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Full text of "Report of the congressional committees investigating the Iran- Contra Affair : with supplemental, minority, and additional views"

Y l.l/2:Serial 13758 

United States Congressional... 



Government 
Documents 



AUG 28 1990 



B0^ 




Pi 

m 1 






100th Congress — 1st Session • January 6-December 22, 1987 



Senate Report 

No. 216 




IRAN-CONTRA INVESTIGATION 

APPENDIX B, VOLUME 17 
DEPOSITIONS 



United States Congressional Serial Set 

Serial Number 13758 



United States Government P: aiting Office 
Washington : 1989 



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 

Appendix B: Volume 17 
Depositions 



Daniel K. Inouye, Chairman, 
Senate Select Committee 

Lee H. Hamilton, Chairman, 
House Select Committee 



U.S. Senate Select Committee U.S. House of Representatives 

On Secret Military Assistance to Iran Select Committee to Investigate 

And the Nicaraguan Opposition Covert Arms Transactions with Iran 

November 13, 1987. - Committed to the Committee of the Whole House 

on the State of the Union and ordered to be printed. 

November 17, 1987. -Ordered to be printed. 



Washington : 1988 



Bnited States ^enatt 

SELECT COMMITTEE ON SECRET MILITARY 

ASSISTANCE TO IRAN AND THE NICARAGUAN OPPOSITION 

WASHINGTON, DC 20510-6480 



March X, 1988 

Honorable John C. Stennis 
President pro tempore 
United States Senate 
Washington, D.C. 

Dear Mr. President: 

We have the pleasure to transmit herewith, pursuant to 
Senate Resolution 23, Appendix B to 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, 




Warren B. Rudman ^^^^^ 



Vice Chairman 



III 



U.S. HOUSE OF REPRESENTATIVES 

SELECT COMMITTEE TO INVESTIGATE 

COVERT ARMS TRANSACTIONS WITH IRAN 

UNITED STATES CAPITOL 

WASHINGTON, DC 206 15 

(202) 225-7902 

March 1, 1988 



The Honorable Jim Wright 
Speaker of the House 
U. S. Capitol 
Washington, D. C. 20515 

Dear Mr . Speaker : 

Pursuant to the provisions of House Resolutions 12 and 
330 and House Concurrent Resolution 195, 100th Congress, 1st 
Session, I transmit herewith Appendix B to the Report of the 
Congressional Committees Investigating the Iran-Contra Affair , 
House Report No. 100-433, 100th Congress, 1st Session. 

Appendix B consists of the depositions taken by the 
Select Committees during the investigation. The contents of 
Appendix B have been declassified fo^-Yelease to the public. 




Lee H. Hamilton 
Chairman 



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 Paul Barbadoro 

Executive Assistant Deputy Chief Counsel 

To the Chief Counsel 

Mary Jane Checchi 
Executive Director 

Lance I. Morgan 
Press Officer 



VI 



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 



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 



W. T. McGough, Jr. 
Richard D. Parry 
John D. Saxon 
Terry A. Smiljanich 
Timothy C. Woodcock 



Committee Staff 



Assistant Counsels 



Legal Counsel 
Intelligence /Foreign 

Policy Analysts 
Investigators 



Press Assistant 
General Accounting 
Office Detailees 



Security Officer 
Security Assistants 



Chief Clerk 
Deputy Chief Clerk 



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 
Georgiana 

Badovinac 
David Carty 
Kim Lasater 
Scott R. Thompson 
Judith M. Keating* 
Scott R. Ferguson 



Staff Assistants 



Administrative Staff 



Secretaries 



Receptionist 
Computer Center 
Detailee 



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 



VIII 



Committee Members' Designated Liaison 



Senator Inouye 
Senator Rudman 

Senator Mitchell 

Senator Nunn 

Senator Sarbanes 
Senator Heflin 



Peter Simons 
William V. Cowan 
Thomas C. Polgar 
Richard H. 
Arenberg 
Eleanore Hill 
Jeffrey H. Smith 
Frederick Millhiser 
Thomas J. Young 



Senator Boren 



Senator McClure 
Senator Hatch 



Senator Cohen 



Senator Trible 



Sven Holmes 
Blythe Thomas 
Jack Gerard 
Dee V. Benson 
James G. Phillips 
James Dykstra 
L. Britt Snider 
Richard Cullen 



Part Time* 



Assistant Counsel 
Hearings Coordinator 
Staff Assistants 



Interns 



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 



Document Analyst 

Historian 

Volunteers 



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. 



IX 



United States House of Representatives 



Select Committee to Investigate 
Covert Arms Transactions with Iran 



Majority Staff 



John W. Nields, Jr. 
Chief Counsel 

W. Neil Eggleston 
Deputy Chief Counsel 

Kevin C. Miller 
Staff Director 



Special Deputy 

Chief Counsel 
Staff Counsels 



Press Liaison 
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 



Systems 

Administrator 
Systems 

Programmer/ 

Analysts 
Executive Assistant 
Staff Assistants 



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 



Minority Staff 



Associate Minority 

Counsel 
Assistant Minorirs' 

Counsel 
Minority Research 

Director 



Thomas R. Smeeton 
Minority Staff Director 

George W. Van Cleve 
Chief Minority Counsel 

Richard J. Leon 
Deputy Chief Minority Counsel 



Robert W. 
Genzman 
Kenneth R. Buck 

Bruce E. Fein 



Minority Staff 
Editor/Writer 

Minority Executive 
Assistant 

Minority Staff 
Assistant 



Michael J. Malbin 

Molly W. Tully 

Margaret A. 
Dillenburg 



Committee Staff 



Investigators 



Director of Security 



Robert A. 

Bermingham 
James J. Black 
Thomas N. 

Ciehanski 
William A. Davis, 

HI 
Clark B. Hall 
Allan E. Hobron 
Roger L. Kreuzer 
Donald Remstein 
Jack W. Taylor 
Timothy E. Tray lor 
Bobby E. Pope 



Security Officers 



Editor 

Deputy Editor 
Associate Editor 
Production Editor 
Hearing Editors 

Printing Clerk 



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 



Associate Staff 



Representative 
Hamilton 

Representative 
Fascell 

Representative 

Foley 
Representative 

Rodino 

Representative 

Brooks 
Representative 

Stokes 
Representative 

Aspin 



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 



Representative 

Boland 
Representative 

Jenkins 
Representative 

Broomfield 
Representative 

Hyde 
Representative 

Courter 
Representative 

McCollum 
Representative 

DeWine 
General Counsel to 

the Clerk 



Michael W. Sheehy 

Robert H. Brink 

Steven K. Berry 
David S. Addington 
Diane S. Doman 

Dennis E. Teti 

Tina L. Westby 

Nicholas P. Wise 

Steven R. Ross 



XI 



Contents 

Volume 17 



Preface XXI 

McMahon, John N 1 

McMahon, Stephen 383 

McNeil, Frank 515 

Makowka, Bernard 579 

Marostica, Don 641 

Marsh, John 781 

Mason, Robert H 889 



Depositions 



Volume 1 



Airline Proprietary Project Officer. 
Alvarez, Francisco J. 
Allen, Charles. 
Arcos, Cresencio. 



Volume 2 



Volume 3 



Armitage, Richard. 
Artiano, Martin L. 
Associate DDO (CIA). 
Baker, James A., III. 
Barbules, Lt. Gen. Peter. 
Harnett, Ana. 
Bartlett, Linda June. 
Bastian, James H. 
Brady, Nicholas F. 
Brown, Arthur E., Jr. 



Byrne, Phyllis M. 
Calero, Adolfo. 
Castillo, Tomas ("W"). 
Cave, George W. 
C/CATF 



Volume 4 

Channell, Carl R. 

Chapman, John R. (With Billy Ray Reyer). 

Chatham, Benjamin P. 

CIA Air Branch Chief. 

CIA Air Branch Deputy Chief. 

CIA Air Branch Subordinate. 

CIA Chief. 

CIA Communicator. 

CIA Identity "A". 



XV 



Volume 5 

CIA Officer. 

Clagett, C. Thomas, Jr. 

Clark, Alfred (With Gregory Zink). 

Clarke, George. 

Clarridge, Dewey R. 

Cline, Ray S. 

C/NE. 

Cohen, Harold G. 

Volume 6 

Collier, George E. 

Cole, Gary. 

Communications Officer Headquarters, CIA. 

Conrad, Daniel L. 



Volume 7 



Cooper, Charles J. 
Coors, Joseph. 
Corbin, Joan. 
Corr, Edwin G. 
Coward, John C. 
Coy, Craig R 
Crawford, Iain T.R. 



Crawford, Susan. 
Crowe, Adm. William J. 
Currier, Kevin W. 
DCM, Country 15. 
DEA Agent 1. 
DEA Agent 2. 
DEA Agent 3. 
deGraffenreid, Kenneth, 
de la Torre, Hugo. 
Deputy Chief "DC". 



Duemling, Robert W. 
DIA Major. 
Dietel, J. Edwin. 
Dowling, Father Thomas. 
Dutton, Robert C. 
Earl, Robert. 



Volume 8 



Volume 9 



XVI 



Farber, Jacob. 
Feldman, Jeffrey. 
Fischer, David C. 
Floor, Emanuel A. 
Former CIA Officer. 
Fraser, Donald. 
Fraser, Edie. 
Fuller, Craig L. 



Volume 10 



Volume 11 



Furmark, Roy. 

Gadd, Richard. 

Gaffney, Henry. 

Gaffney, Henry (With Glenn A. 

Galvin, Gen. John R. 

Gantt, Florence. 

Garwood, Ellen Clayton. 

Gast, Lt. Gen. Philip C. 

Gates, Robert M. 

Glanz, Anne. 



Rudd). 



Volume 12 



George, Clair. 
Godard, Ronald D. 
Godson, Roy S. 
Golden, William. 
Gomez, Francis D. 
Goodman, Adam. 
Gorman, Paul F. 
Graham, Daniel O. 
Gregg, Donald P. 
Gregorie, Richard D. 
Guillen, Adriana. 



Hakim, Albert. 



Hall, Wilma. 
Hasenfus, Eugene. 
Hirtle, Jonathan J. 
Hooper, Bruce. 



Volume 13 



Volume 14 



XVII 



Hunt, Nelson Bunker. 
Ikle, Fred C. 
Jensen, D. Lowell. 
Juchniewicz, Edward S. 
Kagan, Robert W. 
Keel, Alton G. 
Kellner, Leon B. 
Kelly, John H. 
Kiszynski, George. 



Volume 15 



Koch, Noel C. 
Kuykendall, Dan H. 
Langton, William G. 
Lawn, John C. 
Leachman, Chris J., 
Ledeen, Michael A. 



Jr. 



Volume 16 



Lei want, David O. 
Lilac, Robert H. 
Lincoln, Col. James B. 
Littledale, Krishna S. 
McDonald, John William. 
McFarlane, Robert C. 
McKay, Lt. Col. John C. 
McLaughlin, Jane E. 



McMahon, John N. 
McMahon, Stephen. 
McNeil, Frank. 
Makowka, Bernard. 
Marostica, Don. 
Marsh, John. 
Mason, Robert H. 



Meese, Edwin IIL 
Melton, Richard H. 
Merchant, Brian T. 
Meo, Philip H. 
Miller, Arthur J. 
Miller, Henry S. 
Miller, Johnathan. 



Volume 17 



Volume 18 



XVIII 



MUler, Richard R. 



Motley, Langhorne A. 
Mulligan, David P. 
Nagy, Alex G. 
Napier, Shirley A. 
Newington, Barbara. 
North, Oliver L. 
O'Boyle, William B. 
Osborne, Duncan. 
Owen, Robert W. 
Pena, Richard. 
Pickering, Thomas. 
Poindexter, John M. 



Posey, Thomas V. 
Powell, Gen. Colin L. 
Price, Charles H., H. 
Proprietary Manager. 
Proprietary Pilot. 
Radzimski, James R. 
Ramsey, John W. 
Ransom, David M. 



Volume 19 



Volume 20 



Volume 21 



Volume 22 



Raymond, Walter, Jr. 

Regan, Donald T. 

Reich, Otto J. 

Revell, Oliver B. 

Reyer, Billy Ray (See John Chapman). 

Reynolds, William B. 



Volume 23 



Richard, Mark M. 
Richardson, John, Jr. 
Robelo, Alfonso. 
Robinette, Glenn A. 
Rodriguez, Felix I. 
Roseman, David. 



XIX 



Rosenblatt, William. 

Royer, Larry. 

Rudd, Glenn A. 

Rudd, Glenn A. (See Henry Gaffney). 



Rugg, John J. 
Russo, Vincent M. 
Sanchez, Nestor. 
Scharf, Lawrence. 
Schweitzer, Robert 1 
Sciaroni, Bretton G. 
Secord, Richard V. 



Shackley, Theodore G. 
Sigur, Gaston J. 
Simpson, Major C. 
Sinclair, Thomas C. 
Singlaub, John K. 



Slease, Clyde H., IIL 
Smith, Clifton. 
Sofaer, Abraham D. 
Steele, Col. James J. 
Taft, William H., IV. 
Tashiro, Jack T. 
Teicher, Howard. 
Thompson, Paul. 
Tillman, Jacqueline. 



Volume 24 



Volume 25 



Volume 26 



Volume 27 



Thurman, Gen. Maxwell. 

Trott, Stephen S. 

TuU, James L. 

Vessey, John. 

Walker, William G. 

Watson, Samuel J., IIL 

Weinberger, Caspar. 

Weld, William. 

Wickham, John. 

Zink, Gregory (See Alfred Clark). 



XX 



Preface 



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, under authority contained in the resolutions establishing 
them (H. Res. 12 and S. Res. 23, respectively), deposed approximately 290 
individuals over the course of their 10-month joint investigation. 

The use of depositions enabled the Select Committees to take sworn responses 
to specific interrogatories, and thereby to obtain information under oath for the 
written record and develop lines of inquiry for the public hearings. 

Select Committees Members and staff counsel, including House minority 
counsel, determined who would be deposed, then sought subpoenas from the 
Chairmen of the Select Committees, when appropriate, to compel the individuals 
to appear in nonpublic sessions for questioning under oath. Many deponents 
received separate subpoenas ordering them to produce certain written documents. 

Members and staff traveled throughout the United States and abroad to meet 
with deponents. All depositions were stenographically reported or tape-recorded 
and later transcribed and duly authenticated. Deponents had the right to review 
their statements after transcription and to suggest factual and technical correc- 
tions to the Select Committees. 

At the depositions, deponents could assert their fifth amendment privilege 
to avoid self-incrimination by refusing to answer specific questions. They were 
also entitled to legal representation. Most Federal Government deponents were 
represented by lawyers from their agency; the majority of private individuals 
retained their own counsel. 

The Select Committees, after obtaining the requisite court orders, granted 
limited or "use" immunity to about 20 deponents. Such immunity means that, 
while a deposed individual could no longer invoke the fifth amendment to avoid 
answering a question, his or her compelled responses— or leads or collateral 
evidence based on those responses— could not be used in any subsequent criminal 
prosecution of that individual, except a prosecution for perjury, giving a false 
statement, or otherwise failing to comply with the court order. 

An executive branch Declassification Committee, located in the White House, 
assisted the Committee by reviewing each page of deposition transcript and some 
exhibits and identifying classified matter relating to national security. Some 
depositions were not reviewed or could not be declassified for security reasons. 

In addition, members of the House Select Committee staff corrected obvious 
typographical errors by hand and deleted personal and proprietary information 
not considered germane to the investigation. 

In these Depositions volumes, some of the deposition transcripts are follow- 
ed by exhibits. The exhibits -documentary evidence- were developed by Select 
Committees' staff in the course of the Select Committees' investigation or were 
provided by the deponent in response to a subpoena. In some cases, where the 
number of exhibits was very large, the House Select Committee staff chose for 
inclusion in the Depositions volumes selected documents. All of the original 



XXI 



exhibits are stored with the rest of the Select Committees' documents with the 
National Archives and Records Administration and are available for public in- 
spection subject to the respective rules of the House and Senate. 

The 27 volumes of the Depositions appendix, totalling more than 30,000 pages, 
consist of photocopies of declassified, hand-corrected typewritten transcripts 
and declassified exhibits. Deponents appear in alphabetical order. 



XXII 



Publications of the Senate and House 
Select Committees 



Report of the Congressional Committees Investigating the Iran-Contra Ajfa 
1 volume, 1987. 

Appendix A: Source Documents, 2 volumes, 1988. 
Appendix B: Depositions, 11 volumes, 1988. 
Appendix C: Chronology of Events, 1 volume, 1988. 
Appendix D: Testimonial Chronology, 3 volumes, 1988. 

All publications of the Select Committees are available from the U.S. 
Government Printing Office. 



XXIII 



Stenographic Transcript of . ^ ^ ^^-j 
HSiTSl^ — — • 
HEARINGS ' . \ \^ 

.. . ^ *.-^^ 

Before the C^^VQ, v ^ ^^^~^ 

SELECT COMMITTEE ON SECRET MILITARY ASSISTANCE 
TO IRAN AND THE NICARAGUAN OPPOSITION 



UNITED STATES SENATE 



DEPOSITION OF JOHN N. MC MAHOH- 
Monday, June 1, 1987 




•v;;;;: 






,202) 628-93C0 : -.^ h & M«JM*?j?«>*' «"«» 

20 F STREET. N.W. -j» . ^{,^.SV ' "^ ' ' 

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82-720 0-88-2 



UNOLftS^RED 



1 DEPOSITION OF JOHN N. McMAHON 

2 Monday, June 1, 1987 

3 United States Senate 

4 ' Select Conunittee on Secret 

5 Military Assistance to Iran 

6 and the Nicaraguan Opposition 

7 Washington, D. C. 

8 Deposition of JOHN N. McMAHON, called as a 

9 witness by counsel for the Select Committee, at the 

10 offices pf the Select Committee, Room SH-901, Hart Senate 

11 Office Building, Washington, D. C. , commencing at 10:50 

12 a.m., the witness having been duly sworn by MICHAL ANN 

13 SCHAFER, a Notary Public in and for the District of 

14 Columbia, and the testimony being taken down by Stenomask 

15 by MICHAL ANN SCHAFER and transcribed under her 

16 direction. 
17 



UN(^«SSIRED 



UftCtA^lftED 



1 APPEARANCES : 

2 On behalf of the Senate Select Committee on Secret 

3 Military Assistance to Iran and the Nicaraguan 

4 Opposition: 

5 PAUL BARBADORO, ESQ. 

6 THOMAS POLGAR 

7 On behalf of the House Select Committee to 

8 Investigate Covert Arms Transactions with Iran: 

9 W. NEIL EGGLESTON, ESQ. 

10 , Deputy Chief Counsel 

11 RICHARD J. LEON, ESQ. 

12 Deputy Chief Minority Counsel 



UNCLASSIflED 



UNCLASSIFIED 









c ;. 


. :_ .1 • a 














EXAM I HAT I ON 


ON BEHALF OF 




WITNESS 




SEMATE 




HOUSE 




John 


N. McMahon 












By Mr. 


Barbadoro 


4 










By Mr. 


Leon 






154 






By Mr. 


Barbadoro 


159 










By Mr. 


Egglestor. 






161 






By Mr. 


Leon 






165 






; 


z :•: - 


: 3 : t s 








McMAHON EXHI 


IBIT NU!!BE:S 


FOR 


IDENTIFICATION 














35 














39 














49 














56 














67 














80 








^ 






W- 














87 














106 






10 








115 






11 








134 






12 








148 

















UNCLASSIIIED 



UN€IA$S(FIED 



1 PROCEEDINGS 

2 Whereupon, 

3 JOHN N. McMAHON, 

4 called as a witness by counsel on behalf of the Senate 

5 Select Committee and having been duly sworn by the Notary 

6 Public, was examined and testified as follows: 

7 EXAMINATION ON BEHALF OF THE SENATE COMMITTEE 

8 BY MR. BARBADORO: 

9' ■ Q Could you state your name, please? 

