WASHINGTON TIMES - REGAN DENIES GIVING SECRET FUNDS APPROVAL

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP91-00901R000500230011-9
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 15
• Document Creation Date: December 14, 2016
• Document Release Date: November 30, 2000
• Sequence Number: 11
• Publication Date: November 28, 1986
• Content Type: NSPR

Approv ' Release 2003/04/02: CIA-RDP91-00901 R0005002300't4 '''
WASHINGTON TIMES
28 November 1986
? ?
gitvmg
an denies
e
secret funds approval
By Mary Belcher
THE WASHINGTON TIMES
SANTA BARBARA, Calif. -
White House Chief of Staff Donald
Regan yesterday denied reports that
he had approved a secret U.S. plan to
divert profits from Iranian arms
shipments to Nicaragua's anti-
Marxist rebels.
United Press International quoted
an unnamed White House source as
saying: "Regan approved the con-
cept of using Iran funds to finance
the Contras."
UPI also said Mr. Regan was in-
formed regularly about the opera-
tion by Vice Adm. John Poindexter,
the national security adviser who re-
signed Tuesday, and Lt. Col. Oliver
North, the NSC official who was dis-
missed for organizing the scheme.
Mr. Regan called the report "ri-
diculous."
"I was not briefed throughout on
all of this," he said, emerging from a
Thanksgiving dinner at which he
was host forWhite House staff mem-
bers.
"I never heard of it before the
news came out on Monday about
what was happening with the Iran
money and the Contras;' the chief of
staff said.
Mr. Regan said he had "no idea"
where the UPI report originated.
"How can you comment on an
unnamed source?" he asked.
Justice Department investigators
on Monday uncovered the diversion
of $10 million to $30 million in prof-
its from the secret arms shipments
to Swiss bank accounts controlled by
Nicaraguan resistance forces.
Attorney General Edwin Meese
III said Tuesday that Col. North, for-
mer deputy director of the NSC, was
the only U.S. official who had "pre-
cise" knowledge of the Nicaraguan
connection.
Mr. Meese said Adm. Poindexter
and former National Security Ad-
viser Robert McFarlane had general
knowledge of the diversion of funds.
As the intrigue deepened over
who in his administration knew what
about the arms deals, President Rea-'
gan spent a secluded Thanksgiving
with his family at his nearby moun-
taintop ranch.
When Mr. Regan was asked ear-
lier yesterday whether the rising
tide of allegations was getting out of
control, he said, "No, no, no. We want
to have out in the open anything of a
wrongdoing.
"Remember, the first we heard of
this was Monday afternoon ... when
the president first got the informa-
tion that there had been
wrongdoing.
"By Tuesday morning, he had
made his statements;' Mr. Regan
said. "Whenever there is something
wrong we want it to come out.
Meanwhile, a pared-down White
House staff here had little to say
about a Los Angeles Times report
that Col. North destroyed doc-
uments that might have revealed the
scope of administration in-
volvement, which is under investiga-
tion.
The Los Angeles Times said Col.
North, who was interviewed by Jus-
tice Department officials over the
weekend, destroyed documents that
might have implicated others in the
operation
The newspaper reported that Col.
North destroyed the papers at least
36 hours before the locks on his
White House office were changed
and the premises were secured ear-
lier this week.
Col. North, in a brief interview
before joining his family for
Thanksgiving dinner in Washington,
said: "I have no statement to make at
this time."
"At the appropriate time and in
the appropriate forum I will make a
full exposition of the facts as known
to me," he said. "The time and place
of that exposition will be determined
with the advice of counsel."
A senior Justice Department offi-
cial in Washington yesterday told
The Washington Times that depart-
ment investigators on Saturday gave
the NSC a list of documents belong-
ing to Col. North they wanted se-
questered.
The senior official, responding to
the Los Angeles Times report, said
the investigators reviewed doc-
uments on Monday and Tuesday and
that they appeared complete.
He did not confirm or deny the
report that Col. North had destroyed
documents.
Another source close to the White
House said Col. North had gone to
his office over the weekend to clean
up, not to destroy documents.
The Justice Department and the
FBI are investigating whether Col.
North or others broke the law in car-
rying out the Iranian arms sales and
by diverting funds to Nicaraguan
rebels.
Mr. Regan said he had "no idea of
any wrongdoing or any right-doing"
on Col. North's part, "and that's why
we have the investigation."
Earlier yesterday, Col. North was
turned away at the White House
gate. His name has been put on a
"do-not-admit" list because he is un-
der investigation.
"He no longer has a White House
pass, and he cannot be admitted to
the compound for any reason;' said
White House spokesman Dan How-
ard.
A major question is whether Col.
North - who was deeply involved in
efforts to secure private funding for
the Nicaraguan resistance - insti-
gated the diversion of arms ship-
ment funds to Swiss bank accounts
controlled by the Contra rebels.
Mr. Howard would not comment
on any of the escalating swirl of al-
legations and reports.
"The whole matter is in the hands
of the professional investigators,"
Mr. Howard said.
UPI, quoting two unnamed White
House officials, also reported that
President Reagan has been briefed
regularly on actions taken by Col.
North to funnel private military aid
to the Nicaraguan rebels, two White
House officials said Thursday.
However, the two officials said
they did not know whether the
briefings by the White House na-
tional security adviser touched on
funds channeled from Iranian arms
sales to the rebels.
The president, who will return to
Washington on Sunday, spent yester-
day morning clearing brush and rid-
ing horses.
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 Meanwhile, the Urged For
Martin Jenco, who was released last
July by pro-Iranian Moslem extrem-
ists in Beirut, yesterday expressed
hope that the remaining hostages
would be freed.
