, includ- ing the HAWK shipment, were implemented with the knowledge and approval of the President and his top advisers; and the Presi- dent himself told Shultz on the day of his press conference that he had known of the November 1985 shipment when it occurred. McFarlane, Poindexter, and North were inti- mately involved in the Israeli shipments; and the CIA had actually transported one deliv- ery from Israel to Iran. 10 While the President was denying any ille- gality, his subordinates were engaging in a coverup. Several of his advisers had ex- pressed concern that the 1985 sales violated the Arms Export Control Act, and a "cover story" had been agreed on if these arms sales were ever exposed. After North had three conversations on November 18, 1986, about the legal problems with the 1985 Israeli ship- ments, he, Poindexter, Casey, and McFarlane all told conforming false stories about U.S. involvement in these shipments. With McFarlane's help, North rewrote NSC staff chronologies on November 19 and 20, 1986, in such a way that they denied contemporaneous knowledge by the Admin- istration of Israel's shipments to Iran in 1985. They asserted at one point that the U.S. Government believed the November 1985 shipment consisted of oil-drilling equipment, not arms. Poindexter told Congressional Committees on November 21, 1986, that the United States had disapproved of the Israeli ship- ments and that, until the day before his brief- ing, he believed that Administration officials did not know about any of them until after they had occurred. He then destroyed the only Finding signed by the President that showed the opposite. Casey told Congressional Committees on November 21, 1986, that although a CIA proprietary airline had actually carried mis- siles to Iran from Israel in 1985, the proprie- tary had been told the cargo was "oil-drill- ing equipment." McFarlane told the Attorney General on November 21, 1986, that the Israelis said they were shipping oil-drilling equipment in November 1985 and that McFarlane did not learn otherwise until May 1986. On learning that the President had author- ized the Attorney General to gather the rele- vant facts, North and Poindexter shredded and altered official documents on November 21, 1986, and later that weekend. On No- vember 25, 1986, North's secretary con- cealed classified documents in her clothing Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Executive Summary and, with North's knowledge, removed them from the White House. According to North, a "fall guy" plan was proposed by Casey in which North and, if necessary, Poindexter, would take the re- sponsibility for the covert Contra support operation and the diversion. On Saturday November 22, 1986, in the midst of these efforts to conceal what had happened, Poin- dexter had a two and one half hour lunch with Casey. Yet Poindexter could not recall anything that was discussed. North testified that he assured Poindexter that he had destroyed all documents relating to the diversion. The diversion nevertheless was discovered on November 22, 1986, when a Justice Department official, assisting the Attorney General's fact-finding inquiry, found a "diversion memorandum" that had escaped the shredder. Prior to the discovery of the diversion memorandum, each interview by the Attor- ney General's fact finding team had been conducted in the presence of two witnesses, and careful notes were taken in accordance with standard professional practices. After discovery of the diversion memorandum? which itself gave rise to an inference of seri- ous wrongdoing?the Attorney General de- parted from these standard practices. A series of important interviews?Poindexter, McFarlane, Casey, Regan, and Bush?was conducted by the Attorney General alone, and no notes were made. The Attorney General then announced at his November 25 press conference that the diversion had occurred and that the Presi- dent did not know of it. But he made several incorrect statements about his own investiga- tion. He stated that the President had not known of the Israeli pre-Finding shipments, and he stated that the proceeds of the arms sales had been sent directly from the Israelis to the Contras. These statements were both mistaken and inconsistent with information that had been received during the Attorney General's fact-finding inquiry. Poindexter testified to these Committees that the President did not know of the diver- sion. North testified that while he assumed the President had authorized each diversion, Poindexter told him on November 21, 1986, that the President had never been told of the diversion. In light of the destruction of material evi- dence by Poindexter and North and the death of Casey, all of the facts may never be known. The Committees cannot even be sure whether they heard the whole truth or whether Casey's "fall guy" plan was carried out at the public hearings. But enough is clear to demonstrate beyond doubt that fun- damental processes of governance were dis- regarded and the rule of law was subverted. Findings and Conclusions The common ingredients of the Iran and Contra policies were secrecy, deception, and disdain for the law. A small group of senior officials believed that they alone knew what was right. They viewed knowledge of their actions by others in the Government as a threat to their objectives. They told neither the Secretary of State, the Congress nor the American people of their actions. When ex- posure was threatened, they destroyed offi- cial documents and lied to Cabinet officials, to the public, and to elected representatives in Congress. They testified that they even withheld key facts from the President. The United States Constitution specifies the process by which laws and policy are to be made and executed. Constitutional process is the essence of our democracy and our democratic form of Government is the basis of our strength. Time and again we have learned that a flawed process leads to bad results, and that a lawless process leads to worse. Policy Contradictions and Failures The Administration's departure from democratic processes created the conditions for policy failure, and led to contradictions which undermined the credibility of the United States. 11 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 ? 11 V , Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Executive Summary The United States simultaneously pursued two contradictory foreign policies?a public one and a secret one: ?The public policy was not to make any ? concessions for the release of hostages lest such concessions encourage more hostage- taking. At the same time, the United States was secretly trading weapons to get the hos- tages back. ?The public policy was to ban arms ship- ments to Iran and to exhort other Govern- ments to observe this embargo. At the same time, the United States was secretly selling sophisticated missiles to Iran and promising more. ?The public policy was to improve rela- tions with Iraq. At the same time, the United States secretly shared military intelligence on Iraq with Iran and North told the Iranians in contradiction to United States policy that the United States would help promote the over- throw of the Iraqi head of government. ?The public policy was to urge all Gov- ernments to punish terrorism and to support, indeed encourage, the refusal of Kuwait to free the Da'wa prisoners who were convict- ed of terrorist acts. At the same time, senior officials secretly endorsed a Secord-Hakim plan to permit Iran to obtain the release of the Da'wa prisoners. ?The public policy was to observe the "letter and spirit" of the Boland Amend- ment's proscriptions against military or para- military assistance to the Contras. At the same time, the NSC staff was secretly assum- ing direction and funding of the Contras' military effort. ?The public policy, embodied in agree- ments signed by Director Casey, was for the Administration to consult with the Congres- sional oversight committees about covert ac- tivities in a "new spirit of frankness and co- operation." At the same time, the CIA and the White House were secretly withholding from those Committees all information con- cerning the Iran initiative and the Contra support network. ?The public policy, embodied in Execu- tive Order 12333, was to conduct covert op- erations solely through the CIA or other 12 organs of the intelligence community specifi- cally authorized by the President. At the same time, although the the NSC was not so authorized, the NSC staff secretly became operational and used private, non-accounta- ble agents to engage in covert activities. These contradictions in policy inevitably resulted in policy failure: ?The United States armed Iran, including its most radical elements, but attained neither a new relationship with that hostile regime nor a reduction in the number of American hostages. ?The arms sales did not lead to a modera- tion of Iranian policies. Moderates did not come forward, and Iran to this day sponsors actions directed against the United States in the Persian Gulf and elsewhere. ?The United States opened itself to black- mail by adversaries who might reveal the secret arms sales and who, according to North, threatened to kill the hostages if the sales stopped. ?The United States undermined its credi- bility with friends and allies, including mod- erate Arab states, by its public stance of op- posing arms sales to Iran while undertaking such arms sales in secret. ?The United States lost a $10 million contribution to the Contras from the Sultan of Brunei by directing it to the wrong bank account?the result of an improper effort to channel that humanitarian aid contribution into an account used for lethal assistance. ?The United States sought illicit funding for the Contras through profits from the secret arms sales, but a substantial portion of those profits ended up in the personal bank accounts of the private individuals executing the sales?while the exorbitant amounts charged for the weapons inflamed the Irani- ans with whom the United States was seek- ing a new relationship. Flawed Policy Process The record of the Iran-Contra Affair also shows a seriously flawed policymaking proc- ess. Approved For Release 2011/05/25 : CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Executive Summary Confusion There was confusion and disarray at the highest levels of Government. ?McFarlane embarked on a dangerous trip to Tehran under a complete misappre- hension. He thought the Iranians had prom- ised to secure the release of all hostages before he delivered arms, when in fact they had promised only to seek the hostages' re- lease, and then only after one planeload of arms had arrived. ?The President first told the Tower Board that he had approved the initial Israeli shipments. Then, he told the Tower Board that he had not. Finally, he told the Tower Board that he does not know whether he approved the initial Israeli arms shipments, and his top advisers disagree on the question. ?The President claims he does not recall signing a Finding approving the November 1985 HAWK shipment to Iran. But Poin- dexter testified that the President did sign a Finding on December 5, 1985, approving the shipment retroactively. Poindexter later de- stroyed the Finding to save the President from embarassment. ?That Finding was prepared without ade- quate discussion and stuck in Poindexter's safe for a year; Poindexter claimed he forgot about it; the White House asserts the Presi- dent never signed it; and when events began to unravel, Poindexter ripped it up. ?The President and the Attorney General told the public that the President did not know about the November 1985 Israeli HAWK shipment until February 1986?an error the White House Chief of Staff ex- plained by saying that the preparation for the press conference "sort of confused the Presidential mind." ?Poindexter says the President would have approved the diversion, if he had been asked; and the President says he would not have. ?One National Security Adviser under- stood that the Boland Amendment applied to the NSC; another thought it did not. Neither sought a legal opinion on the question. ?The President incorrectly assured the American people that the NSC staff was ad- hering to the law and that the Government was not connected to the Hasenfus airplane. His staff was in fact conducting a "full serv- ice" covert operation to support the Contras which they believed he had authorized. ?North says he sent five or six completed memorandums to Poindexter seeking the President's approval for the diversion. Poin- dexter does not remember receiving any. Only one has been found. Dishonesty and Secrecy The Iran-Contra Affair was characterized by pervasive dishonesty and inordinate secre- cy. North admitted that he and other officials lied repeatedly to Congress and to the Amer- ican people about the Contra covert action and Iran arms sales, and that he altered and destroyed official documents. North's testi- mony demonstrates that he also lied to mem- bers of the Executive branch, including the Attorney General, and officials of the State Department, CIA and NSC. Secrecy became an obsession. Congress was never informed of the Iran or the Contra covert actions, notwithstanding the requirement in the law that Congress be no- tified of all covert actions in a "timely fash- ion." Poindexter said that Donald Regan, the President's Chief of Staff, was not told of the NSC staffs fundraising activities because he might reveal it to the press. Secretary Shultz objected to third-country solicitation in 1984 shortly before the Boland Amendment was adopted; accordingly, he was not told that, in the same time period, the National Securi- ty Adviser had accepted an $8 million con- tribution from Country 2 even though the State Department had prime responsibility for dealings with that country. Nor was the Secretary of State told by the President in February 1985 that the same country had pledged another $24 million?even though the President briefed the Secretary of State on his meeting with the head of state at 13 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Executive Summary which the pledge was made. Poindexter asked North to keep secrets from Casey; Casey, North, and Poindexter agreed to keep secrets from Shultz. Poindexter and North cited fear of leaks as a justification for these practices. But the need to prevent public disclosure cannot jus- tify the deception practiced upon Members of Congress and Executive branch officials by those who knew of the arms sales to Iran and of the Contra support network. The State and Defense Departments deal each day with the most sensitive matters affecting millions of lives here and abroad. The Con- gressional Intelligence Committees receive the most highly classified information, in- cluding information on covert activities. Yet, according to North and Poindexter, even the senior officials of these bodies could not be entrusted with the NSC staff's secrets be- cause they might leak. While Congress's record in maintaining the confidentiality of classified information is not unblemished, it is not nearly as poor or perforated as some members of the NSC staff maintained. If the Executive branch has any basis to suspect that any member of the Intelligence Committees breached security, it has the obligation to bring that breach to the attention of the House and Senate Leaders? not to make blanket accusations. Congress has the capability and responsibility of pro- tecting secrets entrusted to it. Congress cannot fulfill its legislative responsibilities if it is denied information because members of the Executive branch, who place their faith in a band of international arms merchants and fmanciers, unilaterally declare Congress unworthy of trust. In the case of the "secret" Iran arms-for- hostages deal, although the NSC staff did not inform the Secretary of State, the Chair- man of the Joint Chiefs of Staff, or the lead- ership of the United States Congress, it was content to let the following persons know: ?Manucher Ghorbanifar, who flunked every polygraph test administered by the U.S. Government; 14 ?Iranian officials, who daily denounced the United States but received an inscribed Bible from the President; ?Officials of Iran's Revolutionary Guard, who received the U.S. weapons; ?Secord and Hakim, whose personal in- terests could conflict with the interests of the United States; ?Israeli officials, international arms mer- chants, pilots and air crews, whose interests did not always coincide with ours; and ?An unknown number of shadowy inter- mediaries and financiers who assisted with both the First and Second Iranian Channels. While sharing the secret with this dispar- ate group, North ordered the intelligence agencies not to disseminate intelligence on the Iran initiative to the Secretaries of State and Defense. Poindexter told the Secretary of State in May 1986 that the Iran initiative was over, at the very time the McFarlane mission to Tehran was being launched. Poin- dexter also concealed from Cabinet officials the remarkable nine-point agreement negoti- ated by Hakim with the Second Channel. North assured the FBI liaison to the NSC as late as November 1986 that the United States was not bargaining for the release of hos- tages but seizing terrorists to exchange for hostages?a complete fabrication. The lies, omissions, shredding, attempts to rewrite his- tory?all continued, even after the President authorized the Attorney General to find out the facts. It was not operational security that moti- vated such conduct?not when our own Government was the victim. Rather, the NSC staff feared, correctly, that any disclo- sure to Congress or the Cabinet of the arms- for-hostages and arms-for-profit activities would produce a storm of outrage. As with Iran, Congress was misled about the NSC staff's support for the Contras during the period of the Boland Amendment, although the role of the NSC staff was no secret to others. North testified that his oper- ation was well-known to the press in the Soviet Union, Cuba, and Nicaragua. It was not a secret from Nicaragua's neighbors, Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Executive Summary with whom the NSC staff communicated throughout the period. It was not a secret from the third countries?including a totali- tarian state?from whom the NSC staff sought arms or funds. It was not a secret from the private resupply network which North recruited and supervised. According to North, even Ghorbanifar knew. The Administration never sought to hide its desire to assist the Contras so long as such aid was authorized by statute. On the contrary, it wanted the Sandinistas to know that the United States supported the Contras. After enactment of the Boland Amendment, the Administration repeatedly and publicly called upon Congress to resume U.S. assist- ance. Only the NSC staff's Contra support activities were kept under wraps. The Com- mittees believe these actions were concealed in order to prevent Congress from learning that the Boland Amendment was being cir- cumvented. It was stated on several occasions that the confusion, secrecy and deception surround- ing the aid program for the Nicaraguan free- dom fighters was produced in part by Con- gress' shifting positions on Contra aid. But Congress' inconsistency mirrored the chameleon-like nature of the rationale of- fered for granting assistance in the first in- stance. Initially, Congress was told that our purpose was simply to interdict the flow of weapons from Nicaragua into El Salvador. Then Congress was told that our purpose was to harrass the Sandinistas to prevent them from consolidating their power and ex- porting their revolution. Eventually, Con- gress was told that our purpose was to elimi- nate all foreign forces from Nicaragua, to reduce the size of the Sandinista armed forces, and to restore the democratic reforms pledged by the Sandinistas during the over- throw of the Somoza regime. Congress had cast a skeptical eye upon each rationale proffered by the Administra- tion. It suspected that the Administration's true purpose was identical to that of the Contras?the overthrow of the Sandinista regime itself. Ultimately Congress yielded to domestic political pressure to discontinue as- sistance to the Contras, but Congress was unwilling to bear responsibility for the loss of Central America to communist military and political forces. So Congress compro- mised, providing in 1985 humanitarian aid to the Contras; and the NSC staff provided what Congress prohibited: lethal support for the Contras. Compromise is no excuse for violation of law and deceiving Congress. A law is no less a law because it is passed by a slender major- ity, or because Congress is open-minded about its reconsideration in the future. Privatization The NSC staff turned to private parties and third countries to do the Government's business. Funds denied by Congress were ob- tained by the Administration from third countries and private citizens. Activities nor- mally conducted by the professional intelli- gence services?which are accountable to Congress?were turned over to Secord and Hakim. The solicitation of foreign funds by an Ad- ministration to pursue foreign policy goals rejected by Congress is dangerous and im- proper. Such solicitations, when done secret- ly and without Congressional authorization, create a risk that the foreign country will expect and demand something in return. McFarlane testified that "any responsible of- ficial has an obligation to acknowledge that every country in the world will see benefit to itself by ingratiating itself to the United States." North, in fact, proposed rewarding a Central American country with foreign as- sistance funds for facilitating arms shipments to the Contras. And Secord, who had once been in charge of the U.S. Air Force's for- eign military sales, said "where there is a quid, there is a quo." Moreover, under the Constitution only Congress can provide funds for the Execu- tive branch. The Framers intended Con- gress's "power of the purse" to be one of the --principal checks on Executive action. It was designed, among other things, to prevent the 15 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 II I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Executive Summary Executive from involving this country unilat- erally in a foreign conflict. The Constitution- al plan does not prohibit a President from asking a foreign state, or anyone else, to contribute funds to a third party. But it does prohibit such solicitation where the United States exercises control over their receipt and expenditure. By circumventing Con- gress' power of the purse through third- country and private contributions to the Contras, the Administration undermined a cardinal principle of the Constitution. Further, by turning to private citizens, the NSC staff jeopardized its own objectives. Sensitive negotiations were conducted by parties with little experience in diplomacy, and financial interests of their own. The dip- lomatic aspect of the mission failed?the United States today has no long-term rela- tionship with Iran and no fewer hostages in captivity. But the private financial aspect succeeded?Secord and Hakim took $4.4 million in commissions and used $2.2 million more for their personal benefit; in addition, they set aside reserves of over $4 million in Swiss bank accounts of the Enterprise. Covert operations of this Government should only be directed and conducted by the trained professional services that are ac- countable to the President and Congress. Such operations should never be delegated, as they were here, to private citizens in order to evade Governmental restrictions. Lack of Accountability The confusion, deception, and privatiza- tion which marked the Iran-Contra Affair were the inevitable products of an attempt to avoid accountability. Congress, the Cabinet, and the Joint Chiefs of Staff were denied information and excluded from the decision- making process. Democratic procedures were disregarded. Officials who make public policy must be accountable to the public. But the public cannot hold officials accountable for policies of which the public is unaware. Policies that are known can be subjected to the test of reason, and mistakes can be corrected after 16 consultation with the Congress and delibera- tion within the Executive branch itself. Poli- cies that are secret become the private pre- serve of the few, mistakes are inevitably per- petuated, and the public loses control over Government. That is what happened in the Iran-Contra Affair: ?The President's NSC staff carried out a covert action in furtherance of his policy to sustain the Contras, but the President said he did not know about it. ?The President's NSC staff secretly di- verted millions of dollars in profits from the Iran arms sales to the Contras, but the Presi- dent said he did not know about it and Poin- dexter claimed he did not tell him. ?The Chairman of the Joint Chiefs of Staff was not informed of the Iran arms sales, nor was he ever consulted regarding the impact of such sales on the Iran-Iraq war or on U.S. military readiness. ?The Secretary of State was not in- formed of the millions of dollars in Contra contributions solicited by the NSC staff from foreign governments with which the State Department deals each day. ?Congress was told almost nothing?and what it was told was false. Deniability replaced accountability. Thus, Poindexter justified his decision not to inform the President of the diversion on the ground that he wanted to give the President "deniability." Poindexter said he wanted to shield the President from political embarrass- ment if the diversion became public. This kind of thinking is inconsistent with democratic governance. "Plausible denial," an accepted concept in intelligence activities, means structuring an authorized covert oper- ation so that, if discovered by the party against whom it is directed, United States involvement may plausibly be denied. That is a legitimate feature of authorized covert op- erations. In no circumstance, however, does "plausible denial" mean structuring an oper- ation so that it may be concealed from?or denied to?the highest elected officials of the United States Government itself. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Executive Summary The very premise of democracy is that "we the people" are entitled to make our own choices on fundamental policies. But freedom of choice is illusory if policies are kept, not only from the public, but from its elected representatives. Intelligence Abuses Covert Operations As former National Security Adviser Robert McFarlane testified, "it is clearly unwise to rely on covert action as the core of our policy." The Government cannot keep a policy secret and still secure the public support necessary to sustain it. Yet it was precisely because the public would not support the Contra policy, and was unlikely to favor arms deals with Iran, that the NSC staff went underground. This was a perver- sion of the proper concept of covert oper- ations: ?Covert operations should be conducted in accordance with strict rules of account- ability and oversight. In the mid-1970s, in response to disclosures of abuses within the intelligence community, the Government en- acted a series of safeguards. Each covert action was to be approved personally by the President, funded by Congressional appro- priations, and Congress was to be informed. In the Iran-Contra Affair, these rules were violated. The President, according to Poin- dexter, was never informed of the diversion. The President says he knew nothing of the covert action to support the Contras, or the companies funded by non-appropriated monies set up by North to carry out that support. Congress was not notified of either the Iran or the Contra operations. ?Covert actions should be consistent with publicly defined U.S. foreign policy goals. Because covert operations are secret by defi- nition, they are of course not openly debated or publicly approved. So long as the policies which they further are known, and so long as they are conducted in accordance with law, covert operations are acceptable. Here, however, the Contra covert operation was carried out in violation of the country's public policy as expressed in the Boland Amendment; and the Iran covert operation was carried out in violation of the country's stated policy against selling arms to Iran or making concessions to terrorists. These were not covert actions, they were covert policies; and covert policies are incompatible with de- mocracy. ?Finally, covert operations are intended to be kept from foreign powers, not from the Congress and responsible Executive agencies within the United States Government itself. As Clair George, CIA Director of Oper- ations, testified: "to think that because we deal in lies, and overseas we may lie and we may do other such things, that therefore that gives you some permission, some right or some particular reason to operate that way with your fellow employees, I would not only disagree with tbat I would say it would be the destruction of a secret service in a democracy." In the Iran-Contra Affair, se- crecy was used to justify lies to Congress, the Attorney General, other Cabinet officers, and the CIA. It was used not as a shield against our adversaries, but as a weapon against our own democratic institutions. The NSC Staff The NSC staff was created to give the President policy advice on major national security and foreign policy issues. Here, however, it was used to gather intelligence and conduct covert operations. This depar- ture from its proper functions contributed to policy failure. During the Iran initiative, the NSC staff became the principal body both for gather- ing and coordinating intelligence on Iran and for recommending policy to the President. The staff relied on Iranians who were inter- ested only in buying arms, including Ghor- banifar, whom CIA officials regarded as a fabricator. Poindexter, in recommending to the President the sale of weapons to Iran, gave as one of his reasons that Iraq was winning the Gulf war. That assessment was contrary to the views of intelligence profes- sionals at the State Department, the Depart- 17 77-026 0 - 87 - Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 .11 .L. I. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Executive Summary ment of Defense, and the CIA, who had concluded as early as 1983 that Iran was winning the war. Casey, who collaborated with North and Poindexter on the Iran and Contra programs, also tailored intelligence reports to the positions he advocated. The record shows that the President believed and acted on these erroneous reports. Secretary Shultz pointed out that the intel- ligence and policy functions do not mix, be- cause "it is too tempting to have your analy- sis on the selection of information that is presented favor the policy that you are ad- vocating." The Committees agree on the need to separate the intelligence and policy functions. Otherwise, there is too great a risk that the interpretation of intelligence will be skewed to fit predetermined policy choices. In the Iran-Contra Affair, the NSC staff not only combined intelligence and policy functions, but it became operational and con- ducted covert operations. As the CIA was subjected to greater Congressional scrutiny and regulation, a few Administration offi- cials?including even Director Casey?came to believe that the CIA could no longer be utilized for daring covert operations. So the NSC staff was enlisted to provide assistance in covert operations that the CIA could not or would not furnish. This was a dangerous misuse of the NSC staff. When covert operations are conducted by those on whom the President relies to present policy options, there is no agency in government to objectively scrutinize, chal- lenge and evaluate plans and activities. Checks and balances are lost. The high policy decisions confronting a President can rarely be resolved by the methods and tech- niques used by experts in the conduct of covert operations. Problems of public policy must be dealt with through consultation, not Poindexter's "compartmentation"; with hon- esty and confidentiality, not deceit. The NSC was created to provide candid and comprehensive advice to the President. It is the judgment of these Committees that the NSC staff should never again engage in covert operations. 18 Disdain for Law In the Iran-Contra Affair, officials viewed the law not as setting boundaries for their actions, but raising impediments to their goals. When the goals and the law collided, the law gave way: ?The covert program of support for the Contras evaded the Constitution's most sig- nificant check on Executive power: the President can spend funds on a program only if he can convince Congress to appropriate the money. When Congress enacted the Boland Amendment, cutting off funds for the war in Nicaragua, Administration officials raised funds for the Contras from other sources? foreign Governments, the Iran arms sales, and private individuals; and the NSC staff controlled the expenditures of these funds through power over the Enterprise. Con- ducting the covert program in Nicaragua with funding from the sale of U.S. Govern- ment property and contributions raised by Government officials was a flagrant violation of the Appropriations Clause of the Constitu- tion. ?In addition, the covert program of sup- port for the Contras was an evasion of the letter and spirit of the Boland Amendment. The President made it clear that while he opposed restrictions on military or paramili- tary assistance to the Contras, he recognized that compliance with the law was not op- tional. "[W]hat I might personally wish or what our Government might wish still would not justify us violating the law of the land," he said in 1983. A year later, members of the NSC staff were devising ways to continue support and direction of Contra activities during the period of the Boland Amendment. What was previously done by the CIA?and now pro- hibited by the Boland Amendment?would be done instead by the NSC staff. The President set the stage by welcoming a huge donation for the Contras from a for- eign Government?a contribution clearly in- tended to keep the Contras in the field while U.S. aid was barred. The NSC staff thereaf- Approved For Release 29,11/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Executive Summary ter solicited other foreign Governments for military aid, facilitated the efforts of U.S. fundraisers to provide lethal assistance to the Contras, and ultimately developed and di- rected a private network that conducted, in North's words, a "full service covert oper- ation" in support of the Contras. This could not have been more contrary to the intent of the Boland legislation. Numerous other laws were disregarded: ?North's full-service covert operation was a "significant anticipated intelligence ac- tivity" required to be disclosed to the Intelli- gence Committees of Congress under Sec- tion 501 of the National Security Act. No such disclosure was made. ?By Executive order, a covert operation requires a personal determination by the President before it can be conducted by an agency other than the CIA. It requires a written Finding before any agency can carry it out. In the case of North's full-service covert operation in support of the Contras, there was no such personal determination and no such Finding. In fact, the President disclaims any knowledge of this covert action. ?False statements to Congress are felonies if made with knowledge and intent. Several Administration officials gave statements de- nying NSC staff activities in support of the Contras which North later described in his testimony as "false," and "misleading, eva- sive, and wrong." ?The application of proceeds from U.S. arms sales for the benefit of the Contra war effort violated the Boland Amendment's ban on U.S. military aid to the Contras, and con- stituted a misappropriation of Government funds derived from the transfer of U.S. prop- erty. ?The U.S. Government's approval of the pre-Finding 1985 sales by Israel of arms to the Government of Iran was inconsistent with the Government's obligations under the Arms Export Control Act. ?The testimony to Congress in November 1986 that the U.S. Government had no con- temporaneous knowledge of the Israeli ship- ments, and the shredding of documents relat- ing to the shipments while a Congressional inquiry into those shipments was pending, obstructed Congressional investigations. ?The Administration did not make, and clearly intended never to make, disclosure to the Intelligence Committees of the Finding? later destroyed?approving the November 1985 HAWK shipment, nor did it disclose the covert action to which the Finding relat- ed. The Committees make no determination as to whether any particular individual in- volved in the Iran-Contra Affair acted with criminal intent or was guilty of any crime. That is a matter for the Independent Counsel and the courts. But the Committees reject any notion that worthy ends justify viola- tions of law by Government officials; and the Committees condemn without reserva- tion the making of false statements to Con- gress and the withholding, shredding, and alteration of documents relevant to a pend- ing inquiry. Administration officials have, if anything, an even greater responsibility than private citizens to comply with the law. There is no place in Government for law breakers. Congress and the President The Constitution of the United States gives important powers to both the President and the Congress in the making of foreign policy. The President is the principal archi- tect of foreign policy in consultation with the Congress. The policies of the United States cannot succeed unless the President and the Congress work together. Yet, in the Iran-Contra Affair, Administra- tion officials holding no elected office re- peatedly evidenced disrespect for Congress' efforts to perform its Constitutional over- sight role in foreign policy: ?Poindexter testified, referring to his ef- forts to keep the covert action in support of the Contras from Congress: "I simply did not want any outside interference." ?North testified: "I didn't want to tell Congress anything" about this covert action. 19 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 II , 1 I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Executive Summary ?Abrams acknowledged in his testimony that, unless Members of Congressional Com- mittees asked "exactly the right question, using exactly the right words, they weren't going to get the right answers," regarding solicitation of third-countries for Contra sup- port. ?And numerous other officials made false statements to, and misled, the Congress. Several witnesses at the hearings stated or implied that foreign policy should be left solely to the President to do as he chooses, arguing that shared powers have no place in a dangerous world. But the theory of our Constitution is the opposite: policies formed through consultation and the democratic process are better and wiser than those formed without it. Circumvention of Con- gress is self-defeating, for no foreign policy can succeed without the bipartisan support of Congress. In a system of shared powers, decision- making requires mutual respect between the branches of government. The Committees were reminded by Secre- tary Shultz during the hearings that "trust is the coin of the realm." Democratic govern- ment is not possible without trust between the branches of government and between the government and the people. Sometimes that trust is misplaced and the system falters. But for officials to work outside the system be- cause it does not produce the results they seek is a prescription for failure. Who Was Responsible Who was responsible for the Iran-Contra Affair? Part of our mandate was to answer that question, not in a legal sense (which is the responsibility of the Independent Coun- sel), but in order to reaffirm that those who serve the Government are accountable for their actions. Based on our investigation, we reach the following conclusions. At the operational level, the central figure in the Iran-Contra Affair was Lt. Col. North, who coordinated all of the activities and was involved in all aspects of the secret 20 operations. North, however, did not act alone. North's conduct had the express approval of Admiral John Poindexter, first as Deputy National Security Adviser, and then as Na- tional Security Adviser. North also had at least the tacit support of Robert McFarlane, who served as National Security Adviser until December 1985. In addition, for reasons cited earlier, we believe that the late Director of Central In- telligence, William Casey, encouraged North, gave him direction, and promoted the concept of an extra-legal covert organiza- tion. Casey, for the most part, insulated CIA career employees from knowledge of what he and the NSC staff were doing. Casey's passion for covert operations?dating back to his World War II intelligence days?was well known. His close relationship with North was attested to by several witnesses. Further, it was Casey who brought Richard Secord into the secret operation, and it was Secord who, with Albert Hakim, organized the Enterprise. These facts provide strong reasons to believe that Casey was involved both with the diversion and with the plans for an "off-the-shelf' covert capacity. The Committees are mindful, however, of the fact that the evidence concerning Casey's role comes almost solely from North; that this evidence, albeit under oath, was used by North to exculpate himself; and that Casey could not respond. Although North told the Committees that Casey knew of the diver- sion from the start, he told a different story to the Attorney General in November 1986, as did Casey himself. Only one other wit- ness, Lt. Col. Robert Earl, testified that he had been told by North during Casey's life- time that Casey knew of the diversion. The Attorney General recognized on No- vember 21, 1986 the need for an inquiry. His staff was responsible for finding the diver- sion memorandum, which the Attorney Gen- eral promptly made public. But as described earlier, his fact-finding inquiry departed from standard investigative techniques. The Attor- ney General saw Director Casey hours after Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Executive Summary the Attorney General learned of the diver- sion memorandum, yet he testified that he never asked Casey about the diversion. He waited two days to speak to Poindexter, North's superior, and then did not ask him what the President knew. He waited too long to seal North's offices. These lapses placed a cloud over the Attorney General's investigation. There is no evidence that the Vice Presi- dent was aware of the diversion. The Vice President attended several meetings on the Iran initiative, but none of the participants could recall his views. The Vice President said he did not know of the Contra resupply operation. His Na- tional Security Adviser, Donald Gregg, was told in early August 1986 by a former col- league that North was running the Contra resupply operation, and that ex-associates of Edwin Wilson?a well known ex-CIA offi- cial convicted of selling arms to Libya and plotting the murder of his prosecutors?were involved in the operation. Gregg testified that he did not consider these facts worthy of the Vice President's attention and did not report them to him, even after the Hasenfus airplane was shot down and the Administra- tion had denied any connection with it. The central remaining question is the role of the President in the Iran-Contra Affair. On this critical point, the shredding of docu- ments by Poindexter, North, and others, and the death of Casey, leave the record incom- plete. As it stands, the President has publicly stated that he did not know of the diversion. Poindexter testified that he shielded the President from knowledge of the diversion. North said that he never told the President, but assumed that the President knew. Poin- dexter told North on November 21, 1986 that he had not informed the President of the diversion. Secord testified that North told him he had talked with the President about the diversion, but North testified that he had fabricated this story to bolster Secord's morale. Nevertheless, the ultimate responsibility for the events in the Iran-Contra Affair must rest with the President. If the President did not know what his National Security Advis- ers were doing, he should have. It is his responsibility to communicate unambiguous- ly to his subordinates that they must keep him advised of important actions they take for the Administration. The Constitution re- quires the President to "take care that the laws be faithfully executed." This charge en- compasses a responsibility to leave the mem- bers of his Administration in no doubt that the rule of law governs. Members of the NSC staff appeared to believe that their actions were consistent with the President's desires. It was the Presi- dent's policy?not an isolated decision by North or Poindexter?to sell arms secretly to Iran and to maintain the Contras "body and soul," the Boland Amendment notwithstand- ing. To the NSC staff, implementation of these policies became the overriding con- cern. Several of the President's advisers pursued a covert action to support the Contras in disregard of the Boland Amendment and of several statutes and Executive orders requir- ing Congressional notification. Several of these same advisers lied, shredded docu- ments, and covered up their actions. These facts have been on the public record for months. The actions of those individuals do not comport with the notion of a country guided by the rule of law. But the President has yet to condemn their conduct. The President himself told the public that the U.S. Government had no connection to the Hasenfus airplane. He told the public that early reports of arms sales for hostages had "no foundation." He told the public that the United States had not traded arms for hostages. He told the public that the United States had not condoned the arms sales by Israel to Iran, when in fact he had approved them and signed a Finding, later destroyed by Poindexter, recording his approval. All of these statements by the President were wrong. 21 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 11 11 . .. I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Executive Summary Thus, the question whether the President knew of the diversion is not conclusive on the issue of his responsibility. The President created or at least tolerated an environment where those who did know of the diversion believed with certainty that they were carry- ing out the President's policies. This same environment enabled a secretary who shredded, smuggled, and altered docu- ments to tell the Committees that "some- times you have to go above the written law;" and it enabled Admiral Poindexter to testify that "frankly, we were willing to take some risks with the law." It was in such an environment that former officials of the NSC staff and their private agents could lecture the Committees that a "rightful cause" justi- fies any means, that lying to Congress and other officials in the executive branch itself is acceptable when the ends are just, and that Congress is to blame for passing laws that run counter to Administration policy. What 22 may aptly be called the "cabal of the zeal- ots" was in charge. In a Constitutional democracy, it is not true, as one official maintained, that "when you take the King's shilling, you do the King's bidding." The idea of monarchy was rejected here 200 years ago and since then, the law?not any official or ideology?has been paramount. For not instilling this pre- cept in his staff, for failing to take care that the law reigned supreme, the President bears the responsibility. Fifty years ago Supreme Court Justice Louis Brandeis observed: "Our Government is the potent, the omnipresent teacher. For good or for ill, it teaches the whole people by its example. Crime is contagious. If the Government becomes a law-breaker, it breeds contempt for law, it invites every man to become a law unto himself, it invites anarchy." The Iran-Contra Affair resulted from a failure to heed this message. Approved For Release 2011/05/25 : CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Part II Central America Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 11 I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 1 Introduction: Background on U.S.-Nicaragua Relations On July 17, 1979, President Anastasio Somoza De- bayle and his family fled Nicaragua. A civil war that had devastated the nation's economy and caused more than 130,000 casualties was at an end, as was the autocratic and corrupt 43-year rule of the Somoza family. But the battle for Nicaragua's future was just beginning. The United States had long played a role in Nicara- gua's affairs. Under the Monroe Doctrine of 1823, the United States had declared the Western hemisphere, including Central America, off-limits to European powers. For the rest of the 19th century, U.S. influ- ence was episodic. An American privateer named William Walker briefly seized control of Nicaragua in 1855, opened its borders to slavery, and appointed himself President before he was deposed and execut- ed. The opening of the Panama Canal, however, in- creased the strategic importance of Nicaragua to the United States in the early 20th century. A treaty signed by the United States and Nicaragua in 1911 gave the United States an exclusive right of intervention in return for the reorganization of Nica- ragua's finances. One year later, President Taft in- voked this pact as a basis for dispatching 2,700 Ma- rines to Nicaragua. The Marines initially arrived at the request of a U.S.-supported Nicaraguan President, ostensibly to protect American property and citizens. They stayed, with one brief intermission, until 1933. During this period, Nicaragua was a virtual depend- ency of the United States. From 1927 to 1933, the Marines and the Marine- trained Nicaraguan National Guard, with General Anastasio Somoza Garcia at its head, fought a guerril- la war against the forces of General Augusto Cesar Sandino, who opposed the U.S.-backed Conservative Government of Adolfo Diaz. Sandino, whose aim was to rid Nicaragua of "U.S. imperialists," became a na- tional hero to many Nicaraguans during those years; the Sandinistas were named after him. When U.S. forces withdrew in 1933, Sandino accepted a truce. He was shot dead a year later. Many authorities be- lieve Sandino was killed on direct orders from Somoza, who seized power from the civilian govern- ment in 1936. From 1936 to 1979, Anastasio Somoza Garcia and then his son, Anastasio Somoza Debayle, ruled Nica- ragua. The rule of Anastasio Somoza Debayle was characterized by corruption; the Somoza family owned nearly one-third of all the land and controlled much of the country's wealth. In 1961, opponents of Somoza formed the National Liberation Front (FSLN), popularly known as the Sandinistas. This fledgling resistance organization drew much of its early support from students. Fidel Castro provided some of its initial financial backing. Through the early 1970s, the FSLN was a marginal group, unable to succeed in its low-level guerrilla war or to marshal popular support. The 1972 earthquake that devastated the capital city of Managua, however, changed the nature of the conflict between the rebels and the Government. Fol- lowing the earthquake, Somoza reaped immense prof- its from international relief efforts. His show of greed in the face of so much suffering was an important fact in his loss of support from the growing Nicaraguan business and professional classes. Another was his grooming of his son, known as Tachito, to inherit his position. Successive attacks by the FSLN were met by in- creasingly harsh reprisals by the National Guard. Strikes, street protests, and guerrilla raids prompted Somoza to order the wholesale shooting of alleged peasant collaborators and the clearance of large areas of the countryside where opposition fighters found sanctuary. Somoza's human rights abuses led the Carter Administration in April 1977 to reduce mili- tary and economic aid to the regime. Six months later, the aid was restored after Nicaragua promised to curb the excesses of the National Guard. Despite Somoza's promises, the situation deteriorat- ed. In January 1978, Pedro Joaquin Chamorro, the editor of La Prensa, Nicaragua's foremost opposition newspaper, was assassinated. His assassins were never found, but the public reacted against the Government. A wave of protest swept the country. The ranks of the FSLN swelled with new recruits. Business, trade, and church groups joined the rebellion. The FSLN was the only force trained and capable of opposing the National Guard. The fact that the movement had taken on the rhetorical trappings of a leftist insurgency seemed of little consequence to Nicaraguans eager to remove Somoza. Following the 25 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Figure 1-1. Map of Central America. Chetumal MEXICO Tuxtla Gutierrez Belize City OBelme BELIZ GUATEMALA Rio MotagLia Gue;oltenango 0 Guatemala ?San Pedro Sala Santa ? Ana Madero HONDURAS Tegucigalpa Matagalpa Grande Pt? ua tranada NICARAGUA Bluefielda Lago de Nicaragua Central America International boundary o National capital Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 1 killing of Chamorro, non-Marxist resistance groups began to gather around the FSLN, leading ultimately to the creation of the Broad Opposition Front seeking to draw all economic classes, ages, and professions. By the beginning of 1979, the movement could claim the full backing of Cuba, the unqualified support of the democracies of Venezuela and Costa Rica, and broad sympathy throughout Latin America. In February 1979, the State Department announced that, because of Somoza's unwillingness to accept a negotiated settlement, the United States was recalling more than half of its officials in Nicaragua and sus- pending all new economic and military aid. The end of U.S. backing cut the last props of support for the Government, and the end of the Somoza dynasty came on July 17, 1979. The Sandinistas were enormously popular when they began their rule. A Provisional Government of National Reconstruction was formed to lead the coun- try. At its head was a five-person directorate com- posed of Violetta Chamorro (widow of the murdered La Prensa editor), Alfonso Robelo, Sergio Ramirez, Moises Hassan, and Daniel Ortega. Hassan and Ortega came from the militant wing of the Sandinista Party. Members of the 18-member cabinet and the 33- member council were drawn from a broad spectrum of Nicaraguan public life. Though Nicaraguans were generally satisfied that the new Government repre- sented the Somoza opposition, the United States was not, pointing to Ortega and Hassan as left-wing radi- cals. The Sandinistas Take Over The Sandinistas set out to court public favor and international support. They promised free elections, a free press, free enterprise, an independent judiciary, and an end to political oppression. Yet, the Sandinistas took over television and radio stations and censored the newspaper La Prensa, which opposed repression whether by the Sandinistas or by Somoza. The Sandinistas forced the two moder- ate members of Nicaragua's governing council, Cha- morro and Robelo, to resign, pressured opposition parties, continued political detentions, and expropriat- ed land. The revolutionary party organization as- sumed the functions of state. On September 19, 1980, the Government announced that it would not hold national elections until 1985. Americans were divided on how to interpret Sandi- nista intentions. If the Carter Administration did not openly embrace the Sandinistas, neither did it close all doors to a possible reconciliation. Immediately fol- lowing the Sandinista victory, the United States do- nated $39 million in emergency food aid to Nicara- gua, and in 1980 Congress appropriated an additional $75 million in emergency economic assistance (Public Law 96-257). Similarly, Washington supported the provision of aid to Nicaragua from international lend- ing organizations. The Carter Administration accepted the fact that the United States was in "competition" with Cuba to win over the Nicaraguan Government, but it hoped that friendly relations could be maintained. Yet while providing overt financial assistance, President Carter in the fall of 1979 signed a Finding authorizing sup- port to the democratic elements in Nicaragua because of the concern about the effect of the Sandinista take- over on such institutions. In public statements, Sandinista officials expressed their desire for better relations with the United States, and insisted that they had no intention of supporting insurgencies aimed at subverting their neighbors. Their actions, however, began to raise doubts. Weap- ons and equipment sent by Cuba through Nicaragua were making their way to rebels in El Salvador. The new regime received aid from several sources, including United States, Mexico, Venezuela, and Western Europe. But the United States, the largest single contributor, became increasingly concerned about the new regime's growing ties with the Eastern bloc. Nicaragua increased its number of Cuban advis- ers, and in 1980 and 1981 signed agreements with the Soviet Union and East bloc governments, including Bulgaria and East Germany, for advisers and military and intelligence assistance. Candidate Ronald Reagan stated his firm opposition to any further U.S. support for the Sandinistas. In January 1981, President Carter suspended aid to the Nicaraguan regime. In April 1981, the Reagan Ad- ministration continued this policy. It announced that it would withhold the remaining $15 million in un- spent U.S. assistance to Nicaragua and not request further economic aid until the revolution was democ- ratized and all assistance to the Salvadoran rebels ceased. Concerns about Nicaragua's internal repression, its growing military force, its ties to the Soviet bloc and its support for the Salvadoran insurgency led the Ad- ministration to consider ways to assist the regime's opponents, who came to be known as the Contras. The Contras As the Sandinistas consolidated their hold on Nicara- gua in 1979 to 1981, the concerns of the United States were matched within Nicaragua itself. In response, a new Nicaraguan rebel movement?anti-Sandinista "Contras"?emerged. 27 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 II . 1 I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 1 Figure 1-2. Map of Nicaragua I / NUE TA SEGOV)A . 0?1,.1111????luil / ? 0 . N.,... 0?' MAD) ? .. j? / /Combos 1 ? de Yall .N. Sondlito pto Tum ? inse / % Edell \ jin ? ..--.... 0 . ? . N -% illopratle . ? Rio Blanco ??r.???? r...; El Sauce i .Muy Muy ollue L. ? . \ Beane tRio Jim Bonito 11 ' JCHONTALES ? M ?Julgaipa International boundary ??? Departamento boundary o National capital 0 Departamento capital Departamentos have the same name as their capitals except where noted o2.5 op Kilometers 0 25 510 Miles 28 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 1 The Contras were not a monolithic group, but a combination of three distinct elements of Nicaraguan society: former National Guardsmen and right-wing figures who had fought for Somoza and against the revolution; anti-Somocistas who had supported the revolution but felt betrayed by the Sandinista Govern- ment; and Nicaraguans who had avoided direct in- volvement in the revolution but opposed the Sandinis- tas' increasingly anti-democratic regime. Many future Contra leaders fled to exile. Some, like Jose Francisco Cardenal, head of the Superior Coun- cil of Private Enterprise (COSEP), moved to the United States, where they began a political campaign to win support for their cause in Congress and from among the Cuban and Nicaraguan exile communities. Other anti-Sandinistas set about organizing a resist- ance movement in neighboring nations. The largest and most active of these groups, which later came to be known as the Nicaraguan Democrat- ic Force (FDN), was led by Adolfo Calero Portocar- rero. Calero had been an accountant and businessman, and had been active in the movement to oust Somoza. Following the liberation, he served as the political coordinator of the Conservative Democratic Party and became an outspoken critic of the Sandinista Government. Calero joined the resistance movement after his office and home were attacked and he was forced into exile. Although Calero had opposed Somoza, the FDN had its roots in two insurgent groups made up of former National Guardsmen who fled Nicaragua after the fall of Somoza. In 1981, this branch of the resist- ance consisted of only a few hundred men. Other elements of the anti-Sandinista resistance emerged following the failure of members of the Nic- araguan provisional government to resolve their dif- ferences over the political direction of the country. Increasingly, those who opposed the Sandinistas found themselves isolated within the Government. The resignation in 1980 of Violetta Chamorro from the ruling directorate triggered an exodus of moderate leaders from the Government. Among those who left were Alfonso Robelo Calle- jas and Arturo J. Cruz. Robelo had entered politics during the two national strikes organized against Somoza. In March 1978, he founded the Nicaraguan Democratic Movement and was imprisoned by Somoza. After his release, he was forced into exile. He participated in the post-revolutionary Government as the head of his own political party and as an opponent of the Sandinista regime. Cruz, who would become a prominent Contra leader, was named Nica- raguan Ambassador to the United States in 1981. He resigned 2 years later in protest against Sandinista policies, and joined the resistance in 1983. In addition to the main force of FDN fighters cen- tered primarily in the northern portion of the country, other resistance forces became active in other parts of Nicaragua. These include several Indian groups oper- ating along the Atlantic coast and, after 1981, a group formed by the charismatic figure and former Sandi- nista guerrilla leader and hero, Eden Pastora. Forces under Pastora were based along the southern border with Costa Rica. Initial support for the Nicaraguan resistance came from another country, which organized and supplied paramilitary forces in early 1981. By the end of 1981, however, the Contras were looking to the United States for their support. They were to find a receptive audience?President Reagan. 29 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 2 The NSC Staff Takes Contra Policy Underground In December 1981, the President authorized a Central Intelligence Agency (CIA) covert action program to support the Contras. The CIA's activity, however, did not remain covert for long: within months, it was the topic of news reports and the subject of Congres- sional debate questioning the Administration's policy in support of the Contras. The Administration re- sponded that it did not intend to overthrow the San- dinista Government in Nicaragua, but sought to check the spread of communism to El Salvador and other nations in Central America. In 1982, in the first Boland Amendment, Congress sought to enforce that claim by barring the Adminis- tration from using Congressionally appropriated money for the "purpose" of overthrowing the Sandi- nista regime. The Administration, although not pleased with the amendment, nevertheless accepted it, because the amendment allowed the Administration to maintain support for the Contras so long as that sup- port had as its "purpose" stopping the spread of the Sandinista revolution outside Nicaragua's borders. With the first Boland Amendment, then, came a temporary compromise between the Administration and Congress. But it was an inherently uneasy com- promise, based more on semantics than substance: The Contras were not in the field to stop Sandinista arms flowing to El Salvador; they were in the field to overthrow the Sandinistas. The Intelligence Commit- tees of Congress, while rejecting that objective, nev- ertheless approved CIA use of contingency reserve funding to support the anti-Sandinistas. And the Ad- ministration embraced the contradiction inherent in the new law, by emphasizing that U.S. support was aimed only at interdicting arms destined for other Central American Communist insurgencies. During 1983, press reports of a "secret" CIA war in Nicaragua led to increased questioning in Congress. In July, the House voted to end all Contra aid. Mean- while, in the hopes of forestalling an aid cutoff, the Administration accepted an invitation by the Senate Select Committee on Intelligence to clarify its inten- tions in pursuing a covert program. Despite Adminis- tration efforts to meet those concerns, by the winter, the House and Senate had agreed to cap Contra fund- ing at $24 million, a sum that both the Administration and the Congress knew would not last through fiscal 1984. Nonetheless, the Administration decided to escalate the operations in Nicaragua. When the Nicaraguan harbor mining was disclosed in April, it created a storm of protest in Congress and around the country and, chiefly as a result, Congress declined to appro- priate more money for the Contras. With the CIA out of funds for the Contras, the NSC staff took over the program of supporting the Contras. But this time, the operation was covert in a new sense?it was con- cealed from Congress. Beginning in May 1984, when the CIA-appropri- ated funds for the Contras ran out, the National Secu- rity Council (NSC) staff raised money for Contra military operations from third countries with the knowledge of the President, supervised the Contras' purchase of weapons, and provided guidance for the Contras' military operations. The operational responsi- bilities fell largely to Lt. Col. Oliver L. North, a member of the NSC staff who reported to the Nation- al Security Adviser, Robert C. McFarlane, and his deputy, Vice Admiral John M. Poindexter. In October 1984, the Congress passed and the President signed the second Boland Amendment pro- hibiting the expenditure of any available funds in sup- port of Contra military operations by any agency or entity involved in intelligence activities. Rather than halting U.S. support for the Contras, the CIA's with- drawal was treated as a call for the NSC staff to take over the entire covert operation, raising more money from a third country, arranging for arms purchases, and providing military intelligence and advice. The NSC staff went operational?and underground. The December 1981 Finding Within 2 months of President Reagan's inauguration, the CIA proposed, and the NSC considered, plans for covert action to deal with the growing Cuban pres- ence in Nicaragua. The United States continued to recognize the Nicaraguan Government, but diplomat- ic relations became increasingly adversarial because of the Administration's concern that the Sandinistas were continuing to receive significant military support 31 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 _ ? , Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 2 from Cuba, support targeted, in part, for insurgent groups beyond Nicaraguan borders.2 In December 1981, President Reagan signed his first Finding specifically authorizing covert paramili- tary actions against the Sandinista Government in Nicaragua.3 Under the law, covert actions may be initiated only by a personal decision of the President. A Finding is an official document embodying that decision. By signing a Finding, a President not only authorizes action, but accepts responsibility for its consequences. Sponsoring the CIA's new covert program in Cen- tral America was the Director of Central Intelligence, William J. Casey. Casey was a veteran of covert operations, having served with the Office of Strategic Services (OSS), the predecessor to the CIA, during the Second World War. In 1945, Casey, just 32 years old and a Navy lieutenant, was chief of the Secret Intelligence Branch that directed intelligence gather- ing in German-controlled Europe from OSS head- quarters in London. After the war, Casey became a successful corporate lawyer and a wealthy investor, was appointed Chair- man of the Securities and Exchange Commission, and later became head of the President's 1980 election campaign. Following the 1980 election, Casey was named Director of Central Intelligence, the first Di- rector to enjoy Cabinet rank. Casey was a firm believ- er in the value of covert operations, and took an activist, aggressive approach to his craft. In the words of the CIA's Deputy Director of Operations, Clair George, "Bill Casey was the last great buccaneer from OSS."4 Pastora Defects Casey saw the opportunity to make military head- way against the Sandinistas in early 1982, when rebel leader Eden Pastora defected from the ruling Sandi- nista junta. Pastora appeared to be an ideal candidate for Contra military leadership. Known to his follow- ers by the nom de guerre, "Comandante Zero," he had been one of the heroes of the fight against Somoza. From 1977 to 1978, he served in the Sandinista Na- tional Liberation Front and later held several high posts in the new Government until his abrupt resigna- tion in 1981. In April 1982, Pastora organized the Sandinista Revolutionary Front (FRS) and declared war on the Sandinista Government. Although Pastora was a popular, charismatic leader with the potential to challenge the Sandinistas, his geographic base presented a problem for the Adminis- tration. He insisted on operating in the southern part of Nicaragua. The Administration, however, claimed that its only purpose in aiding the Contras was to interdict arms flows to El Salvador, which lies to the north of Nicaragua. Support for Pastora in the South contradicted that claim. 32 Casey's deputy, Admiral Bobby R. Inman, an intel- ligence professional who had headed the National Se- curity Agency, objected to this broadening of the covert program. He believed that it was unsound, and unauthorized by the existing Presidential Finding. Yet Casey was determined to proceed. Inman retired at the end of June 1982 and the CIA supported Pastora without any change in the Presidential Finding.6 A Proposal for a New Finding Pastora's rebel group "develop[ed] quickly."6 By July 12, 1982, Donald Gregg, then head of the NSC's Intelligence Directorate and responsible for all covert action projects, proposed a new draft Finding to keep pace with Pastora's developing operations. Gregg, like Inman, believed that broad support for Pastora was outside the scope of the December 1981 Find- ing.7 He wrote to William Clark, the National Securi- ty Adviser, that "additional actions not covered by previous authority are now being proposed." Those "additional actions" included providing "financial and material support," training, and arms supply to Pas- tora's forces.6 The problem with providing that assist- ance under the December 1981 Finding, as Gregg saw it, was that the "rationale" of the earlier Finding appeared "to be to have the anti-Sandinista forces strike against the Cuban presence in Nicaragua rather than attacking the Sandinista units."" Vice Admiral Poindexter, then military adviser to the National Security Adviser, disagreed. In a hand- written note, Poindexter stated: "I don't see this really needs to be approved since the earlier Finding covers it, but maybe it would be good to get a confirmation since we now have a better idea as to where we are going."11 As drafted by Gregg, the proposed Finding provided for CIA paramilitary support to forces inside Nicaragua for the purpose of "effect[ing] changes in Nicaraguan government policies."12 This draft Finding, with its broadly stated goals, was never approved by the President. Boland I By the fall of 1982, press reports told of a growing U.S. involvement in Nicaragua." Administration spokesmen responded by stating that the U.S. Gov- ernment was seeking not to overthrow the Nicara- guan Government, but merely to prevent it from ex- porting revolution to El Salvador. Aid to the Contras was presented as an act in defense of El Salvador, not a hostile act against Nicaragua. Congress soon began to question this explanation." The Contras were in the field for the announced purpose of overthrowing the Sandinistas, not simply to interdict supplies destined for El Salvador." Con- gress debated the issue extensively, with some Mem- bers questioning whether their own Government was Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 2 violating the charters of both the United Nations and the Organization of American States by interfering in the internal affairs of Nicaragua." Members voiced concern that U.S. support for the Contras was provid- ing a "convenient pretext" for the Sandinistas to impose martial law, suppress freedom of the press, stifle religion, and undermine the rights of assembly and free elections." Those who supported these views called for a complete cutoff of aid to the Con- tras. There was equally strong support in Congress, par- ticularly in the Senate, for aiding the Contras. Some Members believed that the Sandinistas were trying to spread a Marxist revolution to neighboring states. They argued that no Communist regime had ever stepped down or consented to free elections and that support for the Contras was necessary to bring about democracy in Nicaragua.'8 Out of this debate emerged an amendment to the Defense Appropriations bill for fiscal year 1983, later known as Boland I. Introduced by Representative Edward P. Boland, the amendment passed the House by a vote of 411-0, and was adopted, in December 1982, by a Conference Committee of the House and Senate. This first Boland Amendment prohibited CIA use of funds "for the purpose of overthrowing the Government of Nicaragua." '9 The internal contradictions of the Administration's announced Nicaragua policy" were carried forward in the new law: Congress appropriated funds that would be used by the CIA for Contra assistance, but at the same time rejected the Contras' objective to remove the Sandinista Government. During the floor debate on his amendment, Representative Boland indi- cated that while the Administration did not like his proposed restrictions, it would accept them." Con- gress had not cut Contra funding; it merely had legis- lated an impermissible purpose. The Administration still could maintain support for the Contras and did, by relying upon its original justification for Contra support?stopping arms flows to El Salvadoran Com- munist insurgents. In December 1982, The New York Times reported intelligence officials as saying that Washington's "covert activities have. . . become the most ambitious paramilitary and political action operation mounted by the C.I.A. in nearly a decade. . . ."22 One month later, in January 1983, Senator Patrick J. Leahy, ac- companied by staff of the Senate Intelligence Com- mittee, visited Central America to review U.S. intelli- gence activities related to Nicaragua. His findings, supplemented by followup Committee briefings and inquiries, revealed that the covert action program was "preceding policy," that it was "growing beyond that which the Committee had initially understood to be its parameters," and that "there was uncertainty in the executive branch about U.S. objectives in Nicara- gua."23 Questions about compliance with the Boland Amendment increased throughout 1983. In March, 37 House Members sent a letter to the President warning that CIA activities in Central America could be vio- lating the law." In April, news reporters visiting Contra base camps wrote that "[t]he U.S.-backed secret war against Nicaragua's leftist Sandinista regime has spilled out of the shadows."" Challenged to defend the Administration's compli- ance with the law, the President asserted in April that there had been no violation of the Boland Amend- ment. There would be none, said the President, be- cause even a law he disagreed with had to be ob- served: "We are complying with the law, the Boland Amendment, which is the law."" "[VV]hat I might personally wish or what our government might wish still would not justify us violating the law of the land."27 When asked if his Administration was doing anything to overthrow the Government of Nicaragua, he replied, "No, because that would be violating the law."28 According to some in Congress, the Administration was facing a "crisis of confidence" about the legitima- cy of CIA support for the Contras." The President responded with a major address on Central America to a joint session of Congress on April 27, 1983. Rejecting images of a new Vietnam, the President stated: But let us be clear as to the American attitude toward the Government of Nicaragua. We do not seek its overthrow. Our interest is to ensure that it does not infect its neighbors through the export of subversion and violence. Our purpose, in con- formity with American and international law, is to prevent the flow of arms to El Salvador, Hon- duras, Guatemala, and Costa Rica. It soon became clear, however, that the President had not made the case for the Administration's Contra support policy with either the Congress or the American people." He was not helped by the Con- tras' performance on the ground. The Contras had failed to win either popular support or military victo- ries in Nicaragua and could not, without both, sustain public support in the United States." The Administration Responds to Congressional Unrest: May- September 1983 In May 1983, both the House and Senate Select Com- mittees on Intelligence challenged the Administra- tion's Nicaragua policy, but in different ways. The Senate Intelligence Committee "took the rather un- usual step of requiring" that "the Administration ar- ticulate, in a clear and coherent fashion its policy 33 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 11 ...1 ..1 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 2 objectives." Before the Committee would vote for more aid, it wanted a new Presidential Finding.33 The House Permanent Select Committee on Intelli- gence, on the other hand, favorably reported a new bill, the "Boland-Zablocki" bill, to the full House for consideration.34 The bill barred aid for the Nicaragua covert action program, but it also took the Adminis- tration at its word about the need to stop arms flows to El Salvador. The legislation provided $80 million in assistance to Central American governments to stop the flow of arms to rebel groups, but no funds for "support of military or paramilitary activities in Nicaragua."35 Despite strong Administration opposi- tion, the House passed the bill on July 28, 1983, by a vote of 228195.36 With its implicit threat of an aid cutoff, the Boland- Zablocki measure challenged the Administration to articulate a plausible rationale for covert aid. The bill exposed the loose fit between the Administration's announced policy of stopping arms flows to El Salva- dor and its covert support of the Contras. If the Administration really wanted to stop arms flows to El Salvador, it could do so directly, said the Congress; but if its purpose was to aid the Contras in over- throwing the Nicaraguan Government, there would be no funding.37 The Administration responded to the threat of an aid cutoff in three different ways. First, the Adminis- tration established a public relations office in the State Department attempting to muster the public and Con- gressional support necessary for the Contras. Second, anticipating that a cutoff might nevertheless occur, the Administration developed a secret plan to stock- pile weapons for the Contras at the CIA. Finally, at the same time, to satisfy Congressional demands, the Administration agreed to draft a new Finding. White Propaganda In June of 1983, the Administration decided upon a new method of trying to win public support for the President's policy in Central America. On July 1, 1983, then National Security Adviser Clark an- nounced that "the President had decided that the Ad- ministration must increase our efforts in the public diplomacy field to deepen the understanding of the support for our policies in Central America."39 As a result, an office of Public Diplomacy for Latin American and the Caribbean (S/LPD) was estab- lished in the State Department, headed by Otto Reich,39 who eventually was given the rank of Am- bassador.40 The S/LPD was an interagency office with personnel contributed by the Department of State, the Department of Defense (DOD), the Agency for International Development, and the U.S. Information Agency. Although created as part of the State Department, the office was established at the direction of the National Security Council.4' The S/ LPD's activities were coordinated by an interagency 34 working group staffed by the NSC. The principal NSC staff officer was a former senior CIA official. With the knowledge and approval of Director Casey, he was detailed to the NSC staff for a year. He later became Special Assistant to the President with re- sponsibility for public diplomacy matters. The mission of the office?public diplomacy?was a "new, non-traditional activity for the United States government," according to the State Department. In fact, "public diplomacy" turned out to mean public relations-lobbying, all at taxpayers' expense. The office arranged speaking engagements, published pam- phlets, and sent materials to editorial writers.42 In its campaign to persuade the public and Congress to support appropriations for the Contras, the office used Government employees and outside contractors?in- cluding Richard Miller and Francis Gomez who would later work with North to provide Contra as- sistance.4 3 A Deputy Director of S/LPD, Jonathan Miller, reported the office's success in what he labeled a "White Propaganda Operation," which sought to place op-ed pieces in major papers by secret consult- ants to the office.44 By Reich's own description, the office adopted "a very aggressive posture vis-a-vis a sometimes hostile press." It "briefed Members of Con- gress, reached out to audiences previously over- looked, found new ways of reaching traditional audi- ences, and generally did not give the critics of the policy any quarter in the debate."45 It claimed that lajttacking the President was no longer cost free."'" Later, the Comptroller General would find that some of the office's efforts, in particular Jonathan Miller's "White Propaganda," were "prohibited, covert propaganda activities,"47 "beyond the range of acceptable agency public information activities. . . 2'49 In a September 30, 1987, letter, the Comptroller General concluded that S/LPD had violated "a restriction on the State Department's annual appropriations prohibiting the use of federal funds for publicity or propaganda purposes not authorized by Congress." 49 The CIA Tries to Stockpile In the summer of 1983, while efforts were under- way at the State Department to change public opin- ion, the CIA began secret preparations in the event Congress decided to cut off aid to the Contras. In that event, the Agency planned to obtain equipment free of charge from the DOD. On July 12, the President directed that the DOD provide enhanced support for the CIA in its efforts to assist the Contras.5? One day later, the CIA sent a "wish list" to the DOD, requesting that $28 million in equipment be transferred to it, "free-of-charge."' The list covered everything from medical supplies to aircraft, and included a request for personne1.52 The Approved For Release 2011/05/25 : CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 2 Joint Chiefs of Staff proposed that each of the four services carry a quarter of the cost of these trans- fers.53 The equipment then could be stockpiled by the CIA and provided to the Contras if the need arose. The CIA would not run afoul of any aid ceiling since it had not paid for the equipment. The equipment involved had been paid for out of the normal DOD budget allocation. In short, money appropriated by Congress for one purpose would be used for another, bypassing any limits Congress might place on CIA appropriations, such as the then-pending Boland- Zablocki bill.54 By late summer, the DOD's General Counsel con- cluded that a nonreimbursable transfer would violate the Economy Act, a law requiring that the DOD be reimbursed for the cost of interagency transfers.55 The CIA would have to pay for all items except surplus equipment. From the CIA's perspective, this defeated the purpose of the plan: to avoid the expend- iture of CIA funds and shift the cost to the DOD.56 The project was finally terminated on February 12, 1985, after the CIA had obtained, without cost, 3 surplus Cessna aircraft and, at cost, 10 night vision goggles, 1 night vision sight, and a Bushmaster cannon.57 The September 1983 Finding: A New Rationale for Covert Aid Trying to forestall a complete cutoff of Congres- sional aid, the Administration accepted the Senate Intelligence Committee's proposal that it draft a new Finding defining and delimiting the purposes of the covert program. By August, Director Casey had pre- sented the Committee with a first draft and later, in September, proceeded to "informally discuss the find- ing with Senator Goldwater and other key Senators of the SSCI."58 Within the Administration, the Find- ing was, as North put it, "thoroughly scrubbed" by the State Department and NSC staff as well by as the Justice Department and lawyers from DOD and CIA." On September 16, 1983, at a National Security Planning Group (NSPG) meeting, Director Casey briefed the President and his advisers from the State and Defense Departments on the draft Finding. The Director explained that the earlier Finding had been "modified to reflect [a] change of objectives. No longer was the covert program justified solely by the need to curb Cuban support for the Sandinistas or to stop arms flows out of Nicaragua. A new, and broader, rationale was added: covert aid was intended to pressure the Sandinistas to negotiate a treaty with nearby countries.6' The new Finding also reflected a change of tactics. Congress would not accept a Finding broad enough to permit paramilitary operations conducted by U. S. citizens. The Administration gave its assurances that aid for paramilitary operations would be limited to third-country nationals." Casey told the President that the "new Finding no longer lets us engage in PM [paramilitary operations]."63 Three days later, on September 19, 1983, the Find- ing was signed.64 The next day, the Intelligence Committees received briefings on it. Shortly thereaf- ter, the Senate Intelligence Committee voted to pro- vide aid for a continued covert operation in Nicara- gua.65 The new Finding, however, was not without prob- lems. The Administration's stated objective in sup- porting the Contras was now to pressure the Sandinis- tas into accepting a treaty that had to include free elections. If, as the President believed, the Sandinistas could not win such an election, they would never agree to such a treaty.66 Only the prospect of a military defeat would push them toward a negotiating posture. Yet, the renunciation of a military victory was the price set by Congress for a bipartisan com- promise. The Finding thus contained within it a para- dox that would haunt the Administration's Nicaragua policy. Forcing the Issue: The December Funding Cap and Intensifying Covert Operations One day after the September Finding was briefed to the Intelligence Committees, an unnamed Administra- tion official was quoted in The New York Times explaining the rationale of the new Finding: "Yes, we are supporting the rebels until the Nicaraguans stop their subversion," an "approach," the official urged, that "should end the argument over whether the Ad- ministration was violating its pledge by doing more than just stopping the arms flow."67 But Administration hopes that the September Find- ing, and its new rationale for covert action, would end the debate on Contra aid were quickly dashed. Discussions were held on the House floor over the advisability of continuing covert aid, and the Presi- dent took his cause to the public in his radio address- es. In October, the House voted to halt all aid to paramilitary groups fighting the Nicaraguan Govern- ment." The Senate, however, wanted to continue aid. In early December, the House and Senate agreed to a compromise: A "cap" of $24 million would be placed on Contra funding, and the CIA would be barred from using its contingency reserves to make up any shortfal1.69 Congress and the Administration recognized that the $24 million appropriation would be insufficient to sustain a covert operation through the fiscal year.7? Therefore, the door was left open for a future Admin- istration funding request to carry the program for the balance of the year if negotiations for a peace treaty were thwarted by the Sandinistas. The President was 35 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 2 required to report to Congress by March 15 on the steps taken to achieve a negotiated settlement in Cen- tral America.? The Decision to Bring the Situation to a Head Having survived the threat of a total cutoff of funds for the Contras, the Administration decided to intensi- fy the CIA's covert activities while funding still re- mained.72 Charged by the new National Security Ad- viser, Robert McFarlane, to prepare an "in-depth review" of the Administration's Central America policy,73 a Special Interagency Working Group (SIG)74 concluded: "Given the distinct possibility that we may be unable to obtain additional funding in FY-84 or FY-85, our objective should be to bring the Nicaragua situation to a head in 1984." 74a At a Janu- ary 6 NSPG meeting, the President and his advisers concurred in the SIG recommendation: "Our covert action program should proceed with stepped up inten- sity." 7 5 Even before the decision had been officially ac- knowledged, plans had been implemented to step-up paramilitary operations in Central America. In the fall, speedboats carried out attacks against Sandinista patrol craft and fuel tanks.76 By November, a more heavily armed speedboat had been developed for follow-on operations.77 At the end of December, and thereafter, the mining and other operations increased. In early January, the CIA proposed attacks against fuel supply depots and transmission lines along the "entire Pacific coast of Nicaragua."78 On January 7, three magnetic mines were placed in Sandino harbor;79 on February 3, an air attack destroyed a Sandinista "communications and naval arms depot""; and on February 29, more mines were placed at Corinto." By March 29, plans had been made to support an attack by Eden Pastora on San Juan del Norte; it was hoped that the attack would result in the installation of a provisional gov- ernment.8 2 The Role of Lt. Col. Oliver North At the NSC, Lt. Col. Oliver North became the liaison with the CIA in its intensified covert effort. A graduate of the U. S. Naval Academy, he had distin- guished himself on the battlefield in Vietnam, winning a Silver Star, a Bronze Star, and two Purple Hearts." He was assigned to the NSC in October 1981, where he quickly established a reputation with his superiors as a staffer who could get a job done.84 North was energetic, articulate, action-oriented, and had a reputation for bypassing red tape.85 His superi- ors could depend on him not only to carry out orders, but to keep them informed." North was a prodigious writer, often staying in his office until late at night to complete lengthy papers or other work.87 36 As described by a number of his colleagues, North's relationship to McFarlane was very close.88 With McFarlane's rise to the position of National Security Adviser, North came to play an increasingly large role not only in the operational aspects of Contra policy, but also in forging that policy. North already had contacts in Central America who were pleased with his success. On November 7, 1983, John Hull, Indiana native, ranch owner in Costa Rica, and Contra supporter, wrote that "B.G.," or "blood and guts," as North was known, was to have a new boss, Robert McFarlane. Hull hoped this would make North "more powerful as we need more like him."89 North became a strong advocate within the NSC staff of intensified covert support for the Contras. He was the point of contact, transferring information from the CIA to the National Security Adviser for the President's approval.9? For every significant, and sometimes insignificant, operation, he provided a memorandum to the National Security Adviser des- tined for the President. His reports were detailed and enthusiastic, his recommendations supportive of fur- ther operations.9' In his new assignment, North looked to Casey for guidance. In his words, Director Casey was a "teach- er or philosophical mentor" of sorts, to whom he looked for help and advice on a regular basis.92 "Bill Casey was for me a man of immense proportions," North testified, "a man whose advice I valued greatly and a man whose concern for this country and the future of this land were, I thought, on the right track." "History," North stated "will bear that out."93 Tension Between the 1983 Finding and Intensified Operations In a series of memorandums written between Oc- tober 1983 and March 1984, North recorded the CIA's increasing covert presence in the region. Rela- tively minor operational details were given to the President, as on November 4, when North advised McFarlane to suggest an increase in the number of weapons supplied to the Contras by 3,000. The Presi- dent approved the recommendation.94 North not only sought approval for, but also reported the results of, various actions proposed to him by Agency person- nel. On February 3, he reported a successful attack on a Sandinista communications and naval arms depot. Admiral Poindexter penned, "Well done," and checked North's recommendation that the President would be briefed.9 5 North frequently stated in his memorandums that the actions recommended were within the Septem- ber 1983 Finding. 96Yet, progress toward negotiations and success in arms interdiction were not the focus of his attention; instead, the destruction of Sandinista fuel supply lines or the mining of harbors was the Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 2 subjects of these memorandums. North kept his superiors advised of Contra actions that would weaken the Sandinista regime, explaining that the purpose of the mining and attacks was to enhance the Contras' military strength, while "reduc[ing] the mobility of Sandinista military units."97 North could contend that such military activities were within the scope of the Finding because of the Finding's essential ambiguity: Paramilitary action, once authorized, may be used to promote a diplomat- ic end while at the same time furthering the cause of military victory. But by March of 1984, it had become clear that the diplomatic end the Finding described was not what North anticipated or encour- aged. In memoranda to McFarlane, he proposed sig- nificant military actions against the Sandinistas, the details of which cannot be disclosed for national secu- rity reasons, but which give substance to the testimo- ny of Clair George, CIA Deputy Director for Oper- ations, that North's ideas were often extreme, "crazy," or "hairbrained."98 The memos reveal the same enthusiasm for covert paramilitary operations that North would later bring to his work as the "switching point" for Contra support during the next 2 years.69 The Money Begins to Run Out By February 1984, the $24 million earmarked by Congress for the Contras was being quickly depleted. On February 13, North wrote to McFarlane, empha- sizing the importance of obtaining "relief from the $24M ceiling,"1" but recognizing that "[c]ongres- sional resistance on this issue is formidable": [P]rospects for success are bleak even with a concerted effort. At some point, we may have to reassess our prospects and decide whether pru- dence requires that we somehow stretch our FY- 84 effort to avoid running out of funds.101 In a memorandum drafted by North for the President, McFarlane concluded that "[u]nless an additional $14M [million] is made available, the [Contra aid] program will have to be drastically curtailed by May or June of this year. "102 The Harbor Mining Disclosures In early April, the country learned that the U.S. Government was involved in the mining of Nicara- guan harbors. U.S. Government presence in Nicara- gua had become "embarrassingly overt."103 As McFarlane testified: "The disclosure that harbors had been mined in Nicaragua was received very badly. . . 104 Some in Congress believed that the Administration had misrepresented the activities it conducted under the September 1983 Finding.105 Senator Barry Goldwater, Senate Intelligence Committee Chairman, charged that his Committee Members had been de- ceived at the very moment they were being asked to vote to support Contra aid. "[lit is indefensible on the part of the Administration to ask us to back its for- eign policy when we don't even know what is going on," he declared.106 After initial assertions by Director Casey and the National Security Adviser 1?7 that full and detailed disclosure had been provided to Congress, the Ad- ministration decided to end the escalating battle and offered a truce. On April 26, Director Casey "apologize[d] profoundly," conceding inadequate dis- closure.'" But the "apology" could not heal the "fracture" between Congress and the Administration that the mining had created."9 The Administration's policy to bring the situation "to a head" had back- fired: the plan, rather than attracting support, lost it. Keeping the Contras Together: Spring-Summer 1984 The Administration's proposal for $21 million in supplemental assistance for the Contras now lay in doubt as Congress debated the course of U. S. policy in Central America. The uproar over the mining inci- dent made any further appropriation unlikely. Indeed, House Speaker Thomas P. (Tip) O'Neill, Jr. declared that, in his view, the President's funding request was "dead." 10 With or without appropriated funds, the Adminis- tration planned to continue supporting the Contras. In McFarlane's words, the President directed the NSC staff to keep the Contras together "body and soul."110a In Poindexter's words, the President "wanted to be sure that the contras were support- ed.,,i McFarlane assigned this responsibility to North, who testified: I was given the job of holding them together in body and in sou1.112 To keep them together as a viable political oppo- sition, to keep them alive in the field, to bridge the time between the time when we would have no money and the time when the Congress would vote again, to keep the effort alive, be- cause the President committed publicly to go back, in his words, again and again and again to support the Nicaraguan resistance. '13 37 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 11 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 2 Tapping Foreign Sources The First Efforts With the appropriated funds projected to run out in May or June, the Contras could be kept together only if an alternative source of funding could be found. The Administration began to look beyond the U.S. Treasury to foreign countries for monetary support. As early as February, North drafted a National Secu- rity Decision Directive recommending "immediate ef- forts to obtain additional funding of $10-$15 million from foreign or domestic sources to make up for the fact that the current $24 million appropriation will sustain operations only through June 1984."114 While McFarlane struck this language from an official pol- icymaking document,' 15 he quietly pursued the same idea. Looking to Country 1 for Contra Support McFarlane testified that perhaps as early as Febru- ary 1984, he considered "the possibility of in effect farming out the whole contra support operation to another country, which would not only provide the funding, but give it some direction."' 16 In February or March, McFarlane pursued the idea with an offi- cial from Country 1."7 He inquired whether Country 1 would have any interest in instructing "the contras in basic tactics, maneuver[s], and so forth."8 Coun- try 1 officials eventually declined the invitation."9 But McFarlane was not dissuaded from attempting a less ambitious plan for third-country support. On March 27, McFarlane met with Director Casey and proposed a plan to approach third countries, including Country 1, for Contra assistance. In a memorandum of that date, Casey recounted McFarlane's plan: In view of possible difficulties in obtaining sup- plemental appropriations to carry out the Nicara- guan covert action project through the remainder of this year, I am in full agreement that you should explore funding alternatives with [Coun- try 1] and perhaps others.12? Others were not in "full agreement," however, about an approach to Country 1. Secretary of State George P. Shultz testified that during other discus- sions within the Administration about third-country funding, he questioned the legality and wisdom of any third-country approach. Shultz testified that by April 18, McFarlane knew he (Shultz) felt it was a mistake to approach Country 1 for Contra support.'21 Nevertheless, McFarlane followed through with the plan recounted in Director Casey's March 27 memo. He directed Howard J. Teicher, the Director of Near East Affairs at the NSC, to speak to an official in Country l's Ministry of Foreign Affairs about obtain- ing monetary support. Teicher made the approach, but Country 1 declined to be a part of the plan.122 McFarlane, in a memorandum of April 20, told 38 Teicher that he was "disappointed in the outcome but we will not raise it further . . . [w]e will not press them on the question of assistance to the contras."123 In May, Secretary Shultz learned of Teicher's ap- proach from the U. S. Ambassador to Country 1, and he confronted McFarlane at the White House.'" Ac- cording to Shultz, McFarlane told him that Teicher's approach to Country 1 was without authorization and that Teicher was operating "on his own hook."125 But Shultz later learned, to the contrary, from his Ambassador, that Teicher had made a point of telling the Ambassador he was in Country 1 at McFarlane's instructions.'" Later, McFarlane told the Commit- tees that he had directed Teicher to seek a contribu- tion from Country 1.127 Looking to Country 6 for Contra Support Another third-country funding option considered by the CIA during the spring of 1984 was an ap- proach to Country 6. In his March 27 memorandum, Casey indicated that Country 6 officials alreadY had been approached and that the initial reaction had been favorable.'" Between April 10 and 13, 1984, Duane (Dewey) Clarridge, Chief of the Latin American Di- vision of the CIA Directorate of Operations traveled to Country 6.129 While there, CIA Deputy Director John N. McMahon, told Clarridge to "hold off" on his discussions because of the recent harbor mining disclosures.130 Upon his return to the United States, Clarridge wrote: Current furor here over the Nicaraguan project urges that we postpone taking [Country 6] up on their offer of assistance. Please express to [Coun- try 6 official] my deep regret that we must do this, at least for the time being, and I fully realize that he cannot crank up assistance on a moment's notice, should we decide to go forward in the future.131 Clarridge testified that neither Casey's March 27 memorandum nor the cable traffic (in some cases cap- tioned, "[Country 6] Assistance to the Nicaraguan Project"132), represented CIA efforts to solicit Contra assistance from Country 6.133 He conceded that the documents showed that, prior to his arrival, Country 6 had offered to aid the Contras, and that an offer may have been made as early as January 1984 in a meeting between Director Casey and a Country 6 official.'" But before he arrived in Country 6, Clarridge testified, "a decision had been taken . . . that we would neither ask for any assistance nor would we accept any . . . ."136 Clarridge did not explain why, if the Country 6 offer of assistance was dead before his visit, he urged on his return "we postpone taking [Country 6] up on their offer of as- sistance."136 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 2 Country 2 Contributes Funds By May 1984, the Contras had exhausted the last portion of the $24 million Congressional appropriation for fiscal 1984. McFarlane testified that possibly as early as May,'" he met with the Ambassador from Country 2 and explained that it was almost "inevita- ble that the Administration would fail" to win Con- gressional support for the Contras.138 According to McFarlane, the Ambassador offered to "provide a contribution of $1 million per month, ostensibly from private funds that would be devoted to?as a humani- tarian gesture?to sustenance of the Contras through the end of the year."1" In his testimony, McFarlane denied that any solicitation of Country 2 had oc- curred, and insisted the Country 2 contribution was merely a gift. 140 After receiving the contribution and informing his deputy, Admiral Poindexter, McFarlane charged North with the responsibility for arranging the trans- fer of funds: "[I] asked him to be in touch with the contra leaders and to find out where the bank account was kept. . . . Lieutenant Colonel North came back and provided the name of the bank, its address and the contras' account number for the bank in Miami. . . ."14' McFarlane communicated this to the Ambassador by handing him an index card with the account number on it.142 North testified that it was McFarlane who asked him "to establish the initial resistance account offshore to which money was sent by a foreign government."143 According to McFarlane, the President was in- formed of the Country 2 contribution shortly after it took place. McFarlane placed a note card into the President's morning briefing book. He chose this method of informing the President of the contribution to reduce any chance that others at the President's daily briefing might become aware of the funding scheme. After the meeting, McFarlane was called in to "pick up the note card which," he recalled, "ex- pressed the President's satisfaction and pleasure that this had occurred."144 McFarlane also testified he informed selected mem- bers of the executive branch of the funding. "Within a day or so," he told Vice President George Bush, and at a weekly breakfast with the Secretaries of State and Defense, he "drew them aside" and informed them that the Contras would be "provided for" until the end of the year. Neither Secretary, according to McFarlane's testimony, asked the source of the funds.145 McFarlane testified that it was "likely" he told then-Chief of Staff, James A. Baker III "Mil the spring of '84," and that it was "possible" he told then- Counselor to the President Edwin Meese III of the Country 2 contribution.146 McFarlane claimed he did not inform Director Casey of the Country 2 fund- ing.147 But McFarlane's account was disputed by other witnesses. Secretary of Defense Caspar W. Weinberg- er had no recollection of being so advised by McFar- lane;148 and Secretary Shultz testified that he was told of the contribution for the first time in June 1986 after Admiral Poindexter became concerned that the Secretary of State had not been told of the Country 2 contribution.149 Baker denied any knowledge of the contribution. 50 The June National Security Planning Group Meeting On June 25, the National Security Planning Group met to consider options for funding the Contras. In attendance were the President, Vice President Bush, Secretary Shultz, Secretary Weinberger, Director Casey, Meese, and McFarlane. Director Casey urged the President to seek third-country aid. Secretary Shultz responded that Chief of Staff James Baker had told him that if the U.S. Government acted as a conduit for third-country funding to the Contras, that would be an "impeachable offense."" Casey re- sponded that it was permissible if the plan called for direct contributions from third countries to the Con- tras. Meese recalled that there was an opinion by Attorney General William French Smith that provid- ed authority for such a plan, but also noted that if an opinion were sought, Justice Department lawyers should be given guidance on what the opinion should say. The meeting ended without any firm conclusion. McFarlane advised that no one was to do anything without the necessary Justice Department opinion. Although McFarlane had already secured the contri- bution from Country 2, neither he nor anyone else mentioned it.152 And although McFarlane had urged those at the National Security Planning Group meeting not to do anything, that very day North arranged for the trans- fer of Country 2 funds to Contra leader Adolfo Calero. North's notes reveal that on June 25, 1984, he told Calero that funds would be transferred "w/in 24 hrs.," through an offshore account. North issued a series of instructions to Calero: "Never let agency know of amt, source, or even availability" of the funds; "No one in our govt. can be aware"; and "Your organization must not be aware."153 North made these plans to send the Country 2 funds to Calero despite his apparent knowledge of the legal difficulties expressed earlier that day at the Na- tional Security Planning Group meeting. His notes reflect that he was advised of those discussions by Clarridge of the CIA. North recorded phrases such as "impeachable offense" (presumably referring to Sec- retary Shultz's remark), and "going to French Smith ?reading on US seeking alternative funding." The note continues: "Seek 3d party funding.91154 The next day, Director Casey met with Attorney General Smith along with members of the Justice Department and the CIA legal staff. In a memoran- 39 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 11 V , Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 2 dum recording the meeting, the CIA's General Coun- sel, Stanley Sporkin, reported that in response to Di- rector Casey's question about the "legal limits" of funding options, the Attorney General stated: that he saw no legal concern if the United States Government discussed this matter with other na- tions so long as it was made clear that they would be using their own funds to support the Contras and no U.S. appropriated funds would be used for this purpose. The Attorney General also said that any nation agreeing to supply aid could not look to the United States to repay that com- mitment in the future. The DCI [Director of Central Intelligence] made it clear that if there is a possibility this option might be used, he would advise the CIA oversight committees.155 The Intelligence Committees were not advised of the Country 2 contribution until 1987. Providing Support?The Private Network With funds available from Country 2, North turned to creating a mechanism for providing materiel sup- port for the Contras. "When we ran out of money," North testified, "when people started to look in Nica- ragua and Honduras and Guatemala and El Salvador and Costa Rica for some sign of what the Americans were really going to do," a decision was made to create an infrastructure, what North termed a "covert operation" to provide the operational support denied by Congress.156 North testified that, at Casey's suggestion, he turned to Retired U.S. Air Force Maj. General Rich- ard V. Secord: 157 [I]n 1984, we were approaching the proscriptions under Boland, Director Casey and I had had a number of discussions. I had made a number of trips, and obviously by then I had become much more engaged in the support for the resistance. Director Casey is the one who had suggested General Secord to me as a person who had a background in covert operations . . . and was a man who, by Director Casey's definition, got things done, and who had been poorly treated. Those were his words. I approached General Secord in 1984 and asked that he become engaged in these activities. . . . I went back to him again and at some point in '84, he agreed to become actively engaged. He agreed to establish, and did, private commercial entities outside the United States that could help carry out these activities.158 It was always viewed by myself, by Mr. McFarlane, by Direc- tor Casey, that these were private commercial ventures, private commercial activities 40 It was clearly indicated that Mr. McFarlane and Admiral Poindexter and in fact almost drawn up by Director Casey, how these would be outside the U.S. Government, and that I told them right from the very beginning that those things that he did deserved fair and just compensation.16? [I]t was always the intention to make this a self- sustaining operation and that there always be something there which you could reach out and grab when you needed it. Director Casey said he wanted something you could pull off the shelf and use at a moment's notice.'" The network, albeit privately run, was created for the purpose of pursuing "foreign policy goals." Accord- ing to North: "It was never envisioned in my mind that this would be hidden from the President." 162 The President has publicly stated that he was kept informed of some of the efforts by private citizens to aid the Contras.163 Poindexter testified the President "knew the contras were being supported . . . by third-country funds and by private support activity. . . ." 