10 A John N. McMahon. 

11 Q Mr. McMahon, when did you become Deputy 

12 Director of Central Intelligence? 

13 A In June 1982. 

14 Q And when did you retire from the Agency? 

15 A March 29, 1986. 

16 Q How long were you with the Central 

17 Intelligence Agency? 

18 ■- A About 34-1/2 years. 

19 Q And I'm sure you've had a lot of assignments 

20 during that period, but could you give us a brief 

21 overview of your career with the Agency? 

22 A Indeed. When I came down to Washington after 
2 3 college I went to Georgetown Law School and decided that 
2 4 I needed to eat, so I got a job working nights with CIA 
25 in their communications, what they called their Cable 



UNetftS^IED 



UNCfc^S»H£D 



Secretariat. And I did that for a semester, lost 25 
pounds, and CIA asked me if I'd like to go overseas to 



And I said indeed I would. So I went 
overseas. I left school at the end of that semester and 
went into training in communications during the first 
part of '52, and then went overseas in June '52, 
initially in commo. I left that, joined the European 
Division, which was then the DDP, working in the Cable 
Secretariat, which I did up through about 1954. 

I came back on home leave and then went back 
and worked briefly in admin. 

Q You mean administration? 

A Administration. And then a notable gentleman 

who was working witii^^^^^^^^^^^^^H decided to leave 

and return to Washington and his name was 

and^^^^^^^^^^^^^Hneeded someone to help him out, 

went down there and kind of became his aide. And 

|was soon replaced by^^^^^^^^^^H and I stayed 

on as^^^^^H aide, which was basically reviewing all the 

correspondence, getting it ready for him, being his bag 

carrier when he traveled. 

I came back from overseas and at that time I 

had two children and my draft deferment status continued 

from student to overseas with the Agency, and then with 
,■» .-^ 





ilfR)tA^'Str!t'b 



UN€fcASSPED 



two kids, but I wanted to get my military obligation over 
with rather than have it hang over my head to the age 35. 
So I volunteered to be enlisted in the draft. The Army 
wouldn't take me because they figured I was trying to run 
away from my home obligations with two kids, but the 
Agency prevailed upon the draft board and they drafted 
me. And I served a little over six months with the Army 
and was given an honorable discharge to return back to 
the Agency. 

I worked briefly in an organization known as 
Central Processing, which offered me the opportunity to 
have experience in administration, personnel, logistics, 
finance, and travel, and I did that for about nine months 
and was recruited fori 




And then, after a little over a year of that, 
I was appoin_ted_the_ E^G^^Y|^tf^»%r of the Division, 



\jHCtASS\F^tO 



,„. «.t W.S ...her st.a„,., .-cus. I .as only t.e„ a 

,S-U an. tn.s woul. .e the e,.lvale„t o. a 1. o, 16 job. 

But I tooK tnat on principally because I have ,ood 

„ppo« throughout the o.,ani..tion and the two people 

.unnin, that ot,anUatio„, the Chle. an. the Deputy, ha. 

Kio™ SO I was put in kind of as a 
a communications problem. So i wa 

buffer. The Division there had not only the_ 

>-^c:r.nn^ibility fori 




10 



UNCi^^SH^D 




So I did that routine with the comptroller and 
trying to work with^^^^^H for a while, and then a 
gentleman by the name of Bud Wheelon, Dr. Wheelon, who is 
now Chairman of the Board of Hughes, was appointed DDSiT 
and his job was to pull together all RiD activities in 
the United States. 

Q What is DDS&T? 

A Deputy Director for Science and Technology. 
And he was to pull together all of the research and 
development activities in the Agency, as well as do the 
analytical work associated with sciencel 




We operated that and I became Director of that 




worked that; job for three years. 
Then Schlesinger 




Schlesinger asked that I go over and take over that 
office. 

So I went down and we renamed the officel 




12 



UNOLASStFBED 



this cat who knew nothing about either operations or 
their business was their boss. 

That was a fantastic office. 




I had that job for maybe a year and a half, 
and Bill Colby, who was then Director, asked that I 
become the Associate Deputy Director of Administration, 
and I went over there and did that for a year or two, and 
then George Bush came in as Director, and he was given 
the charter under the Executive Order to prepare a 
consolidated budget for all intelligence activities. 

Up to that point in time, the DCI had 
"responsibility for the intelligence community", such as 
the Defense Intelligence or NSA or what have you, but he 



had no clou 



VHEij^^M 



budget authority. 



13 



UliClASSlF^D 



11 



1 And Jerry Ford's Executive Order gave the DCI the 

2 responsibility for pulling it together, except it fell 

3 short. It gave him no authority. So we still had to go 

4 around and say pretty please, but I guess we did it in a 

5 sufficient manner that the various agencies told us what 

6 their budget was. But we still couldn't do anything 

7 about it. 

8 But at least we published the first 

9 consolidated budget that the U.S. ever had on all its 

10 intelli<^ence activities, national intelligence 

11 activities. 

12 Then, as you know, with the election of Carter 

13 — yes, Bush left and Stan Turner came in as Director.- 

14 And Stan Turner was a four-star Admiral; my boss in the 

15 Intelligence Community Staff then was Dan Murphy, who was 

16 also a four-star Admiral. And it was deemed that we 

17 couldn't have two four-star Admirals in the same shop, so 

18 Murphy left in April and that would have been April '77. 

19 And I stayed on in both jobs, as the Acting 

2 Deputy to the DCI for Intelligence Community and also as 

21 the Associate, and I held that job until January '78. 

2 2 Turner came to me, I guess in July or August, and wanted 

2 3 to know who would be a good DDO because he wanted to make 

24 a replacement there. And I gave him several names and he 

25 checked them out and finally — I think it was in October 



UN€kftSSIf4£D 



14 



UM(a*SSJFitO 



12 



1 — he said he wanted me to be the DDO. 

2 I told him that that would be a mistake, that 

3 the DDO had suffered immensely and I think to an 

4 appreciable degree wrongly under the Pike and Church 

5 Committee investigations, and that the worst thing Turner 

6 could do is to put a non-DDO in there, particularly since 

7 he had gained the reputation of being non-interested in 

8 HXraiNT and was more technical, and to take someone who 

9 had basically S&T background and put him in as the DDO 

10 would be bad. 

11 So I argued that for several months, and 

12 finally in December he told me that if I didn't take the 

13 job he was going outside the Ager.cy for the DDO. So r 

14 took the job and I held the job as the Deputy Director 

15 for Operations until — 

16 MR. EGGLESTON: December of which year? 

17 THE WITNESS: I took it in January 1978 and I 

18 held it until 1981. And Casey asked me to take over what 

19 is now the DDI, Deputy Director for Intelligence. It was 

20 known at that time as the National Foreign Assessment 

21 Center, and that's where we do our basic intelligence 

22 analytical work and intelligence production. 

23 I did that reluctantly. In fact, I suggested 

24 that it would be a good time for me to retire, since I 

25 was eligible for retirement under the Agency retirement 



UN(^ASSMD 



ii 



yncti^stf^D 



program. And he asked me not to do that, that he felt 
that something was wrong in the DDI and he wanted me to 
go in and try and find out what it was. I told him he 
was talking to the wrong guy because I didn't know how an 
analyst thought or ticked. 

But, at any rate, I went into the DDI and I 
was impressed. When I was the Deputy Director for 
Operations I read just about every piece of intelligence 
that the DDI produced because I wanted to see whether our 
appropriations were making an impact as well as being, 
informed as to what was going on in the world. 



And when I went to the DDI I realized that the 
reason for that was that our analytical process was 
segmented. It was a functional organization. We had 
economists in one organization which would address 
worldwide things. We had political scientists that 
addressed the political thiiig5«,-¥«tJiad military people. 



"ISKiEil^O' 



16 



lil»Ct<^Stf4£D 



14 



1 And as papers would come to me as DDI and I wanted to ask 

2 a question on what was going on inij^^^^Hl would get 

3 three or four inputs and I'd have to integrate what was 

4 going on inHBHHbecause I got a political view, an 

5 economic view, and a military view. 

6 I thought that was all wrong, and I didn't 

7 think that was my job, to do intelligence integration. 

3 So to figure out how the organization ticked and how the 

9 people worked -- are you interested in all this, by the 

10 way? 

11 BY MR. BARBADORO: (Resuming) 

12 Q I'm very interested in it, but if we hope to 

13 do this deposition in three or four hours we probably ■ 

14 should focus a little more and just tell me what your 

15 assignments were. 

16 A Okay. 

17 MR. EGGLESTON: But that was so interesting we 

18 didn't interrupt. 

19 THE WITNESS: At any rate, I decided to 

20 reorganize. I reorganized regionally. I put all the 

21 analysts on a specific country together, regardless of 

22 what they were doing, and they could produce a finished 

23 integrated process, and that mirrored how State 

24 Department worked. It was regional in function as well. 
2 5 ^M^faflOt^l^fl^ 

fo! 



fl£g^%-zation and a great 



n 



25 



Um^SSIBED 



15 



1 trauma. But after a few months it began to take hold and 

2 the analysts thought it was a great idea. 

3 Then Casey said to me that he was going to set 

4 up or put new life in a dormant position known as the 

5 Executive Director, and the Executive Director would be 

6 responsible for the day-to-day management of CIA and 

7 Bobby Inman, who was the Deputy Director of CI, would 

8 worry principally about the community and the outside. 

9 So in January 1982 I assumed that position and 

10 held it to AJune '82, when I was made the DDCI. 

11 BY MR. BARBADORO: (Resuming) 

12 Q Other than your time as DDO did you have any 

13 other assignments in the Operations Directorate? 

14 A One. For a few months after I got out of the 
Army in ^^^^^^^^^^^^^^^^^^^Hthe European 

16 Division, but that was not substantive. We were trying 

17 to figure out how to bring automation to the handling of 

18 files. 

19 Q And other than your time as DDI had you had 

20 any assignments in the Intelligence Directorate? 

21 A No. 

22 Q I'll ask you another question that might call 

23 for a long answer. I'll ask you to try to — 

24 A Hold your hand up if it gets too long. 



1 1 want to asK. yuu \.u ne 



18 



letftSSiBED 



16 



1 job of DDCI when you were there. 

2 A It covered all aspects of running CIA as well 

3 as running the community. Casey and I did not really 

4 diwy up the pie, so to speak, and we more or less 

5 prepared ourselves for meetings with duplicate books. If 

6 we were having a meeting, say with Bill Clark or 

7 McFarlane or Poindexter, the staff people would prepare 

8 two books, and we'd prepare that. 

9 If there was an NSC meeting, two books would 

10 be prepared, and we'd both do it or both prepare for it, 

11 and either he'd go or I would go. So we were both kind 

12 of up to speed on everything that was going on. 

13 We tried to give feedback to one another by 

14 just opening the door and walking in. Sometimes that 

15 worked and sometimes that didn't, but if something came 

16 up that I wasn't aware of it was very easy to go find 

17 someone who knew what was going on and fill in. And Bill 

18 Casey did a fair amount of travel, so that meant that 

19 there had to be a fair degree of continuity between both 

20 our jobs, and I felt that we had a very easy relationship 

21 and fairly good communications. 

22 Q You've alluded to this. What was your 

23 relationship with the Director? 

24 A Well, I didn't know him until he came in as 

25 Director, but it was kind of a no holds barred 



k^a4ASSIFJ£D 



19 



liHGUSSlEED 



17 



1 arrangement. If I disagreed with something, I felt 

2 totally at ease to disagree with him. But I never felt 

3 that there was a strain at all between us, and he has a 

4 delightful sense of humor with a great deal of wisdom. 

5 He's a very smart guy. His bumbling and mumbling is very 

6 deceptive in that regard. 

7 But he had a very fertile mind, was always 

8 thinking. He never saw an event in isolation. He would 

9 look at the ramifications. If there was an incident in 

10 some country, he would look to see where that might bulge 

11 out elsewhere in the world. So he always had a global 

12 outlook on things. He was constantly on top of trying to 

13 improve the analytical process, -3t only by bringing in 

14 more analysts into the Agency but encouraging the 

15 analysts to get outside the Agency and to talk to 

16 academicians and to talk to people, businessmen, who had 

17 experience in the countries and try and bring in all 

18 available scraps of information on any given issue or any 

19 given country. 

20 And I think his forte, quite apart from his 

21 notoriety on covert actions, I think his forte was really 

22 in improving the analytical process and making everyone 
2 3 in that process feel like they were very much a part of 

24 that action. 

25 Q Did you f eel_^tha^^g\^,l^ the Director's 



20 



^H@tA^W£D 



1 trust? 

2 A Yes. 

3 Q Were there operations that the Central 

4 Intelligence Agency was involved in that you were not 

5 briefed on? 

6 A I don't think so. 

7 Q When internal memoranda would come up through 

8 the executive registry to the DCl would you ordinarily 

9 see those documents? 

10 A Normally I would get a copy of that, yes. _ 

11 Q When cables would come up, DCI Eyes Only, 

12 would you see those cables? 

13 A Not always. The way I worked in my office,' I 

14 had an assistant that screened all the correspondence and 

15 all the traffic, and we would usually get together around 

16 6:00 at night and she would give me a brief on all the 

17 issues and events that came in during the day, and then 

18 if there were papers to sign I would sign them. So I 

19 used her as a screening process to cull out the things of 

20 interest or non-interest. 

21 So I seldom saw cable traffic, but I was 

22 briefed on it. The only exception to that was what they 

23 called operational traffic in a privacy channel which the 

24 DDO or the DDO Division Chiefs would send out, and I 

25 would only get ahold <^f ^^at, if b^%\°^° would tell me 



21 



1 about it. And the routine I used was I would get in in 

2 the morning around 7:10 and I would go down to the DDO 

3 office and they would kind of give me a dump of what went 

4 on during the night from an operational standpoint. 

5 Q So if there were privacy channel cables sent 

6 or received you wouldn't ordinarily see those unless you 

7 went down to the DDO and asked to see what was sent or 

8 received? 

9 A That's right. And to me I think, 

10 parenthetically, that is a failure within the Agency._ 

11 Q Not to share privacy channel cables with the 

12 DDCI and the DCI? 

13 A Yes. Not so much that. There is so much ■ 

14 traffic that there's no way the DCI or DDCI can keep on 

15 top of everything going on, but v.-hat I recommended to Bob 

16 Gates as this thing began to unfold, that they assign the 

17 Inspector General to receive a copy of every piece of 

18 correspondence, no exception, in the Agency and have the 

19 Inspector General monitor what's going on. Because if 

2 you see a cable and then you don't see another one until 

21 next week, you lose that continuity of what was going on. 

22 Q When the Director would have meetings with the 

23 National Security Advisor would you ordinarily go along 

24 to those meetings? 

25 A I would go to the ones that we had scheduled 



UN^^SSPED 



22 



UN(^ASSIF'£D 



20 



1 on Thursdays. We usually had a meeting every Thursday 

2 around 5:00 or 6:00 with the National Security Advisor. 

3 We would have breakfast with the Secretary of Defense on 

4 Friday morning. We'd have lunch with the Secretary of 

5 State Friday afternoon. 

6 In the last year or two, that was changed, 

7 when McFarlane decided to have what was called a family 

8 lunch, and he would get the two Secretaries, himself and 

9 Casey together, and at that point I would meet with, have 

10 lunch with, the Deputy Secretary of State, originally Ken 

11 Dam and then later John Whitehead. 

12 Q So until the family luncheons started you 

13 would meet on a weekly basis with the DCI with the 

14 National Security Advisor and then-'separate meetings with 

15 the Secretary of Defense and Secretary of State? 

16 A Right. 

17 Q Once the family grou^ maeting»_«tarted you did 

18 not attend the family group iBgAtin4»r and the people who 

19 attended those were the DCI, th«=irtitional Security 

20 Advisor, the Secretary of State and the Secretary of 

21 Defense? 

22 A Correct. 

23 Q And the family group meetings were weekly 



meetings; 



Usually, yes. 



Ut(Otft^(rt£D 



l4i8t#SSfFfED 



21 



1 Q And instead of attending those meetings you 

2 would have lunch with the Deputy Secretary of Defense, 

3 Mr. Dam? 

4 A Mo. I always had breakfast with Cap and he 

5 would bring in Taft, and if Weinberger wasn't there, then 

6 Casey and I would meet with Taft. So we always met, in 

7 spite of the family group. We always met with the 

8 Secretary of Defense or his Deputy. 

9 Q So you continued to meet with them once a 

10 week? 

11 A Right. But I didn't meet then with Shultz, 

12 but instead would met with Ken Dam or John Whitehead, and 

13 they would usually have the Director of INR and Mike 

14 Armacost with them. 

15 Q Was there a reason why you and the Director 

16 stopped meeting on a weekly basis with the Secretary of 

17 State? 

18 A I think it was because McFarlane assessed that 

19 he had to get better communication between the three of 

20 them and he decided that that would be a good way of 

21 doing it, without having lower level people around. 

22 Q Was there tension between the Director of 

23 Central Intelligence and the Secretary of State? 

24 A Not tension. There was disagreement at times 

25 over different events, but it wasn't — I don't think it 



iNmSSfFSED 



24 



f a£tftSStf4E0 



m 

1 was an inhibiting factor, and certainly not a constant 

2 gnaw. They used to play golf together and socialize 

3 together. There were certain policies that Casey didn't 

4 agree with, and, you know, he would argue with Shultz on 

5 them, but there was no hostility involved or anything of 

6 that nature. 

7 Q Were briefing books prepared for your weekly 

8 meetings with the Secretary of State, Secretary of 

9 Defense, and the National Security Advisor? 

10 A ^ Yes. 

11 Q And you and Casey would get the same briefing 

12 book? 

13 A Yes. 

14 Q Was a briefing book prepared for the family 

15 meetings? 

16 A I don't recall. I can't speak to that, 

17 because I was interested in the one I was getting for my 

18 meeting. 

19 Q When you attended these meetings would you 

20 ordinarily prepare a memorandum for the record or summary 

21 of what went on in the meeting? 

22 A Yes. I tried to be religious in doing that. 
2 3 Q Did the Director prepare any such memoranda 

24 for the record, as far as you know? 

25 A I don't think so. 



25 



UHOLASSIEIEO 



23 



1 Q Did he customarily make notes at any of those 

2 meetings? 

3 A Only if he was going to follow up on 

4 something, but he didn't make notes as to the entire 

5 conversation. What we'd do is literally go through those 

6 briefing books and just use them as talking aids, and if 

7 there was a particular paper on an intelligence situation 

8 we'd say, you know, here's an intelligence situation you 

9 ought to be aware of. And there was a good tie between 

10 all three books, so that we kind of made sure that the 

11 three principals were briefed on the same subject matter 

12 throughout. 

13 Q There was somebody in the Central Intelligence 

14 Agency that had the responsibility of making sure that 

15 everyone was on the same line for meetings? 

16 A Yes, that was Casey's special assistant, and 

17 later he wore the title as well as the Executive 

18 Secretary. 

19 Q What kind of direct access to the President 

20 did Casey have when you were DDCI? 

21 A I think he had the potential for direct access 

22 whenever he wanted it. He was usually very careful in 

23 making sure that the National Security Advisor knew what 

24 he was concerned with, and if he felt it important to go 

25 see the President he usually told the National Security 



UN^^SMED 



26 



Uliiltft^SliStO 



24 



1 Advisor, and I guess sometimes he went with him, and 

2 sometimes he didn't. 

3 But I don't think there were, you know, that 

4 many occasions where Casey felt he had to use that 

5 channel. He had certainly the potential of doing it. 

6 Q If he felt he had to communicate directly with 

7 the President, how would he do it? 