"Perhaps it's going to have to be
Christmas or it might be a feast of
the Moslems, but I know it's going to
be a feast day celebration when
they're set free," Father Jenco said
before attending a Thanksgiving
dinner at Blessed Sacrament
Church in Westminster, Calif.
In Marinette, Wis., a lawyer for
the family of Eugene Hasenfus said
the investigation of the Iranian arms
sales and Contra funding may help
free Mr. Hasenfus from a Nicara-
guan prison.
Attorney Ernest Pleger said the
investigation provides an opportu-
nity to call Mr. Hasenfus to testify in
the United States because the Iran
deal involved funneling money to the
Nicaraguan resistance.
"I wouldn't be at all surprised if
there were a formal request made
that he be present for those hear-
ings," Mr. Pleger said.
There is speculation that money
secretly funneled to the Contras
from the Iranian arms deals was
Released290-0ar~~~ ~(8-Ry D5~I9p1~Y0 9018000500230011-9
flights such as the one that crashed
last month with Mr. Hasenfus
aboard. Mr. Hasenfus, the sole survi-
vor of the crash, was captured by
Nicaraguan government troops and
subsequently sentenced to 30 years
in prison.
In a separate development for-
mer CIA Deputy Director Botby__
/-~ Ray Inman said he would turn down.,
any request bv.thg prese nt to _ ea
the NSC. "I have not been contacted
by anyone in the administration
about servinL.and Iam not
available," Mr. Inman said Wednes-
day, responding to reports that he
was being considered as a re-
p acement or Mr. Poindexter.
Mr. Inman, who heads a computer
and electronics firm and describes
himself as a Reagan supporter, said
he was skeptical of the administra-
tion's position that Col. North mas-
terminded the complex Iranian
arms deal.
? Jeremiah O'Leary and Michael
Hedges contributed to this report in
Washington.
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UNITED PRESS INTERNATIONAL
27 November 1986
IRAN ARMS - INMAN
AUSTIN, TX
HLE GLILY
f't Former CIA deputy director Bobby Ray Inman says he would not accept if
President Reagan asked him to head the National Security Council following John
Poindexter's resignation.
"I have not been contacted by anyone in the administration about serving and
I am not available,'' Inman said Wednesday, responding to reports he was being
considered as the next national security adviser.
Inman, who heads the Microelectronics and Computer Technology Corp. and
describes himself as a Reagan supporter, said he was skeptical of the
administration's position that the complex Iranian arms deal was masterminded by
Lt. Col. Oliver North.
Reagan fired North and accepted Poindexter's resignation after an
administration inquiry showed the profits from the sale of U.S. military
equipment to Iran were shuttled to Swiss bank accounts controlled by Nicaraguan
rebel leaders.
Reagan's role in the secret shipment of arms to Iran has revived the nation's
Watergate-era distrust of government, Inman said.
''We're back again to the mold of 'don't trust your government,''' the
retired admiral said.
"I have some difficulty believing a lieutenant colonel was acting all on his
own but that does not mean the president was aware of all the details, '' he
said.
''It is clear it is very damaging to the president, whatever one's view of
him, pro or con,'' Inman said. "I happen to be pro. I think President Reagan's
greatest contribution was restoring confidence in the leadership of the
presidency.''
But Inman said that confidence has been shattered by the covert arms deal.
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WASHINGTON POST
27 November 1986
Reagan Names Board to Study NSA'
By David Hoffman
Washington Post Staff Writer
SANTA BARBARA, Calif., Nov,
26-The Justice Department today
expanded its probe of the Iran
weapons shipments into a full-scale
criminal investigation as Attorney
General Edwin Meese III said peo-
ple with "tangential" ties to the gov-
ernment were involved in the op-
eration.
Justice Department officials said
the probe, which began over the
weekend with Meese and a handful
of his assistants, has been enlarged
to include the Federal Bureau of
Investigation.
In Washington, a department of-
ficial told Washington Post staff
writer George Lardner Jr. that the
investigation will be a wide-ranging
inquiry that could include inter-
views abroad and the presentation
of evidence to a federal grand jury.
The move transforms what began
as a fact-finding exercise for the
president into a formal inquiry as-
signed to the Justice Department's
Criminal Division and under
Meese's supervision.
Meanwhile, President Reagan
announced the appointment of a
three-member review board, head-
ed by former senator John G. Tow-
er (R-Tex.) and including former
secretary of state Edmund S. Mus-
kie and Brent Scowcroft, who was
President Gerald R. Ford's national
security adviser, to determine the
proper government role of the Na-
tional Security Council.
The appointments came a day af-
ter Reagan accepted the resigna-
tion of his national security adviser,
Vice Adm. John M. Poindexter, and
dismissed Lt. Col. Oliver L. North,
a member of the National Security
Council staff. Meese said Tuesday
that North "knew precisely" about
the complex transactions that saw
money from the Iranian arms sales
go to help the Nicaraguan contras
and that Poindexter had some
knowledge of the diversion of funds
and did not stop it.
In an appearance on ABC's "Good
Morning America" today, Meese
said, "It appears that there were
some others involved and that's
what we're looking into now ....
There are some consultants in-
volved and other people who have a
tangential relationship to the Unit-
ed States government that we'll be
talking to."
In another development, a State
Department spokesman dismissed reports that Secre-
tary of State George P. Shultz was planning to resign
and said that "the secretary has every intention of stay-
ing the course with [the president] to the end."