164 There is no evidence, however, to suggest that the President was ever informed about an "off-the-shelf' covert operation. Secord's Initial Role General Secord had served in the Air Force until 1983, when he retired and entered private business. During his service in the Air Force, he was involved in special operations with the CIA in Laos. From 1978 to 1981, Secord headed the U.S. Air Force International Programs office.155 In summer 1984, Secord's first assignment from North was to assist the Contras in buying weapons with the funds sent to Calero by Country 2. In July, Secord, accompanied by his associate and former CIA operative, Rafael Quintero, met with Calero to dis- cuss the Contras' need for low-priced weapons. He left the meeting with a weapons list.166 Although Secord was not an arms dealer, he agreed to act as a broker to procure the weapons with his business part- ner, Albert A. Hakim, a naturalized American of Ira- nian descent.'" In his testimony, Secord referred to the operation that he and Hakim used for Contra support as "the Enterprise." 168 Owen's Role North also obtained the assistance of Robert W. Owen to act on his behalf with Contra leaders. Owen was a private citizen who was a teacher before he joined the staff of Senator Dan Quayle in 1982. After leaving Senator Quayle's staff in 1983, Owen joined Gray & Co., a public relations firm in Washington, D. C.199 In the spring of 1984, while Owen was at Gray & Co., a Contra representative approached the firm Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 2 seeking representation. Owen was asked to contact the Nicaraguan Democratic Forces (FDN). He turned to North, whom he had met the year before while working for Senator Quayle. Owen learned from North that the Contras needed money, and they dis- cussed a plan to set up a group of European proprie- tary companies to purchase weapons overseas. During the discussions, North asked Owen to travel to Cen- tral America to determine the Contras' requirements over the next several months. Owen agreed.'" Taking a leave of absence from his firm, Owen traveled to Central America in late May or early June 1984 and met with Contra leaders. He was told, and subsequently repeated to North, that the Contras "would need $1 million a month, and if they wanted to increase in size they would need about a million and a half dollars a month." 171 Between October 1984 and March 1986, Owen made more than seven trips to Central America collecting information and delivering intelligence and money to the Contras on North's behalf. '72 He was given the code name "T.C." (The Courier), and in his own words, he served as North's "eyes and ears" in Central Amer- ica.'" Boland II In the summer of 1984, CIA covert assistance to the Contras began to wane as funds were depleted. Mean- while, legislation?the second Boland Amendment? that would bar the Agency from future support for the Contras had been passed by the House in early August. According to McFarlane, as the CIA stepped out of the picture, the task of supporting the Contras fell to the NSC: "[t]he President had made clear that he wanted a job done. The net result was that the job fell to the National Security Council staff." 174 In late August, North traveled to Central America to meet with Calero to resolve "immediate operation- al/logistic problems." McFarlane advised North: "Ex- ercise absolute 'stealth.' No visible meeting. No press awareness of your presence in the area." 175 On Sep- tember 1, North proposed to McFarlane that he obtain a "private donor" for a new helicopter to re- place one shot down the day before. The National Security Adviser penned a note: "I don't think this is legal." 176 One month later, on October 9, North proposed a National Security Decision Directive call- ing "for the CIA to provide assistance to the Nicara- guan Resistance Forces in interdicting Soviet arms bound for the FSLN in Managua." Once again, McFarlane wrote on the cover sheet: "011ie/Ken [de- Graffenreid]. 177 pls check w/ CIA legal counsel promptly to confirm this is legal . . . 178 By early October, Congress had adopted the Boland Amendment to an omnibus appropriations bill. Signed into law by the President on October 12, 1984, the bill would later be referred to as Boland II. It provided in relevant part: During fiscal year 1985, no funds available to the Central Intelligence Agency, the Department of Defense, or any other agency or entity involved in intelligence activities may be obligated or ex- pended for the purpose or which would have the effect of supporting, directly or indirectly, mili- tary or paramilitary operations in Nicaragua by any nation, group, organization, movement or individual. Similar provisions were adopted as parts of the De- fense and Intelligence Authorization bills. While Boland II cut off all funding for the Contras, it held out some hope for renewing Contra aid in the future by providing that the Administration could seek a $14 million appropriation on an expedited basis after February 28, 1985. But, even as the bill held out a future hope, its sponsors made clear that the law was intended to achieve an immediate cutoff of aid. As Representative Boland put it, the law "clearly ends U.S. support for the war in Nicaragua. Such support can only be renewed if the President can convince the Congress that this very strict prohibition should be overturned." 178 Poindexter and North, who admitted assisting the Contras in their military activities, had a different view. Both testified that they did not believe that Boland II was applicable to the NSC staff and that while the CIA could no longer provide any assistance to the Contras, the NSC staff was free to do so.'" Poindexter put it succinctly: "I never believed, and I don't believe today, that the Boland Amendment ever applied to the National Security Council staff. . . .,* 181 Their former superior, Robert McFarlane, was sur- prised by that view. '82 McFarlane, who denied au- thorizing the NSC staff to provide military assistance to the Contras, maintained that the "Amendment gov- erned our actions." 183 In "cutting off money for the Contras," he understood Congress to say "we don't want any money raised for the Contras." McFarlane testified that he repeatedly addressed the NSC staff with "a kind of litany of mine, . . . [not to] 'solicit, encourage, coerce, or broker'" financial contributions for the Contras.'" According to McFarlane, he spe- cifically told North to "stay within the law and to be particularly careful not to be associated with or take part in any fundraising activities." 185 He dismissed his instruction to North to keep the Contras "together body and soul" as meaning nothing more than "smoke and mirrors." 186 What he intended North to provide was only moral and political, not military, support.'" North and Poindexter both denied hearing McFarlane's warnings against solicitation and en- treaties to observe the law.'88 Both claimed that they were acting within their legal rights in aiding the 41 Approved For Release 2011/05/25 : CIA-RDP89T00142R000500610001-7 I] 11 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 2 Contras. North stated that all of his acts were author- ized by his superiors,'" and Poindexter, speaking as one of those superiors, confirmed that he had given North a "broad charter" to support the Contras and had "authorized in general" North's actions in carry- ing out that charter.'" McFarlane testified he was unaware of the breadth of North's activities.'91 In any case, Poindexter and North were not de- terred by Boland II in assisting the Contras. Thus, after the Boland Amendment passed, Poindexter ex- plained to McFarlane his Nicaraguan strategy for the future: "continue active negotiations but agree on no treaty and agree to work out some way to support the Contras either directly or indirectly. Withhold true objectives from staffs." 192 Indeed, Boland II was a spur to action. The CIA had to withdraw from supporting the Contras and, according to North, this meant he "was the only person left talking to them." 193 As North put it: "The U.S. contact with the Nicaraguan resistance was me, and I turned to others to help carry out that activity." 194 Poindexter saw it the same way: Very frankly, we were willing to take some risks in order to keep the Contras alive, as I said, until we could eventually win the legislative battle. So for all intents and purposes, Colonel North largely took over the?much of the activity that [the] CIA had been doing prior to their being prohibited from carrying [on] activity because of the Boland Amendment.195 As Poindexter summed up North's role, "[O]nce the CIA was restricted," North was the "switching point that made the whole system work. . . the kingpin to the Central American opposition . . . ." 196 Boland II did not deter North?it simply reinforced the need to keep what he was doing secret from Congress, the public, and others in the Government. The CIA support of the Contras had not been kept from Congress?it was openly debated on the floor and was funded by appropriations. With Boland II, the assistance?now handled by the NSC staff?went underground. Contra Aid Fall 1984 to Winter 1985 Boland II did not cause any immediate crisis for the Contras. Steps taken months before ensured their sur- vival. As McFarlane testified, "[T]here wasn't any need" for funds at the time.'" The $1 million-a- month pledged by Country 2 in June 1984 would "bridge the gap" at least until December. And as North testified, by the time the Boland Amendment was passed, "General Secord had been engaged and money had started to flow to the Nicaraguan Resist- ance from outside sources." 199 42 Arms Shipments Begin and Blowpipes Are Sought While Secord undertook to procure weapons, North remained heavily involved. Calero testified that he consulted with North regarding weapons needs and purchases 199 and North's notebooks confirm this.299 In the fall, the Contras' most pressing need was ground-to-air missiles. The Sandinistas had just ob- tained Soviet-designed HIND-D helicopters, sophisti- cated assault helicopters. North devoted his efforts to finding a missile capable of shooting them down. North learned in December 1984 that Blowpipe missiles were available in a Latin American country and, on his advice, Calero visited the country to ne- gotiate for their purchase."' On December 17, Calero reported back to North that the Latin Ameri- can country was willing to donate Blowpipes provid- ed that Calero bought eight launchers for $200,000.202 Permission was required and North tried to get that permission, recommending to McFarlane that the President take it up directly with the perti- nent head of state.2" McFarlane denied he ever asked "the President to intercede with any person for the obtaining of Blowpipes for the Contras." 204 In any event, permission was not secured and on January 3, 1985, Calero reported to North that the "Blow Pipe deal is off." 205 North would try the following year to revive it. In the meantime, Secord had located ground-to-air missiles in Country 4. But in December, North learned that Secord was having difficulty in arranging their shipment to the Contras. North asked Gaston Sigur, an NSC consultant and expert in Far Eastern Affairs, to set up a meeting in Washington between a representative of the originating country, Country 4, and North.2" At the meeting, North told the Coun- try 4 official that the missiles were going to the Contras, not to the Central American country identi- fied in the official documents.207 North said that while he was "actually seeking to facilitate the trans- portation" of the missiles, he hoped that he could persuade Country 4 to donate them.2" Ultimately, Country 4 agreed to sell the missiles to the Contras. North sent McFarlane and Poindexter a memoran- dum reporting on the meeting. Although McFarlane could not recall the memorandum, he testified that it would likely have prompted him to ask "Admiral Poindexter to find out what was going on . . . and how his [North's] actions squared with the law." McFarlane did not recall how his questions were re- solved.2" North testified that McFarlane and Poin- dexter approved the meeting with the Country 4 rep- resentative described in his memo.2" Meanwhile, the Contras were also running out of basic weapons. According to Secord, in November, Secord, using money provided by Calero, made a Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 2 downpayment on a shipment of arms which was to come by sea from the Far East. But the shipment was delayed and, in fact, it would not arrive until the spring of 1985.2" To make the first arms shipment, the Enterprise needed an end-user certificate (EUC)?a document certifying that the arms were for the exclusive use of the country to which the arms were being sent. The Contras could not issue end-user certificates because they were not a recognized government. Thus, false certificates had to be procured for the Enterprise, and again it fell to North to arrange their procurement. By the end of January, he was engaged in the task. He wrote in his notebooks: "Mtg. w/ Adolfo [Calero]-. . . . [Central American Leader] re: EUC for M-79 Rounds. [Leader of Central American country] turned down." 212 "Private mtg. w/ [U.S. Ambassador to a Central American country], offline items?EUC- $5000 M-79 Rds." 213 By early February, there was urgency in the request: Second met with North and told him that he "need[ed] to get a bunch of EUC's from [Country 14] NOW for next shipment." 214 By February 14, 1985, North had the end-user certificates, and Secord was able to ship more than 90,000 pounds of East European munitions by chartered aircraft from Defex, a European arms dealer, to a Central American country for the Contras.215 Providing Intelligence and Military Advice North's role was not limited to assisting arms pur- chases. On direction from McFarlane, he gave politi- cal advice to the Contras on unifying the different factions and adopting a platform recognizing human rights and pledging a pluralistic society.216 Even more critical for the Contras, North provided military intelligence and advice. The CIA and the DOD could not provide military intelligence directly to the Contras, so North provid- ed it himself. North would obtain maps and other intelligence on the Sandinista positions from the CIA and DOD, ostensibly for his own use.217 North would then pass the intelligence to the Contras using Owen as a courier.215 North explained the reasons for this system: Q: Did you believe that you were complying with Boland when you took intelligence from the CIA and passed it to the Contras through Robert Owen? A: Yes. And the intelligence that I passed myself personally, and it wasn't all from the CIA, much of it came from the Department of Defense. Q: And did you understand at the time that the CIA and the Department of Defense couldn't pass that intelligence directly? A: Exactly. Q: And you believed that it was compliance with Boland, that it was fulfilling the purposes of Boland for you to take the intelligence from the CIA or the Department of Defense and pass it to the Contras? That is what you are saying? A: I am not saying that it was fulfilling the pur- poses of Boland. I am saying it was working around the problem that Boland would have cre- ated in trying to comply with Boland that al- lowed me to do that.219 Director Casey was eager to keep the CIA bu- reaucracy insulated from North's activities in support- ing the Contras. Indeed, in November, Casey com- plained to Poindexter that North was conducting his support activities "indiscreetly," 220 and had disclosed to CIA officials that he was raising funds for, and providing intelligence to, the Contras.221 Learning of the complaint, North wrote McFarlane on November 7, 1984, to defend his behavior. North insisted he had not implicated the Chief of the CIA's Central American Task Force in his Contra support activities. "Clarifying who said what to whom," North acknowledged that he had passed intelligence to Calero to assist him in destroying the Sandinistas' newly acquired HIND-D helicopters. North stated that he had gone to both the CIA and to the DOD for information on the helicopters' location and passed this on to Calero.222 North denied, however, that he had disclosed his purpose to the Chief of the Central American Task Force, or advised him about the "financial arrange- ments of the FDN." 223 In fact, the memo recounts a conversation showing that North misled the Task Force Chief, telling him that the intelligence request had been "a fall out of the CPPG [the Crisis Pre- Planning Group]," and that he (North) had no idea where the Contras were obtaining their funding. In the memorandum, North reported that he encouraged the Task Force Chief's impression that the funding had been obtained from "outside" sources.224 McFarlane testified that he did not authorize North to pass intelligence to the Contras and if, as the memo indicated, North had passed that information to Calero, Boland II would had been violated.225 North admitted that he had provided the intelligence but maintained that Boland II did not "prevent the trans- fer of basic intelligence information to the Con- tras." 226 In early February 1985, North became concerned about a shipment of weapons bound for the Sandinis- tas aboard the ship, the Monimbo. In a memorandum to McFarlane and Poindexter, North recommended the vessel be seized or sunk: If asked, Calero would be willing to finance the operation. He does not, however, have sufficient numbers of trained maritime special operations 43 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 2 personnel or a method of delivery for seizing the ship on the high seas. . . . If time does not permit a special operation [on the high seas] . . . Calero can quickly be provided with the maritime assets required to sink the vessel before it can reach port at Corinto. He is in contact with maritime operations experts and purveyors of materiel nec- essary to conduct such an operation.227 North asked McFarlane for authorization to provide Calero "with the information on Monimbo" and for permission to approach him "on the matter of seizing or sinking the ship." 228 This time, Admiral Poindexter raised a legal ques- tion, but only to advise McFarlane about how North's recommendation should be handled. On the bottom of the memorandum, Poindexter agreed with North that, "We need to take action to make sure ship does not arrive in Nicaragua. JP."229 But in a cover note to McFarlane, Admiral Poindexter wrote: Except for the prohibition of the intelligence community doing anything to assist the Freedom Fighters I would readily recommend I bring this up to CPPG [Crisis Pre-Planning Group] at 2:00 today. Of course we could discuss it from the standpoint of keeping the arms away from Nica- ragua without any involvement of Calero and Freedom Fighters. What do you think?230 No action was taken on North's recommendation to seize the Monimbo. In addition to providing intelligence, North also secured the logistical assistance of a paramilitary op- erations expert. He described those efforts in the same December 4 memorandum to McFarlane in which he had outlined his intervention with Country 4 to secure surface-to-air missiles. According to the memo, Secretary of the Navy John Lehman had suggested to North that he meet with David Walker, a former British SAS officer, to discuss the services Walker's company could provide. North met with Walker, and proposed to McFarlane that Walker: establish[ ] an arrangement with the FDN for certain special operations expertise aimed particu- larly at destroying HIND helicopters. . . . Unless otherwise directed, Walker will be introduced to Calero and efforts will be made to defray the cost of operations from other than Calero's limit- ed assets.231 In his testimony, North confirmed that he had ar- ranged for Walker to "provide operational support for certain activities in the region," and that Walker was paid either by the Contras or Secord. This step, according to North, was approved by Poindexter or McFarlane.232 McFarlane testified that he referred North's memo on the subject to Poindexter,233 and 44 Poindexter said that, if asked, he would have ap- proved North's actions.234 Three months later, Walker provided two techni- cians to help carry out a military operation in Nicara- gua. North testified that he was involved in the oper- ation.235 A subsequent PROF note confirms Walker's role.236 Singlaub Efforts with Countries 3 and 5 Country 2 had pledged funds only through the end of 1984. Therefore, by the end of the year, an urgent need existed to find money for the Contras to contin- ue into 1985. In late November 1984, North approved the efforts of Retired U.S. Army Maj. Gen. John K. Singlaub to obtain funds from third countries to support the Con- tras.237 Singlaub met in Washington with officials of Country 3 and Country 5 to request aid. Singlaub was blunt about the Contras' needs: bullets, guns, and anti- aircraft missiles. The foreign country officials, howev- er, expressed concern about running afoul of "Con- gress by openly defying the Boland Amendment." At the same time they were willing to help "if this could be done in a way that did not attract attention." They agreed to send Singlaub's request to their respective governments.236 On November 28, Singlaub reported to North the reaction of the officials of Countries 3 and 5, inform- ing him he "was prepared to go and meet with senior officials in those governments." According to Sing- laub, North concurred and gave the plan "his bless- ing. . . . [I]t was a good idea, he saw no objec- tion . . ." 239 Whether North was authorized to "bless" Sing- laub's efforts is a matter of conflicting testimony. Ac- cording to McFarlane, to solicit or facilitate aid from a third country was barred by the Boland Amend- ment and he did not authorize North to pursue fund- ing from third countries.24? But according to North, he believed McFarlane had approved: "he was aware of each and every one of [my] actions to obtain money from foreign countries and approved of it. "241 North defended his actions, testifying that Country 3 had offered to make a contribution;242 he had never made any "solicitation" because that would be an improper act for a Government officia1.243 Singlaub followed up on his request, travelling to Countries 3 and 5 in January. He met with highly placed officials and reiterated his earlier request for military donations to the Contras.244 Singlaub provid- ed the officials with an index card bearing the name of the bank and account number, under Calero's con- trol, where the funds could be deposited directly.245 Singlaub told the officials he was a private citizen, but wanted to make it clear he was not an "unguided missile ricocheting around to that part of the world." 246 He expressed the belief that "it would be possible. . . to have someone in the Admin- Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 2 istration send a signal to them. . . to indicate that [he] . . . was not operating entirely on [his] . . . own, without the knowledge of the Administration."247 On February 1, 1985, North's notes reflect that Singlaub called North and told him that Country 3 needed a signal that the Administration would be "greatly pleased" by a donation before Country 3 would be willing to contribute.248 On February 6, North wrote McFarlane and reported that: "Singlaub will be here to see me tomorrow. With your permis- sion, I will ask him to approach [the Country 3 and 5] Embass[ies] urging that they proceed with their offer. Singlaub would then put Calero in direct contact with each of these officers. No White House/NSC solicita- tion would be made."243 McFarlane made no re- sponse on the memo to North's recommendations.2" Singlaub testified that he returned to Washington on February 7, met with North to report his results, and recounted his "entire presentation."2" He rec- ommended that now was the time for a U.S. Govern- ment representative to send a signal to Countries 3 and 5. According to Singlaub's testimony, North re- sponded that he would "brief his superiors," and eventually told him (Singlaub) that he had informed his superior, whom Singlaub assumed to be McFar- lane.252 Countries 3 and 5 did not contribute any money as a result of Singlaub's efforts. Not until late 1985, after a signal was in fact given by an NSC official, did Country 3 make a contribution.263 Country 2 Makes an Additional Contribution With the Contras running out of funds, McFarlane turned once more to Country 2. McFarlane made the initial approach to its Ambassador for more funds. He testified that he did not "solicit" funds because the Boland Amendment prohibited such solicitation. He merely told the Ambassador of the plight of the Con- tras and hoped for a contribution.264 According to Secord, North asked him to follow up on McFarlane's initial meeting.255 Secord testified that he did in fact follow up with the Ambassador, with whom he "had dealt. . . in the past with respect to possible contributions to the Con- tras." When Secord raised the subject, the Ambassa- dor responded curtly, "You can stop twisting my arm . . . . I have decided to take it up with the head of state."266 McFarlane did not recall Secord's involve- ment. 257 In early February 1985, Country 2 agreed to con- tribute an additional $24 million.268 McFarlane in- formed the President of the contribution by placing a note card in the President's daily briefing book. The President again reacted with "gratitude and satisfac- tion," expressing no surprise.263 Unknown to McFar- lane, the Country 2 head of state had already in- formed the President directly of the new contribution. But the President did not mention this when he briefed the Secretary of State and McFarlane on his meeting with the government leader.26? Nor did McFarlane tell the Secretary of De- fense.26' Both Secretary Weinberger and General John W. Vessey, Jr., the Chairman of the Joint Chiefs of Staff, learned of the contribution from other sources.262 Secretary Shultz, who dealt regularly with Country 2, was not told of the contribution until June 1986.263 This was an omission "not of conscious choice," according to McFarlane.264 The new donation from Country 2, like its prede- cessor, was sent to Calero's accounts. Between June 1984 and March 1985, Country 2's contributions, to- taling $32 million, were virtually the only funds the Contras had. 265 Contra Aid: Winter-Spring 1985 The Administration Returns to Congress When the President signed the Boland Amendment, he made it clear he would return to Congress for additional Contra support: I sincerely regret the inability of the Congress to resolve the issue of continuing certain activities in Nicaragua . . . . I am signing this act with every expectation that shortly after the next Congress convenes it will provide adequate support for programs to assist the development of democracy in Central America. 266 In the winter of 1985, the Administration pinned its hopes on obtaining the $14 million in aid held out by the Boland legislation. The law provided for expedit- ed consideration of such a request after February 28, 1985, if the President certified to Congress that Nica- ragua was supporting other Central American com- munist insurgencies. McFarlane conveyed to his staff, in particular to North and Donald R. Fortier, then Senior Director for Policy Development, the Presi- dent's "strong wish that we not break faith with the Contras. . . . [We need] to do everything possible to reverse the course of the Congress, and get the fund- ing renewed," he said. "[T]he mission was to win the vote the next time . . .?"267 The chances for success were dim from the start. The new Chairman of the Senate Intelligence Com- mittee, David Durenberger, had warned publicly that he would oppose both the release of the $14 million and any future Contra aid.268 But the President had not given up. He told a group of reporters, "We're going to do our best."269 Defense Secretary Weinberger called for an updat- ed legislative strategy and new funding alternatives to win the battle in Congress.27? White House officials considered a number of legislative proposals including third-country assistance and/or the supply of non- 45 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Il . 1 . I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 2 lethal aid coupled with third-country lethal assist- 271 Legislative strategy groups met to consider the proposals. McFarlane, accompanied by North, traveled to Central America to gauge the reaction of leaders in the region. Donald Fortier was dispatched to Capitol Hill to assess Congressional sentiment.272 While North assisted in drafting various legislative proposals, his preferred option was to seek Congres- sional approval for sufficient sums to fund an in- creased covert action program "adequate to achieve victory."273 North understood that foreign contribu- tions would ensure Contra survival, but success could only be achieved with increased funding: [R]esources available to the resistance from sym- pathetic government(s) and/or individuals will permit current small-scale operations to continue for at least another 6 to 8 months. A resumption of USG funding or additional alternative re- sources would be essential in order to bring the scale of activity to that which existed in the spring of 1984 and, over time, to prevent an erosion of the will and determination of the FDN combatants.274 North was optimistic that "[w]ith adequate support the resistance could be in Managua by the end of 1985.,, 275 Any legislative proposal for increased aid depended upon the Contras' survival in the field. McFarlane testified he told North that "unless the Contras become a credible military force, they would never gain political support in Congress and among the American people."278 North was counting on the En- terprise to provide the support necessary to maintain the Contras as a viable force. The Weapons Shipments from the Enterprise Continue In the spring of 1985, two weapons shipments ar- ranged by Secord in consultation with North and Calero would finally reach the Contras: first, in Feb- ruary, a planeload of 90,000 pounds of munitions from Europe and, second, in the spring, a sealift. Both shipments were arranged through Transworld Arma- ment, and both apparently required end-user certifi- cates.2" North needed the cooperation of Central American countries to provide documentation and to receive the shipments for the Contras. On March 5, 1985, he proposed that one country be rewarded for its assis- tance. In a memorandum to McFarlane, North sug- gested that the Secretaries of State and Defense and Chairman Vessey of the Joint Chiefs of Staff be asked to grant the Central American country additional se- curity assistance. 278 The "real purpose" of this memo, North explained, was to: 46 find a way by which we can compensate [Coun- try 14] for the extraordinary assistance they are providing to the Nicaraguan freedom fighters. At Tab II are end-user certificates which [Country 14] provided for the purchase of nearly $8M worth of munitions to be delivered to the FDN.27? In the attached memorandum to Weinberger, Shultz, and Vessey, drafted by North, the real purpose behind the request was not stated. The memorandum contained no reference to the end-user certificates, "to the arrangements which have been made for support- ing the resistance through [Country 14],"280 or to the Country 14 munitions "wish list" North attached for McFarlane's information.281 Instead, the request for aid was predicated on its merits. McFarlane testified that he recommended that the Cabinet approve increased assistance based solely on his assessment of Country 14's need, without taking into account its support of the Contras.282 North testified that he had not promised a "quid pro quo." There was no "need" to make such a promise to a country threatened by the Sandinista presence, he said. 283 Disbursements to Other Contra Leaders During the winter and spring of 1985, North decid- ed to use the money sent directly to Calero from Country 2 to support other Contra leaders. To do this, funds were withdrawn from Calero's account using traveler's checks, and hand-carried to North. North stored the checks in his safe. Additional cash was secured from Secord.284 North testified that the idea for maintaining this fund came from Director Casey:285 My recollection is that the very first traveler's checks came either very late '84 or certainly early 1985 and that the sum total of traveler's checks was probably in excess of $100,000 or thereabouts. I also had cash which I estimated to be some- where in the neighborhood of 50 to 75 thousand dollars in cash, so we are talking about an oper- ational account that went from somewhere around 150 to 175 thousand dollars. At various points in time there would be considerable sums in it and at various points in time there would be none in it. My recollection is that I got the traveler's checks in packages of less than $10,000. I understand that others have remembered elsewise, but that is how I remember it. Those funds were used to support the operations that we were conducting. They were used to Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 2 support the covert operation in Nicaragua, and then eventually were used to support other ac- tivities as well. The fact that I had those funds available was known to Mr. McFarlane, to Admiral Poin- dexter, to Director Casey, and eventually to Ad- miral Art Moreau over at the Pentagon. It also came to be known to others, some of whom you have had testimony here.286 * * a * * What is important that you realize is that meticu- lous records were kept on all of this. I kept a detailed account of every single penny that came into that account and that left that account. All of the transactions were recorded on a ledger that Director Casey gave me for that purpose. Every time I got a group of traveler's checks in, I would report them, and I would report them when they went out, even going so far as to record the traveler's check numbers themselves. The ledger for this operational account was given to me by Director Casey, and when he told me to do so, I destroyed it because it had within it the details of every single person who had been supported by this fund, the addresses, their names, and placed them at extraordinary risk.287 Poindexter testified that he knew of the account almost from the start, in 1984: [lit was associated with the first contribution of Country 2, I think it came to my attention, by Colonel North reporting to me, that Mr. Calero had provided some funds to him, and it was my understanding it was cash, at least that's my recollection of my understanding.288 Poindexter "didn't see anything illegal about it," but, as he testified, "any time you handle cash there are perception problems that can certainly develop . . . . And so I told Colonel North he should get rid of the money by returning it or whatever, that I didn't think that was a good idea."288 In fact, the money was instead funneled to various Contra leaders throughout 1985 and 1986. One of the principal beneficiaries of North's fund was a Resistance leader. With McFarlane's approval, North decided to assume support for the Resistance leader, using funds drawn from the Calero ac- count.2" North assured McFarlane that Casey had been told that North would maintain contact with the Contra leader." Later, though, North reported that "the CIA will not be told of the new source for [Resistance leader's] funds."262 By February 27, 1985, "Adolfo [Calero] ha[d] agreed to provide Ethel requisite funds in the blind without [the] [Resistance leader] becoming aware of the source."2" Eventually, Calero was to "deposit $6,250 per month in [Resistance leader's] checking account without [his] knowledge [of the source]."294 But before the direct deposit mechanism could be put into operation, North enlisted Robert Owen and Jona- than Miller, then-Deputy Coordinator for Public Di- plomacy at the State Department, to pass the money to the Resistance leader. Sometime in early March, North handed Owen and Miller traveler's checks from his office safe, and requested that the checks be cashed. Miller and Owen did so, and returned to North's office. Later that day, at his apartment, Owen passed $6,000 to $7,000 in cash to the Resistance leader.295 Owen handled a number of transfers to Contra leaders. He testified that he paid "[s]omewhere be- tween six and ten" Contra leaders, and the total amount paid was "[s]omewhere around $30,000."2" On March 22, 1985, for example, Owen traveled to Central America carrying several thousand dollars in cash or traveler's checks for delivery to a Contra leader.287 In some cases, Owen's efforts did not take him far from the White House itself. In April, for example, he waited outside the Old Executive Office Building in the rain. A car drove up, and Owen passed cash to a Nicaraguan Indian leader sitting inside.2" These payments had a number of purposes: One payment was made to an Indian leader as a "quid pro quo" for ceasing negotiations with the Sandinistas and joining instead with other Indian leaders to "work together in a united front."2" Keeping the Operation Secret North provided the logistical and funding assistance the Contras needed to keep going in Central America at the same time that he worked to keep their cause alive in Washington. To persuade Congress to vote for renewed aid, it was critical that the NSC staff's Contra assistance remain secret. As North warned Calero: "Too much is becoming known by too many people. We need to make sure that this new financing does not become known. The Congress must believe that there continues to be an urgent need for fund- North actively cultivated an image of Contra self- sufficiency within the Administration. For example, he urged the CIA's Chief of the Central American Task Force to reject the State Department's opinion that the Resistance had become largely ineffective since U.S. funding ran out in May 1984. "I told [the Chief of the Central American Task Force]," wrote North, "that it was important that the SNIE [Special National Intelligence Estimate] reflect the fact that there was substantial outside support which had con- tinued for some months and showed no signs of abat- ing.,930i 47 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 II II . 1 . Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 2 But even without such active encouragement, the secrecy shrouding North's efforts contributed to the appearance of Contra self-sufficiency. As funds ar- rived and weapons were shipped, CIA intelligence reports confirmed that the Contras remained not only a viable force, but were surviving on their own, with- out apparent U.S. Government assistance. By March, close to a year after U.S. Government aid had ceased, Director Casey's subordinates provided Casey with briefing materials, reporting surprise at the Contras' survival, but noting there was little intelligence on how the Contras had managed to flourish: Since the cutoff of official funds to the anti-San- dinistas in May 1984 they have been able to field a viable guerrilla fighting force, have increased their numbers, and improved their tactical effi- ciency. It is estimated that to maintain the level of activity that they have it would cost an esti- mated one and one half to two million dollars per month. There is, however, no intelligence on the source of this income, except that it comes from private groups, and possibly some U.S. business corporations.30 2 The secret of North's involvement, however, was not to last. North's name had begun to appear periodi- cally in the press along with that of Singlaub. By March, Singlaub already had become something of a "lightning rod" in the press, attracting attention as a private fundraiser for the Contras.303 According to Singlaub, North told him that his frequent visits to the NSC were a source of concern.304 But North "understood and agreed" that Singlaub had to keep a "high profile" in order to raise funds, and he support- ed the effort. If Singlaub "had high visibility, [he] might be the lightning rod and take the attention away from [North] and others who were involved in the covert side of support." 3 ? 5 Covert Operation and Legislative Strategy Intertwine While maintaining the secrecy of his Contra support activities, North worked to promote a legislative strategy that would change both the Congressional and the public perception of the Nicaraguan threat.306 In March, he and Donald Fortier spon- sored an elaborate plan calling for lobbying, a media blitz, and culminating in almost daily Presidential speeches and phone calls in support of the initiative. At its most ambitious stage, the plan included a 10- page, day-by-day chronology to describe each of the players' appointed tasks.30 7 At the same time, North proposed a "Fallback Plan," should Congress refuse to provide aid or lift the Boland Amendment restrictions.3" In a memo- randum to McFarlane, North noted that the Contras had sufficient funding for munitions to carry them 48 through October 1, 1985, but they needed money for the following year.3" The fallback plan, sent to McFarlane on March 16, called for Country 2, de- scribed as the "current donor," to contribute an addi- tional $25 million to $30 million to the Resistance for the purchase of arms and munitions; for the President to appeal to the public for contributions instead of seeking a Congressional appropriation; and for a tax- exempt foundation to be established to receive the contributions. McFarlane rejected the idea of the Presidential appeal, expressed doubt about seeking more money from Country 2, and approved the estab- lishment of a tax-exempt foundation." ? With McFarlane ruling out a return to Country 2, a return to Congress was the Administration's only hope for renewed Contra funding. During March 1985, North focused his attention on the elaborate legislative strategy plan he had been working on since late February. The plan was developed in conjunction with a peace initiative drafted by North in a Miami hotel room with FDN head Adolfo Calero and other Contra leaders, which became known as the San Jose Declaration. North arranged the deadline for a Sandi- nista response to the peace plan to coincide with the vote by Congress. If the Sandinistas rejected the over- ture, as North anticipated, then "special operations against highly visible military targets in Nicaragua," were timed to follow in the hopes that successful and "visible" Contra military activities might favorably influence Congress's decision on Contra aid.3" At the last minute, however, the Administration considered delaying the submission of the Administra- tion's new aid request to Congress.312 North recog- nized that if the vote were delayed, the Contras' planned military operations would not serve as an effective tool in influencing Congress's decision on the aid proposal. He strongly recommended to McFarlane that the vote take place as originally scheduled. He wrote: The deadline for substantive negotiations . . . was carefully chosen to ensure that the internal oppo- sition would have a specific date for their own planning purposes. Military operations were planned based on the expiration of the offer on April 20. . . . [A]n attack is scheduled for April 25. Based on my request Calero has agreed to postpone the attack for five days. The force which is being inserted to conduct this operation cannot be logistically supported in this area after May 5. The resupply situation will require that they be withdrawn after that date. * * * It is my belief that urging the resistance leaders (particularly Calero) to accept a major delay . . . will result in a breakdown of the unity we have achieved. [Calero] has only cooperated to date in Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 2 the unity effort because he trusts the only persons in the U.S. Government who have supported the movement since October 1984?North and McFarlane.313 The Administration Responds to Congressional Defeat In early April, the Administration submitted a Contra aid proposal to the Congress, along with its own peace plan modeled on the San Jose Declaration. The President pledged that lethal aid would only be pro- vided if the Sandinistas rejected the proposal. The plan provoked controversy, and on April 23, the House rejected the Administration's proposal. When the House rejected the bill, the President's first step was to reassure Central American leaders that he had not given up on Contra aid. As to one country, the President had special cause for concern: A military leader had seized ammunition intended for the Contras. The President telephoned the head of state and received an assurance that the ammunition would be delivered to the Contras.3" Publicly, the President expressed his determination "to return to the Congress again and again." 313 Soon after the House defeat, the Administration was back on Capitol Hill hoping to mold a compromise in sup- port of nonlethal aid. Meanwhile, Nicaraguan President Daniel Ortega traveled to the Soviet Union and throughout Europe, seeking renewed assistance for the Sandinista forces. President Ortega's visit to Moscow prompted the President to issue a warning to Congress: And whatever way they may want to frame it, the opponents in the Congress of ours, who have opposed our trying to continue helping those people, they really are voting to have a totalitar- ian Marxist-Leninist government here in the Americas, and there's no way for them to dis- guise it. So, we're not going to give up.3" President Ortega's Moscow trip also prompted a renewed sense in Congress that something had to be done to support the Contras. With strong support from Congressional leaders, President Reagan an- nounced the imposition of economic sanctions against Nicaragua on May 1, 1985.3'7 Maintaining the Covert Operation Before the Congress rejected the Administration's aid proposal, North was optimistic about the Contras' prospects. In an early April 1985 memo to McFar- lane, North explained what the operation had achieved up to that point, and the plans he had for its future.3" Based on information provided by Calero, North outlined what the Contras had spent "since USG funding expired in May 1984."3" Of the "grand total" of $24.5 million received by Calero, "$17,145,594 has been expended for arms,32? muni- tions, combat operations, and support activities."321 Extolling the FDN's nearly twofold increase in size, and its newly acquired expertise in guerrilla warfare, North emphasized that the money had been spent wisely: "In short, the FDN has well used the funds provided and has become an effective guerrilla army in less than a year."322 The image of Contra military capability cultivated by North was arguably at odds with reality. U.S. Army General Paul F. Gorman, Commander of the Southern Command from May 1983 through Febru- ary 1985, told the Committees that "the prospects of the Nicaraguan resistance succeeding [were] dim at best." Specifically referring to Congressional testimo- ny he gave in June and December 1985, Gorman testified: what I was saying in those days was that I did not see in the Nicaraguan resistance a combina- tion of forces that could lead to the overthrow of the government or the unseating of the Sandinis- tas. . . . The training of the Contras was, when I last saw them in 1985, abysmal. . . . I didn't regard them as a very effective military organiza- tion, based on what I could see in reflections of battles, in communications on both sides. The Sandinistas could wipe them out. Regarding North's reaction to his views, Gorman added: Oliver was terribly concerned about my attitude, and he knew that I was travelling up here on the Hill and in other circles where I was being asked to comment on the prospects of these people. Q: I take it Colonel North, who had been your friend . . . was not pleased with the position you were taking? A: No. . . . I made a speech over at the National Defense University which was reported in the Washington Post . . . and Oliver . . . got very exercised because in it I said . . . I can't see any amount of money or any amount of time, given the present set of conditions, that would be effi- cacious. . . . Oliver got very exercised about that and called me and said would you try to put to- gether an op ed piece . . . which he allegedly was going to get placed in the Washington Post. It never was, and I gather it's because what I wrote displeased him. Gorman concluded by telling the Committees, "it was also very clear to me, he [North] saw me as a prob- lem in terms of what I was saying, and I think he was just doing his damndest to get me to shut up?old General, put a cork in it."323 In the spring, North had made ambitious plans for the Contras' future, according to his April 11 memo. The force would be increased in size. Two special 49 77-026 0 - b7 - 3 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 1 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 2 operations were planned: an "attack against Sandino airport with the purpose of destroying" Sandinista HIND-D helicopters; and a "ground operation against the mines complex" in Nicaragua securing the princi- pal lines of communication in and out of Puerto Cabe- zas. Finally, North told McFarlane the Contras would open a Southern front.324 These plans were soon stalled, though, when in late April, Congress rejected the Administration's funding request. The defeat precipitated a crisis atmosphere among Contra leaders, who had planned on renewed Congressional funding. There were daily contacts be- tween Contra leaders and North, and between North and the CIA Chief of the Central American Task Force. The problems of the Resistance were further complicated when one Central American country, re- sponding to Sandinista encroachment, ordered the Contras to move to less exposed locations.325 Meanwhile, in Congress, a consensus was building in favor of humanitarian aid. By May 15, 1985, Con- gressional leaders were seeking counsel from the NSC on the Administration's position about a Contra sup- port bill that was limited to nonlethal aid. North, along with other NSC staff members, drafted talking points for a meeting between McFarlane and Minority Leader Robert H. Michel, emphasizing that the "pri- mary goal" was to lift the Boland Amendment restric- tions, "which severely limit our ability to support/ advise the now unified Nicaraguan resistance."326 By the end of May, North was optimistic that the Boland Amendment restrictions would be lifted, at least with respect to the CIA's provision of intelli- gence and political support. But even if they were lifted, and Congress appropriated humanitarian aid, North did not contemplate that his covert operation would end. He told McFarlane in a May 31 memo: Plans are underway to transition from current arrangements to a consultative capacity by the CIA for all political matters and intelligence, once Congressional approval is granted on lifting Section 8066 [Boland Amendment] restrictions. The only portion of current activity which will be sustained as it has since last June, will be the delivery of lethal supplies.327 The Secord Group and Its Competition As humanitarian aid measures were debated in Con- gress, Secord's Enterprise was continuing to procure weapons for the Contras. By May, Secord was using Thomas G. Clines, rather than the original broker. Clines' source was a European arms dealer.325 Secord was also using Rafael Quintero to handle the logistics of the arms deliveries in Central America. As North put it, Quintero was the "Secord man on [the] scene."329 He coordinated the arms reception in Cen- tral America, and "all of the liaison with the Contras and with the local authorities."33? From Quintero, Secord would obtain the information necessary to 50 provide North with what North termed "views from on [the] scene" in Central America.331 Clines, Quin- tero, and Secord were to play an increasingly large role in the Contra support structure as the summer progressed. During May, Secord arranged through Clines for the third in a series of arms transfers to the Contras. This time, the shipment was to arrive by sea.332 Peri- odically, Secord would call North with the latest update, as on May 8: "Came out of mtg/ in . . . now in Paris; -Tested every item; -ship arrived 4-5 hours ago; -40,000 M-79 . . . ."333 Later, on May 24, North recorded: "Call from Dick; -Vessel needs shipping agent for receiving; -Need to do long lead plan for Aug-Sep delivery; -need to make deposit for M-79 buy."334 As Secord testified, North "was in the infor- mation collection business" and "[h]e wanted to know if I would provide him with details of any deliveries or deals that were made, and I did so gladly."335 General Secord was not the only weapons dealer seeking the Contra account during the summer of 1985. For example, Ronald Martin, a Miami arms dealer, was by May "setting up [a] munitions 'super- market'" in Central America.336 As North testified: "You had a very competitive environment down there. Once the U.S. Government withdrew in '84 from directly supporting the resistance, you ended up with a lot of folks out there running a very cutthroat business."337 North discouraged Calero from dealing with some of Secord's competitors. He testified that CIA Direc- tor Casey had suspicions that the arms warehouse operation run by Martin was supported by U.S. fund- ing that had been diverted to Martin by a Central American country. According to North, Casey told him "that there shouldn't be any further transactions with that broker until such time as he resolved or they were able to resolve where" the money to stock- pile "several millions of dollars worth of ordnance" had come from.338 Secord's other competitor for procuring arms for the Contras during the spring of 1985 was General Singlaub. As early as April, Singlaub had begun to arrange for a major weapons purchase, after meeting at FDN base camps in March with the FDN military commander, Enrique Bermudez.339 The list of weap- ons Singlaub drew up with Bermudez included AK-47 rifles, RPG-7 rocket launchers, light machine guns, and SA-7 surface-to-air missiles. Singlaub took the weapons list to North, who made "some additions and subtractions." North and Singlaub "reach[ed] a clear- cut statement of what we were going to buy.',340 Sometime later that month, Singlaub introduced Calero to a European arms dealer.34' Calero was astonished at the low prices he had been quoted; "at least in the case of the AK-47s that price was about half of what we had previously had to pay.91342 (In part, this can be attributed to the fact that Singlaub did not take a commission.) Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 2 According to Singlaub, North later confirmed that the prices quoted by the European arms dealer were lower than anything he had ever seen before. Con- fronted with the price list, North "expressed some surprise, doubt, that they could be purchased for that price." But, he "made it quite clear that that was a very, very good price and a bargain. We were getting twice as many weapons for the same amount of money."343 In his testimony, North maintained that he checked Secord's prices against the prices of other dealers: "[s]ome were higher, some were lower."344 Part of the explanation for the difference between Secord's prices and those of Singlaub's dealer was Secord's profit margin?a margin of which Calero was unaware. Secord testified that his markup on all Contra shipments "averaged out almost exactly 20 percent."345 In fact, the actual commission charged on the cost of arms averaged 38 percent.346 In Secord's own words: By the way, this was a strict commercial kind of transaction. There was nothing spooky about it. It was just a normal brokering deal. The prices were marked up in the process, different markups for different line items depending upon the size, but between 20 and 30 percent was the markup which is quite low in the arms business.347 Secord candidly admitted that he was to make a profit:348 Q: I take it from what you are saying that you were to make a profit on these arms transactions? A: Yes . . . . It was intended that the profits generated would be shared by Hakim, myself, and, of course, the arms dealer.349 Calero testified he was unaware that Secord was earning money off the arms sales. He believed that Secord was supplying the weapons at cost.35? "My understanding, right from the beginning, was that he was not making a profit," Calero recalled.351 North, on the other hand, testified that it was his understand- ing from his conversations with Casey in 1984 that those running the off-the-shelf covert entities were entitled to fair compensation:352 "The arrangement that I made with General Secord starting in 1984 recognized that those who were supporting our effort were certainly deserving of just and fair and reasona- ble compensation." 3 5 3 Calero Tries Singlaub In early May, Calero and Singlaub met with Secord in North's office to discuss procuring SA-7 mis- siles.354 Although Singlaub's price was lower than Secord's, North and Calero decided that Secord should supply the missiles because Secord was pre- pared to provide training and Singlaub was not.355 Sometime in mid-May, Calero placed an order for weapons?other than SA-7s?through Singlaub's dealer. Calero "preferred" dealing with Singlaub, rather than Secord, because not only was Singlaub a closer personal friend, but also his prices were lower. Singlaub told Calero that he believed Secord was making a profit. Secord, on the other hand, told Calero that Singlaub would be unable to deliver: "The price was so, you know, so low that he thought he [Singlaub] couldn't make, he couldn't do it. Yes, he [Secord] told me that, yes."356 North's notes reflect an unsuccessful attempt to per- suade Calero not to deal with Singlaub via the Euro- pean arms dealer.357 On May 17, Secord met with North and discussed pending weapons transactions, including Martin's munitions supermarket and the "Singlaub deal w/ A.C; -[European arms dealer] . . . .; - 10K AK47s; -procuring items from USSR . . ." 358 An hour and 20 minutes later, North spoke to Calero and noted, "will stop move w/ [Europe- an arms dealer]." 359 But despite Calero's apparent decision to stop the Singlaub deal, Secord informed North on May 20 that it "[s]ounded like Calero was going to have to go through with [the European arms dealer] purchase." 369 North appears to attribute to Director Casey his reluctance to procure arms through the European dealer. According to North, Casey warned him of "a transaction of some five to six million dollars from a broker who he was concerned had also been involved in reverse technology transfer to the Eastern Bloc, and he told me to do everything possible to discour- age further purchases."361 Although North did not name the dealer, his reference to a "transaction of some five to six million dollars" points to the Europe- an arms dealer. The arms dealer denied to the Com- mittees any involvement in reverse technology trans- fers.3 6 2 The purchase that Singlaub arranged did in fact go forward after Owen, at North's request, confirmed the list with Calero. The arms arrived in Central America on July 8, 1985.3 6 3 This was the last shipment Calero was to order from Singlaub or any arms dealer other than Secord. The Singlaub shipment had nearly exhausted the funds in Calero's own accounts. Calero told North in May, "[I] have enough to cover this [shipment] but [it] will leave nothing." 3 6 Thereafter, money raised by North and Secord was given directly to Secord, who then provided the Contras with arms. Calero testified he was "never given a reason" why his "au- thority to have cash directly sent to [him] to make those purchases in the future was taken away."365 51 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 I I I .J I Approved For Release 2011/05/25 : CIA-RDP89T00142R000500610001-7 Chapter 2 Chapter 2 1. See R. McFarlane Memo, 2/27/81, to Secretary Haig, N33323-47 (forwarding Director Casey's proposal). 2. See "Review of Foreign Policy," House Foreign Af- fairs Committee, 97th Cong., 1st Sess., 16-17 (Nov. 12, 1981) (state-ment of the Hon. Alexander M. Haig, Jr., Sec'y of State). 3. Earlier, in March 1981, the President had authorized a CIA covert program for Central America in general. 4. George Test., Hearings, 100-11, 8/6/87, at 269. 5. Inman Int., 3/16/87. 6. Gregg Memo, 7/12/82, to Clark,"Proposed Covert Action Finding on Nicaragua," N44654. 7. Gregg Memo, 7/12/82, to Clark, "Proposed Covert Action Finding on Nicaragua," N44654. 8. Id. 9. Id. 10. Id. 11. Poindexter handwritten note, attached to Gregg Memo to Clark, 7/12/82, "Proposed Covert Action Finding on Nicaragua," N44652. 12. Gregg Memo, 7/12/82, to Clark, "Proposed Covert Action Finding on Nicaragua," N44656. 13. See e.g., Newsweek, Nov. 8, 1982, at 43. 14. See, e.g., Cong. Rec. H9148-49 (Dec. 8, 1982) (state- ment of Rep. Harkin). 15. See The Washington Post, April 3, 1983 at A13 (quot- ing Contra leaders rejecting the Administration's explana- tion for Contra aid: "The people who are fighting, they are not fighting to stop the weapons. . . . We are fighting to liberate Nicaragua. As Suicide [a Contra leader] put it . . . We're not going to stop the transport of arms and supplies to the Salvadoran guerrillas until we cut the head off the Sandinistas.) 16. See Cong. Rec. H9149 (Dec. 8, 1982) (statement of Rep. Leach); id. at H9151 (statement of Rep. Mikulski); id. at H9153 (statement of Rep. Studds). 17. See Cong. Rec. H9149 (Dec. 8, 1982) (statement of Rep. Leach); id. at H9158 (statement of Rep. Matsui). 18. See Cong. Rec. S15363-64 (Dec. 18, 1982) (statement of Sen. Helms). 19. Pub. L. 97-377, Defense Appropriations Act for FY 1983, Sec. 793. In enacting the Boland Amendment, the Congress re-jected a bill that would have barred all covert action funding, as well as an amendment that would have barred Administration support of any insurgent group having the purpose to overthrow the Nicaraguan Govern- ment. See "The Boland Amendment," Chapter 26. 20. Since 1982, the Administration has taken the position that, under the Boland Amendment, it was the agency's purpose that was controlling, not the Contras' purpose. See Opinion of the Intelligence Oversight Board, Apr. 6, 1983, J4825; "The Boland Amendment," Chapter 26. 21. Cong. Rec. H9156 (Dec. 8, 1982) (statement of Rep. Boland); "The Boland Amendment," Chapter 26. 22. The New York Times, Dec. 9, 1982, at A9. 23. Select Committee on Intelligence, S. Rep. No. 665, 98th Cong., 2d Sess., at 5 (1984) (hereinafter "S. Rep. 98- 665"). 52 24. Letter, from 37 Congressmen, 3/24/83, to the Presi- dent, HF1367; see Turner Memo, 4/6/83, to the President's Intelligence Oversight Board, at 17, J4824. 25. Newsweek, April 11, 1983, at 46. 26. 1983 Public Papers of the President of the United States, Ronald Reagan, Vol. 1, at 539 (April 14, 1983) [hereinafter "Presidential Papers"]. 27. Id. at 541. 28. Id. 29, See The Washington Post, April 3, 1983 at A3 (state- ment of Sen. Daniel Moynihan). 30. 1983 Presidential Papers, Vol. 1, at 603-04 (April 27, 1983). 31. In June 1983 a CBS/New York Times poll showed that the public opposed helping the Contras try to over- throw the Nicaraguan Government by 53 percent to 23 percent. New York Times, July 1, 1983, at A2. In Septem- ber, a Harris survey showed 60 percent opposed, and 24 percent favored, U.S. Government support for the Contras. The Harris Survey, 9/29/83, at 3. 32. See Gorman Dep., 7/22/87, at 25-32; McFarlane Test., Hearings, 100-2, 5/11/87, 9-10, 21. 33. S. Rep. 98-665 at 5-6. 34. H.R. 2760 was sponsored by Representative Edward P. Boland, then Chairman of the House Intelligence Com- mittee and Representative Zablocki, then chairman of the Committee on Foreign Affairs. See H. Rep. 122, 98th Cong., 1st Sess., Part 1 at 1; Part 2 at 2 (May 13, 1983). 35. See H. Rep. No. 122, 98th Cong., 1st Sess., at 4. 36. Cong. Rec. H5880-81 (July 28, 1983). 37. See Cong. Rec. H5721-62 (July 27, 1983); id. at H5819-82 (debate on Boland-Zablocki). Ultimately, the Boland-Zablocki legislation was never considered by the Senate, and did not be come law. See "The Boland Amend- ment," Chapter 26. 38. Clark Memo, 7/1/83, to SPG Principals, S9243. 39. Id. 40. Report to the Senate Committee on Foreign Rela- tions: Subj: "Conferral of Personal Rank of Ambassador," S9516. 41. S9468. 42. In its first year, S/LPD claimed credit for 1,500 speaking engagements and for sending material to 239 edito- rial writers in 150 cities. Comptroller General's Report, 2/ 8/85, S9391. It published pamphlets, such as "Broken Prom- ises: Sandinista Repression of Human Rights in Nicaragua, "The Sandinista Military Build-up, "Misconceptions About U.S. Policy Toward Nicaragua," all for the purpose of "Spreading the President's Message to the Public, the Media and the Congress." Gardner Memo, 6/25/85, to Twohie: Subj: "Current Program of S/LPD," S9441. 43. See Chapter 4. 44. J. Miller Memo, 3/13/85, to P. Buchanan: Subj: "'White Propaganda' Operation," S9418. 45. Reich Memo, 3/1/86, to W. Raymond, S9460. 46. Id. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 2 47. Comptroller General Letter, 9/30/87, to Hon. Jack Brooks, Hon. Dante Fascell, at S11655. 48. Id. at S11652. 49. Id. at S11656. The State Department's Inspector Gen- eral concluded in Audit Report No. 7PP-008 (July 1987) that "there is no evidence that S/LPD staff participated directly or indirectly in any unlawful lobbying or that IBC spent S/LPD contract funds for lobbying activities." 50. Vessey Memo, 9/6/83, to Chief of Staff, U.S. Army et Subj: "DoD Support for the DCI," at D15331. 51. See DOD "Background Paper," D15321 (July 13, 1983 "wish list"); see Information Paper, 4/14/87, D13718 (referring to the CIA's original request as a "Christmas List"). 52. Memo, Subj: "Supplies Needed to Support Nicara- guan Resistance Effort," D15249; Memo for the Record, 7/ 15/83, Subj: "CIA Request for DoD Support," D15356-364. 53. See DoD Memo, 7/28/83, to Chief of Staff, U.S. Army, Chief of Naval Operations, Chief of Staff, U.S. Air Force, Commandant of the Marine Corps: Subj: "DOD Support for the DCI," D15344. 54. This effort has been addressed generally in the press. See, e.g., US. News and World Report, Dec. 15, 1986, at 27- 28. 55. DOD Memorandum for the Director, J-3, The Joint Staff, 8/19/83, Subj: "DoD support for the DCI," D15338- 40; DOD Memo, 12/9/83, "Background Paper for the Di- rector," D13760 (chronology of project developments). 56. W. Taft IV Memo, 9/2/83, to Weinberger: Subj: "CIA Request for DoD Support of Covert Activities in Nicaragua," D25051 ("The CIA has been disappointed with our pointing out this difficulty; it has suggested that it has insufficient funds to support such activities on its own"). 57. CIA paid the preparation and transfer cost of $28,000, but not the equipment cost of the aircraft. See DOD Memo, 12/9/86, "Background Paper for the Director," at D13762-63. 58. Clark Memo, "Meeting with National Security Plan- ning Group," N49258; see also S. Rep. 98-665 at 6. 59. North/deGraffenreid Memo, 9/15/83, to Clark: Subj: "NSPG Meeting on Covert Action in Nicaragua," N49255. 60. NSC Handwritten Notes, 9/16/83, N54822. 61. Presidential Finding Scope Paper, 9/19/83, N6783. 62. Presidential Finding Scope Paper, 9/19/84, N6783. 63. NSC Handwritten Notes, 9/16/83, N54823 (emphasis in original). 64. Presidential Finding, 9/19/83, N6780-82. 65. S. Rep. 98-665 at 6. 66. See Minutes of 5/16/86 NSPG Meeting, 6/4/86, N10288. 67. S. Rep. 98-665 at 6 (quoting The New York Times); see Casey Memo, 9/27/83, to Clark, N6787-89. 68. See Cong. Rec. H8389-432 (Oct. 20, 1983). 69. See H.R. Rep. 98-569. 70. See Cong. Rec. H10543-45 (Nov. 18, 1983); id. at S16859-60. 71. Intelligence Authorization Act, FY 1984, sec. 109. 72. SIG Paper, 12/20/83: Subj: "Where Next in Central America," at N32314. 73. C. Hill Memo, 12/20/83, to McFarlane: Subj: "Next Steps in Central America," N32308. 74. The Special Interagency Working Group consisted of representatives from the State Department, CIA, DOD, NSC, Joint Chiefs of Staff and the White House. See Memo, 9/23/83, Subj: "Legislation on Nicaragua," N6883. Later, an interagency policymaking group on Central America would be called a Restricted Interagency Group or "RIG." 74a. SIG Paper, 12/20/83: Subj: "Where Next in Central America," at N32314; see McFarlane Memo, 1/6/85, Subj: "Meeting with the National Security Planning Group," at N46540 (summarizing SIG strategy paper). 75. McFarlane Memo, 1/6/85: Subj: "Meeting with the National Security Planning Group," N46450; NSDD 124 (approving measures outlined in the SIG paper, "Where Next in Central America," N32308-359). 76. North/Menges Memo, 10/19/83, to McFarlane: Subj: "Special Operations: Nicaragua," N44721. 77. North/Menges Memo, 10/19/83, to McFarlane: Subj: "Special Operations: Nicaragua," N44721. 78. Attachment to North/Menges Memo, 12/22/83, to McFarlane: Subj: "Anti-Sandinista Actions," at N30844. 79. McFarlane Memo, 2/17/84, Subj: "Meeting with the National Security Planning Group," at N40040. 80. North Memo to McFarlane, 2/3/84, Subj: "Attack on Guerrilla Command and Control Centers in Nicaragua," at N44831. 81. North/Menges Memo, 3/2/84, to McFarlane: Subj: "Special Activities in Nicaragua," at N44842. 82. North Memo, 3/30/84, to McFarlane: Subj: "Nicara- gua Special Activities Program," at N34514. 83. See North Personnel File, D6087, D6089. 84. Poindexter Test., Hearings, 100-8, 7/15/87, at 41-42; McFarlane Test., Hearings, 100-2, 5/11/87, at 31. 85. Poindexter Test., Hearings, 100-8, 7/15/87 at 41-42 McFarlane Test., Hearings, 100-2, 5/11/87, at 31-32; Gregg Int., 4/2/87, at 4, 6; P.X. Kelley Int., 9/30/87, at 7. 86. McFarlane Test., Hearings, 100-7, 7/14/87, at 203, 221. 87. Hall Test., Hearings, 100-5, 6/8/87, at 466; see North Test., Hearings, 100-7, Part II, 7/13/87, at 55-56. 88. Gregg Int., 4/2/87, at 4; Ledeen Dep., 6/19/87, at 33; Earl Dep., 5/22/87, at 29. 89. Letter, 11/7/83, J. Hull to R. Owen, N7460. 90. North's notes reveal frequent Contra-related contacts during this period between North and Dewey Clarridge, then Chief of the Latin American Division of the CIA's Directorate of Operations. See North Notebooks, 1/84- 3/29/84, Q0011-0165. 91. See, e.g., North memo, 3/30/84, to McFarlane: Subj: "Nicaragua Special Activities Program," N34514; North/ Menges Memo, 3/2/84, to McFarlane: Subj: "Special Ac- tivities in Nicaragua," N44842. 92. North Test., Hearings, 100-7, Part II, 7/13/87, at 40; North Test, Hearings, 100-7, Part I, 7/9/87, at 244-45. 93. North Test., Hearings, 100-7, Part I, 7/9/87, at 245. 94. North/Menges Memo, 11/4/83, to McFarlane: Subj: "Support for Nicaraguan Democratic Opposition," N40079, N40081. 95. North Memo, 2/3/84, to R. McFarlane: Subj: "Attack on Guerilla Command and Control Centers in Nicaragua," N44831-32; see North/Menges Memo, 1/23/84, to McFar- lane: Subj: "Targeting Guerilla Command and Control Cen- ters in Nicaragua," N44837. 96. See, e.g., North/Menges Memo, 10/19/83, to McFar- lane: Subj: "Special Operations: Nicaragua," at N44721; North/Menges Memo, 12/22/83, to R. McFarlane: Subj: "Anti Sandinista Actions," at N30842; North Memo, 3/30/ 53 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 I I I I I I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 2 84, to McFarlane: Subj: "Nicaragua Special Activities Pro- gram," at N34515. 97. North/Menges Memo, 12/22/83, to McFarlane: Subj: "Anti Sandinista Actions," N30841; see North Memo, 3/30/ 84, to McFarlane: Subj: "Nicaragua Special Activities Pro- gram," N34514. 98. George Test., Hearings, 100-11, 8/6/87, at 269. 99. Poindexter Dep., 5/2/87, at 63. 100. North Forwarding Note to McFarlane, 2/13/84, N16901. 101. North/Keel Memo, 2/7/84, to McFarlane: Subj: "Additional Resources for Our Anti-Sandinista Program," N16908 (attached to North Forwarding Note, 2/13/84, N16901). 102. McFarlane Memo, 2/21/84, to the President: Subj: "Central America Legislative Strategy?Additional Funding for the Anti-Sandinista Forces," N16894. 103. Los Angeles Times, Apr. 13, 1984, at 1. 104. McFarlane Test., Hearings, 100-2, 5/11/87, at 13. 105. The National Security Adviser later expressed his regret about "lapses," such as the "failure to brief the Com- mittees on the San Juan del Norte operation." McFar- lane, PROF Note, 5/4/84 at 17:57:43, to Poindexter, N7091; see also deGraffenreid Memo, 6/13/84, to McFarlane: Subj: "Prospectus on New Covert Action Procedures," N7094 ("with the exception of the special measures on Nicaragua (mining . . . etc.) our Hill briefings have been timely and thorough"). 106. S. Rep. 98-665 at 8 (quoting Goldwater statement). 107. See, e.g., Weekly Presidential Documents, Vol. 20, No. 15, at 517-18 (Apr. 10, 1984 statement); McFarlane letter, 4/5/84, to Sen. H. Baker, N43406-07 ("Please be assured that we have not deviated from the strictest inter- pretation of this Finding.") 108. S. Rep. 98-665 at 8-9. 109. S. Rep. 98-665 at 10. 110. Los Angeles Times, April 13, 1984, at 9. 110a. McFarlane Test., Hearings, 100-2, 5/11/87, at 5, 20- 21. McFarlane testified these were his words, expressing the President's "sentiment." McFarlane Test., Hearings, 5/11/ 87, at 21. North testified that, lals they were relayed to me," the words 'body and soul' "were the words of the President." North Test., Hearings, 100-7, Part I, 7/9/87, at 265. 111. Poindexter Test., Hearings, 100-8, 7/15/87, at 54. 112. North Test., Hearings, 100-7, Part I, 7/7/87, at 74. 113. North Test., Hearings, 100-7, Part I, 7/9/87, at 265. North testified that he received this assignment around the time of the Kissinger Commission Report, which was re- leased Jan. 10, 1984. Report of the National Bipartisan Commission on Central America (H. Kissinger, Chairman); North Test., Hearings, 100-7, Part I, 7/13/87, at 79. McFar- lane dated the instruction "in the days leading to Boland II," which was enacted in October 1984. McFarlane Test., Hearings, 100-7, Part II, 7/14/87, at 221. 114. North/Menges Memo, 1/13/84, to McFarlane: Subj: "Central America?Draft NSDD to Implement NSPG De- cisions of January 6, 1984," N43397 (emphasis added). 115. Memo, North/Menges, Memo, 1/13/84, to R. McFarlane: Subj: "Central America?Draft NSDD to Im- plement NSPG Decisions of January 6, 1984," handwritten changes, N43397. 116. McFarlane Test., Hearings, 100-2, 5/11/87, at 14. 54 117. The Committees agreed at the request of the White House that, in the interest of U.S. foreign relations, certain foreign nations which were approached or enlisted for Contra aid would not be referred to by name. Accordingly, those countries were given numerical designations. 118. McFarlane Test., Hearings, 100-2, 5/11/87, at 15. 119. The idea that Country 1 might fund U. S. ventures in Central America was not a new one for McFarlane. In the spring of 1983, he learned that Country 1 might be willing to provide security assistance and agricultural training to other countries. In a note to Oliver North recounting this offer, McFarlane mused that since the U. S. appropriation to Country 1 increased every year, perhaps it would be willing to sign over the increase for use in Central America. 120. Casey Memo, 3/27/84, to McFarlane, RCM Ex. 29 at 456, C7490. Casey already had devised his own plan for raising additional funds. In the March 27 memorandum, he indicated that two initiatives already were underway at the CIA to provide the Contras with weapons and other materi- als: one involved an arrangement with Country 1, and the other involved an approach to Country 6. Neither effort produced any significant Contra assistance. Id., C7490. 121. Shultz Test., Hearings, 100-9, 7/23/87, at 13. 122. McFarlane Test., Hearings, 100-2, 5/11/87, at 15-16; Teicher Dep., 4/23/87, at 15. 123. McFarlane Memo, 4/20/84, to Teicher, RCM Ex. 30 at 459, N10576. Secretary Shultz was unaware of the sub- stance of this memo. Shultz Test., Hearings, 100-9, 7/23/87, at 14-15. 124. Shultz Test., Hearings, 100-9, 7/23/87, at 13-14. 125. Shultz Test., Hearings, 100-9, 7/23/87, at 13-14. 126. Shultz Test., Hearings, 100-9, 7/23/87, at 13-14. 127. McFarlane Test., Hearings, 100-2, 5/11/87, at 15-16. 128. Casey Memo, 3/27/84, to McFarlane, C7490. See also CIA Cable, 3/8/84, DRC Ex. 19, CIA Cable, 3/10/84, DRC Ex. 19-1. 129. CIA Cable from D. Clarridge, 4/5/84, DRC Ex. 19- 11; id., 4/12/84, DRC Ex. 19-15. 130. CIA Cable, 4/10/84, DRC Ex. 19-14. 131. Clarridge Test., Hearings, 100-11, 8/4/87, at 31; CIA Cable, from D. Clarridge, 5/11/84, DRC Ex. 19-18. 132. See, e.g., CIA Cables, 3/23/84, DRC Ex. 19-2; id., 3/ 24/84, DRC Ex. 19-3; id., 4/2/84, DRC Ex. 19-5; id., 4/3/ 84, DRC Ex. 19-6; id., 4/4/84, DRC Ex. 19-7. 133. Clarridge Test., Hearings, 100-11, 8/4/87 at 29-32. 134. Clarridge Test., Hearings, 100-11, 8/4/87, at 29-30, 32-33. 135. Clarridge Test., Hearings, 100-11, 8/4/87, at 34. Clarridge also defended the Agency's conduct by emphasiz- ing that Country 6's early offer was rejected because it turned out Country 6 wanted reimbursement and that Coun- try 6 sought a bilateral arrangement with a Central Ameri- can country, not the Contras specifically. Clarridge Test., Hearings, 100-11, 8/4/87, at 28-32. 136. CIA Cable from D. Clarridge, 5/11/84, DRC Ex. 19-18. 137. McFarlane Test., Hearings, 100-2, 5/12/87, at 84. 138. McFarlane Test., Hearings, 100-2, 5/11/87, at 17. 139. McFarlane Test., Hearings, 100-2, 5/11/87, at 17. 140. McFarlane Test., Hearings, 100-2, 5/11/87, at 17: I should stress, I described it as it happened, and while there is no solicitation, cry for solicitation, in fact it was unmistakable in his own mind that my concern and my view of this impending loss would represent a significant setback for the President, Approved For Release 2011/05/25 : CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 2 and if anyone with any gumption could manage without being led or asked, then a contribu- tion would have been welcome. 141. McFarlane Test., Hearings, 100-2, 5/11/87, at 17-18. North's notes show that the arrangements were made by June 25. On June 24, he noted "call to RCM re arrange- ments" and on June 25 he noted that he had told Calero the funds were on their way. North Notebook, 6/24/84, Q0338; id., 6/25/84, Q0340. Bank records show the pay- ment was actually received in Calero's account on July 6, 1984. Bank Records, 0318. 142. McFarlane Test., Hearings, 100-2, 5/11/87, at 18. 143. North Test., Hearings, 100-7, Part II, 7/13/87, at 80. 144. McFarlane Test., Hearings, 100-2, 5/11/87, at 18-19. 145. McFarlane Test., Hearings, 100-2, 5/11/87, at 18. 146. McFarlane Test., Hearings, 100-2, 5/11/87, at 53. 147. McFarlane Test., Hearings, 100-2, 5/11/87, at 24. 148. Weinberger Dep., 6/17/87, at 74 (denying any knowledge of a Country 2 contribution). 149. Shultz Test., Hearings, 100-9, 7/23/87, at 4; Poindex- ter Test., Hearings, 100-8, 7/15/87, at 78-79. 150. Baker Dep., 6/22/87, at 12. Attorney General Meese did not testify on this issue. 151. Baker did not recall "using that language or having a specific opinion such as that, although I do, as I have stated, recall feeling that we should take a very close look at the question of legality and feeling that we could not do indirectly what we couldn't do directly." Baker Dep., 6/22/ 87, at 8-9. 152. See Shultz Test., Hearings, 100-9, 7/23/87, at 14-17. 153. North Notebook, 6/25/84, Q0340 (emphasis in origi- nal). 154. North Notebook, 6/25/84, Q0343. 155. Sporkin Memo for Record, 6/26/84, Subj: "Nicara- gua," C8322. Secretary Shultz testified that, as far as he knew, no Justice Department opinion was ever obtained. Shultz Test., Hearings, 100-9, 7/23/87, at 17-18. 156. North Test., Hearings, 100-7, Part I, 7/7/87, at 74. 157. North Test., Hearings, 100-7, Part I, 7/8/87 at 116. There is some evidence that Secord may have been in- volved in another covert operation prior to the Contra project. In an Apr. 27, 1984, notebook entry, North relates what appears to be an arms deal with Country 1 ("Team to [Country 1] $54 million worth of arms"). Later the note states: "McFarlane talked to [Country 1 official] Can't produce $; similar to Secord arrangement; 65 lift vans; $750K." North Notebook, 4/27/84, Q0228 (emphasis added). 158. North Test., Hearings, 100-7, Part I, 7/8/87, at 116. 159. North Test., Hearings, 100-7, Part I, 7/8/87, at 117. 160. North Test., Hearings, 100-7, Part I, 7/8/87, at 117. 161. North Test., Hearings, 100-7, Part I, 7/8/87, at 122. As recounted by North, Casey's plan mirrored the sugges- tions of others. It was about this time that Robert Owen, who would become North's courier, provided him with a plan for "setting up proprietary companies . . . to purchase goods overseas and provide assistance to the contras." Owen Test., Hearings, 100-2, 5/14/87, at 325-26. 162. North Test., Hearings, 100-7, Part II, 7/13/87, at 46. 163. See The New York Times, May 16, 1987, at Al ("As a matter of fact, I was very definitely involved in the decisions about support to the freedom fighters. It was my idea to begin with.") 164. Poindexter Test., Hearings, 100-8, 7/20/87, at 228. 165. See Secord Test., Hearings, 100-1, 5/5/87, at 46. 166. Secord Test., Hearings, 100-1, 5/5/87, at 48-49. On July 26, North had a conversation with Gen. Secord, and his notes report the involvement of "Chi Chi" Quintero: L-100 Shipping prices Shipping Agent?Raphael Chi Chi Quintero Cuban/Miami knows maritime ops knows logistic support would make a logistics advisor travels in region frequently Canadian Arms dealer?Century Arms Ltd. North Notebook, 7/26/84, Q0448. 167. Secord Test., Hearings, 100-1, 5/5/87, at 50-51; Hakim Test., Hearings, 100-5, 6/3/87, at 200. 168. Secord Test., Hearings, 100-1, 5/7/87, at 172. 169. Owen Test., Hearings, 100-2, 5/14/87, at 325-26. 170. Owen Test., Hearings, 100-2, 5/14/87, at 325-26. 171. Owen Test., Hearings, 100-2, 5/14/87, at 327; see Owen Letter, 7/2/84, to North, RWO Ex. 1 at 777 ("fire- cracker costs"). 172. Owen Test., Hearings, 100-2, 5/14/87, at 326-42. 173. Owen Test., Hearings, 100-2, 5/14/87, at 334-35; Id., 5/19/87, at 385. 174. McFarlane Test., Hearings, 100-2, 5/11/87, at 5. 175. North Memo, 8/28/84, to McFarlane: Subj: "Official Travel to Honduras on August 31, 1984," at N46204. 176. North Memo, 9/2/84, to McFarlane: Subj: "FDN Air Attack of 1 September," RCM Ex. 30-B at 426, N44850. 177. Ken deGraffenreid was, at the time, the head of the NSC Staffs Intelligence Directorate, the group responsible for coordinating policy on covert action projects. deGraf- fenreid Dep., 6/19/87, at 5; id., 7/27/87, at 58. 178. North Memo, 10/9/84, to McFarlane: Subj: "Draft National Security Decision Directive (NSDD) on Arms Interdiction in Central America," at N6446-51. 179. Cong. Rec. H11974 (Oct. 10, 1984). Representative Hyde, an opponent of the Boland Amendment, gave it a similar interpretation in urging members to reject it. He stated: "[S]ection 107 . . . forbids any assistance to the freedom fighters in Nicaragua. . . . Arm them and abandon them on a party line vote. No food, no medicine, no ammu- nition, not even moral support. We barely leave them a prayer." Cong. Rec. H8269 (Aug. 2, 1984). See Chapter 26 for a fuller discussion of the legislative history of the Boland Amendment. 180. North Test., Hearings, 100-7, Part I, 7/8/87, at 162- 63; see id., at 270-71; McFarlane Test., Hearings, 100-7, Part II, 7/14/87, at 223-24; Poindexter Test., Hearings, 100-8, 7/ 20/87, at 52-53. See Chapter 26 for a fuller discussion of their views. 181. Poindexter Test., Hearings, 100-8, 7/15/87, at 52-53. 182. See McFarlane Test., Hearings, 100-7, Part II, 7/14/ 87, at 203-04. 183. McFarlane Test., Hearings, 100-7, Part II, 7/14/87, at 203; see also McFarlane Test., Hearings, 100-2, 5/12/87, at 129. 184. McFarlane Test., Hearings, 100-2, 5/11/87, at 44-48; McFarlane Test., Hearings, 100-2, 5/11/87, at 20. 185. McFarlane Test., Hearings, 100-2, 5/11/87, at 21. 186. McFarlane Test., Hearings, 100-2, 5/11/87, at 21. 187. McFarlane Test., Hearings, 100-7, Part II, 7/14/87, at 204, 221-22. 55 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 , . I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 2 188. Poindexter Test., Hearings, 100-8, 7/21/87, at 340-41; North Test., Hearings, 100-7, Part I, 7/9/87, at 177. 189. North Test., Hearings, 100-7, Part I, 7/8/87, at 177; id, 7/9/87, at 186; id., 100-7, Part II, 7/13/87, at 78-79. 190. Poindexter Test., Hearings, 100-8, 7/20/87, at 228- 29; id., 7/15/87, at 74. 191. McFarlane Test., Hearings, 100-7, Part II, 7/14/87, at 204; see also id., 7/14/87, at 211-22. 192. Poindexter PROF to McFarlane, 11/23/84 at 21:27:14, JMP Ex. 4. 193. North Test., Hearings, 100-7, Part I, 7/7/87, at 74. 194. North Test., Hearings, 100-7, Part I, 7/7/87, at 74. 195. Poindexter Dep., 5/2/87, at 51-52. 196. Poindexter Dep., 5/2/87, at 63. 197. McFarlane Test., Hearings, 100-7, Part II, 7/14/87, at 225. 198. North Test., Hearings, 100-7, Part II, 7/10/87, at 2-3. 199. Calero Test., Hearings, 100-3, 5/20/87, at 11-12. 200. See, e.g., North Notebook, 1/10/85, Q0957; id., 1/3/ 85, Q0934; id, 12/12/84, Q0893. 201. North Notebook, 12/7/84, Q0882; id., 12/17/84, Q0910; see North Memo, 12/20/84, to McFarlane: Subj: "Follow-up with [ ] re: Terrorism and Central America," N7200-02. 202. North Notebook, 12/17/84, Q0910; cf. North Memo, 12/20/84, to McFarlane: Subj: "Follow-up with [1 Re: Terrorism and Central America," N7200 (indicating $15K price per launcher). 203. North Memo, 12/20/84, to McFarlane: Subj: "Follow-up with [ ] re: Terrorism and Central America," N7200-02. 204. McFarlane Test., Hearings, 100-7, Part II, 7/14/87, at 222. 205. North Notebook, 1/3/85, Q0934. 206. North Memo, 12/4/84, to McFarlane: Subj: "Assist- ance for the Nicaraguan Resistance," RCM Ex. 32 at 468, N16887. 207. North Memo, 12/4/84, to McFarlane: Subj: "Assist- ance for the Nicaraguan Resistance," RCM Ex. 32 at 468, N16887. 208. North Test., Hearings, 100-7, Part I, 7/7/87, at 83-84. 209. McFarlane Test., Hearings, 100-2, 5/11/87, at 29-30. 210. North Test., Hearings, 100-7, Part I, 7/7/87, at 83-84. 211. Secord Test., Hearings, 100-1, 5/5/87, at 51-52. Bank records indicate that the downpayment for the first sealift was not made until February. H9409. 212. North Notebook, 1/29/85, Q1553-54. 213. North Notebook, 1/30/85, Q1555. 214. North Notebook, 2/5/85, Q1580 (emphasis in origi- nal). 215. See North Memo, 3/5/85, to McFarlane: Subj: "Aid to the Nicaraguan Resistance," RCM Ex. 35 at N7189-97 (attaching end user certificates dated Feb. 14, 1985). 216. See McFarlane Test., Hearings, 100-7, Part II, 7/14/ 87, at 221; North Notebook, 1/2/85, Q0932. 217. C/CATF Test., Hearings, 100-11, 8/4/87, at 237-38. 218. See Owen Test., Hearings, 100-2, 5/14/87, at 332-33. 219. North Test., Hearings, 100-7, Part I, 7/9/87, at 266- 67. 220. See Poindexter Test., Hearings, 100-8, 7/15/87, at 193. 221. See North Memo, 11/7/84, to McFarlane: Subj: "Clarifying Who Said What to Whom," RCM Ex. 31 at 463, N6914. 56 222. Id, RCM Ex. 31, at 463-64, N6914-15. 223. Id, RCM Ex. 31, at 465, N6916. 224. Id, RCM Ex. 31, at 464, N6915. 225. McFarlane Test., Hearings, 100-7, Part II, 7/14/87, at 222; McFarlane Test., Hearings, 100-2, 5/11/87, at 166. 226. North Test., Hearings, 100-7, Part I, 7/9/87, at 204- 05. 227. North Memo, 2/6/85, to McFarlane: Subj: "Nicara- guan Arms Shipments," RCM Ex. 33 at 472, N6918. 228. Id, RCM Ex. 33, at 472, N6918. 229. Id, RCM Ex. 33, at 472, N6918. 230. Id, RCM Ex. 33, at 475, N6921. 231. North Memo, 12/4/84, to McFarlane: Subj: "Assist- ance for the Nicaraguan Resistance," RCM Ex. 32, at 470, N16889. 232. North Test., Hearings, 100-7, Part II, 7/14/87, at 157. 233. McFarlane Test., Hearings, 100-2, 5/11/87, at 29-30. 234. Poindexter Test., Hearings, 100-8, 7/20/87, at 230. 235. North Test., Exec. Session, 7/9/87, at 58. 236. North, PROF Note, 8/23/86 at 15:52:52, to Poin- dexter, N12151. [North Classified Ex. 336.] 237. Singlaub Test., 5/20/87, at 192; see North Test., 7/7/ 87, at 199-202. 238. Singlaub Test., 5/20/87, at 190-93; see also North Test., 7/7/87, at 199-202. 239. Singlaub Test., 5/20/87, at 192. 240. McFarlane Test., 5/11/87, at 14-15; id., 5/14/87, at 203. 241. North Test., 7/7/87, at 198-99. 242. North Test., 7/7/87, at 202-04. 243. North Test., 7/7/87, at 234 ("[S]omeone had told me that a U.S. Government official should not, cannot, will not, whatever solicit.") 244. Singlaub Test., 5/20/87, at 193-94. 245. Singlaub Test., 5/20/87, at 201. 246. Singlaub Test., 5/21/87, at 164. 247. Singlaub Test., 5/20/87, at 198-99. 248. North Notebook, 2/1/85, Q1567; see Singlaub Test., 5/20/87, at 198-201. 249. North Memo, 2/6/85, to McFarlane, RCM Ex. 34 at 479, N7015. In a handwritten addition, North wrote: "Nor should Singlaub indicate any U.S. Government endorsement whatsoever." Id 250. North Memo, 2/6/85, to McFarlane, RCM Ex. 34, at 479, N7015. 251. Singlaub Test., 5/20/87, at 200. Singlaub informed North that he presented three options for Country 3 to contribute to the Contras: (1) a deposit to a foreign bank account where no subsequent accounting would be provid- ed; (2) a contribution directly to, and with an accounting by, Singlaub; and (3) a diversion from the proceeds of an upcoming arms sale to Country 3 (so that no disbursement would then be reflected on Country 3's books). Singlaub also proposed that Countries 3 and 5 make direct contribu- tions to the Contras of military supplies. Singlaub Test., 5/ 20/87, at 195-97. 252. Singlaub Test., 5/21/87, at 204. 253. See North Test., 7/7/87, at 199-207. 254. McFarlane Test., 5/13/87, at 103-05. 255. Secord Test., 5/5/87, at 154-56. 256. Secord Test., 5/5/87, at 154-56. 257. McFarlane Test., 7/14/87, at 218. 258. McFarlane Test., 5/11/87, at 49-52. 259. McFarlane Test., 5/11/87, at 51-52. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 2 260. McFarlane Test., 5/11/87, at 50-51; see Shultz Test., 7/23/87, at 8-9; McFarlane Int., 4/5/87, MF1955. 261. Weinberger Test., 7/31/87, at 133, 135. 262. Vessey Dep., 4/17/87, at 6; Weinberger Test., 7/31/ 87, at 134; cf. CWW Ex. 39, CIA Memo for the Record by J. McMahon, "Breakfast with Secretary and Deputy Secre- tary of Defense," 3/15/85, ("In closing the Secretary stated that he had heard that [Country 2] had earmarked $25 million for the Contras in $5 million increments"). While Weinberger did not recall making the statement recorded in the memo, Weinberger Dep., 6/17/87, at 74-75, McMahon confirmed, in his deposition, the accuracy of the informa- tion. McMahon Dep., 7/1/87, at 57 (Q: "Do you remember that meeting where Secretary Weinberger mentioned that he had heard that [an official of Country 2] had earmarked $25 million foi- the contras?" A: "Yes." Q: "What did he say in that meeting?" A: "Exactly what you said. It was like an offhand remark.") 263. Shultz Test., 7/23/87, at 8-9. 264. McFarlane Test., 5/11/87, at 54. 265. See 04882-83. 266. Weekly Presidential Documents, Vol. 20, No. 45, 11/ 9/84, at 1817. 267. McFarlane Test., 5/11/87, at 43. 268. The Washington Post, 11/30/84, at Al (statement of Sen. David Durenberger). 269. Weekly Presidential Documents, Vol. 20, No. 51, 12/ 21/84, at 1909. 270. See Weinberger Memo, 1/3/85, to McFarlane: Subj: "U.S. Policy Toward Nicaragua," at N6495. 271. See North Memo, 1/15/85, to McFarlane: Subj: "Nicaragua Options," Tab F, "Options and Legislative Strategy for Renewing Aid to the Nicaraguan Resistance," at N45086-93. 272. See North Memo, 1/15/85, to McFarlane: Subj: "Nicaragua Options," at N45025, N45029; see also McFar- lane Test., 5/11/87, at 44. 273. North Memo, 1/15/85, to McFarlane: Subj: "Nicara- gua Options," Tab I, "Policy Options for Nicaragua," at N45029. 274. North Memo, 1/15/85, to McFarlane: Subj: "Nicara- gua Options," Tab E, "The Future of the Nicaraguan Re- sistance," at N45083. 275. North Memo, 1/28/85, to Poindexter: Subj: "Nicara- guan SNIE," (referring to "The Future of the Nicaraguan Resistance," Tab E to "Nicaragua Options" Memo, at N45029), at N32824. 276. McFarlane Test., Hearings, 100-2, 5/11/87, at 21. 277. Secord Test., Hearings, 100-1, 5/5/87, at 49-52. 278. North Memo, 3/5/85, to McFarlane: Subj: "Aid to the Nicaraguan Resistance," RCM Ex. 35 at 494, N7184. 279. North Memo, 3/5/85, to McFarlane: Subj: "Aid to the Nicaraguan Resistance," RCM Ex. 35 at 494, N7184. 280. Id. RCM Ex. 35 at 495, N7185. 281. Id. RCM Ex. 35 at 494, N7184. 282. McFarlane Test., Hearings, 100-2, 5/11/87, at 32-33; McFarlane Int., 4/5/87, MF1957. 283. North Test., Hearings, 100-7, Part I, 7/8/87, at 147- 48. 284. North Test., Hearings, 100-7, Part I, 7/8/87, at 132, 135. 285. North Test., Hearings, 100-7, Part I, 7/8/87, at 132 286. North Test., Hearings, 100-7, Part I, 7/8/87, at 132. 287. North Test., Hearings, 100-7, Part I, 7/8/87, at 133. North made no mention in his testimony about what he believed to be the "extraordinary risk" involved. In con- trast, in the case of his notebooks, which also contained the names and addresses of private donors and recipients, North felt free to remove them from the protection of his locked and guarded office. North Test., Hearings, 100-7, Part I, 7/ 8/87, at 134. He destroyed the ledgers as the Contra diver- sion was coming to light in November 1986. North Test., Hearings, 100-7, Part I, 7/8/87, Part I, at 134. 288. Poindexter Test., Hearings, 100-8, 7/15/87, at 74. 289. Poindexter Test., Hearings, 100-8, 7/15/87, at 74. 290. North Memo, 3/15/85, to McFarlane, N7127-28. 291. North Memo, 2/27/85, to McFarlane, N6418-19. 292. North Memo, 3/15/85, to McFarlane, at N7128. 293. North Memo, 2/27/85, to McFarlane, N6419. 294. North Memo, 3/15/85, to McFarlane, N7128. 295. Owen Test., Hearings, 100-2, 5/14/87, at 237-39. 296. Owen Test., Hearings, 100-2, 5/19 at 347-48. 297. Owen Test., Hearings, 100-2, 5/14/87, at 34.0-41. 298. Owen Test., Hearings, 100-2, 5/14/87, at 341-42. 299. Owen Test., Hearings, 100-2, 5/14/87, at 339-40. 300. "Steelhammer" Letter to "My Friend," RWO Ex. 3 at 782 (emphasis in original). 301. North Memo, 11/7/84, to McFarlane: Subj: "Clarify- ing Who Said What to Whom," RCM Ex. 31, at 464, N6915. 302. CIA Memo, 3/5/85, "Outside Support to the FDN," C2470. 303. See, e.g., Guardian, 3/13/85, at 3; see also Boston Globe, 12/30/84, at A21, A24. 304. Singlaub Test., Hearings, 100-3, 5/20/87, at 83-84. 305. Singlaub Test., Hearings, 100-3, 5/20/87, at 83-84. 306. As Owen wrote to North in February, "[a] major lobbying, educational and public relations effort is needed to help sway a Congress which appears inclined not to vote for passage of covert funding." Owen Memo, 2/19/85, to North: Subj: "Public Relations Campaign for the Freedom Fighters," RWO Ex. 4 at 783. 307. North/Fortier Memo, 3/22/85, to McFarlane: Subj: "Timing and the Nicaraguan Resistance Vote," Tab, "Chronological Event Checklist," N40320-331. The plan ap- parently evolved from meetings of an ad hoc working group chaired by Patrick Buchanan. See id. at N40317. 308. North Memo, 3/16/85, to McFarlane: Subj: "Fall- back Plan for the Nicaraguan Resistance," RCM Ex. 36 at 511, N10618. 309. Id. RCM Ex. 36 at 512, N10619. 310. Id. RCM Ex. 36 at 512, N10619. 311. North/Fortier Memo, 3/22/85, to McFarlane: Subj: "Timing and the Nicaraguan Resistance Vote," at N40317. 312. See Fortier Memo, 4/1/85, to McFarlane: Subj: "Contra Vote ?Delay to May," N18785-86. 313. North Memo, 4/1/85, to McFarlane: Subj: "Using the March 1 San Jose Declaration to Support the Vote on the Funding for the Nicaraguan Resistance," N40317 (em- phasis added). 314. McFarlane Test., Hearings, 100-2, 5/11/87, at 28. 315. Weekly Presidential Documents, Vol. 21, No. 18, at 537 (Apr. 24, 1985). 316. Weekly Presidential Documents, Vol. 21, No. 18, at 557 (Apr. 29, 1985). 317. Weekly Presidential Documents, Vol. 21, No. 18, at 566 68 (May 1, 1985). 57 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 ....1 ..1 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 2 318. North Memo, 4/11/85, to McFarlane: Subj: "FDN Military Operations," RCM Ex. 37 at 520, N10592. 319. Calero Test., 5/20/87, at 29; North Memo, 4/11/85, to McFarlane: Subj: "FDN Military Operations," RCM Ex. 37 at 520, N10592. 320. In all but one case, these arms had been purchased by Calero from General Secord. Calero Test., 5/20/87, at 30. 321. North Memo, 4/11/85, to McFarlane: Subj: "FDN Military Operations," RCM Ex. 37 at 520, N10592. As of March 25, 1985, Calero had received $32 million. 04881-83. 322. Id., RCM Ex. 37 at 521, N10593. 323. Gorman Dep., 7/22/87, at 25-32. 324. RCM Ex. 37 at 521, N10593. North's notes suggest that these plans were at least to some extent pursued. On June 17, North first met with Secord and "Tom" (perhaps Clines); that same morning he met with the Chief of the Central American Task Force, and noted "-need more Intel; -MAPS - 1:80,000 Northern Area; -Maps of Managua Air- port Area." The note continues: "-Log/Mil Pining - Miami -3 small Maule, 1 C-47, 1 Helo, Medevac -Log Support for 3 mines Area -Log Support for Managua Ops -Phaler Boat Ops -Refinery -Ammo Purchase Program -Training Pro- gram." North Notebook, 6/17/85, Q1953-54. 325. On May 6, North learned from the Chief, Central American Task Force, the details of a Sandinista attack. North Notebook, 5/6/85, Q1796. By the next day, the Con- tras had been ordered to move out, and Calero called North to tell him that he was "waiting for word on where they want[ed the] FDN to move to." North Notebook, 5/7/85, Q1800. North received the same news from the Chief, CATF: They had to "immed. vacate [location], will have to vacate." North Notebook, 5/8/85, Q1808. On May 13, North learned from the U.S. Ambassador that the "disper- sal" was "complete." North Notebook, 5/13/85, Q1818. North told a Central American Ambassador that it was "essential that [the] movement not feel abandoned . . ." "There must be some visible link/continuity in [the] pro- gram." North Notebook, 5/9/85, Q1810. 326. North/Fortier/Lehman/Burghardt Memo, 5/15/85, to McFarlane: Subj: "Congressional Strategy for Nicara- guan Resistance Funding," N40244. 327. North Memo, 5/31/85, to McFarlane: Subj: "The Nicaraguan Resistance: Near Term Outlook," RCM Ex. 38 at 532, N10584. 328. Secord Test., Hearings, 100-1, 5/5/87, at 52-53. 329. North Notebook, 5/1/85, Q1790. 330. Secord, Hearings, 100-1, 5/5/87, at 53. 331. See, e.g., North Notebook, 5/17/85, Q1832: "Mario [Calero] more & more in picture;-ponchos, Howard, tires for C-47;-LORAN C w/ Bad cable, boots w/bad soles; - serious logistics problems; - possible Martin interference w/ [Central American] delivery; -ship arrives 1 June 85 - Danish vessel; -$148/copy for . . . in lots of 5K or more." 58 332. See RCM Ex. 37 at 525, "FDN Expenditures and Outlays." 333. North Notebook, 5/8/85, Q1806. 334. North Notebook, 5/24/85, QI861. 335. Secord Test, Hearings, 100-1, 5/5/87, at 57. 336. North Notebook, 5/1/85, Q1790. 337. North Test., 7/8/87, at 83. 338. North Test., 7/8/87, at 84. 339. Singlaub Test., 5/20/87, at 202-03. 340. Singlaub Test., 5/20/87, at 204. 341. Singlaub Test., 5/20/87, at 206-08. 342. Singlaub Test., 5/20/87, at 210-11. 343. Singlaub Test., 5/20/87, at 218. 344. North Test., 7/8/87, at 83. 345. Secord Test., Hearings, 100-1, 5/5/87, at 53. 346. See Chapter 22. 347. Secord, Hearings, 100-1, 5/5/87, at 51. 348. But see Secord Test., 5/5/87, at 152 ("[L]ater in 1985, I foreswore my share of the profits that had accrued to that time, none of which I had drawn, and discussed this extensively with Mr. Hakim"). 349. Secord Test., 5/5/87, at 142. For details of the finan- cial workings of the Enterprise, see Chapter 22. 350. Calero Test., 5/20/87, at 32. 351. Calero Test., 5/20/87, at 279-80. 352. North Test., 7/10/87, at 155-56. 353. North Test., 7/8/87, at 62. 354. Singlaub Test., 5/20/87, at 211-13. 355. Singlaub Test., 5/20/87, at 213-14. 356. Calero Test., 5/20/87, at 90. 357. North called Clarridge immediately after he dis- cussed the purchase with Secord, and asked Clarridge to do a check on the European arms dealer. North Notebook, 5/ 18/85, Q1834. Clarridge, who was by then Chief of the CIA's European division, reported back on May 23, 1985. Id., 5/23/85, Q1858. 358. North Notebook, 5/17/85, Q1831. 359. North Notebook, 5/17/85, Q1833. 360. North Notebook, 5/20/85, Q1837. 361. North Test., 7/8/87, at 84. 362. Committee Interview, 6/10/87. 363. Singlaub Test., 5/20/87, at 222-25. The vessel was met by an associate of Ron Martin, Mario DelAmico, who held himself out as a representative of a Central American country, charged with FDN matters. In September, Sing- laub met with DelAmico, who warned him that he should never send another ship but, instead, purchase weapons through Martin. Id. at 227. Singlaub told North of this "threat," and North responded that "he would take what- ever action was necessary of this." Id. 364. North Notebook, 5/15/86, Q1825. In fact, Calero's funds were not completely depleted until October 1985. See bank records, 04737. 365. Calero Test., 5/20/87, at 152. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 3 The Enterprise Assumes Control of Contra Support In the summer of 1985, Congress voted to appropriate $27 million for the Contras' humanitarian needs, in- cluding food, medicine and clothing. At the same time, the covert program, run by the National Securi- ty Council (NSC) staff, entered a new and bolder phase. With the Contras' daily living needs taken care of by Congress, and their requirements for arms having been met through Country 2's prior donations, the NSC staff was able to focus on attempting to improve the Contras' military effectiveness. This in- volved establishing an air resupply program for the main Contra fighting force operating in the North of Nicaragua, the Nicaraguan Democratic Force (FDN), and promoting the opening of a second Contra front in the South of Nicaragua by supporting other Contra fighters, independent of the FDN, who were operat- ing there. This support for the southern forces includ- ed the procurement of arms as well as the establish- ment of an air resupply program. Disappointed at the failure of Adolfo Calero to develop a logistics infrastructure, Lt. Col. Oliver North asked Gen. Richard Secord and his associates to assume new responsibilities that under the Boland Amendment the U.S. Government could not under- take. Secord agreed to continue to handle all future weapons procurement for the Contras and to acquire and operate a small fleet of planes to make air drops of weapons, ammunition, and other supplies to the Contras in both northern and southern Nicaragua. North arranged the funding for Secord to carry out these activities, directing third-country and private contributions to Secord that previously went to Calero. These funds were later augmented by the diversion from the Iranian arms sales that North, with Admiral John Poindexter's approval, initiated. Financed by contributions and the diversion, the Secord group purchased and operated five airplanes, built an emergency airstrip in Costa Rica, maintained an air maintenance facility and a warehouse in an- other Central American country, and hired pilots and crew to fly the air drop missions. They also pur- chased weapons and ammunition in Europe and deliv- ered them to Central America for use by the Contras in the south and north. North called the organization "Project Democracy." Secord and his partner, Albert Hakim, referred to it as the Enterprise. The Enterprise, though nominally private, func- tioned as a secret arm of the NSC staff in conducting the covert program in Nicaragua. While Secord con- trolled the operational decisions of the Enterprise, North remained in overall charge of the Contra sup- port program. He set the priorities and enlisted the support of an Ambassador, Central Intelligence Agency (CIA) officials, and military personnel to carry out the air resupply operation. He dealt with crises as they arose, sometimes on a daily basis. In carrying on these tasks, North had the unqualified support of Admiral Poindexter, who had replaced Robert McFarlane as National Security Adviser in December 1985. The efforts of the NSC staff and the Enterprise to carry out a government function with a makeshift covert organization were, however, dogged by prob- lems from the beginning. The Enterprise's aircraft were in poor condition and the group had to over- come numerous tactical problems in carrying out its mission. While the Enterprise conducted routine air drops in northern Nicaragua, it was not able to begin a regular air drop operation in the south until late summer of 1986?at a time when both Houses of Congress had voted to authorize the CIA to resume its support for the Contras with appropriated funds and when the Enterprise was trying to sell its assets to the CIA. The operation ended abruptly in October 1986 when the plane that Eugene Hasenfus was on was shot down while on a mission to drop supplies to the Contras in Nicaragua. Before that and for more than 2 years, the NSC staff had secretly achieved what Congress had openly disapproved in the Boland Amendment?an extensive program of military support for the Contras. The Boland Amendment operated as a restraint on disclo- sure, not on action, as the NSC staff placed policy ends above the law. The Enterprise's Mission is Expanded On June 12, 1985, the House passed a bill approving $27 million in humanitarian assistance to the Contras, paving the way for final approval and signature by the President in August 1985. While that vote virtual- 59 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 11 , i 1 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 3 ly ensured that the Contras would have adequate food, medical supplies, and other provisions, it also strictly limited the money to nonmilitary uses. The provision of covert military assistance re- mained the secret business of the NSC staff. In the summer of 1985, articles appeared in the press specu- lating about the role of the NSC staff in assisting the Contras and Congress began inquiring of the National Security Adviser whether this was true. Yet, at this very time, the NSC staff decided to extend its covert program to include a system for resupplying Contras in the field. Some of the Contras fighting within Nica- ragua were as many as 30 days away by land from border areas. To keep them supplied and to encour- age other fighters to move from border sanctuaries to Nicaragua, a capacity to make aerial drops of ammu- nition and other supplies was essential.' As early as February 1985, North had urged Calero to set aside $10 million from the funds raised from Country 2 to hire a logistics expert and create a resupply operation. But the available money was used to purchase and stockpile weapons. As a result, by summer 1986, the Contras had a surplus of arms. Their problem was how to deliver these weapons to the fighters. For North, the answer lay with Secord and his group.2 In early July, North held a meeting in Miami of Contra leaders and members of Secord's group to arrange for what Congress had refused to fund?the air resupply of lethal material for the Contra forces inside Nicaragua. Present were North, FDN leader Adolfo Calero, Enrique Bermudez, the FDN military commander, Secord, and his associates, Thomas Clines and Rafael Quintero.3 North began the meeting with an expression of a loss of confidence in the way the FDN was handling the donated funds he had directed to the FDN. Secord described North's remarks: The meeting commenced on a pretty hard note, with Colonel North being worried about and critical of the Contras, because he had been re- ceiving reports that the limited funds they had might be getting wasted, squandered or even worse, some people might be lining their pockets. His concern, as he articulated it, was a very serious one. He was afraid that if anything like this was going on that since they were dependent on contributions that the image of the Resistance could be badly damaged; it could ruin us, in fact, and he was very, very hard on this point.4 North's solution, though not unveiled at the meet- ing, was to have Secord and his group take over the procurement function for the Contras. As Robert Owen, North's courier, testified, "I think he and Gen- eral Secord felt they probably could do a better job" of handling the funds than the Contras.3 60 North had decided to furnish the FDN directly with arms, air support, and other supplies. He would no longer leave to the Contras the task of spending their own money on these goods and services. Almost immediately after the Miami meeting, Secord's part- ner, Albert Hakim, established the Lake Resources account in Geneva, Switzerland, and thereafter virtu- ally all donated funds were directed by North to the Lake Resources account in Switzerland, not Calero's accounts. The Secord group?the Enterprise?would no longer function simply as an arms broker from which Calero would purchase the arms. With the contributions, it would make all the decisions on arms purchases and supply the Contras with the weapons and the other support they needed, without receiving from the Contras payment for the arms.6 The Contras' management of money was only one of the problems raised at the all-night meeting in Miami. More important was the need to create an airlift system to drop supplies to FDN troops inside Nicaragua and to open a Southern front. The first priority, all agreed, was the delivery of the arms already purchased to the soldiers fighting near and inside Nicaragua. Before the Boland Amend- ment was passed, the CIA helped to arrange the airlift of arms and other supplies to the troops. When the CIA withdrew, the Contras had difficulty maintaining this important logistical function. The FDN's aircraft were few and could not effectively and consistently penetrate Nicaraguan airspace past Sandinista de- fenses. Moreover, the FDN lacked properly trained personnel. The continuing resupply of troops and its attendant logistics, maintenance, and communications comprised the "sinews of war," the infrastructure nec- essary for any sustained and effective fighting force. North turned to Secord to establish and run the air resupply operation.7 The participants in the Miami meeting also agreed on the need to open a Southern front. With the FDN, the principal Contra force, operating in the North, the Sandinistas could concentrate their military forces on the Northern front. Forcing the Nicaraguans to fight a two-front war by building up a Contra force in the South was elemental military strategy. Calero, howev- er, continued to concentrate his resources on his own organization in the North, the FDN.8 The air resupply and Southern front projects went hand-in-hand. Because neighboring countries were re- luctant to permit land resupply from inside their bor- ders, a southern force could not live without air re- supply. And the FDN could not, or would not, un- dertake this mission on its own.3 Thus, the air resupply operation that North asked Secord to undertake was also the key to the Southern front. In giving this assignment to Secord, North testi- fied that he acted with McFarlane's authority." McFarlane denied this." Poindexter, however, stated that he was "aware that Colonel North was con- Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 1 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 3 cerned about the logistics operation, the way it was going, and I was aware that he was going to talk to General Secord about setting up a more professional logistics support operation as a private operation." 12 The New Humanitarian Aid As the Enterprise began implementing the plans laid in Miami, the Contras received a boost from Wash- ington. On August 8, 1985, President Reagan signed legislation authorizing $27 million in humanitarian aid to the Contras." For the first time since May 1984, the Contras would receive U.S. Government funding as well as intelligence support from the CIA. Al- though the Boland Amendment remained in effect, new legislation specified that the Amendment did not prohibit exchanging information with the Contras." The legislation prohibited the CIA or the Depart- ment of Defense (DOD) from administering the new humanitarian funds and required that the President ensure that any assistance "is used only for the intend- ed purpose and is not diverted" for the acquisition of military hardware. The State Department was chosen to administer the aid. By executive order signed on August 29, 1985, the President created the Nicara- guan Humanitarian Assistance Office (NHAO) in the State Department.15 The State Department was reluctant to accept this responsibility. The Department had no experience and lacked the organization to feed and provide for the daily needs of troops. To run NHAO, Secretary George P. Shultz tapped Ambassador Robert Duem- ling, a seasoned diplomat, but with no prior experi- ence in administering an aid program. Secretary Shultz cautioned Duemling to administer the aid not only with "enthusiasm" but also with "care." Ambas- sador Duemling found the program difficult to admin- ister from the start.16 Nicaragua's neighbors did not officially recognize the Contra movement, even though Contras operated unofficially out of their ter- ritory. The cargo of the initial NHAO flight on July 10 was impounded when local Central American au- thorities learned that an NBC film crew was on board at the invitation of Calero's brother. Thereafter, that Central American country barred, for a period of time, the entry of NHAO employees, which prevent- ed them from conducting any on-site accounting of supplies or of the Contras' needs." Deumling's diffi- culties were definitional as well as operational. NHAO had continually to assess whether various items were "humanitarian" within the meaning of the statute." Preparations for the Resupply Operation In the beginning of August, Secord met with North and others to discuss the steps necessary to establish the resupply program. First, a logistics organization consisting of aircraft, spare parts, maintenance, com- munications, and trained personnel had to be set up. For that, Secord turned to former Air Force Lt. Col. Richard Gadd, who since his retirement from the military in 1982 had been providing, through a private business, air support to the Pentagon.19 The second task was to obtain a secure operating base from which the aircraft could launch their mis- sions. For this, Quintero, on Secord's instructions, consulted with the Contra leaders and chose a mili- tary airbase in a Central American country ("The Airbase".) Secord and North concurred in this choice. 