ARMS SOLD TO IRAN SAID TO BE OVERPRICED DELIBERATELY TO RAISE FUNDS FOR CONTRAS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90-00965R000707060032-0
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 2
• Document Creation Date: December 22, 2016
• Document Release Date: December 19, 2011
• Sequence Number: 32
• Publication Date: December 18, 1986
• Content Type: OPEN SOURCE

Declassified in Part -Sanitized Copy Approved for Release 2011/12/19 :CIA-RDP90-009658000707060032-0
a WALL STREET JOURNAL
A~'n~~R~ _ 18 December 1986
ON P ~-
Artns Sold to Iran Said to Be Overpriced
Deliberately to Raise Funds for Contras
By JoH` ~b'ALl'r~TT
.ti'raj(Rrpurtcr n(THr-. W:~~.~. i rKf:r.~r J. a rc. v.
WASHINGTON - Reagan adminrstra?
lion officials deliberately paid the Penta-
gon bargain prices for weapons they with-
drew from U.S. military stocks and then
overcharged the Iranians for them in an
effort to establish a fresh source of mili?
tary aid for hard-pressed Nicaraguan
rebels. administration sources said.
.although the full story of the Iran-Con'
tra policy still isn't known. this suggests
that C'.S. arms sales to Iran and aid to the
Contras were linked from the start. at
least in some officials' rninds. [t also sug?
;gists that while the Reagan adminrstruion
decided to sell arms to [ran nwktly to win
the release of C.S. hostages ;+nd ro influ-
ence events in Iran. officials set the prices
of the arms and managed the secret npera-
tiun so some of the profits from the sales
could be diverted to the Contras.
The sources said President Reagan,
Central [ntelli~ence A envy Director ~ti"il-
liam l.asey an rte ease rC.i~f Staff
onal e~an never explicitly approved
funneling Iranian arms money to the Nica-
rteu;+ns. Other a ministration and con-
gressional offictals said they have uncov?
Bred nn ~rritten record linking the Iran
arms sales :rod Contra aid.
B~;t !t isn't known whether the president
~?r his 'nn .+ides wire ,iware that the Iran
rrrrs sales crni!d general+~ prnflts that
nu.,ht be do erred h, ocher r,nrses. Nnr is it
lear u?hv \tr. Casev, by hrs own ,+cruunt.
didn't :earn of the c i~~ersirmk r ore Attnr-
CP~' l~Pneral E ~~?111 .tee$e i'P':e;i~et t enl
t~ubhr!v last month.
Jir?. Jteese testified yesterda}? at a
closed hearing of the Senate Intelligence
Commutee. The panel. u?hu h tt:rood drnan
an administranun proposal th;rt it grant
limited immunity Ui witnesses lntnl~erl m
the [ran-Contra iffair to r~icrt testimony.
rxpectk b) hear today frnm farmer Na-
Uunal Security Adviser Robert \IcFurlane
for a se~~nnd time.
.also yesterday. Nirtra~ua pardoned
Eugene Hasenfus, a crew member of a pri-
vate plane downed by Nicartar+n govern-
ment forces Oct..i ?.ahile the craft ferried
arms to the insurgents. JIr. Hasenfus ??as
turned over to Sen. Christopher Dndd ~ D.,
(bnn.~. a liberal critic of the administra?
tion~s Central America policy, who said
5tr. Hasenfus could prose to be a valuable
witness ui the coming invesfigation by kpe-
crtl Hruse and Senate rommrttees ap-
pointed th+s week.
Last January, when the administration
decided t~~ begin selling l ?.S. arms to Irm.
President Reagan and his ad~uers ~~~ere
worried that the Contra mmPment might i At the same time, the admmistration
collapse unless it nbtarned fresh sources nt b~ asked +[s standard r~x;edures fnr rirn-
rnilitary ard. The president had begt;n a nine cuti?ert operations an out Lt Col.
campaign to win ?llri, million in C.S. mili- ; \orth m charge of the operatwn with !ngts
tar}- assistance, but his aides weren't cer- ~ oval help frnm a ne~~ly cre;+ted CI:1 rnun-
tain they could u?in in Congress. and they ~ ter^Nrrorism center. Zhe eL+borate nlan
were worried that e~?en if 'hey did, prig;ate ket~t the adrninistratinn s top uffirr+l- ut
aid to the msur,entk might evaporate be? the dark. p rmi rmv rnv nraeirlWnr vt~
fore new ['.S. go~~ernment aid could be de- ~ C;tsey and other top aides to denv that thev
livered. I knew about anv diaersutn of profits rrnm
Acrordmg to administration sources. i the Iranian arms sales. C'.S. intelli~enc?e
LL Cul. t~li~:er \nrth. the'ormer \atinnal ' sources said.