8 A He would usually go down to see him. 

9 Q Did he ever call the President on the 

10 telephone? 

11 A I believe he did, yes. 

12 Q How frequently would that happen? 

13 A I don't think that often. 

14 Q Did he ever write letters to the President? 

15 A Yes, if there was an issue that he felt 

16 strongly about he would write the President and tell him 

17 what he thought. 

18 Q Would those letters go through the National 

19 Security Advisor or would they go directly to the 

20 President? 

21 AX don't know, but knowing Casey I think he 

22 would make sure that the National Security Advisor was 

23 aware of that. 

24 Q In general Casey tried to keep the National 

25 Security Advisor informed of what he was doing with the 



27 



UMGLASSfflED 



1 

2 

3 

4 

5 

6 

7 

8 

9 
10 
11 
12 
13 
14 

15 

16 

17 

18 

19 

20 

21 
22 
23 
24 
25 



President 
A 
Q 
A 
Q 
A 



Yes. 

When did you first meet Colonel Northl 
Gee, I don't know. 

Did you know him before you became DDCI? 
The first time I met North was 

m a JCS war game, and we were meeting 
down in the situation room, and we had, I th^Tk, 




yHail^^^^^ 



26 



1 Q Can you give me a year on that? 

2 A I don't know whether it was '81 or '82. 

3 Q Okay. During the time that you were DDCI did 

4 North frequently visit the Director at headquarters? 

5 A No. 

6 Q What kind of relationship did North have with 

7 the DCI? I'll tell you that his records reflect, the 

8 DCI's records reflect, a number of meetings with Colonel 

9 North and a number of phone conversations with him. Is 

10 that consistent with your understanding of their 

11 relationship? 

12 A No, not at all. I can't imagine why Casey 

13 would bother talking with North ■..hen he could talk with 

14 anyone else he wanted to. That ray have happened either 

15 after I left or when we were opted out of Central America 

16 and Ollie was trying to drum up all kinds of support 

17 there. But I can't — I don't recall North being around 

18 the Agency very much. 

19 Q The Director had an office in the Old 

20 Executive Office Building. How much time did he spend 

21 there? 

22 A I think he used it any time he was in downtown 
2 3 Washington and had either a gap between meetings down 

24 there or if he was going to meet some outside visitor he 

25 would often meet him down there. 



^«i'rfjic^frr£0 



23 



ym^^Stf^^ 



Q Did the Director ever speak to you about Ollie 
North - what he thought of him, what his relationship 



^^ 27 

1 Q To your knowledge did the Director ever meet 

2 with Colonel North at the OEOB office? 

3 A I would not know. 

4 Q Do you know whether Colonel North would ever 

5 see the Director at his home? 

^ A No, I have no idea of that. 

7 

8 

9 with North was? 

10 A No. 

^^ ° ^° ^= f^^ as you knew, the relationship wasn't 

12 particularly close and during the period of time you were 

13 DDCI he didn't have much contact with you? 

^^ ^ "®11' 1 took objection to the newspaper 

reports which mentioned that North was working for Casey. 
That just blew my mind. i had no indication that that 
was the case whatsoever, and I don't think it's a fact. 
I think Casey's malady drew a lot of attention. 
^^ Q "^ou mean because he's not able to — 

^° A Unwarranted because he couldn't defend 

21 himself. 

^^ '2 Because he can't defend himself, people are 

assuming that he had a closer relationship with North 
than he actually had? 
A Right. 



I/N0LA^FI€D 



30 



UNCmStfTED 



1 Q To your knowledge, he didn't have a 

2 particularly close relationship with Colonel North? 

3 A No, he did not, not to my knowledge. 

4 Q How important was the contra program to the 

5 Director? If you could list his top four or five 

6 priorities, would the contra program fit within the 

7 Director's top four or five priorities? 

8 A By all means. 

9 Q Where would you rank it? 

10 A I would rank it probably number one, if not a 

close second^^^^^^^^^^^^^l 

12 Q How much time would you say the Director spent 

13 on the contra issue? 

14 A A lot of time. He was very interested in what 

15 was going on down there on a day-to-day basis. 

16 Q Because the Director had it as a high priority 

17 and spent considerable time on it, did you also spend 

18 time on the contra program? 

19 A Well, I thought it was in good hands. I was 
2 knowledgeable of what was going on down there. I 

21 believed in the contra program, but I had great 

22 reservations whether or not CIA could prosecute it. I 

23 predicted that we were going to be legislated out of 

24 Central America a year and a half or two before it 

25 happened. I could just see the uneasiness welling up in 

TCtf» SECB5T/C(!>pB»([0RlV A 



31 



UNOkA^SIfJED 



1 Congress, not so much that the need was there, but the 

2 fact that we were asking Congress to be a partner to a 

3 covert action that was only kept secret within CIA. 

4 And the only one who put a secret stamp on it 

5 in conversation on contras was in CIA. It was just an 

6 open war and it had reached a dimension that I felt was 

7 just too much. In fact, I urged Casey to get the Agency 

8 out of it and turn it over to DOD because of the growing 

9 uneasiness in Congress. And it was that the Senators and 

10 Congressmen; felt they couldn't look their constituents in 

11 the eye and go for this covert action program and try to 

12 sign up to something that is supposed to be secret when 

13 it is so public. 

14 And if it was so important and everybody knew 

15 about it and the Congressmen were voting to give covert 

16 action funds, why didn't they give open funds and do it 

17 in an open fashion? And Casey finally agreed that I 

18 could talk to people about it and I talked to Bill Clark 

19 and said, you know, let's get DOD to take this over. 

20 It's reached a dimension that's too big for us and it's 

21 an embarrassment to the U.S. Government. 

22 And Bill Clark said eventually, well, it's all 

23 right with me, if you can convince Shultz and Weinberger. 

24 I believe I mentioned it to Shultz, and I can't be sure 

25 of that, but I know I did mention it to Weinberger, and 



y^m^iFtED 



32 



UflOkA^SIffED 



30 




1 he just said no way. Vou know, he wasn't blind — not 

2 with a ten-foot pole. 

3 So, at any rate, we hung in there and, sure 

4 enough, down came the Boland Amendment and we were 

5 legislated out of it. 

6 Q Who were the principal DO officers that Casey 

7 dealt with on the contra program during the period of 

8 time that you were DDCI? 

9 A Dewey Clarridge and then^^^^^^^^^Bwhen 

10 Dewey — 

11 Q Dewey Clarridge wa^^^^^^^lthe Latin America 

12 Division, correct? 

13 A Yes. 

14 And^^^^^^^^^Kvas Chief of the Central 

15 American Task Force. Why did Casey's principal officer 

16 on contras change f rom^^^^^^^^^Hthe Latin America 

17 Division to the Chief of the Central American Task Force? 

18 A It was because we all 1 iked^^^^^^^^^^^HHe 

19 was a very sharp officer and I think a very precise guy, 

20 and I think we had a great deal of confidence in him. 

21 And when we made the whole move, we brought ir 

22 ^^^^^Hto be Chief of Central America, and^^^^Hceing 

23 the guy that he was, I think he was the natural guy to 

24 run the program. 

25 I think Dewey kind of assumed the role of 

UNekASSIflED 




1 

2 Force 



U, but .ISO Chief of the Central American TasK 



31 



Q 



Did Dewey Clarr.dge have frequently direct 
contact w.th the Director about the contra pro.ra.. 

', Tw' frequently would he .e up there talking 

with the Director about it? 

, Oh, Idon.t.now, but !■» sure it was three or 

.ore ti.es a wee., and lotsoftelephone calls. 

^ . .^^^^^K^ave similar contact 
And later did^^^^^^ 

with the Director? 

Channels than Oew.y .1," "• So I -ould tn.nV^|B 
; „o„l., VO. .no., »1. - CaU =ao„o a lot a.s.or «a„ 
, „e„.V would talk to Clair George. 

5 Lefs tal). about the period of t..e in 1984 
; .nen ,ou r.aU.ed that the .undin, .o. the cont.ae .a. 
, ,oin, to run out and not .e renewed .o. so.e ti.e. 
!0 did you first realize that? 

, v,eU, as I said, a year and a half or t-o I 
\] xnew it was oonin,, and there was a lot of iterations, a 

1 Of si^s oo.in, out Of confess su,,estih, a ,rowi„. 



82-720 0-88-3 



34 



UNOLHS^FIED 



32 



1 but I can't say when. 

2 Q In view of the Director's commitment to the 

3 contra program, in view of your awareness, and that would 

4 have been certainly by the spring of 1984, that the U.S. 

5 Government money was going to run out, what efforts did 

6 you and the Director make to plan for how the contras 

7 could continue to be funded? 

8 A The thrust of our activity was to get 

9 administrative support in Capitol Hill to turn that 

10 around. , I felt we kind of dropped the ball in letting 

11 the Boland Amendment come in and take hold, that the 

12 Administration seemed to be content to let humanitarian 

13 assistance represent U.S. interest and hope that third 

14 countries would fill the vacuum. 

15 My concern was twofold on that. I felt that 

16 we were letting Congress off easy. I felt that for the 

17 contras to be successful they had to have Congressional 

18 support. That was a given. And so I felt that there 

19 should have been more pressure placed on Capitol Hill to 
2 keep the contra program going. 

21 Secondly, I thought it was a cop-out to rely 

22 on third countries and hope that they would provide 

23 support. But if the Administration let Congress get away 

24 with just giving military aid and if we were accepting 

25 the fact that that was the will and the intent of the 



u#Ot##SfF^D 



onccussn^ED 



33 



1 Congress as a whole, then any third country that 

2 supported the contras Congress would soon learn about and 

3 they would put the squeeze on those countries by cutting 

4 off their foreign aid. 

5 So all we were buying in letting the 

6 humanitarian assistance go through was maybe one year 

7 before the third countries would have to kowtow to 

8 pressure from Congress, just like the Administration was. 

9 Q I understand that there were continuing 

10 efforts ;to turn the Congress around on this issue during 

11 the entire period of time that the Boland Amendment was 

12 in effect. 

13 A Right. 

14 Q But is it fair to say that by March or April 

15 of 1984 you realized that there was going to be a 

16 substantial period of time before Congress could be 

17 turned around on the issue? 

18 A Yeah. Usually the only way to the board is 

19 through the authorization and appropriations, so you had 

20 to wait for that cycle. 

21 Q So at the very least you knew there was going 

22 to be almost a year before new money could be voted. 

23 A To get back to the board. 

24 Q And you also knew that the contras were being 

25 funded almost entirely by United States Government funds; 



UNGIASStfJED 



uNetfssinED 



34 



1 correct? 

2 A Correct. 

3 Q What planning went on at the CIA during the 

4 winter-spring of 1984 as to how the contras could 

5 continue to exist during that period of time when you 

6 knew there wouldn't be any U.S. Government funding? 

7 A The whole planning that I was exposed to 

8 focused on lobbying Congress and bringing pressure to 

9 bear on Congress to turn itself around, and I know of no 

10 plan for anyone in the Agency or any effort on the Agency 

11 to get support out of other countries to replace the 

12 Boland or substitute for the Boland thing. 

13 Now the Boland Amendment didn't hit till the 

14 fall of '84, I think. 

15 Q Right. I'm going to show you a document in a 

16 second, but during the March-April 1984 time frame you 

17 are not aware of any efforts within the CIA to determine 

18 whether we could get some third countries to provide the 

19 ■ support that the U.S. Government could no longer provide? 

20 A Oh, there was efforts to get them to help out, 

21 but at that time period it was quite legal and 

22 permissible to do so. Originally we had hoped that^^^^H 

23 ^^^^H^^^Bmight play a role there, but they had done so 

24 in the initial periods of the contra program and pulled 

25 out. But I'm privy to this exchanaeof cables 



37 



3 

4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 



16 



UNGkA&SIFtED 



1 

2 Q 



I want to get into that in a minute, but I 
want to show you another document first, and why don't I 
do that now? If we could mark this as McMahon Exhibit 1 
and just for the record it's a 27 March 1984 memorandum 
for Robert McFarlane from the DCI regarding assistance to 
the Nicaraguan program. 

(The document referred to was 
marked McMahon Exhibit Number 1 
) for identification.) 

Mr. McMahon, let me just make one more 
identifying reference to this exhibit. The Committee 
number is C-7490, and the CIA number is CIIN 3077. 
Please take a look at that. 



1^ (Pause.) 

A All right. 



Have you seen that document before, Mr. 



17 Q 

18 McMahon? 

,g A I can't recall. I notice that is a time when 

20 I was traveling, so I may not have seen it. 

2, Q The document speaks in general terms about how 



the contras could be supported, and it discusses several 

different alternatives. I'd like to go over those 

24 alternatives with you. 

... ,i^»rnAtive mentipnsO^is the possibility 



one alternative mention^<^i 



38 



IJttOLftSSIftED 



of going to^^^^^^^^^Hto obtain assistance for the 
contras. What do you know about that? 

A I don't know much, but I think it's a non- 
starter, 




Q In the memorandum Director Casey says to Mr. 
McFarlane: "I am in full agreement that you should 
explore funding alternatives 

^^^^^^^^^^^^Hwere you aware the Director 
Mr. McFarlane were having discussions about going to^| 

^^^^^^^^^^^^^Tto obtain funds for the 
contras? 

A Not that I can recall. 




Q This was not something that was discussed at 
your weekly meetings with the Director and Mr. McFarlane 
as far as you can recall? 

A Not that I can recall, but if it did chances 
are — if we did discuss it, chances are it's in my 



UH€L^SStf}ED 



37 



lever did give 



memoranda. 

Q Do you know whethei 
or provide any funding to the contras? 

A I suspected they did, but I had no firsthand 
knowledge. 

Q What led you to suspect that they did? 

A Well, when the Boland Amendment came down I 
wondered what countries could possibly help out, and I 
figured thatj 
and 




Q Why did you pick those countries as possible 
donors? 

A Because they, I think, were well disposed 
towards the Administration and wanted to help the 
Administration. 

Q Are they also countries that might have 
something to gain from the Administration by supporting a 
program like this? 

A By all means. 

Q The memorandum says, in the third paragraph: 
"The second alternative we" — meaning the CIA — "are 
exploring is the procurement of assistance froml 

I've also shown you before the deposition a 



series of c 



trnm^^ES) 



in a moment about 



40 



UNSi^SSiHED 



38 



1 

2 

3 

4 

5 
6 
7 
8 
9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 



that approach, but can you tell m e from where did the 
come to go tc^^^^^o obtain 

contras? 

A I don't know. It's conceivable that when the^ 

Agency learned that 




^^^^^^^^^ But I don ' t 

know who really originated it. 

Q You don't know, but you would think that 
Clarridge might have been the person? 
A Right. 

Q The final alternative mentioned is in 
paragraph four and says: "Finally, after examining 
legalities you might consider" - and I can't read one of 
the words -- "appropriate private U.S. citizen tc 
establish a foundation that can be a recipient of non- 
government funds Which could be dispersed to the FDN." 

Did you ever discuss during this time period 
with Director Casey the possibility of finding private 
citizens to establish a foundation which could receive 
non-government funds to support the FDN? 

A NO. And, knowing my contacts in the United 
States, they don't have money to do that. 



^ettSStfiED 



41 



UM€kA^(F^D 



39 



1 Q Casey never talked to you, though, about that 

2 as a possible way of supporting the contras? 

3 A No, I don't think he did. 

4 Q Do you know where he came up with this idea 

5 that is mentioned in paragraph four of the memorandum? 

6 A It could be his fertile mind, because he is 

7 always thinking of ways of figuring things out. And, of 

8 course, he knows the entire power and financial structure 

9 in the United States. 

10 Q It was never something he discussed with you, 

11 however? 

12 A No. I'n sure from his fundraising days for 

13 the Republican Party he had a pretty good fix on what 

14 people are prepared to help. 

15 Q Let me mark as McMahon Exhibit 2 the series of 

16 cables concerning the attempt or the discussion about 

f rom^^^^^^^^^^^^^l f or the 

18 these cables run by the Committee numbers C-8933 through 

19 C-8945, and they run CIIN numbers 3871 through 3883. 

20 (The document referred to was 

21 marked McMahon Exhibit Number 2 

22 for identification.) 

23 Mr. McMahon, these are the cables that I 

24 showed you before the deposition, correct? 

25 A Right, 



itM64ASS(F^D 



42 



liMCt^SlflCD 



1 

2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 




Q And in general terms they describe a proposed 

trip, which did ta ke place, whei 

^^^^^^^^^^^■we n t 

possibility of obtaining aia^^^^^^^^^. ,, 
^^^^^^^^^■^^^^^^^H I o r 

contras. However, although the trip took place, the 

actual atte.pt to solicit the aid did not take place. is 

that a fair summary? 

A That's my recollection of it. I think we 
turned him off of that. 

^^^^^°^^°^^noyhow it happened that 
^^^^^^^^^^^^^^^^^^^B came to go tc 

A I don't know, you know, how that was spawned. 




but from look 



ing at this it's obvious that he went ovei 



^^^cus^etUnga c c e s £ 
^^^^^^^^^^■to for the contra 

Q Did Director Casey ever discuss this 
possibility with you of obtaining aid froi, 

A Not in the beginning. i think from here it 
notes that they caught up to me with this idea during a 
trip. 

you a to^^|^^^^H|^| 

around that ^^^^^^^^^^ 

A I was 




43 



ljN€lASStF»8£D 





was asked to do this, I said all right, since I'm over 
there I will gol 

Q Who asked you to go tc 

A Me. 

Q You decided on your own? 
A Right. 

Q And what were you going to 
to do? 

A Just to touch base with! 




44 



1 

2 
3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 




Q Let me interrupt for a second. When you went 
ta|^^^^^^^^^^Hdid you have any intention of discussing 
the of^^^^^^^^^^^^^^^H|giving 

money or materiel to the contras? 

A Not when I left, but I guess t got a cable to 
do that. 

Q Who sent you that cable — and if you need to 
take a moment to go through them, please. 

A I guess the cable was sent out by — it was 
sent out by Dewey Clarridge, saying that he had a meeting 
with the DCI on 23 March on the Nicaraguan project and he 
suggested that Dewey sen d the cable to m e and have me 

w i t h ^^^^^^^^^^^^^^^^^^^^H w h e n 
there. 

Q What was your response" 



UNOLA^if^D 



45 



A I didn't respond, that I recall, 
_Q Did you raise it withJ 




therefore, I don't think it was raised. 

Q Did you have some reluctance about raising 
that issue?, 

A Yes. I didn't think it was a good idea. 

Q Why not? 

A Because we had enough problems with Congress 
on the Nicai 




Q Apart from the problems wtth^s^ongress are 
there any policy reasons why you thought it might not be 
a good idea to solicit aid^^^^^^^^^^^^^^Hfor the 
contras? 

A No. 

Q When did you learn that] 

Dewey Clarridge, was planning to make 
trip^^^^^^^^^^^to ask for aid for the contrast 




AS^FI£D 



46 



i*N§tft^#*BED 



44 



A Well, I think after I came back he was 
preparing to go. 

Q Do you know whether that trip had any other 
purpose other than to try to obtain aid for the contras? 

A I can't say. 

Q Did you have any discussions with Mr. 
Clarridge about the trip before he left? 

A Y€ 




Q Had a decision been made by the time 
Mr. Clarridge left as to whether he was going to ask for 
aid for the contras? 

A Yeah. I think that was turned off. I think 
we knocked that off. 

Q So you are saying that you think by the time 
he left the decision had already been made for him not to 
ask for aid to the contras? 

A I believe that's the case, yes. 