Reagan arrived here for a Thanksgiving vacation as
an ABC News poll showed deepening skepticism among
the American public of the president's explanations
about the Iran operation. The poll showed that Rea-
gan's job approval rating has fallen another four points
since his news conference last week. Fifty-three per-
cent of those surveyed said they approved of the way he
is handling his job, compared to 67 percent in Septem-
ber.
The nationwide poll, taken after the disclosure of the
Nicaraguan link Tuesday, showed that six in 10 of those
questioned say they think that Reagan knew about the
diversion of money to the Nicaraguan contras before
Monday, which is when he said he learned of it.
In addition, 67 percent said they think Reagan knew
about it from the start, while 28 percent said he did not
know of it from the start.
Asked whether the resignation of Poindexter and the
firing of North ended the controversy, eight in 10 of
those questioned said it did not. Overall, 67 percent
said they disapprove of the way Reagan has handled the
Iran arms situation.
Three of every four people questioned said they dis-
approved of the way the Iran weapons money was di-
verted to help the contras.
Reagan's public approval rating has not been so low
since the controversy over deploying the Marines in
Lebanon in September 1983. However, his approval
rating is higher than his low of 42 percent in January
1983 when the recession was ending.
The survey showed a strong continuing belief in Rea-
gan, even if he makes mistakes. Sixty-eight percent of
those questioned agreed with the statement that Rea-
gan may have made mistakes in this particular instance
but that it does not raise major questions about his abil-
itv to run the country. Only 26 percent agreed with the
statement that Reagan is not in control of his presiden-
cy and that the situation raises major questions about
his ability to govern.
In a written statement today, Reagan said the newly
appointed review board will conduct a "comprehensive
study" of the future role and procedures of the National
Security Council staff "in the development, coordina-
tion, oversight and conduct of foreign and national-se-
curity policy."
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"In particular," he added, "I have asked the board to
review the NSC staff's proper role in operational activ-
ities, especially extremely sensitive diplomatic, military
and intelligence missions. Specifically, they should look
at the manner in which foreign and national-security
policies I established have been implemented by the
NSC staff."
Reagan created the board in response to sharp crit-
icism in recent weeks that the White House had over-
stepped its bounds in getting involved in the operational
details of.the Iran arms shipments, while excluding sen-
ior military leaders and diplomats.
Reagan said he wanted the review completed in a
prompt and thorough manner." White House deputy
press secretary for foreign policy Dan Howard said
Reagan would meet with the members Monday to dis-
cuss the effort.
"The bottom line is that they will have carte blanche
to talk to anyone and see anything they need to look at,"
he told reporters as Reagan flew to his California ranch
for the holiday.
White [louse officials said a replacement for Poindex-
ter has not been selected. "We're collecting names,"
chief of staff Donald T. Regan told reporters on arrival
at Point Mugu Naval Air Station this afternoon.
Sources said one candidate for the NSC post was for-
a mer CIA w Inman.
As the president stepped from Air Force One, he was
quickly directed away from a "pool" of reporters under
the wing and taken in the opposite direction to meet
with a group of schoolchildren.
Regan insisted before leaving Washington that he did
not have a responsibility to look into the Iran weapons
shipments earlier. "1 didn't know anything was happen-
ing," he said. "You understand that the NSC doesn't
report to the chief of staff."
Despite calls for appointment of an independent
counsel to take over the probe under the Ethics in Gov-
ernment Act, officials in Washington said Meese in-
tends to remain in charge until the Justice Department
has developed "a complete factual record." They said
there was not enough evidence yet to think that anyone
has committed a federal crime, let alone that one has
been committed by an official high-ranking enough to
trigger appointment of an independent counsel.
The inquiry will be "basically managed" by Associate
Attorney General Stephen S. Trott and Assistant At-
torney General William Weld, who heads the Criminal
Division.
"It will be complete, thorough and expeditious," one
official said. "We would like to produce a product by the
end of the year, but we just don't know how long it will
take."
The mushrooming inquiry began modestly last
Thursday, according to a knowledgeable source, when
Meese and Chuck Cooper, the assistant attorney gen-
eral in charge of the Office of Legal Counsel, were re-
viewing legal issues involved in testimony to be given
by administration officials on the increasingly explosive
issue of arms shipments to Iran.
They found "noticeable gaps" in the records kept by
different officials. So, about 11:30 a.m. Friday, Meese
met with Reagan. Regan and Poindexter and told them
they needed a comprehensive overview.
"Everybody agreed that was needed," the source
said. Meese was given the chore with the idea that a full
report would be ready for the president to present at a
scheduled NSC meeting on Monday afternoon. Meese
headed back to the justice Department and assembled a
small team, including Cooper, Assistant Attorney Gen-
eral William Bradford Reynolds, Meese staff assistant
John Richardson and several others. -
The worked through the weekend, reviewin doc-
uments and talking to people, inclu ing t e prest ent.
` gan, u tz, Defense Secretary Caspar W. Weinber-
ger, CIA Director William f Casey Poindexter. North
and former national security adviser Robert C. McFar-
lane. Meese spoke with Vice President Bush on Mon-
"These were conversations, not part of a formalistu
investigation," the source emphasized.
By Saturday, the review team came across informa-
tion indicating a connection between funds coming out
of Iran and the Nicaraguan contras. That link became
increasingly clear as the weekend wore on. As a result,
the source said, Meese met told Reagan at 11 a.m.
Monday that more information was needed. The topic
was taken off the NSC agenda. Meese conferred with
Reagan late Monday and early Tuesday.
By that time, the source said, "Poindexter had al
ready let it be known he would be leaving, and the pres-
ident said it was time to get all of this out."
