EX-AIDE TIES U.S. TO FUND TRANSFER

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90-00965R000807560008-1
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 2
• Document Creation Date: December 22, 2016
• Document Release Date: February 8, 2012
• Sequence Number: 8
• Publication Date: December 9, 1986
• Content Type: OPEN SOURCE

Declassified and Approved For Release 2012/02/08: CIA-RDP90-00965R000807560008-1
nTl^t F.Y'~1: LY I
Ex-Aide Ties U.S.
To Fiend Transfer
McFarlane Sans President's %rd
Treated as Intelligence `Finding'
W h ngtoa t Jta rifer
WASHINGTON POST
9 December 1986
Former national security adviser Robert C. McFar-
lane testified yesterday that he was told last May by Lt.
Col. Oliver L. North that "the U.S. government had
applied part of the proceeds" from the Iranian arms
sales "to support the contras," a contradiction of asser-
tions by President Reagan and Attorney General Edwin
Meese III that Americans played no role in funneling
the money to aid the Nicaraguan rebels.
In four hours of testimony before the House Foreign
Affairs Committee, McFarlane said he had been in-
formed of the U.S. government role by North, who was
recently fired from the National Security Council staff,
at the time the two men secretly traveled to Iran in an
attempt to exchange U.S. arms for American hostages
held by pro-Iranian extremists in Lebanon.
In another controversial disclosure, McFarlane said
the White House considered the president's oral ap-
proval in August 1985 of the shipment of U.S.-made
arms from Israel to Iran to have the same authority as a
written intelligence "finding," the legal mechanism au-
thorizing U.S. government covert operations. Part of
the controversy surrounding the secret arms sales cen-
ters on whether such an activity violated U.S. laws on
transferring weapons to terrorist nations.
McFarlane also told the committee that Meese had
given an oral opinion that such unwritten findings by
the president were legal. The president informed key
members of the administration about his oral finding in
"one-on-one conversations," McFarlane said.
McFarlane's appearance came on the first day of pub-
lic hearings by the House into the controversy that has
beset the White House for more than a month. The
House Permanent Select Committee on Intelligence is
scheduled to begin closed hearings on the matter todg
The Senate Select Committee on Intelligence opened
the second week of its closed hearings yesterday with
testimony by Elliott Abrams, assistant secretary of
state for inter-American affairs, and Robert Owen, who
worked as a State Department consultant on the so-
called humanitarian aid program for the contras. Owen
became the committee's third witness to refuse to tes-
tify by invoking the Fifth Amendment.
The former national security adviser's account of the'
handling of the profits from the Iran sales contradicted
statements by Reagan in a Time magazine interview
two weeks ago. The president said "another country"'
overcharged the Iranians for the arms and put the pro-
ceeds into contra bank accounts. "It
wasn't us funneling money to
them," he added.
Meese, during a Nov. 25 news
conference, said the bank accounts
for the profits were opened by
contra representatives. Information
about those accounts was passed on eign Affairs Committee. Both in-
to representatives of Israel, who yoked the Fifth Amendment last
arranged for the fund transfer, ac- week before the Senate committee
cording to Meese's version. Amer- and have already invoked House
icans, he said, did not control the Rule 11, which allows subpoenaed
money and did not participate in the witnesses to request exclusion of
transfer of the funds. cameras. Citing the president's
Under congressional prohibitions pledge of full cooperation with the
in force at that time, all U.S. mil- various investigations, the House
itary aid to the Nicaraguan rebels committee also has requested-but
was forbidden and U.S. officials not subpoenaed-NSC staff mem-
were barred from soliciting such ber Howard J. Teicher, who was the
assistance directly or indirectly. council's expert on Iran.
McFarlane's explanation for the The Senate Select Committee on
legal status of oral findings by Rea- Intelligence spent much of yester-
gan appeared to conflict with past day questioning Abrams, who
practice. Traditionally, intelligence chaired the interagency group guid-
findings have been drafted within ing the administration's contra pro-
the National Security Council with gram. Abrams has also been iden-
tified as the State Department of-
ligence Agency. They are then nor- ficial who solicited a multimillion-
mally circulated within key depart- dollar donation from the sultan of
merits for approval and signed by Brunei for the contra "humanitar-
the president. Copies are sent to ian" aid fund and directed that the
Cabinet members_to keep key ad money be sent to a Swiss bank ac-
ministration officials informed about count.
cla ndestine operations. Owen, who invoked the Fifth
Justice Department spokesman Amendment, is a former Senate
Terry Eastland said late yesterday aide who served as a link between
after conferring with Meese in Lon- North and the contras while serving
don that the attorney general would as a consultant to the State Depart-
have no comment until reviewing ment beginning in 1985. Owen also
McFarlane's testimony. helped organize Nicaraguan Indian
A former top CIA official familiar military opposition in Honduras and
with agency activities and the law a 200-man force in Costa Rica in
said yesterda that he could not 1985, according to the Associated.