Q Okay. Let me try to go over this with you. 
In one of the cables, Committee number C-8947, it's a 



II^^Iej^cqdeword ^ £ Q 



47 



UNOtftSSfRED 



45 



cable dated 10 April '84, and if I can read this 
correctly it's to IM MEDIAT^^^^^^^ and it says: 
Subject^^^^^^^^^^Discussions witq^^^^^^^^^^^^BODCI 
advises that there are some second thoughts around town 
as to wisdom involvin<^^^^^^^^^^^Hin already 
complicated Central American equation. Request you hold 
off on this aspect of your discussions until we can get 
definitive word to you. 

Let me show you that cable. Can you tell me 
who this cable is being sent to?_ 
A It's being sent tol 




Q What this message says basically is don't do 

anything to pursue the Central American issue until we 
can give you a definitive answer on what to do; is that 



rightl 



Right. 



Ul^LASSlFEED 



UN(^4^SSIEI£0 



46 



Q The nex t cable i n sequence, C-894 8, Is to 

headquarters froin^^^^^^Hand that^^^^^^^^^| 

April^ Have 
read that right? Is that describing the arrival of Dewey 
Clarridge ir 

A That is correct. 

Q And at the time of his arrival the decision en 
what to do on aid to the contras is still unresolved; 
isn't that right? 

A .That's right. 

Q In fact, if thedecj 




A Right. When he went out, though, he had 
instructions not to raise it. That was an issue that we 
weren't going to put forth with! 

Q Well, if you weren't going to raise that, 
wouldn't you have sent someone other thai 



A I can't answer why he went. There may have 
been another reason that I don't know. 

Q Well, let me then refer to the next cable I 
have in sequence. It's a cable C-8949, dated 1 May 84, 



i^0t*SStFt£D 



UN0t«^Stf4£D 



47 



to headquarters fron^^^H|^^t says: "Any word to 
pass^^^H^^^^^^^Hon reference 
Have been able by avoidance of personal meting to delay 
response to date, but local circumstances now dictate 
need to see^^^^^^^^^^oonest . If no decision yet 
reached, will temporize accordingly." 

Do you know what he is referring to? 

A No. I can't really answer that. 

Q Isn't he referring to the decision on whether 
to ask for aid for the contra program? 

A That would seem logical, in light of what went 
on before. 

Q So isn't it the case that as of 1 May the • 
decision on whether to solicit aid for the contra program 
had not yet been made? 

A That's possible, yes. 

Q And finally let me show you the cable C-8945. 
It is a cable froii 

and isn't it in this cable when the final 
decision is communicated tc 

^^^^|that the -- strike that. Let me try to do it 
better. 

Isn't it in this cable that the final decision 
is made on whether to solicit aid fror 



the contras? 



UNClASStRED 



50 



UlitLftSSiRiO 



48 



A Yes. That would be a logical conclusion. 
MR. LEON: What's the date on that, Paul? 
MR. BARBADORO: It's dated 1 May 84. 
BY MR. BARBADORO: (Resuming) 
Q But it's your testimony that when Dewey 
Clarridge went to^^^^^^^^^Hhe was under instructions 
not to raise the possibility of obtaining aic 



A Yes. 

Q Who gave him those instructions? 

A Well, I think I was involved in that 




Q I want to pursue this issue of third country 
funding with you a little bit further and I want to show 
you a memorandum for the record from General Counsel 
Sporkin, dated June 26, '84, and let's mark that as 



iWILflSSIFTED 



51 



imetftsstmD 



49 



1 McMahon Exhibit 3. It's C-7808 and CIA number 3098. 

2 (The document referred to was 

3 marked McMahon Exhibit Number 3 

4 for identification.) 

5 Please take a look at that, Mr. McMahon. 

6 (Pause.) 

7 I don't imagine that — well, you are on the 

8 distribution list for this memo. Do you recall getting 

9 it? 

10 A The subject matter is certainly familiar with 

11 me. 

12 Q Do you remember an NSPG meeting where the 

13 possibility of aid, soliciting aid from third countries, 

14 was discussed. 

15 A No, I can't recall that, although it's not 

16 beyond the realm of consideration. 

17 Q Did you ordinarily attend NSPG meetings? 

18 A Either the Director or I. Infrequently both 

19 of us did. But usually it would be one or the other. 

20 Q In this memorandum, which is dated June 26, it 

21 says: "The DCI explained that funds to support the 

22 current Nicaragua program were running out and that he 

23 wanted to discuss the legal limits of the options 

24 available to the government. The DCI mentioned that he 

25 was at a recent NSPG meeting where he had been requested 



ufiettssmED 



52 



UN€kftS$tBiD 



1 to discuss the matter informally with the Attorney 

2 General. The DCI said one proposal being considered 

3 involved other nations in the region providing aid to the 

4 Nicaraguan contras." 

5 It's your testimony that you can't recall an 

6 NSPG meeting where that was discussed but that it's 

7 possible that there was one? 
3 A Yes. 

9 Q Do you recall any discussions with the DCI 

10 during this, period, June of 1984, about the possibility 

11 of obtaining funds from third countries? 

12 A No. No, I can't recall any. 

13 Q Do you recall the DCI mentioning that he had - 

14 been asked to discuss the possibility of third country 

15 funding informally with the Attorney General? 

16 A No. 

17 Q Do you know whether any discussions like that 

18 took place? 

19 A No, but it wouldn't surprise me. But I think 

20 it's beautiful evidence that Casey was trying to follow 

21 the law. 

22 MR. BARBADORO: Let's go off the record a 

23 second. 

24 (A discussion was held off the record.) 
2 5 MR. BARBADORO: Back on the record. 



llNCtA^lflED 



UNClASSIFtED 



51 



1 BY MR. BARBADORO: (Resuming) 

2 Q The memorandum states that "after discussion 

3 the Attorney General stated that he saw no legal concern 

4 if the United states Government discussed this matter 

5 with other nations, so long as it was made clear that 

6 they would be using their own funds to support the 

7 contras and no U.S. appropriated funds would be used for 

8 tfeis purpose. " 

9 During June of '84 was it your understanding 

10 that the law would have allowed you or other government 

11 officials to approach third countries to obtain aid? 

12 A Definitely. As far as I was concerned, that 

13 paragraph -- and I'm not a lawyer, with all modesty — 

14 that paragraph would be applicable up to the time of the 

15 Boland Amendment, but once the Boland Amendment was in 

16 then we really couldn't play that role because the Agency 

17 under our ground rules can never ask someone to undertake 

18 an action that it can't legally do itself. 

19 In other words, if we seek a surrogate, we 

20 must have the same authorization of what we want the 

21 surrogate to do. 

22 Q As we go down the memo, it says: The Attorney 

23 General also said that any nation agreeing to supply aid 

24 could not look to the United states to repay that 

25 commitment in the future. I want to ask you a policy 



UNCLASSfFSED 



54 



yNmSStflED 



52 



1 question here in relation to that. Is it a concern as a 

2 policy matter when the United States tries to seek aid 

3 from third countries for covert programs that those 

4 countries might expect something from the United States 

5 in the future? 

6 A I don't thinlc it's a quid pro quo. I think 

7 that you have to look to the overall general relationship 

8 between the countries. They obviously will do something 

9 to curry our favor, but it may not be anything specific 

10 at the timd. They just want to stay in good terms, much 

11 as they would vote favorably for us at the U.N., knowing 

12 that that kind of incurs a debt of unspecif icity in the 

13 future. 

14 Q As a policy matter, though, does it concern 

15 you that there might be the possibility that if we asked 
I^^H^^H^Hto give us aid for one of covert 

17 programs tha^^^^^^^^^would expect us to then 

them wi^^^^^l^^HH^Hfr'' something 
19 like that in the future? 

A I don't think you can drive it to a specific 
return. I think you have to look upon it that are you 
our friends and, if so, why don't you help us out because 
we need help, because I don't think it's a one-for-one. 

24 Q Do you think as a policy matter that the 

25 Congress, which is going to vote aid, foreign aid, for 



UN(^«SStHE3 



55 



UN€L#SSmED 



53 



1 third countries should be informed of solicitations to 

2 those third countries for assistance in our covert 

3 programs? 

4 A If CIA were doing that, I think we would 

5 inform them. In fact, it is my understanding that we 

6 usually do that. In fact, we have come upon a phrase in 

7 our covert action Findings, where we say "through third 

8 parties or third countries", whatever, and Congress says 

9 well, who are you going to use, and we usually tell them. 
10 Q This memo is dated June 1984. In July 1984 

H Adolfo Calero received his first $1 nillion deposit from 

12 a country that Robert KcFarlane has identified ^^^^^^^H 

13 ^^^f^^^During June of 1984 did you ]cnow of any attempts 

14 by anyone in the United States Government to obtain aid 

15 for the contra program from| 

16 A No, I did not. 

17 Q When did you first learn of the possibility 

18 that^^^^^^^^^Hhad provided aid to the contras? 

19 A When I read it in the newspaper. I suspected 

20 it, but I never had any firsthand knowledge. 

21 Q Okay. 

22 MR. LEON: Were you surprised that the 

23 Director would keep that from you? 

24 THE WITNESS: Keep that from me? 

25 MR. LEON: If he knew it. 



UNgLASSIFiED 



56 



UN€tJ^lf^D 



54 



1 THE WITNESS: Yes, I would be surprised. I 

2 think Casey did not want to know because when we would 

3 come to Congress and we'd get around to this subject he'd 

4 often be asked well, who's helping out the contras. And 

5 I didn't want to know, and neither did Casey, because we 

6 would feel obliged then to tell Congress. Mow we felt 

7 Congress would put the squeeze on those countries. 
3 BY MR. BARBADORO: (Resuming) 

9 Q By June of '84 did you know that Ollie North 

10 was the principal action officer for the contra program 

11 within the NSC? 

12 A No. 

13 Q Who did you think over at the NSC staff had 

14 principal responsibility for the contra program at that 

15 time? 

16 A Well, I guess it would have to be Ollie, but, 

17 you know, I had never heard Ollie designated as that. 

18 Q And you had no knowledge in June of 1984 that 

19 Ollie North had played any role in trying to obtain aid 

20 from any third country for the contras? 

21 A No, I don't recall any of that. 

22 Q And you had no knowledge of any discussions 

23 between the Director of Central Intelligence and either 

24 Robert McFarlane or Colonel North about the possibility 

25 of people on the NSC staff trying to obtain aid from 



unetftssifiED 



57 



UNCtft^tFfiD 



55 



1 third countries for the contras? 

2 A No, other than the correspondence that you 

3 showed me . 

4 Q Was it a conscious decision on your part not 

5 to know, not to seek to know about where the money was 

6 coining from for the contras? 

7 A Definitely. 

8 Q And could you explain why that was? 

9 A Because if I was testifying on any given 

10 subject in Congress and the question was asked, I would 

11 tell them. And we operate, as any true intelligence 

12 officer knows, on a need to know, and when furds were cut 

13 off it was not my need to know where they were coming ■ 

14 from, and I just wanted to stay away from it. 

15 Q It was your understanding once the Boland 

16 Amendment was passed that no CIA official could be 

17 involved in soliciting aid from third countries; correct? 

18 A Definitely, and we sent instructions to 

19 everyone to make sure that was the case. 

20 Q And to your knowledge were any CIA officials, 

21 including the Director, involved in any way during the 

22 period of the Boland Amendment in trying to obtain funds 

23 from third countries for the contras? 

24 A None that I am aware of. 

25 Q You said you didn't know about the money 



yNGIftSS#{ED 



58 



imetftsstF^D 



56 



1 coming from^^^^^^^^^^ffor the contras until you read 

2 about it in the papers recently, but you said you 

3 suspected. I want to show you a document bearing the 

4 Committee numbers C-2707 through 2716 and bearing the CIA 

5 number CIIN 1323. And it concerns a meeting with the 

6 Secretary and Deputy Secretary of Defense, 15 March 85. 

7 Could we mark that as McMahon Exhibit 4? 

8 (The document referred to was 

9 marked McMahon Exhibit Number 4 

10 , for identification.) 

11 Please take a look at this, and feel free to 

12 read the whole thing. However, I intend to question you 

13 only about the part that's highlighted. 

14 (Pause.) 

15 Mr. McMahon, this exhibit concerns a meeting 

16 that you and Director Casey had with Secretary Weinberger 

17 and his Deputy on March 15, 1985; correct? 

18 A Right. 

19 Q And part of this document is the summary that 

20 you prepared of that meeting? 

21 A Yes. 

22 Q Under paragraph seven there's a discussion 

23 about support for the contras. In that paragraph it 

24 says: In closing, the Secretary stated that he had heard 
t h a t^^^^^^^^^^^^^^^^^^^^^^^^^^^ h a d 



UK€LI^SICI£D 



57 



1 $25 million for the contras in $5 million increments. 

2 Do you remember that meeting where Secretary 

3 Weinberger mentioned that he had heard that^^^^^^^^^H| 

4 had earmarked $25 million for the contras? 

5 A Yes. 

6 Q What did he say in that meeting? 

7 A Exactly what you said. It was like an offhand 

8 remark. In fact, he said it, if I'm not mistaken, when 

9 we were getting up to leave and we had discussed, you 

10 know, what can we do to get Congress to address this 

11 problem of aid to the contras and get off the non-lethal 

12 kick. And as we were breaking up — and, as you can see, 

13 it is the last it em in the note — he said I've heard 

14 that^^^^m^l^^o kind of the hearsay 

15 context, and that was the extent of his comment. 

16 Q He didn't say anything else about how he had 

17 learned, for example, about^^^^^^l 

18 A No, not that I recall. 

19 Q And he didn't say anything, as far as you can 

20 recall, about how the money had been obtained, who was 

21 involved in the solicitation? 

22 A None whatsoever. 

23 Q Did Director Casey say anything when Secretary 

24 Weinberger made this statement? 

25 A No_. 



UNOU^EIED 



UKCLA&SIFIED 



58 



Q Afterwards did you ask Director Casey if he 
knew anything about this solicitation -- excuse me, this 
assistance? 

A No. 

Q Can you explain to me why you wouldn't have 
said anything to Director Casey about this? 

A Probably because, as I go back to the original 
thing, I really didn't want to know what anyone else was 
doing to the contras, 




Q As far as you knew, however, no one in CIA was 
involved at any time in approaching^^^^^^^^lto obtain 
aid for the contras? 

A No, that I am aware of.j 




various times, didn't he? 



UMCiftSSIFlED 



61 



UNCkASSII^D 



59 



A Yes. 

Q To your knowledge did he ever raise the contra 
issue witbJ 

A Not that I'm aware of. 




62 




Q Is it fair to say that you briefed Congress 
several times or you were present at Congressional 
briefings on the issue of the contras several times 
during '85 and '86? 

A 'Yes. In fact, I was the one who went down to 
try and convince Congress to roll over the Boland 
Amendment by starting up the $100 million program, and 
that was done through the intelligence authorization 
process which began in January-March time period in '86. 
But you may recall Congress began to turn themselves 
around in the tail end of '85. They gave us $3 million 
for the contras to give thera communications equipment and 
then in the authorization process we came back with a 
pitch for $100 million, which was eventually approved. 

Q During your briefings to Congress you were, on 
at least one occasion, probably more than one occasion, 
asked where the contras were getting their money from. 



right' 



mCUISSU^ED 



UNCMSSTRED 



61 



1 Q And you told them you didn't know because you 

2 didn't know? 

3 A Right. 

4 Q Did you ever tell them you suspected money was 

5 coming froir 

6 AX believe so, yes 




8 Q Did you ever learn -- you mentioned that you 

9 didn't have any knowledge other than what we have just 

10 discussed of money coming f rom^^^^^^^^^^^^B Did you 

11 ever receive any information that the governments of 
either^^^^^^^^^^^^^^^H had been by any 

13 U.S. Government official to obtain aid? 

14 A No. 

15 Q And apart from what you ray have read in the 

16 papers do you have any information that they did, either 

17 of those governments did actually give money to the 

18 contras? 

19 A No, I do not. 

20 MR. BARBADORO: X think this may be a good 

21 time to break for lunch. Why don't we do that and 

22 reconvene after you have had something to eat? 

23 (Whereupon, at 12:30 p.m., the taking of the 

24 instant deposition recessed, to reconvene at 1:15 p.m. 

25 the same day. ) 



UN^ASSIfSED 



64 



(IN^tSSmED 



62 



1 AFTERNOON SESSION 

2 (1: 15 p.m. ) 

3 Whereupon, 

4 JOHN N. McMAHON, 

5 the witness herein, having been previously duly sworn, 

6 was further examined and testified as follows: 

7 EXAMINATION - Resumed 

8 BY MR. BARBADORO: 

9 Q Mr. McMahon, let's just finish up with the 

10 contras^and then move on to other areas. If you've been 

11 following our hearings at all or if you have read the 

12 Towe..- Report or any of the press reports on this matter 

13 you know that in early 1986 a cortra resupply operation 

commenced operating out o^^^^^^^^^^^^^^^^Hand 

15 supplying the southern front forces in southern Nicaragua 

16 but also the FDN forces. 

17 Are you familiar in general terms with the 

18 reporting that's occurred on that resupply operation? 

19 A I can't say that I am. 

20 Q You haven't been following it that closely? 

21 A No. You mean the Hasenfus caper? 

22 Q That's right. What knowledge did you have 

23 back in early 1986 before you left the Agency about how 

24 the contras were being supplied? 

25 A I had none. 



IJN0LASSIF!€D 



65 



UN0LASS4Fi£D 



63 



1 Q Did you have any idea about how the southern 

2 front forces were getting their military supplies? 

3 A No. I suspected air and possibly by boat. 

4 Q Had you heard that there were private 

5 Americans, private patriotic Americans, private 

6 benefactors, Project Democracy -- any name you want to 

7 call it -- that there was a group of American citizens 

8 that were involved in an effort to resupply the contras? 

9 A I know that Americans were, with no reference 

10 to any particular name or organization. But I know that 

11 there were a lot of people in the U.S. that were 

12 concerned about the contras and wanted to help, and there 

13 was a number of speeches made. I think Ollie North was a 

14 principal speechmaker in trying to drum up interest in 

15 the contra situation. 

16 But who was doing the supplying and how it was 

17 carried out, I don't know. 

18 Q You had no knowledge while you were at the 

19 Agency about any resupply operation based at( 
20 

21 A No", other than that conducted by CIA when it 

22 was legal. 

2 3 Q And you had no knowledge about Ollie North's 

24 direct involvement in any such resupply operation? 

25 A No. 



mtftSSIflED 



52-720 0-88-4 



UNCtASS^ED 



64 



1 Q Did you know that Richard Secord was in any 

2 way involved in supplying the contras, either in selling 

3 arms to them or in running any resupply operation? 

4 A No. I didn't hear Secord 's name involved 

5 until the Iran situation back in November, I guess it 

6 was. 

7 Q Director Casey met with Mr. Secord, by Mr. 

8 Secord 's testimony, I believe in November of '85 and 

9 February of 1986. Do you remember the Director meeting 

10 with Mr., Secord? 

11 A No. I was unaware of that meeting. 

12 Q And the Director never said anything to you 

13 about his meetings with Mr. Secord? 

14 A Not that I recall. 

15 Q The Director also met v/ith General Singlaub at 

16 around that time. Did he ever tell you he was meeting 

17 with General Singlaub? 

18 A No. I never heard of that until I read it. 

19 Q Did you know about the construction of the air 

20 st 

21 A No, I didn't. That was quite a surprise to 

22 me. 

23 Q When did you find out that there was an air 

24 strip? 

25 A In the process of this hearing. 



UttCLAS^FfED 



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VjH^4^SSIf.ltO 



65 



Q Do you know^^^^^^^^^^^H 

2 A No, I don't believe I do. 

3 Q Wasn't he Director Casey's special assistant? 

4 A Oh, yes, yes. Okay. 

5 Q He was the Director's special assistant, and 

6 I'm sorry I can't give you the starting date, but until 

7 about the end of the year 1985, maybe into the first 

8 couple of weeks of 1986. Does that sound right to you? 