2 ? Finally, Secord concluded that to establish a sus- tained air resupply operation on the Southern front, an emergency airstrip was necessary in the South. North suggested to Secord Santa Elena in the north- west corner of Costa Rica, which North believed could also be used as a covert secondary operating base for resupply to the Southern front.21 U.S. Support for the Covert Operation The plans made in Miami for a resupply operation and a Southern front could not have been implement- ed without the active support of U.S. Government officials. In July 1985, almost immediately after the Miami meeting, North asked Lewis Tambs, the newly ap- pointed Ambassador to Costa Rica, to help open a Southern front for the Contras, a request that Poin- dexter approved.22 Tambs agreed without consulting Secretary Shultz. Later that summer, North specifical- ly asked for Tambs' help, as well as that of CIA Chief Tomas Castillo, to facilitate the construction and use of the airfield.23 North testified that he had received authorization from Director of Central Intelligence William J. Casey to bring Castillo into the resupply operation. Moreover, according to North, the airstrip was dis- cussed in the Restricted Interagency Group on Cen- tral American Affairs, which consisted of, among others, North, the Chief of the Central American Task Force (CATF) at the CIA and the group's chairman, Elliott Abrams, Assistant Secretary of State for Inter-American Affairs.24 Abrams acknowledged the discussions, but testified that he believed "private benefactors, as we used to call them, were building the airstrip." 25 The Airfield Is Planned On August 10, 1985, North flew to Costa Rica where he met with Castillo and Tambs. North and Castillo discussed the establishment of a secret airbase that would permit moving all Contra military oper- ations inside Nicaragua for resupply by air. Castillo and Tambs then worked to achieve the establishment Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 61 I 1 II , I . 1 . I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 3 of the airfield and air resupply depot for the Contra forces. Castillo reported these developments to the Chief of the CATF at CIA headquarters. The Chief replied that he was pleased with these developments but he "emphasize[d]" to Castillo that neither the CIA nor DOD could "become involved directly or indirectly" in the project." Less than a week later, North sent Robert Owen to Costa Rica to scout the Santa Elena site. Owen met with Tambs, who introduced him to Castillo as a North emissary. The next day, Owen and Castillo surveyed Santa Elena. Owen took photographs and returned to Washington with a map, photos, and a description of various logistical problems presented by the air strip. North later told Castillo that he thought Santa Elena was an ideal place for a refueling and resupply base.2 7 Meanwhile, North recruited a former Marine col- league, William Haskell, to negotiate the purchase of the land at Santa Elena for the airfield. By the begin- ning of September, Haskell, under the alias of Olm- stead, arrived in Costa Rica to meet with Joseph Hamilton, an American who headed the group that owned the land at Santa Elena. While Tambs assisted in bringing the parties together, Castillo alerted North that local groups had to be involved in the construc- tion. Eventually, Secord paid more than $190,000 for local contractors and guards at the airstrip.28 On Oc- tober 3, Haskell called North with news of Hamilton's tentative approval for the sale of the land. Shortly thereafter, North, Haskell, Secord, Gadd, and Hakim met. At North's request, Gadd agreed to assemble a team and assume responsibility for constructing the airstrip. 29 The Airbase Is Secured Once the Airbase in the other Central American country was selected as the most desirable main base for the air resupply operation, North also took the necessary steps to obtain host-government approval, which required the assistance of other U.S. Govern- ment officials. North's notebooks reflect that on Sep- tember 10, 1985, he met with Col. James Steele, a U.S. Military Group Commander stationed in Central America, and Donald Gregg, Vice President Bush's National Security Adviser. Among the discussion topics North listed was a "Calero/Bermudez visit to [the Airbase] to estab[lish] log[istical] support/ maint[enance]," as well as other possible locations for the resupply base.3? Gregg, however, testified that he did not know of the resupply operation prior to the summer of 1986.3' On September 16, North's notebooks reflect a call from Steele, "what about Felix?help for a/c [air- craft] maint[enance]." 32 An ex-CIA operative, Felix Rodriguez had volunteered as a private American cit- izen to aid a Central American Air Force in counter- insurgency maneuvers. Rodriguez had a close rela- 62 tionship with a local Commander stationed at the Airbase ("The Commander"). In a letter dated Sep- tember 20, North asked Rodriguez to obtain service space at the Airbase for one C-7 Caribou aircraft and for occasional Maule maintenance. The Maule would be operated by the FDN and the Caribou by a private contractor for aerial resupply of both the FDN in the North and eventually in support of a Southern front, North wrote. North also said Rodriguez could use North's name with the Commander. Rodriguez agreed to help and obtained the Commander's ap- proval.33 Poindexter had sanctioned North's efforts to obtain the Central American country's help in the logistics of air resupply.34 Securing suitable aircraft that the Enterprise could afford proved difficult. In the summer of 1985, North met with both Secord and Calero on the most imme- diate aircraft needs of the FDN and the resupply operation. They decided that their first need was a C- 7 Caribou, a twin-engine propeller aircraft capable of carrying a 5,000-pound cargo over a 900-mile range.35 By November 1985, Gadd, whose task it was to locate and purchase the airplanes, had found three surplus C-123 airplanes belonging to a Latin Ameri- can Air Force. Gadd had earlier formed Amalgamat- ed Commercial Enterprises (ACE), a shelf company registered in Panama, to hold title to the aircraft. ACE was owned equally by Gadd and Southern Air Transport of Miami, which was to provide mainte- nance and other logistical support." The logistics director of the Latin American Air Force was unwilling to sell the airplanes?whose use was for military transport?to Gadd without a sign of official U.S. Government approval. So, Gadd turned to North for assistance, who decided to intercede in an effort to obtain the airplanes. North told Gadd and Secord that he requested both Robert McFarlane and the State Department's assistance. On November 15, North indicated in his notebook that he called "El- liott" "re call to [the Latin American country]" for the purpose of telling [that country] that "ACE is OK." Abrams, however, denied any knowledge of the planes belonging to the Latin American country's Air Force. In addition, North asked Vince Cannistraro, a colleague at the NSC, to intercede with the Latin American country. In the PROF note on November 20, North referred to Cannistraro's upcoming call and provided the following talking points: A reputable business organization called A.C.E. Inc. is negotiating with your air force to buy three excess C-123 aircraft, a number of engines (48) and some spare parts. A.C.E. is a legitimate company which will use the aircraft for a good purpose that is in the interest of your country and ours?humanitarian aid deliveries to anti-communist resistance forces (. . . Nicaragua). Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 3 Apparently the logistics director for the air force . . . was concerned that A.C.E. (Amalgamated Commercial Enterprises) may not be legitimate or that the A/C could be used for drug running or the like. This is not the case. It would be very helpful if you could contact someone who can clarify the good reputation of A.C.E. and encourage [the logistics director] to consummate the offer which has been made by A.C.E. The need is great for these planes. They will help the cause of democracy where it is most needed. Nonetheless, the Government of the Latin American country did not approve, and the Enterprise had to look elsewhere.37 From the inception of the air resupply operation in July 1985, North impressed upon Secord the fact that they were operating with donated funds that were strictly limited. Consequently, more preferable air- planes that were examined by Gadd and discussed by North and Secord, such as the Casa 212 and the L- 100 turbo jet propeller-driven aircraft, were rejected because of their high cost, in favor of the less expen- sive C-7 and C-123.38 Country 3 Comes Through More third-country money was needed to support the Contras. McFarlane had barred a return to Coun- try 2,39 and John K. Singlaub had since the end of 1984 been trying unsuccessfully to obtain money from Country 3. In the summer of 1985, North turned to Gaston Sigur, a Senior Director for Far Eastern and Asian Affairs on the NSC staff, to seek his assistance with Country 3.40 According to Sigur, North told him that it was an "emergency situation," and that he and McFarlane were aware that Country 3 "might have an interest in giving some assistance, financial assist- ance in the humanitarian area to the Contras." 41 North, too, testified that he had gone to Sigur with the knowledge, and approval, of McFarlane.42 McFarlane testified to the contrary, claiming that he was "firm" with North "in saying to him absolutely no participation by you or any other staff member in any kind of approach to this country." 43 Sigur recalled that when North asked him to set up the meeting, he inquired, "[N]ow everything here is quite legal?" to which North replied, "[O]h yes, we have checked all that out and there is no question about that. 9> 44 Sigur met with a Country 3 official and, without mentioning any specific amount of money, learned that the representative needed "to go back to his home government on it." The same day, Sigur went to McFarlane and told him that any contribution from Country 3 would have to be made directly through U.S. Government channels. According to Sigur, "Mr. McFarlane's response to that was that this is not pos- sible, that cannot be done, and so I saw that as the end of that, and I told Colonel North about it." 45 North was not deterred. He asked Sigur to arrange a face-to-face meeting with the Country 3 representa- tive." At the ensuing meeting at the Hay-Adams Hotel in the fall of 1985, North told the Country 3 representative that "this country [U.S.] would be very grateful if they were to make the contribution."47 North's plea was successful. Sometime later, the Country 3 official responded with a $1 million contri- bution in "humanitarian" assistance.48 North then sent Owen to give the official an envelope containing the Swiss bank number of the Enterprise's Lake Re- sources account. The $1 million was transferred to Lake Resources and another $1 million followed in the early months of 1986.49 The Link With NHAO Without the knowledge of its supervisors, the Nica- raguan Humanitarian Assistance Office (NHAO) pro- gram was used to further the Enterprise's activities. Robert Owen became the first link between NHAO and the covert operation. In mid-September 1985, Owen applied to Ambassador Duemling for a position in the humanitarian aid office. North recommended Owen as a "can do" person "who knows the scene," but Duemling declined to hire him." Duemling still refused to hire Owen even after the three directors of the United Nicaraguan Opposition (UNO)?Calero, Arturo Cruz, and Alfonso Robelo? wrote Duemling requesting Owen's help. North, how- ever, continued to press for Owen's employment. At a Restricted Interagency Group meeting on October 11, North complained about the October 10 NHAO re- supply flight impounded by Central American au- thorities, claiming that it would never have happened if Owen had been working for NHAO. Only then did Duemling relent and agree to fund a UNO contract with Owen's company, the Institute for Democracy, Education and Assistance, Inc. (IDEA), to assist in disbursing the humanitarian aid." North exploited Owen's new position by using his trips, funded by humanitarian aid dollars, to transfer and receive information about the Contra war and the fledgling resupply operation. Following his trips to Central America, Owen would submit two reports? one to NHAO describing humanitarian services per- formed and another to North describing his activities in coordinating lethal aid. The grant agreement with the State Department barred Owen from performing "any service" related to lethal supply "during the term of this grant." 52 North also told Owen that he should introduce Gadd to Mario Calero, who was in charge of pur- chases for the FDN in the United States, so that Gadd might get a contract to fly humanitarian aid supply missions." Later, North personally accompa- 63 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 3 nied Gadd to meet with Ambassador Duemling and urged Duemling to award Gadd an air delivery con- tract, to which Duemling, unaware of Gadd's role in the lethal resupply operation, agreed.54 New Legislation Congressional Support Increases On November 21, 1985, the Senate agreed to a con- ference report on the Intelligence Authorization Bill providing two significant Contra support measures: the CIA was granted additional money to provide communications equipment to the Contras and the bill specifically provided that the State Department was not precluded from soliciting third countries for hu- manitarian assistance. The U.S. Government was still barred from expending funds to provide lethal assist- ance to the Contras but, according to North, "the instructions were to bite off a little at a time and start moving back toward full support." 55 Poindexter Visits Central America On December 12, 1985, the newly appointed Na- tional Security Adviser, Admiral Poindexter, took a trip with North to Central America." In a PROF note to Poindexter, North recommend- ed the trip, suggesting that it be "billed as a quick tour through the region to confer w/ top ranking U.S. officials to reinforce the continuity of U.S. policy in the region." That explanation would be a "plausible cover" for the real purpose of the trip, which included delivering to Central American offi- cials "the messages we need sent." 57 One of the messages was that "we [the United States] intend to pursue a victory and that [a Central American country] will not be forced to seek a politi- cal accommodation with the Sandinistas." 58 North noted that this Central American country was at- tempting to use support of the Contras as leverage to force U.S. aid.59 The Santa Elena airstrip in Costa Rica was also an issue raised in discussions during the trip. North brought Poindexter up to date on the progress of the Santa Elena airstrip, and they discussed what meas- ures "could be taken to encourage" Costa Rica to be more cooperative with the Contras. When Poindexter returned from his one-day trip to Central America, he briefed the President on the morning of December 13, including informing the President of the efforts to secure the land necessary for the airstrip. Poindexter testified, and his notes reflect, that Poindexter "did talk to him [the President] about the private air- strip." 60 Continued Funding Problems By the end of 1985, North had put into motion the airlift operation and the beginnings of the Southern 64 front. A critical problem remained how to fund these efforts. Throughout 1985, North, Casey, and Singlaub discussed a variety of methods to fund support for the Contras. In early 1985, in connection with his solicita- tion of Country 3, Singlaub suggested to Country 3 officials and to North that a portion of his proposed arms sales to Country 3 be diverted and applied to the benefit of the Contras. During the summer of 1985, Singlaub worked without success through Geomili- tech Consultants, owned by Barbara Studley, on di- verting part of a $75 million proposed sale of torpe- dos to Country 3. In the fall of 1985, Singlaub ar- ranged for both North and Casey to meet with Stud- ley to present yet another plan to aid the Contras and democratic resistance forces worldwide. Geomilitech would be a vehicle for a three-way trade to "enable the U.S. Government, the Administration, to acquire some Soviet-bloc weapons without having to go through the painful process of appropriations," in order to furnish weapons to anti-Communist insurgen- cies in Nicaragua and around the world. The pro- posed trade entailed the U.S.'s giving credit for high technology purchases to another country, that coun- try using the credit to deliver military equipment to a totalitarian country, which would then transfer Soviet-compatible weapons to a trading company. Ac- cording to the plan, the company, at the direction of the NSC and CIA, would distribute the weapons to the Contras and other resistance movements, "man- dating neither the consent or awareness of the De- partment of State or Congress." These fundraising ideas were never approved. The diversion from the Iranian arms sales would provide the needed funds." Legislative Plans and a New Finding At a January 10, 1986, NSC meeting, the first in 15 months on Nicaragua, the President heard the views of his advisers. CIA Director Casey described a build- up of Soviet weaponry and increasing Sandinista re- pression in Nicaragua; Admiral William J. Crowe, Jr., discussed the inability of the Department of Defense to provide logistical assistance that the Contras badly needed; and Secretary Shultz voiced his approval for resumption of Congressional funding for a covert pro- gram. The President ended the meeting by instructing his advisers to prepare to go back to Congress with a request for full funding ($100 million) of a covert action program.62 A week after the meeting, the President signed a new Finding on Nicaragua, consolidating what had been separate Findings governing various aspects of the program. The Finding authorized the CIA to im- plement the newly granted aid and to establish the communications network for which Congress had just provided funding. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 3 The Resupply Operation Begins In January 1986, the plans set in motion by North in the fall of 1985 were beginning to give shape to the resupply operation. Gadd recruited flight crews, agreed with Southern Air Transport that it would handle all aircraft maintenance, and purchased the first aircraft, a C-7 Caribou. A team was also sent to Santa Elena and construction of the airstrip began in earnest.63 Moreover, the problem of secure communi- cations was solved with the help of the National Se- curity Agency. According to North, both Casey and Poindexter had told him to seek some type of secure communica- tions support. North turned to the National Security Agency for secure communications equipment.64 The National Security Agency provided KL-43 en- cryption devices to North. On January 15, North gave KL-43s to the principal members of the covert operation: Secord, Gadd, Steele, Castillo, Quintero, and William Langton, president of Southern Air Transport. North also put a device in his office at the Old Executive Office Building. Each month newly keyed material was distributed to the group to enable them to communicate with each other in a secure manner.6 5 Throughout January 1986, North also pursued dis- cussions with Steele and CIA representatives about arrangements for using the Airbase and for establish- ing the airstrip at Santa Elena. North's notebooks indicate a series of telephone conversations with Steele relating to obtaining the permission of Central American officials for the resupply aircraft to operate from the Airbase.6 6 During that same period, North wrote to Poin- dexter that General John Galvin, Commander of U.S. Southern Command, was "cognizant of the activities under way in both Costa Rica and at [the Airbase] in support of the DRF [Democratic Resistance Force]." North added, "Gen. Galvin is enthusiastic about both endeavors." According to North's notebooks, North, Poindexter, and others met with Galvin on January 16 to discuss, among other items, "covert strategy/ training/planning/support" for the Nicaraguan Resist- ance. General Galvin testified that he knew of the air resupply operation, but believed that it was being financed and run by private individuals, not the NSC staff.6 7 Meanwhile, North continued his discussions on the details of construction of the airstrip at Santa Elena. His discussions covered arrangements for fuel storage on site, the construction of guard quarters and even instructions to the bulldozer operation." In February, after consultation with Enrique Ber- mudez and various commanders connected with the Southern front, North and Secord decided to deliver approximately 90,000 pounds of small arms and am- munition geared for airdrop to the FDN, which also could be delivered to the Southern front. This was the first delivery of arms that North and Secord pro- vided to the Contras without payment from them and out of funds that had been contributed directly to the Enterprise. 69 Yet by February, supply problems still plagued the operation. There was only one plane at the Airbase, and it was damaged. On its arrival flight, the C-7 plane had developed mechanical problems. The crew jettisoned spare parts, and even training manuals, but the plane crash-landed nonetheless.7? Faced with the Contras' requests for resupply and lacking aircraft to perform the job, North sought to deliver arms to the Contra soldiers using aircraft that had been chartered by NHAO to take humanitarian supplies from the United States to Central America." In February 1986, North called Gadd at home and told him to charter an NHAO flight from New Orle- ans to the Airbase in Central America. Once the plane arrived at the Airbase, it was directed to an FDN base where ammunition and lethal supplies were loaded and airdropped to the FDN. NHAO later re- fused to pay for the portion of the charter that cov- ered the delivery of lethal supplies." In the South, however, the Contra forces remained without necessary supplies. In part, the problem was logistical: the Costa Rican airfield was not yet open and the only planes available at the Airbase could not make the flight to southern Nicaragua. The problem was also political: the FDN did not want to share its scarce resources with the southern forces. In early February, Owen warned North that "our credibility will once again be zero in the south" if deliveries did not soon start: [T]hey have been promised they will get what they need. Who is to be the contact for these goods and who is to see that they are delivered? A critical stage is being entered in the Southern Front and we have to deliver.73 In early March, North asked Owen to travel with another NHAO humanitarian aid flight that, upon un- loading, would be reloaded at the Enterprise's ex- pense with lethal supplies for airdrop to the Southern front. However, the FDN never produced the muni- tions promised, even though CIA officials tried to persuade the FDN to release the munitions. The mis- sion thus resulted in failure. As Owen later wrote North, "the main thing to be learned from this latest exercise is . . . the FDN cannot be relied upon to provide material in a timely manner."74 The President Meets a Costa Rican Official In March 1986, a meeting North arranged for a Costa Rican Official with President Reagan at the White House occurred. The meeting was simply a photo 65 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 I I I I . 1 I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 3 opportunity, attended as well by North and Cas- tillo.75 After the Oval Office visit, North asked the Official to meet with Secord that afternoon to work out some issues concerning the airstrip. At the meeting, the Official asked Secord for a letter, which the Official dictated, to the effect that the Costa Rican Civil Guard maintain control of the airstrip, have access to it for training purposes, and that ecological and envi- ronmental considerations apply.76 Lethal Deliveries Begin By the end of March 1986, the C-7 Caribou aircraft was operating and flights finally began to ferry lethal and nonlethal supplies for the FDN in the North. But the problem of resupplying the Southern front re- mained.77 On March 28, Owen wrote to North that he, Steele, Rodriguez, and Quintero reached a consensus on what steps had to be taken to successfully resupply the South: lethal and nonlethal supplies should be stockpiled at the Airbase; the Caribou or better yet a C-123 should load at the Airbase, deliver to the South, and refuel at Santa Elena on the return to the Airbase; and the Southern Air Transport L-100 should be used until Santa Elena was prepared to refuel the C-7 and C-123.78 While Gadd completed the purchase of a second C- 7 Caribou and the first C-123 in early April, North responded to the growing needs of the southern forces. Between early April and April 11, North co- ordinated virtually every aspect of the first drop of lethal supplies into Nicaragua by way of the Southern front. He was in regular communication with Secord and others to ensure that the drop was successful. KL-43 messages among the planners involved in this drop show both the level of detail in which North was concerned and the coordination among various U.S. Government agencies to ensure that the drop succeeded. The first message, from North to Secord, established the essential elements of the drop: The unit to which we wanted to drop in the southern quadrant of Nicaragua is in desperate need of ordnance resupply. . . . Have therefore developed an alternative plan which [Chief of the CIA's CATF] has been briefed on and in which he concurs. The L-100 which flies from MSY to [an FDN base] on Wednesday should terminate it's NHAO mission on arrival at [the FDN base]. At that point it should load the supplies at [the Airbase] which?theoretically [the CIA's Chief of Station in the Central American country] is assembling today at [the FDN base]?and take them to [the Airbase]. These items should then be transloaded to the C-123. . . . On any night be- tween Wednesday, Apr 9, and Friday, Apr 11 these supplies should be dropped by the C-123 in the vicinity of [drop zone inside Nicaragua]. The 66 A/C shd penetrate Nicaragua across the Atlantic Coast. . . . If we are ever going to take the pressure off the northern front we have got to get this drop in?quickly. Please make sure that this is retransmitted via this channel to [Castillo], Ralph, Sat and Steele. Owen already briefed and prepared to go w/ the L-100 out of MSY if this will help. Please advise soonest.79 Secord and Gadd arranged to lease the L-100 plane from Southern Air Transport. Secord transmitted the following instructions to Quintero on April 8: CIA and Goode [North's code name] report Blackys [a Southern front military commandante] troops in south in desperate fix. Therefore, [CIA's Chief of Station in a Central American country] is supposed to arrange for a load to come from [the FDN base] to [the Airbase] via L100 tomorrow afternoon. . . . Notify Steele we intend to drop tomorrow nite or more like Thurs nite. . . . Meanwhile, contact [Castillo] via this machine and get latest on DZ [drop zone] co- ordinates and the other data I gave you the format for. . . . CIA wants the aircraft to enter the DZ area from the Atlantic. . . .80 On April 9, Secord relayed to North that "all co- ordination now complete at [the Airbase] for drop? [Castillo] has provided the necessary inputs."' After the Southern military commanders relayed the drop zone information to Castillo's communications center, Castillo sent a cable to the Chief of the CATF at CIA headquarters, requesting flight path information, vec- tors based on the coordinates of the drop zone, and hostile risk evaluation to be passed to the crew. CIA headquarters provided the information, as it did on three other occasions that spring.82 After Secord's April 9 message, the L-100 arrived and was loaded with a considerable store of munitions for airdrop to the South on April 10. Castillo had provided the location of the drop zone to Quintero, and Steele told the Southern Air Transport crew how to avoid Sandinista radar. Despite North's intricate planning, the L-100 was unable to locate the Contra forces. The maiden flight to the Southern front had failed.83 On April 11, the L-100 tried again, airdropping more than 20,000 pounds of lethal supplies inside Nicaragua. This was the first successful drop to the southern forces. Before the plane left, Steele checked the loading of the cargo, including whether the as- sault rifles were properly padded. Castillo reported the drop to North in glowing terms: Per UNO South Force, drop successfully com- pleted in 15 minutes. . . . Our plans during next 2- 3 weeks include air drop at sea for UNO/KISAN indigenous force . . . maritime deliveries NHAO Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25 : CIA-RDP89T00142R000500610001-7 Chapter 3 supplies to same, NHAO air drop to UNO South, but with certified air worthy air craft, lethal drop to UNO South. . . . My objective is creation of 2,500 man force which can strike northwest and link-up with quiche to form solid southern force. Likewise, envisage formidable opposition on At- lantic Coast resupplied at or by sea. Realize this may be overly ambitious planning but with your help, believe we can pull it off." The Resupply Operation Steps Up Its Activities While the April 11 mission to the South was the only successful airdrop in that region, the air resupply op- eration was, by April, operating regular, almost daily, supply missions for the FDN in the North. Most missions delivered supplies from the main FDN base to the FDN's forward-operating positions. Other flights dropped lethal cargo to units operating inside Nicaragua. Many of these flights were helped infor- mally by CIA field officers on the ground, who pre- pared flight plans for aerial resupply missions, briefed the air crews on Nicaraguan antiaircraft installations, and provided minor shop supplies to the mechanics. On one occasion, the CIA operations officer at an FDN base flew Ian Crawford, a loadmaster for the resupply operation, in a CIA helicopter with lethal supplies on board over the border area so Crawford could see where he and his crew were airdropping cargo three to four times daily. However, the resup- ply operation was not without problems. Poor mainte- nance hampered the performance of the aircraft and a lack of a closely knit organization contributed to the Enterprise's troubles.95 Because of these problems, North and Secord flew to the Airbase in Central America on April 20 for a one-day meeting with the Commander, Steele, Rodri- guez, and the military leadership of the FDN. During the meeting, North and Secord emphasized the impor- tance of the Southern front and complained about the difficulty of getting stocks out of the FDN, thus pre- paring the FDN for the future storage of Southern front supplies directly at the Airbase. There was some misunderstanding as to whether the FDN were the legal owners of the aircraft, but North and Secord stated that the aircraft belonged to a private company dedicated to support all the Contras, both the FDN and the Southern front. In turn, the FDN leaders expressed their dissatisfaction with the C-7 aircraft. They were simply "too old" to operate effectively, Bermudez told them. He wanted bigger and faster aircraft. North responded that if he had the money to buy better aircraft, he would, but they were financing the operation with donated funds." The possible purchase for the FDN of Blowpipe surface-to-air missiles to use against the Sandinista HIND-D helicopters was also raised. In December 1985, Secord and Calero had tried to purchase Blow- pipes from a Latin American country. The transaction proceeded to the point where the Enterprise placed a deposit on the missiles. But necessary approvals for the sale could not be secured, even though North enlisted the help of Poindexter and of McFarlane, who remained in contact with North by PROF ma- chine even after he left the Government." After the April 20, 1986, meeting, the first shipment of lethal supplies by the Enterprise for the Southern front arrived at the Airbase to be stored by the resup- ply operation. At North's request, the Enterprise paid David Walker $110,000 for two foreign pilots and a loadmaster to fly missions inside Nicaragua so that U.S. citizens would not be exposed to possible shoot- down or capture." Secord tcok another step to overcome the resupply problems. He recruited Col. Robert Dutton to manage the resupply operation on a daily basis. Secord knew Dutton from their active duty together in the U.S. Air Force, where Dutton had considerable experience in managing covert air resupply oper- ations. Gadd's role was phased out and on May 1, Dutton, retiring from the Air Force, was placed in operational command of the resupply operation, re- porting to Secord, and increasingly over time, direct- ly to North on all operational decisions of conse- quence.89 At the outset, Secord emphasized to Dutton that the air program would receive very little in the way of additional funding. Dutton was instructed to manage the operation with existing equipment and conserve resources carefully as the money provided was all "donated." 90 When Dutton took over, he traveled to Central America to assess the operation. There were approxi- mately 19 pilots, loadmasters and maintenance opera- tors at the Airbase. In addition, Felix Rodriguez and his associate Ramon Medina coordinated with the Commander and oversaw the local fuel account. Dutton also examined the aircraft?two C-7s, one C- 123, and the Maule?and found that, indeed, they were in "very poor operating condition." 91 The resupply operation at the Airbase maintained a warehouse stocked with an assortment of munitions? light machine guns, assault rifles, ammunition, mor- tars, grenades, C-4 explosive, parachute rigging, uni- forms, and other military paraphernalia. The crews lived in three safe houses and used a separate office with maps and communications equipment. By May, the Santa Elena airstrip, along with emergency fuel storage space and temporary housing, was finished." Because Secord (and later North) had impressed on Dutton the need for strict accountability given the limited nature of the donated funds, Dutton enforced a stringent set of accounting requirements: Expendi- tures had to be carefully documented and all missions fully reported. Moreover, Dutton devised an organi- 67 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 I I I .1 I I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 3 zation, based on a military hierarchy, that delineated each person's role and responsibility. Dutton also de- fined the legal constraints on the organization as he had understood from Secord: no Contra combatants could be airdropped into battle. These new require- ments of accountability, reporting, and organization were followed for the remaining life of the oper- ation.93 Despite these impending changes, North wrote to Poindexter expressing his weariness and warning that without Congressional authorization for CIA involve- ment, "we will run increasing risks of trying to manage this program from here with the attendant physical and political liabilities. I am not complaining, and you know that I love the work, but we have to lift some of this onto the CIA so that I can get more than 2-3 hrs. of sleep at night." 94 Dutton's Reorganization Plan Following his first trip to Central America in May, Dutton began drafting a reorganization plan for the Enterprise "to outline in one document exactly what the basic operating locations were, and who the key people were and what their responsibilities were."95 The plan was reviewed, edited, and approved by both Secord and North." The plan stated that "B.C. Washington has operational control of all assets in support of Project Democracy."97 While Secord maintained that B.C. Washington meant "primarily myself and Robert Dutton," 98 Dutton testified that "B.C. Washington" described North and Secord.99 According to Dutton, the purpose of the reorgani- zation plan was to disguise the role of Secord and North. The lawsuit brought by freelance journalisits Tony Avirgan and Martha Honey had named Secord and was generating publicity. North and Secord, ac- cording to Dutton, were concerned that Rodriguez, who had become disaffected, was providing informa- tion about the operation to Avirgan and Honey. North and Secord, therefore, wanted to create the pretense that they "had withdrawn from the oper- ation, they were no longer part of it, and this new company called B.C. Washington, which represented the donators [sic], therefore the benefactors?that they had come in to take over the operation." 100 But, according to Dutton, "the fact was that Colonel North and General Secord's relationship with the or- ganization had not changed one bit."?' As Dutton acknowledged, "B.C. Washington" was a facade that North and Secord developed in order to cloak their role.1?2 The Southern Front Resupply On May 24, 1986, the day after Dutton left Central America, another planeload of munitions, paid for by the Enterprise arrived at the Airbase for the Southern front. Because the FDN was reluctant to make arms available to the independent southern Contra forces, 68 North and Secord decided in April 1986 that arms and other supplies would now be stored under the control of the Enterprise at the Airbase. This second direct shipment of arms to the Airbase to be delivered to the Southern front was part of the new plan. To- gether with the late April shipment, there were now more than $1 million in arms at the Airbase available for airdrop to the Southern front forces.'" The warehouse, however, was not large enough to accommodate the new munitions. Dutton had to ask the Commander for permission to expand the ware- house, while seeking North's approval for the addi- tional cost of construction. After the Commander au- thorized the expansion, North relayed to Secord his approval for construction to proceed.'" With new arms and an expanded warehouse, Dutton had the material to deliver to the Southern front. However, while regular deliveries with the C-7 continued to the FDN in the North, no flights were being made to the South. North told Dutton that the Southern forces were adding 150 new recruits a day, but that they had neither enough weapons for the fighters nor enough medicine to treat the growing problem of mountain leprosy.1?9 On June 2, Castillo called North and told him that drops to the southern units were needed as soon as possible. Castillo advised North that Quintero had all the necessary vector information to make the drops. Following Castillo's request, two deliveries were pre- pared for the South totalling about 39,000 pounds, and on June 9, after coordinating with Castillo the location and needs of the Southern troops, the C-123 airplane tried to make an air drop. However, the plane could not locate the troops inside Nicaragua, and when it landed at the Santa Elena airstrip, it got stuck in the mud.'" The stuck plane caused consternation at the U.S. Embassy in Costa Rica. The month before, Oscar Arias had been inaugurated as the new President of Costa Rica. The new Costa Rican Government had told Ambassador Tambs that it had instructed that the airstrip not be utilized. Tambs, in turn, told Castillo to notify North and Udall Corporation that the airstrip had to be closed. Now Tambs was faced with explain- ing to President Arias why a munitions-laden airplane was stuck in the mud at Santa Elena. A plan was devised by Tambs, Castillo, and others at the U.S. Embassy to borrow trucks from a nearby facility to free the aircraft, but the plane was able to take off before the plan could be carried out.'" The needs of the FDN still had to be met. On June 10, North met with Calero who requested that the Caribou planes fly more missions inside Nicaragua. The Enterprise was just about to purchase additional arms for the FDN.'" However, the most pressing need, North wrote to Poindexter, was neither money nor arms, but rather: "to get the CIA re-engaged in this effort so that it can be better managed than it Approved For Release 2011/05/25 : CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 3 now is by one slightly confused Marine Lt. Col." North further reported to Poindexter that "several million rounds of ammo are now on hand . . . Criti- cally needed items are being flown in from Europe to the expanded warehouse facility at [the Airbase]. At this point, the only liability we still have is one of Democracy, Inc.'s airplanes is mired in the mud (it is the rainy season down there) on the secret field in Costa Rica." 109 The decision to purchase additional millions of dol- lars in arms for the FDN was taken after the Enter- prise learned from Bermudez and the FDN leaders that FDN stocks were getting low. Hundreds of tons of East European weapons were paid for in three installments between June 27 to July 16. The ship- ment, the last arms purchased for the Contras by North and Secord, never reached Despite the difficulties, North wanted to continue to airdrop supplies, especially to the South. As soon as the C-123 was freed from the mud, it embarked on another mission with a full lethal load for the south- ern troops. But this time, fog covered a mountain, and William Cooper, the chief pilot for the resupply oper- ation, hit the top of a tree, knocking out an engine. After the plane reached the drop zone, Cooper could not locate the troops." Communicating by KL-43, North told Castillo that to facilitate further airdrops to the southern forces, he had "asked Ralph [Quintero] to proceed immediately to your location. I do not think we ought to contem- plate these operations without him being on scene. Too many things go wrong that then directly involve you and me in what should be deniable for both of us.""2 Meanwhile, North made further plans to ensure re- supply to the Southern front. With the C-123 dam- aged in flight, the remaining C-7 aircraft could only make the trip to the South if it were able to refuel before the return trip, and the Santa Elena strip was not operational. North asked Dutton to look for an- other C-123, and with Tambs' assistance, arranged for a new flight pattern in which the empty C-7 aircraft, after making its drops, refueled at the San Jose Inter- national Airport in Costa Rica. The new refueling plan permitted two small drops of supplies to the Southern front. But, by the third week in July, $870,000 worth of munitions were still sitting at the Airbase waiting for the Southern forces. Despite all the efforts, the vision of a year before for the South- ern front had yet to become a reality."3 Alternative Funding Sources: North's Response to Congressional Action The Administration continued to seek an appropria- tion for the CIA to resume its program of covert assistance to the Contras. In early May, according to Poindexter, the President told him, "If we can't move the Contra package before June 9, I want to figure out a way to take action unilaterally to provide assist- ance." Poindexter wrote his deputy, Donald Fortier, "The President is ready to confront the Congress on the Constitutional question of who controls foreign policy. . . . George [Shultz] agrees with the President that we have to find some way and we will not pull out." 114 North, who received a copy of Poindexter's PROF note, responded immediately with a suggestion: The Contras should capture some territory inside Nicara- gua and set up a provisional government. The Presi- dent would respond by recognizing the Contras as the true government and provide support. Asked by Poin- dexter whether he had talked to Casey about his plan, North replied, "Yes, in general terms. He is support- ive, as is Elliott [Abrams]. It is, to say the least, a high risk option?but it may be the only way we can ever get this thing to work."115 The Money: Third Country Assistance By the end of April 1986, the Contras' funding needs were critical. North told Fortier: "We need to explore this problem urgently or there won't be a force to help when the Congress finally acts."6 The same day, North wrote to McFarlane that "the resist- ance support acct. is darned near broke," and asked for assistance in filling the gap: Any thoughts where we can put our hands on a quick $3-5M? Gaston [Sigur] is going back to his friends who have given $2M so far in hopes that we can bridge things again, but time is running out along w/ the money. So far we have seven a/c working, have delivered over $37M in sup- plies and ordnance but the pot is almost empty. Have told Dick [Secord] to prepare to sell the ship first and then the a/c as a means of sustain- ing the effort. Where we go after that is a very big question. "7 An Aborted Solicitation Despite North's reference to "Gaston," it was not Gaston Sigur, but Singlaub who went to the Far East in May 1986 in search of Contra aid. This time, Sing- laub wanted to be sure that he would receive the official U.S. "signal" these countries had previously told him was a condition to their aid. Before he trav- eled to Countries 3 and 5, Singlaub spoke to Elliott Abrams at the State Department and, according to Singlaub, explained that he wanted to know "how the U.S. would send a signal." Singlaub testified that Abrams told him that he (Abrams) would send the signal. "8 Singlaub arrived in Country 3, but before he could meet with his contact, Abrams told him to stop the plan. When Singlaub and Abrams later met, Singlaub 69 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 II LJL. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 3 testified that Abrams told him that the solicitation was "going to be handled by someone at the highest level." Singlaub assumed that it would be someone from the White House, although Abrams never gave him a specific name.119 However, Abrams disputed Singlaub's testimony. While acknowledging that he spoke to Singlaub about Singlaub's proposed solicita- tion, Abrams testified that he never agreed to provide to Singlaub a U.S. Government signal for the solicita- tion."? Abrams' account is supported by the testimo- ny of Richard Melton, at the time Director of the Office of Central American Affairs at the State De- partment, who was present during Abrams' conversa- tions with Singlaub.'21 The May 16, 1986, NSPG Meeting On May 16, 1986, the President and his advisers discussed the issue of obtaining funds from third countries. In a memorandum to the President for the National Security Planning Group (NSPG) meeting, North suggested three ways to "bridge the gap" in funding: (1) a reprogramming of funds from DOD to the CIA ($15 million in humanitarian aid); (2) a Presi- dential appeal for private donations by U.S. citizens; and (3) a "direct and very private Presidential over- ture to certain Heads of State." The last source of funds would, as North put it, eliminate the need "to endure further domestic partisan political debate." 122 Director Casey opened the meeting and explained the Contras' needs. The good news, he told the Presi- dent, was that the Contras had infiltrated more troops into Nicaragua than ever before, and the troops were now being resupplied by air.'" The "bad news" was that the Resistance was operating under the assump- tion that it would receive new funding at the end of May. Only $2 million remained from the humanitarian assistance appropriation. '24 Later in the discussion, Secretary Shultz returned to the Contras' need for funds. Noting the unlikeli- hood of an immediate Congressional appropriation and the improbability that the intelligence committees could be persuaded to reprogram funds, Secretary Shultz suggested that third countries be approached for humanitarian aid. North added that the Intelli- gence Authorization Act of 1986 permitted the State Department to approach other governments for non- military aid. '25 No one at the meeting discussed the fact that Coun- try 2 had already given $32 million to the Contras, including a $24 million donation committed to the President personally. Nor was it mentioned that sev- eral Far Eastern countries had been approached for donations or that Country 3 had given $2 million only 6 months earlier. Instead, Shultz was instructed to prepare for review by the President a list of countries that could be solicited. Later that day, North told Poindexter that the ur- gency of the need had lessened: The Enterprise had 70 that day received the last $5 million of the $15 million arms sales to Iran. North wrote Poindexter: "You should be aware that the resistance support organiza- tion now has more than $6 million available for imme- diate disbursement. This reduces the need to go to third countries for help." 126 North later testified that he wrote the message because "it was important he [Poindexter] understand that Secretary Shultz didn't need to go out that afternoon and go ask for addition- al help." Poindexter testified that he understood the $6 million to which North referred was coming from the Iranian arms sales, but he did not tell the Presi- dent the $6 million was available. North testified that as he was leaving the NSPG meeting, he mentioned to Poindexter that Iran was supplying $6 million for the Contras, but that he did not know whether he was overheard.'27 North wrote Poindexter that he did not know whether all those present at the NSPG meeting, such as Chief of Staff Donald Regan, knew of "my private U.S. operation." On the other hand, North noted to Poindexter, "the President obviously knows why he has been meeting with several select people to thank them for their 'support for Democracy' in CentAm."128 North also realized that disclosure of a significant sum of money earmarked for Contra support, but only made possible by arms sales to Iran, could prove politically embarrassing. The more money there is (and we will have a considerable amount in a few more days) the more visible the program becomes (airplanes, pilots, weapons, deliveries, etc.) and the more inquisitive will become people like Kerry, Barnes, Harkins, et al. While I care not a whit what they may say about me, it could well become a political embarrassment for the Presi- dent and you. He suggested that the problem could be "avoided simply by covering it with an authorized CIA pro- gram undertaken with the $15M" reprogrammed funding from the DOD budget.'29 Poindexter approved North's recommendation to seek the $15 million reprogramming and responded to his concerns: "Go ahead and work up the paper needed for the $15M reprogramming. . . . I under- stand your concerns and agree. I just didn't want you to bring it up at NSPG. I guessed at what you were going to say. Don Regan knows very little of your operation and that is just as well." By May 28, how- ever, it was clear that "the votes were not there," and the reprogramming effort was dropped in favor of a campaign to obtain Congressional support for the $100 million aid package. '30 Meanwhile, the concerns that prompted North's si- lence at the May 16 NSPG meeting persisted: Who knew about the secret aid third countries had given Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 i Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 3 earlier? In the prior 2 years, members of the NSC staff had approached several countries for financial assistance to the Contras. Of these, two had provided funds or other forms of assistance. Those solicitations were made without the knowledge of the Secretary of State and other senior diplomatic officials. The December amendment expressly provided that soliticitations for humanitarian aid were not preclud- ed. Now, Secretary Shultz and others were discussing making approaches to countries that had already con- tributed. Poindexter and North became concerned that their prior actions would be uncovered. On June 10, North wrote Poindexter, "[A]t this point, I'm not sure who on our side knows what. Elliott has talked to Shultz and had prepared a paper re going to [Country 2 and Country 3] for contribu- tions. Elliott called me and asked 'where to send the money." North asked Abrams to "keep quiet" until he talked to Poindexter. North added: At this point I need your help. As you know, I have the accounts and the means by which this thing needs to be accomplished. I have no idea what Shultz knows or doesn't know, but he could prove to be very unhappy if he learns of the [Country 2 and 3] aid that has been given in the past from someone other than you. Did RCM [McFarlane] ever tell Shultz. '31 North recommended that Poindexter and McFar- lane meet to discuss "how much Sec Shultz does or does not know abt [Country 2 and 3] so that we don't make any mistakes." 132 Poindexter declined to follow North's advice: "To my knowledge Shultz knows nothing about the prior financing. I think it should stay that way." '33 Nonetheless, McFarlane informed Secretary Shultz. As the Secretary described the event, on June 16, 1986, he received a telephone call on a secure phone from McFarlane, who had by then been out of the Government for approximately 6 months. In a con- versation that occurred completely out of context and long after the donation had been made, McFarlane told Secretary Shultz about the Country 2 donation to the Contras.134 Soon thereafter, Abrams recommended Brunei as a likely country from which to seek humanitarian assist- ance for the Contras. As Poindexter put it, "[t]hey have lots of money." 135 Brunei also qualified for another reason. The Secretary of State did not want to be beholden to any country that was a recipient of U.S. aid.'36 Brunei was not. Originally, the Secretary of State was to make the approach during a meeting with the Sultan of Brunei in June. Before Secretary Shultz left, Abrams asked North for a Contra account to which the money could be sent. North directed his secretary to prepare an index card with the account number on it. North told Abrams that the account was controlled by the Contras and Abrams so in- formed Secretary Shultz.'" Following Poindexter's instructions, North did not reveal that the NSC staff "had access to the accounts." 138 North gave the index card to Abrams, who gave it to the Secretary of State. The Secretary decided, however, that he would discuss the general issue of Central America with the Sultan but that he would not make an actual solicitation. The card was not used on that trip.'39 On August 8, 1986, Abrams met in London with a representative of the Government of Brunei. In an unusual occurrence for Abrams, he traveled under an alias. The two men first met at a London hotel, then walked in a nearby park where Abrams requested $10 million in bridge financing for the Contras. Asked by the official what Brunei would receive in return, Abrams responded, "Well, . . . the President will know of this, and you will have the gratitude of the Secretary and of the President for helping us out in this jam.''140 The official persisted, asking, "What concrete do we get out of this?" Abrams responded, "You don't get anything concrete out of it." Abrams then gave the account number that he had received from North to the Brunei official."' Although the Sultan of Brunei eventually trans- ferred the $10 million, the funds never reached the account for which they were intended. North testified that he had intended to give Abrams the number of the Lake Resources account controlled by Secord and Hakim, but the account numbers had been inadvert- ently transposed by North or by his secretary, Fawn Hal1.142 Felix Rodriguez Becomes Disaffected Shortly after North traveled to Central America in late April 1986, Rodriguez decided to leave Central America. Rodriguez testified: "I don't know if I got a sixth feeling or something, but after I saw the people in there, I didn't feel comfortable with it and I thought we had better leave." Rodriguez informed Steele, citing fatigue as the reason for his depar- ture.'43 Rodriguez met with Vice President Bush in Wash- ington on May 1. He had arranged the meeting through the Vice President's National Security Advis- er, Donald Gregg. The appointment scheduling memo for the meeting states: "To brief the Vice President on the status of the war in [a Central American coun- try] and resupply of the Contras." Members of the Vice President's staff gave conflicting testimony over how this description was printed on his schedule. Sam Watson, the Vice President's Deputy National Securi- ty Adviser, testified that the memo was inaccurate, and that he did not provide the description. Phyllis Byrne, the secretary who typed the memo, testified that Watson had given her the description.'" In the Old Executive Office Building on his way to the Vice President's office, Rodriguez stopped by to tell North he was leaving the operation. Rodriguez Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 71 ..1. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 3 said North asked him to remain in Central America, but he ignored the request. Escorted by Gregg and Watson, Rodriguez then met with the Vice Presi- dent.' 45 Before Rodriguez could tell the Vice President that he was leaving Central America, North arrived and told the Vice President about the good job Rodriguez was doing. Embarrassed to tell the Vice President he was going to leave, Rodriguez left the meeting with- out discussing his resignation, and eventually returned to Central America. Rodriguez testified that "at no point in any of this conversation did I ever mention doing anything that was remotely connected to Nica- ragua and the contras." Moreover, former Senator Nicholas Brady, who was also present at the meeting, testified that the resupply operation was not dis- cussed.146 Rodriguez stayed in Central America, but his rela- tionship with Dutton became increasingly strained. According to Dutton, they disagreed on how the operation should be run. At the same time, North had his own reservations that Rodriguez was "something of a loose cannon" who might reveal the oper- ation.147 On June 8, Dutton complained about Rodriguez in a KL-43 message to North: "He now wants a $10K emergency fund that he will control. He also wants partial control of our fuel fund ($50K)." Cash funds translated into unaccountable slush funds so far as Dutton was concerned. Furthermore, with the estab- lishment of cash accounts, the resupply operation would be "losing control of one of the most critical portions of the operation, that is the money." 148 Rodriguez was summoned to meet with North and Dutton in Washington on June 25. North began by showing Rodriguez the organizational plan drawn up by Dutton, in which Rodriguez was designated "liai- son officer." After North stated that he had intelli- gence that Rodriguez was compromising the oper- ation by talking over open, unsecured telephone lines, Rodriguez complained that the poor condition of the aircraft, the communications equipment, and the lack of adequate radar had endangered the pilots and crew on the flight which hit the mountain, even though on that flight, despite the fog, the pilot was able to locate the drop zone by using the aircraft's radar. North, in turn, offered Rodriguez $3,000 a month to stay in the operation, which Rodriguez later accepted.'" Rodriguez testified that at the end of the meeting, he asked to see North alone. Rodriguez told North that he had learned "that people are stealing here," in particular Thomas Clines, a former associate of Edwin Wilson. Rodriguez expressed his concerns that arms were being sold at inflated prices. North disput- ed Rodriguez's conclusions and told Rodriguez that Clines was a patriot, and that he was not buying equipment, only helping to transport the goods. In fact, none of the arms furnished to the FDN and the Southern front since Rodriguez became involved in 72 the operation were sold to the Contras. Instead, the Enterprise purchased arms with money obtained from the arms sales to Iran and private U.S. donors.15? At the close of the meeting, according to Rodri- guez, North made one last comment. Congress was voting that day on the $100-million Contra aid legisla- tion, and the television in North's office carried the floor debate. According to Rodriguez, North looked at the television and said: "Those people want me but they cannot touch me because the old man loves my ass." North did not recall that part of his conversation with Rodriguez. That meeting was the last between the two.151 New Legislation On June 25, 1986 the House approved the Adminis- tration's request for $100 million in Contra aid. Al- though the bill would not become law for another 3 months, the vote ensured passage of the Contra aid legislation. The President announced at 11:30 a.m. that day that the vote "signal[led] a new era of bipar- tisan consensus in American foreign policy. . . . We can be proud that we as a people have embraced the struggle of the freedom fighters in Nicaragua. Today, their cause is our cause." 152 The $100 million aid package marked the first time in more than 2 years that the House had voted to provide lethal assistance to the Contras. By June 1986, North had established air resupply to both the Northern and Southern fronts. The Enterprise had succeeded in flying lethal material to the Contra fight- ers inside Nicaragua; even Americans in the employ of North's organization were flying into that country, all financed by donated funds and proceeds from the Iranian arms sales overseen by North. None of North's activities were disclosed to Congress in ad- vance of the House vote. Only 1 month later, before the aid bill had been signed, Poindexter would write to Congress that the NSC was complying with the letter and spirit of the Boland Amendment.' 53 Selling the Assets to the CIA With the House vote in June, North's hopes to reengage the CIA in Nicaragua were on the verge of being realized. North was increasingly occupied with the Iran arms initiative, and he was anxious to give the Contra resupply operation back to the CIA. But North wanted the Enterprise to recoup its investment, and urged the CIA to buy the assets of the resupply operation in Central America.'" Secord had Dutton prepare a plan to present to the CIA. North wrote to Poindexter: We are rapidly approaching the point where the PROJECT DEMOCRACY [PRODEM] assets in CentAm need to be turned over to CIA for use in the new program. The total value of the assets (six aircraft, warehouses, supplies, maintenance Approved For Release 20,11/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 3 facilities, ships, boats, leased houses, vehicles, ordnance, munitions, communications equipment, and a 6520' runway on property owned by a PRODEM proprietary) is over $4.5M. All of the assets?and the personnel?are owned/ paid by overseas companies with no U.S. connec- tion. All of the equipment is in first rate condi- tion and is already in place. It wd be ludicrous for this to simply disappear just because CIA does not want to be "tainted" with picking up the assets and then have them spend $8-10M of the $100M to replace it?weeks or months later. Yet, that seems to be the direction they are head- ing, apparently based on NSC guidance. If you have already given Casey instructions to this effect, I wd vy much like to talk to you about it in hopes that we can reclaim the issue. All seriously believe that immediately after the Senate vote the DRF [Nicaraguan Democratic Resistance] will be subjected to a major Sandi- nista effort to break them before the U.S. aid can become effective. PRODEM currently has the only assets available to support the DRF and the CIA's most ambitious estimate is 30 days after a bill is signed before their own assets will be avail- able. This will be a disaster for the DRF if they have to wait that long. North predicted "disas- ter" if his plan was not followed.'" The plan drafted by Dutton at Secord's request offered two options. The first was to sell the assets of the organization to the CIA at cost; the second would continue the operation on behalf of the CIA for a monthly fee. Although Dutton, Secord, and North differed in their public testimony over whose idea it was to include these two options (and Secord denied that he ever authorized a sale of the assets), Dutton's plan contemplated that the Enterprise would continue in operation. The plan indicated a preference for a sale because the funds generated would permit the Enterprise to engage in other covert action projects: "[W]e prefer option I with the proceeds from the sale going back into a fund for continued similar require- ments." 156 North testified that the idea to sell the Enterprise's assets to the CIA was Director Casey's. In a PROF note to Poindexter at the time, North said that the sale to the CIA would be the only way to finance purchases for the Contras prior to the time the Con- gressional appropriation became effective: Given our lack of movement on other funding options, and Elliot/[C/CATF's] plea for PRODEM [Project Democracy] to get food to the resistance ASAP, PRODEM will have to borrow at least $2M to pay for the food. That's O.K., and Dick is willing to do so tomorrow? but only if there is reasonable assurance that the lenders can be repaid. The only way that the $2M in food money can be repaid is if CIA purchases the $4.5M worth of PRODEM equip- ment for about $2.25M when the law passes. Concluding his efforts to "sell" the project, North offered to send Poindexter a copy of Dutton's "pro- spectus," or, as he wrote, "the PROJECT DEMOC- RACY status report. It is useful, nonattributable read- ing." 167 Poindexter responded that he had not given Casey any "guidance" against the sale and, indeed, that he approved of North's plan. Poindexter explained that he had told CIA Deputy Director Robert Gates "the private effort should be phased out," but he agreed with North and asked him to talk to Casey about the plan to sell Project Democracy to the CIA.' 58 Clair George, the CIA Deputy Director for Oper- ations, testified that North asked him to buy the air- craft, but that he declined because their use in private resupply could result in criticism of the CIA. "I wouldn't buy those planes if they were the last three planes in Central America," he said.'" The Resupply Operation is Interrupted Relations between Felix Rodriguez and the resup- ply operation continued to deteriorate. Tensions in- creased when early in August a dispute erupted be- tween Secord's deputy, Rafael Quintero, and Rodri- guez. Ignoring Quintero's instructions not to use the aircraft, Rodriguez took an Enterprise-owned plane in Miami and flew into the Airbase with a load of spare parts and medicine. By the time Rodriguez arrived in Central America, Quintero was claiming that the plane had been stolen. Quintero gave instructions to refuel and send the plane back to Miami, full of the supplies. Rodriguez ignored the order and told the crew to unload." 6? Rodriguez maintained that all the aircraft belonged to the FDN, and expressed his concern to the Com- mander that the Enterprise would pull out, taking the planes away from their rightful owners?the FDN.'" On August 6, Dutton called North to tell him that Rodriguez "took C-123K from Miami." 162 North later complained to Gregg, the Vice Presi- dent's National Security Adviser, that Rodriguez had "made off with an airplane," and asked him, "Will you call him and find out what the hell is going on?" Rodriguez told Gregg he had decided to tell Gregg "about what had been going on." 163 Steele then called North to tell him that the "situa- tion was not good." Steele warned North there was no one on the "scene who can take charge," and that the Commander was becoming a "potential problem" because he believed that the aircraft "belong[ed] to the DRF [Democratic Resistance Forces]." Steele added that Rodriguez was "enroute to see Don [Gregg]."' 64 73 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 1 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 3 North sent his colleague and aide, Lt. Col. Robert Earl, to sit in on the Rodriguez-Gregg meeting. Brief- ing Earl before the meeting, North portrayed Rodri- guez as someone who had "insinuated himself into the organization and was giving rudder orders and it was not his place to do so." 165 In the dispute with Rodriguez, Quintero had also accused Rodriguez of air piracy. Now, after confer- ring with Rodriguez, the Commander understood that he too was accused of air piracy, and feared the aircraft themselves would be taken. On August 8, Rodriguez met with Gregg and set out his allegations about the Secord group. Gregg noted the points Rodriguez made: "using Ed Wilson group for supplies"; "Felix used by 011ie to get Contra plane repaired . . ."; "a swap of weapons for $ was arranged to get aid for Contras, Clines and Gen- eral Secord tied in"; "Hand grenades bought for $3 - sold for $9." Gregg, according to Earl, expressed shock about the involvement of Clines.166 On August 12, Gregg convened a meeting to dis- cuss Rodriguez's allegations with a group of Adminis- tration officials involved in Central American policy- making: Steele; Ambassador Edwin Corr; Deputy As- sistant Secretary of State Walker; the Chief of the Central American Task Force; and from the NSC, Earl and Ray Burghardt. Gregg testified that he "went over the notes with the people who were there." Without mentioning North's involvement, Gregg emphasized that he considered Clines not reli- able but that he had faith in Rodriguez.167 Gregg knew by this time that North was involved in the operation. Rodriguez had made that clear at his initial August 8 meeting, and Gregg's notes reflect that knowledge.'" Gregg testified that at no time did he pass that information on to the Vice President. Gregg did not report the meeting, because he be- lieved it "was a very murky business. . . . We had never discussed the Contras. We had no responsibility for it. We had no expertise in it. I wasn't at all certain what this amounted to. . . . I felt I had passed along that material to the organizations who could do some- thing about it, and I frankly did not think it was Vice Presidential level." 169 The Resupply Operation Resumes Shortly after Gregg's August 12 meeting, Steele was scheduled to meet with Dutton in Washington to resolve the dispute with the Commander. Dutton had told Steele by KL-43 that "It is everyone's intent to continue to support the effort," but that the aircraft were owned by an independent company, not the FDN, in part so they could be used to support the Southern front forces as well as the FDN. Secord, too, insisted that the aircraft belonged to a private company. Earl, North's deputy, told Secord by KL- 43 on August 13 that the crew should simply pull out because the threat of a lawsuit against the Command- 74 er had "poisoned the atmosphere." Secord responded that there was more than "1 million dollars worth equipment" in Central America owned by the Enter- prise, which had no intention of abandoning them. Secord explained that the "threat of air piracy lawsuit has nothing to do with [the Commander]. This was comment made to VP by 011ie ref Max [Felix Rodri- guez] vice [the Commander]." 170 Dutton later met with Steele in Washington and by the end of the meeting, Steele had agreed to help to solve the brewing "confrontation" between the Com- mander and the resupply operation.'" The warring parties reached an uneasy resolution after Steele returned to Central America. Steele took a more active role in overseeing the flights and was told to inform the Commander that, while the assets were made available to the Contra cause, they be- longed to a private company whose desire was to turn them over to the CIA once the Agency resumed Contra support. Steele felt that he would have trouble persuading the Commander to accept this position until he was assured that the CIA would continue to provide support.172 On August 22, Dutton was able to reassure Steele: Received new guidance through Goode [North] from his boss. We are to stay in full operation supporting the drops until 1 Oct. At that time NSC says that CIA will have been in operation approx. 1 month. The CIA will go to [The Cen- tral American government] and explain that they, the CIA, are now in contro1.1" During the fall of 1986, problems continued in the resupply operation, but some success on both the Northern and Southern fronts was finally achieved. The resupply operation delivered more than 180,000 pounds of lethal supplies to the Southern front in September alone.17 4 In late August, North attended a Restricted Inter- agency Group meeting at which the Chief of the CATF and others were asked what steps the airlift? i.e., according to North, the "covert operation being conducted by this government to support the Nicara- guan Resistance"?should take now that the CIA was due to assume control. According to North, he de- scribed at that meeting the activities in which the Enterprise was engaged and sought approval from the Restricted Interagency Group to continue until the CIA could take over.175 While the Chief of CATF acknowledged that North discussed airdrops to the Contras, he testified that he did not recall North dis- cussing "his full service covert action program."76 On August 22, Dutton met with Quintero and de- vised a new plan for Southern front resupply that he presented to North: The initial arrival over the drop zone should be at dusk; once the zone has been identi- fied by the pilots, repeated sequential drops would be made in the evening without communication to the Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 3 troops. Castillo agreed with the plan, as did Steele. North also approved it.177 On September 4, North met with Poindexter. North asked Poindexter for the "go/no go" on sequential air deliveries to the Southern forces. Shortly afterwards, North told Secord to implement the new drop plan and conduct a "force feed" operation to the South where all supplies would be delivered sequentially in accordance with Dutton's plan.178 On September 9, Dutton flew with the crew in the second C-123 (now operational) inside southern Nica- ragua to attempt a lethal drop to the troops Castillo had identified. But this mission was unable to locate the troops, prompting Dutton to propose to North using two aircraft on each mission to increase deliv- ery potential once troops were located and to protect against increased Sandinista antiaircraft fire. Dutton also asked North for help on weather information and troop location. North approved the use of two air- craft and told Dutton to obtain weather information from Steele, and that he would speak to Castillo about troop locations. North cautioned Dutton not to personally fly inside Nicaragua again: The operation could not afford the exposure if the plane were shot down inside Nicaragua with Col. Robert Dutton at the controls.179 The pace of delivery stepped up. The resupply op- eration was finally becoming effective only weeks before the CIA would be back in the business. On September 11, a lethal drop was successfully made to the South using the C-123 while the C-7 delivered more arms for the FDN in the northern regions. Dutton reported the success of the southern delivery to North. On the 12th, three aircraft made more de- liveries: a C-123 delivered 10,000 pounds to the South and a C-7 and a Maule delivered to the FDN. Sep- tember 13 was "a red letter day," Dutton wrote to North. All five aircraft flew at the same time, with lethal loads dropped in both the North and South. "The surge is now in full force," Dutton relayed to North. The plan at last was working.180 Things were going so well that Dutton advised North that an additional $20,000 in cash was needed for the fuel fund and that the "C-123 is now armed with HK-21/7.62 machine gun on the aft ramp, bring on the MI-24." In fact, before Dutton returned to Washington, he could report to North that "all troops should now have equipment. Will stand by for direc- tion from [Castillo]. He already told us not to send any more to [a Southern commandante] for a while. Never thought we would hear that." 181 The "hand-to-mouth" operation that had limped along on limited resources for so long had, with the support of certain individuals, finally delivered the goods. Under North's direction, Dutton's operational control, Castillo's critical assistance in locating, dis- patching, and scheduling the needs of the Southern troops, and Steele's coordination with the Command- er, the South received arms, while deliveries contin- ued apace to the FDN in the North. Indeed, for the rest of September, lethal drops were successfully made to both the FDN and the Southern forces. North duly reported the operation's success to Poin- dexter.182 When Dutton returned from Central America later that month, he met with North. North asked him to arrange a 1-day trip to the region so that he could personally thank the pilots and crew. North told him, "Bob, you will never get a medal for this, but some day the President will shake your hand and thank you for it."183 Dutton had also prepared a photograph album de- picting the operation: the operational bases, drop zones, aircraft, munitions, and the crew replete with assault machine guns and other assorted weapons. Dutton showed the album to North, who liked it and said he wanted to show it to "the top boss."84 North testified that he sent the album to Poindexter to show to the President, but never heard further about the album. Poindexter testified that he did not show the album to the President.185 North Expands His Special Operations Even with the $100 million in appropriated funds becoming available in the near future, North tried to get other aid for the Contras. In May, Israeli Defense Minister Yitzhak Rabin had offered to provide Israeli military advisers for the Southern front. Although nothing came of this offer, North and Rabin met again in September and discussed an Israeli transfer of Soviet bloc weapons to the Contras. Rabin wanted "to know if we had any need for SovBloc weaps and ammo he could make avail." Rabin asked whether North's ship, the Erria, had left the Mediterranean. When North responded that it was in Lisbon, Rabin suggested that it dock at Haifa and "have it filled w/ whatever they cd assemble" of a "recently seized PLO shipment captured at sea." '86 Poindexter sanctioned the Israeli arms offer: "I think you should go ahead and make it happen. It can be a private deal between Dick [Secord] and Rabin that we bless. . . . Keep the pressure on Bill [Casey] to make things right for Secord." Later, Poindexter cautioned "[a]bsolutely nobody else should know about this. Rabin should not say anything to anybody else except you or me." On September 15, North told Poindexter that "orders were passed to the ship this morning to proceed to Haifa to pick up the arms. Loading will be accomplished by Israeli military per- sonnel." 187 Despite Poindexter's caution, North later recounted the offer in a memorandum briefing the President for a visit from Israeli Prime Minister Shimon Peres. North wrote that Prime Minister Peres was likely to raise certain sensitive issues, such as the transfer of Soviet bloc arms by the Israelis "for use by the Nica- raguan democratic resistance." North recommended: 75 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 1 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 3 "If Peres raises this issue, it would be helpful if the President thanked him since the Israelis hold consid- erable stores of bloc ordinance compatible with what the Nicaraguan resistance now uses." Next to this sentence, Poindexter penciled: "Rabin. Very tightly held."188 As another expansion of his special operations, North received an offer from a third party to engage in sabatoge and other activities inside Nicaragua, to be financed with Enterprise funds. Poindexter ap- proved the sabatoge plan, but instructed North not to become involved in conspiracy or assassinations.189 According to North, the plan was never implemented because North was dismissed.19? The Operation Begins to Unravel: Disclosure of the Airstrip Along with others in the Administration, North had helped to prevent the disclosure of his operation to Congress. The extent of his involvement in Central America, however, made him open to exposure. Al- though the U.S. Congress was not told of North's role in supporting the Contras, Central American governments?including that in Managua?were aware of it. Eventually, one of those governments chose not to remain silent. Early in the morning on September 6, North learned that a Costa Rican official was threatening to hold a press conference announcing the existence of the Santa Elena airfield and alleging violations of Costa Rican law by North, Secord, and Udall Re- sources. North immediately called Assistant Secretary Abrams and told him that the press conference had to be stopped. Half an hour later, North had reached Ambassador Tambs and placed a conference call to Abrams.191 President Arias was scheduled to visit the United States, and Abrams "instructed Tambs to advert to the visit in a way which made it clear to President Arias that his visit was at risk." Abrams testified, "It was supposed to be diplomatic, but the message was supposed to be clear." North's notes reflect the idea of a greater threat than the cancellation of a White House visit: "Conf. call to Elliott Abrams and Amb. Lew Tambs; -Tell Arias; -Never set foot in W.H.; - Never get 5 [cents] of $80M promised by McPher- son." An hour or two later, Tambs had made the call (but did not threaten the cutoff of aid), and the press conference was cancelled.192 In his report to Poindexter, North exaggerated his own role in the crisis. In a PROF note, North told Poindexter he had personally forestalled the crisis by calling the President of Costa Rica and threatening to cut off aid. North conceded to Poindexter that he may have overstepped the bounds of his authority: "I recognize that I was well beyond my charter in deal- ing with a head of state this way and in making 76 threats/offers that may be impossible to deliver." Poindexter responded: "Thanks, 011ie, you did the right thing, but let's try to keep it quiet." North admitted in his testimony that he had not called Presi- dent Arias. He claimed, instead, that the PROF mes- sage "was specifically cast the way it was to protect the other two parties engaged." 193 The Costa Rican officials were delayed but not deterred by the call. On September 25, Costa Rican authorities held a press conference announcing the discovery of a "secret airstrip in Costa Rica that was over a mile long and which had been built and used by a Co. called Udall Services for supporting the Contras." Olmstead was named as the man who set up the airfield as a "training base for U.S. military advisors."194 North offered a "damage assessment" to Poin- dexter, assuring him that "all appropriate damage con- trol measures" had been undertaken to "keep USG [U.S. Government] fingerprints off this." He wrote to Poindexter: Udall Resources, Inc., S.A. is a proprietary of Project Democracy. It will cease to exist by noon today. There are no USG fingerprints on any of the operation and Olmstead is not the name of the agent?Olmstead does not exist. We have removed all Udall Resources . . . to another account in Panama, where Udall maintained an answering service and cover office. The office is now gone as are all files and paperwork.' 95 The New York Times picked up the story. North, with assistance from Abrams and others, drafted press guidance for the Administration's response. The "guidance," approved by Poindexter, stated that the airstrip had been offered to the Costa Rican Govern- ment "by the owners of the property who had appar- ently decided to abandon plans for a tourism project." It concluded: "No U.S. Government funds were allo- cated or used in connection with this site nor were any U.S. Government personnel involved in its con- struction. Any further inquiries should be referred to the Government of Costa Rica." The U.S. Govern- ment's role in facilitating the construction of the air- field was concealed.196 At the same time North was promoting this cover story, he suggested to Poindexter that steps be taken to "punish" the Costa Rican Government for the dis- closure.'97 On September 30, North again argued that any attempt to benefit President Arias should be quashed: "Those who counsel such a course of action are un- aware of the strategic importance of the air facility at Santa Elena and the damage caused by the Arias' government revelations." 198 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 3 The Covert Operation Ends The triumph of the airlift was short-lived. When Bill Cooper wrote to Dutton in late September after an- other successful drop, "Ho-Hum, just another day at the office," Dutton warned him to be careful.'29 On October 5, a C-123 left the Airbase at 9:50 a.m. local time with 10,000 pounds of ammunition for a drop to the FDN inside Nicaragua. Cooper was in command, Buzz Sawyer the co-pilot, and Eugene Ha- senfus the loadmaster who would actually drop the supplies. An FDN fighter was also on board for radio communications to the troops on the ground. Al- though the mission was to support the northern FDN forces, the plane flew a southern route to avoid San- dinista guns.20? First reports had the plane missing. Castillo sent Southern front troops to look for the plane and Dutton notified North's office in an attempt to mount a search operation. Earl attempted to arrange for a U.S. military search and rescue mission, while friend- ly governments in the region also organized a discreet search effort. Felix Rodriguez called the Vice Presi- dent's Deputy National Security Adviser at his home, telling him the plane could not be found. It was all to no avail: the plane had been hit by a Sandinista SAM- 7 over Nicaraguan territory. Three crew members were killed. Only Hasenfus survived, captured by the Sandinistas.201 Abrams called North and asked him to arrange to retrieve the bodies. The State Department issued press statements claiming no U.S. involvement in the mission.202 But the Enterprise had begun to unravel. The bodies of the crew were found bearing Southern Air Transport identification cards. The Federal Aviation Administration and the U.S. Customs Service began to investigate. With secrecy no longer possible, the resupply operation was shut down.203 Presidential Authorization and Knowledge The President told the Tower Review Board that he did not know that the NSC staff was assisting the Contras.204 After the Tower Report was issued, the President stated that private support for the Contras was "my idea." 205 In fact, the President knew of the contributions from Country 2.206 According to Poin- dexter, the President's policy was "to get what sup- port we could from third countries." 207 In general, Poindexter understood that the Presi- dent wanted the NSC staff to support the Contras, including encouraging private contributions. The President also knew, according to Poindexter, that North was the chief staff officer on Central America who was responsible for carrying out the President's general charter to keep the Contras alive. Poindexter regularly reported to the President on the status of the Contras, the fact that they were surviving, and "in general terms" North's role in facilitating their survival. As a result of these briefings, Poindexter thought that the President understood that both he and North were coordinating the effort to support the Contras. Poindexter also believed the President under- stood that "Col. North was instrumental in keeping the Contras supported without maybe understanding the details of exactly was he was doing." 208 As to the level of detail provided to the President on the Contra support operation, Poindexter testified that he: would not get into details with the President as to who was doing what. The President knew that there was a Boland Amendment, he knew there were restrictions on the government. As he has said, I think, since November of 1986, that he did not feel that the Boland Amendment applied to his personal staff and that that was his feeling all along. I knew that. He knew the Contras were being supported, and we simply didn't get into the details of exactly who was doing what.2" Poindexter testified that on one occasion, he briefed the President with some specificity about the Contra support program, but understood that the President did not recall the briefing: Now, you know, the President doesn't recall ap- parently a specific briefing in which I laid out in great detail all of the ways that we were going about implementing the President's policy, and I frankly don't find that surprising. It would not, frankly, at the time have been a matter of great interest as to exactly how we were implementing the President's policy.210 Without getting to the "extraneous ? detail[s]" of how the President's policy was being implemented, however, Poindexter briefed the President on the Santa Elena airstrip in Costa Rica. Poindexter testified that in December 1985, after he returned from Central America, he specifically briefed the President about the local assistance provided in establishing the air- strip. In addition, Poindexter informed the President that the "private individuals" were also involved in establishing the airstrip. At the same time, Poindexter excluded the "extraneous detail" that North, through Tambs and Castillo, had facilitated the construction of the airstrip.211 Similarly, while Poindexter thought that the President was aware of North's role in sup- porting the Contras, "it did not include something as specific as directing Col. North to conduct air supply operations." 212 North testified that he believed that the President approved his efforts to resupply the war. In fact, his actions support that belief. While Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 77 u Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 3 Poindexter testified that he did not show the photo- graph album detailing the operation to the President, North testified that he sent the album to the President through Poindexter and told Dutton that the Presi- dent would thank Dutton for his efforts. Conclusion Although the North-Secord resupply operation ended on a disastrous note, with the shooting down of the Hasenfus plane, North had successfully managed, with the approval of his superiors, the covert pro- gram to assist the Contras for almost 2 years. The covert program that North had developed inevitably created conflicts of loyalties and shadings of duties among the persons whom he coopted to assist him. Felix Rodriguez was a close associate of Donald Gregg, the National Security Adviser to the Vice President. Yet North instructed Rodriguez not to tell Gregg that he was secretly working for North, and Rodriguez testified that he complied until the summer of 1986.213 According to North, Director Casey wanted to insulate the CIA's career employees from North's operation so that the CIA could not be charged with a violation of the Boland Amend- ment.2" CIA officials admitted that, far from their traditional role, they "actively shunned information. We did not want to know how the Contras were being funded . . . we actively discouraged people from telling us things." 215 78 The CIA's attempt to remain uninformed failed as North sought out the assistance of CIA personnel in Central America. Particularly after Congress amended the law to allow the CIA to exchange intelligence with the Contras, many flights undertaken by the Enterprise were reported by CIA field offices to CIA headquarters; and at least one CIA Chief of Station provided information necessary for the Enterprise to make accurate airdrops and avoid Sandinista fire. A CIA Chief of Station, the U.S. Ambassador to Costa Rica, and other operatives?both Government employees and private citizens?that North recruited with the approval of his superiors provided necessary support to his covert program of military support for the Contras. Yet throughout this time, the NSC staff repeatedly assured Congress that it was complying with the letter and spirit of the Boland Amendment. The NSC staff's resupply operation provided essen- tial support to the Contras' during 1986. Not only did North coordinate that effort, but he decided with Secord, after consulting the Contras' military com- manders, what supplies were needed in order to con- duct the entire Contra operation, both on the ground and in the air. North directed the Enterprise's efforts on behalf of the Contras with Poindexter's approval and in the belief that the President likewise concurred. The result was that, with the help of other U.S. Govern- ment officials, North managed to provide to the Con- tras what Congress had not: a full-scale program of military assistance. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 3 Table 3-1.?Resupply Flights Made by the North/Secord Resupply Operation During 1986 DATE AIRCRAFT FDN/SOUTHERN NOTES 23 March 86 C-7 Caribou N/A Local Flight-No Cargo 24 March 86 C-7 Caribou N/A Local Flight-No Cargo 25 March 86 C-7 Caribou N/A Local Flights-No Cargo 26 March 86 C-7 Caribou N/A 3 Local Flights-No Cargo 28 March 86 C-7 Caribou N/A 2 Local Flights 28 March 86 C-7 Caribou N/A 2 Local Flights 28 March 86 C-7 Caribou N/A 2 Local Flights-No Cargo 31 March 86 C-7 Caribou N/A Local Flight-No Cargo 31 March 86 C-7 Caribou N/A Local Flight-No Cargo 31 March 86 C-7 Caribou N/A Training-No Cargo 1 April 86 C-7 Caribou FDN Lethal Cargo 3,440 lbs. 1 April 86 C-7 Caribou N/A Local Flight-No Cargo 4 April 86 C-7 Caribou FDN Lethal Cargo (2 flights) 9,200 lbs. 6 April 86 C-7 Caribou N/A Training 7 April 86 C-7 Caribou FDN Lethal Cargo (2 flights) 8,600 lbs. 8 April 86 C-7 Caribou FDN Lethal Cargo (2 flights) 11,500 lbs. 9 April 86 C-7 Caribou FDN Lethal Cargo (3 flights) 18,000 lbs. 10 April 86 C-7 Caribou FDN Lethal Cargo (2 flights) 7,900 lbs. 10 April 86 L-100 Southern Arrived DZ on time but never saw inverted or strobe light. Aborted after staying in area 25 minutes. Lethal Cargo: 18 bundles 11 April 86 C-7 Caribou FDN Lethal Cargo (3 flights) 16,250 lbs. 11 April 86 L-100 Southern Lethal drop UNO/ South received 20,000 lbs. ammo, grenades, rock- ets, launchers, rifles, magazines, etc. 1 May 86 C-7 Caribou FDN 1 May 86 C-7 Caribou FDN Lethal Cargo: Hard - 800 Soft - 700 5 May 86 C-7 Caribou FDN Lethal Cargo 5 May 86 C-7 Caribou FDN 7 May 86 C-7 Caribou FDN Lethal Cargo: 1000 lbs. 8 May 86 C-7 Caribou FDN Lethal Cargo 8 May 86 C-7 Caribou FDN Cargo: Soft 6300 9 May 86 C-7 Caribou FDN Cargo: Soft 3700 12 May 86 C-7 Caribou FDN 12 May 86 C-7 Caribou FDN Cargo: Soft 4150 12 May 86 C-7 Caribou FDN Lethal Cargo: 5140 lbs. 12 May 86 C-7 Caribou FDN Cargo: Soft - 6000 12 May 86 C-7 Caribou FDN Lethal Cargo: 3000 lbs. 13 May 86 C-7 Caribou FDN Lethal Drop 13 May 86 C-7 Caribou FDN Cargo: Hard - 3000 Soft - 20430 13 May 86 C-7 Caribou FDN Cargo: Hard - 3700 Soft - 1000 13 May 86 C-7 Caribou FDN Cargo: Hard - 500 Soft - 1500 13 May 86 C-7 Caribou FDN Cargo: Hard - 4150 14 May 86 C-7 Caribou FDN Cargo: Hard - 1000 Soft - 3850 14 May 86 C-7 Caribou FDN Cargo: Hard - 450 Soft - 4058 14 May 86 C-7 Caribou FDN Cargo: Hard - 2175 Soft - 3850 15 May 86 C-7 Caribou FDN Cargo: Soft - 5178 19 May 86 C-7 Caribou FDN Cargo: Soft - 600 20 May 86 C-7 Caribou FDN Cargo: Soft - 3756 20 May 86 C-7 Caribou FDN Cargo: Soft - 3778 20 May 86 C-7 Caribou FDN Cargo: Soft - 3714 20 May 86 C-7 Caribou FDN Cargo: Soft - 3778 21 May 86 C-7 Caribou N/A Airbase to Santa Elena airstrip and return 21 May 86 C-7 Caribou FDN Cargo: Soft - 3358 22 May 86 C-7 Caribou FDN Cargo: Soft - 358 6 June 86 C-123 N/A Airbase to Santa Elena airstrip and return 9 June 86 C-123 Southern Stuck in mud at Santa Elena 10,000 lbs of munitions, uniforms & medi- cines. 10 June 86 C-7 Caribou FDN Lethal Drop 79 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 I I II . .. I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 3 Table 3-1.?Resupply Flights Made by the North/Secord Resupply Operation During 1986?Continued DATE AIRCRAFT FDN/SOUTHERN NOTES 11 June 86 C-123 N/A Return with 5000 pounds to Airbase 12 June 86 C-7 Caribou FDN 5000 pounds lethal 13 June 86 C-123 Loaded 7 pallets and Hold. Gross weight 7038 lbs. lethal. Bad weath- er put flight on hold until 1600 14 June 86 C-I23 Southern Lethal No drop zone contact 15 June 86 C-123 Southern Lethal, no drops made. While over Costa Rica, A/C bounced over the trees & damaged engine. By Checking radar with LORAN (a Navigational aid), A/C then flew over drop zone twice, avoiding enemy anti-aircraft fire. No DZ contact with troops. Plane down 7- 10 days. 21 June 86 C-7 Caribou Southern Refueled at San Jose AP Cargo: HK- 21 machine guns, cartridges, gre- nades Successful drop inside Nica- ragua 8 July 86 C-7 Caribou FDN Successful drop of lethal supplies to the FDN inside Nicaragua 9 July 86 C-7 Caribou FDN Lethal 8000 lbs. 9 July 86 C-123 Southern Airbase to Parrots Beak 10 July 86 C-7 Caribou FDN Drop 3 pallets of boots, 81 mm mor- tars & ammo plus small ammo, 6 pallets medical clothing & small ammo. DZ receipt confirmed. 12 July 86 C-7 Caribou Southern Lethal Cargo: Cartridges, grenades and non-lethal. Landed in San Jose, then returned to Airbase. 13 July 86 C-7 Caribou FDN Lethal drop made 1-1/2 mile from original DZ. 28 July 86 C-7 Caribou FDN Lethal drop. 29 July 86 C-7 Caribou FDN Lethal Cargo including ammunition is successfully dropped inside Nica- ragua. Inbound-received sporadic 37 mm AAA when crossing a road. Receipt of cargo confirmed by radio 31 July 86 C-7 Caribou FDN Lethal cargo dropped inside Nicara- gua. Receipt of cargo confirmed by radio 13 Aug 86 C-7 Caribou FDN Landed with 1500 lbs. 14 Aug 86 C-7 Caribou FDN Air drop 4580 lbs. lethal inside Nica- ragua. 30 mins in DZ 15 Aug 86 C-7 Caribou FDN Air Drop 4580 lbs. lethal Dropped 7 FDN parachute school graduates. 15 Aug 86 C-7 Caribou FDN 4030 lbs. 17 Aug 86 C-7 Caribou FDN Local Training 18 Aug 86 C-7 Caribou Southern 4000 lbs. Lethal Load 18 Aug 86 C-7 Caribou FDN 2,400 hand grenades 19 Aug 86 C-7 Caribou FDN Maintenance 20 Aug 86 C-7 Caribou FDN Still problems w/right engine 20 Aug 86 C-7 Caribou Southern C-7 Caribou returned w/4500 lbs. to be added to 7000 lbs. 21 Aug 86 C-7 Caribou FDN Still problems w/right engine 22 Aug 86 C-123 Southern Abort 23 Aug 86 C-123Southern Aborted 10,000 lbs. lethal 25 Aug 86 C-123 Southern Lethal Cargo Dropped 26 Aug 86 C-7 Caribou Southern Lethal 4800 pounds Returned w/load no radio contact no lights visible 27 Aug 86 C-7 Caribou Southern Lethal 4560 lbs. Bad weather. 28 Aug 86 C-7 Caribou Southern Lethal 4600 lbs. 5 Sept 86 C-7 Caribou Southern Lethal-10,000 lbs. No drop-20mm over DZ?no lights no radio con- tact?DZ UNO 80 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 3 Table 3-1.?Resupply Flights Made by the North/Secord Resupply Operation During 1986?Continued DATE AIRCRAFT FDN/SOUTHERN NOTES 7 Sept 86 C-123 Southern Lethal HK-21 machine guns, car- tridges, C-4 explosive, hand gre- nades, shells 9 Sept 86 C-123 Southern Lethal No drop No contact in DZ Troops on ground unable to identi- fy coordinates of DZ. Bad weath- er. Arrived at coordinates early 10 Sept 86 C-7 Caribou FDN Weapons & supplies. 11 Sept 86 C-7 Caribou FDN Lethal 384 81mm shells 11 Sept 86 C-I23 Southern Lethal load 10,000 lbs. No drop made Bad weather. Called North's office to get assistance w/ weather reports. 12 Sept 86 C-123 Southern Drop 10,000 lbs. Rifles, grenades mortar shells, cartridges and non- lethal 12 Sept 86 C-7 Caribou FDN 3800 lbs. of ammo grenades and non- lethal 13 Sept 86 C-123 Southern 10,000 lbs. dropped cartridges, hand grenades and non-lethal 13 Sept 86 C-123 FDN 5,000 lbs food 4,630 grenades 13 Sept 86 C-7 Caribou FDN 1500 lbs of chutes & straps 13 Sept 86 C-7 Caribou FDN Additional delivery 14 Sept 86 C-123 . Southern 10,000 lbs cartridges, shells, machine guns, and grenades 14 Sept 86 C-7 Caribou FDN mortar shells 17 Sept 86 C-123 Southern 9850 lbs. cartridges, C-4 explosive, fuses, detonators, and grenades. 19 Sept 86 C-123 Southern 10,500 lbs. lethal 20 Sept 86 C-123 FDN in the Southern Provinces 10,500 lbs. lethal 3 machine guns, ammo, grenades, all received in good shape. 23 Sept 86 C-123 Southern 10,100 lbs 15 pallets Lethal: grenades, AK's 702 ammo 29 Sept 86 C-123 Southern Lethal Drop Cartridges, shells, and grenades 29 Sept 86 C-7 Caribou FDN 2,400 hand grenades 30 Sept 86 C-7 Caribou FDN Lethal Drop 30 Sept 86 C-7 Caribou FDN Lethal 5 Oct 86 C-123 FDN in the Southern Provinces Lethal; Plane shot down. Carrying guns & other ammo. Left Airbase at 0950. Full fuel and 10,000 lbs. route same as usual. Planned to return to Airbase 1530. Never reached DZ. Source: Flight logs and mission reports compiled by air resupply operation pilots and flight crew. 81 77-026 0 - 87 - 4 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 .1 I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 3 Chapter 3 1. Secord Test., Hearings, 100-1 at pp. 57-65; (hereinafter "Secord"), North Test., Hearings, 100-7 I at 162; (herein- after "North"), Signed Memorandum of Interview of Rich- ard V. Secord, Aug. 18, 1987 (hereinafter "Secord Inter- view"). 2. Id. 3. Secord, Id. 4. Secord, Hearings, 100-1 at 58. 5. Id.; Owen, Hearings, 100-2, at p. 36. See also Section on Enterprise of the Narrative. 6. See Note 1 supra. 7. Id. 8. Id. 9. Id. Although the participants did not decide to author- ize specific action, they agreed on the need to conduct resistance activities inside Nicaragua's urban areas. This too was a subject that North and Calero had previously dis- cussed. Indeed, North had in December introduced Calero to David Walker, a British insurgency expert, to conduct such operations. 10. North Test., Hearings, 100-7, at 94. 11. McFarlane Test., Hearings, 100-2, at 96-97. 12. Poindexter Test., Hearings, 100-8, at 8 (hereinafter "Poindexter"). See also North, 100-7, at 150 and Secord at 6061, 138. 13. International Security and Develop. Act of 1985, Pub. L. 99-88, 99 Stat. 149. 14. Supplemental Appropriations Act for 1985, Pub. L. 99-88. 15. Calero Test., Hearings, 100-3, at 12. 16. Duemling Deposition, 8/20/87, at 9-11. 17. Duemling Deposition, 8/20/87, at 46-48. 18. Duemling Deposition, 8/20/87, at 28-29; Abrams Test., 100-3 at 35-36. 19. Secord Test. Id., Secord Interview and Deposition of Richard Gadd, May 1, 1987 at 6-7. 20. Id. 21. Id.; Castillo Test., Hearings, 100-4, at 40 et seq. (here- inafter "Castillo"). 22. Poindexter, Test., Hearings, 100-8, at 75. 23. Tambs Test., Hearings, 100-3, at 367-68, 375, 427; North, 100-7, 7/8/87, at 150. 24. North Test., Hearings, 100-7, Part 1 at 173-174. North did not identify which members of the Restricted Inter- Agency Group were present during these discussions. (Id.) 25. Abrams Test., Hearings, 100-5 at 20. 26. North Notebooks, 8/10, 8/18/85; Castillo at 11-15, Exhibits TC-1 and TC-2 at 87 et seq. 27. Memo from TC (Owen) to BG (North), 8/25/85, RWO Exhibit 9; Castillo at 14 and 60 et seq. 28. Owen at 351; Castillo at 16; North Notebooks 9/3/86 and 9/17/86; Interview of Joseph Hamilton; H6345 (summa- ry of CSF Ledger). 29. North Notebooks 10/3/85; Gadd Dep., 5/1/87, at 19- 22. 30. North Notebooks, 9/10/85. 31. Gregg Dep., 5/18/87 at 27. 32. North Notebooks, 9/16/85. 33. Rodriguez Test., Hearings, 100-3, at 289-90; Ex. FIR-1 (hereinafter Rodriguez). 34. Poindexter Test., Hearings, 100-8, at 75. 82 35. North Notebooks 7/23-24/85, 8/3/85, 8/15/85; Dutton Test., Hearings, 100-3, at 212 and 283 (hereinafter Dutton); Coors Test., Hearings, 100-3, at 44. 36. Gadd Dep., 5/1/87, at 13-16; Dutton at 212. 37. Gadd Dep., 5/1/87, at 16-19; Secord Interview Para. 3; North Notebooks 11/15/86; Abrams Test., Hearings, 100- 5, at 145-46; N12087 PROF Note 11/20/85, Exhibit OLN- 87. 38. Secord Interview, Para. 4; Gadd Dep., 5/1/87, at 12- 13. While the search for aircraft continued, in October 1985, North directed troop salary payments to the FDN and in December 1985, another 85,000 pounds of ammunition and other arms arrived for the FDN from the Enterprise.(/d., CSF Adjusted Ledger) 39. McFarlane, Test., Hearings, 100-2, at 28-29. 40. North Test., Hearings, 100-7, at 78-79. 41. Sigur Test., Hearings, 100-2, at 286-287. 42. North Test., Hearings, 100-7, at 78-79. 43. Ex. RCM-26. 44. Sigur Test., Hearings, 100-2, at 288-89. 45. Sigur Test., Hearings, 100-2, at 289. 46. Sigur Test., Hearings, 100-2, at 290. 47. North Test., Hearings, 100-7, at 79. 48. Sigur Test., Hearings, 100-2, at 291, id. at 286-292. 49. Owen Test., Hearings, 100-2, at 11-14; North Test., Hearings, 100-7, Part I, at 208. Congressman Jenkins gave this political context for the contribution from Country Three: "In October 1985 when the NSC staff was schedul- ing an appointment for Colonel North to meet with one of these countries that later contributed $2 million, I was in- volved in a tough legislative battle in this House. On Octo- ber 12, I believe, of 1985, this House passed a textile bill, very controversial. At that very time, Colonel North appar- ently was soliciting, from a nation that was impacted by this bill, funds secretly and that country later delivered $2 mil- lion, according to the testimony. The President vetoed that bill in December 1985 and between December 1985 and August 1986, when the Congress decided to sustain the President by an eight-vote margin, there were entreaties apparently made to many other nations that were impacted by this legislation." McFarlane 100-2, at 279. 50. S4344, Handwritten Notes, 9/24/85. 51. Owen Test., Hearings, 100-2, at 355; Duemling Dep., 8/20/87 at 65-68 and 60-63. 52. Owen Exhibit RWO-14, 100-2 at 825-26; RWO-17, 100-2 at 831. The contract between Institute for Democra- cy, Education and Assistance, Inc. and NHAO provided that as a condition of the receipt of this grant, the grantee [IDEA] agrees . . . "that Mr. Robert Owen shall not during the term of this Grant perform any service which is related to the acquisition, transportation, repair, storage or use of weapons, weapons systems, ammunition or other. . . [lethal aid]." RWO-17, Duemling Dep. at 69. 53. Owen Test., Hearings, 100-2, at 380. 54. Gadd Dep., 5/1/87, at 24-26. 55. North Test., Hearings, 100-7, at 268. 56. Poindexter Depo., 5/2/87 at 64; Memo from North to Poindexter, 12/2/85. 57. PROF Note, North to Poindexter, 12/5/85, 22:12:05. 58. N49179, Memo, North to Poindexter, 12/10/85. 59. Id. 60. Poindexter at 222-27, 310; Tambs at 380-81; Deposi- tion of Poindexter, 5/2/87 at 64-68. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 3 61. Singlaub Test., Hearings, 100-3, at 89-90; Exhibit JKS- 6 at 462-65. 62. N10720-28, Memo from Burghardt to Poindexter, 1/14/86. 63. Gadd Dep., 5/1/87, at 15, 21 and 26. 64. North Test., Hearings, 100-7, at 140-41; 151. 65. Gadd Dep., 5/1/87, at 42; North at 7/7/87 at 84, 150, Secord at 65, 252; Dutton at 208-09; Poindexter at 75; North Notebooks 1/15/86. 66. At the end of December 1985, Steele called North to report that all was "OK" on final flight arrangements at the Airbase and that fuel for the aircraft had to be handled on a "pay as you go" basis. On January 6, North talked to Steele about problems with Felix Rodriguez, including security concerns and Rodroguez' ties to an arms dealer connected to the military of a Central American country. Despite various organizational problems, Steele called North a week later to report significant progress. The Commander was now "fully aboard." The building construction for a ware- house was underway, and all that was needed was money to pay for the fuel. On January 16, North discussed with Steele the 3 Butler buildings Gadd was constructing and operational security at the Airbase. North talked to Steele again on January 20 concerning additional operational prob- lems and determined (apparently after a call from the Chief of the CATF) that flight planning data for resupply aircraft should be passed to Steele for local coordination. North Notebooks 12/19/85, 12/23/85, 1/6/86, 1/20/86, 1/31/86; Depo. of Col. James Steele 4/21/87 at 27, 68. 67. Id.; North Notebooks 1/16/86; Dep. of Gen. John Galvin, 6/13/87 at 32-33; Castillo, Test., Hearings, 100-4, at 15-16. 68. Id. By this time, North had also coordinated with Castillo, Quintero's arrival and help in overseeing the air- strip construction, particularly in obtaining local supplies. (Id.) 69. Secord Int. Para. 8; North Notebooks Feb. 27, 1986. 70. Rodriguez Test., Hearings, 100-3, at 292. 71. On Feb. 18, North wrote in his notebook: "Call [Chief of the CATF at the CIA] ASAP. Find A/C: L-100 C-7 standby. See Duemling - Americit crews." The C-7 at that time was still on standby while the L-100 were the aircraft Gadd had chartered from Southern Air Transport to deliver humanitarian supplies under NHAO contract from the United States to Central America. North Notebooks 2/18/86 and 2/29/86; Gadd at 34 et. seq.; C/CATF Dep. I 5/1/87 at 91, 103-05, 114. 72. Id. 73. Owen, RWO-11, 100-3 at 816-17. 74. Owen, at 358, and RWO-14 at 825. 75. Poindexter at 222-27; Castillo Test., Hearings, 100-4, at 33. 76. Id. 77. See Table of Resupply Flights made by the North/ Secord Resupply Operation During 1986, infra. 78. RWO-14a, 100-3 at 825. 79. Gadd Dep., 5/1/87, at 39; KL-43 Message April 1986; OLN-88, Hearings, 100-7, Part 3. 80. Gadd Dep., 5/1/87, at 34-35; KL-43 Message 4/8/86, Secord to Quintero (82330Z Apr 86). 81. KL-43 Message, 4/9/86 [Copp: 4/9/86 0945]. 82. Castillo at 21-23; C/CATF Dep. I 5/1/87 at 114. 83. Castillo at 24; Dep. of Ian Crawford, 3/13/87 at 60- 61; Secord Ex. 3, 100-1 at 418-20. 84. Castillo at 22; Exhibit TC-6, 100-4. (KL-43, 4/12/86); Dep. of Ian Crawford, 3/13/87, pp. 58-63. 85. See Note 77 supra; Crawford Dep., 3/13/87 at 58-63; Dep. of CIA Field Operations Officer, at 45 et. seq. 86. Rodriguez Test., Hearings, 100-3, at 299; Gadd at 37- 38; Secord Int. at Para. 6. 87. North to McFarlane Memorandum dated Dec. 4, 1984; Secord at 66-67; Exhibits OLN-83, 84, 281, 282. See also Chapter 2. 88. Secord at 68; Secord Int. Para. 8; H893 Wire Trans- fer; Dutton at 214. 89. Secord at 64; Dutton at 204-08. 90. Dutton at 208. See also Dutton Chronology of Events for May. 91. Dutton at 208, 212-13; Dutton Chronology of Events, entry for 5/19/86. 92. Id. 93. Dutton at 208, 223; Secord at 68. 94. PROF Note, OLN to JMP, 5/16, 19:29:43. 95. Dutton, Test., Hearings, 100-3, at 54. 96. Dutton, Test., Hearings, 100-3, at 118. 97. Dutton Ex. RCD-14. 98. Secord 5/7 at 111. 99. Dutton at 119-20. 100. Id. at 119-20. 101. Id. 102. Id. 103. Dutton at 213-14; Secord Int. Para. 8; Exhibits RCD- 14 and RCD-15, 100-3. 104. Dutton at 214-15; Secord at 251. 105. Dutton at 215 and 218. 106. Dutton at 216-17; KL-43 Message dated 6/9/86; Pilot Mission Reports; Secord at 74. 107. KL-43 #R00022; Tambs at 381-83 and 407; Castillo at 32-33; Interview of John C. Taylor, Commander of the Office of Defense Cooperation, U.S. Embassy, Costa Rica. 108. North Notebooks, 6/10/86; Secord Int. Para. 7; H495 Wire Transfer. 109. PROF Note, North to Poindexter, 6/10/86, Ex. OLN-70, 100-7, Part III. 110. See Note 108 supra. 111. Dutton at 217; Pilot Mission Report of Bill Cooper and John Piowatty; Dutton Chronology for June. See also Note 74. 112. KL-43 Message North to Castillo 6/16/86, Ex. OLN-89, 100-7, Part III. 113. Dutton at 217-219; Ex. RCD-14 at 8. 114. PROF Note, 5/2/86, Ex. JMP-45, 100-8. 115. PROF Note, Ex. OLN-287, 100-7, Part III. 116. PROF Note, Ex. OLN-27, 100-7, Part 3. 117. PROF Note, Ex. OLN-4; 100-7, Part III. 118. Singlaub Test., Hearings, 100-3, at 90. 119. Id. at 91. 120. Abrams Test. Hearings, 100-5, at 56-58, 124. 121. Depo. of Richard Melton, May 27, 1987, at 14-15, 20-21, 25 and 32. 122. Memo, Ex. JMP-50, N3873-34; N3738 Drop by CSIS Briefing (Robinson) 6/10/86. 123. N10290, Memo from Burghardt to McDaniel, 6/4/86. 124. N3738, Drop by CSIS Briefing (Robinson) 6/10/86. 125. N10296, Memo from Burghardt to McDaniel, 6/4/86. See also Shultz Test., at 17-19. 83 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 3 126. PROF Note, North to Poindexter, Ex. OLN-10, 100- 7, Part III. 127. North Test., Hearings, 100-7, Part 1, at 311-13. 128. Id. at 310; Ex. OLN-10, 100-7, Part III. 129. Id. 130. Ex. OLN-11, 100-7, Part III; PROF Note, Ray Burghardt to RBM, 5/28/86, 18:36, N18096. 131. PROF Note, North to Poindexter, Ex. OLN-70, 100- 7, Part III. 132. Id. 133. Id. and Ex. JMP-52, 100-8. 134. Shultz Test., Hearings, 100-9, at 4, 18-19, Ex. GPS-8. 135. PROF Note, 6/10/86 Poindexter to North, Ex. OLN-81. 136. Abrams Test., Hearings, 100-5, at 34; Shultz at 19. 137. Shultz Test., Hearings, 100-9, at 20. 138. PROF Note, 6/10/86, Poindexter to North, Ex. OLN-81. 139. Shultz Test., Hearings at 19-20. 140. Abrams, 100-5 at 126-31. 141. Abrams, 100-5 at 34. 