INVESTORS' ROLE IN ARMS SALES TOLD BY CASEY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90-00965R000605530027-7
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 2
• Document Creation Date: December 23, 2016
• Document Release Date: February 20, 2013
• Sequence Number: 27
• Publication Date: December 11, 1986
• Content Type: OPEN SOURCE

Declassified in Part - Sanitized Copy Approved for Release 2013/02/20: CIA-RDP90-00965R000605530027-7 4*/
Ow Fa WALL STREET JOURNAL
11 December 1986
Investors' Role
In Arms Sales
Told by Casey
Dispute Arises Over When
CIA Chief Discovered
Funding Irregularities
By'DAvio?Roi-l-Ens and
tart' Report Cr., of THE WAIT STREET ..1(A:RNAI.
WASHINGTON?A network of private
investors linked to an old friend of Central
Intelligence Agency Director William
22.,y helped finance and sought tr-o
rrom Iranian purchases of U.S. arms. ac-
ording to intelligence sources.
In secret testimony before congres-
sional committees, Mr. Casey has said that
an October meeting with his friend led the
director to suspect potential irregularities
and the possible diversion of funds from
the sales.
But two administration sources familiar
with the program said Mr. Casey knew as
early as last spring that profits from the
Iran sales were being funneled to Nicara-
guan insurgents.
Asked last night about allegations that
he knew before last month that the funds
were being diverted. Mr. Casey said:
"That's false. That's utterly false."
The disclosures shed new light on the
role of private investors in the controver-
sial sales and raise questions about when
Mr. Casey first learned of the diversion
and how he treated the evidence. Attorney
General Edwin Meese has said that Mr.
Casey and other top administration offi-
cials learned of the diversion of funds to
the insurgents only last month, when the
Justice Department discovered it.
.Mr. Casey's friend, New York energy
consultant Roy Furmark. warned the di-
rector that a group of Canadian investors
were threatening to take legal action, pos-
sibly against Saudi financier Adnan Kha-
shoggi. a major figure in the sales, and the
U.S. government. Any such suit would
have threatened the secrecy of the opera-
tion.
According to Mr. Casey's testimony, the
CIA chief ordered an internal investigation
into the financing of the arms sales. An ad-
ministration source says Mr. Casey re-
ferred the matter to Vice Adm. John Poin-
dexter, then President Reagan's national
security adviser, and suggested he consult
the White House counsel's office. Mr.
Casey didn't take it directly to the presi-
dent or the attorney general.
In an interview Tuesday, Mr. Furmark
denied having anything to do with the
arms. business. The consultant has long-
standing ties to the Mideast and was a
close associate of Mr. Casey's late per-
sonal friend and former law client, New
York oil man John Shaheen.
According to sources, Mr. Casey indi-
cated that the investors put up an amount
in the range of S15 million to $20 million for
interim financing to carry out the sale. The
investors are believed most directly tied to
Mr. Khashoggi, for whom Mr. Furmark
has worked, according to an intelligence
source.
In testimony yesterday before the
House Foreign Affairs Committee, Mr.
Casey indicated that he only became
aware of the potential diversion from his
meeting with Mr Furmark. But accord-
ing to two administration sources knowl-
edgeable about the Iran operation. Mr.
Casey has known at least since last spring
that some profits from the sales were be-
ing diverted. "Casey knew from the begin-
ning that the Iranians were being over-
charged." said one intelligence source.
"And he knew that some money was being
siphoned off."
The sources said that top-secret mes-
sages having to do with the Iranian arms
transactions were sent on the CIA "pri-
vacy" channel used by John Kelly, U.S.
ambassador to Lebanon, in his reports on
attempts to free hostages in Lebanon.
The sources said that all messages car-
ried on that channel are delivered auto-
matically to the director's desk, and that
Mr. Casey also would have received cru-
cial intercepts of other related communica-
tions.
These intercepts, collected by the Na-
tional Security Agency and distributed to
the CIA, the White House and a few Penta-
gon officials, disclosed that the Iranians
were being charged many times more than
the value of the weapons they were buying,
the sources said.
At the same time, last summer, CIA op-
eratives in El Salvador, Honduras and
Costa Rica charged with monitoring activi-
ties of the Nicaraguan rebels all reported
to CIA ? headquarters an increase in sup-
plies for the insurgents.
In addition, some of them expressed
concern about the increased presence of
retired Air Force Maj. Gen. Richard Se-
cord, an important figure in the diversion
scheme and in the supply network to the
rebels, called Contras.
Background in Energy Business
Mr. Furmark, who is listed in Delaware
records as president of Furmark Corp. in
New York, has a long background in the
energy business and has past ties to Roger
Tamraz. a Lebanese businessman who has
represented Saudi-backed companies. Mr.
Tamraz, U.S. intelligence sources said, is a
director of the Bank of El-Mashrek and
chairman of the Bank of Kuwait & the
Arab World, both in Beruit. He also is affil-
iated with two other Beruit businesses. In-
tra Investment Co. and First Arabian
Corp. and with Tetra Tech Inc., an Arling-
ton, Va., concern that the sources said em-
ploys some former CIA agents. Mr. Fur-
mark, asked whether he had a role in the
arms sale, said, "I'm not in that business.