9 A That's about right. 

10 Q , We believe he started about September of '85 

11 and was special assistant until about December or January 

12 of '86. 

13 A Right. You said '86. I don't think he was- 

14 there. I thought he left before I left. 

15 Q Well, you left in — 

16 A March '86. 

17 Q What I meant was December '85-January '86 is 

18 around the time he left; is that right? 

19 A Yes, right. 

20 Q fHHHj^Hhas told us that he left because 

21 he wanted to go and try to raise money for the contras 

22 from privat e sources. Di d you have any knowledge that 

23 that was wh:,^^^^^^^^»;as leaving the Agency? 

24 A No, not raising money so much, but I felt he 

25 left for a two-fold purpose. One, he was personally 



UNCitSSfFfED 



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66 



1 upset that the U. S. Government was not carrying out a 

2 program to support the contras, and that really bothered 

3 him. And he left to help out the contras. And I think 

4 in fact Casey even attempted to discourage him from doing 

5 that because I think Casey was pleased with what he was 

6 doing for him.^^^^^ 

7 But^^^H conviction, as far as I was 

8 concerned, was that the U.S. Government wasn't doing what 

9 they should and he was going to go out and see what he 

10 could do> to help out. 

11 Q Did he ever discuss with you exactly what he 

12 was going to do? 

13 A No. 

14 Q So you had no idea as to how he planned to 

15 help out the contras? 

16 A No. In fact, the only conversation I had 

17 about his departure was a stand-up conversation in a 

18 doorway. 

19 Q What did he say to you there? 

20 A He just said I want to help the contras and we 

21 can't do it working here at CIA. 

22 Q Did the Director ever tell you how^^^^^^^^^B 

23 planned to help out with the contras? 
2 4 A No. 

25 Q Let's move on to a different topic, after 



UNetltSWED 



69 



UNCtftSSlFtED 



67 



1 spending three hours discussing the contras. I'd like to 

2 show you a document which has been introduced into 

3 evidence at our hearings in redacted form. It is our 

4 numbers N-7417 through N-7422 and it is a memorandum 

5 dated June 7, 1985, for Robert McFarlane from Oliver 

6 North regarding Status of Hostage Recovery Efforts. 

7 If we could have that marked as McMahon 5. 

8 (The document referred to was 

9 marked McMahon Exhibit Number 5 

10 for identification.) 

11 I can maybe direct your attention to the parts 

12 of it that I am going to ask you about. I'm going to ask 

13 you about the part headed DEA Operation on the second 

14 page, running through page four. You might just take a 

15 look at that part of it. 

16 (Pause.) 

17 Mr. McMahon, the portion of Exhibit 5 that I 

18 showed you describes an operation involving DEA agents 

19 and certain DEA contacts in Lebanon which would be used 

20 to help gain the release of the hostages in Lebanon. Did 

21 you in 1985 have any knowledge of an operation that 

22 involved the use of DEA agents to gain the release of the 

23 hostages? 

24 A No, I don't. In fact, that's quite a 

25 surprise. 



UMGUSSIFIED 



m 



UNCLASSIFIED 



68 



1 Q The operation described here talks about an 

2 effort to bribe, pay bribes to people to gain the release 

3 of the hostages. It talks about payments of $1 million 

4 per hostage. It talks about $200,000 being paid up front 

5 and involves the use of the DEA agents and their contacts 

6 in Lebanon. Is it your testimony that you knew 

7 absolutely nothing about this operation? 

8 A That's correct. In fact, it ran contrary to 

9 the Agency's policy on trying to get the hostages 

10 released. iJe were constrained to provide funds only f or • 

11 intelligence collection, and the policy was then existent 

12 in the U.S. Government at that time that we would not 

13 provide bribes or ransom to seek release of the hostages. ' 

14 Q In your opinion, if this operation that is 

15 described here had been conducted by the Central 

16 Intelligence Agency, would it have required a Finding? 

17 A Definitely. Or else a recant by the President 

18 or Secretary of State of the policy not to provide 

19 ransom. 

20 Q The operation described here is directly 

21 contrary to what the Administration's policy was? 

22 A The way I read it, it is. 

23 Q If you had been made aware of an operation 

24 such as the one described here, would you have been 

25 supportive of it? 



iJNG4«SS4H£D 



71 



UNeiA^SiF^ED 



69 



1 A No, because I think that, as harsh as it may 

2 sound, I think the policy of not paying ransom is a valid 

3 one because the experience that U.S. business suffered in 

4 Central America showed that ransom doesn't pay, that when 

5 the local terrorist groups -- call them what you will; we 

6 call them terrorist groups now -- would run out of funds 

7 they would kidnap the nearest U.S. businessman, get a 

8 ransom and then they'd fill their coffers for a year. 

9 When they needed more, they would ransom 

10 another one; So that policy doesn't work, and I think 

11 the policy we had was the proper one. 

12 MR. EGGLESTON: Mr. Barbadoro just asked you 

13 if this activity had been undertaker, by the CIA whether a' 

14 Finding would have been required, and you answered yes, 

15 unless the policy had been recanted. I wasn't sure how 

16 those two halves fit together. 

17 THE WITNESS: You are correct in correcting me 

18 on that. A change of policy does not require a Finding, 

19 but if CIA were involved in the passage of funds that 

20 would be for other than the collection of intelligence, 

21 therefore we would need a policy to use CIA funds to pay 

22 ransom. Thank you for the correction. 

2 3 BY MR. BARBADORO: (Resuming) 

24 Q Are you aware of an effort that was made in 

25 the early months jX^^|8ijt«^ »|il»qRr«iiri|elligence 



72 



I^LASSIS^D 



1 

2 

3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 



iformation or 



Ves. we went down every blind alley we ecu. 



find. 



Q DO you recall whether any DEA agents were 
involved in obtaining that information? 

A NO. The whole DEA angle is new to me. I just 
don.t recall that at all and I would find that very much 
out of character in Lebanon 




Q When did you first become aware of the 
ssibUity that the government of Israel was selling 



po 

U.S. arms to Iran? 

A Selling is the wrong wo 
that I can say that. Let me expl 



rd, and I'm not sure 




73 



LASS(FSED 




8 The whole thing fell dead there, but that gave 

9 me an awareness that the Israelis were up to something. 

10 And then a year or two later, as chance would have it, 

11 one of our officers told me that the Israelis must be 

12 fooling around with Iran because they c ontacted^^^^J 
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^Bto see 

14 would carry some cargo to Iran. 

15 Q The Israeli government contactedl 

16 A Some Israelis. Whether it was the government 
or But^^^^^^^^^^^^ltur^ed 

18 down. I said, well, that's a good thing because we 

19 wouldn't do that anyway. But that gave me still an 

20 awareness that the Israelis were up to something. 

21 Then I guess the next reference I had to 

22 Israeli involvement was in November of '85, and McFarlane 

23 and I had been -- the Director and I had been at our 

24 Thursday meeting with McFarlane, and we broke up and I 

25 walked out the door first. And Bud called the Director 



UKCtA^ff^^'i^ 



74 



UltOLASStFftD 



72 



1 back and said something to the Director, and I was 

2 talking then to the secretaries out front. And when we 

3 were in the car driving back he said, did you hear what 

4 Bud said to me? And I said no. And he said that the 

5 Israelis either had or were proposing to, I thought he 

6 said, give arms to the Iranians. 

7 I don't know if he used the term sell or not. 

8 I forget exactly. 

9 Q That was on November 14? 

10 A rYes, that would be in the right time period. • 

11 Q I want to get into that in a minute, but I 

12 have a few things I want to ask you about before that. 

13 When did you first hear the name Mar.-cher Ghorbanifar? 

14 A Well, I guess the best tinie I can refer to 

15 that is when the NSC was dealing with or attempting to 

16 set up an arrangement with the Iranians, and Poindexter 

17 was the principal person at the time, I believe, so that 

18 would have been — 

19 Q This was after the November 14? 

20 A That was after the November thing. 

21 Q You'd never heard Ghorbanifar' s name mentioned 

22 in any way prior to that? 

23 A I don't recall it. Chances are I did, because 

24 he's kind of a ne'er do well and had been in and out of 

25 CIA burn lists. But I had no association with Iran 



(JN(^«S$tF?ED 



75 



WLflSSIFJED 



73 



1 dealings on anything until after that arms shlpraant. I 

2 think it was the first part of '86 that I came upon it. 

3 Q The reason 1 ask you is that from CIA 

4 documents that we have reviewed it appears that Mr. 

5 Ghorbanifar was involved in an earlier approach to obtain 

6 U.S. arms that involved the CIA in the summer of 1985, 

7 and a person named Cyrus Hashemi. Does that ring a bell 

8 with you at all? 

9 A The name Hashemi rings a bell, if it's the two 

10 brotherf . There are two brothers involved, I think the 

11 Hashemi brothers. 

12 (A discussion was held off th« record.) 

13 MR. BARBADORO: Let's go back on the record. 

14 BY MR. BARBADORO: (Resuming) 

15 Q Is it fair to say, Mr. McMahon, that you have 

16 no recollection of any approach that was made to the CIA 

17 by Mr. Ghcrbanifar and Mr. Hashemi in the summer of 1985 

18 to sell or to obtain U.S. arms for Iran? 

19 A Not that I can recall. 

20 Q Earlier in your testimony you mentioned that 
^^^^^^^^^^^^^^^^^^^^^^^^^^V was 

22 Israelis to carry something to Iran and ^^^^^SBI 
^^^^HHB|turned them down. Why was that? 

24 A I don't know. It was a fait accompli when 

25 word got to me. I don't know whether it was a scheduling 



UN^*SSIf^tD 



7e 



UN^1tSSIf?ED 



74 



problem or what. 

Q If you had been approached about possibly 

having^^^^^^^^^^^Vused to ship things from to 
Iran, would you have approved the use ofj 
for that purpose? 

A No, because we had an embargo on things going 
to Iran. 

Q Our records show that 
carried gunpowder and detonators to Iran on 12 August 
•85, I believe. Do you know anything about that? 

A No. 

Q Would you have approved of it? 

A No. 

Q Would that have required a Finding, in your 
view? 

A Definitely. 

Q Ordinarily in your job as Deputy Director of 
Central Intelligence would you receive^^^^^^^^Hthat 
was coming to the Agency? 

A Not all. Certain stuff. Usual ly^^Hwould 
f lag^^^^^^^^^^^Bto me that they wanted me to see, so 
it would be addressed to John McMahon. 

Q Can you give me an idea of the kind of volume 
of ^^^^^^^^B you would get on any given day? I mean, 
would there be two or three operations that you would be 



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77 



UN(^4SStFED 



75 



1 
2 
3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 



getting^^^^^Bfor, or would it be — 

A It would be once a month. 

Q That you would receive something from^^^l 

A Yeah, maybe something like that. 

Q In September of 1985 Charlie Allen was tasked 

by Ollie North to begin collecting^^^^^^^^Hon a 

person namec^^^^^^B^*^^ ^ person named] 






'showing it to Charlie Allen, and copies of 
[were sent to Director Casey and to you,- 
among others. Do you recall getting thatj 
A well, as I said, 

would probably go to my assistant and she 
would tell me about it. Occasionally I would read one. 
Q Do you recall being told about that^^^H 



A Indeed. In fact, if I'm not mistaken, the 
purpose of this was that the NSC was trying to develop 
access to the hostages and they were working this, they 
were working a number of avenuest^achit 




78 



ytrctftSSffffiD 



76 



You must remember that the context of this 
whole Iran operation was -really the frustration which the 
NSC had over CIA's ability to rescue the hostages or 
provide good intelligence about it. And the government 
used every channel tht 




And I think in the frustration of not having 
good information on the hostages the NSC decided to try 
and work their own contacts. 

Q Is it fair to say that in September of 1985 
that you were aware that the NSC had an effort to obtain 
information about the hostages and that that effort 
involved! 




A I believe — I'm not sure of the date, but I'd 
have to say yes in the general context I was aware of 
that tasking. 

Q How closely were you reading^^^^^^^^^K/hen 
it came in? 

A Not very closely. 

Q Did you ever obtain briefings from Charlie 
Allen about what was going on? 



UI«eLftS$}F9£D 



79 



yi*CLRSS«f?€0 



77 



A Usually tfiat was my source of information. He 
would come in periodically and tell me what was going on. 

Q How frequently would he come in? 

A Oh, I don't know -- once every week or so. My 
calendar would demonstrate that. 

Q I'll represent to you that I have reviewed 
^^^^^^^^■and if you need it I have summaries of 




Do you recall either byl 
or by discussions with Charlie Allen that there was an 
effort involving these people to obtain the release of 
U.S. hostages in exchange for U.S. weapons? 

A Not specifically. I would say that the effort 
was to get the U.S. hostages. What means or how those 
means would be employed I wasn't that sure of. 

Q Do you recall any discuss ion wi th Mr. Allen 
about the fact that they were! 



bNCLftSSIFSt 




80 



10 



UltCLA^FS£0 



2 A NO, not the U.S. My context was through the 

3 Israelis, not the U.S. doing it. 

4 Q so you thought the Israelis may be trading 

5 U.S. weapons? 

6 A I thought the whole thrust was the Israelis 

7 were up front doing this in behalf of the U.S. 

8 Q And what this was, you thought, was that 

9 trading U.S. weapons for these hostages? 
A or weapons that the Israelis had, yes. To me- 

11 it was a weapons-for-hostage deal 

12 Q And fror 

13 discussing with Mr. Allen in September and October oi 

14 1985 you knew that this effort involved Israel trading 

15 arms in exchange for hostages? 

Ig A I can't say it's that crisp. 



but obviously 



17 there was a lot of dealings going on. 

And it involved arms and it involved hostages? 

It involved arms and hostages. Hostages were 
20 foremost. What was ir 



18 Q 

19 A 



.nvolved to do that I'm not that 



21 clear on. 

22 Q And did you also know that this was an NSC 

23 initiative? 

24 A No. I felt that it was an Israeli initiative. 

25 Q Did you know that the NSC was aware of and 



buetitssintD 



81 



|}N&L4SSiF;ED 



79 



1 monitoring the Israeli initiative? 

2 A Yes. 

3 Q You must have, because North was the one that 

4 had asked Allen to| 

5 A Right. 

6 Q Did you discuss this initiative with Director 

7 Casey in September and October of 1985? 

8 A Not that specific initiative. I think I 

9 discussed the whole issue of the hostage situation and I 

10 was uneasy .with the arms-for-hostage connotation of it. . 

11 But if the Israelis were prepared to do that, and if the 

12 President was prepared to let the Israelis do it, then 

13 that was fine by me, as long as we weren't involved. 

14 Q Did you know in September or October that the 

15 President was prepared to let the Israelis trade arms for 

16 hostages? 

17 A No. 

13 Q Did you assume that because you knew the NSC 

19 was aware of the fact that it was going on? 

20 A Yes. 

21 Q Benjamin Weir was released on September 15, 

22 1985. Did you have any idea at that time what had 

23 prompted his release? 

24 A No. In fact, I felt that maybe one of the 

25 arrangements had come to fruition, but I wasn't sure. No 



UN^tSm£D 



82 



ljR6tft§S1ft£D 



1 one had ever said that this was a successful release and 

2 if you looked at Benjamin Weir's statements after he came 

3 out, I would say they were more beneficial to the 

4 Iranians than they were to the U.S. or the Israelis 

5 because he was very critical of the U.S. and Israeli 

6 relationship. So if Benjamin Weir was sought for, he was 

7 the wrong guy to get out. 

8 But I was not specifically aware of a cause 

9 and effect. 

10 Q pid Mr. Allen in his briefings ever attribute. 

11 Mr. Weir's release to this effort involving Israeli 

12 shipments of arms to Iran? 

13 A Not that I recall. 

14 Q Could we mark as McMahon 6 a copy of the 

15 proposed testimony of the DCI before the House 

16 Appropriations Committee dated 8 December 1986, Committee 

17 numbers C-5832 through 5349, and CIA number CIIN 2226A? 

18 (The document referred to was 

19 marked McMahon Exhibit Number 6 

20 for identification.) 

21 Mr. McMahon, I just want to show you one 

22 paragraph here that maybe you can clarify for me and 

23 maybe it's just as easy to read it. This is the 

24 Director's proposed testimony, which he never gave 

25 because of the problem with the brain tumor. He wasn't 



^tCtH^SlKEO 



8a 



UNCtltSStRED 



1 able to appear. 

2 On the second page in the last paragraph on 

3 the page, it says: In the early fall of 1985 Bud 

4 McFarlane, after one of the weekly meetings which he and 

5 his deputy had with me and my deputy, asked me to stay 

6 behind. He told me about discussions he had had at the 

7 highest levels in Israel urging the desirability of 

8 discussions with officials in Iran and offering channels 

9 of access. He told me that for obvious reasons only a 

10 handful of people in the Israeli and American governments 

11 were told about this effort. I distinctly recall 

12 McFarlane emphasizing that the purpose of such 

13 discussions would be the future relationship with Iran- 

14 and Iran's great importance in the east-west-Middle-East- 

15 Persian Gulf equation. 

16 Were you present at any meeting in the early 

17 fall of 1985 with Bud McFarlane when this issue was 

18 discussed? 

19 A The Director was possibly making reference to 

20 that meeting that we had on November 14 when he stayed 

21 afterwards with Bud and then the Director mentioned in 

22 the car what was going on. 

23 Q It says the early fall, but the only meeting 

24 you can recall is November 14, '85; correct? 

25 A Yes. 



84 



IfttCfcA^lffED 



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1 Q Let me mark as McMahon 7 a series of documents 

2 concerning a 19 September 85 meeting with Robert 

3 McFarlane, Committee numbers C-2309 through 2329, CIIN 

4 number 1294. 

5 (The document referred to was 

6 marked McMahon Exhibit Number 7 

7 for identification.) 

8 I only want to ask you about the first page of 

9 the memorandum for the record dated September 23, 1985, 

10 if you woulil take a look at that. 

11 (Pause.) 

12 What I've just shown you is a memorandum you 

13 prepared; correct? 

14 A Yes. 

15 Q And it's of a meeting that occurred on 19 

16 September 1985 with you, the Director, and Mr. McFarlane; 

17 is that right? 

18 A Yes. 

19 Q In paragraph three of that memorandum you 

20 describe a reference that Mr. McFarlane made in which he 

21 said that he had heard reports that Benjamin Weir had 

22 been released because the U.S. had agreed at least 

23 indirectly to provide weapons to Iran or at least to wink 

24 at arms transferred from Israel or other countries to 

25 Iran. 



W«ifc^Srf!EO 



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__:j w- u*4- t^A t-n do it . 



83 



1 

2 

3 

4 

5 
6 
7 
8 
9 

10 

11 

12 

13 

14 

15 

16 

17 

13 

19 

20 

21 

22 

23 

24 

25 



He said he hated to do^it, but ha called David 
Kimche, Director General of the Israeli Ministry of 
Foreign Affairs on the open line to assure him that that 
was not the case and that no deal had been struck for the 

release of weir. 

DO you recall Mr. McFarlane telling you that? 

A Yes, I do. 

Q Tell me what else he said about that. 

A I think that's about it. 

Q IS it fair to say that you knew at this point. 



that Israel apparently was involved in an initiative to 
help gain the release of the hostages by trading arms? 

A I can't put a handle on th e timing. I was 
unde r the impress ion_or_^th^j 

llllllll^^^^^^^Bthedes 

^^^^■^^^^n airplane of supplies to Iran, that 
they were dealing in arms with Iran. 

And I just felt that that was part of the deal 
that the IsraeUs had w.th the Iranians. And there was, 
you know, a lot of speculation on that. I know there was 
a lot of effort on the part of the NSC to get the 

hostages out. 