Security Cuenca ,:idr who was tired for al? ~s tlesi ed frnm the start to be
legedl}? mastermuiding the [ran-Contra a deniable operation, sat one r~ ~
scheme. concluded Lrte last }-ear that arms ~ Ltced intelligence source.
~ sales to [ran could generate huge profits. ut nt er top '~. n trials attended the
~.~?hich then could be funneied through mid- meeting at which Lt. Col. North presented
dlemen to the `iatragtian insurgents. fir. Nir with inflated prices for C'.S. xrms.
The sources saui Lt. Cnl. \nrth sug? .according to an account in Time maga?
Bested to his boss. then Nauonal Security zinc, M1tr. Nir later told his superiors that
Adviser Jahn Poindexter, that ['.S. arms "nn one 'asked questions'' about the prices.
sates to Iran might be used to' help the although they were three to four times the
Contras. It isn't known whether ~-ice Adm. book value of ?; ? weapons. Other sources
Poindexter a~prrne t e i ea, or u? et er said the Irania,,.~ 'a'cre charged as much as
he discussed a ~.~?Rh ~~'hite Hocike Chief of ~ six times the book value for soma C.S.
Staff Dona'cJ ~ in- ~Ir. f'airy' nr other 'weapons.
top ntticuilk' Although the value of the weapons ship-
~tessrs. Regan and Casev h?rv drnird i
^nder? oath that the~? kne~,v befor last i merits to Iran remains unclear, there has
month that crnfitk frnm the tans ;il ~ ~ been testimom~ that Iran paid about X30
ware diverted to the i'nntras. Last night. ~ million. The C[A, which collected the arms
after his mtelhgence ccmunittee testimony. ~ from military stocks, reimbursed the Pen?
Jtr. Meese was quoted by the .associated tagnn nn v ~+.._ mi ton.
Press as standing by his tiov. _:i assertion Sen ~~i iam Cohen ~R., 3laine~ said
the '~I,.? million was too low by a "sub-
that Lt. Col. North wars the only C'.S. offi- i stanaal" margin. He said the difference
vial ??hu knew all the cietailk of the diver- between the figure and the amount actu?
Sion of the arms-sales pr?nr,~rdk ro the Nic-
i illy paid possibly represented profits that
araguan insurgents..1P also reported that I ,,,,rtld have been used as secret aid to Nica?
~dr.:1leese card he auin't know if the Con- r;r~ran arerril:as. The price paid to the
tras actually recen ed name} ~rnnt the
arms sales. ~ P~~ntagnn "w;;s at least wholesale." he
Sep;+ratPlV, in ~'nkta Rica, C~~fitr.l ',~ul ;ittrC .1 ~'!OSrd-d00r he;tring VPS[erd;lC
!Fader Altnnso Rnbelo card the insurg~n?s ~t~ith i~efense Secretary Caspar ~~'ein-
' recei~~ed uu more than "~' ~- ni the arms- h`'r,~~~r. H~~ rc~iitsed to duc!ose whether \[r.
sales profits, with the rent~+uider guin,~ to ~~"inb?'r?,er had told the committee who
fixed ;he prices ~~f the Iranian arms.
"large, perhaps illegal commissions" to ~ Sen. Cohen said that the weapons-pri?
people he said he couldn t identify, accord- 'marily TOW anti-tank missiles and parts
utg to the AP. 'Ifor Hawk missiles-were mostly older
er~~sident Reagan signed an intelligence models no longer. in production and that
"fading ' authorizing direct sales of C.S. 'there could be some latitude in pricing
arms to [ran ~~n J,tn. !'. ;titer emuunrr;rl such items.
meer.n~s wit t-.tmi.ies n ,. nsta~ The administration first sanctioned sell-
apparent y in hones of w~innutg their re- ing arms to Iran through Israel. But last
Lase. an admimstratinn official s_iid. ~ January, it decided to push out two Israeli
~ rt in Iwo 'weeks of the presidential di- middlemen and to sell arms to Tehran di-
recti~ e. Lt. Col. North presented Amiran redly, even though Mr. Weinberger, Secre-
Nir, a t~~rr?~~nsm .ulvlser to Shimnn PerPS, tary of State George Shultz, and former
then prima nnnikter of Israel. with a list of National Security Adviser Robert McFar-
inflated pru~es fnr the arms the Iranians ;lane all opposed the move.