142. Abrams, 100-5 at 42; North, 100-7, Part 1 at 33; Hall, 100-5 at 88. 143. Rodriguez Test., Hearings, 100-3, at 252-55. 144. N46325; Memo from Don Gregg to Debbie Hutton, 4/16/87; Deposition of Phyllis M. Byrne, 6/16/87 at 13; Samuel Watson Dep., 6/16/87 at 26-27. 145. Rodriguez at 257-60. 146. Id.; Depo. of Nicholas Brady, Oct. 1, 1987. 147. Dutton at 255-56; Dep. of Robert Earl 5/22/87 at 163. 148. KL-43 Message Dutton to North, 6/8/86 Ex. RCD- 1; Dutton at 220-21. 149. Dutton at 221-22; Rodriguez at 305 et seq. 150. Rodriguez at 306. See Note 65. 151. Id.; North, 100-7, Part 1 at 48. 152. N37096, Memo dated 6/25/86, Presidential State- ment: Victory of Contra Aid Legislation. 153. Poindexter, 100-8 at 104. 154. North, 100-7 at 312; Dutton at 222-25. 155. Ex. OLN-198, 100-7, Part III. 156. Secord Ex. 4, 100-1 at 439. 157. Ex. OLN-158, 100-7, Part III; North, 7/14/87 at 146. 158. PROF Note, 7/86, 15:31, Poindexter to North. North continued to hope, up through September, that the assets could be sold. On Sept. 3 or 4, North met with Ambassador Tambs and told him that he wanted to sell the assets because the Freedom Fighters were out of money. North hoped to raise about $5 million. Tambs was skeptical. He knew that the Costa Rican Government closed down the airstrip. Tambs asked North: "How could you sell something which you couldn't use?" North did not reply. Tambs, 5/28 at 170-72, 234. 159. George Test., Hearings, 100-11, at 35-36. 160. Dutton at 225-226; Rodriguez at 307-309; KL-43 Messages in July and August. 161. Id. 162. North Notebooks, 8/6/86. 163. Dep. of Donald Gregg at 11-12. 164. North Notebooks, 8/7/86. 165. Dep. of Robert Earl, 5/2/87 at 101-04. 166. Rodriguez at 309-10; Earl at 166-69. Sam Watson, Gregg's deputy, was also at the meeting. His notes state: 84 "Felix?Tom Clines, Secord?Ripping Off Contras?Fraud, a crime to profit." N46663. 167. Gregg Dep. 5/18/87 at 28-29. 168. Gregg Dep., 5/18/87 at 14, 34. 169. Gregg Dep. at 30-31; Earl Dep. at 175. 170. KL-Messages # 340, 342, 347, 351, and 345. See also Secord Ex. 3, 100-1 at 430 et seq; Dutton at 225-27. 171. Dutton at 225-27; Steele Dep. at 72. 172. See Note 170 supra. 173. KL-43 8/22/86 Secord Exhibit 3 at 431. 174. Dutton at 234. 175. North, 100-7 I at 86-89 and 158. 176. Hearings, Testimony of C/CATF 8/5/87 at 66-67. 177. Dutton at 229-30; KL-43 8/22/86 RCD-5. 178. Id. North Notebooks 9/4/86; KL-43, Secord Ex. 3 at 434. 179. Dutton at 230-35 and accompanying exhibits, RCD- 6, 7, 8 and 9. 180. Id. 181. KL-43 Messages Ex. RCD-9, 10 and KL-43 Message Dutton to North, 9/17/86, #423. 182. Dutton at 232-34; Ex. OLN-162, 100-7; PROF Note North to Poindexter Sept. 15, 1986. 183. Dutton at 236. 184. Dutton at 236-37. 185. North at 133; Poindexter at 227. 186. PROF Note, 9/12/86, 21:50, North to Poindexter (N12163). 187. Ex. OLN-60, OLN-160, OLN-161, 100-7, Part III; Ex. JMP 60, 100-8. 188. Ex. OLN-303, 100-7, Part III. 189. North Test., Executive Session. 190. Id. 191. North Notebooks 9/6/86; Tambs at 210. 192. Id., Abrams at 124-25. 193. Ex. OLN-203, 100-7, PROF Note, 9/7/86, 11:18:45, Poindexter to North; Ex. OLN-301, 100-7, Part III; North Test., 100-7 I at pp. 86-87. 194. PROF Note, 9/25/86, 11:23, Poindexter to North. 195. N18064-65, Prof Note, 9/25/86, 17:39:51 North to Poindexter 196. N30783, Memo North to Poindexter, 9/30/86 197. N18063, Prof Note, 9/25/86, 11:23:45, Poindexter to North 198. N30782, Memo, North to Poindexter, 9/30/86 199. Dutton at 237-38. 200. Dutton at 238-39; KL-43 Message, Ex. RCD-12. 201. Id. 202. Abrams Test., Hearings, 100-5, at 62. 203. Dutton at 239-40. 204. Report of the President's Special Review Board, February 26, 1987 at 111-24. 205. The New York Times, May 16, 1987 at Al. 206. McFarlane Test., Hearings, 100-2, at 17. 207. Poindexter Test., Hearings, 100-8, at 54-55. 208. Poindexter, 100-8, at 54-55, 73-76, 89, 222-29. 209. Poindexter, 100-8 at 101. 210. Id. 211. Poindexter, 100-8 at 225-226. 212. Id. at 229. 213. Rodriguez, 100-3 at 67. 214. North at 223-225. 215. Gates Test., Senate Select Committee on Intelligence Dec. 4, 1986, at 38. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 4 Private Fundraising: The Channell-Miller Operation While donations from other countries and profits from the Iran arms sales provided most of the money for lethal assistance to the Contras after the Boland Amendment, the network of private foundations and organizations formed by Carl R. "Spitz" Channell and Richard R. Miller also played a role. Channell's prin- cipal organization, the tax-exempt National Endow- ment for the Preservation of Liberty (NEPL), used White House briefings and private meetings with the President to raise more than $10 million from private contributors, almost all for the Contra cause. Over half of this total came from two elderly widows? Barbara Newington and Ellen Garwood?who made the bulk of their contributions after receiving private and emotional presentations by Lt. Col. Oliver North on the Contras' cause and military needs. One dozen contributors accounted for 90 percent of NEPL's funds in 1985 and 1986. Of the $10 million that was raised, only approxi- mately $4.5 million was funnelled to, or spent on behalf of, the Contras, including more than $1 million for political advertising and lobbying. The rest was retained by Miller and Channell for salaries, fees, and expenses incurred by their organizations, including compensation to their associates, David Fischer and Martin Artiano. The NEPL money spent for direct and indirect assistance to the Contras was disbursed primarily by Miller at the direction of North. Approximately $1.7 million was "washed" by Channell through Miller's domestic and Cayman Island entities?International Business Communications (IBC) and I.C., Inc.?to the Enterprise, where it was commingled with funds from third-country contributions and the Iranian arms sale. Another $1 million was passed at the direction of North through Miller's entities to accounts controlled by Adolfo Calero, and approximately $500,000 was distributed at North's request to other persons and entities engaged in activities relating to the Contras. Channell and Miller made elaborate efforts to con- ceal the nature of their fundraising activities and North's role. Certain funds received by NEPL for Contra assistance were allocated on Channell's books to a project denominated "Toys," a euphemism for weapons. The NEPL and IBC employees were in- structed to refer to North by a code name, "Green." Funds were transferred to the Contras, not directly? which would be traceable?but through Miller's anonymous offshore entity, I.C., Inc. North misrepre- sented to several White House officials the nature of the network's fundraising activities. For instance, the President apparently was led to believe that the funds were being raised for political advertising; the Presi- dent's Chief of Staff, Donald Regan, was deliberately kept in the dark by North and Admiral John Poin- dexter; and North misrepresented to Congress and White House personnel the nature of his involvement in the activities of NEPL and IBC. As a result, the network was able to operate successfully until the latter part of 1986, when increased Government aid to the Contras and public disclosure of both the Iranian arms sales and the Contra resupply network made further assistance efforts unnecessary and unwise. By using a tax-exempt organization to funnel money to the Contras?for arms and other purposes? Channell and Miller provided tax deductions to donors. As a result, the U.S. Government effectively subsidized a portion of contributions intended for lethal aid to the Contras. In the spring of 1986, Chan- nell and Miller pled guilty to criminal tax charges of conspiring to defraud "the United States Treasury of revenues to which it was entitled by subverting and corrupting the lawful purposes . . . of NEPL by using NEPL . . . to solicit contributions to purchase mili- tary and other non-humanitarian aid for the Contras." At his plea hearing, Channell identified Miller and North as his co-conspirators. The Background Carl R. "Spitz" Channel! Channell, 42, was raised in Elkton, West Virginia. He attended American University from 1963 to 1968 and then, for a brief period, the Union Theological Seminary in Virginia. He left to join the Army and, after service for 3 years, received an honorable dis- charge.3 In 1976, Channell began to work for Terry Dolan, the founder of the National Conservative Political Action Committee (NCPAC). His initial responsibility was assisting in Congressional campaigns. After the 85 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 ..1.. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 4 1978 elections, Dolan asked Channell to shift to fund- raising. To Channell's own surprise, he was an instant success, and was named by Dolan as NCPAC's first national finance chairman. In that position, Channell concentrated on NCPAC's "high dollar donor pro- gram" and set up a number of briefings in Washington for potentially large contributors.2 This fundraising method was to become the standard operating proce- dure for the Channell-Miller network. In 1982, Channell left NCPAC to form his own political consulting organization, the Channell Corpo- ration, to offer fundraising advice to campaigns and candidates. By 1984, he began to establish a network of other politically-oriented foundations. First, he founded the American Conservative Trust (ACT) as a Political Action Committee (PAC). At approximately the same time, he incorporated NEPL and sought Internal Revenue Service (IRS) recognition of NEPL as a tax-exempt foundation under Section 501(c)(3) of the Internal Revenue Code.3 In its application for tax-exempt status, NEPL as- serted that it was formed "to educate members of the general public on American political systems and soci- etal institutions." The application further stated that this education was to be accomplished through the study of the development of American political sys- tems and the influence of such systems on societal institutions in the United States. NEPL indicated to the IRS that it would collect information on these topics, make that information available to the general public, and eventually conduct seminars.4 On December 12, 1984, the IRS issued a determina- tion letter stating that, based on the information con- tained in NEPL's application and assuming that its operations would be consistent with the program out- lined in the application, NEPL qualified as an exempt organization under Section 501(c)(3).5* According to Channell, when he formed NEPL in late 1984, most "Washington insiders" doubted that anyone could raise money to advance foreign policy. Channell, however, believed that he could succeed because his major donors were committed to Presi- *Channell formed additional entities between 1983 and 1986. The American Conservative Trust State Election Fund (ACT-SEF) was formed as a state PAC to take advantage of state laws allowing corporate contributions to such entities. "Sentinel" was formed in 1983 as a lobbying organization under Section 501(c)(4) of the tax code. The "American Conservative Foundation," a 501(c)(3) corpo- ration also established in 1983, was intended to focus on issues that were "more worldwide in scope and interest" than NEPL. The "Anti-Terrorism American Committee" (ATAC) was formed in 1986 as a PAC focusing on "congressional attitudes toward terror- ism and policies associated with terrorism." "Grow Washington" and "Hill Potomac" were corporations established to pursue specif- ic initiatives that, according to Channell, never materialized. Those entities have therefore remained inactive and unfunded. In 1986, Channell assumed control of another conservative organization, Western Goals, which had been established by the late Representa- tive Larry McDonald. Channell Dep., 9/1/87, at 62-66. 86 dent Reagan and his philosophy toward foreign af- fairs. 6 At first, NEPL concentrated on raising funds to publicize "European issues," e.g., SALT, summits, and nuclear freeze proposals. In January 1985, after NEPL ran a large newspaper advertisement congratu- lating President Reagan on his inauguration, Channell received a call from Edie Fraser of the public rela- tions firm, Miner & Fraser. According to Channell, Fraser indicated that she admired the ad and asked for NEPL's assistance in organizing and promoting a fundraising dinner for the Nicaraguan Refugee Fund (NRF). This was Channell's introduction to the Con- tras' cause.7 To assist him, Channell recruited Daniel Conrad, a fundraising consultant from San Francisco, with whom Channell had dealt on earlier occasions. Conrad came to Washington, and together he and Channell initiated NEPL's involvement in the Nicara- guan issue.8 Daniel L. Conrad Conrad, 44, received a bachelors degree in English and Political Science from Northwestern University in 1965. He also did graduate work in philosophy and business at Northwestern and the University of Michi- gan.3 In the late 1960s, after short stints as a manage- ment trainee at Ford Motor Company and a fundrais- er for Northwestern, Conrad joined Harvey Fundrais- ing Management of Milwaukee, Wisconsin, as a field director for campaigns. In the early 1970s, after a brief career as a stock- broker, Conrad started his own firm, the Institute for Fundraising, in San Francisco. It was a sole propri- etorship that presented seminars, produced manuals, and offered consulting services in the field of fund- raising." In the late 1970s, Conrad incorporated his business as Public Management Institute (PMI), which evolved from a training and consulting services firm to one primarily engaged in the publishing of periodicals and reference materials on financial grants and capital campaigns. Conrad himself continued, however, to consult on fundraising matters.12 Conrad first met Channell in 1978 or 1979 at a seminar on fundraising being taught by Conrad in Alexandria, Virginia. After their initial meeting, Channell called Conrad periodically for informal advice on fundraising. In 1983 or 1984, Channell hired Conrad as a consultant to advise him on how to build a political consulting business, an assignment that lasted approximately 1 week.13 Given Channell's history of looking to Conrad for advice, it was natural for Channell to ask Conrad to assist him in fundraising for the Contras?even though Conrad had never been involved in political fundraising and had no particular interest in the Nica- raguan issue." Their financial arrangement was never Approved For Release 2011/05/25 : CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 4 formalized. According to Conrad, Channell just gave him money periodically. For his efforts on the NRF dinner, for example, Conrad recalls receiving $10,000 or $15,000 from Channell, $10,000 from the NRF, and $1,500 from Miner & Fraser. After that time, Con- rad's compensation "kept changing," with Channell deciding at various intervals how much to pay him. According to Conrad, he signed on with Channell's organizations more as a matter of friendship than as a matter of business. i5 Although Conrad had no formal position or title, he served initially as the number two person in each of Channell's organizations. Channell eventually gave him the title, "Executive Director."18 When Conrad joined Channell, the common offices for Channell's various entities were in a small town- house at 305 4th Street, NE, in Washington, D.C. Later, in August 1986, as money from Contra donors rolled in, they moved to luxurious and spacious new quarters in National Place, 1331 Pennsylvania Avenue, NW, Washington, D.C., and hired additional staff and fundraisers. Lines of authority in Channell's organization were informal. Fundraisers reported either to Conrad or Channell, who shared responsibility for training them. Channell, however, was generally in charge of pre- paring the script to be used for soliciting prospective donors. '7 Richard R. Miller and IBC Miller, 35, received a bachelors degree in 1976 from the University of Maryland. During parts of 1979 and 1980, he served as director of broadcast services for the Reagan campaign. William Casey, Director of the 1980 Presidential campaign, furloughed him when funds ran short but then rehired him. During the furlough, Miller formed Ram Communications, a short-lived public relations firm.18 After the 1980 election, Miller served on the transi- tion team and then briefly as special assistant to the director of public affairs in the Department of Trans- portation. From February 1981 to February 1983, he was chief of news and public affairs for the Agency for International Development (AID). He was then promoted to public affairs director at AID, where he remained until 1984.19 Upon leaving AID, Miller established IBC as a sole proprietorship to engage in media relations, strategic planning for public affairs, political analysis, and exec- utive branch liaison. In 1984, he began to work with Francis Gomez who recently had left his position as Deputy Assistant Secretary for Public Affairs in the State Department. Miller had first met Gomez in Feb- ruary 1982.20 Immediately upon leaving the State Department in February 1984, Gomez received a contract from the State Department to assist its newly formed Office of Public Diplomacy for Latin America and the Caribbe- an (S/LPD) with public relations advice and support. The original purchase order for the contract specified that Gomez was to write talking point papers on Central America, prepare speaker kits, identify and refute distortions and false allegations regarding U.S. policy, draft sample speeches, prepare op-ed pieces and feature articles, assist Central American refugees and exiles visiting Washington, arrange media events for them, and make them available for Congressional interviews.21 This contract was renewed with Gomez in May 1984 and then assumed by IBC in August or Septem- ber 1984. Before it terminated in September 1986 after several renewals, Gomez and IBC received a total of $441,084 from the State Department.22* By mid-1984, with the assumption of the State De- partment contract, IBC was functioning as an infor- mal partnership between Miller and Gomez, even though Gomez was technically a subcontractor to IBC. At a later time, Miller and Gomez would each establish personal corporations?Miller Communica- tions, Inc. and Gomez International, Inc.?and, effec- tive January 1, 1986, would restructure IBC into a partnership of those two entities. There is not, howev- er, any written partnership agreement.23** In September 1984, IBC also began to represent one of Adolfo Calero's organizations, the Nicaraguan De- velopment Council (NDC). Initially, IBC charged NDC $3,000 a month for public relations services, a fee that was later raised to $5,000 a month when IBC hired a full-time employee to do work for NDC. This relationship gave Miller and Gomez significant oppor- tunities to work closely with Calero, Alfonso Robelo, and Arturo Cruz.24 In the course of assisting the Contras with their public relations, Miller was introduced to North, ap- parently by either Otto Reich or Jonathan Miller (no relation)?Director and Deputy Director of S/LPD? who were IBC's principal contacts at the State De- partment.25 In early 1985, Richard Miller became in- volved with the NRF dinner, with which Channel! and Conrad were also engaged. This was the begin- ning of their relationship, although the dinner de- manded little of their respective energies and was organized and run principally by others. *In Audit Report No. 7PP-008, July 1987, the State Depart- ment's Office of Inspector General filed its conclusions reached after a special inquiry into the awarding and supervision of these contracts with Gomez and IBC. That report concluded, in summa- ry, that, while the original contract was justifiable, its utility became questionable during its later stages. The Inspector General also criticized the sole-source, noncompetitive process for awarding and administering the contracts, especially the classification of one version of the contracts as "SECRET," indicating that the classifi- cation was unjustified and improper. Audit Report at 32-33. "In July 1986, IBC entered into a joint venture with David C. Fischer & Associates, a consulting firm founded by a former aide to President Reagan. R. Miller Dep., 8/20/87, at 93-95. 87 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 4 The NRF Dinner According to Channell, the NRF dinner had to be postponed several times and was an organizational disaster. When it finally took place on April 15, 1985, President Reagan attended and delivered the keynote address. The NRF dinner proved to Channell that large and expensive functions were not an efficient method of raising money for the Contras, but the President's commitment to the Contra cause con- vinced Channell that the Nicaraguan issue was fertile ground for fundraising and public education." Thereafter, Channell and Conrad, with the assist- ance of Miller, concentrated on private meetings with potential large donors, who would be given an audi- ence with North and, in some cases, a photo opportu- nity with the President. The idea of focusing on potential big givers to the Contras was not new. Edie Fraser, one of the princi- pal organizers of the NRF dinner, testified that at the suggestion of the State Department she met with North on December 11, 1984, to seek White House "participation" in the dinner. At that meeting, Fraser mentioned the Sultan of Brunei to North as a possible contributor to the NRF. Fraser explained that the Sultan had come to her attention because he had made a contribution to UNICEF in honor of Mrs. Reagan. On December 28, 1984, Fraser sent further biographical information on the Sultan to North, but does not know if North ever followed this lead." On March 4, 1985, Fraser sent additional informa- tion to North on the planned dinner. At the bottom of the cover letter she added a handwritten note: "011ie, Very Imp., Two people want to give major contribs i.e. 300,000 and up if they might have one 'quiet' minute with the President." 28 According to Fraser, she added this note to the letter because of her conversations with Channell and Conrad, who suggested that some of their contribu- tors might make large donations to the NRF dinner if they could meet alone with President Reagan. As far as Fraser can recall, she added the number of donors ("two") and the possible amount of money ("300,000") to her note to give the offer some defini- tion. She cannot be sure that either Channell or Conrad were that specific in their conversations with her." Neither Channell nor Conrad recall discussing such an offer with Fraser.3? Fraser received no response from North regarding the offer. In fact, Fraser says she never heard from or spoke to North again after their initial meeting on December 11, 1984. Her letters were not answered by North; someone else at the White House ultimately assumed responsibility for liaison with the group plan- ning the dinner." NEPL and IBC Meet In late March 1985, prior to the NRF dinner, Chan- nell called the office of Edward Rollins, then White 88 House Political Affairs Director, to ask how NEPL could help support "the President's agenda in Central America." Rollins's office referred the call to John Roberts, then a White House aide, who agreed to have lunch with Channell and Conrad." At that lunch, according to Channell, Roberts re- sponded to their interest in the Nicaraguan issue by stating that they should talk to Miller and Gomez, the principals of IBC. Roberts told Channell and Conrad that IBC was "the White House outside the White House" on this issue. Shortly thereafter, Channell and Conrad set up a meeting with Miller.33* Roberts had called Miller prior to that meeting and alerted him to the referral, suggesting that Channell and Conrad wanted to "help the President" on Nica- ragua. In particular, Roberts told Miller that Channel! and Conrad wanted to do a media campaign. Roberts did not mention any possibility of direct financial as- sistance to the Contras.34 Channell-Miller Network The Beginnings In late March or early April 1985, Channell, Conrad, Miller, and to a significantly lesser degree, Gomez, embarked on an effort to assist the cause of the Con- tras. Their joint efforts would extend into the latter portion of 1986. According to Miller, Channell initial- ly offered to IBC a retainer of $15,000 per month, which IBC accepted.35 In exchange for this retainer, IBC was to handle media relations, political analysis, research, advertis- ing copy, film production, and other public relations functions. There was never any written agreement, however, reflecting the arrangement between NEPL and IBC.36 At first, IBC lent support to the American Con- servative Trust and NEPL in their efforts to educate the public on the Nicaraguan issue. Very quickly, however, Channell expressed to Miller an interest in raising money for the Contras. Because of their prior contact with the Contras' organization and leaders, Miller and Gomez believed that they could be of assistance. One of Channell's first steps, with IBC help, was to secure a letter from Adolfo Calero au- thorizing NEPL to solicit contributions on behalf of his organizations.37 This letter, dated April 10, 1985, opened "Dear Spitz," and read in part: Please help us to achieve our dream, a free and democratic Nicaragua, not tied to a hostile Soviet threat but to a peaceful democratic American tradition. *With respect to this conversation, Roberts told the Committees in an interview that he possibly described Miller as "fronting for the State Department" or as "in the family." Roberts Int., 7/17/87. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 4 All resources you can raise will be appreciated. We can put all of them to good purposes. Richard Miller and Frank Gomez can keep you informed of our progress and serve as our con- tact point in the United States.38 The Initial Solicitations In early April 1985, Channell spoke with one of his prior contributors, John Ramsey of Wichita Falls, Texas, who Channell felt might be interested in con- tributing to support the Contras. Ramsey seemed re- ceptive to the idea, but wanted to meet Calero in person to ensure that any money he contributed would, in fact, be used to support the Contras." Channell scheduled a dinner for himself, Conrad, Miller, Gomez, Ramsey, and Calero in Washington, D.C., on April 10, 1985. At the last minute, however, Calero was unable to attend and the dinner went forward without him. Going into the dinner, Channell had told Miller and Gomez that Ramsey was a "tough cookie" who probably would be most interest- ed in the Contras' need for arms and other lethal supplies.4? At the dinner, in a private room at the Hay-Adams Hotel, Miller and Gomez spoke at length about the Contras' need for supplies, both lethal and non-lethal. Gomez showed Ramsey a book of photographs taken during a recent trip Gomez had made to various Contra bases in Central America. This collection in- cluded pictures of Contra fighters, mortars, and ma- chine guns.4' Conrad openly tape-recorded the conversation during dinner, supposedly because he was learning new information about the Contras and wanted to preserve it.'" The transcript of the tape, as further interpreted by Channell, Conrad, and Miller during depositions, confirms that Channell, Miller, and Gomez discussed the Contras' military and non-mili- tary needs at length, often in response to questions from Ramsey. At one point, Miller deflected a sugges- tion by Ramsey that people be solicited to send used shotguns to the Contras: RAMSEY: "The best I can tell, a shotgun is the best thing to use in jungle warfare." GOMEZ(?): "Or a very rapid fire machine gun. That's why the AK-47s and the M 16s are the best weapons." MILLER: "The M16 fires a 22.5 caliber bullet." RAMSEY: "I bet I could get 10,000 people to give their old shotguns to this." MILLER: "Only one problem. You can't export guns without a license."43 Shortly after this exchange, the subject turned to methods of counteracting Soviet-supplied HIND heli- copters: GOMEZ or MILLER: "Calero has said publicly, so that the Sandinistas could hear on secret radio communications in the field saying we have red eyes [missiles]. It's a big lie." UNKNOWN: "They're playing a psychological war against the Sandinistas." MILLER(?): "The more sophisticated of the shoulder-held missiles, the red eyes. There's 2 different kinds. One that's a little less expensive and there's one that's $8,000. It can take it out." 44 Later, Channell itemized some of Calero's needs: CHANNELL: "Calero wants those red eye mis- siles. He wants boots. He wants back packs. He wants AK-47 rounds which you can get on the international market. He wants communications equipment." 46 Ramsey, however, returned again to his suggestion to provide the Contras with donated arms, which is not what Channell and Miller had in mind: RAMSEY: "We're going to call it the Shotgun Drive. And we're going to get Remington to put up the amo [sic]. Dupont owns Remington. "We're going to start on CBs. We're not even going to invoke the electronic media until we get support or we have about three semis going north on Tobacco Road out of North Carolina full. "And they keep calling on another semi. "We got an empty semi out there? Somebody got an 18-wheeler empty can come down and help liberate Central America?" 46 Near the end of the transcript, the Channell-Miller group succeeded in turning the discussion back to missiles and money: UNKNOWN: "Between now and May 1 the red eye missiles could be the entire key. "Because if they succeed at this point in launch- ing an offensive including tanks and MI24 heli- copters into that region and go for the cans . . . . "There's two different kinds of red eye missiles. There's one that's very unsophisticated which is just a direct shot missile. And then there's one that's able to take on the Hind [sic] because the Hind has major decoy devices, has heavy arma- 89 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 4 ment, and it has these flares on the back of the exhaust from the jets?the expulsion from the engine?that mask the heat. "So you have to have the $8,000 red eye to make it work."4 7 The transcript concludes with an observation, at- tributed to Miller, summing up well the philosophy with which Channell, Conrad, and Miller approached their solicitations: MILLER: "If you provide money for ammuni- tion, the money they've set aside for ammunition can go to boots. "On the other hand, if you provide money for boots, what they've set aside for boots can go to ammunition." 4 8 The solicitation was a success. The next morning Ramsey had breakfast with Calero and, at that time or shortly thereafter, donated $20,000 directly to the Nicaraguan Development Council. As noted earlier, the NDC had previously retained IBC as a public relations consultant.* Later, in early June 1985, Miller received a tele- phone call from North, who asked him to try to raise $30,000 for an undisclosed purpose related to the Contras. North also gave Miller the name and number of a Robelo-controlled account in the United States? although Miller did not know that?into which any contribution could be deposited.49 At Channell's suggestion, Miller contacted Ramsey, who sent $10,000 directly to the Robelo-controlled account.5? North later confirmed to Miller that the contribution had been received." Channell then asked Miller to have North send telegrams of appreciation to both Ramsey and Chan- nell. Miller got North's approval for these telegrams and sent them over North's name.52 In those June 6, 1985 telegrams, North thanked Ramsey and Channell for their support." The Ramsey solicitation was not, however, to become the model. It did not produce enough money for the effort and the donation was sent directly to Robelo so that the Channell-Miller group was not compensated. A new approach was undertaken. North's Maiden Presentation After the Ramsey solicitation, Channell drew on his experience with NCPAC briefings, and worked with When Ramsey was shown a copy of the dinner transcript, he indicated that, while portions of the dialogue seemed familiar, "[t]here is very much on there I have never heard of before." Ramsey Dep. at 70. Ramsey suggested that Channell, Conrad, Miller, and Gomez "might not have ask[ed] for the money [for lethal supplies] directly." Instead, "[t]hey were just saying that if the [Contras] had the money they could buy them." Ramsey Dep. at 87. 90 Miller to sponsor a White House "event" for prior and potential NEPL contributors. This event was in- tended to educate contributors about the situation in Nicaragua and to solicit funds for the Contras. Through North, Miller and other IBC associates were successful in arranging a White House briefing for a group invited by NEPL.54 The briefing was held on June 27, 1985, in the Old Executive Office Building next to the White How with North as the principal speaker. According to Channell, North delivered what became his standard speech about Nicaragua and the Contras. North showed slides during his presentation, some of which had been provided by IBC.55 North's speech was an impassioned plea. He dis- cussed the Communist threat posed to Nicaragua's neighbors by the Soviet and Libyan military buildup in Nicaragua, the political and religious repression in Nicaragua, the humanitarian and military needs of the Contras, and the importance of United States support for the Contras. North also emphasized that the United States would be flooded with millions of refu- gees if Nicaragua continued under its existing regime and policies.* This briefing was the initial substantive encounter between Channell and North.** 56 After the briefing, the potential donor group was taken across the street for a reception and dinner at the Hay-Adams Hotel. As was to become customary, NEPL arranged and paid for food and lodging at the Hay-Adams for persons attending this special White House briefing. At the dinner, Channell presented Calero with a check for $50,000, which represented all Contra-related contributions received to date by NEPL. At Miller's instruction, the check was made payable to a Calero account.57 Channell testified that his understanding was that the contributed funds would be used for humanitarian supplies. This understanding was based on Calero's specific appeal that night for medicine and food.58 The Establishment of LC., Inc. Meanwhile, in March or April 1985, North was contacted by Kevin Kattke?whom North described to Miller as an "intelligence community gadfly"? about an alleged Saudi Prince who proposed donating to the Contras $14 million of profits derived from the sale of Saudi oil.*** North referred the Prince?who *North presented a version of his slide presentation during the public hearings. North Test, Hearings, 100-7, Part II, at 142-46. **Some donors who contributed money to Calero through NEPL had received expressions of appreciation from North prior to the June 27 briefing. E.g., RM 3577. These communications were apparently arranged by Miller at Channell's request. R. Miller Dep., 6/23/87, at 27. ***The Prince eventually was determined to be a fraud, and now is imprisoned for a separate swindle involving a Philadelphia bank. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 4 used a variety of pseudonyms, the most common of which was Ebrahim al-Masoudi?to Miller, who was engaged to market the Prince's oil. Miller and the Prince met several times over the course of the next several months. Miller's interest was twofold: he and North wanted to raise money for the Contras, and he was to receive $1 million of the profit that would be derived from the sale of the oil." Miller kept North fully apprised of his dealings with the Prince, which eventually also included a prospective gold transaction and assistance in freeing the hostages held in Lebanon.6? Indeed, Miller be- lieved that he "was an agent working on [North's] behalf" in connection with these and other activities undertaken at North's request.6' * On April 26, 1985, Miller and Gomez incorporated a Cayman Islands corporation known as I.C., Inc.62 This entity originally was intended to receive the profits from the transactions conducted with the Prince. Gomez was included because Miller needed a second corporate director under Cayman Islands law and Gomez was a close business associate on whom Miller could rely." The Cayman Islands were chosen by Miller on the recommendation of a "political friend." Miller wished to keep "offshore" any money that he derived from his transactions with the Prince, because: (1) he did not want to incur federal income tax on these pro- ceeds; and (2) he and North "took precautions all the time . . . not to have organizations be readily available for public view." Miller was told that it was cheaper to maintain bank accounts in the Cayman Islands than in Switzerland. He also received advice from an attor- ney that such an offshore "collection point" was a lawful arrangement. 6 4 Although no proceeds were derived from the ven- ture with the Prince,** I.C., Inc. became an integral part of the Channell-Miller fundraising network for the Contras. It served as a conduit, protected by Cayman Islands bank secrecy laws, through which the funds contributed to the tax-exempt NEPL could be transferred to the Contras or to the Enterprise. Miller advised North in late April or early May 1985 of the actual formation of I.C., Inc." Indeed, North testified that he directed Miller to establish this Cayman Islands corporation to be used for Contra funding efforts.66 In May 1986, Miller changed the name of I.C., Inc. to "Intel Co-Operation, Inc.," and amended the corporate charter to specify that the company was engaged, among other things, in provid- *For a more detailed account of the Prince's activities in connec- tion with operations and persons under investigation by the Com- mittees, see Chapter 5. **According to Miller, he spent approximately $370,000 on ac- tivities involving the Prince. North was aware of and approved these expenditures. Miller did not incur monetary loss, however, because North authorized Miller to reimburse himself for these expenditures from Contra assistance funds transferred to IBC from NEPL. R. Miller Dep., 8/21/87, at 404-07. ing grants to "political and benevolent" organiza- tions.67 At that time, Miller told North about this name change and charter amendment, which Miller asserts was not aimed at providing increased cover for the operation.6 The Creation of the Network Soon after the June 1985 briefing, Channell asked Miller to arrange a meeting with North. Certain con- tributors to NEPL were concerned about press re- ports suggesting that contributions for the Contras were being skimmed or spent on unnecessary or obso- lete items." In addition, Channell wished to express his appreciation to North for the June 27 briefing.70 Miller ultimately arranged a meeting on July 9 for himself, North, Channell, and Conrad at the Grill Room in the Hay-Adams Hotel. At the meeting, Channell asked North how best to ensure that funds contributed to NEPL for the benefit of the Contras actually were used for that purpose. North told Chan- nell that henceforth "continued" contributions to NEPL for the Contras should be passed to IBC for proper dispersal. From shortly after this meeting through the fall of 1986, NEPL made all Contra as- sistance payments to IBC or to I.C., North had shown a flow chart to his deputy, Robert Earl, and Miller sometime in 1985, which showed NEPL, IBC, and I.C., Inc. as vital parts of an elaborate Contra funding network. While this chart turned out not to be a fully accurate depiction of the actual workings of the network, North used it with Miller to explain "how a covert operation is set up." Miller recalls that the chart was similar to (although not as complete as) a chart found in North's safe and reproduced in the Tower Review Board Report at C- 17.72 Channell-Miller Network The Operation White House Briefings and Hay-Adams Gatherings The North briefing in June 1985 served as the blue- print for other similar briefings during the next year for NEPL contributors or potential contributors. These group briefings occurred on October 17, 1985, November 21, 1985, January 30, 1986, and March 27, 1986. The White House briefings were meticulously planned by NEPL, IBC, North, and White House personnel. Internal White House memorandums ob- tained by the Committees show that North was the switching point for arranging and coordinating the briefings with White House liaison, White House Counsel, and White House security. 91 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 4 NEPL prepared and sent invitations to persons se- lected by Channel] and his associates. A typical invi- tation to a briefing stated in pertinent part: You are one of a small group of dedicated Amer- icans who has stood by President Reagan . . . in support of his agenda. . . . It will be a pleasure to meet you in Washington on [date] when you attend our special security briefing followed by a working dinner. . . . Please be reminded that your accommodations at the Hay-Adams Hotel are taken care of and there is no expense to you. 7 3 For those who attended, NEPL met them at the airport with a limousine and escorted them to the Hay-Adams Hotel, where all expenses were paid by NEPL. The group typically was taken from the Hay- Adams to a reception room in the Old Executive Office Building, where they were introduced to North and other White House personnel. Other than North, among those who participated in these brief- ings were Patrick Buchanan, White House Communi- cations Director; Mitch Daniels, Political Assistant to the President; Linas Kojelis, Special Assistant to the President for Public Liaison; Linda Chavez, Deputy Assistant to the President and Director of the Office of Public Liaison; and Elliott Abrams, Assistant Sec- retary of State for Inter-American Affairs. For the January 30 briefing, David Fischer?a former Special Assistant to the President who became a highly paid consultant to NEPL and IBC?even arranged for a Presidential "drop-by." North always delivered the principal speech and slide presentation along the lines of the June 1985 briefing. While he was an effective speaker, North generally was careful not to ask for money, often telling the audience that he could not solicit funds because he was a Federal employee. He did, however, suggest that persons interested in contributing funds for the Contras should speak with Channell. At least one attendee at these briefings recalled North's stating that there were certain matters he could not discuss with them "on this side of Pennsylvania Avenue" but that Channell would raise later "on the other side of the street," a reference to the Hay-Adams Hote1.74 An account of North's presentation was provided at the public hearings by an eventual contributor in at- tendance at the March 1986 briefing, William O'Boyle: [North] described the military and political situa- tion in Nicaragua. He had photographs of an airport in Nicaragua that had been recently built; the purpose of the airport was ostensibly com- mercial, but it was in fact a disguised military airport. One of the uses for which the airport was intended was to recover the Russian Backfire 92 bombers after they made a nuclear attack on the United States. Another possible use of this airport was to fly a certain kind of mission that was currently being flown out of Cuba, up and down the east coast of the United States. Apparently every day a Rus- sian plane leaves Cuba, as I recall, and goes right up the 12-mile limit, has some kind of large device on the outside of the plane. . . . This Nicaraguan air base would allow the Russians to fly the same kind of mission up the west coast to the United States. . . . He described the refugee problem . . . and we could look forward in the next few years to mil- lions of refugees flooding across our borders as this happened. . . . He showed photographs which indicated that the Nicaraguan government officials were indicated in smuggling dope. . . . He also told an anecdote about some Nicaraguan agents that were recently caught with dope and money and so forth and disguised as American agents.75 O'Boyle indicated also that North furnished him with classified information designed to show that the Sovi- ets were managing the diplomacy of the Nicaraguans before the United Nations.76 After the briefings, Channell, Miller, and their asso- ciates hosted a cocktail party and dinner at the Hay- Adams, often attended by Contra leaders and some U.S. Government officials. During the reception and dinner, NEPL and IBC employees attempted to deter- mine which attendees were the most likely contribu- tors. The enticement of purchasing lethal supplies for the Contras was often used with potential contribu- tors. Those persons who expressed a serious interest in contributing money for the Contras were offered the opportunity to meet one-on-one with North, and, if they gave enough, a meeting with the President.77 Large contributors to NEPL uniformly received thank you letters from North (and often from the President) for their support of the President's policies in Central America, although without specific refer- ence to any contribution.78 North's Involvement in Solicitations Intended for the Purchase of Lethal Supplies In his public testimony, North testified that "I do not recall ever asking a single, solitary American citi- zen for money."79 He readily admitted, however, that "I showed a lot of munitions lists" to Contra contrib- utors or potential contributors "in response to ques- tions about the cost of lethal items."" The Commit- tees received evidence on North's activities that shed light on these statements. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 4 1. "Big Ticket Items" and "011ie's New Purchase" Lists. In the late fall or early winter of 1985, Channell asked Miller to have North prepare and provide a list of "big ticket items" to be used in soliciting contribu- tions for the Contras. At Miller's request, North recit- ed a list that included heavy lifting of cargo by air- craft (approximately $675,000 worth); training and outfitting of an "urban tactics unit"; the resupply of a Contra fighting unit known as the "Larry McDonald Brigade" (a Contra unit); and probably missiles of some kind.81 Miller typed the list onto his computer, printed a single copy, gave that copy to Channell, and deleted the computer entry. Channell used this list, which totalled approximately $1.2 million, to solicit contribu- tions." An apparently different "big ticket items" list was prepared by North and used by him and Channell in a solicitation of Nelson Bunker Hunt. Handwritten notes produced by Miller indicate other conversations with North about fundraising for lethal supplies. A note dated September 18, 1985, contains entries read- ing "$415,000-Weapons, C4, M79" and "520,000 MAUL."83 "C4" refers to an explosive, "M79" likely refers to a grenade launcher, and "$520,000 MAUL" refers to the cost of eight Maule airplanes. Miller testified that North provided this information to him with the understanding that it would be used for fundraising.84 Another handwritten note of Miller's contains the entry "011ie's new purchase list." The note is dated February 5, 1986.85 Miller does not recall the deriva- tion of this entry.86 2. North's Special Appeals. As North testified public- ly, he met with scores of potential contributors to convey the plight and needs of the Contras. Insofar as North's actual role, the more revealing of these meet- ings are those that were conducted in private. As the descriptions below indicate, North prepared potential large contributors for what Conrad termed "the call to the altar." 87 a. Nelson Bunker Hunt?In September 1985, Chan- nell arranged a meeting in Dallas between North and Nelson Bunker Hunt, a wealthy Texas businessman who had contributed $10,000 to NEPL the previous July. Channell rented a private airplane for $8,000 to $9,000 to transport North to and from Dallas.88 * The trip was worth the cost. In Dallas, there was a private dinner at the Petrole- um Club attended by Hunt, Conrad, Channell, and North. North gave his standard briefing, without slides, and showed Hunt a list of various Contra needs. The list was divided about evenly between lethal and non-lethal items, and included Maule air- craft and a grenade launcher possibly described as an * This was the first time North used an airplane supplied by NEPL; on one other occasion, NEPL chartered a plane to fly North and his family for a weekend visit to Barbara Newington's house in Connecticut. Channell Dep., 9/1/87, at 148. "M-79." The total price was about $5 million. Ac- cording to Channell, after discussing the items on the list and their prices, North "made the statement that he could not ask for funds himself, but contributions could be made to NEPL, or words . . . to that effect." North then left the room, a maneuver that had been "pre-arranged."89 Channell explained that the list was his idea because he wanted a "fundraising objective" to take to Hunt. He therefore had asked North to prepare a list total- ling about $5 million for use in the solicitation of Hunt.5? Despite this evidence, Hunt has told the Commit- tees that Channell never spoke to him about the Con- tras' need for weapons. According to Hunt, Channell told him that the Contras had "unpaid bills" for "[flood and shelter, medicine, [and] general expenses. . . ." 91 Hunt testified that he does not recall any conversation he had with North at the dinner.52 Nonetheless, as a result of this dinner, Hunt made two payments to NEPL of $237,500 each." One of them was a contribution and one was a loan. The loan was evidenced by an unsigned promissory note be- cause Channell would not agree to the loan (especial- ly after he was unable to find a contributor to guaran- tee the loan on NEPL's behalf). Nevertheless, he held the $237,500 principal for 4 months, repaying it to Hunt in January 1986 without interest." Hunt subse- quently paid $237,000 to NEPL in March 1986 as a contribution, making his total contributions to NEPL $484,500.55 In the case of Hunt's initial $10,000 contribution in 1985, he sent NEPL a personal check drawn pursuant to a "check request" and marked "contribution." He also itemized the $10,000 contribution as a charitable deduction on his 1985 tax returns. By contrast, each step in the later transactions was conducted with Hunt's law firm?Shank, Irwin & Conant (SI&C) of Dallas, Texas?acting as an intermediary, and issuing its own checks, backed by Hunt's funds." Hunt testified that he handled these transactions in this manner in an effort to avoid publicity in the "liberal media" over the contributions. He acknowl- edged that the NEPL gifts were the only ones he had ever made indirectly. Moreover, none of the check requests or check stubs for the three large checks has any entry in the section designated for "purpose." Documentation for other checks produced by Hunt consistently included this entry. Hunt indicated that he must have overlooked this omission on the three checks in question.57 Finally, Hunt did not itemize the $237,500 contribu- tion on his 1985 tax return or the $237,000 contribu- tion on his 1986 return. He explained that, because of large losses each year, he did not need the deductions. Nonetheless, numerous other contributions apparently were itemized by Hunt on those tax returns." 93 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 11 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 4 In short, it seems that Hunt took great pains to keep his large contributions to NEPL "off the books." As indicated above, a note made by Miller 1 day after Hunt issued the checks for the contribution and loan to NEPL contains the entries "$415,000?Weapons C4, M79" and "$520,000 MAUL," referring to muni- tions and airplanes." This same note refers expressly to Hunt in a different context.1?? b. Barbara Newington?Barbara Newington, a wealthy widow from Greenwich, Connecticut, had been a large contributor to Channell organizations (and at least one predecessor organization) for a few years. In 1985 and 1986, Newington contributed a total of $2,866,025 to NEPL. On June 25 or 26, 1985, she met privately with North because she was unable to attend the Channell group meeting arranged for the next day. She also met privately with President Reagan on two occasions.101 In early November 1985, North, Miller, and Chan- nell participated in a solicitation of significant contri- butions from Newington. Miller's handwritten notes leading up to the meeting indicate that Channell pre- pared a proposed "pitch" for "Green"?the code name for North used by NEPL and IBC?to use with Newington. This "pitch" included statements such as "[you are] the most secure person we know in the U.S." and "[w]e are asking you to take on a project that requires your kind of person.'9102 Although Miller does not specifically recall, he might have re- layed a somewhat softened version of this solicitation to North.1?3 In further preparation for the solicitation, Miller created a file folder that contained an unclassified photograph of a Soviet HIND helicopter on one side of the folder and a picture of a shoulder-held surface- to-air missile on the other side. He also included an article from The New York Times on the capabilities of the HIND helicopter.'" The critical meeting took place in Newington's suite at the Hay-Adams Hotel where Channell, Miller, and Newington were joined by North. At the meet- ing, North referred to the file folder prepared by Miller, placed The New York Times article in front of Newington, and described the capability of the pictured surface-to-air missile to counteract HIND helicopters. In response to a question from Newing- ton, North indicated that he knew where to obtain such missiles, although Miller cannot recall whether North quoted any prices. North left the room shortly thereafter. According to Miller, North's absence was not specifically prearranged, "but it was his practice not to be in the presence of the donor when they were asked for money.',105 Channel] then solicited Newington for a substantial amount of money. Over the course of the next 4 to 6 weeks, Newington made stock contributions to NEPL worth approximately $1.1 million.106 Like Hunt, 94 Newington has denied that she ever made a contribu- tion intended for the purchase of lethal supplies."7* At some point in the spring of 1986, Channell and Newington decided to invite North and his family to Newington's house for a weekend of recreation and relaxation. Miller, North, and North's family travelled to Connecticut in a private plane chartered by Chan- nell. It is unclear whether there was any discussion of Contra assistance that weekend.'" c. William O'Boyle?William O'Boyle testified that he received several fundraising calls from NEPL in early 1986. O'Boyle, an independently wealthy busi- nessman from New York City, had been referred to NEPL by a friend from Texas.'" In late March, he was invited by mailgram to a private White House briefing on Nicaragua. He flew to Washington on March 27, was met at the airport by a limousine arranged by NEPL, and was delivered to the Hay-Adams Hotel, where he met Channell, Miller, and others. Channell escorted the group to a meeting room in the Old Executive Office Building, where North presented the briefing described above." ? After the briefing, the participants returned to the Hay-Adams for a cocktail reception and dinner at- tended by Channell, Miller, and other NEPL and IBC personnel. During the reception, O'Boyle indicated to a NEPL employee, either Cliff Smith or Krishna Litt- ledale, that he was interested in making a contribution to purchase weapons for the Contras. He wanted to know what weapons were needed and how much they cost. The NEPL employee with whom O'Boyle spoke told him later that a Blowpipe antiaircraft mis- sile could be purchased for $20,000.111 After dinner, Channell told O'Boyle that there was a small, select group of persons in the United States who contributed money for lethal supplies to carry out the President's policy in support of the Contras. Channell asked O'Boyle if he would meet with North at breakfast the next morning. O'Boyle agreed."2 Breakfast took place in the main dining room of the hotel. Before North arrived, the conversation between O'Boyle and Channell continued in the same vein as the evening before. Channell told O'Boyle that they had him "checked out" overnight to ensure that he (O'Boyle) was reputable enough to join the select group of Americans Channell had mentioned.113 When North arrived, Channell told him that O'Boyle was willing to contribute funds for the pur- chase of weapons. North immediately began to de- scribe from a notebook the Contras' needs, including several million rounds of "NATO" ammunition, East- ern bloc ammunition, Blowpipe and Stinger antiair- *Miller later heard from Calero that no missiles had been re- ceived by the Contras. North told Miller that the Newington money had been used to purchase "secure radios." R. Miller Dep., 8/20/87, at 237. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 4 craft missiles, and Maule aircraft. North explained that Blowpipe missiles cost $20,000 each, but that they had to be purchased in packs of 10. He also mentioned that the cost of Maule airplanes was $65,000 each. According to O'Boyle, North stated that "he could not ask for money himself as a govern- ment employee."114 Either at this breakfast or the evening before, Channell informed O'Boyle that if he contributed $300,000 or more, a 15-minute "off-the-record" meet- ing would be arranged between O'Boyle and Presi- dent Reagan. Channell indicated that other people who had contributed that amount of money had met with the President. O'Boyle understood that these meetings with the President were "off-the-record" be- cause the subject matter was so secret and sensi- tive.115 O'Boyle told Channell that he wanted time to con- sider whether to make a contribution. After returning to his home in New York for a few days, O'Boyle decided to contribute $130,000 to NEPL for the pur- chase of two Maule airplanes.* He flew to Washing- ton to deliver his check to NEPL headquarters and was taken to the Hay-Adams Hotel by a NEPL em- ployee. Channell met O'Boyle at the hotel. O'Boyle then gave his check to Channell, who telephoned North to join them at the hotel. '16 When North arrived, Channell showed him O'Boyle's check, which North acknowledged. North spoke to O'Boyle again of the Contras' military needs and corresponding costs, but indicated that Blowpipe missiles no longer were available. In North's presence, Channell again told O'Boyle that a larger contribution would warrant a meeting with the President and asked for more money. 117 Despite a visit in New York from Channell and Conrad and another meeting with North in Washing- ton in which North disclosed a purported "secret" plan as to how the Contras would prevail in Nicara- gua, O'Boyle informed Channell that he did not wish to make further contributions to NEPL.** In any event, in response to a subsequent mailing from NEPL, O'Boyle made one more contribution for $30,000.118 d. Ellen Clayton Garwood?Ellen Garwood also tes- tified at the Committees' public hearings. She had been a NEPL contributor on several occasions. She is a wealthy octogenarian widow from a well-known family in Austin, Texas. Garwood first met North in *The Committees have concluded from Enterprise records that O'Boyle's contribution was used for general Contra support, not for the purchase of two Maule aircraft. **At the meeting in New York, O'Boyle expressed to Channell some concerns about the legality of using tax deductible contribu- tions for weapons. According to O'Boyle, Channell told him that a lawyer had advised favorably on the question of legality, but that in any event the money could not be traced because contributions were being passed through a for-profit corporation and overseas. O'Boyle Dep. at 91. 1984 at a Council for National Policy meeting. She had been briefed privately by him on the Contras' needs at least a handful of times, including once at a small airport in Dallas when North flew there to solicit Hunt in September 1985."9 Garwood travelled to Washington in April 1986 to attend meetings of NEPL contributors. Prior to the trip, Channell told Garwood that she would be pre- sented with an appeal for much more money than had been requested of her before.'20 During the last day of the NEPL meetings, Chan- nell asked Garwood to meet with him and North that evening in the hotel lounge. At the evening meeting, North told Garwood that the situation of the Contras was desperate. With tears in his eyes, North explained to her that the Contras were hungry, poorly clothed, and in need of lethal supplies. He emphasized that the Contra forces might not exist by the time the Con- gress renewed Contra aid.'21 Either North or Channell then produced a small piece of paper with a handwritten list on it. They discussed the list in hushed tones outside of Gar- wood's hearing. After North left the lounge, Channell showed the paper to Garwood. The paper contained a list of weapons and ammunition, with a price oppo- site each category of items. She recalls that the list included hand grenades, antiaircraft missiles, bullets, cartridge belts, and other items.122 Channell told Garwood that the items were what the Contras needed to sustain their efforts and re- quested her to provide the amount necessary to pur- chase the listed lethal supplies. Channell transcribed a copy of the list for Garwood to take with her.123 To supply the items on the list, Garwood immedi- ately contributed more than $1.6 million to NEPL; she wired $470,000 in cash and transferred stock valued at $1,163,506. For this same purpose, she con- tributed an additional $350,000 the next month. All told, she contributed $2,518,135 in 1986. Garwood stated unequivocally that the principal purpose of these April and May 1986 contributions was to pur- chase for the Contras the weapons and ammunition on the list provided by North and Channe11.124 * * These descriptions of the Hunt, Newington, O'Boyle, and Garwood solicitations are not exhaus- tive. The Committees interviewed or deposed 13 of NEPL's significant contributors during the relevant time period, nearly all of whom reported personal contact with North. The Committees have received evidence that several of these contributors?including John Ramsey of Wichita Falls, Texas, and C. Thomas Claggett, Jr., of Washington, D.C.?made donations intended for the purchase of lethal supplies. Chan- nell's records reveal that 12 contributors, including Newington and Garwood, accounted for slightly more than 90 percent of NEPL's contributions in 1985 and 1986. 95 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 I I II . . .. I . Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 4 By giving to the tax-exempt NEPL, the contribu- tors were able to claim tax deductions even though their contributions were intended for the purchase of lethal supplies. The Committees have received evi- dence that several of these contributors claimed tax deductions for their NEPL contributions. For taxpay- ers in the 50 percent tax bracket, this meant that the public in effect paid for half their gifts. The Role of the President In a May 19, 1986, PROF note to Poindexter, North wrote "the President obviously knows why he has been meeting with several select people to thank them for their 'support for Democracy' in Cent[ral] Am[erica]."123 In fact, what the President knew is a matter of some doubt. The President, in his March 19, 1987, press confer- ence said that he believed that contributors he met had donated money for political advertising for the Contras.126 The minutes of the May 16, 1986, Nation- al Security Planning Group (NSPG) meeting reveal the same understanding on the part of the President. He stated, "What about the private groups who pay for ads for the Contras? Have they been contacted? Could they do more than ads?" 127 Similarly, in prep- aration for the January 30 briefing, Linda Chavez wrote a memorandum to the President, stating that "ACT and NEPL spent in excess of $3 million sup- porting the President's programs through public awareness using television and newspaper mes- sages." 128 In fact, much of the $3 million was direct- ed toward Contra support activities, including arms. Poindexter, however, testified at his deposition that "Where wasn't any question in my mind" that the President was aware that the contributors he was thanking were giving to the Contras 123 He added that "in the White House during this period of time that we were encouraging private support, we really didn't distinguish between how the money was going to be spent." 1" North testified that in writing his May 19 PROF note, he assumed that the President was aware that the contributions were for munitions, as well as other things, although he denied ever dis- cussing this with the President.131 The President met with and thanked several large contributors for their support of his policies. David Fischer, former Special Assistant to the President, arranged Presidential photo opportunities or meetings with at least seven major Channell-Miller contributors in 1986. Fischer and Martin Artiano, a Washington lawyer, were paid steep fees by IBC (which charged these fees to NEPL) for arranging these meetings (among other services). Channell's statement to O'Boyle that these meetings carried a $300,000 price tag is substantiated by Edie Fraser's cryptic note to North (mentioned above); at least five of the six con- tributors who donated more than $300,000 to NEPL were invited to meet with the President. 96 The Role of David Fischer and Martin Artiano In late November or early December 1985, Miller asked Martin Artiano, an acquaintance from the 1980 Reagan Presidential campaign, to help him find some- one "who had some Washington experience at a rela- tively senior level" to provide "consulting" assistance to IBC on behalf of NEPL.132 When Artiano learned of IBC's needs, he contacted David Fischer, who had been a friend since they worked together as advance men in the 1976 Reagan campaign."3 After the unsuccessful 1976 Reagan Presidential effort, Fischer worked as an employee of Deaver and Hannaford, a public relations firm that did extensive work for Mr. Reagan. Fischer was in charge of Mr. Reagan's advance operations and served on occasion as his personal aide during the years of preparation for another Presidential run in 1980.134 During the 1980 campaign, Fischer became the full-time personal aide to Mr. Reagan, travelling on the campaign plane with the candidate. After the inauguration in January 1981, Fischer was appointed Special Assistant to the President with an office adjacent to the Oval Office.135 For the next 4 years?until April 1985? Fischer was in almost constant contact with the Presi- dent. As President Reagan's second term began in early 1985, Fischer and his wife decided for personal rea- sons to move to Utah. By the fall of 1985, however, Fischer wanted to return to Washington and asked Artiano to let him know about employment or con- sulting opportunities136 When contacted by Artiano about the IBC opportunity, Fischer authorized Ar- tiano to pursue discussions with Miller on his behalf.137 When Miller decided to retain Fischer and Artiano, he sought Channell's concurrence because NEPL ulti- mately was to be the recipient of, and billed by IBC for, the "consulting" services performed by Fischer and Artiano. While all the participants recall that Fischer and Artiano agreed to act as subcontractors for IBC and provide services to Channell's organiza- tions, there is sharp dispute over the terms of that agreement. This dispute is only sharpened by the ab- sence of a written understanding. Channell and Conrad insist that they agreed to pay Fischer and Artiano $50,000 for each meeting Fischer scheduled with the President for a NEPL contributor. Conrad claims to recall a meeting in December 1985 in Miller's office attended by Miller, Artiano, Fischer, Channell, and himself at which Artiano broached, and Channell accepted, this proposal.'" Channell recalls Fischer and Artiano making this proposal but claims that he rejected it as too expensive. Instead, according to Channell, he opted for a straight retainer of $20,000 per month.'" Gomez recalls that Fischer and Artiano were to be compensated at least in part based Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 4 on the number of Presidential meetings they could arrange for NEPL contributors.'" Fischer and Artiano vehemently deny that any such proposal was made or accepted. Artiano, who negoti- ated with Miller on behalf of Fischer, testified that they initially agreed to a 2-year consulting contract for a monthly retainer of $20,000 a month. When he and Fischer realized the amount of work Channell demanded, however, Artiano testified that he request- ed a $50,000 "acceleration" of their retainer. This payment was made to them on January 31, 1986, and was split evenly by Artiano and Fischer. Later, Fisch- er demanded and received another $50,000 "accelera- tion," which he did not split with Artiano. In July 1986, Fischer and Artiano recast their arrangement with IBC entirely, replacing the 2-year consulting contract with a formal joint venture between "David C. Fischer & Associates" and IBC."' According to both Fischer and Artiano, they learned in early 1986 that Channell and Conrad were operating under the assumption that there was a straight fee-for-Presidential meeting arrangement. Ar- tiano thereupon convened a meeting of all the princi- pals and disabused Channell and Conrad of that notion.142 Miller's recollection lends some credence to every- one's account. He testified that the initial agreement, struck in December 1985, was a $20,000-a-month con- sulting arrangement. He testified, however, that this initial agreement did not contemplate Fischer setting up meetings at the White House. Shortly after striking the original deal, according to Miller, Channell began to make increased demands upon Fischer, one aspect of which was setting up meetings between the Presi- dent and major NEPL contributors. In exchange for servicing those increased demands, Fischer and Ar- tiano demanded, through Miller, an acceleration of their retainer to $70,000 per month (that is, $50,000 per month more than the monthly fee of the original arrangement). When Miller relayed this demand to Channell, Channell suggested that, for such a sum, NEPL should get at least one meeting with the Presi- dent each month. According to Miller, Channell ulti- mately did agree to this acceleration.'" All told, between December 1985 and February 1987, IBC paid Fischer $397,400 and Artiano $265,000. Artiano transferred $60,000 of his payments to Fischer. All of the payments were reimbursed to IBC by NEPL. When asked about allegations that Fischer was paid $50,000 for each meeting arranged with the President, Donald Regan, the President's Chief of Staff, testified that he had no independent knowledge of such an arrangement, but, if true, the allegations would be a "real embarrassment." According to Regan, "we thought he was doing it out of his concerns for the contras and the goodness of his heart, a public pro bono type of thing." He continued: "To find out he was being paid for it was a real shock . . . . [A]nyone getting paid to get a group into the White House, we tried to block that." 144 Fischer, however, contends that Regan knew by the first meeting between the President and Channell supporters?in January 1986?that Fischer was acting as a paid consultant to the Channell organization. When he raised the subject with Regan, according to Fischer, Regan responded, "I hope you're being com- pensated for this."14 5 North's Other Fundraising Efforts Separate from his Channell-related efforts, in the fall of 1985, North enlisted Roy Godson?a consult- ant to the National Security Council?to assist in rais- ing funds for a humanitarian organization involved with Nicaragua. Godson's efforts led to a deposit to the I.C., Inc. account through first the Heritage Foundation and then the Institute for North-South Issues (INSI), a non-profit organization controlled by Miller and Gomez. This deposit originally took the form of a $100,000 grant from the Heritage Founda- tion to INSI. The Heritage Foundation received the money for the "grant" from a private contributor arranged by Godson and Clyde Slease, a Pittsburgh attorney and friend of Godson's. Godson had ar- ranged for Slease to meet privately with North and McFarlane on the need to raise funds for the humani- tarian organization.146 The true objective of this "grant" was disguised in correspondence between Miller (as Treasurer of INSI) and Edwin J. Feulner (as President of the Her- itage Foundation) with whom Godson had met pre- viusly. Miller sent an INSI "grant proposal" to the Heritage Foundation in September 1985 proposing the preparation and dissemination of public information materials in Central America. This proposal requested $100,000. On October 15, the Heritage Foundation sent INSI a check for $100,000, with Feulner stating by letter that "[m]y colleagues and I have discussed your proposal in some detail, and are pleased to re- spond in a positive way." 147 INSI passed to I.C., Inc. only $80,000 of the $100,000 Heritage Foundation "grant," and retained the $20,000 balance as an administrative fee. The ulti- mate distribution of the $80,000 forwarded to I.C., Inc. was made to an entity which, according to Miller, North represented was an account controlled by the humanitarian organization. INSI misrepresent- ed on its 1985 IRS Form 990 the nature of the activi- ties supported by this money.148 Godson also arranged for John Hirtle, a stockbro- ker in Philadelphia, to meet with North in Washing- ton. Following this meeting, Hirtle and North met again in Philadelphia with two prospective contribu- tors.'" One subsequently donated $60,000 by check dated December 13, 1985, directly to INSI. Shortly thereafter, this amount was then transferred by INSI directly to a Lake Resources account in Switzerland. 97 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 4 What Happened to the Money Just as only a small fraction of the Iranian arms profits was used for the Contras, so only a small part of the money Channell raised for the Contras reached them. Fischer and Artiano received more than $650,000 or more than five percent of the total money raised, and Miller, Gomez, and their companies re- tained a large percentage of the $5 million that IBC received from NEPL. A total of $2,740,000 was trans- ferred by IBC to I.C., Inc., and $430,000 directly to Lake Resources. After deducting the payments to Fischer and Artiano?which eventually were reim- bursed by NEPL?the balance, approximately $1.2 million, was retained by IBC for fees-for-services and expenses on NEPL's behalf.* This amount, however, is not all that Miller and Gomez received from the venture. Miller testified that North agreed in late 1985 that he and Gomez could begin to collect a 10 per- cent commission on the payments funnelled to the Contras through IBC and I.C., Inc. Miller stated that North said that the 10 percent was reasonable since "most of the other people in the business of providing assistance to the Contras were taking 20% to 30%." 150 North, in his testimony, denied that he had agreed to any specific percentage, but rather stated that he had approved "fair, just, and reasonable" com- pensation to Miller and Gomez.'51 Nonetheless, North's notebooks contain an entry for November 19, 1985, which states "IBC - 10%." Miller and Gomez formed another Cayman Islands corporation in early May 1986, World Affairs Coun- selors, Inc. (WACI) to receive the compensation ap- proved by North. Miller instructed his Cayman Is- lands agent to deduct automatically for WACI 10 percent of all funds transferred to I.C., Inc."2 A total of $442,000 was taken by Miller and Gomez pursuant to this commission arrangement. Miller never told Channell that he and Gomez were receiv- ing a 10 percent commission approved by North. Both Miller and Gomez believed that once the Contra assistance money left NEPL, it was subject to North's total discretion and control."3 Including these commissions, IBC, Miller, and Gomez received more than $1.7 million from the money raised by NEPL for the Contras. Channell's take was also substantial, though apparently not of the magnitude of Miller's and Gomez's total compensa- tion. He furnished his offices extravagantly and was lavish in his expenditures. He drew compensation for 1985 and 1986 totalling $345,000, while Conrad and his organization received more than $270,000, extraor- dinary earnings for nonprofit fundraisers. *During the relevant time periods IBC received $356,472 under its contract with the State Department, $39,000 from Calero for services, $180,000 from affiliated entities, and $407,304 from other individuals or organizations. In other words, the amount retained by IBC from NEPL accounted for nearly 60% of IBC's income in 1985 and 1986. 98 Out of the money raised by NEPL, the Contras and their affiliated entities received only $2.7 million, with approximately $500,000 going to other persons and entities engaged in activities relating to the Contras. The money was routed through IBC and I.C., Inc. and disbursed at the direction of North to Lake Re- sources, Calero, and the other persons and entities. In virtually every case, Miller would tell North when money was available and North would then instruct him on what to do with it. Figure 4-1 depicts the flow of money. In addition, as described in the next section, more than $1.2 million was spent on political advertising and lobbying for the Contras. Political Advertising for the Contras Apart from financial assistance to the Contras, the major project of the Channell and Miller organiza- tions in 1985 and 1986 was a "public education" and lobbying program in support of U.S. Government aid for the Contras. The major vehicle in the "public education" cam- paign was a series of television advertisements pre- pared by the Robert Goodman Agency in Baltimore that cost NEPL $1 million. Adam Goodman of that agency, following the Senate's approval of the Contra funding bill in 1986, wrote a letter to Channell de- scribing their achievement: By design, we launched the four-week national television ad campaign in Washington, DC, in late February. This reflected the economy of reaching all 435 Members of the House (and 100 United States Senators) in one sitting. Beginning with Week 2, and running through the first deci- sive House vote in late March, we also aired spot commercials in 23 additional television markets across the country. These targeted markets, cov- ering the home Districts of nearly thirty Con- gressmen experts considered to be at the core of the key 'swing vote' on Contra funding, added scope and credibility to the ad campaign. In fact, N.E.P.L.'s national television spot series was ulti- mately seen by more than 33 million people, or one out of every seven Americans.' 5 4 Supplementing the television programs were press conferences and speaking tours by persons supporting the Contras. These were arranged by IBC and an- other public relations firm, Edelman, Inc., retained by Channell, which was paid $92,000 by NEPL. NEPL paid $115,000 for extensive polling by the Finkelstein Company as an aid to selecting areas where television advertisements and speaking tours would most likely have a favorable effect on a Con- gressional vote. He also retained two companies, Miner & Fraser and the Lichtenstein Company, to generate letters to Congressmen supporting Contra aid, and he paid two lobbyists for their services in Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 4 support of this effort: Dan Kuykendall, who concen- trated on undecided Republicans and conservative Democrats, and Bruce Cameron, who focused on lib- eral Democrats. Another organization, Prodemca, which had con- centrated on Central American issues, also received payments from Channell. Its representatives apparent- ly participated in strategy sessions about enlisting Congressional support. Finally, it appears that Channell engaged in adver- tising targeted to defeat Representative Michael Barnes's bid for a Senate seat in Maryland. Represent- ative Barnes had been a vocal opponent of military assistance to the Contras. Channell's Anti-Terrorism American Committee ran a series of television adver- tisements opposing Representative Barnes during the primary campaign. When Representative Barnes was defeated in the primary, Channell and his associates (Cliff Smith and Krishna Littledale) sent a telegram to North exulting in this result: We have the honor to inform you that Congress- man Michael Barnes, foe of the freedom tighter movement, adversary of President Reagan's for- eign policy goals and opponent of the President's vision for American security in the future has been soundly defeated in his bid to become the Democratic candidate for the U.S. Senate from Maryland. His defeat signals an end to much of the disinfor- mation and unwise effort directed at crippling your foreign policy goals. We, at the Anti-Terrorism American Committee (ATAC), feel proud to have participated in a campaign to ensure Congressman Barnes' defeat.155 Channell-Miller Network: The End The Beginning of the End On October 18, 1986, the President signed legisla- tion appropriating $100 million for the Contras ($30 million for humanitarian assistance and $70 million in unrestricted aid). The anticipation of this legislation led to a downturn in the activities of the Channell- Miller fundraising and Contra assistance network (see Figure 4-1) after the summer of 1986. With the disclosure in early November of the sale of arms to Iran, however, persons involved in the network became concerned that the story of the net- work would unravel and become public. This pre- scient concern led to meetings between Miller and North on November 20 and 21. The initial meeting was requested by Miller. They met in the hallway outside of North's office in the Old Executive Office Building. Miller told North that he was worried about the possible legal ramifications and the costs associated with a legal defense. North told Miller that he should use the money left in the Intel Co-Operation (or I.C., Inc.) account (approxi- mately $200,000) for any legal fees that might arise.156 North called Miller the next day, November 21, to arrange a meeting later that afternoon. Miller met North in the Old Executive Office Building, and North asked him for a ride to Dupont Circle. Miller told North that money was needed from a foreign source to fund public relations and congressional ac- tivities on behalf of the United Nicaraguan Opposition (UNO). Miller suggested contacting the Sultan of Brunei or an Arab country. North's response was "I gave one to Shultz already and he [screwed it up]." North also stated that "if Shultz knew that the Aya- tollah was bankrolling this whole thing he'd have a heart attack." Miller did not understand either refer- ence.157 Either that day or the day before, North told Miller that the Attorney General had advised North to obtain legal counsel.* Miller dropped North at the office building at 1800 Massachusetts Avenue, N.W., where Tom Green's law offices, among others, are located.158 The Lowell Sun Allegations On December 14, 1986, the Lowell (Mass.) Sun ran a story under the headline "Money from Iranian Arms Sales Was Used to Back Conservatives During 1986 Election." The story stated that "[a]bout $5 mil- lion from the almost $30 million in excess raised from arms sales to Iran was filtered to conservative politi- cal action groups" to "support candidates who backed President Reagan's pro-Contra and Star Wars poli- cies." The only such group named in the article was NEPL. The Committees have uncovered no evidence to substantiate the allegation that NEPL or any other of Channell's political action groups received any pro- ceeds derived from the sale of arms to Iran. In this regard, the Committees have accounted for virtually all of the funds received by Channell's organizations during the relevant period, none of which are trace- able to the Iranian arms sales. Similarly, the Commit- tees have accounted for virtually all expenditures from the Enterprise, and none of these were paid to Channell's organizations. NEPL Activities in December 1986 In December 1986, NEPL's staff received an un- usually lengthy holiday vacation from December 15 to January 5, 1987. The reason given for this lengthy break was that the media were making it too difficult *The Attorney General denied that he offered such advice to North. Meese Dep., 7/8/87, at 103. See Chapter 20 for a more complete description of the events in November 1986. 99 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 4 for the organizations to conduct their work and that the most sensible response was to close operations for a couple of weeks.' 5 9 Immediately prior to the extended holiday, two NEPL accounting employees were instructed by their supervisors to delete from the accounting records any and all references to the "Toys" project. As men- tioned above, contributions intended for the purchase of lethal supplies generally were designated on NEPL's books for the "Toys" project. Alterations in the accounting records and related floppy discs were made to modify prior references to "Toys" to a neu- tral project named "CAFP TV" (presumably Central American Freedom Project?Television Advertis- ing).1 6 0 In addition, NEPL's principal accountant took all NEPL accounting materials home with him during the vacation, including financial records, bank state- ments, check books, deposit slips, and the like.161 The evidence obtained by the Committees suggests that all such records were taken to perform year-end accounting tasks and were returned by the accountant without further alteration. February 1987 Report from IBC to NEPL On February 16, 1987, IBC issued a report to NEPL that reconstructed the disposition of the Contra assistance payments made by NEPL to IBC and I.C., Inc. during the period from July 1985 through the end of 1986. The report contained sup- porting documentation for many of the relevant 162trans- actions. In a summary at the beginning of the report, IBC acknowledged that most of the disbursements of these 100 funds were made "at the request of Lt. Col. Oliver L. North." Moreover, the summary states that "we were assured by [North] at the time that the funds were to be applied solely for humanitarian assistance."163 Miller has told the Committees that he would write these statements differently if he were writing them today.1 6 4* Guilty Pleas of Channel! and Miller On April 29, 1987, Channell pled guilty to a one- count criminal information filed the same day by the Independet Counsel. As noted above, the information charged that Channell, Miller, "and others known and unknown to the Independent Counsel" conspired "to defraud the IRS and deprive the Treasury of the United States of revenue to which it was entitled by subverting and corrupting the lawful purposes . . . of NEPL by using NEPL . . . to solicit contributions to purchase military and other types of non-humanitarian aid for the Contras," in violation of 18 U.S.C. Section 371. The acts identified by the information as part of the conspiracy include the Ramsey, Hunt, Newington, O'Boyle, Garwood, and Claggett solicitations. At the hearing in which Channell's guilty plea was accepted by the Federal district court, Channell named Miller and North as his co-conspirators. Miller pled guilty to a substantively identical crimi- nal information on May 6, 1987. Both Channell and Miller are awaiting sentencing. *According to Miller, he told North in late 1986 that he "hoped to hell the account had been used for humanitarian assistance." North responded "Oh hell, yes." R. Miller Dep., 8/21/87, at 331. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 4 Figure 4-1. The Channell-Miller Contra Assistance Network National Endowment for the Preservation Of Liberty (NEPLI Total Contributions 1985-1986 $10.385.929 55 487 751 May '85 Dec 86 55 037 751 Aug ? Nov 86 5450 000 Gomez International Miller Communications May Dec '86 5135 500 May -Dec 86 5302500 International Business Communications (IBC) Sep 85 ? May '86 52.740.000 ? World Affairs Counselors. Inc May - Dec '86 $442 000 C Inc (Intel Co-operation) Sept '85 - Dec '86 $493.221 Other Contra-Related Persons & Other Entities Nov '85 ? Feb '87 51 030 000 Adolfo Calero Oct '85 - Apr '86 $1.308.075 Sep -Dec '85 $430.000 Lake Resources This chart represents the money flow of the Channell-Miller Contra Assistance Network. Source: Senate Select Committee on Secret Military Assistance to Iran and the Nicaraguan Opposition and House Select Committee to Investigation Covert Arms Transactions with Iran. 101 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 H .1 . 1 . Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 4 Chapter 4 1. Channell Dep., 9/1/87, at 2-4. 2. Id., at 6-10, 14-16, 21; 9/2/87, at 163. 3. Id., 9/1/87, at 30-34. 4. CH 4477-80. 5. CH 4437. 6. Channell Dep., 9/2/87, at 163-64. 7. Id., 9/1/87, at 40-41; 9/2/87, at 165. 8. Id., 9/1/87, at 49-50. 9. Conrad Dep. at 4-6. 10. Id. at 6-8. 11. Id. at 8-10. 12. Id. at 12-16. 13. Id. at 20-22, 25-27. 14. Id. at 24, 557, 559-60. 15. Id. at 28-38. 16. Id. at 38-39. 17. Id. at 41. 18. R. Miller Dep., 8/20/87, at 92-93. 19. Id., 6/23/87, at 19-20. 20. Id., 6/23/87, at 19-21; 8/20/87 at 93-95. 21. Audit Report No. 7PP-008, Office of Inspector General,Department of State (July 1987). 22. Id. 23. R. Miller Dep., 8/21/87, at 93. 24. Id., at 285-86, 306. 25. Id., 8/20/87, at 125-26. 26. Channell Dep., 9/2/87, at 165-67. 27. Fraser Dep. at 28, 31-39; N 6298. 28. Fraser Dep. Ex. 3. 29. Fraser Dep. at 41-60. 30. Channell Dep., 9/2/87, at 75-77; Conrad Dep. at 580- 81. 31. Fraser Dep. at 28-30, 48-49. 32. Channell Dep., 9/1/87, at 52-53. 33. Id., at 52-54. 34. R. Miller Dep., 8/20/87, at 135-37. 35. Id., at 137. 36. Id., at 137-39. 37. Id., at 14849. 38. CH 32022. 39. Channell Dep., 9/1/87, at 80-82; R. Miller Dep., 8/ 20/87, at 141-42. 40. Channell Dep., 9/1/87, at 80-83; R. Miller Dep., 8/ 20/87, at 142. 41. CH 36920-35; R. Miller Dep. Ex. 10. 42. Conrad Dep., 6/10/87, at 75-76; Gomez Dep. at 32- 33. 43. R. Miller Dep. Ex. 10. 44. Id. 45. Id. 46. Id. 47. Id. 48. Id. 49. R. Miller Dep., 6/23/87, at 24-25. 50. Ramsey Dep. at 55; R. Miller Dep., 6/23/87, at 27. 51. R. Miller Dep., 6/23/87, at 27. 52. Id. 53. RM 3577; RM 3578. 54. Channel! Dep., 9/1/87, at 76-78. 55. Id., 9/2/87, at 171. 56. Id., 9/1/87, at 87-88; 9/2/87, at 168-71. See also O'Boyle Test., Hearings, 100-3, 5/21/87, at 117-19. 102 57. Channel] Dep., 9/1/87, at 78-80. 58. Id. 59. R. Miller Dep., 8/21/87, at 382-89. 60. Id., at 389-90. 61. Id., 8/20/87, at 98-99. 62. RM 1136-44. 63. R. Miller Dep., 8/20/87, at 96-100. 64. Id., at 102-04, 113-14. 65. Id., 6/23/87, at 29. 66. North Test., Hearings, 100-7, Part II, 7/13/87, at 58- 59. 67. RM 1541-42. 68. Miller Dep., 8/20/87, at 124. 69. Id., 6/23/87, at 28. 70. Channel! Dep., 9/1/87, at 91. 71. R. Miller Dep., 6/23/87, at 28-30. 72. Id., 8/20/87, at 110-13. 73. CH 35141. 74. McLaughlin Dep. at 50-52. 75. O'Boyle Test., Hearings, 100-3, 5/21/87, at 117-19. 76. Id. 77. Id. at 120. 78. R. Miller Dep., 9/15/87, at 511-15. 79. North Test., Hearings, 100-7, Part I, 7/7/87, at 89-90. 80. Id., at 91. 81. R. Miller Dep., 6/23/87. at 32-33. 82. Id., at 32-34. 83. RM 971. 84. R. Miller Dep., 7/3/87, at 75-76; 8/20/87, at 252-56. 85. RM 859. 86. R. Miller Dep., 8/20/87, at 266-67. 87. Conrad Dep., 6/10/87, at 147-48. 88. Channell Dep., 9/1/87, at 123. 89. Id., at 113-20; 9/2/87, at 171-72. 90. Id., 9/1/87, at 110-11. 91. Hunt Dep., at 32-33. 92. Id., at 21. 93. Id., at 32, 48. 94. Channell Dep. 9/1/87, at 124-25. 95. Hunt Dep. at 52. 96. Id., at 46-55, 79-80, 82-83. 97. Id., at 34, 56, 80-85. 98. Id., at 67, 82-83. 99. RM 971. 100. R. Miller Dep., 6/23/87, at 75-76; 8/20/87, at 254- 55. 101. Newington Dep., at 16-17, 36, 56-58. 102. RM 1042. 103. R. Miller Dep., 8/20/87, at 248-50. 104. Id., 6/23/87, at 34-35. 105. Id., at 34-36. 106. Id., at 36-37. 107. Newington Dep., at 33, 45, 86-87, 90-93. 108. Channell Dep., 9/1/87, at 148. 109. O'Boyle Test., Hearings, 100-3, 5/21/87, at 116-17. 110. Id at 117-18. 111. Id at 118-19. 112. Id at 119. 113. Id at 120. 114. Id at 120-21; O'Boyle Dep. at 42-44. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 4 115. O'Boyle Test., Hearings, 100-3, 5/21/87, at 120; O'Boyle Dep. at 46-47. 116. O'Boyle Test., Hearings, 100-3, 5/21/87, at 121-22; O'Boyle Dep. at 54-55. 117. O'Boyle Test., Hearings, 100-3, 5/21/87, at 122. 118. Id. at 123-24. 119. Garwood Test., Hearings, 100-3, 5/21/87, at 112-14; Garwood Dep. at 12-15, 16-18, 20, 28-30, 32-36. 120. Garwood Test., Hearings, 100-3, 5/21/87, at 113. 121. Id. at 112-13; Garwood Dep. at 33-34. 122. Garwood Test., Hearings, 100-3, 5/21/87, at 113-14; Garwood Dep. at 34. 123. Garwood Test., Hearings, 100-3, 5/21/87, at 114; Garwood Dep. at 35-38. 124. Garwood Test., Hearings, 100-3, 5/21/87, at 115-16; Garwood Dep. at 58-61. 125. N 12528. 126. New York Times, 3/20/87, at A-10, col. 4. 127. N 10298. 128. N 22715. 129. Poindexter Dep., 5/2/87, at 203. 130. Id. at 202. 131. North Test., Hearings, 100-7, Part I, 7/7/87, at 92. 132. Artiano Dep. at 58-59. 133. Id. at 44-45. 134. Id. at 45; Fischer Dep. at 6. 135. Fischer Dep. at 9; Artiano Dep. at 46-50. 136. Fischer Dep. at 159. 137. Artiano Dep. at 59. 138. Conrad Dep., 6/10/87, at 179-80. 139. Channell Dep., 9/1/87, at 155-59. 140. Gomez Dep. at 61-64. 141. Artiano Dep., at 64-72, 78-90; Fischer Dep., at 35- 38; 97-104, 111-119. 142. Fischer Dep., at 104-05. 143. R. Miller Dep., 8/21/87, at 358-62. 144. Regan Test., Hearings? 100-10, 7/30/87, at 58; 7/31/ 87, at 116. 145. Fischer Dep. at 48. 146. Godson Dep. at 53-70; R. Miller Dep., 8/20/87, 276-81; Slease Dep. at 20-36, 56-57. 147. RM 17211. 148. Godson Dep. at 9, 40, 47-85; R. Miller Dep., 87, at 276-81; Slease Dep. at 20-36, 56-57. 149. Godson Dep., at 89-96; Hirtle Dep., at 27-48. 150. R. Miller Dep., 6/23/87, at 38. 151. North Test., Hearings, 100-7, 58-59. 152. 153. 154. 31/86, 155. 156. 157. 158. 159. 160. 161. 162. 163. 164. Part at 8/20/ II, 7/13/87, at R. Miller Dep., 8/20/87, at 226-28. Id., at 228; Gomez Dep., at 88-89. Letter from Adam Goodman to Spitz Channell, 3/ reproduced as part of Channell Dep. Ex. 1. Channell Dep. Ex. 1, No. A36004. R. Miller Dep., 6/23/87, at 5-8. Id., at 9-14. Id., at 14-15. McLaughlin Dep. at 122-30. S. McMahon Dep. at 50-54. Id. at 23-24. RM 1-88. RM 3. R. Miller Dep., 8/20/87, at 236-37. 103 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 5 NSC Staff Involvement In Criminal Investigations And Prosecutions During the period covered by the Boland Amend- ment, federal law enforcement agencies conducted in- vestigations that touched upon various aspects of the secret Contra support operation. Concerned that these investigations, if pursued, would expose the NSC staff's covert operations, North and Poindexter react- ed by contacting the agencies involved. They sought to monitor investigations and, in some cases, to delay or impede their progress by suggesting that national security was at stake. Confronted with such assertions from White House officials involved with the nation's security, law enforcement agencies understandably cooperated with the NSC staff by delaying some in- vestigations, arranging to move a convicted former foreign official whom North was afraid would dis- close facts about the Contras to a minimum security prison, and giving Poindexter and North information about other investigations. The Committees are aware of seven such episodes, three involving the United States Customs Service and four involving the Department of Justice. They represent an integral part of the NSC staff's efforts to keep its operations even from those with legitimate law enforcement interests. North and the Customs Service Maule Aircraft Corporation In the summer of 1986, the United States Customs Service, following up on a CBS news report, began an investigation into allegations that Maule Aircraft Corporation of Macon, Georgia, had shipped four aircraft into Central America to support the Contras in possible violation of U.S. export control laws.' In August 1986, the Commissioner of the U.S. Cus- toms Service, William von Raab, was approached by North, who told him that Customs agents in Georgia were giving Maule Aircraft Corporation a hard time.2 North said the Maule Corporation shipped aircraft such as "Piper Cubs" down south. North also said that Maule was "a close friend of the President." Commissioner von Raab told North he would look into the Customs Service investigation and assigned the matter to William Rosenblatt, Assistant Commis- sioner for Enforcement.3 Rosenblatt contacted North, who told Rosenblatt that the people involved in the sale and export of the four Maule aircraft were "good guys" and had done nothing illega1.4 North insisted that the aircraft were simply "super Piper Cubs" and were exported only to a Central American country, where they were used to supply the Contras with medical and humanitarian supplies.3 Rosenblatt explained that in order to verify the legality of the transactions, Customs needed cer- tain documents and photographs of the aircraft, which North promised to produce. In exchange, Ro- senblatt agreed to postpone issuance of subpoenas. Over the course of the next several weeks, Rosenb- latt continued to contact North periodically to request the promised documentation,6 which North led him to believe would be forthcoming "momentarily." Be- cause of North's promises, Rosenblatt told the agent in charge to suspend issuing a grand jury subpoena for Maule, although the agent asserted that the Maule officials were "stone-walling" him.7 In the interim, Rosenblatt found himself dealing with North on two other matters, one involving a Customs informant named Joseph Kelso and another involving Southern Air Transport's role in the Hasenfus aircraft, where North asked Customs to narrow a subpoena so as not to expose other sensitive operations (see Chapter 18). On November 10, Rosenblatt met with Commis- sioner von Raab to discuss North's assertions that the Customs investigation could compromise national se- curity, including an effort to obtain the release of the hostages.9 At that meeting, von Raab advised Ro- senblatt to speak with Robert Kimmitt, General Counsel to the Treasury Department, about his inabil- ity to obtain the Maule and SAT records. Rosenblatt scheduled that meeting for the afternoon of Novem- ber 17.9 On the morning of November 17, Rosenblatt called North to attempt again to get the promised docu- ments on Maule Aircraft. To Rosenblatt's surprise, North indicated that he had the documents and would send them right over. When they arrived, however, Rosenblatt was quite disappointed. They did not in- clude purchase orders, photographs, or other docu- ments sufficient to dispose of the Customs inquiry. That afternoon, Rosenblatt met with Kimmitt and re- lated the entire episode involving Maule and SAT.' ? 105 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 5 At that point, the investigation resumed, 6 weeks after it had been halted at North's request. While Rosenblatt testified he never mentioned the Kimmitt or von Raab meetings to North and he had no contact with North after November 17," North's notes suggest that Rosenblatt did brief him on these matters after November 17. A note dated "19 Nov. 86" reads: ?Bill Rosenblatt ?Joe Ladow - P/M Maule ?Letter from Justice ?Talk to Commissioner next week ?Talked to Kimmitt re relationship ?Profs w/C-123 military configuration required so- journ ?Names in document - La dodge needed advice on how to handle ?Call Von Raab' 2 Kelso Another matter on which Customs had dealings with North involved Joseph Kelso. Kelso was on probation after a conviction for illegally exporting arms to Iraq. In 1986, he approached Customs under an alias and offered to work as an informant.' 3 In the spring of 1986, Kelso, accompanied by a Customs informant, traveled to Costa Rica to gather information on an alleged counterfeiting and drug ring that supposedly included corrupt DEA agents." Kelso and the informant had not notified the U.S. Embassy or Costa Rican authorities of their investiga- tion, and Kelso was detained and questioned by the Costa Rican authorities and DEA agents as to what he was doing in the country." Kelso was then taken to John Hull's farm." Hull reported the incident to North and Owen in a letter." At the same time, Tambs complained to Customs about their sending informants into Costa Rica without notifying the Em- bassy. After returning to the United States, Kelso, who faced charges of violating his probation, turned over tape recordings of his activities to Customs, and claimed that, apart from his trip for Customs, he was working for the intelligence community." In or about September 1986, Rosenblatt called North to find out if Kelso was working for the intelligence community." North, who was already aware of Kelso's visit to Costa Rica, suggested that Rosenblatt allow Owen, whom Rosenblatt did not know, to listen to Kelso's tapes to verify his claims. Rosenblatt agreed on the assumption that Owen was part of the NSC staff, or otherwise assisting North.2? After receiving the Kelso tapes from Rosenblatt in October, Owen made two trips to Central America where he met with DEA agents. Although Owen was purporting to investigate Kelso's status, he never communicated further with Rosenblatt, and Rosenb- 106 latt concluded from this silence that Kelso had not been working for the intelligence community." Miami Neutrality Investigation In connection with another investigation, this one conducted by the Office of the United States Attor- ney for the Southern District of Florida, North and Poindexter were able to obtain information concern- ing the vulnerability of the Enterprise. The Roots of the Investigation On July 21, 1985, the Miami Herald published an article by reporters Martha Honey and Tony Avir- gan. In that article, a mercenary for Civilian Military Assistance (CMA) named Steven Carr, who was then imprisoned in Costa Rica, spoke of an arms shipment from Fort Lauderdale to a Central American location. The article caught the attention of the FBI in the Southern District of Florida, which opened an investi- gation into Carr's allegations and alerted FBI head- quarters in Washington, D.C., as required in any matter involving the Neutrality Act.22 Garcia Allegations In December 1985, an individual named Jesus Garcia was convicted in the Southern District of Florida on charges of possessing an unlicensed ma- chine gun. 2 3 While Garcia was awaiting sentence, he offered through his attorney to provide federal authorities with information relating to paramilitary plots in Cen- tral America. As a result of that offer, he was inter- viewed on January 7, 1986 by two FBI agents. He claimed that he had been set up on the machine gun charge by a person who supposedly worked for Tom Posey and the CMA, a pro-Contra paramilitary group. According to Garcia, Posey was attempting to neutralize him because of his knowledge of a CMA plot to assassinate Ambassador Lewis Tambs to col- lect a reward offered by a notorious drug kingpin in Central America. The assassination, Garcia told the FBI, would, as an added benefit, be blamed on the Sandinistas, thereby assisting the Contras' cause. Garcia also gave the FBI further details on the gun shipment reported earlier in the Miami Herald.24 The FBI agents and Jeffrey Feldman, the Assistant United States Attorney conducting the investigation, were all skeptical.25 Nevertheless, given the gravity of Garcia's allegations, the investigation continued. At the request of the FBI, embassy officials in Costa Rica interviewed Carr and other American mercenar- ies imprisoned in that country. Hotel records at the alleged site of a critical meeting seemed to confirm its occurrence. Flight plans and records suggested that the alleged arms shipment also could have oc- curred. 2 6 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 5 During this phase of the investigation, the FBI re- ceived allegations that North, Owen, and John Hull were involved in, or at least aware of, the gun run- ning plots.27 This information was not supplied by Garcia, but came through other sources." On March 14, 1986, an FBI agent and Feldman met with Anna Barnett, the Executive Assistant United States Attorney. While the FBI agent and Feldman were in Barnett's office discussing the investigation, United States Attorney Leon Kellner came in to in- quire whether anyone was aware of an alleged plot to assassinate Ambassador Tambs. According to Kellner, he had just received a call from someone at the De- partment of Justice in Washington who wanted infor- mation about the investigation." At or shortly after that meeting, it was decided that the FBI agents and Feldman would travel to New Orleans to interview Jack Terrell, a/k/a "Colonel Flaco," a former CMA mercenary who, they had been told, knew more de- tails of the conspiracy.3? Activity in Washington The FBI agents had been advising headquarters by telex throughout the early stages of the investigation and in early March had received a request from Oliver Revell, Executive Assistant Director of the FBI, for a detailed summary of their findings. Their report was forwarded to headquarters on March 20, 1986.3' Revell's inquiry was itself sparked by a request from Deputy Attorney General D. Lowell Jensen for an update on the investigation." Revell sent a sum- mary of the agents' report five pages in length, to Jensen. 3 3 Upon receiving the memorandum, Jensen met with Attorney General Meese to discuss the case. Jensen recalls that he and Meese decided that Admiral Poin- dexter, the National Security Adviser, should be briefed on the matter because of its international im- plications and the possibility of danger to an Ameri- can diplomat. Jensen was uncertain, however, wheth- er he or Meese initiated the proposal to brief Poin- dexter.34 Meese testified at his deposition that he did not recall discussing this matter with Jensen.35 Jensen also forwarded a copy of Revell's memoran- dum to Associate Attorney General Steven Trott, who forwarded it in turn to Deputy Assistant Attor- ney General Mark Richard. On the "buck slip" ac- companying the memorandum, Trott wrote: Please get on top of this. [Jensen] is giving a heads up to the N.S.C. He would like us to watch over it. Call Kellner, find out what is up, and advise him that decisions should be run by you." On another buck slip attached to the memorandum for his own record, Richard wrote, "3/26/86, spoke to Kellner?AUSA not back yet from [New Orle- ans]."37 Richard recalls speaking with Kellner about the case on several occasions over the next several months. Trott and Jensen also believe they spoke to Kellner about the case on a few occasions. Each of them specifies that he never attempted to impede or otherwise interfere in the investigation itself, and the Committees have no Lvidence that contradicts this." On March 26, 1986, Jensen went to the NSC and showed Poindexter a copy of Revell's memorandum. Jensen does not recall any discussion that may have taken place. Poindexter testified that he does not recall the briefing at all." Terrell and Costa Rica In New Orleans, Terrell provided the FBI agents and Feldman with additional information on the al- leged assassination plot and arms shipment. When pressed, however, Terrell admitted that most, and perhaps all, of his information was based on hearsay rather than on his direct participation or observa- tion.40 Feldman and the FBI agents traveled to Costa Rica on March 31, 1986, and reported to the U.S. Embas- sy. There they met with Tambs, who wanted to know the purpose of their visit. Feldman briefed Tambs thoroughly on their investigation and intentions. During that briefing, Feldman showed Tambs a chart he had drawn to illustrate the supposed conspiracy that had been described to him. The chart showed a pyramid of participants, with lines of involvement running up through John Hull and Robert Owen to Oliver North at the top.4' When he saw the chart, Tambs summoned "Thomas Castillo," who introduced himself to the investigators as a CIA station chief. Castillo provided them background information on Hull. According to Feldman, Castillo also spoke of North warmly as "the person who introduced me to the President of the United States last week."42 Over the course of the next two days, Feldman, the FBI agents, and various embassy personnel inter- viewed Steven Carr and several other imprisoned mercenaries. They attempted to set up an interview with Hull, who initially agreed and then declined to speak to them.43 Feldman was also told by an em- ployee at the U.S. Embassy that Hull had been con- tacted by the NSC about the investigation.44 North received a briefing from Owen on Feldman's visit. In a letter dated April 7, 1986, Owen identified each of the investigators who had appeared in Costa Rica, then wrote: According to [Castillo], Feldman looks to be wanting to build a career on this case. He even showed [Castillo] and the Ambassador a diagram with your name at the top, mine underneath, and 107 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 5 John's underneath mine, then a line connecting the various resistance groups in [a Central Ameri- can country.] Feldman stated they were looking at the "big picture" and not only looking at a possible viola- tion of the neutrality act, but at possible unau- thorized use of government funds. They went several times to the prison to question the five in jail. They tried to talk with John, but he was advised not to talk with them unless he had a lawyer present.4 5 April 4 Meeting Feldman met late on the afternoon of April 4, 1986, with Kellner and Barnett to discuss the results of his trip to Costa Rica. Also present were Larry Scharf (Special Counsel to the United States Attorney) and Richard Gregorie (Chief Assistant United States At- torney). Feldman explained to them that, while the assassi- nation plot seemed to be fading as a cause for concern or a vehicle for prosecution, the gun-running charges seemed to have some basis in fact. Others at the meeting believed, however, that Feldman was having a difficult time fitting a complex combination of facts, witnesses, and actors into a coherent theory of pros- ecution.46 At one point, the topic of the Boland Amendment was raised. Because no one in the room was familiar with the details of that legislation Barnett asked As- sistant United States Attorney David Liewant to locate it with the research computer.47 According to Liewant, when he arrived at Kellner's office with the printout, only Kellner, Bar- nett, and Feldman were present and Kellner was on the telephone talking to someone at the Department of Justice.48 According to Liewant, when Kellner hung up, he turned to Barnett, Feldman, and Liewant and said that the Department wanted them to "go slow" on the investigation. Liewant could tell from Kellner's expression and tone of voice that Kellner was disdainful of that suggestion and had no intention of actually slowing the investigation." If Liewant's account of this meeting is correct, the Department of Justice would appear to have been exerting improper influence to delay an investigation, albeit influence brushed aside by Kellner. But each of the other participants in the April 4 meeting deny that any such telephone conversation took place." Rich- ard, Trott, Jensen, and Meese also deny that any telephone call like that described by Liewant oc- curred or that anyone, to their knowledge, attempted to slow the investigation at any time.51 At the end of the meeting on April 4, Kellner asked Feldman to draft a memorandum pulling together the results of the investigation to date as well as Feld- man's approach to any possible prosecution." 108 The Meese Aside On April 12, Meese, along with Jensen and Revell, arrived in Miami to visit a number of FBI agents wounded in a shoot-out the day before. Kellner ac- companied Meese on his visits." During the day, Meese pulled him aside and asked him about the Garcia investigation. Kellner believes that he told Meese that there did not appear to be much substance to the assassination allegations, but that the gun-running investigation was continuing. Kellner testified that Meese neither stated nor implied that the investigation should be slowed or conducted in any other particular manner." Meese recalls asking Kellner about the matter, al- though he does not recall pulling Kellner aside to do so. Meese testified that he mentioned that case in particular because it had received attention by the press.55 Meese also denies that he attempted to affect the course of the investigation." The Feldman Memoranda On April 28, Feldman provided the first in what was to become a series of memorandums to Kellner. Both Feldman and Kellner felt that it was unsatisfac- tory.57 On May 14, Feldman therefore produced a more detailed memorandum, 20 pages in length. It reviewed the facts gathered to that time and conclud- ed that it was appropriate to issue grand jury subpoe- nas for various documents and witnesses. Feldman wrote: The Bureau believes that a grand jury is neces- sary for several reasons. First, it would dispel claims that the Department of Justice has not ag- gressively pursued this matter. Second, a grand jury would eliminate some of the deception they believe they have encountered during their inter- views with Jesus Garcia, Daniel Vasquez Sr., Ronald Boy, and Max Vargas. Finally, the grand jury would give the Department of Justice access to Costa Gun Shop's business records and CANAC's bank records. Within a few days, Kellner returned the memoran- dum to Feldman with the notation "I concur, we have sufficient evidence to institute a grand jury in- vestigation into the activities described herein."58 Kellner then convened a meeting in his office on May 20 to discuss the case. Present, once again, were Kellner, Barnett, Scharf, Gregorie, and Feldman. As the discussion progressed, Scharf and Gregorie set forth a number of reasons why they believed it pre- mature to issue grand jury subpoenas. Gregorie, at his deposition, summarized those reasons: Before you go into the grand jury, as I told Jeff, you have to have some idea where you're going and what you're looking for. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 5 Up until that time, he had some wild stories that were concocted by freelance newspaper reporters about mercenaries who were unreliable, individ- uals who had failed a polygraph, people who were unreliable, and we did not have a stage set of facts [sic], and I did not think it was appropri- ate to go into the grand jury with a bunch of people who we were later going to find out were totally lying and totally misled in a grand jury, going to confuse them. What I saw was a confused mess of facts that were leading in no particular direction, and had no form or substance to them." By the end of the meeting, a consensus developed that further interviews should be conducted before resorting to the grand jury. Feldman, who had re- quested authorization to go to the grand jury initially, acquiesced in the decision and agreed to have the FBI conduct the additional interviews.60 After Kellner changed his mind and concluded that grand jury subpoenas would be premature, he asked Feldman to redraft the May 14 memorandum to re- flect that conclusion. Feldman did so, and submitted a revised version to Kellner on May 22. Feldman did not change the original date on the revised memoran- dum.6' Kellner asked Scharf to review this new version, and Scharf made a number of changes. Most impor- tant, he included a reference to the Christic Institute litigation filed in the Southern District of Florida on May 30 and added to the conclusion a number of reasons why resort to a grand jury would be prema- ture. Scharf had these changes made on a word proc- essor, but did not change the original date or author. As a result, when Kellner submitted the memorandum to the Department on June 3, it still bore the date of May 14 even though it referred to an event that occurred on May 30. Feldman did not see this final version of his memorandum before Kellner sent it on to Washington.6 2 Further Investigation The FBI agents undertook the additional investiga- tion requested by Feldman. On July 31, 1986, they presented Feldman with a lengthy "prosecution memorandum" that included their most recent find- ings. Feldman, in turn, forwarded that report to Kellner on or about August 14.63 On August 29, 1986, Kellner told Feldman to sus- pend any further investigation on the matter until he (Kellner) returned from an impending trip to Wash- ington. According to Feldman, Kellner told him that "politics" were involved. Feldman found this state- ment surprising and disturbing, because it was the first, and only, time Kellner had indicated to him that such considerations were relevant. When Kellner re- turned from Washington shortly thereafter, he told Feldman to proceed." Kellner confirmed Feldman's version of this inci- dent. According to Kellner, shortly before he was to leave for Washington he received a letter from John Hull making serious allegations of impropriety by members of Senator Kerry's staff, who were also in- vestigating Garcia's allegations. Hull also had includ- ed affidavits from some of the imprisoned mercenaries retracting some of their prior statements regarding gun-running and Contra support. Kellner stated that he feared that he was being put into the middle of a political dispute, and wanted to talk to Mark Richard about the allegations before proceeding further. After that discussion, Kellner immediately authorized Feld- man to proceed. Both Feldman and Richard con- firmed this explanation.6 5 Meanwhile, Kellner had reviewed the prosecution report cursorily and forwarded it, in mid-August, to Richard Gregorie for his input. On October 6, the day after the Hasenfus crash, Gregorie responded to Kellner that he felt the case was ready to go to the grand jury.66 The prosecution memorandum then rested again with Kellner, who forwarded his own approval to Feldman in the first week in November? six months after Feldman had first suggested the need for a grand jury. The relative inactivity from mid- August to the first week in November was again frustrating to Feldman and the FBI agents, and was explained by Gregorie and Kellner as due to the gen- eral press of other matters.6 7 Upon receiving approval from Kellner, Feldman proceeded with the investigation. The Independent Counsel subsequently declined to take over the case and Feldman was continuing to investigate the matter at the time he was deposed by the Committees." Reward for a Friend In one episode, the NSC staff undertook to persuade the Department of Justice to "reward" someone char- acterized by North as a "friend" who had been con- victed of plotting to assassinate a Central American leader. In that episode, the NSC staffs motive appears to have been a desire to prevent disclosure of certain questionable activities. According to a North PROF to Poindexter, the "friend" was an official in a Central American coun- try with whom North, the U.S. Ambassador, General Gorman, and Dewey Clarridge arranged for bases for the Contras as well as overall logistics, training and support. 69 This official and other plotters were indicted prior to 1986 for conspiracy to assassinate a Central Ameri- can leader.7? Pursuant to a plea agreement, the offi- cial pleaded guilty to two felony counts which car- ried a significant maximum sentence; and he was later 109 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 I] V v 1 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 5 sentenced to two shorter, though still significant, prison terms to run concurrently." At the sentencing hearing, U.S. military officials assigned to the State Department testified on behalf of the official. The court provided that the official could be immediately eligible for parole if so determined by the Parole Commission and recommended he serve his sentence at a minimum security institution. Mean- while, Assistant Secretary of State Elliott Abrams promised the official's government that he would look into the case.72 In a September 17, 1986 PROF message to Poin- dexter, North noted that the official was under the impression he would serve only a matter of days or weeks at the minimum security institution and then be released.73 North was concerned that once the offi- cial realized he was really going to serve a long sentence, "he will break his longstanding silence about the Nic[araguan] Resistance and other sensitive operations."74 North noted the next morning he would meet with Oliver Revell, Steven Trott, and Elliott Abrams to explore the possibility of a pardon, clemency, deportation, or sentence reduction. The ob- jective of this exercise, as North put it, was "to keep [the official] from feeling like he was lied to in legal process and start spilling the beans."75 Admiral Poin- dexter responded: "You may advise all concerned that the President will want to be as helpful as possible to settle this matter." 7 6 Representatives of different agencies of the Admin- istration met to discuss the request for leniency. Deputy Assistant Attorney General Mark Richard at- tended a meeting where Defense Department repre- sentatives argued on the official's behalf. Richard con- cluded their reasons were not sufficiently specific.77 No one ever gave a detailed account of what the official had actually done for the United States to deserve leniency. He was always simply described as a "friend of the United States."78 The State Depart- ment agreed with the Department of Justice that the official was a terrorist and should be punished. The CIA did not express an opinion.79 At a subsequent meeting in North's office on Sep- tember 24, 1986, North tried to convince Trott, Revell, C/CATF (CIA) and James Michel, Deputy Assistant Secretary of State, that the official was only tangentially involved in the assassination plot and de- served leniency.8? Revell disagreed. North asked them to consider recommending a minimum security correctional institution rather than the federal prison to which the official had been assigned, despite the court's recommendation, by the Bureau of Prisons.8' In early October, North tried again with the De- partment of Justice, this time with help from General Gorman and Dewey Clarridge. Also at this meeting were Mark Richard (filling in for Trott), Revell, and Elliott Abrams.82 North, Gorman and Clarridge all argued for leniency for the official, explaining only that the official was a "friend of the government" 110 who was "always ready to assist us" and "was helpful in accommodating our military."'" Abrams agreed that the U.S. should do what it could for the official, thereby reversing the State Department's earlier posi- tion.84 According to Richard, he offered to meet with others in the Department and determine whether the Department would oppose the transfer of the offi- cial to the minimum security institution. North's contemporaneous account of that meeting portrayed the Justice Department as more committed to assisting the official. In a PROF note to Poin- dexter, North indicated that, after the last co-con- spirator was convicted and sentenced, the Department of Justice would have the defense attorney file a motion to reduce the sentence to time served and arrange to have General Gorman brief the court in camera on the equities. North said Trott and Revell believed this should result in the release and deporta- tion of the official. North suggested that the official's attorney should be discreetly briefed to mollify the concerns of those involved that the official "will start singing songs nobody wants to hear."85 Richard soon determined that neither Trott nor Kellner had any objection to redesignating the official to the minimum security institution, as contemplated in the original court's recommendation and made the appropriate arrangements with the Bureau of Pris- ons.8 6 The Fake Prince As explained briefly in Chapter 4, an individual named Kevin Kattke contacted North in March or April 1985 about a Saudi "prince" who proposed do- nating to the Contras approximately $14 million in proceeds derived from the sale of the "prince's" oil. North referred the "prince" to Richard Miller. Miller and the "prince" met regularly over the course of the next several months. The "prince" sought Miller's help in marketing the oil, agreeing to pay Miller $1 million of the profits earned. Miller kept North regu- larly apprised of his dealings with the "prince", which eventually also included both a proposed gold trans- action and assistance in freeing the hostages held in Lebanon.87 Indeed, Miller saw himself as "an agent working on [North's] behalf" in connection with these activities.88 Yet while North was attempting to develop the "prince" as an asset in both his Iran and Contra initiatives, the FBI was investigating the "prince" for bank fraud. From the start, Miller had misgivings about the bona fides of the "prince." He did library research without much success in an effort to establish the "prince's" authenticity. According to Miller, North told him that the CIA had confirmed both the "prince's" identity and the veracity of the "prince's" information about the hostages." Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 5 Early in their relationship, the "prince" told Miller that he had information about the hostages in Leba- non that would be useful to U.S. efforts to locate and extricate the hostages. At North's suggestion, Miller related this information to the Hostage Location Task Force, representatives of which met with and inter- viewed the "prince" in Houston. Miller continued to inform North of the hostage-related information con- veyed by the "prince."" In July 1985, North asked a DEA agent (Agent 1)?who was detailed to North in connection with hostage release efforts?to accompany Miller and the "prince" to England to assist the "prince's" entry into the country, if necessary. Agent 1 agreed, and North arranged for payment of his travel expenses." The three men stayed in London for five or six days. Based on discussions with the "prince" about the situation in the Middle East, Agent 1 concluded that it would be worthwhile to develop the "prince" as a source in the hostage location effort." In August 1985, the DEA agents embarked on fur- ther activities with the "prince." At North's request, they traveled to Geneva from Cyprus to help the "prince" obtain travel papers after his passport had allegedly been stolen. Even with the cooperation of Ambassador Faith Whittlesey, Agent 1 was unsuc- cessful in obtaining a U.S. passport for the "prince." A week later, however, Agent 1 obtained travel papers for the "prince" issued by another country. Agent 1 remained with the "prince" in Europe for some time thereafter, and paid the "prince's" ex- penses.? 3 At North's request, Secord met Agent 1 and the "prince" in Geneva in September 1985. After meeting the "prince," Secord expressed to Agent 1 concerns about the "prince's" bona fides." Meanwhile, during the spring and summer of 1985, the "prince" developed legal problems in the United States. In late spring, the "prince" cashed a $250,000 check at William Penn Bank in Philadelphia, which was returned for insufficient funds. This event result- ed in a referral to the FBI's Philadelphia field office for bank fraud charges against the "prince." In con- nection with the fraud investigation, the FBI's Wash- ington field office was asked to interview both North and Miller.? 5 An FBI agent interviewed North on July 18, 1985. According to the agent, North said that he had re- ferred the "prince" to Miller because it was inadvis- able (and potentially unlawful) for an NSC staff person to meet with an individual who planned to contribute funds to the Contras. North further in- formed the agent that the "prince's" interest in donat- ing to the Contras was discussed by North personally with the President and with Robert McFarlane." North "confidentially" advised the agent that the NSC staff had maintained indirect contact with the "prince" because of the Contras' desperate need for funds.? 7 North specifically requested that attempts by the FBI to interview the "prince" be held in abeyance until after the week of July 22, 1985, because the Congress was expected to approve funding for the Contras that week. After being pressed by the FBI agent, North "backed down" on this request, al- though he expressed his view that FBI contact with the "prince" prior to the NSC's determination of the "prince's" true intentions likely would eliminate any possibility that the "prince" would aid the Contras. On his departure from North's office, the agent was introduced by North to Adolfo Calero, whom North called the "George Washington of Nicaragua"." After the North interview, the FBI agent attempted to contact Miller, who did not return several of the agent's telephone calls. North called the agent on July 30, 1985, in apparent response to the agent's attempt to reach Miller. North told the agent that Miller and the "prince" were in Europe arranging a transfer of funds from the "prince" to the Contras." On August 27, the FBI agent finally interviewed Miller, who outlined the history of his contacts with the "prince." Miller mentioned that he knew North, but did not disclose anything to the agent about Nica- ragua. In October, Miller was interviewed again by the FBI. During this session, he pledged complete cooperation with the fraud investigation.'" During the course of the grand jury investigation of the "prince," North called the FBI's Oliver Revell once again to express concern that Miller might be questioned about confidential governmental matters. North told Revell that Miller was a consultant to the NSC and the State Department on the hostage situa- tion, but did not mention Miller's efforts on behalf of the Contras. At North's request, Revell called the Assistant United States Attorney who was handling the "prince's" prosecution in Philadelphia. Revell re- lated the concern expressed by North, and was as- sured by the prosecutor that, if Miller testified, he would not be questioned about any hostage-related activities.1?1 According to Miller, he spent approximately $370,000 on the activities involving the "prince." North was aware of and approved these expenditures. On at least three occasions?two of which occurred after Miller agreed to cooperate fully in the investiga- tion of the "prince"?Miller sent travelers checks to the "prince" in Europe.'" Although the "prince" requested these payments?which totalled $32,500?at least $15,000 was used to finance the DEA hostage rescue operations. North approved all such pay- ments.1? 5 These expenditures, however, did not result in monetary loss for Miller. He complained to North of the money that the "prince" had cost him, and North told Miller to take reimbursement for these costs from Contra assistance funds that he had transferred to 111 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 ..? Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 5 Miller's company by Carl "Spitz" Channell's tax- exempt organization.104 In the end, it was determined that the "prince" was neither a "prince," nor even a Saudi. He was an Iranian con man, who pleaded guilty to bank fraud charges on the eve of his trial. He now is incarcerated in a federal penitentiary in Texas."5 Instigation of Investigations North attempted to exploit his contacts with the FBI to attempt to instigate or intensify investigations of people and organizations perceived as threats to the Enterprise. He was ultimately assisted in this effort by Richard Secord and Glenn Robinette. In early 1986, Secord had been the target of allega- tions that he was running guns and drugs between Central America and the United States. In May 1986, these allegations blossomed into a lawsuit filed in United States District Court for the Southern District of Florida. The lead plaintiffs in the action were re- porters Martha Honey and Tony Avirgan, who were represented by the Christie Institute. The defendants included Secord, Thomas Clines, Theodore Shackley, and John Hull.' ?6 At some point after the lawsuit was filed, North again contacted Oliver Revell, this time to suggest that the federal government ought to investigate the plaintiffs because he thought they were probably being funded or supported by the Sandinistas. Revell told him that the FBI did not engage in that type of investigation. 07 On May 9, the FBI interviewed North about al- leged measures taken against him. North claimed that his car had been vandalized, he had been followed, and his dog had been poisoned. North also claimed a fake bomb device had been left in his mailbox. He had not kept the device, however, for the FBI to analyze. North told the FBI that he had written down the license number of the car that was used to follow him, but, after several requests from the FBI, he failed to provide it, claiming he lost the number.'" The FBI checked with the local police regarding the fake bomb device placed in North's mailbox. North had told them he discarded it before it could be examined. The FBI concluded it was probably a prank rather than a threat. On June 3, 1986, North met with FBI agents to discuss an investigation they had been conducting into allegations by North that he was the target of politi- cally motivated vandalism and harassment, perhaps by foreign intelligence sources. At this meeting, North expressed his displeasure about the FBI's alleged lack of effort in the investigation. In particular, he com- plained that the FBI had never contacted an NSC staffer who supposedly was the source of allegations linking North to drug traffic, had not investigated Daniel Sheehan of the Christic Institute, had not interviewed a reporter who claimed North had threat- 112 ened him, had not examined allegations made by Sen- ator Kerry against North, and had not attempted to interview Senator Durenberger and Representative Hamilton to determine the sources for allegations made against North about which they had raised questions.'" Despite these complaints, the FBI ulti- mately closed its investigation after concluding that none of North's complaints could be traced to foreign intelligence sources." ? North ultimately hit on a better formula, however, with Secord's assistance. In March 1986, Secord had retained Glenn Robinette, a security consultant and former CIA officer, to conduct a private investigation of some of the individuals ultimately involved in the Honey and Avirgan lawsuit.' " One of the people Secord singled out for such treatment was Jack Ter- rell, also known as "Colonel Flaco." Terrell had at one time been a pro-Contra mercenary associated with Tom Posey and CMA. He ultimately became disillusioned with the Contras, however, and began to cooperate with the plaintiffs in the lawsuit. He threat- ened to testify that North had helped provide secret funding to the Contras and that he, Terrell, had used CMA as a cover from which to carry out CIA-spon- sored assassinations."2 In mid-1986, the FBI received information from a classified source that pro-Sandinista individuals might have been contemplating an assassination of President Reagan. The FBI suspected that Terrell might be involved and disseminated this information to the CIA, Secret Service, State Department, Department of Justice, and NSC. " 3 Shortly thereafter, on July 15, 1986, Revell re- ceived a call from North, who indicated that he knew a person familiar with Terrell's activities and would make his contact available for debriefing.114 The FBI met that evening with Robinette, North's contact, who told them he had met Terrell on July 11 while posing as an attorney exploring the possibility of col- laborating with Terrell on a book, movie, and televi- sion program. Robinette, who was in daily contact with Terrell, offered to assist the FBI in gaining infor- mation about him." 5 On July 22, 1986, FBI agents interviewed North. He told them he had heard of Terrell eighteen months earlier when a Contra intelligence officer complained of Terrell's brutality.'" North claimed he suggested at the time of that incident that local officials should expel Terrell. North stated that he had heard that Terrell had tried to import guns into a Central American country and had claimed to be for- merly with U.S. Army Special Forces and the CIA. The FBI agents asked North about Secord and Robinette. North said Secord ran an import-export business and was a consultant to the Defense Depart- ment and emphasized Secord did not work for him. He said Robinette was a security consultant hired by Secord to investigate Terrell. North acknowledged he Approved For Release 2011/05/25 : CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 5 met with Robinette prior to sending him to the FBI and that Robinette gave him copies of the Terrell manuscript and the other materials Robinette shared with the FBI. North stated that neither he nor his staff was responsible for arming, funding, or adminis- tering Contra programs and denied he was involved with covert operations being run from the U.S."7 The FBI decided to watch Terrell with Robinette's help. Although Robinette refused to wear a recording device, he reported back to the FBI after he met with Terrell. Shortly thereafter, Terrell went to Miami at the same time President Reagan visited Miami. Agents observed him there and concluded he was not a threat to the President. The FBI then terminated this investigation.' 18 Summary These seven episodes collectively show how the NSC staff, and North in particular, tried to prevent expo- sure of the Enterprise by law enforcement agencies. We do not mean to impugn the integrity of the law enforcement officials involved. Suggestions that na- tional security could be compromised, coming from NSC aides, inevitably were given weight by law en- forcement officials and led them on occasion to pro- vide information to the NSC staff and to delay inves- tigations. The fault lies with the members of the NSC staff who tried to compromise the independence of law enforcement agencies by misusing claims of na- tional security. 113 77-026 0 - 87 - 5 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 5 Chapter 5 1. Rosenblatt Dep., 9/25/87, at 7. 2. von Raab believes that his first contact with North occurred a few months before this conversation. According to von Raab, he received a telephone call from General Singlaub who inquired about a helicopter, the "Lady Ellen," that Customs was detaining enroute to a Central American country. When von Raab informed Singlaub that the helicopter needed a license before it could be released, Singlaub indicated that he would obtain one. Singlaub then suggested that von Raab call North about the matter. When von Raab did so, North told him that the individuals in- volved with the helicopter were "good guys." Ultimately, Customs issued the appropriate license and released the helicopter. William von Raab, Int., Tower, 2/11/87, N36038-36041. 3. Id. 4. Rosenblatt Dep., 9/25/87, at 16. Rosenblatt testified that, "to the best of [his] recollection," North did not men- tion any involvement of Richard Secord with the aircraft in question. Rosenblatt Dep., 9/25/87, at 13. A North note dated "27 Aug," raises questions because of the following entry: "Bill Rosenblatt - Customs - DOJ observed CBS film - Secord involved - DOJ asked Customs to look into [this?] - Agent preparing to subpoena Maule records - If this is for a "right organization" - 2 to 4 have already gone - Joe Tost/ Justice - U.S. Attorney on this - Need docs on who air planes went to and what was on them - Foreign Assets Control." North Notebook, 8/27/86, Q2369. 5. Rosenblatt Dep., 9/25/87, at 12. 6. Id., at 17-21. 7. Id., at 16-17. 8. Id., at 90-93. 9. Id., at 96-99. 10. Id., at 32, 99. 11. Id., at 35. 12. North Notebook, 11/19/86, Q2634. The entry relating to the "C-123" may refer to a requirement that the Hasenfus air plane have a "sojourn permit" before it left the United States. "Ladodge" may be a reference to Larry LaDodge, the Customs agent in charge of the Kelso matter. 13. Rosenblatt Dep., 9/25/87, at 51. 14. Id., at 48-49. 15. Id. 16. Id. 17. Id., at 60-62. 18. Id, at 54-57. 19. Id., at 55-56. 20. Id, at 57-58, 62-63. North was not questioned on this matter. 21. Id, at 62-69. 22. Currier Dep., 5/5/87, at 6-7. 23. Id, at 8-9, 11; Feldman Dep., 4/30/87, at 5, 8-9. 24. Currier Dep., 5/5/87, at 12-14; Feldman Dep., 4/30/ 87, at 12-15. "CMA" originally stood for "Civilian Military Assistance." In April 1986, it was changed to "Civilian Materiel Assistance." Posey Dep., 4/23/87, at 7. 25. Kiszynski Dep., 5/5/87, at 11-12; Currier Dep., 5/5/ 87, at 12-14; Feldman Dep., 4/30/87, at 16. A polygraph examination conducted on January 14 did nothing to bolster Garcia's credibility. The test was "inconclusive" on wheth- er Garcia was telling the truth about a key meeting where the assassination plot was supposedly discussed, and labelled him "deceptive" on his allegations about Posey's involve- 114 ment. Currier Dep., 5/5/87, at 14; Kiszynski Dep., 5/5/87, at 14; Feldman Dep., 4/30/87, at 17-18. In his sworn testi- mony to the Committees, Posey vigorously denied Garcia's allegations. Posey Dep., 4/23/87, at 72, 77, 84-85, 89. 26. Currier Dep., 5/5/87, at 16; Feldman Dep., 4/30/87, at 21-22. 27. Allegations about North's own involvement in Contra resupply efforts had been reported in the press as early as the summer of 1985. See, e.g. "Private Sources Are Used to Skirt Ban on Contra Aid," Miami Herald, June 24, 1985, at 1A; "Nicaraguan Rebels Getting Advice from White House on Operations," New York Times, August 8, 1985, at Al. 28. Currier Dep., 5/5/87, at 16-18; Kiszynski Dep., 5/5/ 87, at 13-14. 29. Feldman Dep., 4/30/87, at 26; Kellner Dep., 4/30/87, at 7. The Committees have not been able to establish with any certainty the trigger for this inquiry from Washington. Kellner believes the call came from Mark Richard, Deputy Assistant Attorney General for the Criminal Division, and had been sparked by a letter from Garcia's wife that had found its way to Richard's desk. Richard, on the other hand, does not recall being aware of the investigation until some time later in March, when he received a "buck slip" on the matter from Steven Trott, then Assistant Attorney General for he Criminal Division. Kellner Dep., 4/30/87, at 7-8; Richard Dep., 8/19/87, at 53-54. 30. Feldman Dep., 4/30/87, at 26-27, 37. Garcia's sen- tencing proceeding had been scheduled for March 19, 1986. On March 18, Feldman filed a motion to continue this proceeding for 30 days, alleging that the day before, "at approximately 4:30 p.m., the United States Attorneys Office for the Southern District of Florida was requested by the Department of Justice to seek a continuance of the sentenc- ing hearing." J19348. No one is quite certain, however, who made or even who received this request. Kellner Dep., 4/ 30/87, at 9-11; Feldman Dep., 4/30/87, at 31-32; Richard Dep., 8/19/87, at 71-73. 31. Currier Dep., 5/5/87, at 38-40; Kiszynski Dep., 5/5/ 87, at 21-22. 32. Jensen Dep., 7/6/87, at 48-49. 33. Id., at 48; Ex. EM73. Because the investigation re- mains an open matter, the memorandum's contents are clas- sified in their entirety. 34. Jensen Dep., 7/6/87, at 54. Jensen, Trott, and Richard all contend that the sensitive nature of the investigation, its international overtones, and the possible danger to Ambas- sador Tambs made an NSC briefing advisable. They also concur that the level of supervision exercised by the De- partment of Justice was consistent with the nature of the investigation. Jensen Dep., 7/6/87, at 48, 53, 55; Trott Dep., 7/2/87, at 87; Richard Dep., 8/19/87, at 87. Jensen ex- plained that he briefed only the NSC on this matter because Revell's memorandum, which remains classified, indicated that the CIA and the State Department were already being briefed. Jensen Dep., 7/6/87, at 55-57. At his deposition, Meese could not think of anything about the case that merited a special briefing of the NSC. Meese Dep., 7/8/87, at 227. 35. Meese Dep., 7/8/87, at 221. 36. Ex. EM73. 37. Ex. EM73. 38. Richard Dep., 8/19/87, at 68-70, 87, 92-93; Trott Dep., 7/2/87, at 9; Jensen Dep., 7/6/87, at 57-59. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 5 39. Jensen Dep., 7/6/87, at 60-61; Poindexter Test., 7/21/ 87, at 180-81. 40. Feldman Dep., 4/30/87, at 37-38. 41. Id., at 47-50. 42. Id., at 56-59. 43. Id., at 56-59. Although Hull told Feldman he had not spoken to anyone at the embassy before he cancelled the interview, Kirt Kotula, an embassy official, told Feldman that he had, in fact, spoken to Hull and advised him of his right to counsel. Feldman Dep. 4/30/87, at 58-61. 44. Feldman Dep., 4/30/87, at 60-61. 45. Exhibit TC15. Castillo has testified that he never discussed the investigation with Owen. Castillo Test., 5/29/ 87, at 158, 192, 197 (Executive Session). He was uncertain whether he had ever discussed the investigation with North. Castillo Test., 5/29/87, 154-58 (Executive Session). North's notes suggest that he was advised of the investigation by Castillo. In an entry dated "31 Mar 86," North wrote: "1700?call from [Thomas [Castillo?]] * * * - Asst. U.S. Attorney/2 FBI Resident Agent - Rene Corbo - Terrell (Flaco) - CMA - Guns to [a Central American location]. North Notebook, 3/31/86, Q 2078. 46. Feldman Dep., 4/30/87, at 68-71; Barnett Dep., 7/17/ 87, at 27-31; Scharf Dep., 7/17/87, at 31; Gregorie Dep., 7/ 17/87, at 12-15. 47. Barnett Dep., 7/17/87, at 33-34. 48. Testimony by all the other participants in the meeting indicates that Scharf and Gregorie were also in Kellner's of- fice when Liewant arrived. Scharf Dep., 7/17/87, at 15-17; Gregorie Dep., 7/17/87, at 15-20; Kellner Dep., 4/30/87, at 17-20; Feldman Dep., 4/30/87, at 68-70; Barnett Dep., 7/ 17/87, at 38-41. 49. Liewant Dep., 6/2/87, at 9-14. 50. Barnett Dep., 7/17/87, at 38-41; Scharf Dep., 7/17/ 87, at 15-17; Gregorie Dep., 7/17/87, at 15-20; Kellner Dep., 4/30/87, at 17-20; Feldman Dep., 4/30/87, at 68-70. 51. Richard Dep., 8/19/87, at 92-93; Trott Dep., 7/2/87, at 9; Jensen Dep., 7/6/87, at 58-59; Meese Dep., 7/8/87, at 222. Nor do the incomplete telephone records available to the Committees reflect any calls from the Department of Justice to Kellner on the afternoon of April 4. Because the federal government uses a separate network, "FTS," for intra-governmental telephone calls, commercial toll records are not useful. The General Services Administration, which maintains and monitors the FTS network, routinely records information for only 20% of the calls made on the network. A review of these records for April 1986 reveals a call on April ,4 from the Office of the Deputy Attorney General to the Office of the United States Attorney for the Southern District of Florida. The call took place at 11:33 a.m. and lasted only 1 minute. It was, therefore, too early and too brief to be the call described by Liewant, J20977-J21016. This evidence is not, of course, conclusive, since the call described by Liewant could have originated in Miami or could have been among the 80 percent originating at the Department of Justice but not recorded. 52. Feldman Dep., 4/30/87, at 69. 53. Kellner Dep., 4/30/87, at 25-27. There are conflicting accounts as to who rode in what cars with whom. Compare Kellner Dep., 4/30/87, at 26-27; Jensen Dep., 7/6/87, at 63- 64; Meese Dep., 7/8/87, at 225. 54. Kellner Dep., 4/30/87, at 28-33. 55. The Miami News had run a story the day before describing certain aspects of the investigation. See "U.S. Probes Reports of Smuggling for Nicaraguan Rebels," The Miami News, 4/11/86, at 1; Feldman Dep., 4/30/87, at 70. 56. Meese Dep., 7/8/87, at 219-22. 57. Feldman Dep., 4/30/87, at 76-77. 58. Id., at 78-80, J19450. 59. Gregorie Dep., 7/17/87, at 31-33. 60. Feldman Dep., 4/30/87, at 81-83; Kellner Dep., 4/30/ 87, at 46. 61. Feldman Dep., 4/30/87; Kellner Dep., 4/30/87, at 47. 62. Feldman Dep., 4/30/87, at 92-95; Scharf Dep., 7/17/ 87, at 53-58; Kellner Dep., 4/30/87, at 47-49. This last version, including Scharf s changes, was ultimately leaked to the news media. Feldman Dep., 4/30/87, at 96-98. 63. Feldman Dep., 4/30/87, at 102-03; Currier Dep., 5/5/ 87, at 47-48; Kiszynski Dep., 5/5/87, at 31-33. 64. Feldman Dep., 4/30/87, at 104-09. 65. Feldman Dep., 4/30/87, at 104-09; Kellner Dep., 4/ 30/87, at 57-70; Richard Dep., 8/19/87, at 87-90. 66. Gregorie Dep., 7/17/87, at 39; Feldman Dep., 4/30/ 87, at 115. The Hasenfus crash took place on October 5, 1986. 67. Feldman Dep., 4/30/87, at 108-10; Currier Dep., 5/5/ 87, at 49; Kellner Dep., 4/30/87, at 116-17; Gregorie Dep., 7/17/87, at 44. 68. Feldman Dep., 4/30/87, at 110. 69. North PROF Note to Poindexter, 9/17/86, N12602. 70. Memorandum from John L. Martin to William Weld, 9/30/86, J4627-28. 71. Id. 72. Draft State Dept. cable from Deputy Assistant Secre- tary James Michel to Legal Attache in a Central American country, 9/24/86, J4618-21. 73. North PROF Note to Poindexter, 9/17/86, N12602. 74. Id. 75. Id. 76. Poindexter PROF Note to North, 9/17/86, N12604. 77. Richard Dep., 8/19/87, at 122, 126, 132. 78. Id., at 132. 79. Id., at 121-23. 80. Trott Dep., 7/2/87, at 78. 81. Richard Dep., 8/19/87, at 126-28. 82. Id., at 124. 83. Id., at 126-27. Gorman, however, testified that there was discussion that the official may start to talk and reveal sensitive matters the U.S. would prefer remain secret. Gorman maintained he "was prepared to believe that the official might engage in all kinds of outrageous representa- tions." In Gorman's view, however, these sensitive matters did not pertain to questionable Contra-support activities. Memorandum (5/19/87) of Interview (4/16/87) with Gorman, at 12-14. 84. Richard Dep., 8/19/87, at 127. 85. North PROF Note to Poindexter, 9/18/86, N12603. 86. Richard Dep., 8/19/87, at 129-30. 87. R. Miller Dep., 8/21/87, at 381-90. 88. North 's notes demonstrate the regularity with which Miller spoke with North about the "prince." These notes refer to the "prince" by his code name, "Jewell." (See e.g., North Notebook, Q1798, Q1858, Q1930.) R. Miller Dep., 8/ 20/87, at 98-99. 89. R. Miller Dep., 8/21/87, at 390-93. 90. Id., at 377-78. 91. Id., at 393-94; Agent 1 Dep., 8/12/87, at 102-03, 112. 92. Agent I Dep., 8/12/87, at 105-06. 115 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 5 93. Id., at 106-10. 94. Id., at 114-16. 95. James Kramarsic Int. 96. McFarlane flatly denied that North had discussed the "prince" with him. McFarlane Test., 5/11/87, at 95-96. 97. Kramarsic Int., Exhibit 0LN264. 98. Kramarsic Int., Exhibit 0LN264. 99. Kramarsic Int., Ex. 0LN265. According to Miller, he unsuccessfully had attempted to contact the FBI agent when he learned of the investigation from North. R. Miller Dep., 8/21/87, at 396-97. 100. Kramarsic Int.; FB2715-20. 101. Revell Dep., 7/15/87, at 83-89; Nicholas Harbist Int., 6/4/87. 102. A portion of these payments was used by DEA agents with whom the "prince" was traveling. R. Miller Dep., 8/21/87, at 378-79. 103. R. Miller Dep., 8/21/87, at 405-06. 104. Id., at 406-07; see Chapter 4. 105. Nicholas Harbist Int., 6/4/87. 106. Amended Complaint, Avirgan, et al. v. Hull, et al., No. 86-1146 (S.D., Fla., filed Oct. 3, 1986). 107. Revell Dep., 7/15/87, at 36. 108. FBI Teletype, 5/16/86, from Washington Field Office to Intelligence Division, FBI Headquarters, at 1-2, FB2983-86. 116 109. FBI Teletype, June 11, 1986, from Washington Field Office to Intelligence Division, FBI Headquarters, at 3-5, FB 2977-82. 110. FBI teletype, June 11, 1986, from Washington Field Office to Intelligence Division, FBI Headquarters, FB 2977- 82. 111. Robinette Dep., 1/17/87, at 5-7. 112. Terrell had been interviewed by Assistant United States Attorney Jeffrey Feldman in connection with the investigation being conducted into alleged violations of the Neutrality Act and an alleged plot to assassinate Ambassa- dor Lewis Tambs. FBI Form 302, Subj: interview of Ter- rell, dated 7/16/86. Of Terrell's allegations about Posey and the plot to assassinate Tambs, Posey said Terrell "is full of bull." Posey Dep., 4/23/87, at 89. 113. Revell Dep., 7/15/87, at 25-28. 114. Revell Dep., 7/15/87, at 26. 115. Robinette Int., 6/15/87, at 13-14. FBI 302 Report, 7/ 16/86. See also WFO 2 488-1 and 199C-4773. 116. FBI form 302, Subj: Interview of Oliver North, dated 7/22/86, FB3256-58. 117. FBI form 302, Subj: Interview of Oliver North, dated 7/22/86, FB3256-58. 118. Revell Dep., 7/15/86, at 27, 32. , Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 6 Keeping "USG Fingerprints" Off The Contra Operation: 1984-1985 In October 1984, the President signed into law a ver- sion of the Boland Amendment barring the Central Intelligence Agency, the Department of Defense, and "any other agency or entity of the United States in- volved in intelligence activities" from providing sup- port to Contra military activities. Explaining the stat- ute on the floor of the House of Representatives im- mediately before its passage, Representative Edward P. Boland, then Chairman of the House Permanent Select Committee on Intelligence, was clear about the legislation's intent: the provision "ends U.S. support for the war in Nicaragua." National Security Advis- er Robert C. McFarlane acknowledged that intent: "the Boland Amendment governed our actions," he told these Committees.2 Although Congress eventual- ly approved humanitarian aid for the Contras and authorized intelligence sharing, the full prohibition on lethal support remained in effect until October 1986. Despite the Boland Amendment's prohibition, U.S. support for the Nicaraguan Resistance continued. As set forth fully in Chapters 2 and 3, members of the National Security Council staff?with help from offi- cials of other Government agencies?supervised a covert operation supporting the Contras. They pro- vided weapons and military intelligence to the Resist- ance and resupplied troops inside Nicaragua, using funds raised from foreign countries, private citizens, and ultimately the Iranian arms sales. They did so despite the unambiguous intent of Congress that the U.S. Government, including the NSC staff, could not aid the Contras' military effort. Secrecy, therefore, was vital to the success of the Contra operation. Disclosure of U.S. support, Oliver North wrote to John Poindexter in May 1986, "could well become a political embarrassment for the Presi- dent and you." 3 Moreover, disclosure would surely doom the project. Poindexter told these Committees: "It was very likely if it became obvious what we were doing that Members of Congress would have maybe tightened it [the law] up. I didn't want that to happen." 4 * North's term used in two PROF notes to Poindexter dealing with the possible disclosure of the U.S. Government link to the Contra operation. [Exhibits OLN-131 and OLN-307', Hearings, 100-7, Part III.] But just as secrecy was vital to the operation's success, even limited success jeopardized that secrecy. As the Contras continued to purchase supplies and equipment despite the cut-off of aid, Congress and the media inquired, inevitably, about the sources of Re- sistance support and funding. Officials involved in the Contra support operation took every precaution to ensure that the project re- mained secret. They withheld the facts from some Administration officials who spoke out frequently on U.S. policy in Central America, forcing them to mis- lead Congress and the American people. They dis- couraged reporters from pursuing the link between the NSC staff and the Contras. And they responded to direct inquiries with half truths and false state- ments. 1983-1984: Suspicions, and the "Casey Accords" Even before the full-prohibition Boland Amendment was enacted in October 1984, Members of Congress were concerned that the Administration was not pro- viding sufficient information about the covert pro- gram in support of the Nicaraguan Resistance. In April 1983, Senator Daniel Moynihan, Vice- Chairman of the Senate Select Committee on Intelli- gence, spoke of a "crisis of confidence" between Con- gress and the intelligence agencies running the oper- ation.5 A year later, Committee Chairman Barry Goldwater rebuked the CIA in the wake of the rev- elations related to Nicaragua harbor mining. He wrote to CIA Director William Casey: "[W]e were not given the information we were entitled to receive." 6 Expressing the sense of many in Congress, Goldwater said at an Intelligence Committee hearing: "We cannot play guessing games with the intelligence com- munity if the relationship between legislative and ex- ecutive branches is to work." 7 After the mining incident became public in April 1984, Director Casey was called before an extraordi- nary secret session of the Senate-60 Members were present?to explain the failure to consult adequately ahead of time. The Director apologized at the session, and promised a new spirit of cooperation.5 The prom- ise would soon be formalized in what became known 117 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 I _ Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 6 as the "Casey Accords," an agreement between the CIA and the Senate Intelligence Committee on con- sultation guidelines for covert operations. Under the agreement, the CIA would share explanatory material outlining the exact nature, goals, and risks of the covert operation. The CIA would also give prior notice of any "significant, anticipated intelligence ac- tivity," even if the planned activity was part of an ongoing covert operation.9 The accords reflected the recognition that coopera- tion and forthrightness on covert activities were es- sential in the relationship between the Executive and Congress. But the subsequent actions of Casey and members of the NSC staff did not reflect that recogni- tion. 1984: Testimony Before Congress on Third-Country Assistance In December 1983, the President signed into law leg- islation limiting funding for the Contras in fiscal year 1984 to $24 million.' ? The limit was the result of a compromise between the House, which hoped to cur- tail support for the Contras, and the Senate, which favored continuing the aid. Explaining the compro- mise on the floor of the House, Representative Boland said the $24 million, which would likely run out by June 1984, represented a "cap on funding from what- ever source." Representative J. Kenneth Robinson, the ranking Republican on the House Intelligence Committee, said that the $24 million compromise meant "no additional funding could be made avail- able" for the Nicaraguan Resistance "unless additional authorization and/or appropriations are approved by both Houses."12 The Administration, however, sought funding for the Contras beyond the $24 million appropriation. On several occasions in 1984, officials tried to obtain aid for the Contras from third-country sources. Those attempts occurred as early as February, when the Administration began to suspect that Congress was not likely to approve supplemental funding for the Contras when the $24 million ran out." Shortly thereafter, McFarlane sought to obtain equipment, materiel and training for the Contras from Coun- try 1.14 In a March 27, 1984, memo, CIA Director Casey urged McFarlane to proceed with his plans to obtain aid from Country 1, and told him that the CIA was working along a second track to obtain assistance from that Country. Casey added in the memo that the CIA also was exploring "the procurement of assist- ance from [Country 6]." That country had "indicat- ed" that it might make "some equipment and training available" to the Contras." Country 1 rejected McFarlane's approach, and the advance to Country 6 was called off, in part because of the revelations in April relating to the Nicaraguan harbor mining." 118 As McFarlane testified, those revelations left a "zero probability" that Congress would provide sup- plemental funding for the Contras, "and no amount of wringing our hands was going to change that."17 In May or June, the National Security Adviser obtained a $1 million-a-month donation from Country 2, and informed the President, who expressed "satisfaction and pleasure" with the gift. McFarlane testified that he also shared the news with the Vice President." McFarlane informed the President of the donation using a notecard. He rejected the option of telling the President about the gift at a morning briefing because "there could be . . . as many as ten people in the room [and] I simply didn't know for sure who would be there." 9 In order to further ensure that the new Contra funding remained secret, McFarlane did not share de- tails of the gift with the Secretaries of State or De- fense. McFarlane, who acknowledged that he regard- ed the Country 2 contribution as a secret to be closely held, testified he told them in vague terms that the Contras "had been provided for through the end of the year."2? Neither Secretary of State Shultz nor Secretary of Defense Weinberger recall receiving any information on third-country funding until later.2' McFarlane also instructed North not to share news of the new funding with anyone; indeed, according to North, McFarlane never told him which country had contributed.22 North, in turn, instructed Contra leader Adolfo Calero: "never let agency [CIA] know of amt, source, or even availability [of the funds]. . . . No one in our govt. can be aware. . . . Your organiza- tion must not be fully aware."" Stories about the third-country contacts soon began appearing in the media. In mid-April 1984, The Wash- ington Post quoted anonymous sources speculating that third countries might be persuaded to provide money for the Contras.24 Administration officials were quoted in the story as flatly denying that the United States would approach foreign countries for assistance." In an article 4 days later discussing up- coming U.S.-Israeli talks on Israeli assistance to Cen- tral American countries, The Washington Post quoted State Department spokesman John Hughes as saying, "The United States has no intention of using third countries to finance covert action in Central Amer- ica."" Although Hughes was not aware, his denial came at a time when the CIA and NSC staff were continuing their attempts to obtain third-country sup- port. Prompted by the reports, the House Permanent Select Committee on Intelligence requested an ap- pearance on May 2 by CIA Director Casey and Ken- neth W. Dam, then Deputy Secretary of State. The testimony occurred about 5 weeks after Casey had sent the memorandum to McFarlane outlining the CIA's efforts to obtain lethal assistance for the Con- tras from Country 1 and Country 6 and indicating Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 1 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 6 Casey's awareness of McFarlane's attempt to obtain assistance from Country 1. Coming only days after he had pledged to be fully candid with Congress, Casey's testimony was inconsistent with his memorandums: STOKES: . . . There has been some talk in the media with reference to [Country 1] or [Country 2] being alternative funding sources. What can you tell us about that? CASEY: Well, there has been a lot of discussion. We have not been involved in that at all. FOWLER: Who has? CASEY: I do not know.27 * FOWLER: . . . Is any element of our Govern- ment approaching any element of another Gov- ernment to obtain aid for the Contras? CASEY: No, not to my knowledge.28 Kenneth Dam acknowledged to the Committees that "there have been conversations with [Country 1]" about aid to the Contras and explained that those talks had led nowhere." He also said that there had been no "high level" approach to Country 2.30 Asked about Administration activities, Dam denied that the U.S. Government was approaching other countries for assistance: FOWLER: . . . Is the Administration actively looking for help, either in funding or in tactical aid to our [Contra] operation? DAM: . . . We are not making approaches to other Governments. So it is clear?you know, when you say 'actively' I do not know what is going on in terms of people's minds or conversa- tions among people within the executive branch. We do not have a program of approaching other governments for support, and we are not doing so. FOWLER: . . . We want to know whether or not in light of serious questions about the Con- gress' willingness to continue this funding, whether or not our Government in all of its ramifications is looking for help, both in funding and the possibility of some tactical or strategic or geopolitical?whatever you want to call it?help to our operations and policy in Nicaragua. DAM: All I can do is answer precisely, and that is what I am trying to do. We have no program of approaching other Governments. We are not currently approaching other Governments on this subject. I am not going to tell you we will not sometime in the future. We do not see this as a realistic approach. We do not see this as a solu- tion, and I think that is a very precise answer." Dam's denials accurately reflected State Department policy but not Administration activities. There is no evidence that Dam was aware of the Casey and McFarlane third-country efforts or that he did not make his statements in good faith. However, Casey, who knew at least about the approaches to Countries 1 and 6, did not correct Dam's statements. With the help of the Country 2 donation, the Con- tras survived beyond the summer of 1984, when their Congressionally approved $24 million allotment had been exhausted. The donated funds began to flow in July, and by September 4 the Contras had received $3 million.32 By then, Oliver North also had called on Richard Secord to purchase weapons for the Con- tras.3 3 On September 9, two major newspapers, The New York Times and the Miami Herald, published reports suggesting that third countries and private U.S. citi- zens had replaced the CIA in providing aid to the Contras.34 The reports prompted another Congres- sional inquiry. Three days after the stories appeared, the House Intelligence Committee called officials from the CIA and the State Department to appear before it. Members assumed that these officials? Dewey Clarridge, the CIA's Latin American Division Chief, and Ambassador Anthony Langhorne Motley, Assistant Secretary of State for Inter-American Af- fairs?would know whether the reports were true or false.35 Clarridge told the Members that the CIA believed the Contras had been receiving about $1 million per month3 6?precisely what Country 2 had provided. He added, however, "We know of no place or no country that has supplied any funds in any real amount."37 Motley, who had not been informed of the contribution from Country 2, testified: FOWLER: Are we, is the United States of America, soliciting help for the Contras? MOTLEY: No. No. FOWLER: In other countries? MOTLEY: No. FOWLER: Are we encouraging other countries to participate? MOTLEY: No, no, and that's a very good point. FOWLER: Are we under any negotiations or discussions with any other countries to aid these efforts? MOTLEY: No.3 8 Motley explained the "decision" made on this issue by senior Administration officials. As the $24 million Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 119 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 6 was running out, he said, the Administration decided that even though third-country solicitation was still "technically" permitted, a "feeling of mistrust" exist- ed, and "in that context it was decided that we would not encourage and that we would not facilitate either other governments or in private groups within the United States. And to my knowledge, that has been honored." 3 9 Committee member Wyche Fowler, Jr., responded that he had "a hard time believing . . . that our government does not know" how the Contras were surviving.40 Indeed, the President, the Vice Presi- dent, and the National Security Adviser knew that Country 2 had made a substantial donation to the Contras. Early 1985: The Second Country 2 Contribution In February 1985, the Administration obtained an ad- ditional donation from Country 2. A $5 million depos- it was made on February 27, 1985; by the end of March 1985, the amount totaled $24 million, bringing the total donation from that country to about $32 million.4' Again, officials took steps to ensure that the funding remained secret. McFarlane withheld information about the new do- nation from two likely recipients of Congressional inquiries on the subject of U.S. support for the Con- tras: Secretary of State Shultz and CIA Director Casey.42 The President did not tell Shultz either, even though he briefed the Secretary on his meeting with the donor country's head of state shortly after that meeting.43 Shultz testified: "I don't think he [the President] is out to deceive me."44 (Secretary of De- fense Weinberger, along with the Chairman of the Joint Chiefs of Staff, found out about the donation independently.45) About Shultz, McFarlane testified that he "shared virtually everything?I think indeed everything?with the Secretary of State that I would learn of rel- evance."'" Asked whether the reason he did not tell Secretary Shultz was "for his benefit, not for yours," McFarlane said yes.47 McFarlane further explained: "I am guessing that it [not telling Shultz] was prob- ably out of concern for further dissemination and compromise of that relationship, and damage and em- barrassment."'" State Department and CIA officials had been frequently questioned about the sources of Contra funding in 1984. And McFarlane's decision not to tell Secretary Shultz about the donation came shortly after The Washington Post publicized corre- spondence between Representative Joseph P. Addab- bo, the former Chairman of the Defense Subcommit- tee of the House Appropriations Committee, and the State Department. In a December 11, 1984, letter, Addabbo had asked Shultz whether some countries receiving U.S. foreign assistance had diverted some of 120 those funds to the Contras. The State Department replied negatively one month later, and the corre- spondence was the subject of an article on Janu- ary 23.49 Like McFarlane, North took action in February 1985 to prevent disclosure of U.S. Government activi- ties in support of the Contras. In a letter addressed to Calero about the new large donation, North revealed his intention to conceal facts from Congress: Please do not in any way make anyone aware of the deposit. Too much is becoming known by too many people. We need to make sure that this new financing does not become known. The Congress must believe that there continues to be an urgent need for funding.5? Within weeks of the new donation, Assistant Secre- tary Motley was called to testify before the Senate Committee on Foreign Relations. On March 26, 1985, Senator Christopher Dodd asked about "a number of rumors or news reports around this town about how the Administration might go about its funding of the Contras in Nicaragua. There have been suggestions that it would be done through private groups or through funneling funds through friendly third na- tions, or possibly through a new category of assist- ance and asking the Congress to fund the program openly." Motley replied that the Boland Amendment prohibited "any U.S. assistance whether direct or in- direct, which to us would infer also soliciting and/or encouraging third countries; and we have refrained from doing that because of the prohibition."5' Senator Dodd pursued the matter further: DODD: Well, that aside, looking at these resolu- tions, there are always clever ways of discover- ing something that may have been omitted. All I am asking from you is, and from the Administra- tion more directly, is whether or not we can have an assurance that there will be no indirect efforts made to finance the Contra operation through third party nations or through other ve- hicles within the foreign aid authorization to fi- nance this operation, that you will proceed pursu- ant to the resolution as adopted on the continuing resolution. MOTLEY: I think that was one thing that was loud and clear with us when I started. I told you that we understand what it means, direct and indirect, including third party. We take it to the letter of the law at its most liberal interpretation. And I can assure you that we have done it in the past. You want my assurances that we will con- tinue to do it in the future, and if you feel that is necessary, I will so give it to you. DODD: We have that assurance, then. Approved For Release 2011/05/25 : CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 6 MOTLEY: That is right.52 After Senator Dodd referred to the availability of possible loopholes, Ambassador Motley responded: We are going to continue to comply with the law. I am not looking for any loopholes. . . . Nobody is trying to play games with you or any other Member of Congress. That resolution [the Boland Amendment] stands, and it will continue to stand; and it says no direct or indirect. And that is pretty plain English; it does not have to be written by any bright, young lawyers. And we are going to continue to comply with that.53 Again, Motley was not informed that the Adminis- tration had obtained the donation from Country 2, that the National Security Adviser and the CIA had sought assistance from other countries, or that the NSC staff had begun to supervise the covert Contra operation out of its offices. Casey Briefing of Senate Intelligence Committee In late 1984 and early 1985, North sent CIA intelli- gence information to the Contras through Robert Owen.54 The CIA Chief of the Central American Task Force (C/CATF), who ordinarily passed that information to North, denied to these Committees that he knew intelligence was being transmitted by North via Owen to the Contras.55 On April 17, 1985, CIA Director Casey, accompanied by Deputy Secre- tary of State Dam, briefed the Senate Intelligence Committee on intelligence operations in Nicaragua. Casey told Committee members that, apart from intel- ligence which might jeopardize the lives of Ameri- cans, "we've kept out of any intelligence exchange . . . . We haven't been providing intelligence."56 Prior to the date of the briefing, North had ob- tained Richard Secord's assistance to purchase weap- ons for the Contras with the funds donated from Country 2. North testified that Casey suggested Secord for this purpose.57 However, Casey assured the Members that "over the past year, we strictly honored in practice and in spirit the Congressionally mandated restrictions on military aid to the Con- tras."58 He testified: CASEY: [Wle have carefully kept away from anything which would suggest involvement in their activities which have been carried on quite effectively and with considerable success in get- ting support and getting weapons and getting am- munition on their own. They've gone into the international arms markets. We know that from lots of sources that they were buying things from other countries and bringing in ammunition and been raising money. But we don't have any idea as to the quantity, what they got in the pipeline or? CHAIRMAN: That's all I wanted to establish." Deflecting Media Inquiries By June 1985, reporters were close to establishing a link between the NSC staff and Contra support. A June 3 memo from North to Poindexter illustrates North's efforts to discourage reporters from pursuing the story. North boasted in the memo that at his request, Adolfo Calero told Alfonso Chardy of the Miami Herald "that if he (Chardi) [sic] printed any derogatory comments about the FDN or its funding sources that Chardi [sic] would never again be al- lowed to visit FDN bases or travel with their units." North added: "At no time did my name or an NSC connection arise during their discussion."" North and retired Major General John K. Singlaub had already devised a plan to divert press attention away from the NSC staff's Contra operation, which by then was being coordinated under North by Rich- ard Secord, Richard Gadd, and their employees. North encouraged Singlaub to court the media, realiz- ing that, as Singlaub put it, "If I [Singlaub] had high visibility, I might be the lightening rod and take the attention away from himself [North] and others who were involved in the covert side of support."' The plan seems to have had some success. Shortly after his discussion with North, Singlaub was the sub- ject of a long article in The Washington Post con- necting him to support for the Contras," and in the coming months, he would be featured in virtually all the major newspapers. Although North himself soon would be the subject of press reports, Secord was not mentioned in the media until mid-1986, and details of North's resupply operation were not revealed until the plane carrying Eugene Hasenfus was shot down in October 1986. June-August 1985: Press Reports on NSC Staff and Contra Support By April, third-country funding had not only sus- tained the Contras but had "allowed the growth of the Resistance from 9,500 personnel in June 1984 to over 16,000 today?all with arms," according to an April 11, 1985, memo from North to McFarlane." During May, according to a May 31 memo, "the Nicaraguan Resistance recorded significant advances in their struggle against the Sandinistas."64 In June, reporters first linked the Contras' success with North. By mid-August, most major news organi- zations had published or broadcast reports on this "influential and occasionally controversial character in the implementation of the Reagan Administration's foreign policy." 6 5 121 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 6 News stories in June 1985 explored the sources of Contra funding. On June 10, the Associated Press distributed an article by Robert Parry suggesting that the White House had lent support to private fundrais- ing efforts. The article named North as the White House contact for such efforts, which according to the report, revolved around John Singlaub.66 Two weeks later, the Miami Herald reported that the Administration "helped organize" and continued to support "supposedly spontaneous" private fundrais- ing efforts. The article quoted extensively from ousted Nicaraguan Democratic Force (FDN) leader Edgar Chamorro, who described a trip by North and a CIA officer to a Contra base in the spring of 1984. North and the CIA officer assured the rebels, according to the article, that the White House would "find a way" to keep the movement alive. Neither North nor the CIA officer specifically promised private aid, al- though "it was clear that was their intent," Chamorro was quoted as saying.67 In August, reports in The New York Times, The Washington Post, and other major newspapers assert- ed that White House support for the Contras involved more than fundraising. Oliver North had given the Contras "direct military advice" on rebel attacks, ex- ercising "tactical influence" on military operations, The New York Times reported. The newspaper re- ported that North had also "facilitated the supplying of logistical help" to the Contras, filling in where the CIA could no longer help. The information was at- tributed to anonymous "administration officials."69 Denials The day after this story appeared, President Reagan responded to the allegations. "[W]e're not violating any laws," the President said as he signed legislation providing $27 million in humanitarian aid for the Contras and authorizing the exchange of intelli- gence.69 In a statement released later that day, the President added that he would "continue to work with Congress to carry out the program as effectively as possible and take care that the law be faithfully executed." 7 ? The National Security Adviser made his first com- ments on the allegations about North in an interview with The Washington Post. In an August 11 article, McFarlane said he had told his staff to comply with the Boland Amendment. "We could not provide any support," he said, but he also stated that the NSC staff could and did maintain contact with the Con- tras.71 Summer and Fall August 1985: Congressional Inquiries In the third week of August, Representative Michael Barnes, Chairman of the Subcommittee on Western Hemisphere Affairs of the House Committee on For- 122 eign Affairs, and Representative Lee H. Hamilton, Chairman of the House Permanent Select Committee on Intelligence, separately wrote the President's Na- tional Security Adviser, inquiring into NSC support for the Contras." Representative Barnes' letter, dated August 16, cited press accounts as the cause of con- cern about NSC staff support for the Contras. The reports, Barnes wrote, "raise serious questions regard- ing the violation of the letter and spirit of U.S. law." The letter summarized the focus of his inquiry: Whether the NSC staff provided "tactical influence on rebel military operations;" whether the NSC staff was engaged in "facilitating contacts for prospective financial donors;" and whether the NSC staff was involved in "otherwise organizing and coordinating rebel efforts." Barnes made clear his view that such activities would violate the intent, if not the letter, of Congres- sional restrictions on aid to the Contras: "Congres- sional intent in passing the Boland Amendment was to distance the United States from the Nicaraguan rebel movement, while the Congress and the nation debated the appropriateness of our involvement in Nicaragua." The letter continued, "The press reports suggest that, despite congressional intent, during this period the U.S. provided direct support to the Nicaraguan rebels." Barnes' letter concluded with a request for all information and documents "pertaining to any contact between Lt. Col. North and Nicaraguan rebel leaders as of enactment of the Boland Amendment in Octo- ber, 1984." Representative Hamilton's letter also cited press ac- counts and expressed a concern about "actions that supported the military activity of the contras." He requested "a full report on the kinds of activities regarding the contras that the NSC carried out and what the legal justification is for such actions given the legislative prohibitions that existed last year and earlier this year." In addition to the requests from Representatives Hamilton and Barnes, two other inquiries were sent to McFarlane. On October 1, Senators David Duren- berger and Patrick J. Leahy, Chairman and Vice Chairman of the Senate Select Committee on Intelli- gence, sent a letter with specific questions, following up on a meeting with McFarlane." And on Octo- ber 21, Representative Richard J. Durbin wrote McFarlane asking him to respond to charges made in the media. 7 4 Responses to Congress: The McFarlane Letters As described fully in Chapter 3, the covert Contra support operation expanded substantially in the summer and fall of 1985. Until that point, North had arranged for funding, coordinated the purchase of arms, and passed military intelligence to the Contras. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 6 Beginning with the July meeting at the Miami Airport hotel, North sought to broaden the project, attempt- ing to replicate the earlier CIA covert operation. The Enterprise took control of third-country funds and other money obtained with the help of the NSC staff, and began to set up its own air resupply operation to provide weapons and material to Resistance troops inside Nicaragua. On September 5, McFarlane sent the first of his responses to Congress. He wrote to Representative Hamilton: "I can state with deep personal conviction that at no time did I or any member of the National Security Council staff violate the letter or spirit" of Congressional restrictions on aid to the Contras. In denying allegations about NSC staff activities, the letter echoed the language of the Boland Amendment: I am most concerned . . . there be no misgivings as to the existence of any parallel efforts to pro- vide, directly or indirectly, support for military or paramilitary activities in Nicaragua. There has not been, nor will there be, any such activities by the NSC staff.75 This letter, drafted by McFarlane himself, served as the model for five additional letters prepared by North, signed by McFarlane, and sent in September and October in response to Congressional inquiries.76 In testimony before these Committees, McFarlane called these responses "too categorical."" He said: "I did not give as full an answer as I should have."78 North went further, acknowledging that statements in the letters were "false," and summarizing the re- sponses as "erroneous, misleading, evasive, and wrong." 7 9 McFarlane wrote to Hamilton that he made his categorical denials only after he "thoroughly exam- ined the facts and all matters which in any remote fashion could bear upon these charges."8? A review by the NSC staff did take place, but the actions taken in conjunction with that review leave it open to ques- tion. First Reaction: Conceal the Facts When the Barnes letter arrived, Poindexter, who was then the Deputy National Security Adviser, as- signed North to draft the response, noting on a memo he had received from a subordinate: "Barnes is really a trouble maker. We have good answers to all of this."' The "good answers," Poindexter acknowl- edged in testimony, involved concealing NSC staff activities supporting the Contras: Q: And when you suggested that he prepare the first draft of the response, was it your intention that Colonel North be able to answer that letter with finessing a description of his activities? A: That is exactly right. Q: That is why you designated him as the action officer? A: That is right, because my objective here again would have been to withhold information.82 McFarlane, meanwhile, had decided to draft the initial response himself. In preparation, he instructed Poindexter to assemble "records, files of all memoran- dums, papers, travel vouchers, and so forth" relating to the Congressional inquiries." The Committees un- covered no evidence to suggest that the officers who conducted the document search were aware of or attempted to conceal the full extent of NSC staff activities. The search, however, was conducted nar- rowly. The information policy officer assigned by Poindexter to conduct the search wrote the following in a memo presenting plans for the document search: [T]he search should be as narrowly focused as was the request. In this case, Congressman Barnes has focused on `. . . documents, pertaining to any contact between Lt. Col. North and Nica- raguan rebel leaders as of. . . October, 1984.' . . . Fishing expeditions in all files relating to Central America and/or Nicaragua are NOT necesssary to respond to the request.84 The officer ruled out a search of the files in North's office, explaining, "they are 'convenience files' gener- ally made up of drafts, and/or copies of documenta- tion in the institutional and Presidential Advisory files."85 North's files, in fact, included nonlog memos, many PROF notes, his notebooks, and letters to Calero, Owen, and others. Finally, the officer noted that appointment and tele- phone logs had become "favorite targets" of such Congressional inquiries, and suggested "[i]t may be in our interest to be terribly forthcoming and bury Mr. Barnes in logs of dates and/or names re meetings and telecons or perhaps to offer to do so putting him on notice that the logs give times and dates but no sub- stance." She recommended, however, "that for now we limit the search of appointment and telephone logs to 011ie," thus leaving the search to the main target of the inquiry. Under the recommendation, North would be asked to sample the logs and "give us a sense of what they consist of and of the potential relevance to the request." 8 6 Poindexter approved that recommendation, along with the other recommendation to begin a search of all Presidential and official NSC files. He also did not indicate any disagreement with the officer's statement that North's office files ought not be searched.87 Within a few days, some 50 relevant documents were identified, and 10 to 20 were deemed worthy of review. They were given to Commander Paul Thompson, the NSC's General Counsel. On or about August 26, Thompson gave the documents to McFar- 123 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 . .1. 1 ? Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 6 lane, warning him that some warranted concern and raising the possibility of asserting executive privilege in response to the Barnes inquiry." The Six "Troubling" Memos McFarlane reviewed the documents and selected six memorandums which, despite the narrow focus of the search, "seemed to me to raise legitimate ques- tions about compliance with the law." He added: "[A]n objective reading would have taken passages in each of these memorandums to be either reflective of a past act that was not within the law or a recommen- dation that a future act be carried out that wouldn't be."99 A summary of the six documents, all memos from North to McFarlane, follows: Memo of December 4, 1984: "Assistance for the Nicaraguan Resistance." The memo 90 described a meeting between North and an official of Country 4, a totalitarian country, a meeting undertaken "in accord with prior understand- ing." 91 At the meeting, according to the memo, North at- tempted to convince the official to permit a sale of antiaircraft missiles and launchers to the Contras. The official had mistakenly believed that the weapons were intended for the Central American country listed on the end-user certificate. The memo shows North's efforts, only months after the most restrictive Boland Amendment went into effect, to obtain sophis- ticated weapons for the Contras. The memo also recounted a meeting with Singlaub, who described his efforts to solicit aid for the Contras from two other countries located in the Far East. North wrote, "If it is necessary for a USG official to verify Calero's bona fides, this can be arranged."92 Such an arrangement would constitute facilitation of a contribution to the Contras. Finally, the memo dis- cussed David Walker, a former British Special Air Services officer who, in a meeting with North, of- fered to conduct sabotage operations for the Resist- ance. "Unless otherwise directed," North wrote, "Walker will be introduced to Calero and efforts will be made to defray the cost of Walker's operations from other than Calero's limited assets."93 McFarlane testified that upon receiving this memo he believed that he asked Poindexter to investigate and "find out from Colonel North what had happened and how his actions squared with the law."94 The memo contains the notation: "Noted JP" in Poin- dexter's handwriting.95 Memo of February 6, 1985: "Nicaraguan Arms Shipment." The memo 96 noted that the Nicaraguan merchant ship, Monimbo, was about to pick up a load of arms for delivery to Nicaragua, a delivery that North 124 urged should be stopped. North noted, "if asked, Calero would be willing to finance the operation" to seize or sink the ship but does not have the personnel to do so. North suggested that foreign countries might be able to help.97 North added that if time did not permit a "special operation" to seize the ship, "Calero can quickly be provided with the maritime assets required to sink the vessel before it can reach port of Corinto." 98 North recommended "that you authorize Calero to be pro- vided with the information on Monimbo and ap- proached on the matter of seizing or sinking the ship." National Security Council records indicate that McFarlane saw this memo and did not approve or disapprove. McFarlane testified that he did not ap- prove.99 Admiral Poindexter wrote on the memo, "We need to take action to make sure ship does not arrive in Nicaragua." He attached a note saying, "Except for the prohibition of the intelligence com- munity doing anything to assist the Freedom Fighters I would readily recommend I bring this up at CPPG [Crisis Pre-Planning Group meeting] at 2:00 today. Of course we could discuss it from the standpoint of keeping the arms away from Nicaragua without any involvement of Calero and Freedom Fighters." 100 Memo of March 5, 1985: "[A Central American Country's] Aid to the Nicaraguan Resistance." The memo 101 requested McFarlane's signature on memorandums to senior Cabinet officers asking their views on increased U.S. aid to a Central American country. "The real purpose of your ?memo," North wrote, "is to find a way by which we can compensate [the country] for the extraordinary assistance they are providing to the Nicaraguan freedom fighters.',102 The attached memo did not include a reference to such a purpose. North attached to the memo for McFarlane false end-user certificates provided by the Central American country to cover nearly $8 million of munitions that were soon to be delivered to the FDN. The certificates, North wrote, "are a direct consequence of the informal liaison we have estab- lished with [an official of the Central American coun- try] and your meeting with him and [the country's] President." 103 The certificates were made out to Energy Resources International, a company owned by Albert Hakim and Secord. North added in the memo, "Once we have approv- al for at least some of what they have asked for, we can ensure that the right people in [the Central Amer- ican country] understand that we are able to provide results from their cooperation on the resistance issue." 104 North recommended that McFarlane sign and transmit the attached memo to the other Cabinet offi- cers. NSC records reflect that McFarlane approved the recommendation. However, McFarlane testified that aid was sought on its merits, and not to reward Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 6 the Central American country for helping the Con- tras.1?5 Memo of March 16, 1985: "Fallback Plan for the Nicaraguan Resistance." The memo 108 set out a plan to aid the Contras in the event that Congress did not do so. It included several recommendations. Among them: - The President publicly urge Americans to con- tribute funds for humanitarian aid to the Contras. McFarlane wrote in the margin, "Not yet."?7 - Creation of a tax-exempt corporation for dona- tions. McFarlane wrote "Yes."1?8 - "The current donors. . . be apprised of the plan and agree to provide additional $25-30M to the resistance for the purchase of arms and muni- tions." McFarlane wrote "doubtful."109 According to McFarlane, the term "current donors" referred to Country 2.110 Memo of April 11, 1985: "FDN Military Operations." In the memo,' 11 North described how the Contras spent the $24.5 million "made available since USG funding expired," making clear that the funds ob- tained by McFarlane went mostly for "arms, ammuni- tion, and other ordnance items." 112 North also wrote: Despite the lack of any internal staff organization . . . when the USG withdrew, the FDN has responded well to guidance on how to build a staff. Although there was a basic lack of familiar- ity with how to conduct guerrilla-type oper- ations, since July, all FDN commanders have been schooled in these techniques and all new recruits are now initiated in guerrilla warfare tac- tics before being committed to combat. In short, the FDN has well used the funds provided and has become an effective guerrilla army in less than a year. "3 North described Contra plans for "future oper- ations," including a further increase in troops, a spe- cial operations attack against the Sandinista Air Force, a ground military operation against a mine complex and, "the opening of a southern front . . . which will distract EPS units currently committed to the northern front."14 He continued: It is apparent that the $7M remaining will be insufficient to allow the resistance to advance beyond these limited objectives, unless there is a commitment for additional funds. The $14M which the USG may be able to provide will help to defray base camp, training, and support ex- penses but will not significantly affect combat operations until early Autumn due to lead-time requirements. Efforts should, therefore, be made to seek additional funds from the current donors ($15-20M) which will allow the force to grow to 30-35,000.115 North recommended "that the current donors be approached to provide $15-20M additional between now and June 1, 1985." 116 NSC records showed that McFarlane indicated no decision and returned the memo to the System IV files. McFarlane testified that he rejected North's recommendation and sought no further aid from Country 2. Memo of May 31, 1985: "The Nicaraguan Resistance's Near-Term Outlook." In the memo,' 17 North provided an update of Contra political and military activities. Among other things, he listed several important FDN military suc- cesses and concluded: "These operations were con- ducted in response to guidance that the resistance must cut Sandinista supply lines and reduce the effec- tiveness of the Sandinista forces on the northern fron- tier."118 North _concluded by noting, "[P]lans are un- derway to transition from current arrangements to a consultative capacity by the CIA for all political mat- ters and intelligence, once Congressional approval is granted on lifting Section 8066 restrictions [the Boland Amendment]."119 He added: "The only por- tion of current activity which will be sustained as it has since last June, will be the delivery of lethal supplies.'5120 North recommended that McFarlane brief the President on these matters.'21 NSC records do not indicate whether McFarlane approved this recommen- dation. Undiscovered Documents The memos Thompson presented to McFarlane in late August 1985 did not represent all the memos written by North to McFarlane demonstrating North's involvement in supporting the Contras. Be- cause it was limited by the information policy officer to official NSC and Presidential Advisory files, the search would not uncover "nonlog" memorandums. In one such memo, dated November 7, 1984, North made clear that he was attempting to pass intelligence information about Sandinista HIND helicopters to Calero.'22 Nor did the search turn up relevant logged memo- randums in which North indicated that he and Contra leaders had planned the timing of rebel military oper- ations. For example, a March 20, 1985, memo stated: In addition to the events depicted on the internal chronology at Tab A, other activities in the region continue as planned?including military 125 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 I] 11 , . .1..1.. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 6 operations and political action. Like the chronol- ogy, these events are also timed to influence the vote: - planned travel by Calero, Cruz and Robelo; - various military resupply efforts timed to sup- port significantly increased military operations immediately after the vote (we expect major San- dinista crossborder attacks in this time frame? today's resupply. . . went well); and - special operations attacks against highly visible military targets in Nicaragua.' 23 McFarlane-North Alteration Discussions On August 28, McFarlane and North began a series of lengthy meetings to fashion a response to the Con- gressional inquiries. According to a chronology pre- pared by McFarlane, they met six times and spoke by phone four times between August 28 and September 12, the date of the response to Representative Barnes.'" Although both McFarlane and North ac- knowledged to the Committees that they discussed altering the documents, the two dispute the purpose of the meetings. McFarlane maintained that the meetings, together with the document review, constituted his investiga- tion into North's activities, an investigation, he said, that turned up no proof of illegal activities.125 For example, he asked North about allegations relating to fundraising. According to McFarlane, North respond- ed that he had not solicited or encouraged donations, that he merely told potential donors, "if you want to be helpful to the Contras, go to Miami, they're in the phone book they have an office, and do it your- selves."' 26 The two reviewed the documents and, according to McFarlane, North explained that his memos were being misinterpreted. For example, in one memo North wrote that the FDN "has responded well to guidance on how to build a staff," and that "all FDN commanders have been schooled" in guerrilla warfare tactics.127 McFarlane said North told him, contrary to any implication in the document, that the guidance came not from him but from retired military officers hired by the Contras.128 As McFarlane related the events, North offered to alter the documents and McFarlane gave him a tentative go-ahead. McFarlane testified: Well, as we went through them, he pointed out where my own interpretation was just not accu- rate . . . and he just said, you are misreading my intent, and I can make it reflect what I have said 126 if this is ambiguous to you, and I said all right, do that.129 North shortly returned with a sample alteration. McFarlane's testimony indicates that the document North had altered was "FDN Military Operations," dated April 11, 1985. The recommendation in the document, "that the current donors be approached to provide $15-20M additional between now and June 1, 1985" was replaced with a recommendation that "an effort must be made to persuade the Congress to support the Contras."13? North had asserted, accord- ing to McFarlane, that the problem with the docu- ments was one of interpretation and that the changes would be slight. McFarlane acknowledged that this alteration left the document "grossly at variance with the original text."131 McFarlane testified that he did not replace any original NSC documents with altered documents and did not instruct North to do so. He said he took with him when he resigned the pages North had altered and eventually destroyed them.132 North's version of events is substantially different. McFarlane, North testified, brought the selected doc- uments to his attention, "indicated that there were problems with them, and told me to fix them." This meant, he testified, that he was to "remove references to certain activities, certain undertakings on my behalf or his, and basically clean up the record."133 The documents, North acknowledged, "clearly indicated that there was a covert operation being conducted in support of the Nicaraguan Resistance."34 That is why, North testified, McFarlane instructed him to alter them: The documents, after all, demonstrated his [McFarlane's] knowledge and cognizance over what I was doing, and he didn't want that. He was cleaning up the historical record. He was trying to preserve the President from political damage. I don't blame him for that.135 North testified that he did not abide by McFarlane's instruction until shortly before his dismissal: "I saw towards the end of my tenure that this list still had not been cleaned up, and so I went and got the documents out of the system and started revising the documents."136 Although the record is inconclusive on what exact- ly McFarlane and North discussed at their meetings, it is undisputed that both the National Security Advis- er and one of his principal staff members considered altering NSC documents. They discussed this course after receiving requests from several Members of Congress for access to precisely those types of docu- ments. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 6 Responses to Congress: The Denials Within days of his document review and discussions with North, McFarlane sent the first of his responses to Congress. In addition to the broad assurance that the NSC staff was complying with the "letter and the spirit" of the Boland Amendment, the responses con- tain specific denials of allegations that the NSC staff had provided fundraising or military support to the Nicaraguan resistance. Fundraising McFarlane's September 12 response to Representa- tive Barnes stated: "None of us has solicited funds, [or] facilitated contacts for prospective potential do- nors. . . ."137 In his October 7 letter, McFarlane replied as fol- lows to a written question from Representative Ham- ilton: Mr. Hamilton: The Nicaraguan freedom fighters, in the last two months, are reported by the U.S. Embassy, Tegucigalpa, to have received a large influx of funds and equipment with some esti- mates of their value reaching as high as $10 mil- lion or more. Do you know where they have obtained this assistance? Mr. McFarlane: No.138 In fact, according to his own testimony, McFarlane not only knew how the Contras obtained financial assistance, he personally facilitated the main donation to the Contras: Q: . . . I was referring to Country Two and the fact that the actual donors had, as I understand it, Country Two was the actual donors? A: Yes. Q: And that you had not only facilitated con- tacts, but you had facilitated the actual contribu- tion. A: I will accept that, yes.138 Furthermore, according to Assistant Secretary of State Gaston Sigur and North, McFarlane was aware of Sigur's efforts to obtain a donation from a Far Eastern country?efforts that took place while the responses to Congress were being prepared. North, of course, was aware of that approach. Indeed, on August 28, the day he and McFarlane had their first lengthy meeting to discuss the Congressional inquir- ies, North reassured an official from that country that the United States would be grateful if his country made a contribution to the Contras.14? The country responded with a $1 million gift."' Also, in his letter of September 12, Representative Hamilton asked: Has Colonel North been the focal point within the NSC staff for handling contacts with private fundraising groups, such as the World Anti-Com- munist League and the Council for World Free- dom headed by retired Major General John K. Singlaub? McFarlane replied, .6p,10.99142 In fact, however, North had been dealing with Singlaub on fundraising, as the December 4, 1984, North-to-McFarlane memo showed. As North told the Committees, he "certainly saw General Singlaub a lot related to support for the Nicaraguan Resistance."143 Military Assistance In his September 5 letter, McFarlane stated: At no time did we encourage military activities. Our emphasis on a political rather than a military solution to the situation was as close as we ever came to influencing the military aspect of their struggle.144 North was heavily involved in the military aspect of the Contra struggle. He testified that this statement was false.'" In addition to helping arm the Contras, and to providing intelligence and cash to Contra lead- ers, North also, beginning in the summer of 1985, coordinated the efforts to set up a resupply operation to provide lethal and nonlethal supplies to troops inside Nicaragua. Several weeks before the letters were drafted, North asked Secord to set up the oper- ation, and he called on Ambassador Lewis Tambs to facilitate the construction of an airfield for refueling resupply aircraft.'" Yet, McFarlane wrote to Repre- sentative Hamilton on October 7: Lieutenant Colonel North did not use his influ- ence to facilitate the movement of supplies to the resistance.147 North acknowledged that this statement was false.'" It is unclear whether McFarlane was fully aware of North's activities. McFarlane testified he was not.'" But the documents McFarlane reviewed and about which he was concerned shortly before drafting the first response to Congress showed that North repeat- edly attempted to influence the military aspect of the Contras' struggle. Furthermore, McFarlane specifically denied in his October 7 letter to Representative Hamilton that North had provided the Contras "tactical advice": The allegation that Lieutenant Colonel North of- fered the resistance tactical advice and direction is, as I indicated in my briefing, patently untrue.153 127 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 6 North acknowledged to the Committees that although he never "sat down in the battlefield and offered direct tactical advice . . . I certainly did have a number of discussions with the Resistance about mili- tary activities, yes, to include the broader strategy for the Southern front and an Atlantic front and an inter- nal front."5' And McFarlane testified: "I felt it was likely that an officer of the qualifications and excel- lence of Col. North, when he was down visiting in Central America, probably did extend advice."152 Indeed, McFarlane admitted in his testimony that he felt in 1985 that "it was likely" that North had gone "beyond the law" on giving military advice to the Contras.153 He testified: "But without certain evi- dence of it, not being able to disapprove it, I accepted that [the denials McFarlane said North gave him] as sufficient grounds for saying it as truth, and I believe that I was wrong to do so. But that is why I sent McFarlane maintained that he believed at the time that such advice was not the "central concern" of Congress. "It seemed to me that that was inconse- quential to the outcome of the conflict, and probably not in the eyes of Congress a serious matter," he said.'55 Representative Barnes' letter, however, shows that one of his main concerns was about re- ports that North had provided "'tactical influence' on rebel military operations."56 In addition, Representa- tive Hamilton, in his first letter, expressed an interest "in actions that supported the military activity of the contras."57 Each of the other letters from Congress asks McFarlane to respond to specific allegations about NSC military support for the Contras. In any case, McFarlane in his letters offered no such explana- tion, merely a flat denial. Finally, despite his assertion in his letters to Con- gress, McFarlane himself influenced the Contras' mili- tary struggle. The $32 million obtained with his help from Country 2 enabled the Resistance to purchase weapons to continue fighting. The April 11, 1985, memo from North describing how the funds were expended stated clearly that the donation was being used to purchase lethal supplies.'58 McFarlane's Meetings with Members The denials McFarlane made in his letters were repeated in face-to-face meetings with Members of Congress. On September 5, Senate Select Committee on Intelligence Chairman Durenberger and Vice Chairman Leahy questioned McFarlane in an hour- long private briefing. At the start of their meeting, McFarlane showed the two Senators a copy of the letter he would send to Representative Hamilton that day. McFarlane assured Senators Durenberger and Leahy that "no law had been broken," and that "there was no intent to circumvent restrictions Con- 128 gress placed on aid to the Nicaraguan Resistance." Asserting that he had grilled North on his involve- ment with supporters of the Resistance, McFarlane said he was confident that "[N]o NSC staff member either personally assisted the Resistance or solicited outside assistance on their behalf." Senator Leahy de- scribed the meeting in a letter written shortly thereaf- ter: Mr. McFarlane said that the officer [North] had frequently received calls from persons wishing to donate funds, and that he referred them to the Contra leaders themselves. He insisted that the officer never solicited funds, encouraged dona- tions or initiated contacts with potential donors. He further denied that the officer, in several per- sonal meetings with Contra leaders, both in Washington and in Central America, ever offered military advice. The officer's authorized role, Mr. McFarlane said, was to assure the Contras during the time of the Congressional aid cutoff of the President's continued moral support. . . .'69 McFarlane concluded by telling the Senators, "I can't believe everything everyone says, but I do believe 011ie." 160 After the session, Senator Durenberger told a re- porter that he felt McFarlane was candid about his knowledge, but that questions about U.S. Government support for the Contras remained: So we came away from the meeting feeling that from Bud McFarlane we're getting what he be- lieves to be the situation with regard to his staff. Are we satisfied that this sort of concludes the matter and that no one in any way involved was directing the effort? No, you can't be satisfied.'61 On September 10, McFarlane met with Representa- tive Hamilton and other Members of the House Intel- ligence Committee. As Representative Hamilton later summarized the meeting in a letter to a colleague, McFarlane told the Committee Members that Presi- dent Reagan had made clear that the entire executive branch had to comply with the Boland Amendment. McFarlane said he had conducted a thorough investi- gation into allegations made about the NSC staff and concluded that North had not "given military advice of any kind to the Contras," nor had he "solicited, accepted, transmitted or in any other way been in- volved with funds for the Contras. "162 The House Intelligence Committee Chairman ac- cepted the denials of the National Security Adviser. At the close of the session, Mr. Hamilton told McFar- lane, "I for one am willing to take you at your word."163 Approved For Release 20,11/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 6 McFarlane-Barnes Document Dispute In his first response to Representative Barnes on Sep- tember 12, McFarlane ignored the Congressman's re- quest for documents. A PROF note to Paul Thomp- son on September 20 indicated that McFarlane be- lieved he had successfully sidestepped the document issue: "Now that we have the Barnes letter behind us you can return the Contra papers to 011ie please.)9164 Ten days later, however, Representative Barnes re- newed his document request. In a letter to McFarlane dated September 30, 1985, the Congressman wrote: I am sure you understand that the pertinent docu- ments must be provided if the Committee is to be able to fulfill its obligation to adopt legislation governing the conduct of United States foreign policy and to oversee the implementation of that policy under the law.'65 Congressman Barnes went on to explain why he felt strongly about his Committee's need to review the documents: It may be helpful if I spell out more clearly the interest of the Committee. The Committee retains its concern about possible violations of federal law by members of the NSC staff. However, that is not the Committee's only?or even primary? concern, given that the enforcement of the law is an Executive Branch function. It is the Commit- tee's responsibility, however, to conduct over- sight of laws that limit the activities of the Exec- utive Branch under the Committee's jursidiction, and to reach judgments as to whether changes in the law are indicated by those activities. Even if the Committee determined that the activities of the NSC staff on this matter were entirely legal, the Committee might still determine that changes in the law were necessary. I am sure it is obvious to you that the Committee cannot make those judgments unless it has in its possession all infor- mation, including memorandums and other docu- ments, pertaining to any contact between the NSC staff and Nicaraguan rebel leaders. I would hereby renew my request for such information, both oral and documentary. '66 Thus, the Barnes letter of September 30 emphasized that Congress was entitled to know about the NSC's efforts to support the Contras, even if those efforts were legal. Once apprised of the facts, Congress would determine whether additional legislation was required, including closing any loophole in the Boland Amendment that the NSC staff might have claimed. Representative Barnes and McFarlane met at the White House on October 17. The day before the meeting, NSC General Counsel Paul Thompson pre- pared a memo for McFarlane suggesting that Repre- sentative Barnes should be told that the National Se- curity Adviser had no legal authority to turn over the documents. North's actions, Thompson wrote, were at the National Security Adviser's direction "in further- ance of the President's initiatives." Documents per- taining to North's actions in carrying out the Presi- dent's instructions "are internal and deliberative in nature and are furthermore not NSC agency docu- ments. As Presidential advisory papers, they fall under the dominion of the President and are no longer subject to your disposition."167 At the meeting with Congressman Barnes, McFar- lane, referring to a stack of documents on his desk, explained that a document search had been made and that McFarlane had selected documents relevant to Congressional inquiries. He told Congressman Barnes he would not permit the documents to leave his office but would allow the Congressman to read them there. McFarlane acknowledged that he made the offer knowing Representative Barnes would likely refuse it: Q: And I take it?it was part of your thinking that if a busy Congressman came down to your office and saw a substantial stack of documents, and you were having a short meeting [McFarlane had budgeted one hour for the session], it was very unlikely that he would ask to read through the documents from one end to the other? A: I think that is true, yes."8 Indeed, Representative Representative Barnes deemed the offer not to be serious. He understood McFarlane to imply that the documents on the desk were not all the docu- ments but only the ones McFarlane had concluded were "relevant." This, Barnes felt, "was not an ade- quate way to ascertain the truth of the allegations." Furthermore, Representative Barnes believed that prohibiting staff from reviewing the documents would result in an incomplete investigation: "[I]n my experi- ence the only way you can do a good investigation is to compare documents?one to another?and to ana- lyze these with staff who have the time and back- ground to work at putting them in context." McFar- lane's offer, therefore, "didn't seem like a serious pro- posal."169 On October 29, Representative Barnes wrote McFarlane again expressing his view that the proce- dures mandated by McFarlane were "inadequate."'" He requested that McFarlane turn the documents over to the House Intelligence Committee, thereby assuring that the classified materials would be appro- priately handled. Representative Barnes wrote: "I be- lieve that this proposal would surely resolve any con- cerns that the Administration might have about the security of the information, while at the same time fulfilling the responsibilities of the House."7' This 129 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 6 was the last correspondence between McFarlane and Representative Barnes on this issue. North, however, tried unsuccessfully to convince McFarlane to send one more letter?a response North maintained he would have preferred to send at the start.'" In the draft letter, McFarlane refused out- right to turn over documents claiming that they were "internal Presidential documents regarding sensitive relations with other governments."73 The executive branch, the letter said, "must abide by its commit- ments to other governments not to compromise sensi- tive information."174 The letter stated that disclosure of the documents sought by Barnes would "adversely effect the national security of the United States and endanger our citizens."' 7 5 McFarlane's 1986 Testimony In the wake of the November 1986 relevations and a full year after he left office, McFarlane testified before several panels investigating the Iran-Contra Affair: the Senate and House Intelligence Committees, the Senate and House Foreign Affairs Committees, and the President's Special Review Board (The Tower Board). Again, Members of Congress?and this time officials on the Tower Board staff as well? were unable to learn the crucial facts about the Gov- ernment's actions in support of the Nicaraguan Resist- ance. The former National Security Adviser acknowl- edged to the panels that North had told him in May 1986 about the diversion of Iranian arms sales funds to the Contras. That aspect of Administration support for the Resistance, by the time of McFarlane's De- cember 1986 testimony, had been revealed by the Attorney General. Beyond that, McFarlane withheld virtually all other relevant information in his posses- sion about U.S. support for the Contras during the period of Congressional restrictions. He concealed new information he learned of North's activities in 1986, and he repeated many of the inaccurate state- ments that he had made orally and in writing to Members of Congress while he was National Security Adviser. In his testimony before the Select Committees, McFarlane acknowledged that his remarks to investi- gating panels between December 1986 and February 1987, like his statements about U.S. support of the Resistance in 1984 and 1985, had been "clearly too categorical." 