recall a presidential fin di b Press.
made orally. In the House hearing, which
House legal experts say that a drew so many reporters and tele-
presidential finding on the arms vision cameras that a separate hold-
shipments was required under both ing room was opened so the over-
the Arms Control Export Act, flow crowd could watch on televi-
which barred weapons shipments to sion, both McFarlane and Secretary
Iran as a country supporting terror- of State George P. Shultz took
ism, and the 1980 Hughes-Ryan some blame for the current crisis.
amendments, which require that McFarlane said he made a mis-
the White House notify congres- take in believing that the United
sional leaders of covert intelligence States could publicly follow one pol-
operations. icy while pursuing a contrary one in
The Senate intelligence panel secret. He said he should not have
hearings resumed yesterday with urged a program conducted "in a
Chairman David F. Durenberger way our body politic cannot under-
(R-Minn.) saying, "I still feel the stand."
key as far as the American public is Shultz said on two occasions that
concerned is for Ollie North and after he learned of arms shipments
John Poindexter to tell Ronald Rea- going on without his formal approv-
gan everything they know and for al, he could have done more to pre-
Ronald Reagan to tell the rest of vent them.
us." McFarlane, though he put the
North and Vice Adm. Poindexter, Iran initiative in the broad geopo-
who succeeded McFarlane as na- litical context of that country's
tional security adviser until resign- proximity to the Soviet Union, also
ing last month, are scheduled to said, "I'll have to admit the hostages
appear today before the House For- were clearly the, leading underpin-
ning of this whole initiative."
Declassified and Approved For Release 2012/02/08: CIA-RDP90-00965R000807560008-1
 Declassified and Approved For Release 2012/02/08: CIA-RDP90-00965R000807560008-1
Reagan, he said, "was terribly,
terribly concerned about the wel-
fare of the hostages."
McFarlane said he reviewed the
Iran program in December 1985,
after it had been in place for six
months, and found "it was not pro-
ceeding as we hoped it might." His
recommendation to the president at
that time, McFarlane said, was that
no more arms be shipped but that
discussions with Iranian represent-
atives be continued.
Committee members tried to get
McFarlane to say that neither
North nor Poindexter would have
initiated the diversion of funds from
the arms sales to aid the contras
without direction or approval of the
president.
McFarlane several times said
they would have needed "higher
authority" but balked at saying it
would necessarily have come from
the president.
At one point he said, hypothet.
ically, that prior approvals for sup-
port of the contras may have "led
them to take actions that were not
specifically authorized but where
they thought it was previously
granted."
"I can't really account for how it
occurred," McFarlane said of the
contra diversion, but three times
during his testimony he repeated
that North said the U.S. govern-
ment applied certain Iranian funds
to aid the contras.
Shultz and McFarlane provided
the most detailed official recon-
struction of the origins of the Iran
operation to date. Both said that the
initiative originated with Tehran, an
account echoing Reagan in his Time
interview. That contrasts with the
first administration statements,
which said the Reagan administra-
tion decided to seek new contacts
with Iran after the hijacking of
TWA Flight 847.
After June 1985, Shultz said, the
use of arms sales to Tehran was
"periodically considered" as a way
to open contacts with Iran and gain
release of U.S. hostages. McFar-
lane said he was visited by a third-
country representative, presumed
to be from Israel, in July who said
Iranians opposed to terrorism and
eager to end the Iran-Iraq war
wanted to open conversations.
McFarlane agreed, he said, byt
only after their "bona fides" were
established, a subject he told the
legislators he would expand on in a
closed-door session.
In August, the Israeli represent-
ative returned, saying the Iranians
were interested in dialogue but also
wanted "modest quantities of mil-
itary hardware."
McFarlane said the president
made his decision in August that jf
"a third government [Israel] weft
ahead to provide [the Iranians] wild
small quantities of arms," he wou$,i
then permit repurchases to replage
those given to Tehran. I
The transfer took place in Sep-
tember 1985 and the Rev. Benja-
min Weir was released.
Shultz told the legislators he was
never directly told that arms trans-
fers had been undertaken in Sep-
tember and again in November
1985 by the Israelis with Reagan's
approval. Instead, Shultz said, "I
learned, so to speak, that plans had
been implemented" but as far as he
knew they had not been "consum-
mated."
He also learned that a November
shipment had been "rejected" by the
Iranians.
In December, both Shultz and
McFarlane said, there was a discus-
sion about the issue and a U.S. del-
egation, headed by McFarlane, was
instructed to meet with Iranian rep-
resentatives in London about future
relations. McFarlane was directed
by the president to tell the repre-
sentatives that there would be no
further arms shipments.
Staff writers Tom Kenworthy, James
R. Dickenson, Helen Dewar, Howard
Kurtz and Bob Woodward
contributed to contributed to this report.
:7
.Z.
Declassified and Approved For Release 2012/02/08: CIA-RDP90-00965R000807560008-1