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 ARTICLE oved For Release 20031 Y , : A-F J1YOO' Oi OOO500230011-9
ONPI~I Z ovember 1986
Bugs tipped off arms deal
3 By JOSEPH VOLZ
News Washington Bureau
WASHINGTON-Electro-
nic eavesdropping on
Mideast arms dealers is be-
lieved to have provided key
tipoffs to the secret funding
of the contras with profits
from Iran arms sales.
Attorney General Edwin
Meese said that it was not
until he ordered a "thorough
review of a number of inter-
cepts and other materials"
over the weekend that he
learned there was a "high
methods by volunteering kee
Dealers were tapped m or ma ion on wron
o~ n~to Justice probers.
probability" that contra
money-laundering had
occurred.
Meese gave no details but
it was believed that the Pen-
tagon's top-secret National
Security Agency, which has
worldwide electronic eaves.
dropping facilities, was
tuned into phone or radio
conversations among
Mideast arms dealers and
overheard talk about Iranian
and Israeli transactions that
Michael Shaheen, in a classi
fied report, later criticized
Civiletti for withholding th
information.
would block any real pro
at the time that the NSC
chaired by President Carter
poured money into secret But a departure, Aim
contra Swiss bank accounts. 4 Bobby Inman, former he
What is not known is how of NSA and deputy CIA di
long the NSA had this evi. rector, played a key role
dence, suggesting possible uncovering a Carter involving ts1
crimes by U.S. officials, be- Nation scandal involving h
fore turning it over to the Libyan business dealings of
Justice Department. the President's brother, Bilk
In a variety of scandals ly' The i
rover the years, from Water- that Daily News
Inmanlearn
gate to Koreaaate to contra- back in 1980,
been now retired, bypassed the
both
IC gate, have the NSA and National Security Council'
CIA- sources and and personally went straigh
jeop~ to then-Attorney Genera
Ben Civiletti with NSA-inter
cept material indicating tha
Billy Carter had receive(
thousands of dollars in
"loans" from Libya.
Withheld source
Inman told Civiletti not to
reveal the source but
Civiletti failed to tell anyone
including his own aides
thereby withholding a key bit
of information from FBI
agents until they found out
on their own three month
later.
Inman was said to believe
,illy . was no prpspcute
St, ?;~l r i eared, r
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 App a 219ffR / A O "500230011-9 STATINTL
QNFW 21 November 1986
By Nancy Ferris
GCN Staff
Procurement Policy
Inman Sees TVrf Battles Ruling
Bobby R. Inman, who
steps down at the end of the year as head of
the Microelectronics and Computer Tech-
nology Corp., recently had harsh words for
congressional oversight of ADP.
In his dealings with the House Govern-
ment Operations Committee, Inman told
an audience of more than 150 federal offi-
cials and government contractors in Wash-
ington, he has found "a very limited under-
standing" of technology and how it is
changing. Further, he said, "there's a fixa-
tion that everyone in business is dishonest
and out to make a quick buck."
These remarks came in response to an
audience question about procurement pro-
cedures under the Warner Amendment and
the Brooks Act. Inman, who has been based
in Texas for several years, said he was not
up to date on such issues, but he observed
that "turf" considerations, rather than con-
cern about efficiency and effectiveness,
seem to dominate the government's pro-
curement policy-making.
In his earlier talk, Inman said there is a
trend toward more complexity in acqui-
sition even though "Mr. Brooks may retire
one of these years." His reference to Rep.
Jack Brooks, the Texas Democrat who
chairs the Government Operations Com-
mittee, drew some audience applause.
Inman also noted with disapproval that the
government takes 12 to 13 years to acquire
major systems, while the procurement cycle
in the private sector is much shorter, he
said.
Inman spoke at-a symposium on "Strategic
Computing in the Federal. Government:
1986 and Beyond" sponsored by the Oracle
Corp. of Belmont, Calif. While most of his
talk was devoted to current and future ADP
issues, he did not hesitate to comment on
topics ranging from oil wells to the Gramm-
Rudman budget balancing law [see below].
Asked about information security, he
criticized the National Security Agency, al-
though he referred to it only as an organiza-
tion of former colleagues. Inman was NSA
director and also deputy director of the
CIA. NSA wants to achieve a level of
security such that it would take an enemy
40 years to break it, he said, but such pro-
tection is not cost-effective. The real need
is to protect information for a few days or at
most a few months, he said, pointing out
that much sensitive information quickly
loses its value.
In an apparent reference to NSA's plan
to replace the Data Encryption Standard
for protecting sensitive but non-classified
information, he said that "I don't think we
Approved
need to change the standards" to the point
where no organized government efforts
could ever break the code.
Instead, he said, security should rest on
continually generating new, random keys
for each use. Such an approach allows for
an occasional security breach but limits the
amount of information lost in any given
breach, he said.
"You have to think about personnel secu-
rity as the single greatest point of vulnera-
bility," Inman said. Saying that most of
those who have provided U.S. secrets to
other nations have been motivated by
money, he observed that examination of
employees' personal finances raises ethical
and privacy questions.
Computer Matching
He said that when he headed it, the CIA
was allowed no access to Internal Revenue
Service data on individuals with national
security responsibilities. Inman recom-
mended that security agencies supply the
IRS with lists of persons holding security
clearances. The IRS would then match the
list with its files to see whether the net
worth of anyone on the list grew substan-
tially during a year. For those with such
increases in wealth, Inman said, the IRS
could then quickly review the returns to see
whether the source of the money was sat-
isfactorily explained. A list of those without
sound explanations would be returned to
the security agencies.