wanted. Lt. Cnl. North also gave the Israeli i t the time administration offici s
uitermediary the number of ;~ secret Swiss ~, also knew their main con uit to Iran. arms
bank ,+ccount in ~ehich the Iranian pay- 'dealer Manucher Ghorbanifar. had failed a
merits were r, he depnsued. C'.S. and [s- I CIA lie-detector test and that Mr. McFar-
rae!1 knUrr'e5 kaki. i
~~
Declassified in Part -Sanitized Copy Approved for Release 2011/12/19 :CIA-RDP90-009658000707060032-0
 Declassified in Part -Sanitized Copy Approved for Release 2011/12/19 :CIA-RDP90-009658000707060032-0
lane had reported he "was not a Gerson of
i~etrrity."Officials also knew the Iranians
hadn't kept their promises to release all
the Americans held hosts a in Lebanonin
return for Israeli es o ..-made
arms.
But Mr. Pofndexter, Lt. Col. North, and
other senior officials also had concluded at
the same time that the Contras weren't
raising enough money from private
sources to sustain their war against the
well-equipped Sandinista army, senior offi-
cials said. ~A, Penta?on and State De-
artment officials all a eed that unless
new more re to a sources o ar were
found, the anti- andinista movement cou
collapse.
-"C8T(~ress had approved $27 million in
nonlethal aid to the insurgents, but that
was due to run out March 31, and adminis?
tration officials weren't sure they could
win a fight on Capitol Hili for military aid.
Moreover, officials worried that even if the
administration persuaded Congress to voce
military aid to the Contras, contributions
from third countries and private donors
might dry up before it could be deliv-
ered.
"It was clear by then that the private
financing network Ollie (Lt. Cot. Northi
has set up just wasn't up to the job." said
one administration official.
Moreover, Sandinista forces, using So-
viet helicopter gunships, had driven most
of the Contra forces out of Nicaragua and
into Honduras. where Contra morale was
sinking. Contra leaders told Mr. Poin-
dexter that donations to their cause were
falling off. Complicating matters, Hondu-
ran officials had been blocking deliveries
of aid to the insurgents for two months.
"At that time, we were concerned that
a major Sandinista offensive might dis-
mantle the freedom fighters before we
could get more help to them," said one ad-
ministration official.
Mr. Poindexter, just days after he suc-
ceeded Mr. McFarlane as national security
adviser and the Reagan administration de-
cided to stop backing Israeli arms sales to
Iran, made a secret trip to Central Amer-
ica. Sources say he assured Contra leaders
and Honduran officials that the U.S. was
looking for ways to provide additional aid
to the insurgents.
Sources said that when Lt. Col. North
hit upon the idea of using Iraniah arms
sales to produce funds that could be used
to support the Contras, he turned to retired
Air Force Maj. Gen. Richard Secord and
other former military and intelligence offi-
cials to help carry it out without direct
U.S. government involvement. That way.
he apparently hoped to avoid violating a
congressional ban on "direct or indirect"
military aid to the Nicaragua insurgents.
Gen. Secord has refused to testify be-
fore Congress on his role in the affair, cit-
ing his Fifth Amendment right against
self-incrimination, but he recently told
friends [hat he had done nothing illegal.
Some administration officials have
questioned Lt. Col. North's judgment, how-
ever. They say it was a mistake for him to
share control of a Swiss bank account used
to divert money to the Contras. Moreover.
they said that under stress, Lt. Col. North
sometimes told bizarre tales.
For example, officials said that on the
day a Beirut. Lebanon, magazine revealed
the secret U.S. dealings with [ran. Lt. Col.
North burst into the office next door to his
own and told a colleague: "I've got people
in cages all over Europe."
Lt. Col. North is said to have told the
stunne co eaQUe, counterrntellreencP s~e-
cialis[ David Ma or, that re orts of the -
cre ran ea rn s were "di '
T e real sto . Lt. Col. North claimed was
that "our rren s"-a referenc ~ ~ r
an of ers took to mean the Israeli rnrr~ui-
genceservice :~tossad-had kidnar Prn i r~_I
atives of top Iranian officials. who could be
exc ange or ostaresin Lebanon.
Administration officials said they hay e
checked Lt. Col. North's story and believe
it is false.
Declassified in Part -Sanitized Copy Approved for Release 2011/12/19 :CIA-RDP90-009658000707060032-0