Q Mr. McFarlane sa.d he called David Kimche on 



UN(^*SSfrfED 



86 



liN€k«SS)ffiD 



84 



1 an open line to assure him that there had been no deal 

2 struck for the release of the Weir. In your experience, 

3 if Mr. McFarlane had wanted to engage in a conversation 

4 about a proposed deal to gain th^ release of Weir with 

5 Mr. Kimche, would he have called him on an open line? 

6 A Not with something of that nature, but it was 

7 obviously he was sensitive to that, because he made 

8 mention that he was afraid to do it, but he called him on 

9 an open line. 

10 Q . Well, didn't Mr. McFarlane, to your knowledge, 

11 have the capacity to call an official of the government 

12 of Israel on the secure line? 

13 A I don't know. 

14 Q Well, let me ask it this way. Couldn't you 

15 draw from that conversation the inference that 

16 Mr. McFarlane wanted his conversation to be overheard 

17 and that's why he said he had called on an open line? 

18 A That's a possible conclusion, but I couldn't 

19 arrive at that. 

20 Q Did you draw that conclusion at the time you 

21 made this statement? 

22 A I just took it for granted. 

23 Q What did you make of the fact that he was 

24 telling you this and why did you think he was telling 

25 you? 



UNCLmilJ£D 



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UNmSStflED 



85 



1 A He night not have been telling me. 

2 Q I'tn sorry. Why don't you explain that. 

3 A I think he just made that comment. Now it's 

4 conceivable he wanted the record to reflect that this was 

5 not an arms for hostage arrangement with the Israelis. I 

6 don't know what his motivation was. I can't speak to it. 

7 Q Did he just volunteer this? It wasn't in the 

8 course of any conversation about the hostages or anything 

9 else? It was just something he volunteered? 

10 A Normally if it was in the context of something 

11 else you would see it in the memo. I just can't recall 

12 what prompted him to say that. 

13 Q Did he say anything about the NSC initiative, • 

14 which in fact involved Israel and the shipment of arms, 

15 we now know in retrospect? 

16 A No. If he did, I would have reported it. 

17 MR. BARBADORO: Off the record for a second. 

18 (A discussion was held off the record.) 

19 MR. BARBADORO: Let's go back on the record. 

20 BY MR. BARBADORO: (Resuming) 

21 Q Mr. McMahon, do you recall any discussion in 

22 this 19 September 85 meeting about the hostages other 

23 than what is set forth in paragraph three of this 

24 memorandum? 

25 A No, I do not. It's like a dangling 



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yNC4^$M^D 



participle, but 1 ]ust can't recall any more. 

MR. LEON: We could ask for the record do you 
think Bud McFarlane knew that you would make a memorandum 
of that for the record? 

THE WITNESS: No. I don't think so. 
3Y MR. SARBADORO: (Resuming) 




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That I don't recall specif ically,^^^^^^H 

that they are involved in 

negotiations. 

Q Did they tell you about the negotiations? 

A No. 

Q Did you connect these negotiations in your 
mind with the Israeli initiative to trade arms for 
hostages? 

A With the NSC initiative, yes. 

Q ; And at that point, in October, what did you 
understand that initiative to be? 

A I wasn't sure of the specifics other than to 
get the hostages out. 

Q And were you also reasonably certain that it 
involved the transfer of arms from Israel to Iran? 

A In my mind it did. 




91 




Q You've already mentioned a meeting that you 
had with Mr. McFarlane and Director Casey on November 14, 
'84. As of that date what did you know about this? 

A Eighty-four? 

Q Eighty-five. I'm sorry. As of that date what 
did you know about this initiative? 

A I felt that the NSC was doing everything 
conceivable to get the hostages out, that they were not 
pleased with CIA efforts to get it through intelligence 
channels, so that they were working it through diplomatic 
and whatever contacts they could conjure up to cause that 
to happen. _ _ _ ^..^„j*, 



ZD 



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1 Q Well, you've already stated that you also knew 

2 that there was a specific effort involving Israel, didn't 

3 you? 

4 A Israel for sure. I felt that the whole effort 

5 initiated with Israel as far as the Iran situation was 

6 concerned. 

7 Q Vou also knew or believed that it involved 

8 shipments of weapons to Iran? 

9 A I had a strong suspicion that that was the 

10 case. 

11 Q What did Mr. McFarlane say to you at this 

12 meeting on November 14 that added to your understanding 

13 of this initiative? 

14 A He said nothing. He said it to the Director 

15 after I had left. 

16 Q I'm sorry. Why don't you tell me exactly what 

17 happened at the end of that meeting? 

18 A We got up to leave. I went out of the room. 

19 McFarlane continued to talk to Casey. I didn't hear the 

20 conversation. When I got in the car with Casey, when we 

21 were driving back to the Agency, Casey said, did you hear 

22 what McFarlane said? And I said no. And he said that 

23 the Israelis either had or proposed to ship arms to 

24 Israel — arms to Iran — and that was the extent of it. 

25 Q Did you then tell the Director what you knew 



imcmstftED 



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about this initiative? 

A He knew as much as I did. 

Q How do you know that? 

A Well, he was at the same meetings, had access 
to the same cables I did. 

Q And you don't recall any additional discussion 
with the Director? 

A No. You've got to bear in mind that this 
initiative or action, I should say, operation, was an NSC 
operation and, you know, our feedback was whatever th ey 
told us or whatever we sawJ 

In factJ^^^^^^^^^^^^Bwere 
distribution, and the NSC — and I don't know which one, 
whether it was McFarlane, Poindexter or North — directed 
kto limit the dissemination of those 





md, if I'm not mistaken. State was excluded 
and McFarlane assurec^^^^^^^Hhe would brief the 
Secretary of State directly. 

Q Did that concern you, that the State 
Department was excluded? 

A (Nods in the affirmative.) Any time a player 
in government is excluded you usually get in trouble. 
There is a check and balance in our bureaucratic system 
and when you avoid it things screw up. 



yfiSL'JViSlriiit) 



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Q Did you express your concerns to anybody? 

A I did with Casey, and also with 
was very concerned about it, but nothing, you know, went 
beyond that. 

Q You've described this both as an Israeli 
initiative and an NSC initiative. Which do you think it 
was and how do you put those two together? 

A I think the arms for hostages with Iran was an 
Israeli initiative. When I speak of initiatives I think 

10 of the ^^C beginning to play an active role in trying, to 

11 release the hostages through foreign mechanisms, which 

12 NSC would normally do through either State or CIA, and it 

13 was the NSC itself doing it. 

14 Q As far as you knew at the time, when did the 

15 NSC start this initiative? 

16 A Oh, I can't recall, but I would say it has to 

17 be, you know, shortly after the hostages were taken and 

18 we couldn't do much about it. 

19 Q I mean this particular initiative. I don't 

20 mean when did they start trying to find out where the 

21 hostages were and exploring alternatives to gain their 

22 release. I'm saying when did the NSC first start this 

23 initiative involving the shipment of arms from Israel to 

24 Iran to gain the release of the hostages. 

25 A Well, if I look at the events of November '85, 



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1 I'd say it would have to be November 23, 1985, or 22nd, I 

2 guess it was, when the shipment went. 

3 Q So up until that point you saw the NSC's role 

4 as merely monitoring an ongoing Israeli effort? 

5 A Yes. And the tie was, you know, Israelis to 

6 the NSC and NSC people with these contacts. There was no 

7 station or ambassador involvement that I was aware of. 

8 MR. LEON: Were you familiar, Mr. McMahon, 

9 with the proposal that Bud McFarlane in the summer of '85 
XO had circulated to the Directors of Central Intelligence, 

11 Defense and State about an Iran initiative, opening up an 

12 initiative with Iran? Does that ring any bells to you? 

13 THE WITNESS: No, it doesn't. 

14 MR. LEON: Do you remember hearing anything 

15 from the Director about how he was in favor of 

16 McFarlane 's proposal of opening up new doors with Iran 

17 and yet Weinberger and Shultz were not in favor of it? 

18 THE WITNESS: That probably centers around a 

19 paper that was prepared by our National Intelligence 

20 Officer, Graham Fuller, that expressed his growing 

21 concern that the Iran situation with the U.S. had 

22 deteriorated to nothing and that as events transpired in 

23 Iran the Soviets are in a much stronger position there 

24 than we are, and therefore initiatives ought to be taken 

25 to try and bring Iran back into the western orbit. 



UltCtft^IfSD 



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25 



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94 



1 He felt that while the U.S. had no cards to 

2 play that maybe we could encourage the western Europeans 

3 to play a greater role with Iran in order to keep them 

4 away from the Soviets. 

5 BY MR. BARBADORO: (Resuming) 

6 Q I want to turn to that weekend in November now 

7 and I'll try to get through a couple of things relatively 

8 quickly. Your memorandum of December 7, 1985, summarizes 

9 your knowledge of what was going on that weekend, and it 

10 says that yAu first learned of it on Saturday, November • 

11 23, when Ed Juchniewicz asked you if you were aware of 

12 the efforts transpiring to get the hostages out, and your 

13 answer was that you weren't aware of the specifics. 

14 Is that the way you recall learning of what 

15 was going on that weekend? 

16 A Now what he said wasn't the hostages. The way 

17 he phrased it, he said do you know what these guys are up 

18 to. And he handed me a cable which was addressed to the 

19 charge^^^^^^^^fand I think it was from the Deputy 

20 National Security Advisor. At any rate, it was the 

21 National Security Advisor or Deputy National Security 

22 Advisor, and it was kind of a cable that was bemoaning 

23 the fact t ha t^^^^^^^^^^^l would not help out on this 

24 humanitarian mission. And that was about the extent of 



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1 And I read it. It was one of those cables 

2 that had no distribution other than the division and the 

3 DDO. I gave it back to Ed, and I said, look, it's okay 

4 to send cables. We do that all the time for Secretary of 

5 State or Defense or what have you, use our channels 

6 because they are more secure. But I said make sure we 

7 don't get involved, and that was Saturday morning. 

8 And then Monday morning I came in and he said 

9 hey, do you. know what those guys did? And I said what 

10 guys, and he said Secord. Now that's the name I heard. 

11 And I said what was that. And he said they used our 

12 proprietary to send over some oil supplies, and I said 

13 goddam it, I told you not to get involved. 

14 And he said, we're not involved. They came to 

15 us and we said no. And they asked if we knew the name of 

16 a secure airline and we gave them the name of our 

17 proprietary. I said, for Christ's sake, we can't do that 

18 without a Finding. So then I went back to my office and 

19 I punched a button and I said you get those guys together 

20 with Sporkin. 

21 And then I think that was the 7:30 time frame 

22 — 7:15, 7:30 time frame. Then I went back down about 

23 9:00 and I went in. Clair George's door was closed, and 

24 I went into his office and he had a bunch of people in 

25 there, and Clair said I'm just finding out what's going 



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1 on, because he was away for the weekend. 

2 And^^^^^^^Hwas there, who was running the 
^^^^^^^^^^^^^^^^^H^^^^^^H and to make 

4 sure you guys get over to Sporkin and we get a Finding. 

5 And then during the day I called Sporkin several times 

6 and I told him that I wanted a Finding and I wanted it 

7 retroactive to cover that flight. 

8 And he came over, I think it was that night — 

9 it may have been the next morning, but I think it was 

10 that night -'- which would have been Monday, and this was ■ 

11 after the ^^^^^^^^H| had briefed him, and he said well, 

12 we need a Finding, but I'm not so sure that we need a 

13 Finding for use of the proprietary. I said, what do you ■ 

14 need the Finding for, and he said, well, they used our 

15 people overseas to contact government officials and they 

16 exerted influence on government officials. 

17 I said okay, write the Finding. And I said be 
IS sure and make it retroactive, and he said I think I'll 

19 talk to the White House counsel and to Justice, and I 

20 said great. And he left and then, you know, the next day 

21 or so — I can't tell you when — I was standing at my 
2 2 table with several people around me and he came in and 

23 said here's this Finding. 

24 It was a two-paragraph, very short Finding, 

25 and in that Finding it said, you know, we are directing 



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9» 



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1 you to provide everything you can think of, and I think 

2 it said, including munitions or something like that, and 

3 then the last paragraph was a kind of a quit claim that 

4 said, and this goes for any previous act any government 

5 official may have undertaken. 

6 And I said perfect. I said get it to Casey 

7 and I said, get it down there. 

8 Q Let me stop you there and ask you some 

9 questions about November 25. You were told on the 25th 

10 that Secord^ was involved? 

11 A Yes. 

12 Q Who told you that? 

13 A Ed Juchniewicz. 

14 Q And that was the first indication you had that 

15 Secord was in some way involved in this operation; right? 

16 A Right. 

17 Q What did he tell you Secord 's role in the 

18 thing was? 

19 A He didn't, and in fact it now seems rather 

20 incomplete, but I didn't even go into what was in the 

21 shipment. I accepted the fact it was oil equipment 

22 because, you know, the Iraqis had been pounding the hell 

23 out of Kharg Island. 

24 Q Who told you it was oil-drilling equipment? 

25 A Ed Juchniewicz. 



ytlCtASSlMD 



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1 Q When? 

2 A On that — 

3 Q On the Monday? 

4 A On the Monday. 

5 Q Did you connect this shipment in your mind 

6 with the ongoing Israeli initiative that you had read 
a b o u t ^^^^^^^^^^^^^^H 

8 A Yeah, but I didn't connect it in an arms 

9 sense, just that the Israelis were doing things with the 

10 Iranians, Ijecause it was my understanding that that 

11 shipment was going to Israel, not to Iran. 

12 Q Did you think that it was ultimately bound for 

13 Iran? 

14 A Yeah. I figured they'd transship it on their 

15 own planes into Iran. 

16 Q But, in any event, on the 25th you didn't 

17 question Juchiewicz' assertion that it was oil-drilling 

18 equipment? 

19 A My focus, and you might say it's strange, my 

20 focus was that we had done something wrong, that we 

21 weren't authorized to do, and I didn't care what was on 

22 that airplane. We had used our airplane to do something 

23 that we didn't have a Finding to do. And that's why I 

24 insisted on a Finding. 
25 



101 



1 was used to carry cargo bound for Iran that would have 

2 required a Finding regardless of the nature of the cargo? 

3 A No. That was used our airplane to go anyplace 

4 at the request of soreone else. 

5 Q Well, the proprietary flew flights, though, 

6 for private individuals all the time, didn't it? 

7 A But not arranged by CIA headquarters. They do 

8 them directly. They are out scarfing up their own 

9 business, but when we direct them to do something, when 

10 CIA headquarters gets involved, then we have to have an . 

11 authorization to do that. 

12 Q So as far as you were concerned any use of a 

13 CIA proprietary airline at the direction of the CIA would- 

14 have to be done pursuant to a Findir.g? 

15 A Definitely, unless it's :-:t on an Intel 

16 collection mission, put cameras in it or something like 

17 that. 

13 Q When you learned that the proprietary had been 

19 used, your reaction was to immediately contact 

20 Mr. Sporkin and tell him that you needed a Finding 

21 prepared? 

22 A Right. 

23 Q You also told him in that first conversation 

24 that it needed to apply retroactively? 

25 A Right. 



t^t*^Sfft£0 



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1 Q Did you summarize what you knew about what had 

2 gone on that weekend for him? 

3 A Nope. I just said I think our guys screwed up 

4 and you ought to take a look at it. 

5 Q Did you think that the CIA was going to have 

6 to be involved on a continuing basis in this initiative, 

7 or did you think this was just a one-time occasion where 

8 over the weekend of the 23rd of November, one time, a 

9 proprietary plane was used? 

10 A, I didn't focus on that. All I knew is tha.t we 

11 needed a Finding to cover that event. If the NSC in its 

12 dealings needed continued support, then we'd need a 

13 Finding to provide that. 

14 Q And the only thing that you told Mr. Sporkin 

15 was that it had to apply retroactively? You didn't give 

16 him any other idea as to what he should put in that 

17 Finding? 

18 A No. 

19 MR. LEON: Paul, could I ask one question? 

20 In your capacity as the Deputy OCX would you 

21 deal with Sporkin one-on-one on a regular basis or just 

22 once in a while? 

23 THE WITNESS: No. I think we had, you know, a 

24 frequent dialogue. 

25 MR. LEON: Would he also have that kind of a 



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1 relationship with the Director himself? 

2 THE WITNESS: Oh, by all means, yes. 

3 MR. LEON: They had been working together for 

4 years? 

5 THE WITNESS: Yes. Sporkin was in the Agency 

6 because of the Director. 

7 BY MR. BARBADORO: (Resuming) 

8 Q In this meeting with Juchniewicz on the 25th 

9 what were you told about the NSC's involvement in the 

10 initiative?. 

11 A He didn't mention NSC. He referred to "those 

12 guys", which I assumed to be the NSC. 

13 Q Did he mention Colonel North? 

14 A No. But when I came back here, I guess in 

15 January or February — I don't know when it was; I guess 

16 it was for the hearing with the Senate Select Committee — 

17 somebody told me that Juchniewicz said it wasn't Secord 

18 he mentioned; it was North. And I said to Ed, I said, 

19 don't you remember, you know, pounding your chest, and he 

20 said no, I didn't use the name Secord. I used North. 

21 But, you know, I hadn't had any reason to say 

22 Secord unless he told me that. But, you know, it could 

23 be. I mean, could he have seen it from a cable from 

24 ^^^^^^Iwhere Secord was stranded and tied it in that way? 



I don't know. 

9 



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1 At any rate, after that Monday deal I told 

2 Clair George to get together all the traffic and make 

3 sure that everything that had transpired on this, that we 

4 were in tip-top shape, and said stay on top of this. 

5 Q Did you talk to Dewey Clamdge on the 25th at 

6 all? 

7 A Late at night, late in the evening, let's say 

8 6:00-7:00, something like that, Dewey came in with a 

9 cable to go out, and he said the Ambassador's been 

10 calling and, trying to get ahold of Casey and he wanted tg 
know if, you know, he should pursue with^^^^^^^^^^H 

12 to get their approval, and this cable said, you know, the 

13 Director is not here, but this was a National Security 

14 Council mission or operation and that he is not to pursue 

15 it further, and we signed it and sent it out. 

16 Q Were you reading the cable traffic that was 

17 coming in and out that day on this issue? 

18 A NO. ^^^^^^ 

19 Q On November 2 5 at^^^^^^^^Ktime a cable was 

2 sent to headquarters fr oi^^^^^^describin g the operation 
the cable ^^^^^^^^^^^^^^^^^^w^es 

22 the pilot told the ground control lers^^^^^^^Hthat he 

23 was carrying military equipment. Do you ever remember 

24 reading that cable? 






IC^ 



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1 Q Did anybody tell you that there was an issue 

2 where the pilot had told the ground control ^^^^^^^B 

3 that the plane was carrying military equipment? 

4 A No. I'm not so sure that would surprise me, 

5 you know. What the plane was carrying was not my focus. 

6 Q It didn't matter to you one way or the other? 

7 A It didn't matter to me one way or the other. 

8 Q When did you first come to doubt that there 

9 was oil-drilling equipment on the plane? 

10 A I don't know. I've been asked that question 

11 before and I just can't put a time on it. If I was 

12 smart, I would have reacted where I saw the draft Finding 

13 that Sporkin had prepared because in there he had used 

14 the term "weapons" or "munitions" or something like that, 

15 but that just didn't focus on me at the time. 

16 Q From the cable traffic it's apparent that 

17 planning for this operation continued well into December. 

18 Were you aware that planning was ongoing to continue this 

19 operation, to do additional flights into December? 

20 A No. I just told our guys that they weren't 

21 going to do anything more until we got a Finding. 

22 MR. EGGLESTON: There were two things that 

23 were in your memorandum of December 7 about November 25 
2 4 that I wanted to ask you about. There's a line — and 
25 I'll be glad to show it to you -- there's a line that 



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(iN€LA^|ff£0 



10-, 



1 reports on apparently your conversation with Juchniewicz 

2 of that day which says: "When General Secord visited the 

3 Agency he tried to get leads on airlines that might be 

4 available to move equipment to the Near East in a secure 

5 fashion." 