"I don't consider that [kind of arrange-
ment] intrusive into the privacy Americans
deserve," Inman said.
Overall, his theme was the need for more
computing power to support decision-mak-
ing in government and more government
support of research and development ef-
forts. "Computing capacity is at the very
heart of the success to be gained" from
R&D, he maintained.
"I'm convinced from sitting on the side-
lines that we're heading in the wrong direc-
tion" when the government cuts back on
data collection and on information systems,
he said, arguing that knowledge is the key
ingredient in better government. While the
pace of change is increasing, government is
falling behind, he said.
As an example, he said the Federal Re-
serve System is not meeting the challenge
of eliminating the "float" - the delay in
processing monetary transactions. As a
consequence, some people are able to
manipulate the monetary system, and the
Fed's systems do not support tracking these
manipulations. Improvement in the Fed's
systems "could impact on the productivity
of our entire financial system," he said.
Inadequate information on foreign trade
and on job losses and retraining needs also
have hampered the effectiveness of national
policies, he suggested later in his remarks.
After outlining the technical advances he
expects in fields such as energy, telecom-
munications and biotechnology, Inman
said the federal government's role is to in-
vest in R&D (which it does through agen-
cies such as the National Institutes of
Health and the Department of Energy) and
to take the lead in applying new technol-
ogies to basic industries. In the latter role,
he said, the government is not succeeding.
Inman's interest in technology applica-
tions reportedly influenced his decision to
become chairman and chief executive offi-
cer of Westmark Systems Inc. in January.
Westmark, a new Texas firm, has been de-
scribed as a venture capital company or
holding company for high-technology
firms, especially in the defense field.
With respect to national security issues,
Inman said the nation's defense requires
faster, more sophisticated processing of in-
formation and faster responses to threats
once they are detected.
"The odds are growing that we will enter
into additional agreements" to limit actual
tests of weapons systems, he added, and
therefore simulation of weapons perfor-
mance will increase in importance. Cryp-
tography will remain "a very critical ele-
ment of this country's national security as
far out as I can see," he said.
Advanced Computing
As for artificial intelligence, Inman said,
"there's still more hype, in my view, more
brochure salesmanship in what's going on
than reality." He said expert systems hold
some promise, but, "I remain a healthy
skeptic about the gains to be made in natu-
ral-language processing."
Parallel processing is likely to yield great
improvements in price-performance,
Inman said, and distributed simultaneous
processing will be necessary for the Strate-
gic Defense Initiative and other defense
systems.
Software, however, is "the great missing
ingredient," he said, although advances
have been made in such areas as program-
mer productivity tools and automatic code
generators.
Noting that the numbers of U.S. students
in graduate science and research programs
have been declining since 1968, he called for
changes in immigration laws to permit
more U.S.-educated foreign students to re-
main in this country.
 App
20/b~MI'-R~961 (00230011-9
ovem er
Inman Speaks on Issues
Adm. Bobby R. Inman (Ret.)
Retired Adm. Bobby R. Inman had
something to say about many current
issues when he spoke recently at a
Washington symposium:
^ On the barriers to change in federal
agencies: "The problems begin essen-
tially with the one-year budget cycle."
Federal executives must spend too much
of their time developing, defending and
implementing budgets. More long-range
planning is needed.
^ On the future of special-purpose
computers and embedded systems: "I
believe it will be commercially viable 10
years out" to produce many kinds of spe-
cial-purpose and dedicated machines.
Their use will grow.
^ On the Gramm-Rudman deficit re-
duction law: It probably signals the be-
ginning of a cycle of decreasing govern-
ment employment. The fact that
virtually no programs, including de-
fense, are exempted is significant.
^ On the strategic importance of the
Customs Service: "That agency was one
of the most antiquated in government
just five years ago." Its progress enables
it to carry out very important missions
in combating terrorism, bolstering the
nation's competitive position and con-
trolling international transfers of tech-
nology.
^ On spies: Blackmail used to be one
of the most common reasons for Ameri-
cans to turn traitor, but today "life styles
have changed so that it's pretty hard to
think of something you can blackmail
someone for."
^ On technology in space: Direct
broadcasts from orbiting satellites no
longer seem likely in the foreseeable fu-
ture, and commercial manufacturing in
space will not be undertaken until after
the turn of the century.
^ On progress in materials: Alloys will
increasingly replace conventional steel
and aluminum, and stealth technology
will be applied in construction. One out-
come will be easier human habitation in
space, the oceans, arctic regions and
deserts.
? On energy issues: The United
States' lead in nuclear energy has been
lost to the Europeans and Japanese, but
this country still holds the lead. in fuel
cell technology. Energy companies will
work to wring more from their existing
fossil-fuel deposits; they currently re-
cover only 25 percent of the contents of
wells and mines.
^ On the Soviets and the arms race:
Inman was "surprised" at the recent dis-
cussions at the Iceland summit of dis-
carding all ballistic missiles, because
such an agreement would leave us with
limited means of defending ourselves
against cruise missiles. Arms control is
high on the U.S. agenda, but Inman
doubts that the Soviets consider it as
important. Soviet leader Gorbachev is
more concerned about his nation's rela-
tions with Europe and Asia than with
the United States.
^ On the prospects for effective voice
interfaces for systems: "I am a skeptic
on where we are going to go with voice."
There has been little progress in getting
machines to recognize the speech of
more than one individual, he said.
^ On the conflict between personal
privacy and national sen rite: "I just
don't buy the 1984 scenario at all." More
information is the foundation for better
decision-making; how the data is used
should be watched carefully.