7 6 McFarlane's Testimony on North's Activities in 1986 On December 1, 1986, while he was testifying before the Senate Select Committee on Intelligence, McFarlane was asked whether, after his resignation, there were "any indications" about "North's involve- 130 ment in the funding [of the Contras] either directly or indirectly." McFarlane responded: Well, since leaving Government my only basis for knowing anything more about the issue is what I read in the press and the events that I described this morning about what I was told about the diversion of Iranian money in May of this year. So I have no personal basis for cor- roborating the press stories that I've seen that have alleged that Col. North has done various things to channel money and to advise and done business with arms merchants. I have no inde- pendent knowledge of that and I guess the only thing that I do know first hand from Col. North was what he told me about diversion of Iranian monies. I've described that this morning.'" In fact, despite his assertion that he had "no person- al basis for corroborating" allegations about North, and that "the only thing" he knew "first hand from Col. North" was the diversion, McFarlane had learned directly from North in 1986 about efforts to provide funds and weapons to the Resistance. Indeed, McFarlane had offered to assist. After his resignation, McFarlane communicated regularly with the NSC staff via a PROF machine he was permitted to keep in his home. PROF messages in 1986 show that North freely shared with McFarlane details of the NSC- coordinated Contra operation, despite North's strong desire to hold close information about the project. The following exchange between North and McFar- lane about efforts to obtain sophisticated Blowpipe missiles for the Resistance is illustrative. In late March, North wrote to McFarlane about efforts to obtain sophisticated surface-to-air missiles for the Contras: After the House vote on aid to the resistance, I plan to take a few days just to get re-acquainted w/ the family. Meanwhile, we are trying to find a way to get 10 BLOWPIPE launchers and 20 missiles from . . . thru the Short Bros. Rep. The V.P. from Short Bros. sought me out several mos. ago and I met w/ him . . . a few weeks ago . . . . Short Bros., the mfgr. of the BLOWPIPE, is willing to arrange the deal, conduct the train- ing and even send U.K. "tech reps" fwd if we can close the arrangement. Dick Secord has al- ready paid 10% down on the delivery and we have a [Central American country] EUC [end user certificate] which is acceptable to. . . .178 McFarlane replied about one week later: I've been thinking about the blowpipe problem and the Contras. Could you ask the CIA to iden- tify which countries the . . . have sold them to. I ought to have a contact in at least one of them. How are you coming on the loose ends for the Approved For Release 2011/05/25 : CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25 : CIA-RDP89T00142R000500610001-7 Chapter 6 material transfer? Anything I can do? If for any reason, you need some mortars or other artil- lery?which I doubt?please let me know.'" In another message to McFarlane, dated April 21, 1986, North provided details on the resupply oper- ation. "So far," he wrote, "we have seven A/C [air- craft] working, having delivered over $37M in sup- plies and ordnance . . . ." In the message, North also discussed the need to obtain new funding for the Contras. "The resistance support acct is darned near broke," he wrote. "Any thoughts where we can put our hands on a quick $3-5M? Gaston [Sigur] is going back to his friends who have given $2M so far in hopes that we can bridge things again, but time is running out along w/ the money." Sigur recalled making no such approach in 1986.1" Demonstrating to McFarlane his operational control of the resupply program, North added that he had told Secord to sell "the ship first and then the a/c [aircraft] as a means of sustaining the effort." He then proposed to McFarlane that U.S. businessman Ross Perot be approached for funds. "As you know, we've never asked him for help in this regard, believing that he wd be inclined to talk about it," North wrote, an indication that he and McFarlane had discussed funding alternatives. "It may now be time to take that risk. Any thoughts?"181 The reference in the PROF to Richard Secord's involvement in the Contra operation is not the only such reference. In February 1986, North sent a PROF message to McFarlane in which he said that he had "asked JMP [Poindexter] for a session w/ you and Dick Secord as soon as possible after Dick returns tomorrow night from Eur[ope] where he is setting up an arms delivery for the Nic[araguan] resistance. A man of many talents ol' Secord i5."182 In his testimo- ny before the Select Committees, McFarlane specifi- cally acknowledged that he was aware in 1986 that "Secord was involved in helping the Contras."83 But on December 10, 1986, testifying before the House Intelligence Committee, McFarlane denied any such knowledge. Representative Brown asked: "Let me ask about Gen. Secord . . . . Were you aware of the fact that he had a role in the Contra supply operation?" McFarlane replied, "No sir."84 Testimony on Fundraising Activities As described above, McFarlane arranged for two large donations totalling about $32 million from Country 2, telling a high official of that country about U.S. concerns and the Contras' needs, and then pro- viding the bank account number when the country decided to donate funds. The first gift came in 1984 and the second in February and March 1985. In his testimony before Congress following the No- vember 1986 disclosures, McFarlane denied personal knowledge of the donations by Country 2. During McFarlane's testimony on December 8, 1986, before the House Foreign Affairs Committee, Representative Mel Levine asked: "There have been also press re- ports that" Country 2 has been "indirectly involved in financing the Contras. Are you aware of any such activities?" McFarlane replied: "I have seen the re- ports and I have heard that" Country 2 has contribut- ed. However, he said, "The concrete character of that is beyond my ken."185 Similarly, McFarlane testified at that session in re- sponse to a question from Representative Edward F. Feighan that he had "seen the reports that various countries have" donated funds to the Contras, includ- ing Country 2. He testified: "I have no idea of the extent of that or anything else."86 Acknowledging before the Select Committees that his testimony was "not as full an account as I could have given," McFarlane maintained nevertheless that his earlier testimony was "technically accurate."87 He told the Committees that even though he had facilitated the donations, he did not precisely know the extent of the contribution or the exact total of the deposits. However, such precision was scarcely the focus of the questions from the Members of Congress. Moreover, the April 11, 1985, North memo which McFarlane reviewed in connection with the summer 1985 Congressional inquiries, described in great detail the extent of the donation.'" Members of both the House and Senate Intelligence Committees specifically asked McFarlane if he still stood by his 1985 statement that there was no "official or unofficial" relationship involving any member of the NSC staff and fund-raising for the Nicaraguan Resistance.189 Despite his role in the two contribu- tions from Country 2, and despite the knowledge that North and Sigur said he had of Sigur's discussions with Country 3 about a possible donation?all of which occurred during his tenure as National Securi- ty Adviser?McFarlane stood by his statement: "I believe as I did then that that was true throughout my time and association with the NSC."9? On December 18, in his second appearance before the Senate Intelligence Committee following the No- vember disclosures, McFarlane acknowledged for the first time that he "believe[d]" Country 2 had donated funds. He knew of the donation, he testified, only because Secretary Weinberger told him: "I think that is the only one I ever heard about but I was told by the Secretary of Defense that there had been a contri- bution by [Country 2], and I don't know that I could put a date on it."'81 Six weeks after this testimony, McFarlane wrote the Chairman and Vice Chairman of the Senate Intel- ligence Committee to correct his statements. In his letter, he described the 1984 donation, maintaining, as he did before the Select Committees, that he had not solicited the gift. McFarlane did not mention the second contribution from Country 2. He wrote: "At no time from that moment [spring 1984] to this date, 131 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 6 have I ever sought, brokered or otherwise managed donations from anyone."19 2 Testimony on 1985 Activities As McFarlane acknowledged before these Commit- tees, the documents he gathered in response to the summer 1985 Congressional inquiries, "raise[d] legiti- mate questions about compliance with the law."193 In his testimony following the diversion disclosure, McFarlane not only withheld his concerns about the documents, but asserted that they proved that North had fully complied with the Boland Amendment. For example, on December 10, 1986, before the House Intelligence Committee, responding to ques- tions from Representative Dick Cheney, McFarlane testified that in the summer of 1985 he "went to considerable length to determine whether" North had violated the Boland Amendment. A document search, he said, "turned up two or three inches of paper, that reported on contacts that did occur between Colonel North and myself, indeed the President and Contra leaders." He continued: [F]rom the sum total of these documents, it was clear that the activities were to meet with Contra officials, civilian officials, tell them in so many words where we were, that we did not have Congressional support for military help, that we would try to get it, continue working with the Congress, that we couldn't provide it in the short term but we hoped that they would use the time until we could get it, to strengthen their political organization, bring in people like Cruz and others to develop a political program . . . but we couldn't do anything to help them194 McFarlane also told the Tower Board that "neither the documentary record nor interviews with Colonel North showed any evidence" that North had provid- ed military or fundraising support to the Contras.199 As noted above, the documents about which McFar- lane was concerned in August 1985 were not so in- nocuous. Summer 1985: Inquiry of the Intelligence Oversight Board The flood of press allegations about possible NSC violations of the Boland Amendment prompted no investigations by executive branch law enforcement agencies. Only one small executive oversight organi- zation, the Intelligence Oversight Board, responded to the widespread charges. In late August 1985, the Board conducted an inquiry into NSC staff activities. After a brief investigation by its counsel, Bretton G. Sciaroni, the Board concluded that Oliver North had not provided military or fundraising assistance to the Nicaraguan Resistance.19 6 132 Sciaroni began his inquiry with a 30 to 40 minute interview of Paul Thompson. Shortly before that interview, Thompson turned over to McFarlane the NSC file documents on North's activities. Those doc- uments included the six "troubling" memorandums that indicated, as Thompson later put it, that "if he [North] was in effect doing what was reflected in the documents, he was perhaps not aware of the con- straints of the . . . Boland Amendment."'" In his interview with Sciaroni, Thompson made no mention of North's activities as depicted in the memorandums. Indeed, he denied that North had provided "military support" to the Contras and asserted that North had limited himself to providing political encouragement and "moral support" while funds were unavailable.'" Although the Committees cannot be certain what Thompson knew directly of North's activities, it is clear that his denials cannot be squared with the memorandums he had given McFarlane. Furthermore, Thompson withheld from Sciaroni the six "troubling" memorandums included in the batch he gave McFarlane. During their meeting, Thompson provided Sciaroni an inch-thick pile of documents and told him he was producing "the rele- vant documents for my review," according to Sciar- oni. The only documents to which Sciaroni would not be permitted access, Thompson told him, were North's personal working files. Thompson also told Sciaroni that the pile of documents he was turning over were the same as those that had been "shown to the Hi11."199 Missing from the pile were many of the documents Thompson himself acknowledged raised questions about North's activities.2" Sciaroni's next investigative step was to talk with North. During a 5-minute discussion, North gave Sciaroni a "blanket denial" of charges that he was actively involved in aiding the Contras.2" Although North did not recall the conversation with Sciaroni, he was clear in his testimony that he had no intention of being candid with the Intelligence Oversight Board Counsel: "I am sure if he asked me" about supporting the Contras, "I denied it, because after all we viewed this to be a covert operation and he had absolutely no need to know the details of what I was doing.',202 Still, Sciaroni stressed in his testimony that he was justified in expecting cooperation from NSC staff offi- cers. Both Thompson and North, he said, "understood who I represented, the mandate of the Board to look into matters of legality, and the seriousness of the allegations that had been raised."2" His investigation was "an anomaly" in that he had no legal authority over the NSC staff, and therefore, Sciaroni said, he "was relying upon the good will of other officers at the White House.',204 Once again, however, North chose to conceal. This time, the object of his decep- tion was a board established by and operating within the executive branch, an entity privy to intelligence information and programs of the highest sensitivity. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 6 Summary While exercising its responsibility to oversee the im- plementation of the law cutting off aid to the Nicara- guan Resistance, Congress tried repeatedly through 1984 and 1985 to learn how the Resistance was stay- ing alive and whether the U.S. Government was in- volved with the Contras' survival. The President, the Vice President, the National Security Adviser, and officials on the NSC staff were aware that a multimil- lion dollar donation from Country 2, facilitated by McFarlane, was largely responsible for the Contras' survival. North, Poindexter, and perhaps other high Administration officials, were aware that the NSC staff was directly providing lethal support to the Nic- araguan Resistance. McFarlane denied knowledge of North's activities, but documents he reviewed follow- ing Congressional inquiries show that North actively assisted the Contras' military effort. Yet Congressional inquiries on U.S. support for the Contras were invariably met with categorical denials. So too were inquiries made by the media. In both cases, the information sought related not to sensitive operational details, but to a controversial foreign policy issue. The question repeatedly asked was whether it was the policy and practice of the U.S. Government during this period to provide lethal sup- port to the rebels fighting in Nicaragua. It was to that question that Administration officials repeatedly re- sponded with denials. The record leaves no doubt that some of the offi- cials making these denials did so as part of a deliber- ate attempt to deceive Congress and the public. North, who testified, "I didn't want to show Congress a single word on this whole thing," admitted that the letters sent to Congress over McFarlane's signature were "false." In meetings with Members of Congress, McFarlane repeated the statements in the letters. He acknowledged in testimony before these Committees that he had been "too categorical." Poindexter testi- fied that his intent during this period was to "with- hold information." And it is difficult to reconcile CIA Director Casey's testimony in this period with his knowledge of the facts as demonstrated by the docu- mentary evidence, and with his pledge to the Senate Intelligence Committee that he would abide by a new spirit of cooperation. Other officials who denied the existence of U.S. support, including the State Department officials who testified before Congress in 1984 and 1985, and the press liaison of the NSC staff, were unaware of the truth, themselves victims of concealed information. As 1986 began, a new National Security Adviser was supervising the NSC staff, promoted from within. But the covert Contra operation continued, as did the overriding concern to keep the fact that the United States was providing lethal aid to the Contras secret from Congress and the American people. 133 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 II V , . I .. I . Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 6 Chapter 6 1. Congressional Record, 10/10/84 at H11974. 2. McFarlane Test., Hearings, 100-7 Part II, at 203; see also 100-2 at 6, 20-22. 3. Ex. OLN-10, Hearings, 100-7, Part III. 4. Poindexter Test., Hearings, 100-8, at 61. 5. Congressional Record, 4/5/83 at S4109-S4110. 6. Letter of April 9, 1984, from Chairman Goldwater to Director Casey. 7. Transcript of 4/26/84 hearing, at 3. 8. U.S. Senate Report, 98-665, at 9-10. 9. C0619-00621. 10. Public Law 212, 98th Cong., and Public Law 215, 98th Cong. Fiscal year 1984 runs from October 1, 1983 through September 30, 1984. 11. Congressional Record, 11/18/83, at H10544. 12. Id. 13. Oliver North and Alton Keel wrote McFarlane in a February 7 memo that "Congressional resistance on this issue is formidable, to the degree that prospects for success are bleak even with a concerted effort." ("Additional Re- sources for Our Anti-Sandinista Program") 14. See Ch. 1. 15. Ex. 29, Hearings, 100-2, at 456-57. 16. See Chapter 2. 17. McFarlane Test., Hearings, 100-2, at 14. 18. McFarlane Test., Hearings, 100-2, at 18. See also Chapter 2. 19. McFarlane Test., Hearings, 100-2, at 18. 20. McFarlane Test., Hearings, 100-2, at 18, 24. 21. Shultz Test., Hearings, 100-9, at 4; Weinberger, Test., Hearings, 100-10, at 148-49. A second possible reason for the decison not to tell Shultz could be related to the opposition to third-country approach Shultz expressed at a June 24 NSPG meeting and on other occasions. See Shultz Test., Id. at 13-17. 22. North Test., Hearings, 100-7, Part I, at 75-76. 23. North Notebook, June 25, 1984, Q 0340. According to the notebook entry, North gave Calero at this time the code name "Barnaby." 24. Congress Due for Latin Pointers at Home, 4/17/84, The Washington Post, p. A16. 25. Id. 26. Israeli Technical Aid to El Salvador Part of Meetings Here, 4/21/84, The Washington Post p. A8. 27. HPSCI Hearings, 5/2/84, at 69-70. 28. Id. at 98. 29. Id. at 70. 30. Id. at 70. 31. Id. at 70-72. 32. Ex. APC-2, Hearings, 100-3. 33. See Chapter 3. Nicaragua Rebels Reported to Raise Millions in Gifts, 9/9/ 84, New York Times, Al; Private Aid Fuels Contras in Nicaragua, Miami Herald, 9/9/84, p 1A. 35. HPSCI Hearings, 9/12/84, at 17-18. Rep. Fowler asked Clarridge: "I assume that you would know" whether foreign governments had provided substantial financial as- sistance. Clarridge responded: "That's true." Motley said that if other countries had donated, "they would come to us and say, hey, you know, we might be able to help, but what do you think?" 36. Id. at 13. 134 37. Id. at 14. 38. Id. at 18-19. 39. Id. at 20. 40. Id. at 23. 41. Ex. APC-2, Hearings, 100-3. 42. McFarlane Test., Hearings, 100-2, at 24. 43. Shultz Test., Hearings, 100-10, at 147-48. 44. Id. 45. McFarlane Test., Hearings, 100-2, at 23-24. 46. Id., at 24. 47. Id., at 37. Adm. Poindexter displayed similar prior- ities. He tried to ensure that CIA Director Casey would not learn about North's Contra-support activities because, he testified, Casey was vulnerable to direct questions at Con- gressional hearings. 48. McFarlane Test., Hearings, 100-2, at 150. 49. Addabbo Letter to Shultz, December 11, 1984. Reply from W. Tapley Bennett, Assistant Secretary of State for Legislative and Inter Governmental Affairs, January 15, 1985. Contra Aid Disavowal Questioned: Addabbo Unsatisfied with Shultz Reply, The Washington Post, 1/23/85, p. A19. 50. Ex. RWO-3, Hearings, 100-2, at 780-82. A copy of this letter was found in North's safe; it appears to be a draft. Calero did not recall receiving it. North's request of Calero seems to have worked. Calero remained tight-lipped about the Contras' funding. On August 11, 1985, for example, The Washington Post reported that Calero "declined to reveal the sources of his funding since CIA financing dried up a year ago." Calero also denied that North had been involved in Contra weapon purchases. Rebel Leader Tells of Talks with US. 8/11/85 p. Al. 51. Senate Committee on Foreign Relations Hearing at 908. 52. Id. at 909-910. 53. Id. at 910. The following month, Ambassador Motley repeated his assurances to the Defense Subcommittee of the House Committee on Appropriations. (Hearings at 1092) 54. See Chapter 2. 55. C/CATF Test., Hearings, 100-11, at 86-90. 56. SSCI Full Committee Hearing on the President's Report on Nicaragua, 4/17/85 at 18. 57. North Test., Hearings, 100-7, Part I, at 116. 58. Hearing Transcript at 11. 59. Hearing Transcript at 18. 60. Memorandum from North to Poindexter, Press Revela- tions regarding North's Rule with Nicaraguan Resistance, 6/3/ 85. Chardy published his story in June, 2 weeks after the first report on Oliver North. In the memo North also ex- pressed his fear that NSC staffers were talking to reporters about the matter and recommended that Poindexter require NSC staff to take periodic polygraph examinations. [Ex. OLN-186, Hearings, 100-7, Vol. 3. 61. Singlaub Test., Hearings, 100-3, at 84. 62. Private Groups Step Up Aid to Contras, Washington Post, 5/3/85, p. A22. 63. Ex. 37, Hearings, 100-2, at 519. 64. Ex. 38, Hearings, 100-2, at 529. 65. Marine Plays Key Role on Foreign Policy, Washington Post, 8/11/85, p. 1. North had appeared once before in the press in connection with the Contras. On January 18, the Miami Herald reported that North had indirectly helped the Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 6 rebels obtain SAM-7 missiles, one of which shot down a Sandinista helicopter the month before. North, according to the article, "suggested to private contra fund-raisers," in- cluding Jack Singlaub, "the possibility of steering the guer- rillas toward an arms market source" where they could purchase missiles and arrange for training. (US. Helped Contras Get Missiles, 1/18/85, Miami Herald, p. 1A.) 66. White House Reportedly Gave Advice to Contra Fund Raisers. AP Wire, 6/10/85. 67. US. Found to Skirt Ban on Aid to Contras. Miami Herald, 6/24/85, p. 1A. 68. Nicaraguan Rebels Getting Advice from White House on Operations. New York Times, 8/8/85, p. Al. 69. Weekly Compilation of Presidential Documents, 8/ 12/85, Vol. 21, No. 32 at 972. 70. Rebels Move Back Into Nicaragua, 8/9/85, The Wash- ington Post, p. Al. 71. McFarlane Aide Facilitates Policy. The Washington Post, 8/11/85, p. Al. 72. Ex. 40A, Hearings, 100-2, at 546 (Barnes letter); Ex. 41, Hearings, 100-2, at 559 (Hamilton letter). 73. Ex. 41D, Hearings, 100-2, at 581 (letter from Duren- berger and Leahy). 74. N3371. See also Ex. 41B, Hearings, 100-2, (2nd letter from Hamilton with specific questions). 75. Ex. 41A, Hearings, 100-2, at 560. 76. In a PROF message to North and Poindexter on September 3, McFarlane wrote: "I have sent you both sepa- rately a draft letter I have composed to answer Lee Hamil- ton's letter on 011ie's activities." [N3265] With minor changes, that draft became the letter sent to Hamilton 2 days later. McFarlane's PROF note also appears to indicate that he wanted to keep discussion of the responses to Con- gress limited. McFarlane wrote to North: "Please do not share either this note or the separate draft with anyone. . . . Please bring me any edits you have. 011ie, don't send me any PROF notes about H." PROF notes from North to McFarlane were routed through other NSC staff officers. Under Poindexter, North would be able to send PROF messages directly. 77. McFarlane Test., Hearings, 100-2, at 127. 78. McFarlane Test., Hearings, 100-2, at 215. 79. North Test., Hearings, 100-7, Part I, at 176-77. 80. Ex. 41A, Hearings, 100-2, at 560. 81. Ex. JMP-7a, Hearings, 100-8. 82. Poindexter Test., Hearings, 100-8, at 82-83. 83. McFarlane Test., Hearings, 100-2, at 73. 84. Memo to Poindexter, 8/20/85, subj: "Barnes Re- quest." N29803-4. 85. Id. 86. Id. 87. Id. 88. McFarlane Test., Hearings, 100-2, at 73. Thompson Deposition 3/9/87 at 36, 4/28/87 at 3, 10. 89. McFarlane Test., Hearings, 100-2, at 73. 90. Ex. 32, Hearings, 100-2, at 466. 91. Id, at 468. 92. Id., at 469. 93. Id, at 470. 94. McFarlane Test., Hearings, 100-2, at 30. 95. See version of memo numbered N44994-N44999. 96. Ex. 33, Hearings, 100-2, at 471. 97. Id., at 472. 98. Id. 99. McFarlane Test., Hearings, 100-2, at 31. 100. Ex. 33, Hearings, 100-2, at 475. 101. Ex. 35, Hearings, 100-2, at 492. 102. Id, at 494. 103. Id 104. Id., at 495. 105. McFarlane Test., Hearings, 100-2, at 109-11. 106. Ex. 36, Hearings, 100-2, at 510. 107. Id, at 512. 108. Id. 109. Id., at 513. 110. McFarlane Test., Hearings, 100-2, at 35. 111. Ex. 37, Hearings, 100-2, at 519. 112. Id., at 520. 113. Id., at 521. 114. Id. 115. Id 116. Id, at 522. 117. Ex. 38, Hearings, 100-2, at 529. 118. Id., at 530. 119. Id, at 532. 120. Id 121. Id 122. Ex. 31, Hearings, 100-2, at 463. 123. North Memo to McFarlane, "Timing and the Nicara- guan Resistance Vote," N40301. 124. Ex. 71, Hearings, 100-2, at 753. 125. McFarlane Test., Hearings, 100-2, at 73-76, 117-18. 126. Id., at 74. 127. Ex. 37, Hearings, 100-2, at 521. 128. McFarlane Test., Hearings, 100-2, at 74. 129. Id., at 75. 130. Id. 131. McFarlane Test., Hearings, 100-7, Part II, at 204. 132. McFarlane Test., Hearings, 100-2, at 75-76. Evidence indicates that another document was altered in 1985. An altered version of the document, "The Nicaraguan Resist- ance: Near-Term Outlook," dated May 31, 1985 (Ex. 38, Hearings, 100-2 at 529), was found by investigators. The altered version was also typed on stationery available only in 1985, indicating that it had been altered in 1985. In the major change, the following paragraph is deleted: In short, the political and military situation for the resist- ance now appears better than at any point in the last 12 months. Plans are underway to transition from current ar- rangements to a consultative capacity by the CIA for all political matters and intelligence, once Congressional ap- proval is granted on lifting Section 8066 restrictions. The only portion of current activity which will be sustained as it has since last June, will be the delivery of lethal supplies. It was replaced with: In short, the political and military situation for the resist- ance now appears better than at any point in the last 12 months. Plans are underway to transition from ad hoc ar- rangements to a consultative capacity by the CIA for all political matters and intelligence, once Congressional ap- proval is granted on lifting Section 8066 restrictions. (Ex. FH-6A, Hearings, 100-5). 133. North Test., Hearings, 100-7, Part I at 172. 134. Id, at 173. 135. Id., at 174. 136. Id 137. Ex. 40B, Hearings, 100-2, at 549. 135 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 6 138. Ex. 41C, Hearings, 100-2, at 579. 139. McFarlane Test., Hearings, 100-2, at 115-16. 140. North Test., Hearings, 100-7, Part I, at 79; Ex. 71, Hearings, 100-2, at 753; North's calendar. 141. For more detail, see Chapter 2. 142. Ex. 41C, Hearings, 100-2, at 576. 143. North Test., Hearings, 100-7, Part I, at 167. 144. Ex. 41A, Hearings, 100-2, at 561. 145. North Test., Hearings, 100-7, Part I, at 166. North also acknowledged that the following statement, in the Sep- tember 5 letter to Hamilton, was false: "We did not solicit funds or other support for military or paramilitary activities, either from Americans or other parties." 146. See Chapter 3. 147. Ex. 41C, Hearings, 100-2, at 572. 148. North Test., Hearings, 100-7, Part I, at 167. 149. McFarlane Test., Hearings, 100-7, Part II, at 203-05; 100-2 at 157-58. 150. Ex. 41C, Hearings, 100-2, at 572. 151. North Test., Hearings, 100-7, vol. 1 at 167. 152. McFarlane Test., Hearings, 100-2, at 75. 153. Id., at 165. 154. Id. 155. Id., at 75. 156. Ex. 40A, Hearings, 100-2, at 546. 157. Ex. 41, Hearings, 100-2, at 559. 158. Ex. 37, Hearings, 100-2, at 519. 159. Leahy, letter, "Dear Fellow Vermonter" (September 9, 1985), S001286. 160. Recollection of meeting in notes Durenberger shared with Independent Counsel investigators during interview, see: file with Senate Office (Doug Telly). Senate Intelli- gence Committee News Release, 9/5/85. 161. McFarlane Denies Illegal Ties to Contras, New York Times, 9/6/85. 162. Hamilton letter to Representative Leon Panetta, 9/18/85. 163. Memorandum of Interview with Steve Berry, then Associate Counsel, HPSCI, dated 10/15/87. 164. PROF, 9/20/85, "Subject: Contra Papers". 165. Ex. 40C, Hearings, 100-2, at 551. 166. Id., at 551-52. 167. Ex. 70, Hearings, 100-2, at 752. Around this time, McFarlane discussed the Barnes request with White House Counsel Fred Fielding. In addition to discussing executive privilege issues, McFarlane testified that he took the docu- ments gathered by the NSC staff to Fielding and told him that the documents were "extremely troubling in terms of interpretation of law." Fielding does not recall such a state- ment by McFarlane. [Fielding Interview] 168. McFarlane Test., Hearings, 100-2, at 119. 169. Memorandum of Interview of Barnes, dated 5/16/87. 170. Ex. 40D, Hearings, 100-2, Part I, at 553. 171. Id. 172. North Test., Hearings, 100-7, Part I, at 170-71. 173. Ex. 40E, Hearings, 100-2, at 558. 174. Id. 136 175. Id. 176. McFarlane Test., Hearings, 100-2, at 127. 177. SSCI Hearings, 12/1/86, at 148-49. 178. Ex. 45H, Hearings, 100-2, at 617-18. 179. Ex. 451, Hearings, 100-2, at 619. 180. Sigur Test., Hearings, 100-2, at 293. 181. Ex. 46, Hearings, 100-2, at 620. 182. Ex. 45F, Hearings, 100-2, at 614. 183. McFarlane Test., Hearings, 100-2, at 122. 184. HPSCI Hearing, 12/10/86, at 139. 185. Ex. 63, Hearings, 100-2, at 686-87. 186. Id. at 689. 187. McFarlane Test., Hearings, 100-2, at 86. 188. Ex. 37, Hearings, 100-2, at 519-25. 189. McFarlane made the statements in his 1985 letters to the Intelligence Committees. He wrote Hamilton on Octo- ber 7, 1985: "There is no official or unofficial relationship with any member of the NSC staff regarding fundraising for the Nicaraguan democratic opposition." (Ex. 41C, 100-2 at 576) "No one has been designated by the NSC or any other White House entity as official or unofficial contact for pri- vate or public or any other kind of fundraising for the Nicaraguan democratic resistance." (Ex. 41E, 100-2 at 584) 190. HPSCI, 12/10/86, at 111-112. At SSCI, 12/1/86 at 143 McFarlane testified that his earlier statement "remains the case." See also SSI 12/1 at 195. 191. SSCI 12/18/86, at 122-23. See also 139-40. The day before, Secretary Weinberger testified before the Senate Intelligence Committee that he had no recollection of dis- cussing with anyone third-country funding of the Con- tras. [SSCI, 12/17/86 at 67-71.] 192. Ex. 60, Hearings, 100-2, at 678. 193. McFarlane Test., Hearings, 100-2, at 73. 194. Ex. 75, Hearings, 100-2, at 762-63. See also SSI 12/1, at 146-47. 195. Tower 2/21/87, at 62-63. See also House Foreign Affairs Committee, December 8, 1986, at 10-11. 196. Ex. BGS 9, Hearings, 100-5. 197. Thompson Dep., 7/24/87 at 3. 198. Sciaroni Test., Hearings, 100-5, at 8-9. Sciaroni's notes of the interview are at Ex. 3, Hearings, 100-5. 199. Sciaroni Test., Hearings, 100-5, at 17. 200. Sciaroni Test., Hearings, 100-5, at 9-11. Thompson told the Committee that he did not recall precisely which document he gave Sciaroni. He maintained that it would have been inappropriate to turn over the documents he gave to McFarlane without a written request from the Intel- ligence Oversight Board. Although he acknowledged that the documents raised questions about North's activities, Thompson maintained that those questions were answered when North personally assured him that he was not in- volved in supporting Contra military activities or in solicit- ing funds. Thompson Dep., 7/24/87, at 38-41. 201. Sciaroni Test., Hearings, 100-5, at 11. 202. North Test., Hearings, 100-7, Part I, at 158. 203. Sciaroni Test., Hearings, 100-5, at 11. 204. Id., at 41. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 7 Keeping "USG Fingerprints" Off the Contra Operation: 1986 In 1986, the Contra support project finally achieved a degree of operational success. By mid-year, weapons and other material were being dropped to Resistance troops inside northern Nicaragua; by fall, similar air- drops were being made in the South. Congress had appropriated funds for the humanitarian needs of the Contras, it had authorized third-country solicitation for humanitarian aid, and it had allowed the CIA to provide intelligence to the Resistance. But Congress had maintained the prohibition on lethal support. Fol- lowing the pattern of 1984-1985, allegations in the media and independently obtained information prompted Congressional inquiries, which in turn were met with categorical denials by Administration offi- cials, some of whom knew the statements to be mis- leading and false. The expansion of the covert operation's activities in 1986 also created new problems for officials still seek- ing to maintain secrecy. In September, a new Costa Rican Government threatened to reveal the existence of the Santa Elena airfield, exposing the involvement of U.S. citizens and Government officials in providing support to the Contras. Administration officials mobi- lized quickly to squelch the threatened press confer- ence. Successful at first, the officials were unable to prevent disclosure by the Costa Rican Government three weeks later. Concerned that reporters might discover the link between the airfield and U.S. offi- cials, North immediately took steps to ensure that no "USG fingerprints" would be found on Santa Elena.' In October, the Sandinistas shot down an Enter- prise plane on a resupply mission (the Hasenfus flight). Administration officials, not all of whom knew the true facts, denied before Congress and to the media that the U.S. Government was involved in the Hasenfus flight. Even the President spoke out. With no protest from his National Security Adviser or others aware of the facts, the President told the American people: "[There is no government connec- tion with that at all."2 For most of 1986, efforts to determine whether the U.S. Government was providing lethal support to the *North's term, used in two PROF Notes to Poindexter dealing with the possible disclosure of the U.S. Government link to the Contra Operation. (Exhibits OLN-131 and OLN-307, Hearings, 100- 7, vol. 3.) Contras despite the legal restrictions were thwarted by the same techniques used in 1985. January to June 1986: Press Reports Through the first quarter of 1986, Congressional and media attention on the NSC staff's involvement with the Contras abated. In Washington, Congressional Committees had accepted the categorical denials the previous fall by the National Security Adviser. In Central America, the resupply project was not fully operational and Resistance activities slowed. A New York Times reporter in the region in January found the "Nicaraguan guerrillas . . . back in their camps;" in early March, the correspondent described the Re- sistance as being "in its worst military condition since its formation in 1982."3 By the end of March, the Contras' fortunes began to shift, and articles again appeared discussing the sources of Resistance funds and supplies.4 Some fo- cused on charges that the Contras had received lethal support from American mercenaries and funds from drug trafficking; others explored how the Contras were spending the $27 million appropriated by Con- gress in August, 1985, for humanitarian aid.3 By the end of April, North had reemerged as the focus of attention. The allegations in the new series of articles were almost always attributed to anonymous officials, and some of the details were incorrect. But the main charge?that U.S. Government officials had contin- ued to provide lethal aid to the Contras despite the Boland Amendment?was accurate. The renewed re- porting provided the context for a new round of Congressional inquiries that would begin at the end of June. Focus on North In an April 30, 1986, article headlined, "Colonel's Actions May Have Broken Contra Aid Ban," the Miami Herald provided what it called "the first glimpses at the inner workings of the well-oiled pri- vate contra support machine that?with White House encouragement?developed after Congress suspended contra aid." The article asserted that Oliver North 137 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 7 had arranged a meeting between a potential donor and a Contra fundraiser. It quoted "administration officials" as saying that "North acted repeatedly on behalf of the contras, especially in channelling poten- tial donors to the rebels." John Singlaub and Robert Owen were cited in the article as two "conservatives closely associated with the contras" who had frequent meetings with North. In the article, lain administra- tion official authorized to reply to queries" was quoted as saying that "Oliver North has not been involved in illegal activities."6 On June 8, the Miami Herald ran on page one the headline, "Despite Ban, U.S. Helping Contras." Quot- ing anonymous Administration and Resistance offi- cials, the article reported that the Reagan Administra- tion "continued secretly to assist anti-Sandinista rebels in finding weapons and plotting military strategy through a network of private operatives overseen by the National Security Council (NSC) and the CIA." According to the article, the system was supervised by North with "advice from" officers in the CIA Central American division. After enactment of the Boland Amendment, "private individuals were used as bridges between the administration and the rebels." The Administration "feels it has honored" Congres- sional restrictions "by channeling its involvement through private citizens." This belief was attributed to "two administration officials and a knowledgeable rebel leader."7 On June 22, the Miami Herald reported that the "controversial program to coordinate private aid to anti-Sandinista rebels through the National Security Council was approved by officials in the White House." This was attributed to "several current and former administration officials." The article went on to quote "one source," unidentified, as saying that McFarlane briefed Reagan on the proposal to aid the Contras and that the President verbally approved the plan. The Herald reported that McFarlane denied knowledge of any such plan to aid the Contras!' Concern for Secrecy As the Contra support operation expanded during 1986, the task of maintaining secrecy became more challenging. National Security Adviser John Poin- dexter, who admitted to the Committees, "I wanted to withhold information on the NSC operational ac- tivities in support of the Contras from most every- body," did what he could to conceal the NSC con- nection. North oversaw two of the most important NSC "accounts," but Poindexter kept North's title artifi- cially low because "we wanted to provide a signifi- cant amount of cover for Colonel North and his ac- tivities."" According to Poindexter, North's respon- sibilities warranted the title Special Assistant to the President, the third-level rank in the White House. Instead, he kept North as Deputy Director of Politi- 138 cal Military Affairs." "We didn't want to call public attention to Colonel North," Poindexter testified." In July, shortly after the renewal of Congressional inquiries, Poindexter tried further to downplay North's responsibilities. He apparently leaked to the Washington Times the story that North's position at the NSC staff was "precarious" and that "NSC soft liners" were maneuvering "to edge him out."" In a PROF Note sent the day the article appeared, Poin- dexter reassured North about his intentions: "I do not want you to leave and to be honest cannot afford to let you go."14 He told North to call two reporters at the Washington Times and "tell them to call off the dogs." Poindexter wrote: "Tell them on deep back- ground, off the record, not be published, that I just wanted to lower your visibility so you wouldn't be such a good target for the Libs [Liberals]."" Poindexter directed North not to put "things in writing about his operational activities, especially with regard to the support for the Contras."" North had stopped writing "logged" memorandums?docu- ments stored in the official NSC files?after Repre- sentative Barnes had sought access to such documents in the summer of 1985. North testified: "[W]e had . . . decided to take those kinds of documents out of the system altogether . . . so that outside knowledge would not necessarily be derived from having seen them."" Subsequent to the 1985 Congressional in- quiries, written communications about the Contra op- eration between North and his superiors were done exclusively using "non-logged" memorandums and the PROF system. North had assumed that PROF notes, after their use, were erased from computer memory and irretrievable.'8 Poindexter arranged for North to communicate with him directly, thereby preventing other NSC staff members from learning details of the Contra oper- ation. Ordinarily, PROF messages to the National Se- curity Adviser were channeled through other staff members. On August 31, 1985, two weeks after he had assigned North to draft the response to Repre- sentative Barnes, Poindexter sent North a message with the subject heading "Private Blank Check."" When North wanted to communicate with Poindexter directly, he sent a message in reply to the "Private Blank Check" note. Poindexter testified: "Otherwise . . . those messages were intercepted by the [NSC staff] Executive Secretary.'t20 Poindexter also stressed to North the need to avoid speaking of his secret operational activities with anyone, including other Administration officials. In May 1986, Poindexter learned that North had dis- cussed his plan to offer the Erria to the CIA for use in a covert activity with Ken deGraffenreid, Senior Director of Intelligence Programs at the NSC, the officer who maintained NSC documents of the high- est sensitivity. The Erria was a ship under North's control, purchased by the Enterprise for use in van- Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 7 ous covert operations. In a PROF he titled "Be Cau- tious," Poindexter directed North to maintain absolute silence about his activities: I am afraid you are letting your operational role become too public. From now on I don't want you to talk to anybody else, including [CIA Di- rector] Casey, except me about any of your oper- ational roles. In fact you need to quietly generate a cover story that I have insisted that you stop.2' Poindexter testified that he was particularly con- cerned about keeping Casey ignorant of the operation because the CIA Director could be called to testify before Congressional Committees.22 Poindexter also kept the existence of the covert operation hidden from officials who did not ordinarily testify before Congress, such as former Chief of Staff Donald Regan. Poindexter explained: "Based on my feeling that if we were going to keep this up and avoid more restrictive legislation, that we simply had to limit the knowledge of the details to those that had absolutely the need to know. I simply didn't think that he [Regan] had an absolute need to know."23 In addition, Poindexter testified that he felt Regan "talked to the press too much. I was afraid he'd make a slip."24 Despite Poindexter's directive, North kept the CIA Director apprised of everything, according to his testimony. But North shared Poindexter's desire to conceal U.S. Government coordination of Contra support activities from Congress and the American public. He told these Committees: "I didn't want to show Congress a single word on this whole thing."25 In May, as Robert Dutton was brought in and the project became operational, North became concerned that the likelihood of disclosure was increasing. He described in a PROF to Poindexter "the urgent need to get the CIA back into the management of this program." He explained: The more money there is (and we will have a considerable amount in a few more days) the more visible the program becomes (airplanes, pilots, weapons, deliveries, etc.) and the more inquisitive will become people like Kerry, Barnes, Harkins, [sic] et al. While I care not a whit what they say about me, it could well become a political embarrassment for the Presi- dent and you. Some of this can be avoided simply by covering it with an authorized CIA program undertaken with the $15M.26 The next month, as airdrops became more frequent, North tried to ensure that resupply activities in Cen- tral America could not be traced back to him or other U.S. officials. On June 16, he informed Tomas Cas- tillo, a CIA Station Chief in Central America, that he had sent Rafael Quintero to Central America to facili- tate a supply drop to the FDN. "I do not think we ought to contemplate these operations without him being on the scene," North wrote via KL-43. "Too many things go wrong that then directly involve you and me in what should be deniable for both of us."27 Shortly after this message to Castillo, Karna Small, the press liaison for the NSC staff, asked North to comment on allegations that would be broadcast in a CBS News program, "West 57th Street." Small sent a note to North saying she had declined the show's request to speak with North, but that since it would include interviews with people making charges about North, she should call back with a comment. She remarked, "I can't just give them the 'bullshit' re- sponse."28 The segment aired on June 25. It charged that "the White House secretly directed a private aid network to arm the Contras when it was illegal for the White House to do that." The show focused on John Hull, suggesting that he played an important role in helping the Contras from his ranch in Costa Rica. It also alleged that Robert Owen acted as "the NSC repre- sentative" to the Contras and their supporters in Costa Rica. Describing Owen as "the bag man for 011ie North," the report charged that he carried $10,000 a month from the NSC to John Hull for use in purchasing lethal and nonlethal supplies for the Nicaraguan Resistance. The segment also reported: "The White House today quoted Colonel Oliver North as calling the private aid network 'nonsense.' The White House also said, quote, 'The President never approved any such plan' [to aid the Con- tras]".29 Two days after the show aired, North sent a PROF to Karna Small: I have just had a chance to watch the W57th piece. As far as I am concerned, it is the single most distorted piece of 'reporting' I have ever seen. . . . The only charges made about the NSC are made by people who are in jail, on their way to jail or just out of jail. If this is supposed to be credible, then I'll eat my shirt.3? North acknowledged in the PROF that he knew Robert Owen, but denied the inaccurate charge that Owen was "paid off" $50,000. North did not com- ment on the charge, the substance of which was accu- rate, that Owen delivered to Central America money provided by North. Nor did he comment on the gen- eral allegation that he was aiding the Contras. June 1986: New Congressional Inquiry On June 4, Representative Ron Coleman of Texas introduced a Resolution of Inquiry (H. Res. 485), directing the President to provide documents and in- formation about support for the Contras. In a public statement, the Resolution's author explained the need 139 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 1. I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 7 "to get at the truth" behind the widely publicized allegations: "[D]isturbing new reports that our own government officials may have deliberately violated the law that prohibited any open or hidden U.S. as- sistance for military operations inside Nicaragua [sug- gest that there] may have been an intentional disre- gard for our own democratic process."31 In a statement inserted into the Congressional Record, the author of the Resolution explained the information sought from the Administration: My resolution of inquiry seeks answers and infor- mation on two central questions. Did Lieutenant Colonel North develop and implement a plan for Contra funding in the event that Congress did adopt the Boland Amendment? . . . Second, what was the degree of Lieutenant Colonel North's involvement with the Contra high command before, during, and after the Boland Amendment became the law of this land. Did he assure the Contra generals that the administration would find a way to ensure continued funding and as- sistance even in the event of a congressional ban? Did he, as alleged, provide regular tactical and logistical assistance to the Contra high command on a regular basis? Did Lieutenant Colonel North then implement a sham network of intermediaries to filter his continued advice to the Contra gener- als in direct violation of at least the spirit of the Boland language? 3 2 Representative Coleman said he introduced his Reso- lution "very reluctantly," adding: "No one can be allowed to operate above the law of this great coun- try?least of all those officials obligated to defend our Constitution." He concluded by stating that the Reso- lution "touches upon areas of concern that go far beyond the question of one's position relative to Contra aid. Rather, this course of action goes to ac- countability and ensuring that one branch of our Gov- ernment [does not] disregard . . . the other two."33 The Resolution of Inquiry directed the President to provide to the House information and documents in three areas: 1. Funds and Supplies: Information and documents on contacts between any NSC staff member and pri- vate individuals or representatives of foreign govern- ments relating to the provision of funds and supplies to the Contras.34 2. Military Activities: Information and documents on contacts between any NSC staff member and any member of the Nicaraguan Resistance relating to Contra military activities.35 3. Singlaub, Owen & Hull: Information and docu- ments on contacts between any NSC staff member and Robert W. Owen, Maj. Gen. John K. Singlaub, and John Hull." The Resolution was referred to the House Commit- tees on Intelligence, Foreign Affairs and Armed Serv- 140 ices. On June 25 and July 1, the Chairmen of the Foreign Affairs Committee and the Intelligence Com- mittee requested comments from the President on the Resolution. The Executive's Response On July 21, Poindexter wrote the Chairmen of the three Committees "in reply to your letter to the Presi- dent."37 Poindexter testified that he "probably" did not show the letter to the President, but discussed the issue with him "in general terms . . . . I probably told him about the Resolution of inquiry and told him that we were opposed to it. He agreed."38 In the one-page letter, Poindexter first stated the Administration's opposition to the resolution of in- quiry. He continued: Last fall, in an effort to cooperate with Chairman Barnes, my predecessor, Robert C. McFarlane, met with members of your committee and the House Foreign Affairs Committee. While I did not participate in these discussions, I understand that information on the specific issues raised in H. Res. 485, was provided to your Committee and that this information made it clear that the ac- tions of the National Security Council staff were in compliance with both the spirit and letter of the law regarding support of the Nicaraguan re- sistance. Thank you for the opportunity to comment on H. Res. 485. I have forwarded similar letters to Chairman Fascell and Chairman Aspin and sin- cerely hope that this matter can finally be put to rest.3 9 Insisting that the letter was technically accurate, Poindexter acknowledged to the Select Committees that the letter "clearly withholds information."40 By any standard the response was misleading. First, the National Security Adviser implied in the letter that he accepted the view that the Boland Amend- ment applied to the NSC staff, and that the NSC staff under his tenure was not providing covert lethal sup- port to the Contras. Poindexter referred explicitly to the information McFarlane had provided Congress that "made it clear that the actions of the National Security Council staff were in compliance with both the spirit and the letter" of the Boland Amendment. He did not disclose that he had authorized North to provide to the Contras precisely the kind of covert aid the Boland Amendment was intended to prohibit or that, as he put it, "We had been running this [Contra] operation on our own for a long period of time." 4 1 Asked how he could reconcile the statement that the NSC staff was complying with the "letter and spirit" of the Boland Amendment with the actions I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 7 North had taken and that he had approved, Poin- dexter testified: I felt that the Boland Amendment did not apply to the NSC staff and I felt that indeed we were complying with the letter and spirit of the Boland Amendment. Now, it doesn't say that we are not helping the Contras. We were.42 In addition, Poindexter's letter implied that he had no dispute in 1985 with the categorical denials McFarlane gave Congress on allegations about North's activities. In fact, however, Poindexter was aware that North had taken over coordination of Contra-support activities after enactment of the Boland Amendment." Moreoever, when the Barnes letter arrived at the NSC on August 17, 1985, it was Deputy National Security Adviser Poindexter who assigned North to draft the response, intending that North would conceal his true activities from Con- gress.44 As Poindexter himself put it before these Committees, he intended with his letter to say "that the questions had been addressed by Mr. McFarlane in the previous year." 45 But McFarlane's denials had misled Congress the previous year, as Poindexter's letter misled Congress in 1986. August 1986: North's Meeting with Members of Congress In response to the Resolution of Inquiry, the House Intelligence Committee sought to meet with North.46 On August 6, North met with 11 members of the House Intelligence Committee in the White House Situation Room.47 North began the session with a presentation about his activities. The description echoed closely McFarlane's letters the year before to Representatives Hamilton and Barnes: North's princi- pal mission was to coordinate contacts with the Con- tras; a main purpose of his job was to assess the viability of the Nicaraguan Resistance as a democratic organization; and he explained to Contra leaders the limitations on U.S. support as imposed by the Boland Amendment. According to a memorandum based on notes taken at the meeting, North said "that he did not in any way, nor at any time violate the spirit, principles or legal requirements of the Boland Amendment."48 In response to specific questions, North denied that he had raised funds for the Contras or offered them military advice. North told the Members that his rela- tionship with Robert Owen was "casual," that Owen never took guidance from him. He stated that he had not been in contact with John Singlaub at all in 1985 or 1986." By his own testimony, North lied to the Members of the Intelligence Committee at this meeting: A: . . . I will tell you right now, counsel, and all the Members here gathered, that I misled the Congress. I misled? Q: At that meeting? A: At that meeting. Q: Face to face? A: Face to face. Q: You made false statements to them about your activities in support of the Contras? A: I did." At the conclusion of the meeting, according to an observer, Representative Hamilton "expressed his ap- preciation for the good-faith effort that Admiral Poin- dexter had shown in arranging a meeting and indicat- ed his satisfaction in the responses received."' On August 12, Hamilton wrote Representative Coleman that the House Intelligence Committee would not move forward with the Resolution: "Based on our discussions and review of the evidence provided, it is my belief that the published press allegations cannot be proven." 2 Authority to Lie North conceded in his testimony that Poindexter did not give him specific prior authority to make false statements." Before meeting with the Members of the House Intelligence Committee, North expressed to his aide Robert Earl "concern . . . [about] what he was authorized to say" at the session." According to Earl, North tried to obtain guidance from Poindexter but could not reach him." Poindexter "was on leave, yes, out of the office" during this period, according to Earl, who testified: "My impression was that the leave was not accidental. The timing of the leave was just not a coincidence."6 In his testimony, Earl char- acterized his observation as follows: Q: So that your impression of it, your observa- tion of it, was that Colonel North had some in- formation to protect and that he was being left to figure out how to protect it on his own? A: I think that's a fair statement." North and Poindexter differ on whether North had general authority from the National Security Adviser to lie at the session. North testified that he was acting under such authority: "I went down to that oral meet- ing with the same kind of understanding that I had prepared those memos in 1985 and other communica- tions."" North added: "[Poindexter] did not specifi- cally go down and say, '011ie, lie to the Committee.' I told him what I had said afterwards, and he sent me a note saying, "Well done." 59 141 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 11 I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 7 While Poindexter did send such a note, he claimed it did not indicate approval of North's lies. Poindexter acknowledged that North and he had a "general un- derstanding that he [North] was to withhold informa- tion about our involvement." But Poindexter told these Committees that he did not know North had lied at his meeting with the Intelligence Committee, and that he had not expected North would do so.6? The evidence is clear, however, that Poindexter knew North had misled the Members of Congress. Poindexter attached his "well done" message to a PROF Note summarizing the meeting. The summary was written by Bob Pearson, one of two NSC staffers besides North who had attended the August 8 meet- ing in the Situation Room, and sent to Poindexter who forwarded the PROF note to North. The mes- sage began by declaring, "Session was success," and went on to describe North's presentation as "thor- ough and convincing." Pearson wrote: In response to specific questions, 011ie covered the following points: ?contact with FDN and UNO aimed to foster viable, democratic political strategy for Nicara- guan opposition, gave no military advice, knew of no specific military operations. ?Singlaub--gave no advice, has had no contact in 20 months: Owen?never worked from OLN office, OLN had casual contact, never provided Owen guidance.6' Poindexter testified that "by reading the summary in this note, I didn't attach any great significance to it because I knew that the questions and answers would be very carefully crafted."62 Yet Pearson's PROF is clear that North told the Members he "gave no mili- tary advice" to the Resistance, that he had only "casual" contact with Owen and never "provided . . . guidance," and that he had "no contact" with Sing- laub for 20 months. Thus, even if Poindexter did not expressly author- ize North to lie, he was aware of North's misleading statements and made no effort to correct them. Nor did he reprimand North. On the contrary, Poindexter congratulated North on his performance and on his success at deflecting the inquiry. In his testimony, Poindexter acknowledged that he did not expect North to disclose the truth: I did think that he would withhold information and be evasive, frankly, in answering questions. My objective all along was to withhold from the Congress exactly what the NSC staff was doing in carrying out the President's policy . . . . I thought that Colonel North would withhold in- formation. There was no doubt about that in my mind.6 3 142 September 1986: The Santa Elena Airfield Soon after North had turned aside the Congressional inquiry, he learned of a new threat of exposure, this one involving the Santa Elena airfield in Costa Rica. It came just as Congress was taking steps to fund the Contras again. The airfield at Santa Elena had been built with the covert assistance of several U.S. Government offi- cials, including North, Tambs, and Castillo. Complet- ed in early 1986, the airfield was originally intended to serve as an abort base and refueling site for resup- ply aircraft, but never became a crucial element in the operation. The new Costa Rican Government that took office in May 1986, requested that the field not be used to aid the Contras. Ambassador Tambs agreed, and the operation relied on alternative means to drop supplies to Resistance troops inside Nicara- gua.6 4 North learned late Friday, September 5, that the Costa Rican Government planned a press conference about the airfield the next morning. Officials at the press conference, North was told, would reveal that Santa Elena had been used as part of an operation to resupply the Contras and that U.S. Government offi- cials were involved with the airfield. In response, North mobilized several government officials to pres- sure high Costa Rican officials to call off the press conference. North told a good deal of the story in a PROF sent the next day to Poindexter: "Last night at 2330 our Project Democracy rep. in Costa Rica called to advise" that the Arias Government would hold a press conference the next morning "announcing that an illegal support operation for the Contras had been taking place from an airfield in Costa Rica for over a year."65 North wrote that Secord and CIA Station Chief Tomas Castillo would be "predominantly men- tioned." From North's notebook it appears that he too was in danger of being mentioned at the press confer- ence. The first entry relating to the incident reads: "0005?call from [Castillo]?Security Minister plans to make public Udall role w/ Base West [Santa Elena airfield] and allege violation of C[osta] R[ican] law by Udall, Bacon, North, Secord, et al."66 North immediately arranged a conference call with Elliott Abrams and Louis Tambs. North claimed in his PROF note to Poindexter that the three officials agreed that North would call President Arias and make two threats: if the press conference proceeded as scheduled Arias would not be permitted to meet with President Reagan and he "w[ould] never see a nickel of the $80M that [Agency for International Development Director M. Peter] McPherson had promised him" the day before.67 North's notebook also reflected his intention to threaten a foreign gov- Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 7 ernment if necessary to maintain secrecy. The entry reads: 0008 - Conf. . . . Call to Elliott Abrams and Amb Lew Tambs - Tell Arias: - Never set foot in W.H. - Never get 5 [cents] of $80M promised by McPherson.8 8 According to North's PROF Note to Poindexter, Abrams and another Government official passed "the same word" to President Arias." However, accord- ing to their testimony, neither North, Abrams, nor the other official called Arias.70 North testified that he falsified the facts in his PROF note to "protect" the other officials involved." He did not offer any expla- nation why he felt it necesary to hide the facts from Poindexter, who knew details of the resupply oper- ation, including the existence of the airfield. Ambassador Tambs did call President Arias. The purpose, he testified, was to "dissuade him from this press conference."72 Abrams recalled instructing Tambs before the call to President Arias that revela- tion of the airfield would put at risk Arias' upcoming meeting with President Reagan." Tambs testified that he merely told President Arias that it would not be prudent to hold the planned press conference in light of the pending case before the International Court of Justice. 7 4 In his PROF note, North assured Poindexter that steps had been taken to ensure that the NSC-coordi- nated Contra operation would not be linked to the airfield: "As a precaution the Project a/c [aircraft] were flown to [another base] last night and no project personnel remain on site at the field."78 The next day, Poindexter indicated his approval of North's actions. He wrote in a PROF: "Thanks, 011ie. You did the right thing, but let's try to keep it quiet."78 Airfield Revealed: Damage Control Although the initial news conference was cancelled, the Costa Rican Government announced the existence of the airfield three weeks later. On September 26, the Costa Rican Interior Minister told reporters that his government had discovered and shut down an airfield that had been used for resupplying the Contras, for trafficking drugs, or both. Secord and North were not mentioned, although the name of the Enterprise Pana- manian company that built the airfield, Udall Re- sources, Inc., was revealed, as was the pseudonym (Robert Olmstead) of William Haskell, the man who purchased the land.7 7 The airfield had not been used in the resupply oper- ation for several months, and the press conference had compromised its location and purpose. Nonethe- less, action was taken to ensure that the roles of U.S. officials and the Enterprise remained concealed. In a PROF note, North told Poindexter: "There are no USG fingerprints on any of the operation." Udall Resources, which North described as "a proprietary of Project Democracy," will "cease to exist by noon today." The company's resources?$48,000?were moved to another Panamanian account. And Udall's office in Panama "is now gone as are all files and paperwork." Olmstead, North added, "is not the name of the agent?Olmstead does not exist."78 In a second PROF note to Poindexter written that day, North blamed the failure to head off the press conference in part on the absence of Ambassador Tambs, who was on leave. North wrote that Tambs "put this thing back in its box two weeks ago when I called you in the middle of the night to threaten that Arias would not get in the door of the oval office if this came out."78 North's PROF continued with a lengthy slur directed against Costa Rican officials who exposed activities in their own country. North concluded the message: Believe we have taken all appropriate damage control measures to keep any USG fingerprints off this and with Elliott and [CIA Chief Castillo], have worked up appropriate "if asked" press guidance.8? The press guidance went to Poindexter for approv- al on September 30.8' The guidance, which according to the cover memo had been coordinated with Elliott Abrams, the CIA Chief of the Central American Task Force (C/CATF) and Richard Armitage, Assistant Secretary of Defense for International Security Af- fairs, consisted of answers to two likely questions. The first potential question and suggested answer were: [Question] Did U.S. personnel supervise con- struction of the airstrip in Northern Costa Rica? [Answer:] The U.S. Embassy in San Jose, Costa Rica, has reported that during the Administration of Former President Monge the Ministry of Public Security was offered the use of a site on the Santa Elena Peninsula which could be used as an extension of the civil guard training center at Murcielago. The site included a serviceable air- strip which could have supplemented the small one which is located near the training center. The offer was reportedly made by the owners of the property who had apparently decided to abandon plans for a tourism project. The Embas- sy has no information on the Ministry's decision concerning the offer.82 The answer concluded: "No U.S. Government funds were allocated or used in connection with this site nor were any U.S. Government personnel involved in its construction."83 The press guidance thus con- 143 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 II 11 1 . 1 1 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 7 cealed the involvement in the airfield's construction of North, Tambs, and Castillo. The suggested answer in the press guidance to the second possible question was also misleading: [Question:] Was the airstrip intended for use by the Contras? [Answer:] The Government of Costa Rica has made clear its position that it will not permit the use of its territory for military action against neighboring states. The U.S. Government re- spects that position. In fact, the airfield had been used to help the Con- tras. The Costa Rican Government had already re- vealed that the airfield's purpose had been to help the Contras, to traffic drugs, or both. Among the officials who had helped prepare the guidance, Abrams and CIA Central American Task Force Chief acknowl- edged knowing that the airfield was intended to help the Contras and that U.S. citizens?if not Govern- ment officials?were involved.84 North and Poin- dexter, to whom the press guidance was sent for approval, knew the airfield was part of the covert operation to help the Resistance." The steps taken to keep reporters from finding "USG fingerprints" on the airfield were successful for the time being. Not until October 24 did evidence emerge suggesting ties between the airfield and the U.S. Government. That revelation would come from Eugene Hasenfus after he was shot down and cap- tured by the Sandinistas." The Hasenfus Downing On the morning of October 5, 1986, one of the air- craft belonging to the Enterprise left its operational base with 10,000 pounds of ammunition and gear for FDN forces inside northern Nicaragua. William Cooper was in command, Wallace "Buzz" Sawyer was the co-pilot, and a 17-year-old FDN fighter was handling radio communication with the troops on the ground. Also on board, as the "kicker" who would actually drop the supplies to forces waiting below, was Eugene Hasenfus. Within a few hours, the aircraft was reported miss- ing. Officials later learned that the plane had been hit by a Sandinista SAM-7 missile over Nicaraguan terri- tory. Three crew members were killed. Hasenfus sur- vived and was captured by the Sandinistas. The Sandinistas found in the wreckage, and showed reporters, an identification card issued to Hasenfus by the air force in the operational base's host country identifying him as an "adviser" in the "Grupo U.S.A." group at the base, and a business card be- longing to an official at the NHAO office in Washing- ton. They also found and displayed an ID card issued to Cooper by Southern Air Transport.87 144 The U.S. Government Connection The Hasenfus flight was part of the resupply oper- ation coordinated by North with the support and ap- proval of the President's National Security Adviser. North acknowledged in testimony about the flight: "I was the U.S. Government connection."" James Steele, a U.S. Military Group Commander in Central America; Lewis Tambs, the U.S. Ambassador to Costa Rica; and Tomas Castillo, a CIA Station Chief in Central America, all provided assistance to the secret operation to support the Contras. Yet, virtually every newspaper article on the incident in the days after the downing would quote senior Government officials, including the President himself, denying any U.S. Government connection with the flight. And within a week, high Government officials would offer the same categorical denials before Congressional Committees. The Initial Response When the Sandinistas shot down the Hasenfus plane, North was in West Germany negotiating with the Second Channel. He returned to Washington within 48 hours of the downing to help deflect inquir- ies about the flight, leaving Albert Hakim behind to complete his negotiations. Castillo, however, recognized immediately that the Hasenfus crash could lead to disclosure of the oper- ation. Before the downing was even confirmed, he wrote to Robert Dutton via KL-43: Situation requires we do necessary damage con- trol. Did this A/C [aircraft] have tail number? If so, is it the same one which refueled several times at . . . Please advise ASAP. If so, we will have to try to cover quickly as record of tail number could lead to very serious implication." Two days later, plans were made at a Restricted Interagency Group (RIG) meeting in which Abrams and CIA Central American Task Force Chief (Cl CATF) participated to ensure that the U.S. Govern- ment would not be implicated by the flight." A PROF from NSC staff member Vincent Cannistraro to Adm. Poindexter described decisions made at the meeting. Among them, Cannistraro wrote, "UNO to be asked to assume responsibility for flights and to assist families of Americans involved." Also, the group decided that press guidance would be prepared "which states no U.S.G. involvement or connection, but that we are generally aware of such support con- tracted by the Contras."91 A few days later The New York Times reported: "Nicaraguan rebels took full responsibility today for the flight of a military cargo plane that was downed over Nicaragua last week." A "senior Administration official" was quoted in the story as saying that the U.S. Government had asked the rebels to take respon- Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 7 sibility. While denying that any such request was made, Bosco Matamoros, UNO's Washington-based spokesman, told the reporter, "There was no United States government connection."92 Similar denials by Administration officials would soon follow. North was not at the RIG meeting, but he testified that the guidance stating no U.S. Government connection was "not inconsistent with what we had prepared as the press line if such, if such an eventuality occurred."93 The Denials The President: There is no evidence the President knew of U.S. involvement in the Hasenfus flight. But the National Security Adviser and officials on the NSC staff did know. Also, the day of the downing, Felix Rodriguez called Col. Sam Watson in Vice President Bush's office, suggesting to him that North was involved with the flight." Donald Gregg, Assist- ant to Vice President Bush, earlier had been alerted to the possibility that North was linked to the resupply operation. Nevertheless, the President was permitted to deny any U.S. Government connection with the flight. In an exchange with reporters on October 8, the Presi- dent praised the efforts to keep the Contras armed, comparing resupply efforts to those of the "Abraham Lincoln Brigade in the Spanish Civil War." But when asked whether the Hasenfus plane had any connection with the American Government, the President re- plied, "Absolutely none." He told reporters: There is no government connection with that at all . . . We've been aware that there are private groups and private citizens that have been trying to help the Contras?to that extent?but we did not know the exact particulars of what they're doing.95 The Secretary of State: On October 7, Secretary Shultz told reporters that the Hasenfus aircraft was "hired by private people" who "had no connection with the U.S. Government at all."" He was quoted on two national network news programs that evening as saying, "The people involved were not from our military, not from any U.S. Government agency, CIA included."97 On October 10, Shultz reiterated this denial while at the Reykjavik Summit with the Presi- dent. Asked during a Today Show interview about Hasenfus' statements that he worked with CIA em- ployees on the resupply operation, Shultz said: [D]on't forget that this man is under arrest and is saying things under those conditions. I have said, on the basis of checking with both the Defense Department and the CIA, that I am informed by both those agencies that he is not an employee of theirs and they are not connected with this oper- ation.98 Secretary Shultz testified that the U.S. Government involvement with the Hasenfus flight was a "surprise" to him," and the record shows that two National Security Advisers frequently failed to confide in him or give him accurate information. Shultz said he based his denials on a "general understanding" that "there was no problem" with North's activities, be- cause Congressional inquiries into North's activities came up empty. Moreover, Abrams testified that he gave categorical assurances to Shultz that there was no U.S. Government involvement in the Hasenfus flight, and that neither North nor anybody else on the NSC staff was involved in the provision of lethal assistance to the Contras.1?? North claimed in testimony that Shultz "knew what I was doing" to support the Contras, citing a single instance where the Secretary at a reception "put his arm around my shoulder, and told me what a remark- able job I had done keeping the Nicaraguan Resist- ance alive."0' Shultz testified, however, that he merely told North that he appreciated North's work "to keep up the morale of these [the Contra] leaders. . . . But that was the sum and substance of it. To build on that remark this superstructure of implication is entirely unwarranted.',102 Assistant Secretary of State for Inter-American Af- fairs: Elliott Abrams was the primary spokesman for the Administration about the Hasenfus flight. His cat- egorical denials of U.S. involvement were not limited to the State Department; he did not hesitate to tell reporters that no Government agency was tied to the Hasenfus flight, including the NSC staff. Typical of his statements during this period were the following, made on the CNN Evans & Novak show which aired October 11: EVANS: "Mr. Secretary, can you give me cate- gorical assurance that Hasenfus was not under the control, the guidance, the direction, or what have you, of anybody connected with the Ameri- can government?" ABRAMS: "Absolutely. That would be illegal. We are barred from doing that, and we are not doing it. This was not in any sense a U.S. gov- ernment operation. NOVAK: "Now, when you say gave categorical assurance, we're not playing word games that are so common in Washington. You're not talking about the NCS [sic], or something else?" ABRAMS: "I am not playing games." NOVAK: "National Security Council?" ABRAMS: "No government agencies, none. "104 Abrams was no less categorical in denials to Con- gressional Committees. He testified three times during this period. On October 15, Abrams testified alone 145 77-026 0 - 87 - Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 7 before the House Foreign Affairs Subcommittee on Western Hemisphere Affairs. On October 10, he testi- fied before the Senate Foreign Relations Committee, and on October 14, before the House Intelligence Committee. On these two occasions, he was accompa- nied by Clair George, the CIA's Deputy Director for Operations; and the Chief of the CIA's Central Amer- ican Task Force. During the House Intelligence Committee appear- ance, the following exchange occurred: HAMILTON: ". . . Just to be clear, the United States Government has not done anything to fa- cilitate the activities of these private groups, is that a fair statement? We have not furnished money. We have not furnished arms. We have not furnished advice. We have not furnished lo- gistics." GEORGE: "Mr. Chairman, I cannot speak for the entire United States Government." HAMILTON: "Can you, Mr. Abrams?" ABRAMS: "Yes, to the extent of my knowledge that I feel to be complete, other than the general public encouragement that we like this kind of activity."105 As Abrams later acknowledged to these Commit- tees, this statement was "completely wrong.',106 Abrams testified that he was unaware that North was involved with the Hasenfus flight, insisting that he was just another person deceived by North.'" North, on the other hand, included Abrams with other officials who, he said, had tried to keep the Contra operation secret. He testified: "I am sure that others like Mr. McFarlane and Admiral Poindexter and Director Casey and Elliott Abrams and the Chief of the Central American Task Force and others were trying to weigh in their souls what would happen to those [involved in or assisting the operation] . . . if the American Government stood up and announced it."?8 Noting that Abrams had asked North to help raise money to retrieve the bodies of the dead crew- members, North said, "Why would he turn to me if he didn't know I was doing it?"" Abrams testified that he did not specifically call North to ask for such assistance, but that those issues merely "came up in the conversation.""? Moreover, Abrams maintained he had sufficient reason to believe North was not involved in the Hasenfus flight. He noted first that McFarlane had categorically denied to Congress that North was providing military support to the Contras. Abrams conceded that those denials were made a full year before the Hasenfus shoot- down, but said that based on his work with North in the Restricted Interagency Group (RIG) throughout 1986, he "had no reason whatsoever to believe that he was violating the law."111 146 North claimed, however, that his Contra-related ac- tivities were discussed at some RIG meetings.' 12 In his testimony, North specifically mentioned only one RIG meeting, initially asserting that Abrams attend- ed.1 North's notebook entry of that meeting, how- ever, indicates Abrams was not present. Nonetheless, North maintained that Abrams knew details of his Contra-support activities. An entry in North's note- book for April 25, 1986, suggests that North and Abrams discussed "support for S. front," the fact that the "air base [was] open in C[osta] R[ica]," and "100 BP's [Blowpipe missiles]."4 North testified that he did not specifically recall that conversation, "but do not deny that I discussed those [items listed in North's notebook] at various points in time with Mr. Abrams and others."' 13 (Abrams was not asked about this notebook entry.) Moreover, the third key member of the RIG, the CIA Chief of the Central American Task Force (Cl CATF), testified that he was "taken aback" by Abrams' categorical denials of North's involve- ment.' 16 While he insisted that he did not want "to impeach" Abrams' testimony, C/CATF told these Committees: "I thought he [Abrams] would have a broad brush understanding, as did a lot of other people, 011ie was in and around those things."7 Abrams argued in defense of his statements that he or someone on his staff had checked with other key agencies?the Central Intelligence Agency (CIA) and the Department of Defense (DOD)?and verified that no U.S. officials were involved with the Hasenfus flight."" In their testimonies, two key CIA offi- cials?the C/CATF and the Deputy Director for Op- erations?mentioned no call from Abrams' office, and testified they were surprised by Abrams' categorical denials.' 9 Similarly, Abrams noted that soon after the crash, while North was out of the country, he called an NSC staff officer and received assurances that the NSC staff was not involved in the Hasenfus flight.'" Abrams said the official "may have been Mr. Earl."121 Earl, however, was aware that the flight was part of "Democracy, Inc." and that North played an important role in that organization.'" (Earl was not asked about a call from Abrams.) During the period he was making his denials, Abrams spoke with North. But Abrams did not ask whether North was involved with the Hasenfus flight, despite the fact that Abrams, in his words, "knew that he [North] was monitoring" the private Contra sup- port network.'" Abrams said he did not ask North because "it was very clear that [confirming his in- volvement in the flight] would have been completely contradictory to what he had previously told me."1.24 North had a different explanation: "He didn't have to ask me. . . He knew."125 Finally, while testifying before the House Foreign Affairs Subcommittee on Western Hemisphere Affairs Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 7 on October 15, 1986, Abrams said that he did not believe anyone in the Government would know de- tails about the flight: KOSTMAYER: "You have not been told by our Government, if indeed our Government knows, who organized and who paid for this particular flight?" ABRAMS: "I wouldn't separate myself from the Government. We don't know." KOSTMAYER: "Do you think there is anyone in the Government who does know?" ABRAMS: "No, because we don't track this kind of activity."126 Asked to reconcile this response with the fact that he knew North monitored the Contra aid network, Abrams told these Committees: "To say that Col. North was the person who knew the most about the private benefactors?which I thought, and think to be the case?is not to say that he could tell you the name of every one of them and could tell you every- thing that every one of them was doing each day."27 CIA Deputy Director For Operations: Clair George, appearing with Abrams at two sessions before Congressional Committees, limited his denials to the Central Intelligence Agency. Typical of his remarks was the following from his opening statement before the House Intelligence Committee on October 14: First I would like to state categorically that the Central Intelligence Agency was not involved directly or indirectly in arranging, directing or facilitating resupply missions conducted by pri- vate individuals in support of the Nicarguan democratic resistance.'28 In fact, at least one CIA official was directly involved in providing lethal supplies to the Contras in 1986. George testified before these Committees that he was unaware of this fact when he testified at the Hasenfus hearing. Nonetheless, in his testimony before these Committees, George admitted that his earlier state- ment was "wrong", and he offered an apology.129 George acknowledged that he knew in October 1986, that the NSC staff was "participating in some way in supplying the Contras"3? but he allowed Abrams' categorical denials about the involvement of any U.S. officials to pass without comment. He ex- plained: I was surprised Abrams made that statement. It was so categorical. The question is, should I leap up and say, 'hold it, Elliott, what about?excuse me, all you members of HPSCI, but Elliott and I are now going to discuss what we know about'? and I didn't have the guts to do it.'" Saying he was "overly taken with trying to protect the Central Intelligence Agency," George expressed regret that he had not responded in some way to Abrams' categorical denials.'32 CIA Central American Task Force Chief: The C/CATF told these Committees he was aware that the categorical denials about any U.S. involvement in the Hasenfus flight were wrong. Asked whether he had "any doubt" who ran the Hasenfus flight, he said, "No."33 However, testifying before the House Intel- ligence Committee on October 14, the C/CATF said: "We know what the airplanes are by type. We knew, for example there were two C-123s and C-7 cargos . . . . We knew in some cases much less frequently that they were flying down . . . into southern Nicaragua for the purposes of resupply, but as to who was flying the flights and who was behind them, we do not know:9134 The C/CATF maintained before these Committees that his statement was not false because he did not know exactly who was behind the flights: A: "I want to make one thing very, very clear. I don't lie and I don't provide false answers, and if I'm put in a situation that is undeniable, I will find some way to avoid lying. . . . I didn't know who was flying those flights." Q: "Or who was behind them, is what you said?" A: "You could have put me on a rack and I couldn't have told you who the pilots were, who was managing them. I at that time suspected, but didn't know that General Secord was involved with them. I had no idea where the money was coming from. . . . It is not a lie."35 Generally, the C/CATF remained "uniquely silent," as he put it, during the hearings on the Hasen- fus flight where he was a supporting witness: "I spoke when spoken to."36 He told these Committees that he had decided that, as the junior official on a panel with Abrams and George, he would not speak up first: I could have been more forthcoming, but I frank- ly was not going to be the first person to step up and do that. . . . So long as others who knew the details, as much as I, who knew more than I, were keeping their silence on this, I was going to keep my silence. . . . I was a member of the administration team. I wasn't going to break ranks with the team. . . . My frame of mind was to protect, was to be a member of the team.'" The C/CATF told the Committees that he was "trou- bled" by his failure to speak out, but added, "There is not a lot I can do about it."38 147 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 7 Abrams' Brunei Testimony In addition to denying any U.S. role in the Hasenfus flight, Elliott Abrams denied on several occasions that the U.S. Government actions had sought third-coun- try funding for the Contras. His statements were made despite his previous involvement in soliciting funds from the Government of Brunei. In testimony before Congressional Committees in late 1986, Abrams repeatedly deflected questions about the Con- tras' funding, giving responses which were, in his word, "misleading."139 In an October 10 open hearing of the Senate For- eign Relations Committee, Senator Kerry asked Abrams whether Country 2 had provided assistance to the Resistance. Abrams replied: "I think I can say that while I have been Assistant Secretary, which is about 15 months, we have not received a dime from a foreign government, not a dime, from any foreign government." Asked whether the Contras had re- ceived funds, Abrams said: "I don't know. But not that I am aware of and not through us." He added at the hearing that if the Contras had approached a foreign government, "I think I would know about it.?140 Appearing before the House Intelligence Commit- tee on October 14, 1986, together with Clair George, Abrams again denied that third countries had aided the Contras: ABRAMS: "I can only speak on that question for the last fifteen months when I have been in this job, and that story about [Country 2], to my knowledge is false. I personally cannot tell you about pre-1985, but in 1985-1986, when I have been around, no." CHAIRMAN: "Is it also false with respect to other governments as well?" ABRAMS: "Yes, it is also false."4' Before these Committees, Abrams testified that he did not know about the Country 2 or Country 3 contributions. Although he had personally solicited Brunei, that country's donation had not been received at the time of his testimony, and therefore he ex- plained it was technically true that the Contras had not received assistance from Brunei. Furthermore, Abrams testified that Brunei had been promised confi- dentiality, and "I did not believe I was authorized to . . . reveal that solicitation."1.42 On November 25, 1986, Abrams testified together with the CIA's C/CATF before the Senate Select Committee on Intelligence shortly after Attorney General Meese's press conference disclosing the di- version of funds from the Iran arms sales to the Con- tras. He was again asked about reports of third-coun- try funding: 148 BRADLEY: ". . . Did either one of you have any knowledge or indication that the contras were receiving funds from . . . Mid-Eastern sources?" ABRAMS: "No." C/CATF: "No." BRADLEY: "Did either one of you ever discuss the problems of fundraising?" ABRAMS: "Let me add to that, Senator. I spoke to Dick Murphy, Assistant Secretary of State for Near Eastern Affairs, probably in the course of the summer, to ask him if he thought I could raise any money from Middle Eastern sources. He was rather discouraging as to whether we would be able to do it, and so we never tried. . . ." BRADLEY: "Now, you did not discuss with anyone else in the Executive Branch the possibili- ty of receiving funds from . . . any . . . Middle Eastern source?" ABRAMS: "That's correct. I never?once I had that conversation with him, that was the end of it."1.43 Again, Abrams maintained that this testimony was literally correct because Brunei was not a Mid-East- ern country.144 In his Senate Intelligence Committee appearance, Abrams was also asked whether he dis- cussed third-country funding with members of the NSC staff: BRADLEY: "Did either one of you ever discuss the problems of fund raising by the Contras with members of the NSC staff?" ABRAMS: "Well, yes. I mean, I think?I can't remember a specific day, but certainly the ques- tion?the fact, which now appears to be slightly mysterious, that they never had any money, we discussed?you know, it came up all the time, because they were always running out of every- thing. So the question came up, sure." BRADLEY: ". . . So let me ask it again. Did either one of you ever discuss the problems of fund raising by the Contras with members of the NSC staff?" ABRAMS: "No, I can't remember." BRADLEY: "Well, you would say gee, they got a lot of problems, they don't have any money. Then you would just sit there and say, what are we going to do? They don't have any money. You never said, you know, maybe we could get the money this way?" , Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 7 ABRAMS: "No. Other than the conversation I have?other than the Middle Eastern thing which I recounted to you. We're not?you know, we're not in the fundraising business. . . ." BRADLEY: "Were you completely ignorant of all fundraising activities by the Contras?" ABRAMS: "No. Certainly not in the?I knew for?I mean?I don't think I knew anything that wasn't?I am trying to think if I knew anything that wasn't in the newspaper, that is, I knew certainly that Singlaub was raising money for the Contras. I knew that others were raising money for the Contras. I mean, using the Contras in a very general sense. For example, Friends of the Americas raises money for medical relief and things like that. I knew that was happening. I didn't know what Singlaub was raising or how or what he did with it when he got it. I was, until today, fairly confident that there was no foreign government contributing to this. But I knew nothing, still don't know anything about the mechanisms by which money was transferred from private groups that have been raising it, to the Contras."145 Abrams maintained before the Select Committees that these statements were "technically correct" be- cause he was asked about "fundraising by the Con- tras" and the Brunei solicitation was fundraising by the United States for the Contras.146 However, in his exchange with Senator Bradley, when asked whether he was ignorant of all fundraising "by the Contras," Abrams did not limit his responses to his knowledge of fundraising by the Contras. He specifically men- tioned fundraising for the Contras by John Singlaub and by the group, Friends of the Americas. Finally, in his Senate Select Committee testimony, Abrams distanced the State Department from Contra- related fundraising. He stated: "We don't engage?I mean the State Department's function in this has not been to raise money, other than to try to raise it from Congress."147 In his testimony before these Committees, Abrams acknowledged that he intended to prevent the Mem- bers of Congress from learning about the solicitation of Brunei: Q: In fact, your approach on November 25 . . . was that unless the Senators asked you exactly the right question, using exactly the right words, they weren't going to get the right answers. Wasn't that the approach? A: That is exactly the correct description of what I did on that date. . . Q: And, as you have said. . . it would have been a very easy thing to have stopped the whole shooting match by simply saying Senators you are now getting into an area that I am not au- thorized to discuss? A: It would have been relatively easy. It would have been the right thing to do. . . . Q: And so unless the Senators knew the facts in advance so they could frame their question in exactly the right words, they wouldn't find out and they didn't find out. Isn't that what hap- pened? A: Correct. That is exactly what happened.'" Abrams testified that after his November 25 testi- mony, he realized that he had "failed to disclose the solicitation of Brunei," and asked for permission to "go back and tell the Committee there had indeed been another solicitation." Abrams attempted to reach Senator Bradley, who had posed the question, to ex- plain that there had, in fact, been a solicitation which he had failed to mention in this testimony. Failing to reach Bradley, he conveyed the message to a member of the Senator's staff. When Abrams appeared again before the Senate Intelligence Committee on Decem- ber 8, he was asked to explain his answers to the Committee as a whole. Shown a transcript of his earlier statements, Abrams admitted they were mis- leading but attempted to defend them as technically accurate. After a recess, Abrams apologized to the Members, having been advised by Senator Boren to do so.149 He made no similar effort to correct his testimony in October before the Senate Foreign Relations Com- mittee or the House Intelligence Committee. Conclusion Throughout the period of Congressional restrictions on lethal aid to the Contras, Administration officials were asked repeatedly whether the U.S. Government was in any way providing such support. In every instance, officials responded to the inquiries with eva- sive answers or categorical denials. Some of these officials made their statements as part of a deliberate attempt to conceal what they knew about U.S. Gov- ernment support for the Nicaraguan Resistance. These Committees found no direct evidence sug- gesting that the President was a knowing participant in the effort to deceive Congress and the American public. But the President's actions and statements con- tributed to the deception. Congressional Committees overseeing the imple- mentation of the Boland Amendment repeatedly sought to determine how the Contras were being funded. The President knew that Country 2 had pro- vided substantial sums of money to the Resistance; he had personally discussed such a contribution with the leader of that country. But knowledge of this contri- 149 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 7 bution was not widely shared within the Administra- tion. Indeed, high-ranking State Department officials were permitted on several occasions to testify to Con- gress that it was not the policy of the United States to facilitate or encourage third-country donations, and that the Administration had not in fact done so. In one instance, following the enactment of the full pro- hibition Boland Amendment in October 1984, Ambas- sador Motley testified that "soliciting" or "encourag- ing" third country donations would violate the law. In October 1986, the President denied that the U.S. Government had any connection with the Hasenfus flight, depicting it as part of a "private" operation. According to Poindexter the President "understood that the Contras were being supported and that we were involved in?generally involved in coordinating the effort."5? These Committees found no evidence suggesting that the President knew his statements about the flight were false. He merely echoed the denials made the day before by State Department officials.'51 The National Security Adviser and others who knew the President's remarks were false appear to have made no effort to ensure that the President's statements were accurate and his knowledge com- plete. Poindexter testified he was too busy with the Reykjavik summit to correct the public record."2 Reasons for the Deception North endeavored to explain the need for the decep- tion by arguing that he was forced to weigh "the differences between lives and lies." He told the Com- mittees: [t]he revelations of the actual details of this activ- ity . . . would have cost the lives of those with whom I was working, would have jeopardized the governments which had assisted us, would have jeopardized the lives of the Americans who in some cases were flying flights over Nicaragua, would have put at great risk those inside Nicara- gua and in Eastern Europe and other places where people were working hard to keep them alive. . . .153 North's justification for his decision to deceive does not withstand analysis. Congress is routinely briefed on covert operations where lives are at risk. Beyond that, Congress publicly debated and then approved 150 the support of the Contras prior to enactment of the Boland prohibition. Operational details that would have put at risk the personnel conducting those oper- ations were not publicly revealed. The same is true for the Congressionally approved operation in support of the Contras currently underway. Even in 1985 and 1986, Congress was not asking about operational details such as drop-zone coordi- nates or flight paths. Members of Congress simply wanted to know whether it was true that the U.S. Government was providing lethal support to the Nic- araguan Resistance. Indeed, North testified that his efforts were known widely outside the United States, even by this Coun- try's enemies: "Izvestia knew it . . . . My name had been in the newspapers in Moscow, all over Daniel Ortega's newscasts. Radio Havana was broadcasting it."154 Moreover, it was important to the success of the resupply operation that friendly countries in Cen- tral America knew that the U.S. Government support for the Contras was continuing so that they would not drive the Contras out of their countries. Only the American people and the Congress were kept in the dark. Had they known, it would not have been lives at risk but the NSC staffs secret operation itself. Poindexter told these Committees he believed during his tenure in the White House that disclosure of the NSC staff operation would have almost surely triggered tighter restrictions on aid to the Contras."5 McFarlane testified that disclosure of the "troubling" documents on North's activities which he had gath- ered in response to a Congressional inquiry "would be an extremely torturous, conflicting, disagreeable out- come and that I hoped we didn't come to that."56 North's contemporaneous actions and words pro- vide clear evidence that the reasons for the deception had more to do with the political risk to the operation than to the physical risk to operation personnel. The record is clear that North's actions after the revela- tion of the Santa Elena airfield were motivated by a desire to prevent the discovery of "USG finger- prints," in his words, on the airfield. In addition, in a May 1986, PROF note to Poin- dexter, North warned that Members of Congress were bound to become "more inquisitive" as the Contra operation's level of activity increased. He wrote: "While I care not a whit what they say about me, it could well become a political embarassment for the President and you." '57 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 7 Chapter 7 1. Exhibits OLN-131 and OLN-307, Hearings, 100-7, Part 2. Weekly Compilation of Presidential Documents, No. 41 at 1349. 3. Most Contras Reported to Pull Out of Nicaragua, 1/30/86, New York Times, Nicaragua Rebels, In Retreat, Viewed as a Reduced Threat, 3/6/86, New York Times Al. 4. On March 20, for example, the Washington Post re- ported that the Contras had "mounted a series of raids against mostly economic targets in the northern Nicaraguan mountains in the past 10 days as debate quickened in Wash- ington over military aid for their sagging guerilla war." [Washington Post, 3/20/86, Contras Step Up Raids As US. Debate Waxes, p. 6]. 5. See Group's Aid to Contras Probed, The Boston Globe, 4/11/86, p 1; Cocaine, Gun Charges Probed, by the Associat- ed Press in Washington Post, 4/11/86, p. A6; Inquiry Re- ported Into Contra Arms, AP story, the New York Times, p A3; Top 'Contras' Under Scrutiny For Corruption, Chris- tian Science Monitor, 4/11/86; Reagan Asked About Allega- tions, The Washington Post, 4/13/86 p. A38; 11 Miami Banks Ordered to Open Files in Probe of Contra Spending, 5/ 9/86, Miami Herald, p. 1; Similar articles on May 9 in The New York Times, The Baltimore Sun and other papers. 6. Colonel's Actions May Have Broken Contra Aid Ban, Miami Herald, 4/30/86, p. 8. 7. Despite Ban, US. Helping Contras, 6/8/86, Miami Herald, p. 1A; the charges were echoed in an Associated Press story which ran on June 11 in The Washington Post under the headline, US. Abetted Contra Aid During Ban. 8. White House OKd Contra Aid Plan, Sources Say, Miami Herald, 6/22/86 p. 26A. 9. Poindexter Test., Hearings, 100-8, at 95. 10. Poindexter Test., Hearings, 100-8, at 42. 11. Poindexter Test., Hearings, 100-8, at 42. 12. Poindexter Test., Hearings, 100-8, at 42. 13. Going After North, Washington Times, 7/15/86. A PROF Note sent that day to North strongly suggests that Poindexter leaked the story. Poindexter wrote in the PROF: "I just wanted to lower your visibility." And he gave North the name of two Washington Times reporters, suggesting that North call them to straighten the matter out. N12568. See also Ex. OLN- 295 and N12569. 14. PROF Note, 7/15/86 [N12568]. On July 19, 1986, the Miami Herald quoted a "senior administration official" saying that North would be reassigned and would no longer handle Contra matters. 15. PROF Note 7/15/86 [N12568]. 16. Poindexter Test., Hearings, 100-8, at 48. 17. North Test., Hearings, 100-7, Part I, at 174. McFar- lane denied that he gave such instructions to North. McFar- lane Test., Hearings, 100-7, Part I, at 204. 18. North Test., Hearings, 100-7, Part I, at 27. 19. Ex. JMP-7, Hearings, 100-8. 20. Poindexter, Hearings, 100-8, at 196. McFarlane had not arranged for North to communicate with him directly using the PROF system. 21. Ex. OLN-191, Hearings, 100-7, Part III. 22. Poindexter Test., Hearings, 100-8, at 43, 48, 60. 23. Poindexter Dep., 5/2/87, at 208. 24. Id. 25. North Test., Hearings, 100-7, Part I, at 87. 26. Ex. OLN-10, Hearings, 100-7, Part III. "Kerry, Barnes, Harkins" referred to Senator John Kerry, Repre- sentative Barnes and Representative (now Senator), Tom Harkin. 27. Ex. OLN-89, Hearings, 100-7, Part III. 28. PROF Note from Small to North, date unknown [N17526] . 29. Transcript of Broadcast. 30. PROF Note, 6/27/86 [N4951]. 31. Text of statement. On June 21, Coleman gave the weekly Democratic radio address. 32. Congressional Record, June 25, 1986, p. E2264. 33. Id. 34. The resolution reads: "A complete list and description of any contact or other communication between Lieutenant Colonel Oliver L. North or any other member of the staff of the National Security Council and any private individual or any representative of a foreign government concerning the provision to the Nicaraguan resistance of any funding or other assistance from any source other than the United States Government (including assistance by any private group or individual or by any foreign government); and any document prepared by or in the possession of any member of the staff of the National Security Council concerning the provision of any such assistance, specifically including any document concerning any discussion of or involvement in private fund-raising activities on behalf of the Nicaraguan resistance by any member of the staff of the National Secu- rity Council." 35. The resolution reads: "A complete list and discription [sic] of and any document concerning any contact or other communication, directly or through intermediaries, since July 28, 1983, between Lieutenant Colonel Oliver L. North or any other member of the staff of the National Security Council and any member or representative of the Nicara- guan resistance, including any communications concerning the military strategy or tactics, coordination of the activi- ties, or the military equipment or training needs of the Nicaraguan resistance." 36. The resolution reads: "A complete list and discription [sic] of and any document concerning any contacts or other communication since July 28, 1983, between Lieutenant Colonel Oliver L. North or any other member of the staff of the National Security Council and Robert W. Owen (who has served as a consultant to the Nicaraguan Humani- tarian Assistance Office), Major General John K. Singlaub (United States Army, retired), John Hull (a United States citizen operating a ranch in northern Costa Rica)." 37. Ex. JMP-14, Hearings, 100-8. 38. Poindexter Test., Hearings, 100-8 at 102. 39. Ex. JMP-14, Hearings, 100-8. 40. Poindexter Test., Hearings, 100-8 at 96. 41. Poindexter Test., Hearings, 100-8 at 53. 42. Poindexter Test., Hearings, 100-8 at 88. 43. Poindexter Test., Hearings, 100-8 at 73-70. See also Chapters 2 and 3. 44. Poindexter Test., Hearings, 100-8 at 83. 45. Poindexter Test., Hearings, 100-8 at 94. 46. On July 30, the House Armed Services Committee reported H. Res. 485 unfavorably. "Unlike the usual prac- tice of the House in a resolution of inquiry," the report 151 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 11 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 7 explained "rather than requesting him [the President] to produce the specified materials, this resolution directs the production of information." This, the report said, "could place the President in an untenable position concerning compliance if the resolution were agreed to in its present form." (Rept. 99-724) As a result, the other two Committees to which it had been referred-Foreign Affairs and Intelli- gence-were no longer compelled to report the measure within 14 days. Nevertheless, the resolution was still pend- ing under the rules of ordinary legislation, and Committee members wanted to give it full consideration. They deemed it necessary to meet with Oliver North. 47. In attendance at the 8:30 a.m. meeting with North were Chairman Hamilton, Representatives McCurdy, Kas- tenmeier, Daniel, Roe, Stump, Ireland, Hyde, Cheney, Liv- ingston, and McEwen; Bob Pearson and Ron Sable of the NSC staff; and Tom Latimer and Steve Berry of Committee staff. 48. Ex. OLN-127, Hearings, 100-7. 49. Ex. OLN-126 and OLN-127, Hearings, 100-7. The Committee members came to the meeting believing that official Administration policy held that the NSC staff was covered by the Boland Amendment. The former National Security Adviser had told the House Intelligence Commit- tee as much the year before, and the current National Secu- rity Adviser had indicated by his letter that the interpreta- tion stood. North, in his statements to the Members, said nothing to the contrary. He stated that he had always acted in compliance with the letter and the spirit of the Boland Amendment. During the session, he admitted undertaking only those actions clearly permitted by all officials of the Executive Branch. He denied activities that Members who believed the Boland Amendment applied to the NSC would have interpreted as illegal. 50. North Test., Hearings, 100-7, at 176. 51. Ex. OLN-127, Hearings, 100-7. 52. Letter from Hamilton to Coleman, 8/12/86. 53. North Test., Hearings, 100-7, at 177-178. 54. Earl Dep., 5/22/87 at 102. 55. Earl Dep., 5/22/87, at 105-08. 56. Earl Dep., 5/22/87 at 106-07. 57. Earl Dep., 5/22/87 at 107. Poindexter testified: "Obvi- ously with hindsight, it would have been prudent to have sat down and talked to him about that [the meeting with the Members of Congress] before he did it to provide more detailed guidance, but that was not the manner in which I was manning and directing Colonel North at the time." Poindexter Test., Hearings, 100-8 at 152. 58. North Test., Hearings, 100-7, at 178. 59. North Test., Hearings, 100-7, at 178. 60. Poindexter Test., Hearings, 100-8 at 152-156. 61. Ex. OLN-128, Hearings, 100-7. 62. Poindexter Test., Hearings, 100-8 at 104. 63. Poindexter Test., Hearings, 100-8 at 152. 64. See Chapter 2. 65. Ex. LAT-6, Hearings, 100-3. 66. Q2392. 67. Ex. LAT-6, Hearings. 68. North Notebooks, 9/6/86 [Q2392]. North's notebook also indicates that the C/CATF was aware of the threat- ened press conference. 69. Ex. LAT-6, Hearings, 100-3. 70. North Test., Hearings, 100-7, at 86-87; Abrams Test., Hearings, 100-5 at 24-26. 152 71. North Test., Hearings, 100-7, at 86-87. 72. Tambs Test., Hearings, 100-3, at 383. 73. Abrams Test., Hearings, 100-5 at 25. 74. Tambs Test., Hearings, 100-3 at 383. 75. Ex. LAT-6, Hearings, 100-3. 76. PROF Note, 9/7/86 [N12159]. 77. Costa Rica Closes Airstrip Near Nicaragua Border, The New York Times, 9/25/86, p. 13. 78. Ex. OLN-307, Hearings, 100-7. 79. Ex. OLN-131, Hearings, 100-7. 80. Id. 81. Ex. OLN-132, Hearings, 100-7, Part III. The memo- randum was "nonlog," meaning it had not been entered into the official NSC filing system. Poindexter had earlier direct- ed North not to put in writing matters relating to the Contra operation. 82. Ex. OLN-132, Hearings, 100-7, Part III. 83. Id. 84. Abrams Test., Hearings, 100-5, at 20, 24-26; C/CATF Test., Hearings, 100-11 at 95-98. 85. See Chapter 2. 86. Hasenfus Refers to Secret Airstrip, The New York Times 10/24/86 p. 7; Downed Airman Tells Predicament, Los Angeles Times, 10/25/86 p. 1. 87. Crash Survivor Described as Adviser in El Salvador, The Washington Post, 10/8/86. 88. North Test., Hearings, 100-7, at 179. 89. KL-43 Message, RD00492. 90. The meeting was described in a PROF from Cannis- traro to Poindexter: Ex. OLN-133, Hearings, 100-7. 91. Ex. OLN-133. Hearings, 100-7. On October 9 the following entry appears in North's notebook: "Call C/ CATF, Cruz, Calero [about] press release. The A/C was providing humanitarian supplies to UNO fighters." 92. Contras Take Responsibility for the Support Flight, The New York Times, 10/14/86, P. A9. 93. North Test., Hearings, 100-7 at 179. 94. Ex. OLN-99, Hearings, 100-7. 95. Weekly Compilation of Presidential Documents, Vol. 22, #41, at 1348-9; See also Elaborate System Supplies Con- tras, Los Angeles Times, 10/9/86 p. 1; Reagan on Downed Plane: Like Lincoln Brigade, New York Times, 10/9/86, p. A8 96. Reagan Administration Denies US. Link to Plane, Washington Post, 10/8/86, p. Al; Downed Plane Not Ours, Shultz Says, Los Angeles Times, 10/8/86, P. 1. 97. Transcripts of news shows in "Radio-TV Defense Dialog." 98. Id. 99. Shultz Test., Hearings, 100-9 at 204. 100. Abrams Test., Hearings, 100-5 at 65-67. 101. North Test., Hearings, 100-7, at 149. 102. Shultz Test., Hearings, 100-9 at 202. 103. Ex. EA-25, Hearings, 100-5. 104. Id. 105. Ex. EA-28, Hearings, 100-5. 106. Abrams Test., Hearings, 100-5 at 65. 107. Abrams Test., Hearings, 100-5 at 63-69. 108. North Test., Hearings, 100-7, at 180-181. 109. North Test., Hearings, 100-7, at 165. 110. Abrams Test., Hearings, 100-5 at 64-65. 111. Abrams Test., Hearings, 100-5 at 65-68. 112. North Test., Hearings, 100-7, at 88. 113. North Test., Hearings, 100-7, at 88. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 7 114. Ex. OLN-94, Hearings, 100-7. 115. North Test., Hearings, 100-7, at 156. 116. C/CATF Test., Hearings, 100-11 at 157. 117. C/CATF Test., Hearings, 100-11, at 156-157. 118. Abrams Test., Hearings, 100-5 at 63. 119. C/CATF Test., Hearings, 100-11 at 156-157; George Test., Hearings, 100-11 at 165. 120. Abrams Test., Hearings, 100-5 at 63-64. 121. Abrams Test., Hearings, 100-5 at 64. 122. Earl Dep., 5/22/87, at 149-50, 169-70. 123. Abrams Test., Hearings, 100-5 at 64. 124. Abrams Test., Hearings, 100-5 at 65. 125. North Test., Hearings, 100-7, at 179-80. 126. Transcript at 33. 127. Abrams Test., Hearings, 100-5 at 66. 128. Transcript at p. 4. Similar denials were issued by CIA spokeswoman Kathy Pherson to reporters. For exam- ple, on October 10 the Los Angeles Times quoted her as saying, "We didn't have anything to do with the guy [Ha- senfus]. We didn't have anything to do with the plane. And we can say that, instead of our usual "No comment," be- cause a plane that flies in and drops supplies would violate congressional restrictions. We have not and will not violate congressional restrictions." Downed Flier Claims CIA Ties, Los Angeles Times, 10/10/86. 129. George Test., Hearings, 100-11 at 216. 130. George Test., Hearings, 100-11 at 217. 131. George Test., Hearings, 100-11 at 217. 132. George Test., Hearings, 100-11 at 219-221. 133. C/CATF Test., Hearings, 100-11 at 120. 134. Transcript at 20-21. 135. C/CATF Test., Hearings, 100-11 at 121-122. 136. C/CATF Test., Hearings, 100-11 at 120. 137. C/CATF Test., Hearings, 100-11 at 122. 138. C/CATF Test., Hearings, 100-11 at 121, 132-133. 139. Abrams Test., Hearings, 100-5 at 74. 140. Ex. EA-29, Hearings, 100-5. 141. Ex. EA-28, Hearings, 100-5. 142. Abrams Test., Hearings, 100-5 at 85-86. 143. Ex. EA-30, Hearings, 100-5. 144. Abrams Test., Hearings, 100-5 at 72. 145. Ex. EA-30, Hearings, 100-5. 146. Abrams Test., Hearings, 100-5 at 73. 147. Ex. EA-30, Hearings, 100-5. 148. Abrams Test., Hearings, 100-5 at 74-75. 149. Abrams Test., Hearings, 100-5 at 77-79, 94, 146-149. 150. Poindexter Test., Hearings, 100-8 at 89. 151. Assistant Secretary Abrams testified that he had given Secretary Shultz categorical assurances of no U.S. Govern- ment involvement in the Hasenfus flight. (See fn. 100.) Abrams' explanation for his denials is discussed above. 152. Poindexter Test., at 160-61. 153. North Test., Hearings, 100-7, at 335. 154. North Test., Hearings, 100-7 at 119. 155. Poindexter Test., Hearings, 100-8 at 61. 156. McFarlane Tesi., Hearings, 100-2 at 118. 157. Ex. OLN-10, Hearings, 100-7. 153 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 I I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Part III The Arms Sales to Iran Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 8 U.S.-Iran Relations and the Hostages in Lebanon For many Americans, the most surprising and alarm- ing aspect of the Iran-Contra Affair was President Reagan's decision to sell arms to Iran. Only a few years before, that nation had humiliated the United States. From November 1979 to January 1981, Iran held American diplomats hostage, while Iranian mobs in the streets of Tehran chanted slogans calling for the death of President Carter and the destruction of U.S. interests throughout the Middle East. Since November 14, 1979, first in response to the hostage crisis and then because of the Iran-Iraq war, the United States had embargoed the sale of arms to Iran. Moreover, it had been the policy of the United States since December 1983 to pressure other govern- ments, through "Operation Staunch," to stop the sale of arms to Iran in order to help bring an early end to the Iran-Iraq war. The United States also opposed the transfer of arms to Iran because of its involvement in terrorist activi- ties. Following repeated attacks against Americans and U.S. interests in Lebanon, the Secretary of State officially placed Iran on a list of countries -supporting terrorism. Reagan Administration policy on terrorism was well known and was clearly stated by the Presi- dent: "We make no concessions. We make no deals." Why did the Reagan Administration make a com- plete about-face on both of these publicly stated poli- cies?to sell no arms to Iran and to make no conces- sions to terrorists? The background of recent U.S. policy toward Iran and of the seizure of American hostages in Lebanon provides a context in which to assess those policy reversals. No Regional Guarantees Partly in reaction to the war in Vietnam, the United States in 1969 began to shift to a worldwide policy of no longer directly guaranteeing the security of its regional allies. Instead, the United States would work with its friends to ensure ? that they had the military capability to defend themselves against inter- nal subversion or external threat. Under the Nixon Doctrine, the United States looked to regional powers, such as Iran, to serve as guardians of Ameri- can interests in distant corners of the world. Iran's armed forces, under Shah Mohammed Reza Pahlavi, served as a deterrent to regional aggression in this conception of American policy. "Iran," Presi- dent Carter declared during a 1977 trip to Tehran, "because of the great leadership of the Shah, is an island of stability in one of the more troubled areas of the world."2 Equipped with the latest American weaponry and backed by a 350,000-man army, Iran had become America's policeman in the Gulf. The Shah relished the role and his power. "Nobody can overthrow me," he once boasted, "I have the support of 700,000 troops, all the workers, and most of the people. I have the power."3 The Shah's power proved illusory. Growing pro- tests by students, leftists, and, most importantly, Muslim religious opponents led in February 1979 to the Shah's overthrow and his replacement by a Shiite Muslim religious leader, Ayatollah Khomeini, who had been forced into exile in 1964, first to Iraq and then to France. The new regime was contemptuous of both the United States?the "Great Satan"?and the West. Fiery Shiite clerics accused the United States of imperialism and the murder of thousands during the Shah's rule. America's fortunes in Iran had crumbled. If any doubt remained about the nature of the new regime, it was removed on November 4, 1979, when youthful Iranian militants?the Revolutionary Guards?stormed the U.S. Embassy in Tehran and took 66 American diplomats hostage. The hostage crisis lasted 444 days. It helped to drive one President from office and to elect another who pledged that America would not be so humiliated again.4 Arms Sales to Iran In response to the Embassy seizure, the United States on November 14, 1979, embargoed all arms shipments to Iran as part of a general embargo on trade and financial transactions. Ten months later, however, the invasion of Iran by Iraq, on September 22, 1980, raised the question of who might ultimately be pun- ished by this punitive measure. The prospect of an Iranian defeat and an increase in Soviet influence in the region was of concern. 