6 Do you recall Juchniewicz -- I mean, this is 

7 your memorandum I'm reading from. 

8 THE WITNESS: No, I don't recall that, and I 

9 don't recall Secord coming to the Agency. 

10 fIR. EGGLESTON: That's why I was curious. Do. 

11 you recall today that Juchniewicz had told you that he 

12 had actually come to the Agency to look for -- 

13 THE WITNESS: No. 

14 MR. EGGLESTON: The other thing I wanted to 

15 ask you about was did you have any conversation with 

16 Dewey Clarridge about what might have been on the 

17 aircraft or was he telling you about the efforts? 

18 THE WITNESS: No. The only contact I had with 

19 Dewey on this was when he came in that Monday night with 

20 the cable going out tc 

21 MR. EGGLESTON: And it's clear to you that you 

22 didn't have any knowledge about the use or proposed use 

23 of the proprietary until November 25? 

24 THE WITNESS: You bet your life. I did not 

25 know until after the fact. 



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1 MR. EGGLESTON: One last one and then I'll let 

2 you take it on further. There's another line which says: 

3 "After repeated calls to NSC personnel on 27 November 

4 during the week of 2 December continuously receiving 

5 reassurances" — well, forget it. It was the one before 

6 that, actually. 

7 "The Finding was cleared with the Director, 

8 who called McFarlane and Don Regan to ascertain that 

9 indeed this had Presidential approval and to get 

10 assurances ;that a Finding would be so signed." I take if. 

11 this memo is reporting on conversations that you had with 

12 the Director about it? 

13 THE WITNESS: Right, and I also recall going • 

14 in to the Director's office and he v.as on a phone to some 

15 unknown person. He was just saying we need a Finding. 

16 MR. EGGLESTON: And he told you he had spoken 

17 to McFarlane and to Don Regan? 

18 THE WITNESS: I believe that's where I got the 

19 information, yes. 

20 BY MR. BARBADORO: (Resuming) 

21 Q So into the end of November and early December 

22 did you have any knowledge that planning for this 

23 operation was continuing within the CIA? 

2 4 A No. They were under instruction that we would 



do nothing until we had a Finding. ..^ 



108 



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1 Q When did you first read the Finding that 

2 Mr. Sporkin prepared in November? 

3 A I think it was a day or two later. It was 

4 probably the next day. It must have been like Tuesday or 

5 something like that. 

6 Q Who showed it to you? 

7 A I believe it was Sporkin. As I said, I was 

8 standing at this table and I handed it back and said 

9 great. Yeah, it was Sporkin. I said go get the Director 

10 to shoot it, down. 

11 Q And you were shown the Finding before it was 

12 sent off to the white House for signature? 

13 A I was shown that draft Finding, and then I 

14 think that the Director took it down to Poindexter and 

15 McFarlane. 

16 Q Let's mark the Finding, along with a cover 

17 memorandum, as Exhibit 9. 

18 (The document referred to was 

19 marked McMahon Exhibit Number 9 

20 for identification.) 

21 (Pause.) 

22 A Yeah. I see "certain foreign material and 

23 munitions may be provided." 

24 Q And you are quoting from the Finding now, 

25 correct? 



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1 A Yes. And that should have triggered me that, 

2 you know, munitions were very much a part of it, but it 

3 didn't. 

4 Q Is that the Finding you were shown? 

5 A The Finding was not structured as such. It 

6 merely had two paragraphs in it. It was written across. 

7 So I didn't see this formal Finding before it went; I 

8 just saw this draft part of it, and I looked at it, you 

9 know, and said fine. 

10 Q Js the content of this draft I have in front 

11 of you substantially similar to the draft that you were 

12 shown by Mr. Sporkin? 

13 . A Yes, as I recall it. 

14 Q And to your knowledge this was sent to the 

15 White House when? 

16 A I think the very next day. 

17 Q The first page here is a cover memorandum 

18 dated November 26, 1985. Is that approximately when it 

19 was sent over? 

20 A Well, you can't tell from this, because the 

21 date is typed in as opposed to stamped in, but I would 

22 say normally you could assume that. 

2 3 Q Do you know how it got over to the White 

24 House? 

25 A No, I don't. I was under the impression the 



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1 Director took it down, but I don't know. 

2 Q What efforts did you make to determine whether 

3 this Finding was signed? 

4 A Well, I called down. I know the Director 

5 called down. And during that time period Clair George 

6 had some meetings with Poindexter, and I said be sure to 

7 check and see if that Finding has been signed. And then 

8 I knew that Charlie Allen was in contact with North all 

9 the time, and I would ask him to check to see if the 

10 Finding was. signed, and he would come back and report, 

11 you know, what was going on with Ghorbanifar or what have 

12 you. 

13 I would say is the Finding signed. And at one • 

14 point he said Ollie said the only copy of the Finding is 

15 signed and is in his safe. And I found out — 

16 MR. LEON: Who told you that? 

17 . THE WITNESS: Charlie Allen. And I found out 

18 when I came back last, whatever year this was — when I 

19 came back for the hearing with the Senate Select 

20 Committee I went in to the Agency to look at the Findings 

21 and Bernie Makowka was there and he said that he was down 

22 in the White House or the EOB building, whatever, when 

23 Ollie North said that, because he said, I heard that and 

24 that date was December 24, which surprises me. 

25 But, at any rate, I can remember that I was 



(jMCkft^SiTii-k) 



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1 not going to let anything happen in the CIA as far as 

2 movement of anything until that Finding was signed, and 

3 that's why I was constantly interested in whether it was 

4 signed or not. So Ollie made that statement on December 

5 24, according to Berr.ie Makowka. 

6 BY MR. BARBADORO: (Resuming) 

7 Q Isn't it contrary to normal practice for the 

8 CIA not to get a copy of a signed Finding? 

9 A Well, this is the only occasion that I know. 

10 Q Did that concern you, that you didn't get a 

11 signed copy? 

12 A No, because if we now had that NSC running 

13 this "operation" and since the lives of the hostages were- 

14 at stake I could rationalize very easily not passing that 

15 around. And in fact I think Casey m his covering memo 

16 says, you know, don't float this all below. Just go get 

17 it done. 

18 And it is unusual. In fact, it's the only 

19 time that I can remember that we didn't get a copy of a 

20 Finding. 

21 Q This Finding is a straight hostage rescue 

22 Finding. That's the only purpose for which the actions 

23 by the Agency are authorized; correct? 

24 A That's correct, as I read it. 

25 Q Were you aware of any other purpose for this 



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1 NSC initiative on November 25-26 of 1985? 

2 A No. 

3 Q You weren't aware that it had as another goal 

4 the opening up of relations with Iran? 

5 A No. 

6 Q The Finding states that the activities 

7 authorized are the provision of assistance by the Central 

8 Intelligence Agency to private parties in their attempt 

9 to obtain the release of Americans held hostage in the 

10 Middle Eastf. who did you understand the private parties- 

11 to be? 

12 A Probably the Israelis and their contacts. 

13 Q So you meant government of Israel and their 

14 contacts? 

15 A Their go-betweens with the Iranians. 

16 Q What did you understand Secord's role to be? 

17 A I didn't know. 

18 MR. LEON: Could I ask him something about 

19 that? Let me ask you this, Mr. McMahon. On the Finding, 

20 proposed Finding, which — well, do you know if it was 

21 ever signed? 

22 THE WITNESS: I know now it was not signed. 

23 MR. LEON: As to this Finding here on the 

24 Finding itself, which is C-2864, there is some language I 

25 would direct your attention to that states: "Until such 



UlfCtfl^lfttD 



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UWCtflSSfFrfD 



m 



1 tin* as I may direct otherwise." 

2 THE WITNESS: Yes. 

3 MR. LEON: Now as I understand this language 

4 this provides in essence that the substance of this 

5 Finding will not be reported to Congress until such time 

6 as the President may direct. 

7 THE WITNESS: That's correct. 

8 MR. LEON: So, in other words, the initiative 

9 has to come at a later time from the President? 

10 THE WITNESS: Yes. 

11 MR. LEON: It's not the normal process that 

12 usually is ombodied in Findings, is it? 

13 THE WITNESS: That's correct. 

14 MR. LEON: Did that catch your eye when that 

15 came to you? 

16 THE WITNESS: Not, not specifically. But what 

17 I was content in doing was I didn't know how long this 

18 would transpire. Normally we would brief Congress and 

19 alert Congress as soon as we got the Finding. We'd call 

20 Congress and, I think, kind of the ground rules we had 

21 with Congress we'd do it within 48 hours. 

22 But here if you had a number of hostages there 

23 is obviously an arrangement where the Iranians wouldn't 

24 let everything go in one fell swoop. So if you were 

25 going to do something to get one hostage out the security 



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ynet^s?*^ 



112 



1 of the last hostage is as important as the first one. So 

2 it may take a time frame, and I just assumed that it was 

3 going to be done over a time period. 

4 MR. LEON: So if I understand you correctly as 

5 to that clause you saw that as a clause to protect the 

6 ongoing hostage release project? 

7 THE WITNESS: Yes. But you've got to remember 

8 I didn't see this clause in the Finding as I saw it. I 

9 only saw this part here (indicating). 

10 .MR. LEON: For the record, when you say "this. 

11 part here" you are talking about the description portion 

12 of this document? 

13 THE WITNESS: Right, but this is kind of 

14 normal boilerplate except for that last statement. 

15 MR. LEON: All right. Let me focus on that. 

16 Before that last phrase, which is unusual, by your own 

17 testimony — 

18 THE WITNESS: Yes. 

19 MR. LEON: -- v;as included here, were you told 

20 that it was going to be included? 

21 THE WITNESS: Yes. 

22 MR. LEON: Who told you? 

23 THE WITNESS: I was told in this sense. The 

24 mystery person who advised me that the Finding was signed 

25 on December 5 said also that the President does not want 



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115 



10 



mz 



1 you to advise Congress at this time. 

2 MR. LEON: Who told you? 

3 THE WITNESS: I don't know, and it is a 

4 crucial thing to this whole program and why I didn't know 

5 who told us that, I don't know. I don't know whether 

6 Casey told ::ie that it had been signed. I don't know if 

7 Poindexter told me. And on the 5th of December at 7:30 

8 in the morning Poindexter called me, but whether or not 

9 he was the one that told me, I can't say, and it would be 
unfair to say that he was. 

11 'l do recall — 

^2 MR- LEON: Could I stop you there a second? 

13 Who would you say would be in the universe of possible 

14 people to have told you? Casey obviously is one. 

15 THE WITNESS: Casey, McFarlane or Poindexter, 

16 or Sporkin. 

^^ MR. LEON: Okay, And you were aware that 

18 McFarlane was out of town at that point? He was out on 

19 the West Coast? 

20 THE WITNESS: I didn't know that. 

21 MR. LEON: But on the 5th of December someone 

22 relayed to you the fact that this was in it? 

2 3 THE WITNESS: Right, or not to tell Congress 

24 at this time. Now an interesting thing. On the 5th of 

25 December I had a meeting in my office with some analysts 



116 



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114 



1 and with^^^^^^^^H who was the Deputy Director of 

2 Europe at the time, Deputy to Dewey. And in my 

3 assistant's notes she had cryptically said^^^fsaid the 

4 N Finding is signed", or something like that. It was to 

5 that end. 

6 And I callec^^^n^hen I was trying to remember 

7 who told me about it on the 5th. I said, you know, in 

8 the meeting there is this note that you said the Finding 

9 was signed. Who told you that? And he said, I never 

10 said that. , I wouldn't know that. 

11 And so I'm at a dead end. You would think 

12 that something that critical and crucial, that I would 

13 have known who the hell told us that, but it, you know, 

14 just went right over my head. 

15 MR. LEON: The reason I ask is that I asked 

16 Bud McFarlane when he testified if he had ever seen that 

17 kind of clause before in one of these Findings, and he 

18 had said only one other occasion in his whole career. 

19 THE WITNESS: And I wouldn't know what that 

20 was. 

21 MR. LEON: Had you ever seen it before on any 

22 other occasion? 

23 THE WITNESS: Not that I can recall. It might 

24 have been, if it were on the Iranian hostage rescue, it 

25 would have been before McFarlane's career. 



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1 BY MR. BARBADORO: (Resuming) 

2 Q You made a reference to a meeting on December 
5 with^^^^^^^^^^^Other people were present at that 

4 meeting as well, correct? 

5 A Yes, a number of them. 

6 Q Bob Gates was there? 

7 A I believ e so , and several analysts. 

8 Q 

9 A Yes. ^^^^^^^ 
Q ,Ed Juchniewicz and^^^^^^^^^H 

11 A That sounds about right. 

12 Q What was the purpose of that meeting? 

13 A Probably to discuss where we were in the Iran 

14 situation, the Iran hostage situation. I can't recall 

15 the specifics of it. 

16 Q There was to be a meeting with the President 

17 on December 7. Was this meeting on December 5 to help 

18 prepare for that meeting on the 7th? 

19 A That would make sense, yes. 

20 Q Let me mark as Exhibit lol 

21 reconstruction of that meeting from her notes, which 

22 bears the Committee numbers 1-395 through 1-398, and is 

23 CIIN number 11. 

24 (The document referred to was 

25 marked McMahon Exhibit Number 

1 ^*< 



UN6lAS^i^i:ii 



118 



UN^HS^EP 



116 



1 10 for identification.) 

2 A Doesn't she make reference in there ^P^^^| 

3 Q Why don't you read that entire memorandum for 

4 me? 

5 (Pause.) 

6 A This here suggests that the planning was still 

7 down in the NSC, so plans were obviously continuing but 

8 we weren't a part of that show. 

9. Q You are referring to page two of the 

10 memorandum and the last line under the first bullet, 

11 saying Oliver North was lining up the planes, we don't 

12 know how, 

13 Let me ask you some general questions about 

14 the memorandum first. The memorandum states that it's a 

15 reconstruction of notes made by^^^^^^^^^^Bof a meeting 

by you ^^^^^^^^^^H Bob Gatesi^^^^^^^^WEd 
Juchniewicz,^^^^^^^Handfl^|^^HH| Is 

18 memorandum an accurate reconstruction of what went on at 

19 that meeting, as far as you can remember? 

20 A Yeah, it refreshes my memory on that. 

21 Q Having read it, do you have any idea as to 

22 what the purpose of the meeting was? 

23 AX would submit that it was to get me pumped up 

24 for a meeting with the President on Saturday morning. 

25 Q The memorandum states that "the DDCI requested 



rhe memorandum states tnat 



119 



UHCtft&SlfitO 



117 




1 facts on the following: the political scene in Iran; 

2 biography of' 

3 verification ot 

4 was it true that Iran was trying to get U.S. HAWK 

5 missiles to knock out Soviet BEAR aircraft; the status of 

6 the Iran-Iraq war." 

7 I want to ask you first why were you 

8 requesting a biography of 

10 A .1 would suspect -- and I can't recall for a 

11 certainty -- that he was probably identified to the NSC 

12 as one of those people that the Israelis had good contact 

13 with, or that he is moderate and the Israelis wanted to • 

14 contact him. 

15 Q Who would have mentioned that to you — 

16 somebody at this meeting? 

17 A No. I don't know, you know, how I came upon 

18 that. 

19 Q It says in the memorandum under things you 

20 requested, "was it true that Iran was trying to get U.S. 

21 HAWK missiles to knock out Soviet BEAR aircraft over Iran 

22 or the Iran-Iraq border." Why were you asking a question 

23 about the uses to which U.S. HAWK missiles could be put? 

24 A I'm pretty fuzzy on this, but what I think 

25 happened is that this came out of a prior meeting where 



liNOLAStJfStD 



12a 



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1 these assertions or statements were made, and it could 

2 have been with Charlie Allen or with some of our 

3 intelligence analysts or ops people, and what I wanted to 

4 do was get the facts in back of those assertions. 

5 Q Is it true that by this date, December 5, you 

6 had a pretty good idea that HAWK missiles were what were 

7 being shipped? 

8 A No, I don't think I can conclude that. 

9 Q Why were you asking questions about the uses 

10 to which Irpn could put HAWK missiles? 

11 A Because I recall the statement being made that 

12 the Iranians — and I think this came from the Israelis 

13 through the NSC channel -- that the Israelis said the 

14 Iranians were upset with the Soviets coming down and 

15 overflying Iran, and they needed something to get them. 

16 But, you know, I'm reaching on that one. I don't know 

17 for sure. 

18 Q In the second paragraph it says "DDCI noted he 

19 would be attending a meeting at 10 a.m. on Saturday, 

20 December 7, with the President regarding the expansion of 

21 the informal link between the Iranians and the Israelis. 

22 He", meaning you, "noted that a new 'private 

23 interlocutor' was working with Israeli Foreign Ministry 

24 official David Kimche." 

25 Who is this "private interlocutor" that you 



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1 are referring to? 

2 A Probably Bud McFarlane. 

3 Q You would have characterized Bud McFarlane as 

4 a private interlocutor? 

5 A Yeah, I think so. 

6 Q Why would you characterize him that way? 

7 A Well, I don't think everybody in the room 

8 needed to know that Bud was now our mouthpiece to the 

9 Israelis on this Iran program. 

10 Q Who was the old interlocutor? 

11 A I don't know. 

12 Q And who told you that Bud McFarlane was now 

13 working with David Kimche? 

14 A I don't know. I really don't know. In fact, 

15 it's obvious that that may have been the subject of the 

16 Poindexter telephone call at 7:30 that morning, and that 

17 could have been a spinoff of that. 

13 Q The second line in that paragraph says: 

19 "Noted that Iran wanted to get closer to the United 

20 States, and wondered (DDCI) whether this could be a ruse 

21 to get HAWK missiles." Were you wondering whether this 

22 whole initiative was simply a ruse to get HAWK missiles? 

23 Is that what that means? 

24 A I think the whole initiative was a ruse to 

2 5 get, you know, U.S. weapons. But, you know, that's pure 



122 



1 conjecture there. 

2 Q But again there's a reference to HAWK missiles 
and your speculation that the whole thing might have been 
simply an attempt to get HAWK missiles. Didn't you know 
by December 5 that this initiative involved the shipment 
of HAWK missiles from Israel to Iran? 

A I still have to say I don't recall. I should 
have, and chances are I did, but it goes back — the 
Iranians really wanted everything. You know, they needed 
anything. .They had HAWKs; we know that. And they were. 
firing them, so they had to have replenishment. The only 
place you get them is from an American or a country 

13 supplied by America. 

j_4 Q on the second page of the memorandum, under 



the bulletl^^^^^^^^reviewed what had been done 
far, there is the statement that President signed 
Finding. And beside it in handwriting: (I aiy^^^ 
certain who at the meeting actually said this)^^m| 
^^^^|initials and the date. Is it fair to say that 
you also recall somebody saying at the meeting that the 
President signed the Finding but you can't remember who 



15 
16 
17 
18 

19 

20 

21 

22 it was? 

,3 A NO, I can't say that. On the 5th I learned of 



the Finding being signed, but I can't say whether that 
meeting was the cause of_it or not^ 



123 



(JNOLASSff|£D 



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1 MR. LEON: We should say "allegedly signed". 

2 THE WITNESS: Allegedly signed, yes. 

3 MR. LEON: Do you think you were being duped? 

4 THE WITNESS: Me, being McMahon, or me, being 

5 CIA — or both? 

6 MR. LEON: Well, let's put it this way. 

7 THE WITNESS: Do I act like I'm being duped? 

8 MR. LEON: No. Let's put it this way. 

9 Correct me if I'm wrong. You were the person at the 

10 Central Intaslligence Agency who clearly was pushing to 

11 get it signed; correct? 