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UNITED PRESS INTERNATIONAL
21 November 1986
STATINTL
INMAN URGES COMMERCIALIZATION OF TECHNOLOGY
ST. LOUIS
Retired Adm- Rat-h, R- Inman said the United. States mast s.r.eed Ltp. the rate at
whi r_h teC.h??.n1n.+.i r.al b,reak.throitghs. are b.rou,.h.t to. market if it t~tants. to. remain
'o,_ 1 in a ra idlt,~ changing iYinrlri ecorlnmv
' The tl._S.,. still creates. tech !olo,gy at a s.ign.if i ran.tlr faster rate., !there we
are ingi n? is in the seed in commerriall7 i ng it,' ' said Inman, Ltho. was, in St _
t orris. Thurs.da.ty tn, address Mid?tes.tern. srien.tiS.ts. en.nin,eers. and, managers. at a
computer and tel ecammtin i r?ti ens. workshop. hosted b.y t ashingtan Un i ve rs.i tll
''1t is,n't j.LLs.t C._h.ea . 1e,hn.r_ it's. C:L!it!lrer" Tn,man. said... "In. the Ln.ited
_
States, ;!oti test-market a crodLLC.t far a ;rear, then go. to. the bank, for financing
in _ta an,r the hanker is, di pectic invo ved from, the s.tart_''
inttsan, 55, said he hares. to "create models" to creed L1p. the
rom,m rcializatinn p?roces,s, when, he takes, aver ._Ian._ 2 as, chief executive officer
G'f_..IJestmark inc.. Itestmark, based in uatin, Texas., is. arprivatel. held holding
company created to, huy up, defen.s.e electronics. companies, he said-
Inman, a farmer director of the National Security Agency and dertitit Liirertn.r
o,f the Central Intelligence Ag.en.cr, holds, an. equity stake in. Ues.tmark_
Inman is resigning at year's end as chief executive afficerf president ano.
rha i r. an, of Mi rrael ectrnn i rs. & CD!i!.pitter Technol cagy C.o.rp.., al an based in. p,ts,tin,
Re~helped fn!1-,?d the cons .rtit!m, in ~alhir,h 21... U-9- C. mranies~have cooled research
and development resaurrec In. 1,9.3...
MCr.'S. current budget is about :165- million, Inman said.. He said, hn':lever, the
C.nmp.anieS. have fo.cus.ed ort s,ho.rt-term p.ro.jects. wh.ir.h ran. yield near-term, p,rofi ts..
Inman said. long-term research is. needed, and he said he will recommend that b.e
the focus. n.f the consorti'irn' work th.rough. 1,991
' n the issue of terhnalugy creationr .. 4~e're an the up-nn a ainr'' Inman
ar
S.aid._ He said. federal fttndinn,, w sn.'t as. plentiful as. it should, be,. but
university-industry ,partnerships. are taking Lip. the slar.k..
CiayernmEn,t regulation and. methn.dS, of capital fe.rm3tipn that are not able to.
deal with today!' S rapidly r.hanging world erDno , are slowing dn~ln the p.rores.s.,
Inman said..
'Re are seeing a ccintiniied, steady erasion of our manufacturing hale and we
can't maintain our standard o.f living, on, a service econom.y.'' Inman said... ''Yet
there is no. clear sense C'f urgency to. deal with the rratle.n1_' ' - -
Re said. capital and talent have been pooled. at M.C.C. ' ' to. tackle lo!lg.-tern,
to-ugh research rrnbilema, that the companies wauld not have done an their awn-,
' 'Four rears, later, MfC, is. a great sLLcces.s. from. the rn.in.t-o.f-viptxf of
attracting talent- But the real challenge i s. to k,nnta ghat' S. coming and take the
net technala.g.yy to. the !!+arketpl ace
Much of that success, he Said, has heNn in the developt?+ent of technnlnnu
sr
related to, h,ian,h-speed integrated, ci rrtti ts, far rnmRttt +rs and a data hale for
staring artificial intelligence data-
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UNITED PRESS INTERNATIONAL
20 November 1986
Inman criticizes arms sale to Iran
Retired Adm. Bobby R. Inman said Thursday that President Ronald Reagan made
a mistake in selling arms to Iran to secure the release of U.S. hostages held in
Lebanon.
''I'm not a fan of covert action," said Inman, who was director of the
National Security Agency for four years and deputy director of the Central
Intelligence Agency from 1981 to mid-1982.
"Rut an administration turns to it out of frustration. Diplomacy doesn't
work. Force isn't an option. So you try covert action.
"The downside is that though it may be faster, you lose the checks and
balances.''
Inman said a president feels ''he must do something'' with 'the glare of the
media'' on him.
Inman said Reagan's move ''backfired,'' although he said he thought the
president's intentions were good.
"The President's a compassionate man and that compassionate side of him got
him into trouble. It caused very substantial damage to him and to the future of
the administration."
Asked if he thought Reagan made a mistake, Inman said, "Yes, I do."
Inman was in St. Louis to address Midwestern scientists, engineers and
managers at a computer and telecommunications workshop hosted by Washington
University.
Inman, 55, will take over Jan. 2 as chief executive officer at Westmark Inc.,
based in Austin, Texas. Westmark is a privately held holding company that will
seek to buy up defense electronics firms.
At year's end, he is resigning as chief executive officer, president and
chairman of Microelectronics & Computer Technology Corp., also of Austin. MCC is
a consortium of 21 companies which pooled research and development efforts in
1983 under Inman's direction.