157 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 II , . I 1 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 8 Figure 8-1. Map of Iran . AZARBAYJAN-E KHAVARI h-ye h la) 0 Tabriz Ardebil ? iveh AZARBAYJAN-E A 0 Raskt BAKHTARI1 _' AlSahlibild 0 ?li GILAN e Zang's N. ? c KORDESTAN ZANJAN ClaIVII! MAZANDARAN Sari? S e f TEHRAN ' ' SEMNAN anandal o I to...'?` i OTelatin -1.;:, ? HAMADN Ernarnshahr cL MARKAZi 1-? 0 6."'..*gorranitibJr. Arak ?Raskin LOS TAN r ESFAHAN iLion Esfahan ham( ? - DezfOl aShahr-e Kord ( \ , ? CHAHANMAHALL I HO ESTAN 's:, VA BAKHHIARI ....i..... MirkL. 4--; 0 .?-? \ CZel Yazd 1-- ????.., 0 soNsWi" is. rli-ii4 ( \ ....- - -1 Bandwe / BOVIR ;HMADI KhOmeyM .VA KOHKILUYEH Ab? -.4- International boundary Province boundary National capital Province capital 158 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 8 Iran's armed forces were in disarray; the officer corps and enlisted ranks had been decimated by gov- ernment purges and desertions. Iran's military arsenal was also in poor shape. Modern aircraft, armor, and naval vessels purchased by the Shah had been left unattended during the 24-month revolution and were badly in need of spare parts and maintenance. Adding to Tehran's vulnerability was the fact that most of the weaponry in the Shah's arsenal was of American man- ufacture, and the U.S. embargo prevented resupply. National Security Council (NSC) and Central Intelli- gence Agency (CIA) analysts concluded that the Ayatollah Khomeini was ill-prepared to meet Iraq in a modern war. Against this background, the Reagan Administra- tion's Senior Interdepartmental Group (SIG) con- vened on July 21, 1981, to discuss U.S. policy toward Iran. SIG members concluded "that U.S. efforts to discourage third country transfers of non-U.S. origin arms would have only a marginal effect on the con- duct and outcome of the war, but could increase opportunities for the Soviets to take advantage of Iran's security concerns and to persuade Iran to accept Soviet military assistance."5 While no agency representative argued in favor of U.S. action to en- courage an increase in arms supply to Iran, some expressed concern that a rigid U.S. policy against all arms transfers to Iran would not serve overall U.S. interests. The Joint Chiefs of Staff, however, strongly op- posed arms sales to Iran, which they believed would represent a profound shift in U.S. policy that "would be perceived by the moderate Arab states as an action directly counter to their interests." Similarly, they felt that any li]mprovement in the Iranian arms supply would intensify the war with Iraq" and possi- bly spill over into neighboring states. Administration policy against arms sales to Iran remained firm. Despite the U.S. embargo, Iran obtained weapons and military support services on the thriving world arms market. Oil was often the medium of exchange in elaborate barter deals, and Persian Gulf trade became an irresistible lure for international arms mer- chants. The Reagan Administration listed no fewer than 41 countries that had provided Iran with weap- ons since the start of the war.7 As a result, by the spring of 1983, the tide in the Gulf war had turned in favor of Iran. A steady supply of munitions, artillery, and ground-to-air and ground- to-ground missiles had enabled the more numerous Iranian armed forces and Revolutionary Guards to expel Iraqi forces, seize and retain some small pieces of Iraqi territory, and shell the major city of Basra and the capital city, Baghdad. Once thought by West- ern analysts to be on the verge of collapse, Iran had rebounded from its earlier battlefield setbacks. Operation Staunch At this point the Administration decided to initiate Operation Staunch, a plan seeking the cooperation of other governments in an arms sales embargo against ? Iran. On December 14, 1983, the State Department instructed its Embassies in countries believed to be involved in arms trade with Tehran to urge their host governments to "stop transferring arms to Iran be- cause of the broader interests of the international community in achieving a negotiated end to the Iran- Iraq war." Within the U.S. Government, authorities increased surveillance of shipments of American equipment and spare parts destined (usually through intermediaries) for Iran. Between January 1984 and January 1987, the State Department sent more than 400 cables to Amer- ican overseas missions urging compliance with Oper- ation Staunch. Secretary Shultz personally urged member governments to work within the European Community to reduce the flow of materiel to Iran. Reports persisted that Israel still actively supplied the Iranian military despite U.S. efforts to stop arms sales through Operation Staunch. Other reports hinted that U.S. and Israeli representatives met regularly to discuss Tehran's war needs. Widespread reports, par- ticularly from the Middle East, also suggested that the United States was violating its own arms prohibitions. The effectiveness of Operation Staunch was uncer- tain, but Iran's military potential clearly grew. The U.S. Government repeatedly and publicly reaf- firmed its commitment to lessening the flow of arma- ments to Tehran. A typical public statement from the State Department, dated May 1985, noted that: "The U.S. does not permit U.S. arms and munitions to be shipped to either belligerent and has discouraged all free-world arms shipments to Iran because, unlike Iraq, Iran is adamantly opposed to negotiations or a mediated end to the conflict." Iran's Support of Terrorism The long-suppressed Shiite community in Lebanon, with close religious and familial ties to Iran, had found inspiration in the rule of the Ayatollah Kho- meini. In the aftermath of the Israeli invasion of Leba- non in June 1982, some Shiite groups in Lebanon used political kidnappings and terrorism against Americans and American institutions as retaliation against per- ceived U.S. support for the Israeli invasion and occu- pation of their country. The United States became aware in July 1982 that Iran was supporting groups in Lebanon, such as Islamic Jihad and the Hizballah (Party of God), that were suspected of terrorism. United States Marines had been sent to Lebanon briefly in August and September 1982 to supervise the withdrawal of forces of the Palestine Liberation Or- ganization (PLO) from Beirut and returned to Leba- 159 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 8 non soon thereafter in the aftermath of the Sabra and Shatila massacres. The purpose of the U.S. presence in Beirut was to help support the Government of Lebanon in its efforts to restore stability and its au- thority throughout Lebanon. The U.S. troops came to be perceived in Lebanon as a partisan militia, howev- er, working on behalf of the Maronite-and-Christian- controlled government. A series of bold attacks followed against Americans and American interests throughout Lebanon. The U.S. Embassy in Beirut was destroyed in April 1983, killing 63, including 17 Americans. A suicide bombing on October 23, 1983, killed 241 Marines in their bar- racks in Beirut. This incident was followed in Decem- ber by a series of bombing attacks against the U.S. and French Embassies in Kuwait. The 17 men who were apprehended in the Kuwait attack were tried and sentenced to prison. The release of these "Da'wa prisoners" (as they came to be known after a pro- Khomeini party with supporters in several countries) became a key demand of the Hizballah as attacks against U.S. targets and the taking of American hos- tages continued in Lebanon. The Hizballah, a loosely structured movement cen- tered on the Shiite clans of the Bekaa Valley, emerged as a principal opponent of the United States and the Western presence in Lebanon. The use of force?particularly terrorism?against Western inter- ests in Lebanon was viewed by the more militant members of Hizballah as religiously sanctioned. From the outset, U.S. intelligence recognized that the Hizballah was composed of competing political elements, not all of whom were controlled by Iran. But frustration mounted within the Administration in the aftermath of the Marine barracks bombing, the Kuwait Embassy attack, and the assassination on Jan- uary 11, 1984, of the President of the American Uni- versity in Beirut, Malcolm Kerr. On January 20, 1984, the Secretary of State desig- nated Iran a sponsor of international terrorism. This decision was followed 4 days later by the announce- ment that Iran would be subjected to U.S. Govern- ment regulations limiting the export of U.S. military equipment to "countries that have repeatedly provid- ed support for acts of international terrorism."9 The State Department assured Congress that "[t]he ques- tion of further controls under this rubric is currently under active review at senior levels of the Adminis- tration."" The Department announced these addi- tional measures based upon what it termed convincing evidence of a broad Iranian policy furthering terror- ism beyond its borders, including public statements by Iranian officials supporting those acts. 160 Hostage-Taking Begins The hostage-taking that was to propel the Iran- Contra Affair began 6 weeks later. Three Americans were seized in Beirut in 1984: Jeremy Levin, Beirut Bureau Chief for the Cable News Network, on March 7; William Buckley, CIA's Chief of Station, on March 14; and the Reverend Benjamin Weir, a Presbyterian minister who had lived in the Lebanese capital for 30 years, on May 8, 1984. Buckley's capture was of special concern for CIA Director Casey. It was suspected at the time?and later confirmed?that Buckley was being tortured, and Casey wanted to spare no effort to get him back. Citing a continuing pattern of Iranian support for terrorism, the State Department imposed new restric- tions in September 1984 on the export to Iran of aircraft, spare parts for aircraft, and high-powered outboard motors. The Department also banned all other goods and technology to Iran intended for a "military end-use or end-user." The Administration staked out an increasingly tough public position on dealing with terrorists. Speaking in New York on October 25, 1984, Secre- tary Shultz called for "swift and sure measures" against terrorists, both to prevent attacks and to re- taliate for them: "[Me cannot allow ourselves to become the Hamlet of nations, worrying endlessly over whether and how to respond," he said." Yet the hostage-taking continued. Four Americans were seized in 1985: Father Lawrence Martin Jenco, Director of Catholic Relief Services in Beirut, on January 8; Terry Anderson, chief Middle East corre- spondent for the Associated Press, on March 16; David Jacobsen, Director of the American University Hospital, on May 28; and Thomas P. Sutherland, Dean of the American University's School of Agri- culture, on June 9. Throughout this period, the only positive develop- ment on the hostages came on February 13, when Jeremy Levin gained his freedom. It remains uncer- tain whether he escaped from, or was released by, his captors after nearly 11 months of confinement. Around the time that Levin was freed, the NSC, with the Joint Chiefs of Staff, created an interagency Hos- tage Location Task Force. On June 14, 1985, Shiite terrorists struck again, hijacking TWA flight 847 and murdering one of its passengers, Navy diver Robert Stetham. National Se- curity Adviser Robert McFarlane publicly stated: "It is my purpose to remind terrorists and to keep them on notice that no act of violence against Americans will go without a response." 2 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 I I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 8 The President spoke on the same subject on June 30, 1985, "The United States gives terrorists no re- wards and no guarantees. We make no concessions. We make no deals."" leader. Seven months later he authorized the direct sale of arms to Iran. These were strong and unambiguous words from the President and a senior American official. Yet a few weeks later, President Reagan authorized Israel to sell TOW antitank missiles to the government of the Ayatollah Khomeini, the Hizballah's spiritual 161 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 11 . .. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 8 Chapter 8 1. The New York Times, July 1, 1985, at A10. 2. President Jimmy Carter, remarks (Dec. 31, 1977), in: Public Papers of the Presidents of the United States, Book II, 2221 (1978). 3. The Washington Post (Mar. 6, 1978); U.S. News & World Report (June 26, 1978). 4. There have been allegations that officials of the 1980 Reagan campaign?in order to prevent a pre-election an- nouncement by President Carter (an "October Surprise")? met with Iranian intermediaries and agreed to ship arms to Iran in exchange for a post-election release of hostages. Reagan campaign aides were, in fact, approached by indi- viduals who claimed to be Iranian intermediaries about po- tential release of hostages, as were other campaign staffs. The Committees were told that the approaches were reject- ed and have found no credible evidence to suggest that any discussions were held or agreements reached on delaying release of hostages or arranging an early arms-for-hostages deal. 5. L. Paul Bremer, III, Executive Secretary, Department of State to Richard V. Allen, White House, Memorandum, Subj. Iran SIG Meeting of July 21, 1981, 8125833, S (Sept. 23, 1981), N33299. 162 6. Paul F. Gorman, Lieut. Gen., Assist. to the Chairman, JCS, Memorandum for Mr. L. Paul Bremer, III, Special Assistant to the Secretary and Executive Secretary, Depart- ment of State, Subj.: US Arms Transfer Policy Toward Iran, S, CM 1041-81 (Sept. 3,1981), N33300. 7. The New York Times, Apr. 11, 1987, at 2. 8. U.S. Government. Department of State. "Iran-Iraq War," Gist (May, 1985). 9. 15 C.F.R. Section 385.4(d). 10. Developments In The Middle East, July, 1984: Hear- ings before the Subcomm. on Europe and the Middle East of the House Comm. on Foreign Affairs, 98th Cong., 2d Sess., 52 (July 25, 1984). 11. George Shultz, speech, "Terrorism and the Modern World," delivered at the Park Avenue Synagogue in Man- hattan (Oct. 25, 1984); see The New York Times, at A 12 (Oct. 26, 1984); "Shultz Says U.S. Should Use Force Against Terrorism," The New York Times, at Al (Oct. 12, 1984). 12. Developments In The Middle East, June, 1985: Hear- ings Before the Subcomm. on Europe and the Middle East of the House Comm. on Foreign Affairs, 99th Cong., 1st Sess., 22 (June 19, 1985). 13. The New York Times, July 1, 1985, at A10. , Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 9 The Iran Arms Sales: The Beginning In August 1985, the President decided that the United States would allow arms sales to Iran. The decision represented a reversal of U.S. policy against selling arms to Iran and, as it later turned out, against making concessions for the return of hostages. Yet it was made so casually that it was not written down, the President did not recall it 15 months later, and the Secretaries of State and Defense were not even told of it at the time. The President's decision triggered a series of arms transactions with Iran that continued for 15 months. At the initial transaction, the Iranians established a pattern of dealing that never changed: Iran would agree to get the hostages freed in return for arms; once the arms arrived, the Iranians would demand still more weapons; only after another arms shipment would a single hostage?not a group, as promised?be freed. But, instead of breaking off the transactions, the Americans continued to accede to the Iranian de- mands. What follows is the story of how the arms sales began. The Actors Take Their Places Long before the President made his decision, the indi- viduals and circumstances that propelled the sales were at work in Washington, Jerusalem, and Tehran. Since the fall of 1984, the National Security Coun- cil (NSC) staff had been pressing other Government agencies to develop a plan for opening a relationship with Iran and moderating that government's anti- American stance. The State Department and the De- fense Department opposed the notion, and while the Central Intelligence Agency (CIA) was favorably in- clined, officials there said renewed relations hinged on the release of seven U.S. hostages held by the pro- Iranian Hizballah in Lebanon and on a pledge by Iran to stop terrorist activities. In Jerusalem, officials were eager for better rela- tions with Iran, for two very pragmatic reasons: com- mercial and diplomatic. Israel had friendly relations with Iran under the Shah. Despite revolutionary Iran's vow to destroy Israel, the Israelis regarded Iraq as a greater threat to their security than Iran. Israel's goal was to create conditions for the resumption of commercial and diplomatic relations with a post-Kho- meini regime. Tehran had its own agenda. Rhetoric notwithstand- ing?the United States was considered "The Great Satan" and Israel a blasphemy?Tehran wanted modern tanks and high-technology antitank and anti- aircraft missiles to counter Iraq's Soviet-made fighter planes and modern tanks. It needed spare parts to maintain the arsenal of weapons that the Shah had purchased from the United States. The unlikely catalyst for bringing these disparate parties together was Manucher Ghorbanifar?a re- sourceful Iranian merchant living in Paris who under- stood the intersection of interests and saw how the American hostages could be used as an incentive for the sale of missiles to Iran. Ghorbanifar Since fleeing Ilan in 1979, Ghorbanifar had sought to make a career as a broker through whom Western governments could develop contact with Iran. By 1984, Ghorbanifar was well known to U.S. intelli- gence services, and details of his activities filled a thick file in the CIA's Operations Directorate. The CIA viewed Ghorbanifar with particular disfavor, but that did little to discourage the Iranian from trying to interest U.S. intelligence agencies in various schemes, all of which would financially benefit him. His CIA file describes Ghorbanifar as an Iranian businessman and self-proclaimed "wheeler dealer" who, prior to the 1979 revolution, had been the man- aging director of an Israeli-connected Iranian shipping company. According to rumors, Ghorbanifar also was an informant for SAVAK, the Shah's intelligence service, and had a relationship with Israeli intelli- gence; but those relationships have never been con- firmed. Ghorbanifar's business permitted him to travel out- side Iran, and, following the revolution, he chose Paris as his base of operations, particularly after he and his brothers, Ali and Reza, were implicated in an abortive July 9, 1980, coup attempt in Iran. Ghorbani- far apparently developed his own intelligence net- work and endeavored to sell his services to various Western governments. Ghorbanifar became a CIA re- porting source in January 1980. Described by the 163 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 9 Agency as a "rumormonger of occasional usefulness," Ghorbanifar lasted as a source only until September 1981, when the Agency decided he was concerned solely with advancing his financial interests.' Information generated by Ghorbanifar continued to reach the CIA, however, both directly and through other intelligence agencies. In January 1984, Ghor- banifar contacted U.S. Army Intelligence in West Germany with tales of "Iranian terrorist organiza- tions, plans, and activities." 2 In mid-March, a CIA officer met with Ghorbanifar in Frankfurt to explore the data Ghorbanifar was offering. At that meeting, Ghorbanifar indicated he had information on the kid- napping, in Beirut, of CIA Chief of Station William Buckley. He identified an Iranian official (the Second Iranian), who would play a key role in the arms-for- hostages transactions a year later, as the "individual responsible" for the kidnapping.3 He also described an Iranian plot to assassinate U.S. Presidential candi- dates.4 A CIA-administered polygraph examination of Ghorbanifar on this information indicated he was lying. Ghorbanifar gave no satisfactory explanation for the results.3 Undeterred, he again approached the CIA in June 1984, this time trying to broker a meet- ing between the U.S. Government and another Irani- an official (the First Iranian).6 The First Iranian was also to be a key player in the arms-for-hostages trans- actions of 1985 and 1986. According to Ghorbanifar, the First Iranian was favorably disposed towards the United States.7 Again, Ghorbanifar was polygraphed, and again, the examination indicated he was lying.8 This time, the CIA responded by publishing, on July 25, 1984, a rarely issued "Fabricator Notice," warning Agency personnel and other U.S. intelligence and law enforce- ment agencies that Ghorbanifar "should be regarded as an intelligence fabricator and a nuisance." 9 Ghorbanifar Proposes to Ransom the Hostages Ghorbanifar continued to seek a relationship with the U.S. Government. His first chance came in No- vember 1984 when he met Theodore Shackley, a former Associate Deputy Director for Operations of the CIA who had retired from the Agency in 1978. On behalf of his "risk management" firm, Research Associates, Inc., Shackley maintained contact with the former head of the Shah's SAVAK Counterespio- nage Department VIII, General Manucher Hashemi. At the suggestion of Hashemi, Shackley traveled to Hamburg, West Germany, where he met with a group of Iranians, including Ghorbanifar, the First Iranian and a Dr. Shahabadi, chief of the Iranian purchasing office in Hamburg and purportedly a friend of Saudi entrepreneur and arms dealer Adnan Khashoggi. At one meeting, on November 20, Ghor- banifar told Shackley that for a price he could ar- range for the release of U.S. hostages in Lebanon 164 through his Iranian contacts. Ghorbanifar said he re- quired a response on the "ransom deal" by December 7. Ghorbanifar added that he would not work with the CIA because the Agency was "unreasonable and unprofessional." 10 Upon his return to the United States, Shackley sent a memorandum about his meet- ings with Ghorbanifar to Lt. Gen. Vernon Walters, Ambassador-at-Large in the State Department and a former Deputy Director of the CIA." Walters referred the memorandum to Hugh Montgomery, Director of Intelligence and Research in the State Department. Montgomery, in turn, passed the Shack- ley memorandum to Ambassador Robert B. Oakley, head of the State Department's counterterrorism ef- forts, and Assistant Secretary of State for Near East- ern Affairs Richard W. Murphy. Oakley and Murphy regarded the hostage ransom proposal as a "scam," and on December 11, 1984, Montgomery told Shack- ley that the State Department was not interested in pursuing the Ghorbanifar ransom proposal." Ghorbanifar Tries Again Ghorbanifar still did not give up. Having failed with the CIA, the Army, and the State Department, he found another and ultimately more fruitful channel into the U.S. Government through Israel. A New York businessman, Roy Furmark, served as the con- tact point. Furmark had previously worked for Adnan Khashoggi, and was a friend of CIA Director William Casey. Furmark also knew Cyrus Hashemi, a natural- ized U.S. citizen of Iranian extraction whom Furmark tried to interest in a number of business ventures." In January 1985, Furmark and Ghorbanifar met while Furmark was in Europe to discuss business opportuni- ties in Iran." Furmark later introduced Ghorbanifar to Hashemi and Khashoggi." Ghorbanifar, at this time, was look- ing for sophisticated weapons for Iran, and Khashoggi suggested that Ghorbanifar try to develop access to the United States and its weapons through Israel. Sometime later, Khashoggi put Ghorbanifar and Ha- shemi in touch with an Israeli group: Al Schwimmer, an adviser to then Israeli Prime Minister Shimon Peres, and Ya'accov Nimrodi, an Israeli businessman with government service background." Both Kha- shoggi and Hashemi saw the potential for huge profits if Ghorbanifar were to become the conduit for U.S. arms to Iran and gain control of trade between the United States and Iran." At Khashoggi's initiative members of the Israeli team met with Hashemi and Ghorbanifar in London, Geneva, and Israel in early spring. Weapons sales to Iran were discussed but the meetings produced noth- ing concrete." In late April, Ghorbanifar proposed to one of the Israelis that he be permitted to purchase U.S.-manufactured TOW antitank missiles from Israel, and, in return, he would obtain the release of CIA Approved For Release 2011/05/25 : CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 9 Beirut Chief of Station Buckley, then a hostage in Lebanon.' 9 Ledeen Gets Involved At about that same time, NSC consultant Michael Ledeen was trying to persuade National Security Ad- viser Robert McFarlane to use him as an informal channel to get intelligence on Iran from Israel, using his close personal relationships with several high- ranking Israeli officials.2? In March 1985, Ledeen met in Europe with a senior official from a western Euro- pean nation who told Ledeen that the United States could play a significant role in Iran. The foreign offi- cial recommended that the United States contact Israel because the Israelis had the best intelligence resources on Iran.21 Upon his return to the United States in early April, Ledeen proposed to McFarlane that he be authorized to meet with Israeli Prime Min- ister Peres and other Israeli officials to explore poten- tial Israeli-U.S. cooperation on Iran.22 Although the NSC staff told McFarlane that "none of us feel Mike should be our primary channel for working the Iran issue with foreign governments," 23 they were im- pressed with Ledeen's access to Prime Minister Peres, and therefore recommended that Ledeen informally meet with the Israelis to express interest in developing "a more serious and coordinated strategy for dealing with the Iranian succession crisis."24 McFarlane agreed. Ledeen traveled to Israel in early May.25 On May 3 he met with Prime Minister Peres and then with a former senior official of the Israel Defense Forces." During the meetings, Ledeen said he was acting on McFarlane's behalf, although in a private rather than official capacity, and expressed interest in sharing in- telligence on Iran. According to Ledeen, the Ameri- cans held hostage in Lebanon were not discussed at these meetings in early May.27 An Israeli official, however, recalls Ledeen's telling him about offers by various Iranians to help get the hostages released." According to Ledeen, the Prime Minister asked him to advise McFarlane that Israel wanted to sell artil- lery shells or pieces to Iran but would do so only if it received U.S. approval. 2 9 The NSC Reconsiders Iran Policy When he returned to the United States, Ledeen told NSC staff member Donald Fortier that the Israelis were interested in working with the United States on Iran. At the time, Fortier was working closely with CIA National Intelligence Officer for the Near East and South Asia, Graham Fuller, who was updating the Special National Intelligence Estimate (SNIE) on Iran at McFarlane's request.3? A SNIE represents the U.S. intelligence community's short-term assessment of a given country or situation in response to a specific need. Both the SNIE circulated on May 20 and a memo submitted by Fuller three days earlier to CIA Director Casey, included a recommendation of arms sales through an ally as one of a number of options for pursuing an opening to Iran." The NSC staff concluded that Israel should be that country, al- though FOrtier continued to question whether Ledeen was the appropriate intermediary through which the United States should deal with Israel.32 On June 3, 1985, McFarlane approved a second Ledeen trip to Israe1,33 but Ledeen's return to Israel was delayed when Secretary of State George P. Shultz protested Ledeen's earlier trip.34 Shultz had heard from the U.S. Ambassador to Israel that Ledeen had been in Israel talking to Israeli officials about obtaining intelligence on Iran, without notice to the U.S. Embassy.35 Shultz complained to McFarlane that neither he nor the U.S. Ambassador to Israel had been informed of the trip, and pointed out that Israel and the United States had differing interests in Iran. He also questioned the wisdom of relying upon Israeli intelligence about Iran." McFarlane told Shultz that Ledeen had taken the May trip "on his own hook." He also said he was "turning [the Iran initiative] off entirely."37 In fact, McFarlane told Ledeen to post- pone, not cancel, the trip." Major policy changes call for consultation with the Secretaries of State and Defense and an opportunity for the President to consider their views. McFarlane thus began the established process of interdepartmen- tal policy formulation. He had earlier requested the CIA to prepare the updated SNIE on Iran, and in June he asked members of his staff to prepare a draft National Security Decision Directive (NSDD). An NSDD is a Presidential directive establishing policy in a particular area. It is the result of an analytical process, including discussions among the interested parties. Fortier and Howard Teicher of the NSC staff sub- mitted the draft NSDD to McFarlane on June 11, and on June 17, McFarlane circulated this draft to Secre- tary Shultz, Secretary of Defense Caspar W. Wein- berger, and CIA Director Casey. The draft NSDD recommended, among other things, that anti-Kho- meini factions in Iran should be supported, and that U.S. allies and friendly states should be encouraged to "help Iran meet its import requirements . . . includ[ing] provision of selected military equip- ment."" To bolster the NSC's analysis, McFarlane cited the CIA's earlier intelligence estimate that had recommended such arms sales, and warned of the Soviet threat to Iran.4? Only Casey endorsed the draft NSDD.41 Secretary Weinberger wrote on the transmittal note accompany- ing the draft, "This is almost too absurd to comment on. . . . It's like asking Quadaffi to Washington for a cozy chat."42 Weinberger's response to the National Security Adviser was less sarcastic but unambiguously negative.43 Secretary Shultz's response was also nega- 165 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 1 1 II .1 .1 . 1 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 9 tive. He criticized the idea of relaxing the arms em- bargo against Iran, warned against the danger of strengthening Iran, and disagreed with the notion that Iran was in danger of falling into Soviet hands.44 During the same period, the President was sharply critical of Iran. In a speech to the American Bar Association on July 8, 1985, the President declared Iran to be part of a "confederation of terrorist states . . . a new international version of Murder Incorpo- rated." He added, "Let me make it plain to the assas- sins in Beirut and their accomplices that America will never make concessions to terrorists."45 The Discussions Continue While the Secretaries of State and Defense were opposing any relaxation of the arms boycott of Iran, Israel was receiving different signals from the NSC staff. Ledeen testified that McFarlane had authorized him to tell Prime Minister Peres that Israel could engage in a one-time arms sale to Iran of artillery shells or pieces, "but just that and nothing else."'" One of the Israeli participants reported to another Israeli participant, however, that the authorization conveyed by Ledeen from McFarlane was for a trans- fer of TOW missiles.47 By early June, the Israelis were considering a trans- action linking the sale of TOWs to the release of the American hostages." However, the Israelis were un- willing to proceed without evidence of a clear, ex- press, and binding consent by the U.S. Government to the proposed transaction.49 On June 19, Ghorbanifar, accompanied by Fur- mark, met in Israel with the Israeli team. Ghorbanifar proposed that the Israelis sell 100 TOWs to Iran through him. He also agreed to set up a meeting with an Iranian officia1.5? The Israelis reported these developments to McFar- lane. In late June, according to McFarlane's testimo- ny, David Kimche, the Director General of the Israeli Foreign Ministry, became involved in the project. Kimche had an established relationship with McFar- lane and Ledeen." While in Washington for another purpose in early July, he briefed McFarlane on the ongoing contacts of Israeli and Iranian officials, and the Iranians' interest in establishing contact with the United States.52 Kimche recommended that the dis- cussions with the Iranians continue. McFarlane told Secretary Weinberger about the meeting, and Wein- berger's military assistant, Lt. Gen. Colin Powell, re- called that McFarlane discussed both the sale of arms to Iran and the hostages." On July 8, 1985, members of the Israeli team met in Hamburg with Ghorbanifar, Khashoggi, Khashoggi's son-in-law, and the First Iranian. Before the meeting, Ghorbanifar told the Israelis that the sale of 100 TOWs was essential to enhance his credibility with Iran, and claimed that the sale would be followed by the release of the American hostages.54 166 Ghorbanifar described the First Iranian as a politi- cally powerful individual in his own right, with close personal connections to Khomeini, and a leader of one of Iran's revolutionary organizations.55 At the meetings, the First Iranian spoke of the need for a party who could act as a bridge between Iran and the United States, of the threat of Soviet influ- ence in Iran, and of the risks he had taken in meeting with Israel in order to promote an epening with the United States. The participants also discussed missiles and hostages." The First Iranian promised to present a comprehensive written proposal within a week. Shortly after that meeting, according to Ledeen's testimony, Schwimmer flew to Washington and met with Ledeen on July 11, 1985. He briefed Ledeen on Ghorbanifar's proposal to obtain the release of the American hostages in exchange for TOW missiles.57 Ledeen then wrote McFarlane, "The situation [con- cerning Iran] has fundamentally changed for the better."58 On July 13, he briefed McFarlane orally on the Israeli talks with the Iranians." After meeting with Ledeen, McFarlane cabled Sec- retary Shultz with a summary of the proposal con- veyed by Israel: The short term dimension concerns the seven hostages; the long term dimension involves the establishment of a private dialogue with Iranian officials on the broader relations. . . . They [the Iranians] sought specifically the delivery from Israel of 100 TOW missiles. McFarlane recommended to Shultz that the United States go forward with a tentative show of interest, although his admonition proved to be prophetic: Then one has to consider where this might lead in terms of our being asked to up the ante on more and more arms and where that could con- ceivably lead. . . .61 Shultz responded to the proposal with caution, rec- ommending that "we should make a tentative show of interest without commitment." 62 In the meantime, Israel awaited the United States' response on whether it was authorized to sell the TOWs. The President Is Informed McFarlane decided to take the matter to President Reagan, even though the President was in the hospital recuperating from surgery. By this time, the release of the hostages had become an immediate concern to the President. He had met with the hostage families for the first time in late June, and had been moved by the experience. On July 3, he had attended a National Security Planning Group meeting to discuss the hos- tages, and had come away frustrated at the lack of alternatives. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 9 McFarlane met with the President at the hospital on July 18. Donald Regan, the White House Chief of Staff, was present." What was discussed at this meet- ing is not clear: Apparently no one took notes. Regan did not recall any mention of arms at the meeting,83? and McFarlane's accounts have varied: More than a year later, on November 21, 1986, McFarlane wrote in a PROF note to Poindexter that the President "was all for letting the Israelis do anything they wanted at the very first briefing in the hospital."'" But during the public hearings McFarlane stated that the Presi- dent's position was that no U.S. owned items from the United [S]tates [could be] proper[ly] shipped at that time." This left open the possibility that the Israelis were free to ship from Israel Israeli-owned TOWs that had been acquired from the United States." McFarlane testified that the Israelis were informed that the President was unwilling to allow the United States to supply arms directly to Iran." Ledeen testi- fied, however, that, in accordance with McFarlane's instructions, he informed the Israelis that the Presi- dent approved "in principle" the sale of TOWs by Israel subject to further review of the details." But Israeli Defense Minister Yitzhak Rabin would not proceed unless he received assurances that the Secretary of State knew of the plan and that the President unequivocally approved. The Israelis were concerned that the initiative could become public; and without specific American approval, Israel would be the target of criticism. In the meantime, the Israelis had received the First Iranian's written proposal, dated July 16, 1985, which was passed on to Ledeen. The proposal was general, promising a more concrete plan in the near future. It contained no commitment for the release of the hostages." The Israelis insisted on meeting with Ghorbanifar to secure a commitment for the release of the Ameri- can hostages in return for the shipment of 100 TOWs.7? The meeting took place in Israel on July 25. Ghorbanifar stressed the need for the 100 TOWs and, for the first time, mentioned spare parts for antiair- craft missiles." He also said that the Iranians needed other weapons as well. Ghorbanifar stated that the weapons would not only strengthen his and the First Iranian's credibility in Iran, but also win the support of the military. The Israelis told Ghorbanifar that they could recommend that their government supply the missiles only if secrecy would be maintained and the hostages released. Ghorbanifar stated that within 2 to 3 weeks of delivery of the missiles, the hostages would be released, although he warned that the Irani- ans might want to keep a few of the hostages for leverage.72 On July 28, the Israelis briefed Ledeen on the meeting with Ghorbanifar, and on the Israeli deci- sion not to proceed unless U.S. authorization was more unequivocal. Ledeen reportedly said the Israelis had already received sufficient authorization from the response that the President had given in the hospital. But the Israelis were insistent on confirmation." The Israeli Arms Sales Are Authorized On August 2, according to McFarlane's testimony, Kimche flew to Washington to meet with McFarlane and to obtain the specific U.S. position on Israel's sale of the TOWs. The meetings occurred on August 2 and 3. McFarlane made no memorandum of the meet- ings, and recollections differ. All agree, however, that the Israelis asked for permission to sell 100 TOWs, and that McFarlane agreed to present the issue to the President.74 The White House log records an August 6 meeting between McFarlane and the President, the Vice Presi- dent, Secretaries Shultz and Weinberger, and Regan. McFarlane reported that the Iranians wanted a dia- logue with the United States and 100 TOWs from Israel in return for which four hostages would be released." McFarlane also said that the United States would be able to deny any connection to or knowl- edge of the sale, a suggestion the Secretary of State regarded as untenable." Secretary Shultz told the President that it "was a very bad idea," and that despite the talk of better relations, "we were just falling into the arms-for-hostages business and we shouldn't do it." 7 7 Secretary Weinberger also opposed the sale. He and Secretary Shultz argued that the initiative would not work, and that the sale would contradict the U.S. efforts to persuade other countries to observe the embargo.78 None of the witnesses recalls the Vice President's position, and there is no evidence that Casey was consulted by the NSC staff at this stage. McFarlane, according to Ledeen, directed that Casey and the CIA not be informed for fear that the CIA might leak.79 Chief of Staff Regan testified that the President told McFarlane to "go slow" at the August meeting and to "make sure we know who we are dealing with before we get too far into this." 80 According to all the participants, the President announced no decision at the meeting. Several days later, the President telephoned McFar- lane and, according to McFarlane, authorized the Is- raelis to proceed with the sale in modest quantities of "TOW missiles or other military spares" that would be replenished by the United States. The President stipulated that the sales not affect the balance of the Iran-Iraq war, not be used for terrorist purposes, and not include such major items as aircraft.81 McFarlane told Poindexter about the conversation, but Poin- dexter did not recall its contents.82 Regan recalled that the President appeared upset when he learned in September that TOWs had been shipped. The President, in his Tower Board interview, origi- nally confirmed that he had authorized the sale, but later stated that he had no actual recollection one way or another." No documents record the decision. 167 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 I I II .1 I I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 9 The Tower Board concluded that the President most likely approved the Israeli sales before they oc- curred. The evidence supports that conclusion. The Israelis expressly sought the President's approval of the Israeli sales and confirmation that the Secretary of State had been consulted. By McFarlane's own admis- sion, he told the Israelis that they were authorized to sell the TOW5."4 McFarlane had no motive to ap- prove a sale of missiles to Iran if the President had not authorized it. Moreover, Ledeen testified that McFarlane told him of the President's decision." McFarlane also contemporaneously reported the President's approval to Kimche." The President's decision on the arms sale conveyed by McFarlane to the Israelis committed the United States to the policy unsuccessfully advocated in the draft NSDD?the sale of weapons by an American ally to Iran. Preparations for the Delivery In early August, the Israelis began to make the necessary arrangements to obtain the 100 TOWs through the Israeli Ministry of Defense." Ghorbani- far, in the meantime, was meeting with Khashoggi in Spain to arrange financing for the initial TOW pur- chase. The Israeli Ministry of Defense was unwilling to supply. the TOWs until payment had been deposit- ed. Iran, on the other hand, was unwilling to pay until the missiles were delivered. Ghorbanifar asked Khashoggi to "bridge" this gap by lending him $1 million, which Ghorbanifar could then deposit with the Israelis and repay upon payment by Iran. Kha- shoggi agreed." On August 7, Khashoggi ordered the transfer of $1 million into an Israeli intermediary's account." Back in Washington, McFarlane asked Ledeen to coordinate with the Israelis on the release of the hostages in Lebanon." Preparation for the TOW shipment continued in Israel. On August 12, the Israelis decided to deliver the TOWs to Iran by chartering a "neutral," non- Israeli DC-8 aircraft. Still unresolved at this time, however, was the price to be charged by the Israelis to Ghorbanifar for the missiles and the price to be paid by them to the Israeli Ministry of Defense for the TOWs. After considerable bargaining, Ghorbani- far agreed to pay $10,000 per missile, $2,000 less than he was receiving from the Iranian Government. The Israelis did not agree on the price the Ministry of Defense would receive until after the missiles were delivered to Iran. The Ministry of Defense wanted $12,000 per missile, which it calculated to be the replacement cost per missile. The Israeli intermediar- ies maintained that they could only pay $6,000 per missile, because the remainder of what they received from Ghorbanifar was required for heavy shipping costs and other substantial expenses.9? The Ministry of Defense eventually received $3 million from an 168 Israeli intermediary for the 504 TOWs in March 1986.9' Israel Ships 96 TOWs But No Hostage Is Released On August 19, Ghorbanifar returned to Israel where he met with the Israeli team. Ghorbanifar ad- vised that he had made payments in Iran but he was not certain how many hostages would be released. As for CIA Station Chief Buckley, Ghorbanifar said that the Iranians recognized his "special value" and, there- fore, would return him last.92 That same day, the DC-8 transport aircraft arrived in Israel, and was loaded with 96 (rather than 100) TOW missiles." In the early morning hours of August 20, the plane left Israel bound for Iran, with Ghorbanifar on board. The TOWs were then delivered and the aircraft re- turned to Israel late that same day.94 But no hostages were released. Ghorbanifar had an explanation: contrary to his plan, delivery of the mis- siles was taken by the Commander of the Iranian Revolutionary Guards rather than by the Iranian fac- tion for whom they were intended.95 Still, Ghorbani- far remained hopeful that he could produce the hos- tages. With McFarlane's assent, Ledeen met with Kimche in London on August 20 to discuss ways to bring the hostages out of Lebanon." From London, Ledeen flew to California, where the President was vacationing, to brief McFarlane on his meeting with Kimche and to obtain McFarlane's authorization for a meeting in Europe with Ghorbani- far and the Israelis.97 On August 22, McFarlane ap- proved another trip to Europe for Ledeen." On August 30, McFarlane arranged for the State Depart- ment to provide NSC staff member Oliver L. North with a passport in the name of William P. Goode for use in "a sensitive operation in Europe in connection with our hostages in Lebanon." 99 On August 27, the Government of Iran transferred $1,217,410 to Ghor- banifar's Swiss account. On August 29, Ghorbanifar repaid Khashoggi the $1 million loaned by Khashoggi on August 7."0? Khashoggi told the Israelis that, be- cause he had been repaid for the first loan, he would agree to loan $4 million to permit Ghorbanifar to purchase an additional 400 TOWs from the Israe- lis.'" 400 More TOWs for 1 Hostage On September 4 and 5, Ledeen met in Paris with Ghorbanifar and members of the Israeli team. Since no hostages had been released despite the delivery of the 96 TOWs on August 20, severe arguments oc- curred at the meeting.'" Ghorbanifar indicated that one hostage would be released provided the Israelis sold Iran an additional 400 TOW missiles. We are satisfied from our review of all the evidence that the President was informed and approved of the transac- Approved For Release 2011/05/25 : CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 9 tion in the hope that the hostages would be released. The second shipment was approved by Prime Minis- ter Peres and Defense Minister Rabin on September 9.103 On September 10, Khashoggi ordered the trans- fer of $4 million into an Israeli intermediary's account to finance Ghorbanifar's purchase of the 400 TOWs."4 The money reached the Israeli account on September 13 and Ghorbanifar repaid Khashoggi that $4 million the following day.'" The aircraft used to transport the second shipment of TOWs to Iran arrived in Israel on September 14. The DC-8 was loaded with 408 missiles (bringing the total of TOWs shipped to 504), and, early the next morning, it flew to Tabriz to make delivery. On board was Ghorbanifar's Iranian assistant, Mahadi Shahista. Tabriz, rather than Tehran, was used as the Iranian delivery point to prevent this shipment from falling into the hands of the Revolutionary Guards.1?6 The Iranians made it clear that this was an arms- for-one-hostage bargain. They gave McFarlane the choice of any hostage other than Buckley.'" Ghor- banifar told the Israelis that Buckley was too ill to be released.'" In fact, Buckley had died in June of a pulmonary condition brought on by prolonged inter- rogation, torture, and mistreatment. On September 15, American hostage Reverend Benjamin Weir was released near the U.S. Embassy in Beirut.1?9 On September 17, the Israeli intermediary's account received an additional $290,000 from Ghorbanifar for the expense of transporting the 504 TOWs to Iran,' '? and on September 18, Iran transferred $5 million to Ghorbanifar's Swiss account for the additional TOWs. Despite the fact that all the TOWs were delivered, only one hostage had been produced, not the group that Ghorbanifar originally had promised. Still, the President continued to receive optimistic reports on the initiative. However, no other hostages were re- leased for the 504 TOWs. NSC Staff Limits Distribution of Intelligence At the NSC, North was charged with making the necessary arrangements in the event that any hostages were released as the result of the September 15 TOW delivery. North had been briefed on the initiative ear- lier."' On September 12, North contacted Director Casey for assistance in obtaining intelligence on Ghorbanifar (who was then using an alias) and the Second Iranian. Casey put North in touch with CIA's National Intelli- gence Officer for Counter-Terrorism, Charles Allen, who arranged for intelligence support.'12 At McFar- lane's instruction, North told Allen to distribute the intelligence only to McFarlane, Vice Admiral A. S. Moreau, Jr. of the Joint Chiefs of Staff, Casey, and North."3 Secretaries Shultz and Weinberger were not to receive the intelligence. (Weinberger later found out about?and demanded?this intelligence.) Denied access to the intelligence, the State Depart- ment was not told of the Israeli TOW shipment, was not advised of the linkage of Weir's release to arms shipments, and was not informed of the President's decision or the U.S. Government's involvement. Replenishment McFarlane assured the Israelis that the TOWs shipped to Iran would be replenished at a price to be determined. But, McFarlane emphasized, the linkage between the Israeli sale to Iran and the U.S. sale to Israel could not be obvious."4 On September 19, Ledeen sent a message to McFarlane regarding replenishment of Israeli TOW stocks in September: "Issue of replacements: The people who sold the soap for us want to replenish their supply." "5 The Initiative Continues: The Ante Is Upped Despite Ghorbanifar's failure to secure the release of the four or five hostages originally promised, dis- cussions of further arms deals continued. In late Sep- tember, Ghorbanifar met with members of the Israeli team and Ledeen in Paris. This time, Ghorbanifar asked for antiaircraft missiles, including a new HAWK missile to attack high-flying aircraft. (The HAWKs do not have that capability, but apparently none of the participants was aware of this.) Ledeen reportedly consented to a HAWK transaction with Iran, but demanded that the hostages be released."6 Ledeen recalls that McFarlane approved the sale of HAWKs before November, but Ledeen could not recall when."7 Nor could he recall this Paris meet- ing."8 In the meantime, North had received information that another U.S. hostage, allegedly Buckley, would be released between October 3 and 5.1" However, the Islamic Jihad in Lebanon announced, on October 3, that it planned to execute Buckley. North asked Ledeen to arrange for Ghorbanifar to come immedi- ately to the United States to discuss the hostages. On October 8, Ghorbanifar arrived in Washington, ac- companied by Schwimmer and Nimrodi, and met with Ledeen at the Old Executive Office Building.120 At the meeting, Ledeen reportedly stated that the trading of arms for U.S. hostages was a bad idea that should be stopped. Ghorbanifar agreed."' Nonethe- less, the Iranian continued to press for a variety of weapons for Iran.122 At a subsequent meeting with North and McFar- lane, Ledeen maintains that he again expressed his reluctance to be involved with this arms-for-hostages arrangement; preferring to pursue a strategic, not an arms, relationship with Iran.'" McFarlane, on the 169 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 II 1 I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 9 other hand, has stated that Ledeen was the person who communicated the most outrageous arms propos- als to him, and that he, McFarlane, is the one who was "consistently against arms-for-hostages." 124 Ledeen kept his reports ora1,122 and there is no writ- ten record from the fall of 1985 in which Ledeen or McFarlane protest arms sales. Whatever McFarlane's and Ledeen's own views may have been, arms were the currency for the Iran initiative, and McFarlane authorized Ledeen to go to Geneva in late October for a meeting that was to strike the deal for the Israeli HAWK shipment in November.126 Meeting in Europe, October 1985 According to Ledeen, the purpose of the late Octo- ber meeting was not to strike an arms-for-hostages deal with the Iranians, but rather to approach the U.S.-Iranian initiative from the strategic, geopolitical perspective. Ledeen testified that he and the First Iranian discussed ways to improve U.S./Iranian rela- tions without trading arms for hostages. In fact, Ledeen maintained that like himself, this Iranian was "vociferously opposed to what had been done in pro- viding weapons to the Iranian regime over the course of the past couple of months, said that all we could achieve by sending arms to Iran was to strengthen the Khomeini regime, which was the opposite of what he thought we were about."27 It was Ledeen's belief that "so long as the Iranians are able to obtain weap- ons from the United States as a result of [a] dialogue with us, they will say anything and they will do anything in order to continue to get these weapons, and so long as that pipeline of weapons functions, we will never be able to evaluate their real inten- tions."128 Ledeen stated that upon his return from Europe, he reported to McFarlane that the First Iranian thought he could have his people occupy "key positions in the 170 [Iranian] government" if the United States would help by providing a quantity of "small arms and training." By other accounts, however, such political discus- sions are not all that transpired at the late October meeting. According to one of the Israeli intermediar- ies, the Iranian official emphasized that efforts must be continued for the release of the four remaining hostages in exchange for arms, particularly HAWK missiles. Also according to the Israeli intermediary, Ledeen was pressing, on behalf of the U.S. President, for all four hostages to be released as soon as possible and all at once, and he promised that following their release the U.S. would assist Iran as far as it could.' 29 This appears to have been the last meeting among Iranian, Israeli, and American representatives before the shipment of HAWK missiles to Iran in late No- vember 1985. The Lessons of the First Arms Shipment The August-September 1985 TOW transaction set the pattern for the entire Iran initiative: ?A promise by the Iranians to release the hostages in exchange for an agreed quantity of weapons. ?The breach of that promise after delivery of the weapons. ?The delivery of more weapons in response to new demands by the Iranians. ?The release of a single hostage as an enticement to further arms transfers. The lesson to Iran was unmistakable: All U.S. posi- tions and principles were negotiable, and breaches by Iran went unpunished. Whatever Iran did, the U.S. could be brought back to the arms bargaining table by the promise of another hostage. , Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 9 Chapter 9 1. CIA Background Report on Manucher Ghorbanifar, C 1461 at 1462. 2. CIA Report, Army Intelligence and Security Com- mand (INSCOM) Report on Iranian Terrorism, 1/24/84, C 1434-35. 3. CIA cables on William Buckley, C 1502-12. 4. C 1507. 5. CIA cable on Ghorbanifar, 7/25/84, C 1463. 6. Memo to CIA Chief of the Near East Division on the First Iranian, 6/19/84, C 1479. 7. C 1479. 8. C 1461, 1463. 9. C 1463-64. 10. Report on American Hostages in Lebanon, 12/22/84, N 7451-56; Shackley Int., 2/27/87, at 5-7. 11. N 7451-56. 12. Montgomery Int., 3/4/87. 13. Furmark Dep., 7/22/87, at 18-19. In May 1984, Fed- eral criminal charges were filed against Cyrus Hashemi and his brothers, Reza and Jamshid, among others, for alleged arms export control violations. Ultimately, Hashemi ar- ranged with the U.S. Customs Service to run a sting oper- ation that resulted in the April 22, 1986, indictment of 17 individuals in the Southern District of New York on charges that they had engaged in an illegal scheme to smug- gle $2.5 billion in U.S. made weapons to Iran. Until his death, apparently of natural causes, in July 1986, Hashemi was to be the primary prosecution witness at the trial of that case. CIA Memo on Cyrus Hashemi, C 9059-61. 14. Furmark Dep., 7/22/87, at 22-23. 15. Id. at 36-38. 16. Furmark Dep., 7/22/87, at 52-55. Furmark places Khashoggi's introduction of Ghorbanifar to Schwimmer and Nimrodi in June. 17. Furmark Dep., 7/22/87, at 53. 18. Israeli Historical Chronology. Classified information from the Israeli Chronologies is used in this Report pursu- ant to specific agreement between the Government of Israel and the Committees. See, Appendix, "Organization and Conduct of the Committees' Investigation." 19. Id. 20. Ledeen Dep., 3/11/87, at 9-11. 21. Id. 22. Id. at 13-15. 23. PROF Note from Donald Fortier to McFarlane on Iran, 5/28/85, N16390. 24. Id; PROF Note from Fortier to McFarlane on Ledeen and Iran, 4/9/85, N 16390-91; PROF Note from McFarlane to Fortier on Ledeen and Iran, 4/9/85, N 15306. 25. Ledeen Dep., 3/11/87, at 14, 16. 26. Id. at 16-20. 27. Id at 17-19; Ledeen Dep., 6/19/87, at 40-43. 28. Israeli Historical Chronology. 29. Ledeen Dep., 3/11/87, at 17-19; Ledeen Dep., 6/19/ 87, at 40-43. 30. N 16394. 31. Graham Fuller Memo, 5/17/85, to Casey: Subj: Irani- an Policy, D 570-75. 32. N 16394. 33. N 4113. 34. Ledeen Dep., 6/19/87, at 44. 35. Ex. GPS B. 36. Ex. GPS 5. 37. Ex. GPS 6. 38. Ledeen Dep., 6/19/87, at 45. 39. McFarlane Memo, 6/17/85, to Shultz and Weinberg- er: Subj: U.S. Policy Toward Iran, N 53467. 40. Ex. CWW 4. 41. Casey Memo, 7/18/85, to McFarlane: Subj: Draft NSDD re U.S. Policy Toward Iran, N 7583. 42. Ex. CWW 4; Weinberger, 7/31/87, at 86. 43. Ex. CWW 5. 44. Ex. GPS 7; Shultz Test., 7/23/87, at 64. 45. President Reagan's Speech to American Bar Associa- tion, 7/8/85. 46. Tower at B-6. 47. Israeli Historical Chronology. 48. Id In early June 1985, Khashoggi advised the Israelis that Khashoggi would deal directly with Ghorbanifar and the Israelis, to the exclusion of Hashemi. Israeli Historical Chronology. When, in June, Khashoggi excluded Hashemi, Hashemi reacted by trying to market Ghorbanifar to the CIA, through one of Director Casey's close friends, John Shaheen. On or about June 16, 1985, Shaheen called Casey and relayed a message from Hashemi offering to set up a meet- ing in Europe with a high-ranking Iranian official to discuss Iran's interest in acquiring U.S. TOW missiles and Iran's ability to help obtain the release of American hostages held in Lebanon. Before talking to Casey, Shaheen had dismissed part of Hashemi's proposal, telling him, "no weapons, no Da'was." Casey Memo, 6/17/85, to CIA Chief of the Near East Division: Subj: Release of the Hostages, C 8965-66. Hashemi had tried to deal with Casey before without success. However, this time, Casey agreed to Shaheen's proposition, and directed the Chief of the Near East Divi- sion of the CIA's Operations Directorate to pursue the matter. The State Department was told that Casey was "very anxious to move ahead on a proposal" for a meeting with an Iranian representative; but, as outlined in a memo- randum to Under Secretary of State Michael Armacost, the proposal made no mention of any arms sales. By June 24, Armacost had approved a plan by which a meeting would be set up between foreign intermediaries and the Iranian contact to be produced by Hashemi. Richard Murphy Memo, 6/22/85, to Armacost: Subj: Possible Iranian Con- tact, S 3812-13. In early July, Hashemi identified his Iranian contacts as the Second Iranian, described by Hashemi as Deputy Prime Minister of Iran, and Manucher Ghorbanifar, described by Hashemi as a ranking Iranian intelligence officer. CIA Memo for the Record, 7/9/85, Subj: John Shaheen and Hashemi, C 9082-84. The CIA recognized the Second Irani- an as a significant Iranian official and Ghorbanifar as a "fabricator" with whom it did not wish to do business. The Agency suspected a scam but was nonetheless prepared to pursue a meeting between foreign intermediaries and the Second Iranian. Efforts in that regard continued through July and August. CIA Cable on Possible Contacts with Iranian Government Reps., 7/85, C 1475-77; CIA Memo for the Record on Hashemi, 7/23/85, C 9072; CIA Cable, 7/85, C 9073; CIA Cable re the Second Iranian Meeting, C 9074; CIA Memo for the Record on Hashemi, 7/15/85, C 9075- 171 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 9 76; CIA Memo for the Record on Hashemi, 7/15/85, C 9077-78; CIA Memo for the Record on Hashemi, 7/23/85, C 9079; S 3812-16. However, no meeting with the Second Iranian occurred at that time. C 9059-60; George Test., Hearings, 100-11, at 191-192; Former Chief/NE (CIA) Dep., 4/28/87, at 26-53. 49. Israeli Historical Chronology. 50. Id. 51. McFarlane Test., Hearings, 100-2, at 43. 52. Id. at 43-44. 53. Powell Dep., 7/19/87, at 5-7. 54. Israeli Historical Chronology. 55. Id. 56. Id. 57. Ledeen Dep., 6/19/87, at 51. Approximately 2 months prior to the meeting with Schwimmer, Shackley told Ledeen about a meeting Shackley had had with an "Iranian in Europe" who offered to "arrange the Ransom of Buckley and possibly other American hostages." Shackley also gave Ledeen a memorandum describing the proposal, N 7452-56. Although Shackley was describing his meeting with Ghor- banifar in November 1984, see pp. 6-8, and the memoran- dum mentions Ghorbanifar by name, Ledeen testified that he passed the memorandum on to North without reading it and that he had never heard of Ghorbanifar before meeting with Schwimmer on July 11. Ledeen Dep., 3/11/87, at 28- 30. 58. Note to McFarlane from Wilma Hall, his secretary, on Schwimmer and Ledeen, 7/11/85, N 10579. 59. Ledeen also gave McFarlane a document written by Khashoggi that advocated an overture toward Iran. 60. Ex. GPS 9. 61. Id. 62. Ex. GPS 10. 63. McFarlane Test., Hearings, 100-2 at 45-47. Regan Test., Hearings, 100-10, at 6. 63a. Regan Test., Hearings, 100-10, at 6. 64. Ex. 59. 65. McFarlane Test., Hearings, 100-2, at 46. 66. Id. 67. Id. 68. Ledeen Dep., 9/10/87, at 27-28. 69. Israeli Historical Chronology. 70. Id. 71. Id. 72. Id. 73. Id. 74. McFarlane Test., Hearings, 100-2, at 48-49; Israeli Historical Chronology. 75. Shultz Test., Hearings, 100-9, at 27. 76. Id. 77. Id. 78. Weinberger Test., Hearings, 100-10, at 131-32. 79. Ledeen Dep., 6/19/87, at 74. 80. Regan Test., Hearings,100-10, at 12. 81. McFarlane Test., 5/11/87, at 114-21. 82. Poindexter Test., 7/15/87, at 38. 83. Tower at B-19, 20. 83a. McFarlane Test., Hearings, 100-2, at 49. 84. Ledeen Dep., 6/19/87, at 58-61. 85. McFarlane Test., Hearings, 100-2, at 50. 86. Israeli Historical Chronology. 87. Furmark Dep., 7/22/87, at 73-76. 88. Israeli Financial Chronology. 172 89. Ledeen Dep., 6/19/87, at 66; Ledeen Dep., 6/19/87, at 61-65. 90. Israeli Historical Chronology. 91. Id. 92. Buckley died in June 1985 after long interrogation and torture. But the U.S. Government believed that he was still alive as late as the fall of 1985, and was seeking his release. 93. The TOWs were packed in pallets of 12 missiles each, and no unpacked missiles were shipped for safety reasons. Israeli Historical Chronology. 94. Id. The Tower Board Report states that the first shipment by the Israelis of 100 TOWs occurred August 30, 1985. See Tower at B-26. The Board's source for that date is not apparent from the text of the Report. The August 20 date from the Israeli Chronology appears accurate given the context of related events. 95. Id. at 27. 96. Ledeen Dep., 3/11/87, at 52; Ledeen Dep., 6/19/87, at 66-68. 97. Ledeen Dep., 3/11/87, at 52-53. 98. PROF Note by McFarlane on Ledeen, 8/22/85, N 17790. 99. Tower at B-25; see also North Memo to McFarlane: Subj: Fake Passport for North, N 6412-13. Ledeen has testi- fied that to his knowledge, this was North's first involve- ment in and knowledge of the Iran initiative. See Ledeen, Tower Int. (1) at 46 and (2) at 74; Ledeen Dep., 6/19/87, at 72. 100. Israeli Historical Chronology. Only the $1 million repayment figure is derived from the Israeli Chronology. 101. Id. 102. Id. 103. Id. 104. Israeli Historical Chronology; Israeli Financial Chro- nology. 105. Israeli Financial Chronology. 106. Israeli Historical Chronology. 107. McFarlane Test., 5/11/87, at 122-23. 108. Israeli Historical Chronology. 109. Id. 110. Israeli Financial Chronology. The Tower Report's analysis of this transaction differs from that provided by the .Israelis. According to Tower, Ghorbanifar initiated the transaction with a $4 million check to Khashoggi. Kha- shoggi transferred $4 million to the Israeli account on Sep- tember 14. The Iranians transferred $5 million to Ghorbani- far's Swiss account on September 18. Ghorbanifar then noti- fied Khashoggi to negotiate the $4 million check. Ghorbani- far paid later an additional $250,000 to the Israeli account for "additional eight TOW missiles." Tower at B-176-77. 111. North Test., Hearings, 100-7, Part II, at 25, 48. 112. Charles Allen, National Intelligence Officer, Memo Subj: Initiative to Secure Release of American Hostages, 10/7/85, I 0644; Allen Dep., 4/21/87, at 49-58. 113. Charles Allen, Tower Int. at 6. Within the CIA, Allen testified that the intelligence reports were provided to DDO Clair George. Allen Dep., 4/21/87, at 77-79. George denies receiving the material generated prior to the Finding. George Test., 8/5/87, at 277. 114. McFarlane Test., Hearings, 100-2, at 49. 115. N 16502; Ledeen Dep., 3/11/87, at 59-60; Ledeen Dep., 6/19/87, at 68-80. 116. Israeli Historical Chronology. 117. Ledeen Dep., 9/10/87, at 17. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 i Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 9 118. Id. at 16-17. 119. I 0645. 120. Ledeen Dep., 6/19/87, at 81. Ledeen disputes the representation in Charles Allen's memorandum, I 0644-46, linking the October 8 meeting to the threat on Buckley's life by the Islamic Jihad. Ledeen says there was no expectation of hostage releases in early October. See Ledeen Dep., 6/ 22/87, at 132-39. 121. Ledeen Dep., 6/19/87, at 83-84; Ledeen Dep., 6/22/ 87, at 181-83. 122. Id. at 81. 123. Ledeen Dep., 3/11/87, at 71-78; Ledeen Dep., 6/19/ 87, at 81-88. 124. McFarlane letter published in Wall Street Journal, 8/ 14/87. 125. Ledeen Dep., 9/10/87, at 15. 126. Ledeen Dep., 3/11/87, at 78-82. 127. Ledeen Dep., 3/11/87, at 81-82. 128. Id. at 83, 78. 129. Israeli Historical Chronology. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 173 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 10 Arms to Iran: A Shipment of HAWKs Ends in Failure An Israeli-American plan to sell HAWK missiles to Iran in exchange for American hostages crystallized in November 1985. The plan?which grew out of the late October meeting in Geneva among Michael Ledeen and Iranian and Israeli officials and interme- diaries?ultimately led to a shipment of 18 HAWK antiaircraft missiles by a CIA airplane from Israel to Tehran on November 24 and 25. As the plan evolved, National Security Adviser Robert McFarlane had contacts with senior Israeli officials, brought aspects of the plan to the attention of the President, Chief of Staff Donald Regan, and the Secretary of State, and gave Oliver North increasing responsibility for over- seeing the plan's implementation. The planning and execution of the operation did not proceed smoothly, and in the end, no hostages were released. Ledeen Brings Home a Plan NSC consultant Michael Ledeen returned to Wash- ington from the Geneva meeting at the end of Octo- ber 1985. He told North and McFarlane of the Na- tional Security Council Staff of the proposal by Man- ucher Ghorbanifar and the other Iranians that the United States provide specified missiles in return for the release of U.S. hostages in Lebanon. On October 30, 1985, Ledeen first met alone with North and then with both North and McFarlane.' In the first meet- ing, Ledeen said that the "First Iranian," a highly placed Iranian official who acted as a go-between in the arms sales negotiations, "wants to be U.S. ally? has support in Tehran." Ledeen spelled out the Irani- ans' demands for securing the American hostages' freedom. He told North that, "to get hostages out," the Iranians wanted a "blanket order" of 150 HAWK missiles, 200 Sidewinder missiles, and 30 to 50 Phoe- nix missiles. The proposal contemplated that the hos- tages would be released in three groups, with separate arms deliveries to Iran to occur before the second and third releases. Ledeen raised the unresolved problem of U.S. replenishment of the 500 TOWs withdrawn from Israeli reserves and shipped to Iran in August and September 1985 prior to the release of hostage Benjamin Weir. Ledeen said Israeli Defense Minister Yitzhak Rabin was "complaining about" the United States' failure to make good on its promise to replace those items.2 North and Ledeen met with McFarlane later that day to continue the discussion. Ledeen, claiming that improved U.S.-Iranian relations could follow an agreement, advocated cooperation with the Israelis "to bring out credible military and political leaders" in Iran. McFarlane expressed skepticism even about the existence of moderate elements in Iran, let alone their ability to come to power. Nevertheless, he did not oppose renewing arms shipments to Iran. McFar- lane instructed North and Ledeen that "not one single item" of armaments should be shipped to Iran without the release of "live Americans."3 McFarlane, Deputy National Security Adviser John Poindexter, and other senior American officials often repeated this instruc- tion over the next several months, but it was consist- ently disregarded. Ledeen's meeting with the First Iranian in Geneva led to meetings between the Americans and Israelis in early November 1985. The Iranians had significantly increased their demands for weapons. Moreover, the Israelis still sought replenishment of the TO`,Vs they had sold to Iran. On November 8, David Kimche, the Director Gen- eral of the Israeli Foreign Ministry, met in Washing- ton with McFarlane, North, and Ledeen.4 This was one of a series of meetings that McFarlane had with Kimche in the fall of 1985.5 Ledeen arranged this session in the hope of keeping the Iran initiative moving: I asked Kimche to talk to McFarlane because I was convinced that McFarlane was getting ready to resign, and was in a bad psychological state and was planning to abandon the entire Iranian initiative. I urged to Kimche to talk to McFar- lane to ask him, first, not to resign; and second, not to abandon the political initiative with regard to Iran.6 North-Nir Dialogue Begins North and Amiram Nir, the Israeli Prime Minister's Adviser on Combatting Terrorism, met in Washington on November 14.7 Although they apparently did not discuss arms sales to Iran, they did set the foundation 175 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 .1 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 10 for a variety of future Israeli-U.S. covert operations. North jotted notes indicating that this operation could require at least a million dollars a month "for near term and probably mid-term rqmts [requirements]." North's notes list several unanswered questions: ? How to pay for ? How to raise $ . . . ? Use Israelis as conduit? ? Go direct? ? Have Israelis do all work w/U.S. pay? ? Set up joint/Israeli cover op 8 On November 19, North and Nir discussed two code-named covert operations, "T.H. 1," the one they had discussed on November 14, and "T.H. 2." North's notes reflect that the second operation would also require a source of "op[erational] funds."9 In mid- November, North did not have answers to the fund- ing question. But, according to North, within a few months, he and Nir had solved the problem: they would use the Iran arms sales profits." Planning for the privately funded joint covert activities began. McFarlane Briefs CIA On November 14, after a regular weekly meeting attended by Director of Central Intelligence William Casey, his deputy, John N. McMahon, and Poin- dexter, McFarlane told Casey of "the Israeli plan to move arms to certain elements of the Iranian military who are prepared to overthrow the government." McMahon said McFarlane provided this information casually as the meeting was breaking up. Casey relat- ed this information to McMahon on the drive back to Langley." McMahon recalled that this information left him with the impression that the NSC staff was merely monitoring an ongoing Israeli effort." McFarlane Gives Rabin the Go-Ahead The following day, Israeli Defense Minister Rabin met with McFarlane at the White House and told him that Israel was about to make another arms shipment to Iran and would need replenishment from the United States." Rabin wanted "to reconfirm that the President of the United States still endorsed this con- cept of Israel negotiating these arms sales." McFar- lane replied that the President's authorization for Israel to sell arms to Iran subject to replenishment by the United States was still in effect, and that this was "based upon recent questions and reaffirmation by the President that I had received."" Rabin also sought reassurance that the matter was indeed a joint project between the United States and Israel. McFarlane re- plied that while the United States supported Israel's 176 activities, it was going along with Israel on this matter.'6 Rabin raised the still unresolved question of the U.S. commitment to replenish the 504 TOW missiles sent to Iran in August and September. McFarlane replied that he was aware of the difficulties and that within two weeks he would be sending North to Israel to find a technical means of achieving the re- placement. '7 McFarlane Briefs the President McFarlane told the President about the developing plans for the HAWK transaction shortly before they left on November 17 for a summit meeting with Soviet leaders in Geneva. Regan, who was present, said it was: Must a momentary conversation, which was not a detailed briefing to the President, that there [is] something up between Israel and Iran. [McFar- lane said] [i]t might lead to our getting some of our hostages out, and we were hopeful. . . .18 McFarlane did not stress that what he and Rabin saw as Ghorbanifar's unreliability was adding to the risks of the operation. Instead, McFarlane merely made "a passing reference here or there" about these concerns, and did not discuss them at length with the President at the time." The President's reaction was "cross your fingers or hope for the best, and keep me in- formed."26 The November HAWK Shipment By the third week of November, the Israeli interme- diaries and the Americans believed they had reached an agreement with Ghorbanifar on a plan that would gain release of all the hostages by Thanksgiving. The plan was, in essence, a straight swap: U.S.-made mis- siles in Israeli stocks would be sold to Iran in ex- change for American hostages. As the exchange date approached, many details remained unresolved. They were only hammered out in separate and frantic long- distance negotiations among the Israeli intermediaries and Ghorbanifar, Ghorbanifar and his contacts in the Iranian Government, and Israeli Government officials and NSC officials. How Many Missiles? One critical component of the plan was unsettled until the eleventh hour?the number and type of mis- siles that the Israelis would ship to Iran. As evidenced by their late October proposal, the Iranians wanted to purchase immediately hundreds of millions of dollars worth of sophisticated U.S.-made missile systems for use in their war with Iraq. The Israelis were con- cerned about depleting their stocks. The Americans, who had not found a solution to the replenishment Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 10 requirements arising out of the August and September missile shipments, sought an agreement involving smaller quantities of missiles shipped over time. The middlemen in the transaction?Ghorbanifar and Al Schwimmer and Yaacov Nimrodi, Israeli arms dealers also involved in the negotiations?had substantial monetary incentives to negotiate a deal in which large quantities of weapons and money would change hands. By Sunday, November 17, the planners had decided on an initial shipment of 80 HAWK missiles.2' This shipment was to be just the start of a much larger, phased transaction. On November 18, North called Schwimmer, who was in direct contact with Ghorbanifar. They dis- cussed a sale of 600 HAWKs to Iran in groups of 100 spread out over the next 3 or 4 days. Schwimmer told North that the first shipment of 100 missiles had been "approved" in Tel Aviv and that it was to be fol- lowed by the release of five "boxes," the code name for the American hostages.22 After the call, North wrote in his Notebook: "Schwimmer to P/U [pick up] HAWKs in U.S."23 That day, an Israeli official told Prime Minister Shimon Peres that the Americans were willing for 500 HAWK missiles to be supplied, but it was proposed that Israel supply 80 HAWKs.24 There is other evidence of plans for a very large weapons shipment to Iran: In mid-November a Euro- pean broker sought an air carrier to transport immedi- ately 10 planeloads of armaments in long crates from the capital of Country 15 to Tehran.25 An airline owned by the CIA became aware of the shipment." This CIA airline proprietary learned that "[t]he cargo is declared to be medicine but is in reality ammunition etc." 27 When this same proprietary was called in about 10 days later by CIA officials to move HAWK missiles, the company's manager concluded that the cargo was the same as what the European broker had offered earlier.28 By November 20, the plan?as reported by North to Poindexter?had moved away from one involving 500 to 600 HAWKs toward one that included these components: First, 80 HAWKs from Israeli stocks were to be moved to Iran on Friday, November 22, on three planes spaced apart by 2 hour intervals. After the planes were launched, but before they landed in Iran, five American and possibly one French hostage would be released. After the hostages were freed, 40 more HAWKs would be moved to Iran. The United States would replenish Israel's stocks promptly by sale at a mutually agreed price." North's notes from the same day confirm that the initial delivery was to be 80 items, but indicate a key difference from what he had reported to Poindexter: the American hostages would not to be freed all at once in advance of the arrival of any HAWKs, but rather would be released sequentially after each ship- ment. After referring to the total of 80 HAWKs, North wrote: ?One 27-2 27-3 26-1 6+1 French 3? This notation appears to mean that 2 hostages were to be released after a first shipment of 27 missiles, 3 hostages were to be released after a second shipment of the same amount, and 1 hostage would be released after a third shipment of the remaining 26 items. In fact, within a few days, an initial load of HAWKs arrived in Tehran without any prior hostage release. McFarlane's instruction not to ship weapons with- out the prior release of the hostages thus was not followed. From this point on, the Iranians would always insist on sequential delivery of weapons, fol- lowed by the release of hostages. On November 20, North wrote in his notebook: "120 HAWKs = 1) 5 Amcits, 2) Guarantee that no more." 31 North's notes also suggest that although the initial shipment quantity had been reduced from 600 HAWKs, additional arms shipments to Iran were con- templated after the shipment of 120 HAWKs. Follow- ing a description of the sequence of delivery for the first 80 HAWKs and the hostage releases, North wrote: "After-40 more HAWKs, 200 SW [Sidewind- er] missiles, 1900 TOWs." 32 McFarlane Puts North in Charge While McFarlane was at the Geneva summit with the President, North became immersed in the details of the HAWK transaction. North testified that he was "thrown into this on the night of November 17," in almost simultaneous telephone calls from Rabin and McFarlane.33 Rabin told North that the plan called for Israel to move 80 HAWK missiles by November 20. He said that Israel was unwilling to commence the shipment without satisfactory arrangements for re- plenishment by the United States.34 According to North's notes, McFarlane told North to solve Rabin's replenishment problem, and "to keep orders under $14M" each?the threshold figure for reporting for- eign military sales to Congress." After the calls from McFarlane and Rabin, North "flew up immediately [to New York] to talk with Mr. Rabin." In New York, he met with officials of the Israeli Ministry of Defense Procurement Mission, who wanted to ar- range replenishment sales to Israel of 508 TOWs and 120 HAWK missiles.36 The next day, North or Poindexter asked Lt. Gen. Colin Powell, then military assistant to Secretary of Defense Casper Weinberger, about the availability and price of HAWKs and TOWs, and the legality and method of transferring such missiles. The requester initially sought information on a proposed transfer of 500 HAWKs, but, in accordance with the evolving plan, soon cut the number to 120. Powell understood 177 77-026 0 - 87 - 7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 11 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 10 that the ultimate destination of the weapons would be Iran and that Israel was acting as an intermediary." After receiving this request, Powell contacted Noel Koch, Principal Deputy Assistant Secretary of De- fense for International Security Affairs, who in turn asked Henry Gaffney, Director of Plans, Defense Se- curity Assistance Agency (DSAA), to find out how many HAWKs were available for immediate transfer. DSAA is the entity within the Department of De- fense that is primarily responsible for arms sales to other governments. Koch asked Gaffney to prepare a Point Paper examining the requirements for notifica- tion of Congress and whether the ultimate destination of the weapons might be concealed.38 Gaffney testified that he understood from his supe- riors that the Point Paper should cast a negative view of the transaction to reflect Secretary Weinberger's presumed opposition to arms transfers to Iran." He completed his paper, entitled "HAWK Missiles for Iran," on November 22 or 23 and submitted it to Powell. Powell testified that he gave the paper to Secretary Weinberger,4? who did not, however, recall receiving it.4 Gaffney's Point Paper included important informa- tion about the price and availability of HAWKs: 164 missiles were available for foreign sale at that time; the missiles cost the United States approximately $300,000 per unit; and replacement cost would be as much as $437,700 per unit. Transportation and admin- istration charges would have to be added. Seventy- nine of the missiles were available for immediate ship- ment. This state of the inventory may be one reason why the number of HAWKs planned for immediate shipment from Israel to Iran?and therefore the number which the United States would have to quick- ly replenish?was set at 80. Gaffney's Point Paper also described political drawbacks of a weapons trans- fer to Iran.42 Gaffney testified that under the Arms Export Con- trol Act, Iran was not an eligible country for direct sales from the United States, and that, in his view, even if Iran were to become eligible, the contemplat- ed sales of HAWKs could not be made directly or indirectly (through Israel or otherwise) unless the President notified Congress. In addition, Gaffney tes- tified that if the transfer were to be made by Israel, U.S.-Israeli agreements require advance, written U.S. consent. U.S. law mandates that the President cannot give that consent without certain conditions being met in advance, including obtaining assurance from Iran that it would use the weapons only for self- defense and would comply with U.S. restrictions on retransfer to another country. These were conditions that Iran could not or would not meet.43 178 McFarlane Informs the President and the Secretary of State While they were still in Geneva, McFarlane updat- ed the President and Chief of Staff Donald Regan on the status of the HAWK shipment and the anticipated hostage release.44 McFarlane informed them that the Israelis were about to ship the weapons, and ex- pressed hope" that the hostages would come out by the end of the week." McFarlane specifically told the President that Israel was about to deliver 80 HAWK missiles to Iran via a warehouse in Country 15, and that Israel wanted the United States to re- place those missiles.47 McFarlane testified that he simply told the Presi- dent that the Israelis were about to act, but did not ask for specific approval: [T]he President provided the authority in early August for Israel to undertake, to sell arms to Iran, and to then come to the United States for replenishment, to buy new ones. That didn't re- quire then the Israelis to come back to us on each occasion and get new approval.48 The President asked McFarlane to arrange a meeting at which the President and his top advisers would review the initiative after the summit." At about the same time, McFarlane also told Secre- tary of State George Shultz of the impending arms- for-hostages swap." McFarlane called Secretary Shultz by secure phone "out of the blue, about a hostages release and arms sales to Iran." 51 McFar- lane explained that Israel was about to ship 100 HAWKs to Iran through Country 15, that the ship- ment would occur only if the hostages were released, and that the United States would sell replacements to Israel." Secretary Shultz understood it as "a straight- out arms-for-hostages deal." He expressed his opposi- tion, and rebuked McFarlane for not informing him about it earlier: "I told him I hoped that the hostages would get out, but I was against it, and I was upset that he was telling me about it as it was just about to start so there was no way I could do anything about it." 53 When asked about Secretary Shultz' account, McFarlane testified: "I don't recall it that way." 54 Even as McFarlane was filling in Shultz on the broad outline of the plan, his NSC subordinates took steps to keep the Department of State hierarchy in the dark about the complex diplomatic problems caused by the operation. For instance, Secretary Shultz was not told of the back-channel communica- tions and actions of State Department officials, taken at the behest of CIA and NSC officials, to support the HAWK shipment.85 North Recruits Secord As McFarlane had explained to the President and Secretary Shultz, the plan was to move 80 HAWKs Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 10 from Tel Aviv to the capital of Country 15, transfer them to other planes, and then ship them on to Iran. The planners chose this circuitous routing because direct flights from Israel to Iran would draw attention given the poor relations between Israel and Iran.56 Because the cargo was arms, special clearances had to be obtained from the government of Country 15. As the pilot who ultimately flew the HAWKs to Iran stated: Everybody can fly [in Europe] without clear- ances unless you have . . . sensitive stuff like arms aboard, and then you have to have diplo- matic clearance.57 A problem developed on November 18: The gov- ernment of Country 15 was unwilling to grant the special clearances. On that day, North asked Richard Secord?his confederate in the covert operation sup- porting the Contras?to fly to Country 15 to "see what he could do to straighten out the mess."58 Secord said this was when he learned of the Iran arms initiative." North explained the secret operation to Secord, indicating that it had been sanctioned by the United States, that it had run into difficulties in Coun- try 15, and that there was "quite a bit of urgency" to get Secord to go there. According to Secord, North "knew that we had?my organization had had exten- sive deals with the armament [industry]" in Europe and "wondered if I could arrange for this transship- ment."66 The next day, North gave Secord a letter on White House stationery, signed by North "for" McFarlane, stating Your discrete [sic] assistance is again required in support of our national interests. At the earliest opportunity, please proceed to [the capital of Country 15] and other locations as necessary in order to arrange for the transfer of sensitive ma- teriel being shipped from Israel. As in the past, you should exercise great caution that this activity does not become public knowl- edge. You should ensure that only those whose discretion is guaranteed are involved." McFarlane testified he was not aware that North was providing this letter to Secord, and that his per- mission was not sought to send it out." Secord arrived in Country 15 on November 20.63 He and his associate Thomas Clines, who Secord said "had really been handling all of the matters for the Enterprise" in Europe, together started "to work the problem . . . through our colleagues in the armament industry . . .9964 Million-Dollar Deposit to Lake Resources On November 18?the same day that he brought Secord into the deal?North began to arrange for a $1-million transfer from Israeli intermediaries to the account of Lake Resources,65 a Panamanian company controlled by Secord and referred to by North as "our Swiss Co[mpany]."66 Lake Resources and its account at Credit Suisse in Geneva had been estab- lished by North and Secord in May 1985 "to receive monies in support of the covert operations."67 Prior to this deposit, which was made on November 20,68 Secord and North had used the company exclusively for supporting the Contras. The purpose for this $1-million deposit is unclear. North and Secord testified that the payment was for chartering planes to move the 80 HAWKS to Iran." The Israeli Historical Chronology affirms this expla- nation.70 North and Secord, however, were unable to explain why they were asking for transportation ex- penses on November 18 when, according to Secord, his original assignment was only to help obtain land- ing clearances for planes already chartered by Schwimmer.7' It was not until November 22, when Schwimmer's charter unexpectedly fell through, that Secord's role was expanded." At that time, the amount Secord expected to pay for chartering planes was less than $1 million.73 Some evidence suggests that Secord made, or con- templated making, expenditures in Country 15. One of the persons with whom Secord was working, an offi- cer of a European arms company, reportedly attempt- ed to bribe an official of the government of Country 15 to obtain the necessary clearances,74 and there are references to Secord having spent substantial sums in Country 15.75 However, bank records do not show any such payments out of the Lake Resources ac- count. Whatever the initial purpose of the deposit, the Committees have ascertained its use. Secord used ap- proximately $150,000 to pay for air charters relating to the HAWK shipment, and the remaining $850,000 was spent to support the Contras and to make profit distributions to Secord and his business associates, Albert Hakim and Thomas Clines.76 North testified that in early 1986 he told the Israelis that the money had been used "for the purpose of the Contras" and that they acquiesced.77 The first "diversion" to the Contras of money received in connection with the Iranian arms sales had occurred. Confusion in Country 15 The plan to ship the HAWKs through Country 15 faced collapse because the government there refused to grant the necessary clearances. Upon arriving in Country 15, Secord and his associates?the European businessman and Clines?tried to overcome this prob- lem.78 All three were fully aware that the cargo to be moved was HAWK missiles." Because their efforts were outside normal diplomatic channels and in con- tradiction to stated U.S. policy, they were not well- received by the government of Country 15.80 179 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 I I II , ...I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 10 The European businessman may have tried to solve the problem even before Secord arrived. The Deputy Chief of Mission of the U.S. Embassy in Country 15 recalled learning on November 23 that about one week earlier the European businessman had ap- proached an official of Country 15 and offered what the official considered to be a bribe to assist in the transit of a shipment involving the United States, Israel, and Iran.8' If this approach occurred around November 16, as the evidence suggests, then it draws into question Secord's testimony that he was not brought in until November 18. On November 20, the European businessman called an official of Country 15's Foreign Ministry and ex- pressed the hope that the Foreign Ministry would grant permission for two aircraft carrying weapons from Israel for Iran to transit the country. To the official, the businessman appeared to be "acting as a broker for the arms deal." The European businessman referred to an "American general," presumably Secord, involved in the undertaking. The foreign gov- ernment was disturbed by the businessman's approach, and the next day another official asked the American Embassy for "information about this strange case." The Embassy, unaware that the U.S. Government supported this shipment of weapons to Iran, told the Foreign Ministry that the shipment was not author- ized by the United States and was contrary to U.S. Government policy strongly opposing arms sales to Iran.8 2 Contributing to the confusion of the government of Country 15 was another incident on November 21. "Anonymous people claiming to 'represent the Ameri- can administration'" attempted to intercept the coun- try's Foreign Minister and Prime Minister at the air- port of the capital of Country 15 following their return from the European Economic Summit in Brus- sels." A CIA cable reporting this incident stated that this approach, while unsuccessful, was "particularly upsetting" to the foreign government because it "aroused both attention and suspicion."84 North Updates Poindexter As the operation faltered on November 20, North reported to Poindexter and portrayed a mission well under control. He made no mention of the obstacles faced in Country 15: The Israelis will deliver 80 Mod HAWKS to [the capital of Country 151 at noon on Friday 22 Nov. These 80 will be loaded aboard three chartered aircraft, owned by a proprietary which will take off at two hour intervals for Tabriz, [Iran]. The aircraft will file for overflight through the [cap- ital of Country 16] FIR enroute to Tabriz [from Country 15]. Appropriate arrangements have been made with the proper. . . [Country 16] air control personnel. Once the aircraft have been launched, their departure will be confirmed by 180 Ashghari [a pseudonym for Ghorbanifar] who will call [the Second Iranian official] who will call [an Iranian in Damascus] who will direct [another Iranian in Beirut] to collect the five rpt five Amcits [American citizen hostages] from Hizballah and deliver them to the U.S. Embassy. There is also the possibility that they will hand over the French hostage who is very ill. There is a requirement for 40 additional weaps of the same nomenclature for a total requirement of 120. $18M in payment for the first 80 has been deposited in the appropriate account. No acft will land in Tabriz until the AMCITS have been de- livered to the embassy. The Iranians have also asked to order additional items in the future and have been told that they will be considered after this activity has succeeded. All transfer arrange- ments have been made by Dick Secord, who deserves a medal for his extraordinary short notice efforts. Replenishment arrangements are being made through the MOD [Israeli Ministry of Defense] purchasing office in NYC. There is, to say the least, considerable anxiety that we will somehow delay on their plan to purchase 120 of these weapons in the next few days. IAW [in accord- ance with] your instructions I have told their agent that we will sell them 120 items at a price that they can meet. I have further told them that we will make no effort to move on their purchase LOA [Letter of Offer and Acceptance] request until we have all five AMCITS safely delivered. In short, the pressure is on them." This PROF message is clear evidence that North in- formed Poindexter in detail of the HAWK transac- tion?including the involvement of Secord and the replenishment arrangements?well in advance of the shipment. North Asks the CIA for Assistance Secord and the European businessman were unable to budge the government of Country 15. With only hours left before an Israeli plane carrying 80 HAWKs was to depart for the capital of Country 15, North urgently sought assistance from McFarlane, the CIA, and the State Department. North called McFarlane on the evening of November 21; they discussed whether McFarlane should call Country 15's Prime Minister or Foreign Minister in the morning.88a Informed by Secord of the difficulties in Country 15, North immediately asked CIA official Duane Clarridge to assist in obtaining clearances for the plane going there." Clarridge said Secord should contact the CIA Chief in Country 15, whose name North then relayed to Secord.87 At the same time, Clarridge sent "flash" cables instructing the CIA Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 10 Chief in Country 15 and his deputy to report immedi- ately to the office for a "special assignment."88 The next morning, November 22, Secord, using his Copp pseudonym, called the CIA Chief and said that he urgently needed clearance for an El Al charter flight scheduled to leave Tel Aviv in 20 minutes and fly to the capital of Country 15. Secord urged the CIA Chief to call an official of Country 15 and em- phasize the urgency of obtaining the clearance. At this point, the CIA Chief suggested enlisting the help of the Deputy Chief of Mission at the U.S. Embassy in Country 15.89 North Brings State Into the Operation At about this time, North pressed to involve the U.S. Embassy directly in the efforts to obtain the clearances. North accurately told Robert B. Oakley, then Director of the Office of Counterterrorism and Emergency Planning at the Department of State, that Israel had encountered problems obtaining clearances in Country 15 for a transshipment of HAWK missiles for Iran. In contrast, North falsely told Oakley that he had learned of the shipment when "'one of his people' went to an arms warehouse [in Country 15] to obtain arms for the Nicaraguan Resistance, and learned that the Israelis had been obtaining arms from the same source for shipment to Iran." In any event, Oakley gave North permission to tell the Embassy in Country 15 that the State Department was "aware" of the unfolding operation and that the Embassy "could request clearances." 90 Thereafter, the CIA Chief was instructed to insure that if the Deputy Chief of Mis- sion felt compelled to communicate with the State Department, he should use only the CIA channel." The NSC also involved Oakley and the State De- partment in another capacity. On November 21, Oakley notified the CIA's counterrorism component that "information from the NSC indicated that one or more U.S. hostages would soon be released in Leba- non." Oakley reported that a team was departing for Wiesbaden, West Germany, to await the arrival of the hostages. The team arrived in Wiesbaden the follow- ing day, and remained there until November 27.92 On November 22, Oakley reported to Secretary Shultz (who had returned from Geneva) and others at the State Department "that the hostages would be released that afternoon in exchange for 120 HAWKs at $250,000 each?worth $30 million in all." Secretary Shultz and his advisers, Deputy Secretary John C. Whitehead and Undersecretary Michael Armacost, shared their apprehension about the endeavor. The Secretary, who "regarded it as a $30 million weapons payoff," told his deputies: "Bud [McFarlane] says he's cleared with the President."93 The next day, Secretary Shultz was told that no hostage had been released and that the deal had col- lapsed.94 That was false. The operation was still being actively pursued, and the movement of 18 HAWKs was yet to occur. Jumbo Jet Departs for Country 15 Transit Point Although the clearance for landing in Country 15 had not been authorized on the morning of November 22, the El Al 747 carrying the 80 HAWK missiles was ordered to take off for that country's capital. As the plane neared its "go?no go point," frantic efforts were underway to change the country's government's position. Clarridge cabled the CIA Chief in Country 15 and ordered him to "pull out all the stops" to solve the problem.95 Secord called an official in Country 15's foreign ministry, who said that the gov- ernment had decided to withhold permission based upon the U.S. Embassy's previous statement that the United States did not concur in the shipment." Hoping to reverse this position, the Deputy Chief of Mission made hurried phone calls attempting to summon the Country 15 Foreign Minister out of a cabinet meeting; and Secord told the CIA Chief that "McFarlane was being pulled out of [a] meeting with [the] Pope" to call the Foreign Minister.97 All these efforts were in vain. By early afternoon, Secord, who was in radio contact with the El Al plane,98 telephoned North and informed him that the government of Country 15 had refused permission. He said the aircraft had been ordered back to Tel Aviv.93 North and Clarridge Bring in a CIA Airline Due to the delays, the El Al plane, which the Israelis had reserved for this operation for only a limited time, was no longer available.'" Clarridge, North, and Secord scrambled to find other ways to transport the HAWK missiles to Iran. Within hours, Clarridge met with the Chief of the CIA's air branch and told him "we [have] a very sensitive mission in the Middle East and we need a 747 aircraft right away." The branch chief could not locate such a large aircraft on short notice, but suggested that a CIA airline proprietary might be able to move the cargo.'" At 4 p.m. on November 22, an air branch official called the CIA project officer for the proprie- tary, and asked whether its Boeing 707 cargo planes were available to move 80 pieces of "sensitive hi priority cargo" from Tel Aviv to the capital of Coun- try 15. The project officer reported that at least one of the airline proprietary's planes was available.'" Clarridge's actions resulting in the involvement of the air proprietary were at North's request and with the authority of CIA Associate Deputy Director of Operations, Edward Juchniewicz. "3 Juchniewicz spoke with both Clarridge and North on November 22, and told them he had no objection to giving 181 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 I I V Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 10 Secord the commercial name of the airline proprie- tary to charter the necessary flights.'" Over the next 48 hours, Clarridge and CIA air branch personnel closely managed the proprietary's flight activities in support of this covert operation.'" Before the oper- ation was over, the proprietary's project officer also became directly involved in coordinating matters.'" Clarridge Brings in Another CIA Chief Even as the problems in Country 15 remained unre- solved, Clarridge, on the evening of November 22, moved to obtain clearances from another country, Country 16, for overflight rights into Iran.'" Clar- ridge cabled the CIA Chief in Country 16 proposing that he ask Government authorities for "overflight clearances for three commercial DC-8 aircraft (or similar aircraft) flying on a chartered basis from [Country 15] to Tabriz and then retracing their route." Clarridge explained that this was "a National Security Council initiative and has the highest level of USG [United States Government] interest." The CIA Chief was to explain that "the purpose of the flight is humanitarian in nature and is in response to terrorist acts." Clarridge specifically instructed that the U.S. Ambassador to Country 16 "should not be in- formed." 108 Schwimmer's DC-8 Charter Falls Through On the evening of November 22, Schwimmer called North to say the charter of the DC-8s for the Country 15-to-Iran leg of the mission had fallen through. In a PROF note to Poindexter, North updat- ed the situation as of 7:00 p.m.: Unbelievable as it may seem, I have just talked to Schwimmer, in TA [Tel Aviv,] who advises that they have released their DC-8s in spite of my call to DK [David Kimche] instructing that they be put on hold until we could iron out the clearance problem in [the capital of Country 15]. Schwim- mer released them to save $ and now does not think that they can be re-chartered before Monday. ?9 Within minutes of Schwimmer's call, North and Secord discussed a substitute method of transporting the missiles from Country 15 to Iran. Secord suggest- ed that the European businessman's company try to find some planes."? North wrote to Poindexter that Secord would solve the problem by diverting a plane from the Contra operation to the Iran operation: Advised Copp of lack of p/u [pick up] A/C [aircraft]. He has advised that we can use one of our LAKE Resources A/C which was at [the capital of Country 15] to p/u a load of ammo for UNO [United Nicaraguan Opposition]. He will have the a/c repainted tonight and put into serv- ice nit [no later than] noon Sat so that we can at 182 least get this thing moving. So help me I have never seen anything so screwed up in my life. Will meet with Calero tonite to advise that the ammo will be several days late in arriving. Too bad, this was to be our first direct flight to the resistance field . . . inside Nicaragua. The ammo was already palletized w/ parachutes attached. Maybe we can do it on Weds. or Thurs. More as it becomes available. One hell of an operation.1' In fact, it appears that Lake Resources had no planes at this time. Nevertheless, this PROF note reveals that North was beginning to meld the two operations he was overseeing and to recognize that the Lake Resources enterprise could operate in a variety of settings. Over the next 12 hours, Secord and others tried to hire a cargo carrier for the Country 15-to-Iran leg. They unsuccessfully sought to convince officials of a European national airline to take on the assign- ment."3 By the morning of November 23, Secord had identified an aircraft to make the flight,"4 but this plane was never used. Clarridge's Office Becomes the Command Post By November 23, Clarridge's office at Langley had become the command post for coordinating the HAWK transport. North was there most of the day.115 Also present and assisting were the CIA air branch chief, an intelligence officer, and Charles E. Allen.'" Numerous problems with aircraft and flight clearances continued to crop up. As the situation de- teriorated, Clarridge sent cables to the far-flung CIA stations involved, and North stayed in continuous contact with Secord in Country 15 and Schwimmer in Israel. Clarridge's superiors, specifically Juchniewicz and McMahon, were aware of at least some aspects of the activity being directed from Clarridge's office. Juch- niewicz's office received all of the cables being sent to and from Clarridge on the operation."7 In a memo- randum for the record written 2 weeks later, McMa- hon stated: On Saturday, 23 November 1985, Ed Juch- niewicz asked me if I was aware of all the activi- ty transpiring on the effort to get the hostages out. He showed me a cable to [the capital of Country 15] asking that we pass a message to the [Deputy Chief of Mission] from the Deputy As- sistant to the President for National Security Af- fairs [Poindexter]. The message assured the [Deputy Chief of Mission] that only the Secre- tary of State and Ambassador Oakley were aware of the operation. I told Juchniewicz that I was unaware of the specifics of the operation but due Approved For Release 2011/05/25 : CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 10 to the sensitivity of the operation, it was appro- priate that we pass correspondence between the NSC and the ambassadors overseas, but only communications, that we could not be involved without a Finding."8 McMahon testified that he did not know then that the CIA's airline proprietary had been brought into the operation."9 Allen also learned that day of the CIA role in the operation. North called him in the morning and asked him to deliver to Clarridge intelligence data on the Iran initiative. Allen showed the materials to Clar- ridge, who told him that North "had requested some assistance in obtaining a name of a reliable charter airline," that he was considering using the Agency's airline proprietary, and that he was trying to obtain landing and transit clearances in Country 15.120 The Oil-Drilling Equipment Cover Story During the planning of the HAWK missile ship- ment, the Israeli and American participants agreed to keep the true nature of the operation secret. They would use a false "story line" that the cargo to Iran was oil-drilling equipment."' Several American offi- cials who knew of the operation were advised of this cover story but understood that it was false and knew that the cargo was missiles. At the time, the President and Regan knew that the cargo comprised HAWK missiles and were specifical- ly told of the false story before the shipment was made, presumably by McFarlane. Regan testified: "I recall that that was to have been a cover story if discovered, it was to have been said that these were oil-drilling parts. 