I'm an oil man." He did acknowledge that
he knows Mr. Casey from their past associ-
ation with Mr. Shaheen.
? By the director's testimony, as related
by congressional and administration
sources, Mr. Casey hadn't seen Mr. Fur-
mark for several years before the consult-
ant approached him this year with com-
plaints about delayed payments to the pri-
vate investors. The investors had hoped to
profit by providing interim financing to
help carry out the sale until the Iranians
made their payments. But this left them
vulnerable, and Mr. Furmark warned of
potential legal action that would threaten
the secrecy of the sales.
In his meeting with Mr. Casey and two
subsequent discussions with CIA officials,
Mr. Furmark displayed what Mr. Casey
described to Congress as an intimate
knowledge of the operation. The director
testified that it was then that he became
concerned about the possibility of a diver-
sion of funds.
But administration sources said Mr.
Casey, Mr. Poindexter and Lt. Col. Oliver
North, the National Security Council
staffer who was fired last month for alleg-
edly masterminding the profit-sharing
scheme, went to extraordinary lengths to
conceal the operation from their col-
leagues.
"When Casey claims he didn't know -
what was going on, he's saying the CIA is
so incompetent it can't even monitor its
own bank accounts or keep track of the
Contras, which are one of its highest prior-
ities," a source said.
Sources said that on several occasions
State Department officials who got wind ei-
ther of the secret arms sales to Iran or of
an increase in military aid to the Contras
through El Salvador were deliberately
"thrown off the scent."
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'Roger Channel'
Intelligence sources said the secret op-
eration deliberately bypassed not only the
Congress but the State Department and all
the administration's internal controls. In-
telligence that might have revealed the op-
eration was withheld from the Depart-
ment's Bureau of Intelligence and Re-
search. Also, Ambassador Kelly, the
sources said, was told not to report his con-
tacts with Col. North and Gen. Secord on
the State Department's own back-channel,
called the "Roger Channel."
At the Pentagon, the sources said, the
operation bypassed the small "special co-
ordination staff" in the office of Defense
Undersecretary Fred Ikle, which normally
handles projects where the Defense De-
partment provided weapons, parts, or
transport for covert CIA operations.
According to senior Pentagon officials,
Defense Secretary Caspar Weinberger di-
rected Gen. Colin Powell, then his mili-
tary assistant, to order the Army to begin
negotiations with the CIA for the sale of
2,008 TOW antitank missiles, plus parts for
Hawk antiaircraft missiles. Also involved
was Richard 'Armitage, assistant secretary
for international security affairs, who has
testified before the Senate Intelligence
Committee and is expected to return for
further testimony.
In addition to bypassing the officials
normally responsible for such programs,
Secretary Weinberger omitted several
other steps that would be part of covert
programs. A Pentagon document describ-
ing procedures for supporting covert activ-
ities says that notification of the congres-
sional intelligence committees is a condi-
tion for Pentagon participation. The intelli-
gence panels weren't notified this time.
Moreover, the department's general
counsel, who often conducts legal analyses
for special arms transfers, wasn't told of
the shipment to Iran.
Mr. Weinberger and oj.her top officials
say no U.S. weapons were sold in the oper-
ation before last January, when President
Reagan issued a -finding- authorizing the
shipments. Others have said that Pentagon
officials were involved in 1985 discussions
about replacing American weapons Israel
planned to send Iran. "I didn't know the
terms of the deal they had," said a Penta-
gon official who became involved in the
direct shipments made through the CIA in
1986.
Defense Department officials said they
were aware for some time that Israel was
supplying Iran with military equipment de-
spite the U.S. campaign to stop other coun-
tries from doing so.
Even at the White House, where Lt. Col.
North oversaw the secret program, the in-
teragency committee that routinely over-
saw covert operations was bypassed, ac-
cording to knowledgeable administration
officials. Vincent Cannistraro a CIA offi-
cer detaileribirargeeurity Coun-
cil staff who ordinarily coordinated over-
sight of covert action, has said he knew
nothing of the diversion to the Contras un-
til Mr. Meese revealed it.
Separately, Robert Gates, the CIA dep-
uty director, and Robert McFarlane, the
former national security adviser, testified
yesterday before a closed session df the
House Intelligence Committee, Mr. Poin-
dexter appeared before the panel but de-
clined to testify, citing his Fifth Amend-
ment right against self-incrimination. Mr.
Poindexter also declined to testify when he
appeared earlier this week before the
House Foreign Affairs committee.
And Robert Dutton, who works for Mr.
Secord at Stanford Technology Trading, re-
fused to testify, citing his Fifth Amend-
ment right, during an appearance yester-
day before the Senate Intelligence Com-
mittee.
ALSO CONTRIBVTING TO THIS ARTICLE
wAS EDWARD T. Poi Au.
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