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ONPAGE 4o4 10 November 1986
PROFILE
WHAT'S SO GREAT
ABOUT ADMIRAL
BOBBY INMAN? 6A
He has never earned a nickel of profit. But savvy financiers, impressed by his ideas on restoring
America's edge, are behind him in a bold new business venture. ^ by Brian O'Reilly
ADMIRAL Bobby Ray Inman is on a
mission to save the country, or at
least its economic place in the
world. Pretty grandiose, you say, if
not cockeyed. So why are a dozen of the big-
gest names in American business, from Dal-
las real estate tycoon Trammel Crow to
former Secretary of Defense Donald Rums-
feld and New York television titans Laurence
A. Tisch and Thomas S. Murphy eager to
back him with millions as head of an ambi-
tious new enterprise? This 55-year-old re-
tired Navy officer, one backer admits, "has
never run a profit-making company." What
do they see in him?
Certainly not movie-star good looks. In-
man-he hates his given name, Bobby Ray,
tolerates Bobby, and doesn't mind Bob, but
those who work with him call him Admiral-
has a gaptoothed smile, slightly Oriental
eyes, and a pair of eyebrows usually writhing
out of control. Nor can he boast of polished
grace on a ballroom floor. "I'm so clumsy I
can't walk across a room without bumping
into the furniture," he laments. He is simply
one of the smartest people ever to come out
of Washington or anywhere, who dazzles
just about everybody he meets. He pulled off
a military career practically unmatched in the
history of the Navy, without firing a shot.
Thus, when Bob Inman says he has been
tapped to head a holding company named
Westmark Systems that will acquire defense
electronics companies, ears perk up. Nor do
those familiar with him laugh when he says
Westmark will show American industry how
to exploit new technology faster and rein-
vade lost markets. He has gotten crazy ideas
off the ground before.
REPORTER AssocIATB Lorraine Carson
No less a venture, in fact, than an unprece-
dented four-year-old research consortium to
develop advanced technology for a radical
new supercomputer system that would try to
beat anything coming out of Japan's govern-
ment-backed "fifth generation" effort. Mem-
bers of the consortium, called Microelec-
tronics and Computer Technology Corp.,
include such archrivals as Control Data, Hon-
eywell, and NCR-but not IBM or Apple-
as well as RCA, Gould, and Allied-Signal.
When Inman quit the government he was en-
listed to head the venture, setting off a wild
competition by 57 cities in 27 states hoping
to snare the technology incubator, inexplica-
bly known as MCC. Austin, Texas, won out
when the state and several Texans promised
$35 million of help, from real estate to mon-
ey for new professorships at the state uni-
versity there.
MCC's endeavors will take perhaps a de-
cade to bear fruit, and it is far too early to
pronounce it a success. But powerful folks
were sufficiently impressed to want Inman
as chief executive of Westmark, which may
be just down the street in Austin if Inman has
his way. The new company, to which Inman
will move in January, is owned by Mason
Best, a Dallas investment bank created two
yEars ago by Elvis Mason, former chairman
of Dallas's big InterFirst Bank, and Randy
Best, a'Fexas entrepreneur. Willi an infusion
of $100 million from wealthy investors, Ma-
son Best quickly bought food producers, a
publishing company, and three greeting card
companies. "They've done extremely well,"
says investor Robert Redman, a Dallas ccnti-
millionaire and a Mason Best investor.
Now Mason Best has decided to set up
Westmark as a vehicle to move into defense
electronics-"one of the few parts of the
economy that's growing in real terms," in
one backer's words. Mason Best has its eye
on "two or three" electronics companies
that make subassemblies for large weapon
systems. Inman says Westmark's sales could
eventually hit $1 billion a year. "Our ability
to raise capital will not be a restraint on
growth," says a Mason Best spokesman.
If anything, Inman's ambitions are greater
now than when he launched MCC. Friends
say he's frustrated and worried about how
slowly American corporations--including
some of the owners of MCC-adopt new
technologies and turn them into products.
Westmark, he says, will be a model of how
that can be done.
Can he pull it off? Hard to tell. His career,
however brilliant, is shrouded in secrecy.
For most of his 30 years in government In-
man starred in military intelligence. From
1977 to 1981, he headed the nation's most
secret and sophisticated electronics and data
analysis organization, the National Security
Agency, and then spent 18 months as deputy
director of Central Intelligence. He keeps se-
crets at MCC as well, so that member corpo-
rations get first dibs on any discoveries.
One nonsecret about Inman is his extraor-
dinary mind, which propelled him through
the intelligence community so fast he be-
came one of the very few ever to make four-
star admiral by the age of 49 Inman has
demonstrated his wits practically since he
was born, the second of four children, in the
tiny town of Rhonesboro in east Texas. His
father owned a gas station, and the family's
The former spymaster is in the market fir
defense electronics companies.
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means were modest. In grammar school In-
man was a whiz kid on a nearby radio quiz
show, often bringing home prizes.
Ile breezed through nearby Mineola High
School by age 15, though that had some dis-
advantages. "I was a little squirt," he says,
"5-foot-4 and 96 pounds when I graduated."
To keep from being bullied he tutored the
athletes he admired, and helped other stu-
dents run for school offices. "1 acquired pro-
tectors," he recalls with a grin. At 19, grown
to 6 feet, Inman graduated from the Univer-
sity of Texas with a B.A. in history. For a
while he taught at a grammar school, hoping
to go to Stanford Business School. Then the
Korean war broke out.
With the draft looming, Inman signed up
for the Navy's officer candidate school and
soon found himself decoding secret mes-
sages on an aircraft carrier. In 1953 he was in
Washington, hoping to be let out of the Navy
early. Just then, an American cryptographer
in Paris was discovered to have a Coriununist
girlfriend, and hnnian was dispatched to re-
place him. After a stint at the Navy's intelli-
gence school in Washington, he got a chance
in 1958 to impress the brass.