9'122 The government of Country 15 also was aware that the clearances being sought by Secord and others were for moving missiles through its capital and into Iran as part of an effort to gain the release of Ameri- can hostages. Secord understood that both the Prime Minister and Foreign Minister were informed. Indeed, Secord testified that it was not possible to ship HAWKs through the foreign capital without the host country knowing, because special handling of the weapons was required at the airport."3 North claims he used the cover story when he brought Clarridge and Allen into the operation. As he later testified, "I lied to the CIA because that was the convention that we had worked out with the Israelis, that no one else was to know."124 Allen testified that North "stated emphatically" that the cargo was oil- drilling equipment, but that he (Allen) had "serious doubts" about whether this was true."3 If Clarridge did not know the contents of the cargo at the start, he soon learned it. In Country 15, late in the morning of November 23, Secord gave the CIA Chief a full accounting of the mission. Their meeting occurred in a car in a hotel parking lot. Secord re- vealed his identity, explained he was formally associ- ated with the NSC, and specifically told the officer that the planned flight would contain HAWK missiles being sent to Iran in exchange for hostages.'26 The CIA Chief testified that he returned to his office and sent two cables to Clarridge through the "Eyes Only" privacy channel he was using on the HAWK project. The first cable contained a general report, mentioning the discussion with Secord but not setting forth the substance of the conversation.127 The second cable reported that the flights would con- tain HAWK missiles sent to secure the release of the hostages.128 The Committees' investigation did not locate this cable. But the CIA Chiefs subsequent tes- timony about its existence was corroborated in testi- mony by the CIA Deputy Chief '29 and by the Deputy Chief of Mission?who at the time either read the cable or was told about it by the CIA Chief.13? In addition, the CIA communicator, who transmitted the cable from Country 15, vividly recalls being shocked when he read the message and learned that the United States was sending arms to Iran."' Clarridge received additional information that re- vealed that the cargo was HAWKs: North testified that shortly after the shipment occurred, if not before, he had told Clarridge the true nature of the cargo.132 Moreover, on November 23, Allen showed Clarridge a report that, according to Allen, would cause "one [to] think that this initiative had involved arms in the past."33 Allen suspected that the November ship- ment also involved arms and "couldn't help but be- lieve that [Clarridge] suspected that. Particularly he could see the [report] as clearly as I, and he leafed through [its contents] . . . I left the folder with him and then picked it up later."34 After the shipment, Clarridge received additional information that made clear that the cargo was missiles."5 Clarridge insisted in testimony before these Com- mittees that he had no recollection of having learned that the cargo was missiles prior to early 1986.136 This testimony conformed to the false story certain Administration officials put out in November 1986 when they were trying to conceal the advance knowl- edge in the U.S. Government of the shipment of HAWK missiles. The Committees are troubled by the fact that the cable informing Clarridge of Secord's detailed ac- count of the operation, and an earlier cable Clarridge sent to the CIA Chief at the outset of the oper- ation,'" are inexplicably missing from an otherwise complete set of 78 cables sent by CIA officials during the operation.138 Country 15 Routing is Abandoned By the afternoon of November 23, the plan to transship the missiles through Country 15 was aban- doned. The previous evening, McFarlane had called the country's Foreign Minister and believed he had received a "green light" for the flights."9 However, 183 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 ? II V . I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 10 the foreign government still insisted that the United States provide a diplomatic note setting forth the nature of the cargo and the shipping route, and stat- ing that the release of American hostages was the purpose of the shipment.'" The foreign government wanted this documentation because it saw the oper- ation as "so directly in conflict with known U.S. policy and [its own] policy."141 The American plan- ners balked,'" apparently out of a concern about creating a formal paper record of the true nature of the operation. Later that day, the Deputy Chief of Mission, on instructions from Poindexter, handed the Foreign Minister a terse diplomatic note stating that the U.S. Embassy "expresses regret that the Govern- ment of [Country 15] was unable to fulfill the request of the Government of the United States for the hu- manitarian mission."43 Clarridge cabled the CIA Chief in the capital of Country 15 that in light of the diplomatic message, "it is obvious . . . that we are closing down [the Country 15] aspect of this oper- ation.9,144 As the Country 15 transit plan was falling through, North and Clarridge sought a substitute transit point. Clarridge cabled the CIA Chief in the capital of an- other country, Country 18, to request assistance in obtaining landing rights in that country for "5 sorties" by a CIA airline proprietary 707 airplane between Tel Aviv and Tabriz, the first to occur "in the next 12 hours or so . . . and likely result in the release of the hostages."145 Meanwhile, still on November 23, Israeli military personnel began to load the HAWKs into the CIA proprietary airplane at the Tel Aviv airport. If they had not already been told, the proprietary's crew sur- mised from the appearance of the crates that their cargo was missiles and reported this to the airline manager.146 Later that day, the participants decided to move the shipment directly from Tel Aviv to Iran, without transiting a third country. Under the new plan, one of the proprietary's planes would make a series of flights to move the 80 HAWKs.147 After dismissing one route, the planners selected a shorter?but more dan- gerous?route across Country 16.148 But obtaining overflight clearances from Country 16 remained a problem, so Clarridge once again cabled the CIA Chief there.'" Several hours later, the CIA Chief replied that the Government of Country 16 was sup- portive, but needed "some idea of what the aircraft would carry as presumably they would not be empty."'" Late that night, Clarridge sent two more increasingly urgent cables to the CIA Chief in Coun- try 16. In conformity with the cover story, these cables told the CIA Chief to advise the government of Country 16 that "the aircraft are carrying sophisti- cated spare parts for the oil industry" and that the five flights would be spread over a number of days.151 184 North and Clarridge, working with Schwimmer, continued to coordinate the flight activity on Sunday, November 24. At the last minute, they decided that, at least on the first sortie, the plane should land at a transit point in another country, Country 17, to dis- guise the fact that the shipment was moving from Israel to Iran.152 While this decision was being made, the CIA Chief in Country 16 informed Clarridge that the government there had approved the five over- flights, but that "incoming flight cannot come directly from [Country 17]."153 CIA Airline Proprietary Moves the Missiles On November 24, the CIA proprietary aircraft car- rying 18 HAWK missiles flew from Tel Aviv to the transit point in Country 17. Because Schwimmer had sent the plane without a cargo manifest, the pilot lacked the documentation required by customs offi- cials at the transit point, who wanted to inspect the cargo.'" Simultaneously, Schwimmer and the propri- etary manager, along with North and Clarridge, fran- tically discussed how to solve this. While there is evidence to the contrary, it seems the pilot simply talked his way out of the problem.155 After getting out of the transit point in Country 17, the pilot ran into trouble while flying over Country 16. According to the airline manager's report, nothing was prepared for overflight in [Country 16] and [the pilot] had again to talk his way through. Since they [the Country 16 ground con- trollers] repeatedly insisted on a diplomatic clear- ance number, he made one up which was not accepted after long negotiations and then he fili- bustered one hour and 30 min his way through [Country 16], using different altitudes, positions and estimates that he told [Country 16's] Military with whom he was obviously in radio con- tact . . . However, radar realized his off-positions which gave additional reason for arguments and time delays.'56 Cables the next day from the CIA Chief in Country 16 to Clarridge suggested several reasons why the pilot encountered these difficulties. For example, the destination of the plane was changed at the last minute from Tabriz to Tehran, which "provoked query" from Country 16 because it did not square with the clearance request.'" Other discrepancies caused outright anger: [An official of Country 16 was] quite upset over multiple flight plans received, fact first flight came directly from [the transit point in Country 17] and did not request clearance beforehand and conflicting stories about plane's cargo. [The CIA , Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 10 Chief] told [the official] it was oil industry spare parts, telex from carrier stated medical supplies and the pilot told ground controllers he was car- rying military equipment. . . . Bottom line is that [the government of Country 16] still wants to assist but has developed a little cynicism about our interaction with them on the matter.'" Ironically, the pilot reportedly told the flight control- lers the true nature of the cargo even while Clarridge was spreading the cover story to high level officials of Country 16.169 The only part of the operation that went smoothly was the flight into Tehran. The Second Iranian Offi- cial and Ghorbanifar, who were in Geneva, passed word to officials in Tehran to prepare to receive the plane. The plane landed in Tehran early in the morn- ing.160 After an encounter with a military officer who apparently was unaware of the operation, "a civilian with a submachine gun on his back" arrived at the aircraft."' The pilot understood that this person was a member of the Iranian Revolutionary Guard. He instructed the pilot not to disclose to anyone at the airport that the flight had originated in Israel, arranged for the unloading of the plane by military personnel, and got the crew to a hotel? formerly the Sheraton?in downtown Tehran.162 Fourteen hours later, after a warm send-off that included caviar, the plane departed Tehran at 12:15 p.m. E.S.T., on Monday, November 25.163 The air- line proprietary crew expected they would return shortly with more missiles and told the Iranian at the airport, "Don't worry, we [will] come back.99164 However, the airline manager radioed them after they were airborne and instructed them not to return to Israel.162 Problems surfacing in both Washington and Iran put an end to the CIA proprietary airline's role. Within a few days, Secord, using funds from the Lake Resources account, wired a $127,700 payment to the proprietary.166 Aftermath of the HAWK Flight The Failure Sinks In On November 25, with the Americans still enter- taining the hope that one or more hostages might be released, senior White House and CIA officials were informed about the weekend's activities. Poindexter told the President at his regular 9:30 a.m. briefing that a shipment of arms to Iran had just taken place.'" At 7 a.m. that morning at CIA headquarters, Edward Juchniewicz told McMahon that Secord and "those guys" at the NSC had "used our proprietary to send over some oil supplies" to Iran. McMahon's reaction was anger: I said goddam it, I told you not to get involved. And he [Juchniewicz] said, we're not involved. They came to us and we said no. And they asked if we knew the name of a secure airline and we gave them the name of our proprietary. I said, for Christ's sake, we can't do that without a Finding.168 McMahon said that at the time he accepted Juch- niewicz's report that the cargo had been oil-drilling equipment: "[M]y focus was that we had done some- thing wrong . . . and I didn't care what was on that airplane." McMahon's view was that any use of the CIA airline proprietary at the direction of CIA but without a Presidential Finding was illegal.' 68a Shortly after talking to Juchniewicz, McMahon went to Deputy Director for Operations Clair George's office where several staffers were discussing the weekend's activities. McMahon told them "that they weren't going to do anything more until we got a Finding."169 That same morning, North sent word to Schwimmer that the operation was to be put on hold.179 McMahon also moved quickly to contact CIA Gen- eral Counsel Stanley Sporkin on the matter of the airline proprietary's activity." McMahon testified that "during the day I called Sporkin several times and I told him that I wanted a Finding and I wanted it retroactive to cover that flight."172 Sporkin re- called that McMahon simply asked him to look into the legal aspects of the activity, but did not declare that a Finding was necessary.'" Late in the day, two officers from the Operations Directorate, an air branch officer and his group chief, were directed to brief Sporkin on the proprietary's flight.'" The CIA officials most involved in the op- eration?Clarridge, Allen, and the chief of the air branch?were not selected to do the briefing. At Sporkin's request, his deputy, J. Edwin Dietel, sat in on the briefing.175 The participants' accounts of the briefing of Spor- kin differed significantly. The air branch subordinate officer said that the meeting lasted about 45 minutes and that he and his superior explained to the lawyers that the airline proprietary?acting at the direction of the NSC staff and with the approval of Juch- niewicz?had moved some cargo from Israel to Iran. He testified that as of November 25, he knew nothing about the cargo other than its weight and dimensions and that that was the only information about the cargo that was discussed at the briefing. He recalled that the lawyers exhibited no curiosity about the nature of the cargo and that there was no mention that the cargo was either oil-drilling equipment or military equipment. He also testified that nothing was said to indicate that the proprietary's flight was relat- ed to an effort to free hostages.176 185 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 I I I I I I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 10 The CIA group chief said he did not even know of the activity being scrutinized until that morning. He stated in an interview that he and the subordinate explained that a CIA proprietary plane, acting in a strictly commercial capacity, had carried "commercial cargo" into Iran. The subject- of weapons being aboard the plane did not arise, he said. He added that at this point he understood that the cargo might have been farm equipment and that the shipment was not part of an NSC staff operation. '77 Notwithstanding these divergent accounts from of- ficials of the Operations Directorate, it is clear that the briefers told Sporkin that missiles had been trans- ported, and the shipment was part of an effort to free the hostages. Sporkin testified: "What they told me indicated an involvement in a shipment of arms to Iran."78 Sporkin's deputy, Deitel, specifically re- called that the briefers said the cargo was missiles.'79 Sporkin testified that the briefers probably specified the exact type of missiles being shipped.'" During the briefing, Sporkin tentatively concluded that a covert action Finding was necessary to author- ize the previous activity."' He stated that there should be no more flights to move the rest of the cargo in Israel until the matter could be looked into further.'82 After the briefers left, two senior staff attorneys, whom Sporkin had enlisted earlier and who were waiting for the briefing to end, were called into the room. Sporkin related to them that a shipment of "military equipment or missiles" from Israel to Iran had just occurred and that more flights were contem- plated.' 8 3 ? Sporkin then dictated a draft Finding that author- ized the CIA to assist in "efforts being made by private parties" to obtain the release of hostages through the provision of "certain foreign materiel and munitions" to the Government of Iran. The draft stated that Congress would not be notified of the operation "until such time as [the President] may direct otherwise" and that the Finding "ratifies all actions taken by U.S. Government officials in further- ance of this effort."84 Sporkin directed one of the lawyers, Bernard Makowka, to stay late and work on the Finding.'85 Later that night, Sporkin informed McMahon "that a Finding would be required, not so much from the airlift standpoint, but from our in- volvement in influencing foreign government officials to assist the mission."86 Sporkin aryl his deputies met on the morning of November 26, and worked up a final draft of the Finding.'" In its entirety, the Find- ing stated: Finding Pursuant to Section 662 of The Foreign Assistance Act of 1961, As Amended, Concerning Operations Undertaken by the Central Intelligence Agency in Foreign Countries, Other Than Those Intended Solely for the Purpose of Intelligence Col- lection. 186 I have been briefed on the efforts being made by private parties to obtain the release of Americans held hostage in the Middle East, and hereby find that the following operations in foreign countries (including all support necessary to such oper- ations) are important to the national security of the United States. Because of the extreme sensi- tivity of these operations, in the exercise of the President's constitutional authorities, I direct the Director of Central Intelligence not to brief the Congress of the United States, as provided for in Section 501 of the National Security Act of 1947, as amended, until such time as I may direct oth- erwise. SCOPE: Hostage Rescue?Middle East DESCRIPTION The provision of assistance by the Central Intelli- gence Agency to private parties in their attempt to obtain the release of Americans held hostage in the Middle East. Such assistance is to include the provision of transportation, communications, and other necessary support. As part of these efforts certain foreign materiel and munitions may be provided to the Government of Iran which is taking steps to facilitate the release of the American hostages. All prior actions taken by U.S. Government offi- cials in furtherance of this effort are hereby rati- fied.188 The draft Finding referred to no objective of opening a diplomatic channel with Iran. Yet, this was the justification for the arms deals that the Administration offered after they were exposed in November 1986. Rather, the Finding depicted a straight swap of arms for hostages. Sporkin sent the proposed Finding to Casey on November 26.189 That morning, Clair George phoned North to tell him that Sporkin had deter- mined a Finding was necessary.'" Later that day, after Casey called McFarlane and Regan "to ascertain that indeed this had Presidential approval and to get assurances that a Finding would be so signed," Casey, who agreed a Finding was needed,'" delivered the text to Poindexter.192 Poindexter did not immediately present it to the President. Over the next several days, Casey, McMahon, and George made repeated inquir- ies to Poindexter and other "NSC personnel" and "continuously receive[d] reassurances of the Presi- dent's intent to sign the Finding."93 The President Renews His Approval On the day the CIA sent the proposed Finding to the White House, November 26, the President author- ized continuing the arms-for-hostages transaction.'" Approved For Release 20,11/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 10 North's notes indicate that he was so informed by Poindexter at an hour-long meeting: 0940-1050. Mtg w/JMP. RR directed op[eration] to proceed. If Israelis want to provide diff model, then we will replenish. We will exercise mgt over movmt if yr side cannot do. Must have one of our people in on all activities.195 Later that day, North related to an Israeli official that the Americans wanted to carry on even if the supply of additional arms was needed and even if the weapons had to come from the United States."6 But events not within the control of the American side prevented immediate progress in accord with the re- newed authorization of the President. The Iranians Feel Cheated After midnight on November 26, Allen learned that officials in Iran were upset that the wrong model of HAWKs had been delivered.'" The Iranians also complained through Ghorbanifar that the missiles had Israeli markings, which "the Iranians took to be a prov[o]cation." '98 On November 25 or 26, Ghorbanifar, "on the very edge of hysteria," called NSC consultant Michael Ledeen, and said "the most horrible thing had hap- pened. . . . [T]hese missiles had arrived and they were the wrong missile."199 Ghorbanifar gave Ledeen an urgent message from the Prime Minister of Iran for President Reagan: "We have done everything we said we were going to do, and you are now cheating us, and you must act quickly to remedy this situation." Ledeen conveyed this to Poindexter.20? At this point, North dispatched Secord to Israel. During meetings with Kimche and Schwimmer, Secord quickly deduced the source of Iran's displeas- ure: according to him, Schwimmer and Nimrodi had promised Ghorbanifar that the missiles being provided could shoot down high-flying Soviet reconnaissance planes and Iraqi bombers. The I-HAWK missiles that were provided, like all HAWKs, had no such capabil- ity.2" The Iranians were insisting that "these embar- rassing missiles" be removed from Tehran.202 Money Flows Back and Forth In advance of the HAWK shipment, on November 22, Iran made two transfers?one of $24.72 million, the other of $20 million?to bank accounts in Switzer- land to which Ghorbanifar had access.203 Iran appar- ently understood that the larger transfer was its pur- chase price for 80 HAWKs, at a unit cost of approxi- mately $300,000.204 On November 22, Ghorbanifar transferred to an Israeli intermediary's account $18 million and $6 mil- lion.205 According to an Israeli intermediary, the $18 million was the purchase price paid by Ghorbanifar for 80 HAWKs and the $6 million was to be held in trust by the Israeli intermediary at Ghorbanifar's re- quest. Later, it was to be paid back to Ghorbanifar, with Ghorbanifar intending to keep $1 million for himself and use the remainder for payments to certain Iranians.206 North was aware of the $18 million de- posit. On November 20, he wrote in his notebook: "18M Deposited Covers 80H 225K." 207 Around the time that the Israeli intermediary re- ceived these funds from Ghorbanifar, he transferred $1 million to Lake Resources on North's demand.208 On November 22, the Israeli intermediary paid the Israeli Ministry of Defense $11.2 million for the 80 HAWKs at a price of $140,000 per missile.209 Thus, the Israeli intermediary had received from Ghorbani- far $11.8 million more than his total payments to Israel and Lake Resources. According to the Israeli intermediary as reported in the Israeli Financial Chro- nology, $6 million of this residual was held in trust by the Israeli intermediary for Ghorbanifar and the re- maining $5.8 million was to cover shipping and other expenses for the rest of the operation.2" The Chro- nology indicates that Ledeen and North agreed with the Israeli intermediary that this money be kept in the Israeli intermediary's account for these purposes.211 Israel intended to purchase replacement HAWKs with the sum received from the Israeli intermediary. It was doubtful whether the amount received? $140,000 per missile?would be enough to purchase replacements at standard U.S. prices. On November 19, North and the head of the Israeli Procurement Mission in New York discussed replenishment, and North's notes of the conversation refer to a price of "$220K/230K each for Hawks." 212 However, Poin- dexter had instructed North, and North had told the Israelis, "that we will sell them [Israel]" replacement HAWKs "at a price that they can meet." 213 When the HAWK deal collapsed in late November, the Israelis and Ghorbanifar reversed the flow of funds. On November 27, the Israeli Ministry of De- fense returned $8.17 million to the Israeli interme- diary. This was $3.03 million less than the Israelis had paid to the Ministry of Defense. The difference, ac- cording to the Israeli Chronology, represented the prorated charge for the 18 missiles delivered to Iran at $140,000 per item and a deduction of $510,000 for expenses incurred by the Ministry of Defense in the HAWK transaction and in previous transactions.2" Also on November 27, the Israeli intermediary transferred to Ghorbanifar the sum of $18.6 million. This represented a prorated refund of Iran's purchase price for the 62 HAWKs that had not been deliv- ered.2" Thus, at the end of November 1985, the Israelis held more than $5 million in residuals from the failed transaction, most of which was repaid to Ghorbanifar by the Israeli intermediary and to the Israeli Ministry of Defense after Iran returned 17 HAWKs to Israel in early 1986.2" 187 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 10 Conclusion The shipment of HAWKs to Iran was bad policy, badly planned and badly executed. In contradiction to its frequently emphasized public policy concerning the Iran-Iraq war and nations that support terrorism, the United States had approved the sale of arms to Iran. The United States had agreed to a sequential release of hostages following successive deliveries of weapons; thereafter, this departure from policy became the norm. This precedent, established in No- vember 1985, gave the Iranians reason to believe that the United States would retreat in the future from its demand for the release of hostages prior to any weap- ons shipments. 188 The planning and execution of the operation were also flawed. By the time the U.S. Government became directly involved, official disclaimers by un- witting State Department officials had already com- plicated the foreign relations aspect of the project. And the mission itself jeopardized the security of the CIA airline proprietary's operation.21 7 Finally, the cover story that was used by certain NSC and CIA officials in November 1986 was first employed in November 1985 for purposes of oper- ational security. The President, Secretary Shultz, McFarlane, Poindexter, North, and various CIA offi- cials, however, were fully aware in November 1985 that Israel was shipping HAWKs to Iran?not oil- drilling equipment?with U.S. approval and assistance to obtain the release of the American hostages. Approved For Release 2011/05/25 : CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 10 Chapter 10 1. North Notebook, 10/30/85, Ex. CG-40, Hearings, 100- 11. 2. Id. 3. Id. 4. McFarlane Calendar, 11/8/85, MF000856-57; Ledeen Dep., 6/22/87, at 231. 5. McFarlane Test., Hearings, 100-2, at 97. 6. Ledeen Dep., 6/22/87, at 231. 7. North Calendar, 11/14/85, N329. 8. North Notes, 11/14/85, Ex. OLN-69A, Hearings, 100-7, Part III. 9. North Notes, 11/19/85, Ex. OLN-69A, Hearings, 100-7, Part III. 10. North Test., Executive Session, 7/9/87, at 6-10. 11. McMahon, Memorandum for the Record, 11/15/85, C4510. 12. McMahon Dep., 6/1/87, at 90. 13. Id. 14. McFarlane Test., Hearings, 100-2, at 97, 100. Accord- ing to the Israeli Historical Chronology, Rabin did not discuss with McFarlane during this visit that Israel was planning another arms shipment to Iran. 15. Id. at 51-52, 100. 16. Israeli Historical Chronology. According to the Israe- lis, in a telephone conversation on November 21, Rabin stressed to McFarlane that if the Iranian project were not viewed as a joint U.S.-Israel operation, Israel would not undertake it alone. Id. 17. Israeli Historical Chronology; see also McFarlane Test., Hearings, 100-2, at 97. 18. Regan Test., Hearings, 100-10, at 12. 19. McFarlane Test., Hearings, 100-2, at 51-52. 20. McFarlane Tower Int., 2/19/87, at 41. 21. North Notebook, 11/17/85, Ex. OLN-69A, Hearings, 100-7, Part III. 22. North Notebook, 11/18/87, Ex. OLN-69A, Hearings, 100-7, Part III. 23. North Notebook, 11/18/85, Ex. OLN-69A, Hearings, 100-7, Part III. According to the Israelis, Israel approved only a shipment of 80 HAWKs. Israeli Historical Chronolo- gy. 24. Israeli Financial Chronology. On November 19, North and the head of the Israeli Procurement Mission in New York discussed a sale by the United States to Israel of 600 of the Pentagon's most advanced version of the HAWK missile, presumably to replenish a similar number of HAWKs to be shipped by Israel to Iran. North Notebook, 11/19/85, Ex. OLN-69A, Hearings, 100-7, Part III. 25. Airline Proprietary Manager Memorandum, 11/21/85, C9706; Airline Proprietary Manager Dep., 6/11/87, at 71- 74. 26. Airline Proprietary Manager Memorandum, 11/21/85, C9706; Airline Proprietary Manager Memorandum, 11/30/ 85, C6522-C6529, at 6; Airline Proprietary Manager Dep., 6/11/87, at 71. 27. Airline Proprietary Manager Memorandum, 11/21/85, C9706. 28. Airline Proprietary Manager Dep. at 80; Airline Pro- prietary Manager Memorandum, 11/30/85, C6522-C6529 at 1, 6. 29. PROF Note from North to Poindexter, 11/20/85, Ex. JMP-17, Hearings, 100-8. 30. North Notebook, 11/20/85, Ex. JMP-84, Hearings, 100-8. 31. Id. 32. Id. 33. North Test., Hearings, 100-7, Part I, at 51, 59; North Notebook, 11/17/85, Ex. OLN-69A, Hearings, 100-7, Part 34. Id. 35. Id. The Arms Export Control Act bars the President from authorizing a transfer of any "major defense equip- ment valued (in terms of its original acquisition cost) at $14,000,000 or more" unless he submits an unclassified report on the sale to the Speaker of the House and the Senate Committee on Foreign Relations. 22 U.S.C. Section 2753(d). 36. North Test., Hearings, 100-7, Part I, at 51. 37. Powell Dep., 6/19/87, at 15-19. 38. Gaffney Test., Hearings, 100-6, at 133-39; Ex. DOD 1, 3, 5, Hearings, 100-6. Gaffney's notes of November 18-19 also indicate that the United States had shipped 100 HAWKs to Israel 2 weeks previously. In fact, on Novem- ber 21, 1985, an Israeli ship, Zim Houston, took on 100 HAWKs and other weapons in New Jersey and sailed for Israel. Those HAWKs were transferred pursuant to a Letter of Offer and Acceptance between the United States and Israel entered into in 1982. (Validated Shipper's Export Declaration and attachments, 11/6/85, U.S. Customs, N.Y., N.Y. S2045659). 39. Gaffney Test., Hearings, 100-6, at 112. 40. Powell Dep., 6/19/87, at 32-33. 41. Weinberger Dep., 6/17/87, at 22-23, Ex. CWW-9. 42. Ex. DOD-5, Hearings, 100-6. Gaffney's paper provid- ed as follows: The modalities for sale to Iran present formida- ble difficulties: Iran is not currently certified for sales, including indirectly as a third country, per Sec. 3 of the AECA. Congress must be notified of all sales of $14 million or more, whether it is a direct sale or indirect to a third country. The notice must be unclassified (except for some details), and the sale cannot take place until 30 days after the notice. The 30 days can be waived for direct sales, but the third country transfer has no such provision, and notice must still be given in any case. Thus, even if the missiles were laundered through Israel, Congress would have to be noti- fied. It is conceivable that the sale could be broken into 3 or 4 packages, in order to evade Congres- sional notice. While there is no explicit injunction against splitting up such a sale (subject to check . . .), the spirit and the practice of the law is against that, and all Administrations have observed this scrupulously. Ex. DOD-5, Hearings, 100-6. 43. Gaffney Test., Hearings, 100-6, at 61-64. 44. McFarlane Test., Hearings, 100-2 at 102; Regan Test., Hearings, 100-10, at 13. 189 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 I I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 10 45. In retrospect, McFarlane quantified his hope for re- lease of the hostages at no more than a 20 percent probabili- ty. McFarlane Test., Hearings, 100-2, at 102. Even this would have been too optimistic. A CIA polygraph test of Ghorbanifar 2 months later "indicated that he knew ahead of time that the hostages would not be released and deliber- ately tried to deceive us. . . ." Memorandum for the Record, Subject: Manucher Ghorbanifar Polygraph Exami- nation, C6090. 46. McFarlane Test., Hearings, 100-2, at 102. 47. Regan Test., Hearings, 100-10, at 13. 48. McFarlane Test., Hearings, 100-2, at 261. 49. McFarlane Test., Hearings, 100-2, at 55. This meeting occurred on December 7. 50. McFarlane Test., Hearings, 100-2, at 102. 51. Shultz Test., Hearings, 100-9, at 28. 52. Id. at 28; Charles Hill Notes, 11/18/85, Cooper Ex. CJC-17 , Hearings, 100-6. 53. Shultz Test., Hearings, 100-9, at 28-29. 54. McFarlane Test., Hearings, 100-2, at 102. 55. Shultz Test., Hearings, 100-9, at 29. 56. North told Poindexter a few days later that direct flights would "compromise origins and risk eventual uncov- ering of many operational details." North PROF message to Poindexter, 11/22/85 (19:27:15) Ex. OLN-45, Hearings, 100- 7, Part III. Historically, weapons shipments to Iran from Israel during the last decade had been disguised by moving them through other countries. A purpose for disguising such flights is to prevent the Iraqis from intercepting them. Airline Proprietary Manager Dep., 6/11/87, at 24-27. 57. CIA Air Proprietary Pilot Dep., 6/25/87, at 77. 58. North Test., Hearings, 100-7, Part I, at 51. 59. Secord Dep., 6/10/87, at 85-86. 60. Secord Test., Hearings, 100-1, at 79-80. 61. Letter from McFarlane to Secord, 11/19/85, Ex. 1, Hearings, 100-1, at 415. 62. McFarlane Test., Hearings, 100-2, at 209. 63. Secord Dep., 6/10/87, at 83-84. 64. Secord Test., Hearings, 100-1, at 80. 65. North Notebook, 11/18/85, Ex. OLN-69A, Hearings, 100-7, Part III. 66. North to Poindexter PROF Note, 11/22/85, (19:27:15) Ex. OLN-45, Hearings, 100-7, Part III. 67. North Test., Hearings, 100-7, Part I, at 58; Panamani- an Public Instrument, 5/14/85, H679. 68. CSF Ledger for Lake Resources, H986. 69. Secord Test., Hearings, 100-1, at 83, 87-88; North Test., Hearings, 100-7, Part I, at 54. 70. Israeli Historical Chronology. 71. Secord Test., Hearings, 100-1, at 80; Secord Dep., 6/ 10/87, at 89. 72. Secord Dep., 6/10/87, at 87-88; Secord Test., Hear- ings, 100-1, at 88. 73. On November 22, Secord arranged a charter for sev- eral fights between Tel Aviv and Country 15 at a total cost of $60,000, plus fuel, landing, and handling costs. These flights never occurred. Airline Proprietary Manager's Memorandum Re: Mission TLV/THR, 11/30/85, C6522; Airline Proprietary Manager Dep., 6/11/87, at 65-66. Secord ultimately paid $127,700 to the CIA airline proprie- tary, which flew two planes to Tel Aviv and one to Tehran via Country 17. Airline Proprietary Receipt Records, 11/ 29/85 and 12/3/85, C6567 and C6573. 74. DCM Dep., 5/27/87, at 24-25. 190 75. After the flight to Tehran, Secord?who was then in Paris?remarked to the manager of the proprietary airline that he had "to go back to [the capital of Country 15] to save $225,000." Airline Proprietary Manager Dep., 6/11/87, at 148, 171. An entry in North's notebook states "Dick Copp?Spent 750K in [Country 15]." North Notebook, 11/ 24/85, Ex. OLN-69A, Hearings, 100-7, Part III. 76. Financial Chronology, Accounting Workpaper. In ad- dition to the $127,700 paid to the CIA air proprietary, Secord spent $21,983 on chartering a private jet to attend meetings related to the operation. 77. North Test., Hearings, 100-7, Part I, at 56. 78. Secord Dep., 6/10/87, at 88-89. 79. Secord Dep., 6/10/87, at 99. 80. CIA cables after the operation was over explained that these were the reasons for the poor reception. CIA Cables, capital of Country 15 to Headquarters, 11/26/85 and 11/27/85, C5794-95 and C5796-97. 81. DCM Dep., 5/27/87, at 24-25. 82. Cable from American Embassy in Country 15 to De- partment of State Headquarters, 11/22/85, S000304. 83. CIA Cable, capital of Country 15 to Headquarters, 11/23/85, C5758-59. 84. Id. 85. PROF Note, North to Poindexter, 11/20/85, 21:27:39, Ex. JMP-17, Hearings, 100-8. 85a. North Notebook: 11/21/85, Ex. OLN-69A, Hearings, 100-7, Part III. 86. North Notebook, 11/21/85, Ex. OLN-69A, Hearings, 100-7, Part III; Clarridge Dep., 4/27/87, at 7-8. 87. North Notebook, 11/21/85, Ex. OLN-69A, Hearings, 100-7, Part III. 88. CIA Cables, Headquarters to capital of Country 15, 11/22/85, Ex. DRC-1-1 and 1-2, Hearings, 100-11. 89. CIA Cable, capital of Country 15 to Headquarters, 11/22/85, Ex. DRC-1-4, Hearings, 100-9. 90. Oakley Affidavit, 7/2/87, Ex. GPS-55., Hearings, 100- 9. 91. CIA Cable, Headquarters to capital of the Country 15, 11/22/85, Ex. DRC1-5, Hearings, 100-11. 92. Letter from John A. Rizzo to Paul Barbadoro, 7/17/ 87, C10123. 93. Shultz Tower Test., 1/22/87, at 28. 94. Shultz Test., Hearings, 100-9, at 29. 95. CIA Cable, Headquarters to capital of Country 15, 11/22/85, Ex. DRC-1-6, Hearings, 100-11. 96. CIA Cable, capital of Country 15 to Headquarters, 11/22/85, Ex. DRC 1-7, Hearings, 100-11. 97. Id. 98. CIA Cable, capital of Country 15 to Headquarters, 11/22/85, Ex. DRC-1-8, Hearings, 100-11. 99. North Notebook, 11/22/85 (incorrectly dated 11/21/ 85), Ex. OLN-69A, Hearings, 100-7, Part III. 100. PROF Note, North to Poindexter, 11/22/85 (19:27:15), Ex. OLN-45, Hearings, 100-7, Part III. 101. CIA air branch chief Dep., 6/19/87, at 19-22. 102. Handwritten Notes of CIA Airline Proprietary Project Officer, 11/22/85, C6535-C6538. 103. Clarridge Dep., 4/27/87, at 59-60. 104. Juchniewicz Dep., 4/23/87, at 8-19. 105. CIA air branch chief Dep., 6/19/87, at 22-31. 106. Airline Proprietary Project Officer Dep., 6/12/87, at 69 Approved For Release 2011/05/25 : CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 10 107. North had incorrectly reported to Poindexter two days earlier that this matter had already been taken care of. North PROF message to Poindexter, 11/20/85 (21:27:39), Ex. JMP 17, Hearings, 100-8. 108. CIA Cable, Headquarters to capital of Country 16, 11/22/85, Ex. OLN-61, Hearings, 100-7, Part III. 109. PROF Note, North to Poindexter, 11/22/85 (19:27:15), Ex. OLN-45, Hearings, 100-7, Part III. 110. North Notebook, 11/22/85, Ex. OLN-69A, Hearings, 100-7, Part III. 111. PROF Note, North to Poindexter, 11/22/85 (19:27:15), Ex. OLN-45, Hearings, 100-7, Part III. 113. CIA Cable, capital of Country 15 to Headquarters, 11/23/85, Ex. DRC 1-19, Hearings, 100-11. 114. CIA Cable, capital of Country 15 to Headquarters, 11/23/85, C5742. 115. North Test., Hearings, 100-7, Part I, at 60. 116. CIA air branch chief Dep., 6/19/87, at 21-25. 117. The cable routings reflect that the copies of cables were sent to office of the Directorate of Operations. 118. Memorandum for the Record, Subject: NSC Mission, John N. McMahon, 12/7/85, Ex. DRC-12, Hearings, 100-11. 119. McMahon Dep., 6/1/87, at 104. 120. Allen Dep., 4/21/87, at 157-61. 121. North Test., Hearings, 100-7, Part I, at 38. 122. Regan Test., Hearings, 100-10, at 24. 123. Secord Dep., 6/10/87, at 100-01. 124. North Test., Hearings, 100-7, Part I, at 38. 125. Allen Dep., 4/21/87, at 161, 165, 176-77. 126. CIA Chief in Country 15 Dep., 4/13/87, at 19-21. 127. CIA Cable, capital of Country 15 to Headquarters, 11/23/85, Ex. DRC 1-19, Hearings, 100-11. 128. CIA Chief in Country 15 Dep., 4/13/87, at 25-28. 129. Deputy CIA Chief in Country 15 Dep., 7/15/87, at 30-35. In addition, CIA records confirm that a cable of which no copy can be found was sent at this time and assigned a unique file number. 130. DCM Dep., 5/27/87, at 34-37. 131. CIA Communicator Dep., 7/13/87, at 66-68. 132. North Test., Hearings, 100-7, Part I, at 63, 70. 133. Allen Dep., 7/2/87, at 674. 134. Id. at 676. 135. North Test., Hearings, 100-7, Part I, at 38; Allen Dep., 4/21/87, at 167-68; Clarridge Test., Hearings, 100-11, at 7, 20-21. 136. Clarridge Test., Hearings, 100-11, at 8, 20-21. 137. The first cable that the CIA Chief in Country 15 sent to Headquarters on this matter stated it was a reply to Cable 625103. CIA Cable, capital of Country 15 to Head- quarters, 11/22/85, Ex. DRC 1-3, Hearings, 100-11. No cable having this number was located. 138. The Committees have been informed that copies of privacy channel cables are ordinarily sent to the office of the Deputy Director for Operations. CIA officials have searched for the missing cables, and they were unable to locate them or account for the fact that they are missing. The Committees have also been informed that officers as- signed to the office of the Deputy Director for Operations do not have a recollection of seeing the missing cables. 139. PROF Note, North to Poindexter, 11/22/85 (19:27:15), Ex. OLN-45, Hearings, 100-7, Part III; CIA Cable from capital of Country 15 to Headquarters, 11/26/ 85, C5794-95. 140. DCM Dep., 5/27/87, at 10, 20-21; CIA Chief in Country 15 Dep., 4/13/87, at 16, 22. 141. CIA Cable from capital of Country 15 to Headquar- ters, 11/26/85, C5794-95. 142. DCM Dep., 5/27/87, at 22-24. 143. Id. at 24; Diplomatic Note from U.S. Embassy in Country 15 to Ministry of Foreign Affairs, 11/23/85, Ex. GPS-14, Hearings, 100-9. 144. CIA Cable, Headquarters to capital of Country 15, 11/23/85, Ex. DRC 1-29, Hearings, 100-11. 145. CIA Cable, Headquarters to capital of Country 18, 11/23/85, Ex. OLN-62, Hearings, 100-7, Part III. 146. Airline Proprietary Pilot Dep., 6/25/87, at 49-50, 64, 141; Airline Proprietary Manager Dep., 6/11/87, at 108-09. In fact, the crew immediately surmised it was a large arma- ment cargo which the airline proprietary had learned a few days earlier was being moved from the capital of Country 15 to Iran under a cover story that it was medicine. Airline Proprietary Manager Dep., 6/11/87, at 71-77. Two days later, the proprietary's project officer told the CIA's air branch chief that the crew believed that the cargo was missiles and had joked that "we should be firing them at Iran rather than flying them into Iran." Airline Proprietary Project Officer Dep., 6/12/87, at 48-49. The air branch chief testified that he did not know the cargo was missiles until months later. CIA air branch chief Dep., 6/19/87, at 43-44. 147. Airline Proprietary Manager Memorandum, 11/30/ 85, Re: Mission TLV/THR, C6523-24 (hereinafter "Airline Proprietary Manager's Report"), at 2-3. The Americans de- cided it was too dangerous to fly the other plane into Iran because it was registered in the United States. The plane which was used was registered in another western hemi- sphere country. Schwimmer argued the U.S. plane could be used safely by painting a false registration on its tail or by flying it in a formation with the other plane so as to dis- guise it from radar operators. The airline proprietary man- ager reported to CIA that Schwimmer "must be crazy" and rejected these proposals. Id. at 3; Airline Proprietary Project Officer Dep., 6/12/87, at 37-38; Airline Proprietary Manager Dep., 6/11/87, at 116-19. 148. Airline Proprietary Pilot Dep., 6/25/87, at 40-42, 48. 149. CIA Cable, Headquarters to capital of Country 16, 11/23/85, C5749. 150. CIA Cable, capital of Country 16 to Headquarters, 11/23/85, C5759. 151. CIA Cable, Headquarters to capital of Country 16, 11/24/85, C5763; CIA Cable, Headquarters to capital of Country 16, 11/24/85, C5764. 152. Airline Proprietary Manager Dep., 6/11/87, at 138- 39. 153. CIA Cable, capital of Country 16 to Headquarters, 11/24/85, C5767. 154. Airline Proprietary Pilot Dep., 6/25/87, at 56-57, 70 71; Airline Proprietary Manager's Report at 4. 155. Airline Proprietary Project Officer Dep., 6/12/87, 41-42. 156. Airline Proprietary Manager's Report, at 4. 157. CIA Cable, capital of Country 16 to Headquarters, 11/25/85, C5774. 158. CIA Cable, capital of Country 16 to Headquarters, 11/25/85, C5775. 159. The pilot denied that he had any serious problems with the overflight of Country 16 and insisted he did not 191 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 11 . 1 I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 10 and would never tell ground controllers he was carrying arms. Airline Proprietary Pilot Dep., 6/25/87, at 78-79. 160. Airline Proprietary Pilot Dep., 6/25/87, at 96. 161. Airline Proprietary Manager Report, at 4. 162. Airline Proprietary Pilot Dep., 6/25/87, at 99-100. 163. Airline Proprietary Manager's Report at 6; Airline Proprietary Pilot Dep., 6/25/87, at 121. According to the Israeli Historical Chronology, the Iranians were displeased with the missiles prior to the departure of the plane, and the Iranian Prime Minister impounded the aircraft, crew, and missiles. According to this account, an Israeli intermediary personally interceded to persuade the Iranians to release the crew and plane. Israeli Historical Chronology. 164. Airline Proprietary Pilot Dep., 6/25/87, at 116. The pilot, believing he probably would be back the next day, ordered a carpet from a rug merchant and arranged to have it put on what he thought would be the next flight. Id., 113- 14. 165. Id. at 122-23. 166. Airline Proprietary Receipt Records, 11/29/85 and 12/3/85, CIIN 2561 and 2567. 167. Poindexter Test., Hearings, 100-8, at 124; Poindexter Notes, 11/25/85, Ex. JMP-19, Hearings, 100-8. 168. McMahon Dep., 6/1/87, at 95. 168?. Id., at 97-101. 169. Id., at 95-96, 103. 170. North Notebook, 11/25/85, Ex. OLN-69A, Hearings, 100-7, Part III. 171. Memorandum for the Record, 12/7/85, John N. McMahon, Ex. DRC-12, Hearings, 100-11. 172. McMahon Dep., 6/1/87, at 96. 173. Sporkin Test., Hearings, 100-6, at 116-19. 174. Group Chief Interview Report, 6/1/87. 175. Dietel Dep., 6/5/87, at 4. 176. CIA air branch subordinate Dep., 6/5/87, at 16, 134- 46; CIA air branch Interview Report, 6/1/87. 177. Group Chief Interview Report, 6/1/87. 178. Sporkin Test., Senate Select Committee on Intelli- gence, 12/3/86, at 9. 179. Dietel Dep., 6/5/87, at 6. 180. Sporkin Test., Hearings, 100-6, at 128. 181. Sporkin Test., Hearings, 100-6, at 118. 182. CIA air branch subordinate Dep., 6/5/87, at 142-43. 183. Makowka Dep., 5/15/87, at 25-28. 184. Transcription of Sporkin's secretary's shorthand notes of 11/25/85, Ex. SS-1, Hearings, 100-6; Sporkin Test., Hearings, 100-6, at 13-14. 185. Makowka Dep., 5/15/87, at 31-32. 186. McMahon Memorandum for the Record, Ex. DRC- 12, Hearings, 100-11. 187. Makowka Dep., 5/15/87, at 33. 188. Finding, undated, CIIN 103. 189. Note for the Director from Stanley Sporkin, 11/26/ 85, Ex. SS-2, Hearings, 100-6. 190. North Notebook, 11/26/85 (misdated 10/26/85) Ex. OLN-47, Hearings, 100-7, Part III. North had already heard through Clarridge of McMahon's angry reaction. Just after midnight on November 26, North wrote: "Call from Clar- ridge?summoned in by Clair [George]/McMahon?Vhis 192 is criminal.'?Told Agency was 'freight forwarder' by Dewey." North Notebook, 11/26/85 (misdated 10/25/85). Clarridge testified: "I specifically don't remember this tele- phone call and it [North's note] is inaccurate." Clarridge Test., Hearings, 100-11, at 19. 191. McMahon Dep., 6/1/87, at 122. 192. McMahon Memorandum for the Record, Ex. DRC- 12, Hearings, 100-11; Memorandum from Casey to Poin- dexter, 11/26/85, Ex. JMP-18, Hearings, 100-8. 193. McMahon Memorandum for the Record, Ex. DRC- 12, Hearings, 100-11; McMahon Dep., 6/1/87, at 107-08. 194. North Test., Hearings, 100-7, Part I, at 66. 195. North Notebook, 11/26/85, Ex. OLN-69A, Hearings, 100-7, Part III. 196. Israeli Historical Chronology. 197. Allen Dep., 4/21/87, at 168. 198. Ledeen Dep., 3/11/85, at 95. 199. Ledeen Dep., 6/19/87, at 100. 200. Ledeen Dep., 3/11/87, at 86-87. 201. According to the Israeli Historical Chronology, the promises regarding the capability of the missiles were made by Ghorbanifar, not the Israelis. 202. Secord Test., Hearings, 100-1, at 83-85. 203. Tower Review Board Report at B-179. On Novem- ber 25, Iran made a third transfer of $20 million (Id.) The purpose of the two $20 million transfers is unclear, but $40 million is the amount which Ghorbanifar had available for proposed weapons purchases in late 1985 and early 1986. 204. Israeli Financial Chronology. 205. Israeli Financial Chronology. On November 20, North reported to Poindexter that "$18M in payment for the first 80 has been deposited in the appropriate account." (North PROF Note to Poindexter, 11/20/85 (21:27:39)) 206. Israeli Financial Chronology. 207. North Notebook, 11/20/85, Ex. JMP-84, Hearings, 100-8. 208. Israeli Financial Chronology. The $1 million transfer actually preceded the intermediary's receipt of funds from Ghorbanifar. 209. Id. 210. Id. 211. Id. 212. North Notebook, 11/19/85, Ex. OLN-69A, Hearings, 100-7, Part III. 213. PROF Note, North to Poindexter, 11/20/85 (21:27:39), Ex. JMP-17, Hearings, 100-8. 214. Israeli Financial Chronology. 215. Israeli Financial Chronology. The Israeli interme- diary claims that during this same period he paid an addi- tional $700,000 to various other Iranians and $88,752 to defray expenses incurred during the operation. Israeli Finan- cial Chronology. 216. Id. 217. Airline Proprietary Project Officer Dep., 6/12/87, at 102-05. The manager of the airline was furious: "I was really upset that I was put in this situation where I risk the clandestine layout of the whole company just for a stupid flight like that." Airline Proprietary Manager Dep., 6/11/ 87, at 46. Approved For Release 20,11/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 11 Clearing Hurdles: The President Approves A New Plan The difficulties with the November 1985 HAWK shipment and the failure to secure the release of more hostages did not end the arms-to-Iran initiative. Having already traveled down the path of bargaining for the hostages' lives, the President and his NSC staff were reluctant to turn back. North quickly began to plan another arms deal, and the President signed the Finding that Stanley Sporkin prepared immediately after the HAWK shipment. North claimed repeatedly in December that reversing course would cause the radical captors to kill the hostages. North had another motivation for continuing the arms deals. As he explained to Israeli officials in early December, he wanted to divert profits to benefit the Contras he was supporting in Nicaragua. In December 1985 and January 1986, the Secretar- ies of State and Defense argued aggressively to the President against trying to trade arms for hostages. Among other things, they asserted that this initiative was illegal and contrary to longstanding U.S. public policy against providing arms to terrorist states and bargaining with terrorists. Secretary Weinberger and Secretary Shultz' argu- ments, together with a first-hand assessment by McFarlane that the Iranian intermediary was the "most despicable man" he had ever encountered, caused the initiative to lose momentum in December. However, in early January the Israelis approached Poindexter?who had replaced McFarlane as National Security Adviser?with a new plan that Poindexter and North quickly embraced. The President decided to go forward. He signed an expanded Finding and directed that the covert activity not be reported to Congress. Unlike the 1985 transactions, the President decided that the weapons for Iran would now come directly from U.S. stocks. The NSC staff took charge of the initiative, relegating the Israelis to a secondary role. Secord was designated as the agent of the U.S. Gov- ernment in the future transactions. This created the opportunity to generate profits on the arms sales that the Enterprise could use for its other covert projects?including support of the Contras. The Players Change John Poindexter?soon to be elevated to National Se- curity Adviser?and Oliver North met on November 27, 1985, to devise a new plan. Poindexter directed North to have Richard Secord or Israeli official David Kimche deliver a message to soothe the Irani- ans' feeling of having been cheated because the HAWKs delivered three days earlier did not meet their expectation. North and Poindexter also discussed a "change of team" on the operation. North's notes of the meeting indicate that the United States was pre- pared to deliver 120 items (probably a new version of HAWKs) in exchange for all the hostages after the first delivery and a commitment by Iran of no future terrorism.' The change in team included removing Michael Ledeen, the NSC terrorism consultant, as an interme- diary. When Ledeen gave Poindexter the message that the Iranians felt cheated, Poindexter told him, "We're going to take you off this thing for awhile because we need somebody with more technical ex- pertise."2 This was the last time Ledeen spoke to Poindexter on the Iran initiative, "since from the time [Poindexter] became National Security Adviser, [Ledeen] was unable to get an appointment with him." 3 In late November, Secord, Iranian go-between Ghorbanifar, Kimche, and Israeli arms dealers Al Schwimmer and Yaacov Nimrodi met in Paris.4 Ac- cording to notes North took when Secord briefed him on the meeting, Ghorbanifar was "angry," apparently because the Iranians wanted "something to deal w[ith] Soviet Recon[naisancer ?such as Phoenix or Har- poon missiles?rather than the HAWKs that were delivered.5 Ghorbanifar advanced a set of proposals that "blatantly" called for the swapping of arms for hostages.6 The first proposal, as later related to North by Secord, provided for a phased exchange of 3200 TOW missiles for hostages: 600 TOWs = 1 release H ? 6 hrs later = 2000 TOWs = 3 release H+ 23 hrs = 600 TOWs -= 1 release7 The other options were variations in which other armaments?such as Maverick air-to-surface missiles, 193 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 ....1 .. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 11 Dragon surface-to-surface missiles, Improved-HAWK missiles, spares for F-4 air planes, ground artillery, and bombs?would be substituted for some or all of the TOWs. Ghorbanifar's proposal also contemplated arms deliveries beyond the initial swap.9 The Paris group agreed to meet with U.S. representatives in London on December 6 to pursue these proposals.9 North Looks for Weapons During the first few days of December, North had separate meetings with Assistant Secretary of Defense Richard L. Armitage and Israeli Ministry of Defense officials.' ? The purpose of these sessions was to estab- lish liaison between the Pentagon and the Israelis and to identify methods of obtaining weapons to ship to the Iranians or to replenish Israeli stocks following Israeli shipments." One of the Israeli officials met Armitage at the Pentagon on December 2." Armi- tage testified that he could not recall whether he met with the official or what they discussed." Armitage testified that he warned North of resistance to the plan within the Defense Department, noting that Sec- retary Weinberger would be "appalled" if he knew North was dealing with Iranians." Nonetheless, after this meeting, Armitage asked Dr. Henry Gaffney, Di- rector of Plans, Defense Security Assistance Agency (DSAA), to prepare a paper on I-HAWKs and I- TOWs and directed Glenn A. Rudd, Deputy Director of DSAA, to prepare a paper on the legal methods for transferring TOW and HAWK missiles to Iran." Rudd's two-page paper, entitled "Possibility for Leaks," discussed legal methods of selling HAWKs and TOWs to Iran and outlined the inherent risks of Congressional disclosure or discovery by the security assistance community. Rudd concluded there was no way to transfer the weapons, whether directly to Iran or through Israel to Iran, under the Arms Export Control Act without notifying Congress; nor, he said, was there any way to prevent the security assistance community of bureaucrats, diplomats, and arms manu- facturers and dealers from learning of the transfers." When he received Rudd's paper, Armitage instruct- ed Rudd to treat the matter as very confidential and destroy all drafts. Armitage kept the sole copy in his personal office safe.'7 When Armitage briefed Wein- berger prior to a December 7, 1985, meeting at the White House, they reviewed "all the arguments that I [Armitage] had laid out, plus the legal arguments which I had mentioned in passing, and that he had absorbed." '8* *Weinberger did not recall such a meeting, but did not dispute that it had occurred. Weinberger Test., Hearings, 100-10, at 97. In any event, at the White House meeting on December 7, he was well-prepared to attack the plan on a variety of legal and policy grounds. 194 North Lays Out A Plan On December 4, North wrote a PROF message to Poindexter setting out the current situation and pro- posing a new arms-for-hostages transaction. He de- scribed the "extraordinary distrust" the Iranians de- veloped because Schwimmer and Ledeen had prom- ised that the missiles shipped in November could fly high enough to stop Soviet reconnaissance flights. He said, "None of us [Kimche, Meron, Secord] have any illusions about the cast of characters we are dealing with on the other side. They are a primitive, unso- phisticated group who are extraordinarily distrustful of the West in general and the Israelis/U.S. in particu- lar."19 While acknowledging "a high degree of risk" in continuing the operation, North emphasized, "we are now so far down the road that stopping what has been started could have even more serious repercus- sions." He exhorted Poindexter to press on in a way that suggested the United States was already subject to Iranian extortion: If we do not at least make one more try at this point, we stand a good chance of condemning some or all [of the hostages] to death and a renewed wave of Islamic Jihad terrorism. While the risks of proceeding are significant, the risks of not trying one last time are even greater.2? North outlined the proposal slated for the upcom- ing meeting in London. He said the "package" would comprise deliveries from Israel of "50 I HAWKs w/ PIP (product improvement package) and 3300 basic TOWs" and reported that the Iranians had already deposited $41 million to pay for these items and that this sum was "now under our control."2' The sched- ule that North laid out made plain that this would be an unadulterated swap of arms for hostages: H-hr: 1 707 w/300 TOWs = 1 AMCIT H+ 10hrs: 1 707 (same A/C) w/300 TOWs = 1 AMCIT H+16hrs: 1 747 w/50 HAWKs & 400 TOWS =- 2 AMCITs H+20hrs: 1 707 w/300 TOWs = 1 AMCIT H+24hrs: 1 747 w/2000 TOWs = French Hos- tage22 As it had been previously, the schedule was set up so that the Americans had to deliver weapons before the Iranians would produce any hostages. North also reported to Poindexter that "replenish- ing Israeli stocks" is "probably the most delicate issue." He proposed that the Israelis purchase replace- ments with cash, rather than with Foreign Military Sales credits. However, he ignored the legal question about third-country transfers under the Arms Export Control Act. Lastly, North told Poindexter that be- Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 11 sides themselves, only National Security Adviser Robert McFarlane and Duane Clarridge of the CIA had a complete understanding of the full plan.23 Clar- ridge has denied that he and North discussed this plan, and said that the appearance of his name in North's PROF message is probably due to North's "tendency to use my name with McFarlane and Poin- dexter because if I said it was a good idea, then they tended to think it was a good idea."24 The following day, North put the proposal into an unsigned, unaddressed memorandum. This memoran- dum made clear that all 3,300 TOWs and all 50 Im- proved HAWK missiles would come from Israel's "prepositioned war reserve."25 North's memorandum proposed not only that Congress not be notified about the operation and replenishment, but also that there be a cover story to explain why Israel needed to buy weapons: The Israelis have identified a means of transfer- ring the Iranian provided funds to an Israeli De- fense Force (IDF) account, which will be used for purchasing items not necessarily covered by FMS. They will have to purchase the replenish- ment items from the U.S. in FMS transaction from U.S. stocks. Both the number of weapons and the size of the cash transfer could draw at- tention. If a single transaction is more than $14.9 M, we would normally have to notify Con- gress. The Israelis are prepared to justify the large quantity and urgency based on damage caused to the equipment in storage.26 Although the Finding CIA Counsel Stanley Sporkin drafted in November contemplated delayed Congres- sional notification, North's proposal represented an entirely different approach: structuring the transaction so as to evade Congressional reporting altogether. As North was putting together his plan for a new arms-for-hostages deal, the CIA stood by to provide support for more flights into Iran. In the days after the HAWK shipment, Clarridge and CIA stations in Countries 16 and 18 exchanged numerous cables relat- ing to clearances for anticipated flights from Israel to Iran transiting at Country 18 and overflying Country 16.27 On November 27, Clarridge told the stations that the "operation is still on but we have encoun- tered delays" and that "whatever was supposed to happen after the first sortie did not happen and we are regrouping." 2 8 On December 3, he reported to them: "We are still regrouping. Key meetings of prin- cipals will take place this weekend with earliest possi- ble aircraft deployments sometime mid to late week of December 8."29 Clarridge left the United States on other business in early December. However, before leaving he told his deputy to expect another flight to Iran on a project being run by the NSC for which the CIA would be asked to obtain clearances.30 (For an organizational chart of the CIA in 1985, see Figure 11-1.) The President Signs a Finding McFarlane returned to his office on December 3 for the first time after the Geneva summit. He had al- ready told the President of his decision to resign, and he tendered his resignation the following day." On December 3 and 4, McFarlane had several lengthy meetings with Poindexter. However, he does not recall any discussion of the status of the covert action Finding3 2?which CIA Director William Casey had delivered to Poindexter with a recommendation that the President sign it and about which McMahon had been anxiously pestering Poindexter for days.33 On December 5, in one of his first acts as National Security Adviser, Poindexter presented the Finding to the President at his daily national security briefing. The President signed it.34 Poindexter's notes of his daily briefing of the President refer to the Finding.35 Chief of Staff Donald Regan was present at this brief- ing, but testified that he has no recollection of the Finding or the President's signing it: I have racked my brains since I've read about it in the press, that you have had testimony to that effect. I've checked with my members of the staff, the White House staff who were working with me at the time, as to whether they remem- ber it. No one can remember seeing that docu- ment.3 6 Poindexter testified that he was never happy with the Finding because it failed to mention any objec- tives other than trading arms for hostages. He said he submitted it to the President without the staffing and review that normally accompanies a Finding. In fact, other than Casey and McMahon?who both urged that the Finding be signed?Poindexter did not recall discussing it with anyone else.37* *McMahon recalled that Sporkin told him he was going to con- sult with the Department of Justice and the White House counsel before finalizing the Finding. (McMahon Dep., 9/2/87, at 52) North testified that he believed that Meese had "seen and ap- proved" this Finding before it was signed. However, he based this not on personal knowledge but on his understanding that "[alit Findings are reviewed by the Attorney General." (North Test., Hearings, 100-7, Part I, at 71-72) Both Poindexter and Meese testi- fied that Meese was not consulted. (Poindexter Test., Hearings, 100- 8, at 125; Meese Test., Hearings, 100-9, at 8-9). 195 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 CD o) Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 National Intelligence Council General Counsel Inspector General Office of Legislative Liaison 1 Figure 11-1. Organization Chart of the Central Intelligence Agency. DIRECTOR OF CENTRAL INTELLIGENCE I DEPUTY DIRECTOR OF CENTRAL INTELLIGENCE 1 EXECUTIVE DIRECTOR Public Affairs Office Comptroller DIRECTOR OF INTELLIGENCE COMMUNITY STAFF DEPUTY DIRECTOR FOR OPERATIONS I DEPUTY DIRECTOR FOR SCIENCE &TECHNOLOGY I Office of Research & Development Office of Development & Engineering Foreign Broadcast Information Service Office of SIGINT Operations Office of 4_ Technical Service ,_1National Photographic Interpretation Center April 1985 Source: Fact Book on Intelligence, Central Intelligence Agency. DEPUTY DIRECTOR FOR INTELLIGENCE Office of Soviet Analysis Office of European Analysis Office of Near Eastern & South Asian Analysis Office of East Asian Analysis Office of African & Latin American Analysis Office of Scientific & Weapons Research Office of Global Issues Office of Imagery Analysis Office of Current Production & Analytic Support Office of Central Reference 1 DEPUTY DIRECTOR FOR ADMINISTRATION 1 Office of Medical Services Office of Security Office of Training & Education Office of Finance Office of Logistics Office of I Information Services Office of Information Technology Office of Communications Office of Personnel ?EEO 1- H H 1- H H H 1- I- Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 11 Poindexter testified that, to him, the primary signifi- cance of the Finding was its retroactivity?a feature that was highly unusual, if not unique.* He said, "There really wasn't a forward-looking aspect to the Finding."38 However, at the time that the Finding was signed, Poindexter was considering the detailed plan that North had presented for further arms sales, and this was the subject of a meeting two days later with the NSC principals. The original of the signed Finding was kept in Paul Thompson's safe at the NSC.38 Contrary to normal practice, the CIA and other agencies were not given a copy. Indeed, no copies were made. McMahon said that he knew of no other occasion when this oc- curred.4? When the Iran initiative was unraveling almost a year later, Poindexter destroyed this Finding. He be- lieved that if the Finding came to light it would cause "significant political embarrassment" to the President because it would reinforce the emerging picture that the United States had traded arms for hostages.'" In addition, the Finding was evidence of the Administra- tion's contemporaneous knowledge of the HAWK shipment, a fact that Poindexter, Casey, North, and others sought to conceal in November 1986. Poindexter Briefs Shultz The same day the President signed the Finding, Poindexter briefed Secretary of State George Shultz by telephone on the status of the Iran initiative. The briefing?Shultz's first from Poindexter on the sub- ject?was not complete: Poindexter did not even men- tion the Finding. Not knowing he was hearing only part of the story, Shultz commented at the time to an aide, "he [Poindexter] told me more than I had known before of what went on in the latter half of 1985 and I felt this was a good thing and we were off to a good start."42 Shultz told Poindexter that the Iran initiative was a "very bad idea"" and that "[w]e are signaling to Iran that they can kidnap people for profit." 4 4 That same day, December 5, CIA Deputy Director John McMahon convened a meeting with several top CIA officials, including Robert Gates, Edward Juch- niewicz, and Chief of the Near East Division (C/NE). McMahon said that a meeting with the President was slated for the weekend to "take stock" of U.S. efforts to free hostages and expand ties with Iran. He re- quested that various facts relating to Iran's military strength and the status of the Iran-Iraq war be pulled together. Someone at the meeting reviewed what had * Poindexter testified that he could recall only "one or possibly two other findings that had a retroactive nature to them. I, frankly, was always uncomfortable with that, because I thought it didn't particulary make a lot of sense." (Poindexter Test., Hearings, 100-8 at 18) In Executive Session, Poindexter testified that after further thought, he could not recall any other retroactive Findings. (Poin- dexter Test., Executive Session, 8/6/87, at p. already happened, including the November 24 ship- ment and the preparation and signing of the Finding, and the planning for more shipments, including North's chartering of planes and his upcoming trip to London for more talks." North Raises Contra Diversion with Israelis On the day after the President signed the Finding, December 6, North remarked during a meeting with Israeli officials that the United States wanted to use profits from the upcoming arms sale to Iran to fund U.S. activity in Nicaragua. The meeting, which was held in New York, concerned replenishment of Israeli TOWs. One of the Israeli officials made handwritten notes of this meeting on December 12, 1985. Accord- ing to these notes, the Israelis were told by North that not only did the United States have no budget to pay for the 504 TOW missiles (and planned on the Israeli Government's receiving this money from the Israeli intermediaries), but that in the future the United States wanted to generate profits from this transaction in order to finance part of its activity in Nicaragua. According to the Israeli Historical Chro- nology, North had a position paper with him at the meeting that he said was to be presented to the Presi- dent at a meeting the following day.48** North testified that he recalled no such conversa- tion, though he could not rule it out: My recollection was that the first time it [the diversion] was specifically addressed was during a [later] meeting with Ghorbanifar. It may well have come up before, but I don't recall it.47 North testified that his "clearest recollection" was that the notion of using the residuals for the Contras was first suggested by Ghorbanifar in January 1986.48 North flew from New York to London on Decem- ber 6 and met with Secord, Ghorbanifar, Kimche, Schwimmer, and Nimrodi to discuss the 50-HAWK, 3,300-TOW proposal that North had previously pre- sented to Poindexter." Ghorbanifar acknowledged that the Iranians were having increasing difficulty maintaining control over the Hizballah captors and pressed vigorously for a quick renewal of arms ship- ments.8? The President and His Advisers Review the Initiative While North was moving full-steam ahead in the negotiations, the President and his top national securi- ty advisers debated the Iranian initiative at an infor- *4' Two of the Israeli officials at the December 6 meeting, who did not take notes, did not recall the remarks of North recorded by the other Israeli official in his notes. Israeli Historical Chronology. 197 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 11 mal meeting on the morning of Saturday, December 7, in the White House residence. Present were the President, Secretaries Shultz and Weinberger, McMa- hon (sitting in for Casey, who was out of town), McFarlane, Poindexter, and Regan.5' According to McFarlane, the purpose of the meeting was "to review what has taken place since the President's approval of August and the negative viewpoints of the Secretaries of State and Defense to the effect that we hadn't achieved our purpose, and [that the initia- tive] was degenerating into an arms for hostage ar- rangement."52 The discussion that ensued "was now more specific than it had been in August, and it was about a specific plan" to trade weapons for hos- tages.53 Secretary Shultz, Secretary Weinberger, and Regan all voiced strong opposition to the initiative. Secre- tary Shultz advanced multiple policy reasons for not pursuing it. His "talking points" for the session stated that the initiative would "negate the whole policy" of not making "deals with terrorists"; that he doubted it would buy the United States influence with moderates in Iran; that it would undoubtedly become public and "badly shakeir moderate Arabs when they learned that the United States was "breaking our commitment to them and helping the radicals in Tehran fight their fellow Arab Iraq"; and that U.S. allies would be "shocked if they knew we were helping Iran in spite of our protestations to the contrary."54 Secretary Weinberger also forcefully voiced oppo- sition, including on legal grounds. He said the pro- posed arms deal would violate both the U.S. embargo against the shipment of arms to Iran and the restric- tions on third-country transfers of U.S.-provided arms in the Arms Export Control Act. He later testified: "[T]here was no way in which this kind of a transfer could be made if that particular Act governed."55 Secretary Weinberger also pressed many of the ar- guments made by the Secretary of State: I ran through a whole group [of specific objec- tions] and raised every point that occurred to me, including the fact that we were at the same time asking other countries not to make sales of weap- ons to Iran, that there was no one of any reliabil- ity or, indeed, any sense with whom we could deal in Iran and the government, and that we would not have any bargain carried out, that if we were trying to help get hostages released, why there would be a real worry that the matter would not be held in any way confidential, that we would be subjected to blackmail, so to speak, by people who did know it in Iran and else- where, and that we had no interest whatsoever in helping Iran in any military way, even a minor way, and that in every way it was a policy that we should not engage in and most likely would not be successful.56 198 Secretary Weinberger told the President that the initi- ative "wouldn't accomplish anything, and that they [the Iranians] would undoubtedly continue to milk us."57 McMahon argued that the long-range rationale of the arms transactions?to bring about a more mod- erate regime in Iran?was unfounded. I said that I was unaware of any moderates in Iran, that most of the moderates had been slaugh- tered by Khomeini, that whatever arms we give to these so-called moderates they will end up supporting the present Khomeini regime and they would go to the front and be used against the Iraqis and that would be bad." McMahon "was convinced that all of this was an arms for hostage arrangement, no matter what you called it. . . ."33 There is evidence that McMahon also argued that Ghorbanifar was unreliable.60 The President, along with McFarlane and Poin- dexter, spoke in favor of continuing the initiative.6" According to Secretary Shultz: The President, I felt, was somewhat on the fence but rather annoyed at me and Secretary Wein- berger because I felt that he sort of?he was very concerned about the hostages, as well as very much interested in the Iran Initiative.62 Secretary Shultz testified that the President was "fully engaged" in the conversation and frustrated with the situation.63 In response to Weinberger's legal objections, Shultz recalls that the President responded: "'Well, the American people will never forgive me if I fail to get these hostages out over this legal question,' or some- thing like that." Weinberger replied: "'[B]ut visiting hours are Thursday', or some such statement."64" The participants left the meeting with different views about whether the initiative would proceed. According to Poindexter, the President wanted to pursue every means of trying to get the hostages back.65 But McFarlane recalled that the President, with disappointment and frustration, approved the po- sition of no more arms sales to Iran, at least pending the London meeting." McMahon said that no deci- sion was made, and that the President left the meeting to do his Saturday afternoon radio broadcast, telling his advisers to "talk more on this and see what ought to be done."67 Secretary Weinberger testified that he believed the initiative had been put to rest once and for all. Indeed, he returned to the Pentagon after the *Casey was also in favor of continuing the initiative at this point, according to Poindexter. Poindexter Test., Hearings, 100-8, at 25. **Shultz testified that this "banter" between the President and Secretary Weinberger did not have the tone of the President advo- cating violating the law, but rather "was the kind of statement that I am sure we all make sometimes when we are frustrated." Shultz Test., Hearings, 100-9, at 32. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 11 meeting and told his military aide that "this baby had been strangled in its cradle, that it was finished."'" And Secretary Shultz "wasn't sure" where things stood after the meeting, but believed that he and Secretary Weinberger had prevailed.69 A striking aspect of the December 7 meeting was what was not discussed: According to McMahon and Weinberger, neither the November shipment of HAWK missiles, nor the Finding that was signed just two days earlier, came up.70 Despite varying impressions of the meeting, the President directed McFarlane to go to London to meet with Ghorbanifar and others. Poindexter testi- fied that the purpose was to "check out" the Israeli channel to Iran so that the President could have first- hand information on which to base a decision."* McFarlane testified that his purpose was to stress to Ghorbanifar that the United States was open to politi- cal discourse with Iran but no arms sales." But there is evidence of a more specific purpose: McFarlane was to try to talk Ghorbanifar into arranging a release of the hostages outside the framework of an arms deal, or at least before any more arms deliveries." Poindexter proposed at one point during the meeting that McFarlane also have authority, if the Iranians rejected this approach, to inquire whether the British Government would perform the replenishment sales to Israel that Weinberger had argued the United States could not make.74 There is no evidence that such an approach was made. McFarlane Meets Ghorbanifar in London On December 8, McFarlane joined Kimche, Secord, North, Nimrodi, and Ghorbanifar in London." McFarlane presented an agenda that focused on a political opening with Iran and on areas of possible common interests between the United States and Iran. In contrast, Ghorbanifar wanted to talk only about specified numbers of TOW missiles for each hos- tage.76 Ghorbanifar explained that the Iranians were very angry over receiving the wrong kind of HAWK missiles. McFarlane responded: "[G]o pound sand, that is too bad."77 McFarlane was "revolted" by the bargaining and found Ghorbanifar to be a "borderline moron." 7 8 North's view of the meeting was slightly different. He thought McFarlane was telling Ghorbanifar that there could be no more arms sales until after the hostages were released, not that McFarlane was pre- cluding arms sales.79 Once again, as the initiative began to come apart, North raised the specter of the death of the hostages in retaliation for a U.S. decision to break off the negotiations. In a memorandum to *In fact, the United States already had substantial first-hand in- formation on Ghorbanifar from both CIA officials and Ledeen. McFarlane and Poindexter, he wrote: "[A]ll it would take for the hostages to be killed is for Tehran to 'stop saying no' [to the captors]."" McFarlane, North, and Secord flew back to Wash- ington together on December 9. On the way back, McFarlane said he was very unhappy with Ghorbani- far's arms-for-hostages pitch. He viewed Ghorbanifar as a businessman interested only in profit and "one of the most despicable characters he had ever met."" North was unhappy with McFarlane's negative re- action" and that day wrote an "eyes only" memoran- dum to McFarlane and Poindexter entitled "Next Steps." In it, North reviewed options that he saw as necessary "[i]f we are to prevent the death or more of the hostages in the near future."'" After reviewing the problems of Ghorbanifar's untrustworthiness, Schwimmer's arrangement of previous deals that an- gered the Iranians and left Israel with inadequate funds for replenishment, and the United States' "lack of operational control over transactions with Ghor- banifar," North initially set out four options: the arms- for-hostage swap discussed in London, an Israeli de- livery of 4.00 to 500 TOWs to Iran to restore "good faith," a military raid, and "do nothing." North sum- marily rejected the "do nothing" approach: Very dangerous since U.S. has, in fact, pursued earlier Presidential decision to play along with Gorbanifahr's plan. U.S. reversal now in mid- stream could ignite Iranian fire?hostages would be our minimum losses." North testified that Casey shared his view that termi- nating the negotiations would lead to the death of the hostages. 8 5 At the end of the memo, North described a "fifth option": the United States would directly sell arms to Iran, acting pursuant to a Presidential Finding and using Secord as an operational "conduit."'" The Iran initiative was restructured over the next few weeks to closely resemble this "fifth option." Moreover, using the Enterprise as a conduit for the arms sales pro- ceeds facilitated the diversion of funds to the Contras that North had mentioned to the Israelis only a few days earlier.** McFarlane Briefs the President on the London Meeting On December 10, McFarlane briefed the President on the London meeting. Also present were Casey, **On the same day that North prepared this "Next Steps" memo- randum, he also met with the General Counsel of the CIA, Stanley Sporkin. (North Calendar, 12/9/85, N336) Sporkin recalls that McMahon was to attend this meeting as well and that the purpose was to discuss McMahon's desire that the CIA's role in the Iran initiative be eliminated or reduced. Sporkin Test., Hearings, 100-6, at 127-128. 199 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 11 Poindexter, North, and Regan.87* McFarlane empha- sized that Ghorbanifar lacked integrity and that the initiative was unlikely to bear fruit if he remained the channel to the Iranians." At the same time, McFar- lane or North said that abandoning the initiative would risk the lives of the hostages." The President seemed influenced by this concern." No decision was reached about the future of the initiative, and again there were differing perceptions about what would happen. The President continued to hope that its continuation might lead to freedom for the hostages. McFarlane recalled that the Presi- dent asked, [W]hy couldn't we continue to let Israel manage this program, and was expressing and searching for, I think understandably, ways to keep alive the hope for getting the hostages back, and it is quite true that the President was profoundly con- cerned for the hostages." Casey left the meeting with "the idea that the Presi- dent had not entirely given up on encouraging the Israelis to carry on with the Iranians."82 I suspect he would be willing to run the risk and take the heat in the future if this will lead to springing the hostages. It appears that Bud [McFarlane] has the action." Poindexter testified that the President was disappoint- ed that Ghorbanifar appeared to be so unreliable, but was reluctant to abandon the project." In contrast, State Department officials were left with the impres- sion that the initiative was dead. Under Secretary of State Michael Armacost reported to Shultz, who was in Europe, that "Bud's recommendation, upon return- ing from his latest discussions, was to drop the enter- prise. That has now been agreed."88 Late that evening, Clarridge's deputy, who was the acting Chief of the CIA's European Division in Clar- ridge's absence, cabled CIA stations in Countries 16 and 18 to inform them that there would be no more flights, at least in the short run. He wrote: As late as last night the negotiating was still going on. We have just received word now that the deal is apparently all off. Don't know why yet or whether there is a possibility that it will revive in the future. . . . [F]or now it looks like we are standing down." Poindexter to North: Keep Trying Following the briefing, Poindexter had the clear im- pression that the President wanted to continue the program, and he moved to put it "on a sounder foot- Some of the participants place Weinberger at this meeting, but he has no recollection of it. 200 ing."87 Casey too was "a very strong advocate of proceeding."88 Poindexter told North to continue his efforts to keep the Iran initiative moving forward." This involved at least three steps: first, preparing a fully staffed and more comprehensive covert action Finding; second, substituting a new team?to be lead by North and Israeli Amiram Nir?to replace Ledeen, Schwimmer, and Nimrodi; and third, finding a legal way to sell arms to Iran. On this last point, Poin- dexter asked North to work with "the appropriate people at CIA and in [Attorney General] Ed Meese's office, if not Ed Meese himself.99100 The CIA Evaluates Ghorbanifar Ledeen, with North's approval, aggressively urged the CIA to establish an intelligence relationship with Ghorbanifar. In early December, Ledeen met with the CIA's Duane Clarridge and Charles Allen. He told Allen the history of the Iran initiative, including the HAWK missile debacle. He then explained why he believed Ghorbanifar had contacts that could help the CIA gain insights into the Iranian regime and assist its counterterrorism efforts. Ledeen said Ghor- banifar was "a good fellow who is a lot of fun" and "praised [him] to the hilt."1?1** Allen passed the information to the CIA's Near East Division for eval- uation.102 After meeting with Ghorbanifar in mid-December in Switzerland, Ledeen met with Casey on December 19 and repeated his arguments for dealing with the Iranian. Casey reacted favorably but indicated a need to clear up the controversy over Ghorbanifar's poor record with the CIA.'" Casey called Deputy Director for Operations Clair George and instructed him to arrange a new evalua- tion of Ghorbanifar.'" On December 22, the Chief of the Iran branch at the CIA interviewed Ghorbani- far at Ledeen's home. Ledeen and Allen were there and North showed up near the end. Ledeen told the Chief of the Iran branch that Ghorbanifar is "a won- derful man . . . almost too good to be true." The conversation focused on terrorism and leading person- alities in Iran.108 The Chief of the Iran branch reported to his CIA superiors that he was "only further convinced of the untruthfulness or lack of trust that we could put in Mr. Ghorbanifar." They decided that Ghorbanifar should be given a polygraph test, and Ghorbanifar agreed.1" After hearing the briefing on Ghorbanifar, Casey sent the President an "eyes only" letter stating that one of the ongoing initiatives to free the hostages was a plan involving Ghorbanifar. Casey wrote of **At this time, Ledeen also outlined Ghorbanifar's proposal for an anti-Libyan "sting" operation in which the assassination of a leading opponent of Qadhafi would be staged and later revealed to be faked. Ledeen Dep., 6/22/87, at 167, 172-74. Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 11 Ghorbanifar: "He has 3 or 4 scenarios he would like to play out." ?7 The decision to consider continued reliance on Ghorbanifar was remarkable. Previously, Agency offi- cials had found his information so marked by deceit, lies, and self-serving proclamations that it had issued a "burn notice" warning the U.S. intelligence communi- ty that he could not be trusted and should not be dealt with.'" Moreover, the information Ghorbanifar was providing was almost impossible to corroborate. He alone was explaining the Iranian position on the hostage issue. The last deal he had helped arrange, the November HAWK shipment, had been a com- plete disaster. Acceleration of the Initiative: January 1986 Israelis Add a New Element to the Negotiations: The Southern Lebanon Army Prisoners In mid-December, 1985, Amiram Nir, adviser to the Prime Minister of Israel, became involved in the Iran operation; he later became the liaison to the Ameri- cans and Ghorbanifar. Nir, who reportedly was un- aware of the secret Iranian arms deals prior to this time, had spent the last month exploring whether American hostages in Lebanon would be released if the Southern Lebanon Army freed Shiite prisoners. Nir proposed to his superiors that he discreetly get the reaction of the Americans to a hostage release initiative along these lines.'03 After being briefed on the U.S.-Israeli Iran oper- ation, Nir began work on a plan linking that operation with his own plan. He presented to high-ranking Is- raeli officials a proposal that included: (1) a direct sale of TOWs out of Israeli arsenals to Iran and the simul- taneous release of American hostages; (2) a purchase by Israel from the United States of replacement arms, using the proceeds from the Iran sale; (3) exerting Israeli influence to obtain the release of prisoners held by the Southern Lebanon Army; (4) the handling of all logistics by the Israelis to enable the Americans to deny any involvement; and (5) the construction of a convincing cover story to explain the release of the hostages and the prisoners."? Nir then went to London in late December to meet, for the first time, with Ghorbanifar and one of the Israeli intermediar- ies. The three hammered out a detailed?but tenta- tive?plan embodying these elements. The Israeli Government authorized Nir to present this plan to the United States but made clear that the transaction could occur only with U.S. agreement to the entire concept and that Israel would assist in whatever way the Americans requested, but not play a leading role.''' Nir Comes to Washington On January 2, 1986, Nir flew to Washington to meet with Poindexter and North at the request of Prime Minister Peres."2 In an opening meeting with North in a hotel, Nir said that he had an idea about how to improve the progress of the Iranian oper- ation. 113 Nir met later that morning with Poindexter, North, and Don Fortier, Poindexter's deputy, and laid out his plan."4 The central features of the proposal were recorded by Poindexter in his notes: the Israelis would ship to Iran 4,000 "unimproved TOWs"; after the delivery of the first 500, all five American hos- tages would be released; simultaneously the Southern Lebanon Army would release "20-30 Hizballah pris- oners who don't have blood on their hands."' " If the American hostages were released, Israel would ship to Iran the other 3,500 TOWs and Iran would "con- firm" its agreement for "no more hostages [and] terror."116 Under the plan, the United States would replace the TOWs only if the hostages were released. If the hostages were not released, replenishment was not required and Israel would have lost 500 TOWs. If they were freed, then the United States would replace the 4,000 TOWs, plus the 500 TOWs the Israelis had shipped in 1985." 7 Rapid replacement of the TOWs was of particular concern to Nir. He emphasized that the number of TOWs would decrease Israel's arsenal when tension with Syria increased the urgency to keep Israel's arse- nal at full strength. To address Israel's concerns about readiness, Nir called for the United States to "preposi- tion" substitute TOWs near Israel as soon as possible in case a sudden need for them occurred. Thereafter, the United States was to proceed with "regular steady replacement" of the TOWs by sale to Israel. The Israelis also wanted a U.S. commitment that, if the operation were exposed, the United States would say it knew of the operation and did not object.'" Nir and North Discuss Use of Residuals Nir's proposal included another feature: generating profits that could be diverted to other covert projects. This was not a new concept: Nir and North had talked generally about joint covert operations in No- vember, and North had told other Israelis in Decem- ber that the United States wanted to use profits from the arms sale under discussion at that time to finance U.S. activities in Nicaragua. Poindexter recalled that at either the January 2 meeting or another meeting with Nir a few days later, "[t]here also was a very brief, general discussion about some other cooperative activities." North? who talked alone with Nir several times during the first days of January?testified to a more specific dis- cussion about uses for the "residuals": 201 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 11 [I ....1 . 1 . I Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 11 I recall that we met New Year's day or the day after . . . and it was his [Nir's] proposal at that point to use the profits by the arrangement they envisioned, selling Israeli TOWs at a profit, re- plenishing them with part of that money, using part of that money for other operations. . . . I do not believe he mentioned contras at that meeting, but my recollection is we began to talk in early January about other joint U.S.-Israeli, and in some cases unilateral Israeli operations of a cer- tain kind. . . .120 A New Finding Is Prepared Poindexter realized from the start that if the United States embraced the Nir proposal for revitalizing the Iranian initiative, a new covert action Finding would be essential. In notes that he wrote on a flight to join the President in California immediately after the Janu- ary 2 meeting he jotted: "Covert Finding?already pregnant for 500."121 Poindexter testified that the "500" was a reference to the TOWs that Israel had already shipped to Iran with U.S. approval but with- out a Finding.122 On the same day that Nir advanced his new pro- posal, North contacted Sporkin to set in motion the drafting of a new covert action Finding to authorize the activity. North told Sporkin he wanted a more expansive Finding than the one Sporkin prepared in November. He said it should "cover certain other activities, that there was a broader concept to the relationship that was being considered with A first draft of the new Finding, prepared by a CIA staff lawyer who was told nothing of the No- vember Finding,124 did not mention the objective of gaining the release of American hostages. It did au- thorize shipment of arms to Iran. This draft included the standard provision calling for the Director of Central Intelligence to report the activity to the Intel- ligence Committees of Congress.125 On January 3, Sporkin edited the draft Finding, making several significant changes. First, he put the provision calling for Congressional notification in brackets, and above it inserted new language directing that the Director instead "refrain from reporting . . . until I [the President] otherwise direct." Sporkin made this change to present squarely to the President the alternatives on notification. Sporkin also changed the description section of the Finding. He apparently sent this draft to North during the day on January 3.126 The draft contained no references to hostages. North asked Sporkin to meet with him that night to work on the Finding. Before agreeing to this, Sporkin tracked down Casey?who was vacationing in Flori- da?and asked if he should do so. Casey told Sporkin that he knew nothing about what was going on, but that Sporkin should meet North and keep Casey in- 127 202 At the meeting, North showed Sporkin another draft of the Finding.'" The preamble of the North draft included only the nonnotification alternative, a modification that Poindexter, and?North assumed? the President, approved.'" Among other changes were inclusion of a reference to "third parties" and a reference to "USG" (U.S. Government)?rather than just the CIA?as the entity authorized by the Finding to act.'" Sporkin understood "third parties" to refer "to the people that were working with Iran, Ghor- banifar," as well as the Israelis who, Sporkin learned, were involved in the initiative in November."' The North draft, like the Sporkin draft, contained no ref- erence to the central quid pro quo for the arms sales?the hostages. Later that evening or the following day, North called Casey, and Casey's reaction to the renewed initiative was positive. North then reported to Poin- dexter that Casey "thought the Finding was good and that this is probably the only approach that will work."32 The next day, North drafted a cover memorandum for Poindexter to send to the President with the Find- ing. North wrote JIM Nir had proposed a plan "by which the U.S. and Israel can act in concert to bring about a more moderate government in Iran." He said that under the plan, this goal was to be achieved by providing "military materiel, expertise and intelli- gence" to "Western-oriented Iranian factions." Pro- viding such items to moderates would enable them to come to power by "demonstrat[ing] their credibility in defending Iran against Iraq and in deterring Soviet intervention," North said.133 North's draft cover memorandum described the role to be played by the United States under the plan: As described by the Prime Minister's emissary [Nir], the only requirement the Israelis have is an assurance that they will be allowed to purchase U.S. replenishments for the stocks that they sell to Iran. Since the Israeli sales are technically a violation of our Arms Export Control Act em- bargo for Iran, a Presidential Covert Action Finding is required in order for us to allow the Israeli sales to proceed and for our subsequent replenishment sales.134 North's memorandum thus makes plain that he under- stood that, without a Finding, the sale of U.S.-made weapons by Israel to Iran would violate the Arms Export Control Act. The memorandum also stated that if the plan were approved and the Finding signed, Israel would "uni- laterally" commence delivery of TOW missiles to Iran in January, the United States would replenish Israeli stocks in less than 30 days, and five American hostages in Beirut would be released.'" The memo- randum made no reference to Nies proposal regard- ing release of dozens of prisoners held by the South- Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 11 em Lebanon Army, nor to the plan to use profits for other covert operations. On Sunday, January 5, North, Sporkin, and Casey met at Casey's home to discuss the new plan and the draft Finding. Casey read the draft Finding along with a draft cover memorandum and voiced his ap- prova1.136 Sporkin, however, felt uncomfortable about omitting the hostage release objective from the Finding and raised this concern with Casey. Accord- ing to Sporkin, North explained to Casey that the State Department did not want this in the Finding because it would create an appearance of a "hostage- for-arms shipment" and therefore would not "look right." Sporkin argued that the hostage release aspect of the Finding was a "very important element" that "ought to be in there." Casey agreed.'" Apparently around this time, North also revised the cover memorandum to the President. He deleted the statement that the contemplated Israeli sales were a "technical violation" of the Arms Export Control Act and included a sentence expressly recommending that "you exercise your constitutional p[r]erogative to withhold notification of the Finding to the Congres- sional oversight committees until such time that you deem it to be appropriate."138 On Monday, January 6, North hand-carried the draft Finding and cover memorandum to Attorney General Meese for his review. North discussed it with the Attorney General and his deputy, D. Lowell Jensen. Attorney General Meese approved the Find- ing and the "procedures we were using," according to North.139 Attorney General Meese does not recall the meeting, but is "satisfied that it took place.',140 Jensen testified that North presented the papers for "informational" purposes only, and that the Attorney General was not asked for, and did not offer, any opinion.14 The President and Advisers Consider the New Proposal At the morning national security briefing on Janu- ary 6, Poindexter told the President of the Nir pro- posal.'" The Vice President, Regan, and Don For- tier were also present.'" The President "indicat[ed] he was in general agreement" with the proposal and decided there would be a full NSC meeting the fol- lowing day on the proposal and the Finding. Poin- dexter presented the President with the January 6 draft of the Finding at this briefing. Poindexter did not intend that it be signed at this point because it had not yet been "fully staffed" and discussed among the President's national security advisers. But the Presi- dent, not realizing that the Finding was only a pro- posal for discussion, read it and signed it, reflecting his agreement.144 ? Secretary of State Shultz, in fact, had argued at the December 7 meeting against any arms-for-hostages trade. At the full NSC meeting on January 7 were the President, the Vice President, Secretaries Shultz and Weinberger, Attorney General Meese, Casey, Poin- dexter, and Regan.'" While Secretaries Weinberger and Shultz continued to object strenuously, all others favored the plan or were neutral.'" Secretary Wein- berger, who said he had no advance knowledge about the subject, found it to be "very much a re-run" of the December meeting, except that now the President decided to go forward with the plan: I made the same points, George Shultz made the same points. Bill Casey felt that there would be an intelligence gain, and there was also talk of the hostages as one of the motivating factors, . . . but the responses of the President seemed to me to indicate he had changed his view and had now decided he wanted to do this.147 There is no record that the Vice President expressed any views. At the meeting, Attorney General Meese provided a legal opinion that the arms sales could be done legally with Israel making the sales and the United States replenishing Israel's stocks.'" Secretary Wein- berger again objected that the proposed transaction would violate the Arms Export Control Act; the At- torney General responded that there were mecha- nisms outside the AECA through which the operation could proceed legally, including "the President's in- herent powers as Commander in Chief, the President's ability to conduct foreign policy. . . ."149 Meese referred to a 1981 written legal opinion by Attorney General William French Smith stating that the CIA could legally sell to third countries weapons obtained from the Defense Department under the Economy Act. On this authority, he "concurred with the view of Director Casey that it would be legal for the Presi- dent to authorize arms transfers pursuant to the Na- tional Security Act."156 Secretary Shultz felt that it was very clear that the President wanted to go forward with the plan. To the Secretary of State, the lack of opposition "almost seemed unreal," and he left the meeting "puzzled, distressed."5' What Secretary Shultz did not know was that the President had signed a Finding on Janu- ary 6. That act, an indication of the President's re- solve, was not mentioned. North Proceeds With Plans for Replenishment That day, North called Nir in Israel and said that the United States was prepared to proceed with Nir's plan, subject to certain conditions. North said that both the President and Secretary Weinberger had agreed to the plan. North gave Nir this encoded mes- sage: 203 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 11 1. Joshua [President Reagan] has approved pro- ceeding as we had hoped. 2. Joshua and Samuel [Secretary Weinberger] have also agreed on method one [replenishment by sale, as opposed to "method two," replenish- ment by prepositioning]. 3. Following additional conditions apply to Albert [Code name for operation?]. A. Resupply should be as routine as possi- ble to prevent disclosure on our side. May take longer than two months. However, Albert says if crisis arises Joshua promises that we will deliver all required by Galaxie [apparently C 5A cargo plane] in less than eighteen hours. B. Joshua also wants both your govt and ours to stay with no comment if operation is disclosed. 4. If these conditions are acceptable to the Banana [Israel] th[e]n Oranges [U.S.] are ready to proceed.152 Neither of the "additional conditions" proposed by the U.S. side dealt with the substance of the oper- ation. North's notes reflect that the purpose for "rou- tine" resupply spread over a period of months was to enable the purchases by Israel to be broken "into lots of less than Cong[ressional] limit" and to avoid "rais- ing eyebrows."153 The "no comment" proposal would enable the United States?even after the oper- ation was publicly exposed?to avoid acknowledging its central role. Nir and North also discussed terms for replenish- ment sales.'" By this time, the Chief of the Israeli Procurement Mission in New York and Noel Koch, Principal Deputy Assistant Secretary of Defense for International Security Affairs, had been designated as the Israeli and American contacts for hammering out the details.155 Nir told North that Israel could not use the money the Iranians had paid for the 504 TOWs shipped in 1985 to buy replacements because this money was not available. On this point, North's notes state: "Regarding the first 504, it was agreed that the $ was used for other purposes."156 Over the next few days, Nir told North that Israel could pay only $5,000-$5,500 per missile and that the Depart- ment of Defense, using a replacement cost figure, was demanding that Israel pay more.'" On January 9, Nir and North discussed how to use the money Iran would pay for the TOWs. North jotted the following calculation: $10M total 2.5 to Ops 1.5 to Gorba $6M avail for 4500'59 204 The note indicates that Israel was to receive $10,000 per TOW from Iran, or $10 million for the first 1,000 TOWs. From this sum, $2.5 million was to be divert- ed to "Ops,"159 which North testified were the joint Israeli-U.S. covert operations previously discussed with Nir.16? Another $1.5 million was to go to Ghor- banifar. The remaining $6 million would be available to pay the United States for the replacement TOWs. If this scheme were followed for each of the four planned shipments of 1,000 TOWs, $10 million would go for other covert operations and Israel would have $24 million to spend on replacement TOWs?enough to purchase 4,000 missiles at $6,000 each, or 4,500 missiles at a price of $5,333 each. The next day, January 10, Koch and North con- ferred about replacement of the Israeli TOWs. North's notes reflect that one option they considered was selling Israel Improved TOWs "at cos[t]."161 The reference to Improved TOWs is significant be- cause Israel was planning to send basic TOWs to Iran. Thus, the proposed transaction would substan- tially upgrade Israel's arsenal at no cost to that coun- try. The possibility that this might be an objective of the operation had caused some CIA lawyers discom- fort.162 After this conversation, Koch queried DOD Deputy Director Rudd about TOW prices. He appar- ently asked if it would be possible to ship 4,000 Basic TOWs to Israel or Iran for $12 million, or at a price of $3,000 per TOW. Rudd later told Koch that while this quantity was available, the lowest price at which basic TOWs had previously been sold was $6,800 per missile.163 In addition to the price, Koch was concerned about secrecy and Congressional notification. He knew that if the total value of the purchase exceeded $14 mil- lion, a Congressional notification would be required. Rudd told Koch a notification that the Israelis were buying 4,000 basic TOWs would be tantamount to announcing that the missiles were intended for an- other purchaser; informed persons would know the Israelis would have no use for more basic TOWs than it already had.164 Rudd counseled that the best way to get missiles secretly from the Defense Department to Iran would be to "go black"?that is, make it a covert operation with Defense selling the missiles to the CIA under an Economy Act transfer and the CIA transferring them to Iran pursuant to an intelligence Finding. Koch conveyed this conclusion to North and Weinberger's military aide, Lt. Gen. Colin Powell.'" "Going black" appeared to overcome two difficulties in the replenishment issue: (1) maintaining secrecy and avoiding Congressional notification, and (2) avoiding the strictures of the AECA. On January 12, Koch met the head of the Israeli Procurement Mission at National Airport in Washing- ton to continue negotiations on price. Koch reported Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 11 on this meeting to North and to Powell, who suggest- ed that Koch meet with Secretary Weinberger. Koch met with the Secretary the next day. He described the Secretary as "generally agitated over this" and be- lieved "this thing . . . was a very foolish undertak- ing." Koch commented to Secretary Weinberger, "Do we have a legal problem with this? Is somebody going to go to jail?' and [the Secretary's] response was in the affirmative. But I did not take that serious- ly."166 In a subsequent conversation with Koch, North ap- parently expressed a hope that the matter could be solved and the initial steps of the operation finished in time for the President to refer to the freeing of the hostages in his State of the Union message later in January. North jotted in his notes: "Try to get results by State of Union."167 Legal Problems Identified With Replenishment Approach While North continued to work with the Israelis on the replenishment problem, CIA lawyers were raising legal objections. One prepared a memorandum for Sporkin identifying the restrictions and various notifi- cation requirements that the Arms Export Control Act and Foreign Assistance Act placed on third-coun- try transfers.188 The lawyers concluded that weapons that had earlier been acquired from the United States under either of these acts could not be sold to Iran without "U.S. consent, notice to Congress, and the eligibility of the third country recipient for U.S. aid."189 Because the planners had determined there would be no notice and because Iran's terrorist activi- ties rendered it ineligible, the Israeli sale/U.S. replen- ishment approach was not feasible."? However, the lawyers concluded that a sale of weapons from DOD stocks to the CIA under the Economy Act, followed by a CIA sale to Israel or Iran, would be legal. A Presidential Finding would be required.'" Ghorbanifar Fails Polygraph Ghorbanifar returned to Washington in January for his new polygraph. The examination was conducted at the CIA on January 11 and lasted five hours."2 The CIA polygraph operator concluded that Ghor- banifar lied on 13 of 15 items on which he was ques- tioned."3 According to George, "The only questions he passed were his name and his nationality."174 After the test, a CIA officer reported in a memo- randum to Casey, McMahon, and Clair George: "Ghorbanifar is a fabricator who has deliberately de- ceived the U.S. Government concerning his informa- tion and activities. It is recommended that the Agency have no dealing whatsoever with Ghorbani- far."'" Afterwards, Ghorbanifar showed up at Le- deen's house "furious" and "hurting" because the questioning was more expansive than he had expected and because he claimed to be physically injured by the examination techniques.176 The following day, the Chief of the CIA's Iran branch briefed George and the Chief of the Near East Division (C/NE) on the negative results. They in- structed him to have no further contact with Ghor- banifar or Ledeen."7 George viewed the polygraph results as confirming his view of Ghorbanifar and declared to Casey that the Operations Directorate would have nothing more to do with the Iranian. He told North of this decision on January 13.178 A few days later, the Operations Directorate disseminated a notice saying the CIA would do no more business with Ghorbanifar.179 Ghorbanifar's polygraph failure, however, did noth- ing to squelch his relationship with Casey and the NSC staff. Indeed, North?who "wanted" Ghorbani- far to pass180?had braced himself for a negative result. He told Ledeen beforehand that the CIA would make sure Ghorbanifar flunked because they did not want to work with him.181 Casey, notwith- standing Clair George's advice to terminate the Ghor- banifar relationship, found a way to deal with Ghor- banifar outside the normal Operations Directorate headed by George. Casey ordered Charles Allen, who was the CIA's senior antiterrorism analyst, to meet with Ghorbanifar "to determine and make a record of all the information that he possessed on terrorism, especially that relating to Iranian terrorism?just take another look at this individual."82 In George's view, Allen virtually became the case officer for Ghorbani- far.'" To George, there could not have been a "better mismatch" between Allen?who had no expe- rience managing an agent?and Ghorbanifar?who was especially "complex" and difficult to control.'" Allen spent five hours with Ghorbanifar at Le- deen's home on January 13 "to assess Subject's access to Iranian Government leaders" and to obtain infor- mation from him on terrorists. Ghorbanifar set out several areas in which he wished to work with the U.S. Government and the CIA, including the ongoing White House effort to gain the release of the hostages in Lebanon; the blunting of Iranian-, Libyan-, and Syrian-sponsored terrorism; and assisting in the over- throw of Qadhafi.183 Allen thought some of Ghor- banifar's specific proposals worth pursuing, but he considered several of them outlandish, not worthy of exploration, and "very, very filled with hyperbo- le."188 During this session, Ghorbanifar told Allen that funds generated through the projects he was discuss- ing could be used for "011ie's boys in Central Amer- ica."87 Allen recorded this remark in his handwrit- ten notes of the meeting as "can fund Contras."88 He did not, however, refer to it in his memorandum to Casey and others on the session.189 He later ex- plained that at the time he did not "consider it impor- tant or even relevant to my particular mission," that 205 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 . L... 1 Approved For Release 2011/05/25: CIA-RDP89T00142R000500610001-7 Chapter 11 he did not discuss it with anyone else, and that he "promptly forgot it."195 On January 14, Allen briefed Casey on his session with Ghorbanifar. He told Casey that Ghorbanifar was "very hard to pin down," "very flamboyant," "very clever, cunning." Indeed, Allen called him a "con man," to which Casey jokingly responded: "Maybe this is a con man's con man then." For the moment, Allen said, he was given no further assign- ment concerning Ghorbanifar.'91 Restructuring the Deal In mid-January, the plan for the operation was re- structured in two significant respects. First, weapons to be shipped to Iran would come from U.S.?not Israeli?stocks. Second, at the direction of Poindexter, Casey, and North, Richard Secord was brought into the operation as a "commercial cut-out": a conduit for the money to be paid by Iran to the United States for the missiles. This latter change enabled the "diver- sion" of funds to support the Contras, which had already begun in November with the use of a part of the Israelis' $1 million deposit to Lake Resources, to continue in a more direct manner. A one-page, unsigned memorandum dated January 13, 1986, updated Casey on the "TOW for Hostage deal." The memorandum shows th