THE NAVY WAS worried that mainland
China would invade Taiwan, and the
Pacific Fleet was heading to the area
as a precaution. One night while In-
man was on duty, one of the three command-
ers who regularly briefed Admiral Arleigh
Burke, then Chief of Naval Operations, came
in, quickly read a stack of intelligence re-
ports, and sped off. Based on the command-
er's analysis the admiral began dispatching
warships, until word came back that the in-
formation was wrong. Inman was called be-
fore Burke. Blessed with a nea ly
photographic menmory, he was able to re call
each of the hundreds of disp tches he'd read
that night and answer questions. He as
promptly named to replace the disgra ed
commander.
In a whirlwind of promotions, Inman Its-
cended up to director of naval intelligen e,
taking over in 1977 as head of the NSA.
There he set out to master Congress's un-
wieldy budgeting process, which required
hint to make financial projections five years
forward while spending money budgeted five
years earlier and appropriated two years e-
fore. All this in a top-secret budget of p r-
haps $15 billion, hidden away in dozens of
other agencies' budgets. "Anybody who sa 's
I never ran a profit-making company a d
don't know how to keep track of mom y
ought to try that for a while," he says.
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 - - ----------
PROFILE
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Mastering the details, Inntan-testified at
appropriations hearings without notes. Sena-
tor Barry Goldwater called him "the most ar-
ticulate budget explainer I've ever seen."
Senators trying to learn -what the nation's
epics were up to loved him too. "He was
called on as the guy who simply gave the
facts," says Democratic Senator Joseph Bi-
den of Delaware. "Ile'd never volunteer in-
formation, but he'd never mislead you."
Inman's main chore was presiding over
NSA's vast electronic spying and military
communications operation, with its 30,000
employees and awesome banks of powerful
computers at Fort Meade, Maryland, and
around the world. Inman's evenings were of-
ten spent at Washington social functions, but
he would get up the next morning at 4 1.M. to
review briefcases full of NSA material. "Bob
Inman has no hobbies," says Eugene Tighe,
a retired Air Force general and close friend,
"except maybe reading. His office was the
dullest thing you ever saw. Everyone else
might. be showing off ship models or some-
thing. Bob just had bare walls and books."
In 1981 Inman made four-star admiral and
was elevated to deputy director of the CIA.
lie quit 18 months later amid reports of fric-
tion with director William Casey and the Rea-
gan Administration. After a 60-day, 11,000-
mile driving tour of the Western U.S. with
his wife, Nancy, and his two sons (one now a
Navy pilot, the other at Annapolis), he sifted
through hundreds of job offers.
He selected an offer from William Norris,
the founder of Control Data, a major supplier
of computers to the NSA. In early 1982 Nor-
ris had assembled leaders of two dozen tech-
nology companies at a country club in
Florida, where he urged them to join their
efforts to leapfrog Japan's fifth-generation
program. Many doubted the approach would
work, but Inman decided to give it a try.
"Computers themselves didn't turn me on,"
lresays, "but pulling a disparate organization
together that would impact nn the nation's
ability to compete did."
The biggest headache, after MCC won
unanimous passage of a law that eliminated
federal antitrust worries, was finding talent.
Inntan soon discovered that the 12 corpora-
tions that signed up, known as shareholders,
weren't sending their best people to Austin
for top positions. Just as quickly, he sent
people back and started looking elsewhere.
"He had incredible contacts in the scientific
and academic conununity," says General
Tighe. "As soon as somebody showed up, he
was on the phone asking, 'Is this guy any
good?' " To date, eight of MCC's 1 I vice
Once stars out the Waslriu~dnrr social circuit, Rob and!,Vancv Inman like down-hone, Austin.
presidents and two-t!rirds of its 330 scien-
lists have been hired from the outside.
All are working on lilac-sky solutions to
four major technological challenges: raising
clue computing power of microchips by in-
creasing the number of wires that can be at-
tached to one from 3'2 to as many as 1.000;
computer-aided design of very powerful mi-
croprocessor chips; developing faster, more
eflicient software: and designing advanced
computer architecture. '['lie first project has
already achieved a breakthrough: MCC's re-
searchers have boosted the number of mi-
crochip connections to 328. The advanced
computer project, on lie other h,utd. ii ex-
pccted to lake tell yc:u s. like other attempts
to advance so-called artificial intelligence, its
foals include speeding up computers by di-
viding prohicros into ',cveril parts and sol%-
iug Ilrcrii siuutltancooslv'. Member
rornip.nlics can choose which projects to port,.nul get bust rigbls to use the lecluxil-
ogies for three rears.
N OilIlIS SAYS %1CC'S progress "cx-
ccctls cxpecLttioils," but some par-
ticipating, companies aren't so sure.
"Inman did a remarkable job of
bringing the organization to this point," says
Joseph Boyd, chairman of the Harris Corp.
"But right now I don't think you can say in
any sense that 111C'C i.,, a .access or failure."
By sonic crude measures, though, it is work-
ing. The number of participating companies
has riscu trout 12 to :'I, now including Ko-
dak, Boeing, and Westinghouse Four years
ago a seat on the board cost $150,000, but
now newcomers must pay $230,000. That
doesn't count what they contribute to MCC's
$65-trillion-a-year budget.
Inman gets good marks as a boss, but he is
not one of those walk-around managers.
"Ile's not the kind of person who says to
himself, 'Gee, I wonder what they're up to
over at computer-aided design t