12 THE WITNESS: Right. 

13 MR. LEON: And did you ever think then or now 

14 that your being told it had been signed was an effort by 

15 someone, conscious effort, to get you off their back? 

16 THE WITNESS: I would have to agree with that 

17 conclusion, since CIA was not going to do anything until 

18 it was signed. 

19 MR. LEON: Did you think it back then or ar« 

20 you thinking that now? 

21 THE WITNESS: Oh, no, that was then, right 

22 then and there. That's why I kept inquiring, because I 

23 knew we were not going to undertake any support without 

24 that Finding being signed. 

25 MR. LEON: And with Bud McFarlane leaving, 



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1 resigning on December 4, effective the end of the month, 

2 and with John McMahon — excuse me, John Poindexter going 

3 to succeed him, who did you view -- whose job did you 

4 view it to be to ride herd on getting that thing signed 

5 over at the NSC? 

6 THE WITNESS: Poindexter. 

7 MR. LEON: And did you speak with him 

8 personally at some point to ask him? I take that back. 

9 He could have been the one who told you. 

10 I}HE WITNESS: Yes. But, you know, I can't 

11 say. One thing that was certain, though. I knew Casey 

12 was on board as far as needing a Finding, and he wanted 

13 that Finding signed. So there was no doubt in my mind 

14 that Casey would push for that Finding, and that's why I 

15 am content that nothing happened in CIA in support of 

16 this operation other than intelligence that Charlie Allen 

17 would wrap around in until that Finding was eventually 

18 signed. 

19 And, if you recall, later on when it was 

20 signed on the 17th and they told me about it on like the 

21 24th or something like that, then we got involved in the 

22 next shipment. 

23 MR. LEON: And did you think on December 5 

24 that Casey had also been told it had been signed? 

25 THE WITNESS: Casey had to know that it was 



bNCl/tSSfF!ED 



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123 



signed. 

MR. LEON: Allegedly signed. 

THE WITNESS: Allegedly signed, yes. 

BY MR. BARBADORO: (Resuming) 
Q The last thing I want to ask you about this 
memorandum is on the bullet: a review of recent Iranian 
reporting, noted the following, there is a statement 
"Weir rele ased for one planeload, got nothing for second 
load, 




Were you told in this meeting that Reverend 
Weir had been released in exchange for a planeload of 
something? 

A Yes, but don't ask me who told me. 

Q Who told you or what was in the plane? 

A Yeah. 

Q You don't know? You can't recall whether 
anybody said what was in the plane? 

A No. 




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1 Q Tell us what happened at the meeting on 

2 December 7 with the President. 

3 A Present were the President, Secretary of 

4 State, Secretary of Defense, John Poindexter, Don Regan, 

5 and myself. The meeting opened with Bud McFarlane 

6 stating that David Kimche had been in touch with him and 

7 that the Israelis are in touch with a group of moderates 

8 in Iran that are pro-west, pro-U.S., and that the 

9 Israelis feel if we strengthen the moderates' hands by 

10 giving then) arms that it will permit them to have a more. 

11 favorable role in the Iranian government and open up 

12 initiatives with the Iranian government and possibly the 

13 Iranians will help us with the hostage situation. 

14 And it was rather a long brief, but that in 

15 essence is what he said, as far as I'm concerned. I may 

16 not have done justice to it. I said that I was unaware 

17 of any moderates in Iran, that most of the moderates had 

18 been slaughtered by Khomeini, that whatever arms we give 

19 to these so-called moderates they will end up supporting 

20 the present Khomeini regime and they would go to the 

21 front and be used against the Iraqis and that would be 

22 bad. 

23 Secretary Shultz opposed it from the sense 

24 that it looked like we were ransoming hostages, that he 

25 really didn't subscribe to the Israeli claim of the 



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1 moderates in the western orbit. The Secretary of Defense 

2 spoke against it, thought it was a bad idea, also cited 

3 the present embargo that we have. The rest of the 

4 meeting, which took probably more than an hour, or at 

5 least an hour, was basically Shultz and Weinberger 

6 countering the President, who fslt that the U.S. must 

7 make some efforts to open a dialogue with Iran. 

8 And the whole thrust of the President's pitch 

9 was that we ought to pursue a policy of trying to win the 

10 Iranians back. And that was about the extent of the 

11 meeting, and there was no conclusion at the end of the 

12 meeting, as far as I was concerned. When the meeting 

13 broke up -- and it broke up because the President had to • 

14 go to his 12:00 Saturday fireside chat, radio broadcast — 

15 I walked out of that room not knowir.g what to do. 

16 And the President kind of commissioned well, 

17 why don't you folks talk more on this and see what ought 

18 to be done. And that's how it ended. 

19 Q Did Don Regan say anything at the meeting? 

20 A I don't think Don Regan said word one. If he 

21 did, it was very short. I recall Poindexter making some 

22 comment that I would say endorsed the thought of the 

23 initiative with Iran, but that was, you know, maybe a 

24 sentence or two and that was it. 

25 Q Who was advocating continuing the initiative? 



128 



UNOLAS^FSED 



1 A Well, I came out of the meeting thinking that 

2 Bud McFarlane was the advocate, but the more I've thought 

3 of that, the more I feel that Bud was nothing more than a 

4 messenger. He was saying here is what the Israelis 

5 propose and in justice to him he didn't take a pro or 

6 con. 

7 Q Did he attempt to counter the negative 

8 arguments being made by Shultz and Weinberger? 

9 A No, I don't recall that. 

10 Q .You mentioned that the President engaged in a. 

11 rather lengthy interchange with Weinberger and Shultz. 

12 A Yes. 

13 Q Was the President an advocate for continuing • 

14 with the initiative? 

15 A I think he was querying, challenging, trying 

16 to, like a devil's advocate in postulating things to both 

17 Weinberger and Shultz. 

18 Q Ke was taking the side of continuing with the 

19 initiative, but you couldn't determine whether those were 

20 his real feelings or whether he was simply trying to 

21 explore the pros and cons of the initiative? 

22 A I would say it was the latter. He did not 

23 come out and say I think we ought to do this or I think 

24 this is a good idea. He was simply trying to draw out 

25 the rationale and the merits of doing it. 



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1 Q And when he tried to draw out the rationale or 

2 merits of doing it, did he discuss the desirability of 

3 getting the hostages out, or ■.-.ere his discussions focused 

4 primarily on the desirability of improving the 

5 relationship between the United States and Iran? 

6 AX can't honestly answer that, and the reason 

V is that I was convinced that all of this was an arms for 

8 hostage arrangement, no matter what you called it, and I 

9 felt that the effort by the Israelis with this proposal 

10 was giving'us a cover for effecting a hostage release, • 

11 because they were well aware that, one, we couldn't pay 

12 ransom and all like this, and by doing it under the 

13 umbrella of, you know, wooing the Iranians back to 

14 western orbit gave the President the secondary effect of 

15 getting the hostages released. 

IS And so, you know, intelligence officers aren't 

17 supposed to be biased, but I was biased in that sense, so 

18 whatever I heard I kept it in that context. 

19 Q Was there any discussion at the meeting about 

20 previous efforts that had gone on with Israel? 

21 A Not one, and that surprised me afterwards. It 

22 also surprised me that I didn't say, hey, Mr. President, 

23 you know, we've already given them this. But I didn't, 

24 and why I didn't, I don't know. 

25 Q Did the subject of the Finding that you had 



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1 found out just two days before had presumably been 

2 signed, did that come up in the meeting? 

3 A It never came up, and the reason being is 

4 that, as I try to figure that out, is this was more of a 

5 direct U.S. involvement than really kind of letting the 

6 Israelis do thingi, 

7 Q What did HcFarlane say about how this 

8 initiative was supposed to work? 

9 A He didn't say. I don't recall it at that 

10 meeting anyway. 

11 Q Was there any discussion about whether the 

12 arms were to be shipped from Israeli stocks to Iran? 

13 A I don't recall the mecharics were discussed at- 

14 all. I think it was the policy issue that was the focus. 

15 Q Well, then what caused ycu to say that this 

16 was different from the previous initiative because it 

17 involved more direct U.S. involvement? 

18 A Because we now had the U.S. agreeing as a 

19 policy that this is what we do, that we would permit the 

20 Israelis to do this or resupply their arms or what have 

21 you, but I don't recall the mechanics being discussed. 

22 MR. LEON: Did McFarlane report on his trip to 

23 London in the sense that he had met Ghorbanifar and was 

24 personally — 

25 MR. EGGLESTON: He hadn't had it yet. 

TOP; SEC?ET/C«DE*fORD ,. 



131 



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1 MR. LEON: That's worth noting. I'll change 

2 my question. Did you know that McFarlane was going the 

3 next day to London to ineet with Ghorbanifar and others? 

4 THE WITriESS: Mo, I did not. 

5 MR. LEON: Did that come up at the greeting at 

6 all? 

7 THE WITNESS: No, it did not, not that I 

8 recall. 

9 BY MR. BARBADORO: (Resuming) 

10 Q IJid you clear your position on this issue with 

11 Director Casey before you attended the meeting? 

12 A No, but I thought Casey and I were in synch on 

13 this all along, you know. I don't k.-.ow at what point in ■ 

14 time he said this, but he made a cor-.ent. He said, I 

15 think this whole Iranian thing is crazy, and I don't 

16 know, you know, whether he said that after we were 

17 involved with the November flight or not. I just don't 

18 know at what point in time. 

19 But I felt I was representing his and the 

20 Agency's position. 

21 Q So you understood Director Casey, at least at 

22 this time, to be opposed to continuing the initiative? 

23 A For the reasons cited, yes. I think the 

24 thought of moderates in Iran and all of that. I believed 

25 Casey would agree that it would be a good idea to have 



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130 



1 Iran in the western orbit, but I don't think we thought 

2 it was possible at that time. 

3 MR. LEON: Let me follow that point up there. 

4 There's a notion, Mr. McMahon, that's out there that Bill 

5 iasey wanted all of this to happen because he was hell- 

6 bent to get back, at an earlier point he was hell-bent to 

7 get back Mr. Buckley. Did you have any sense that Casey 

8 was so distraught over Buckley's kidnapping and so 

9 desirous to get Buckley back that he was behind pushing 

10 all of this? 

11 THE WITNESS: No, I don't think that that was 

12 the case at all. And I saw no evidence of that. We were 

13 concerned for Buckley. We were anxious to get him out. 

14 But that never really entered the equation. Buckley 

15 didn't enter the equation any more than any other 

16 hostage. 

17 MR. EGGLESTON: Could I just ask you could you 

18 elaborate on what Weinberger said at the December 7 

19 meeting? You said he mentioned the arms embargo. 

20 THE WITNESS: I think Weinberger took it in 

21 the context we have, you know, asked other nations not to 

22 ship arms to Iran, and, you know, we shouldn't do that. 

23 He just thought it was a bad idea. 

24 MR. EGGLESTON: Did he say that there were 

25 various legal restrictions on shipping arms to Iran? 



(JflCLft^flED 



yNaASSIBED 



131 



1 THE WITMESS: He referred to the embargo act 

2 or something like that. 

3 MR. EGGLESTON: Do you recall if the President 

4 reacted to that, to that suggestion? 

5 THE WITNESS: No. 

6 MR. EGGLESTON: Could I just ask a question 

7 that's probably stupid but I never quite understood? How 

8 was it that we were going to get — and maybe you don't 

9 know the answer to this, but how was it that we were 

10 going to sl^ip arms just to moderates? What was going on? 

11 MR. LEON: That's a good question. 

12 THE WITNESS: That is a good point, and I made 

13 that point, saying that if you give to these so-called 

14 moderates it will be to the Khomeini regime. But I think 

15 the context in which it was offered was that if the 

16 moderates can get the arms, they can say, see, boss, 

17 we've got the leverage and that would enhance their 

18 position in the Iranian government, so that they might be 

19 able to modulate what the Iranians do vis-a-vis the 

20 Americans or, you know, the western world. 

21 So I think it's in that context. 

22 MR. EGGLESTON: But the boss would be 

23 Khomeini, presumably? 

24 THE WITNESS: Oh, the boss is Khomeini, but 

25 everybody was -- like now, we were waiting for him to die 



134 



UNeLASf*F.»ED 



132 
VllVkni^^-*.! LUV 

for years, 

MR. EGGLESTON: But it's clear that the 
government is going to use these arms. 

THE WITNESS: You bet your life. It was not a 
separate action on the side. The arms were for Iran 
against the Iraqis, and that's what the Israelis want. 

MR. EGGLESTON: Did you articulate -- I just 
don't remember if you said this — a view on behalf of 
the Agency at this meeting? Did you say what your view 
of the initiative was? 

THE WITNESS: Who's initiativ«? 

MR. EGGLESTON: This December 7 meeting, did 
you say anything? 

THE WITNESS: Yes. I spcXe against the fact 
that there were moderates in Iran. I said, you Itnow, all 
the moderates were killed and that whatever arms we did 
send would end up on the front line against the Iraqis, 
and that was bad. 

MR. EGGLESTON: Would it be fair to say that 
your general advice, then, was not to go ahead? 

THE WITNESS: Was negative, but an 
intelligence officer doesn't comment on policy, only the 
pros and cons from an intelligence standpoint of it. I 
couldn't say that it was a good idea or a bad idea. 




SI 



135 



UNCfe^Sif^D 




BY MR. BARBADORO: (Resuxmg) 

Q Did Director Casey brief you on his meeting 
with the President and others on December 10? 

A I don't recall that. He may have. You know, 
I don't know. 

Q Well, let's mark this and I'll show it to you 
as Exhibit 11. It's a 10 December 85 memorandum for the 
Deputy Director of Central Intelligence from the DCI 
concerning a meeting with the DCI, the President and 
others on December 10. 

(The document referred to was 



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marked McMahon Exhibit Numb€r 
11 for identification.) 
(A brief recess was taken.) 
BY MR. BARBADORO: (Resuming) 
Q Do you remember getting this memo, McMahon 
Exhibit 11? 

A I don't, but it doesn't surprise me. The 
overall subject matter is familiar and it looks like what 
the Director did is provide me with a following chapter 
to the meeting that I had on the 7th. 

Q What was your understanding as to what was 
happening with this initiative between December 5 — 
excuse me, December 7 and January 16, what happened to 
the initiative during that period? 

A I think it was held to basically discussions 
and probing and seeing what was possible, keeping the 
door open until the Administration really decided what it 
was going to do, and that the Agency was involved in an 
intelligence support initiative principally. 



Q Is this reference in McMahon 11, in the 
December 10 '85 memo, to Ghorbanifar the first idea that 
you had that this guy Ghorbanifar was involved in this 



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1 initiative? 

2 A I can't say. I do know that we had told the 

3 NSC that we had burn notices out on Ghorbanifar, that he 

4 was not trustworthy. In fact, if I'm not mistaken, I 

5 sent a memo down to the NSC which was prepared by the 

6 Near East Division, and I'm not sure what date it was, 

7 but Ghorbanifar to CIA was not someone that you wanted to 

8 hang your trust in. 

9 Q At some point the CIA was asked to do a 

10 polygraph of Ghorbanifar, weren't they? 

11 A That was much later on, yes. 

12 Q Not until January. 

13 A Yes, January or after that. 

14 • Q Wasn't there discussion m December about 

15 polygraphing Ghorbanifar? 

16 A I don't recall. Anyway, we didn't think 

17 Ghorbanifar was the shining example that the NSC ought to 

18 be in touch with. 

19 MR. EGGLESTON: Was there any discussion of 

20 Ghorbanifar specifically at the December 7 meeting? 

21 THE WITNESS: I don't recall his name or any 

22 other name being mentioned. I think David Kimche was the 

23 only person that McFarlane referred to. 

24 MR. LEON: Did Mr. Casey comment to you at any 

25 time that Bud McFarlane's reaction to talking to 

^O^tEclEf^CCCEVORD ^ . J 



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janifar 



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1 Ghorbanifar in essence was that he was personally 

2 rerulsed by him and by the idea that he basically wanted 

3 to swap hostages for arms? Did you ever get that from 

4 Casey? 

5 THE WITNESS: No, other than the comment that 

6 Bud made following this 10 December visit. 

7 BY MR. BAR3AD0R0: (Resuming) 

8 Q So as far as you know, between December 7 and 

9 January 17 the initiative was never shut down; it wasn't 

10 acted on, they were just continuing discussions about 

11 what to do with the initiative — whether to continue it 

12 and, if so, how? Is that your sense of what went on 

13 during that time period? 

14 A Yeah. My sense is that tr.e NSC had the ball 

15 to sort this out and I was content that the Agency was 

16 not involved in doing anything, because I never saw any, 

17 you know, action coming forth for us to move arms or 

18 anything like that. 

19 Q Are you aware that Mr. Sporkin was involved in 

20 doing additional drafts of the Finding? 

21 A It was quite surprised to learn that there was 

22 a Finding prepared, I believe dated the 6th of January, 

23 by Sporkin and the Director at the white House. I don't 

24 recall being privy to that. 

25 Q Well, I'll also tell you that we have drafts 



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1 obtained from CIA files of the Finding dated January 2. 

2 A That's the second. That's the date. 

3 Q January 3, January 6, and then the Finding 

4 that was signed on the 17th. Are you aware of any of 

5 those Findings? Were you aware at the time of any of 

6 those Findings being worked on? 

7 A I was not aware of the 2nd, the 3rd, or the 

8 6th. The next Finding that I saw, other than our 

9 proposed draft back in November, was the one that 

10 Poindexter , showed me on the 24th, I believe, of January,. 

11 1986, and that Finding was dated 17 January. 

12 Q So you had no idea that Sporkin was meeting 

13 with Oliver North and working on drafts of the Finding in- 

14 early January? 

15 A No, not that I recall. 

16 Q And you had no idea on the 17th that a Finding 

17 was presented to the President? 

18 A No. 

19 Q Signed by the President? 

20 A No. 

21 Q You didn't even know that a Finding had been 

22 signed by the President in January until the 24th; is 

23 that right? 

24 A That's correct. 

25 Q How did you learn that? 






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1 A Poindexter called me down to his office and he 

2 showed me the Finding dated the 17th of January, and I 

3 read it quickly, noted the President's signature. 

4 Poindexter said that it had been cleared with the 

5 Attorney General. And the new wrinkle in it, as far as I 

6 was concerned, was that we were to provide intelligence 

7 to the Iranians on Iraq, and I objected to that. I felt 

8 that that was really swinging the balance of the war to 

9 give the Iranians intelligence that we had. 

10 If I can recall accurately, the way Poindextej: 

11 phrased it was that we were to supply TOW missiles with 

12 some intelligence to the Iranians in a series of 

13 tranches, and after the first trancr.e then we were to get- 

14 a hostage out, and then we'd do a second one and get 

15 another one. And he said if they don't come through, 

16 then all you've lost is a little intelligence. 

17 And I went back. What they wanted was 

18 intelligence on the battlefield area on the front, and I 

19 think that meeting was on a Thursday or so. I don't know 

20 what the 24th was. At any rate, on, I believe it was, 

21 Saturday, the 25th, Ollie North came over to get the 

22 intelligence. 

23 Q Let me stop you because I'll get to the 25th. 

24 (Pause.) 

25 A VJhose calendar is this? 



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1 MR. LEC:;: O.-ie. 

2 THE Kir.'lESS: 01 lie vasn't there. On the 2 6th 

3 does he say — 

4 MR. LEON: On the 2 6th? 

5 THE WITMESS: The 25th. 

6 MR. LEOM: The 25th is a Saturday. His 

7 calendar doesn't indicate it. 

8 THE WITNESS: Okay. Well, the 24th is what 

9 date — the Friday. Okay. Then it was the next day he 

10 came over. , 

11 BY MR. BARBADORO: (Resuming) 

12 Q So the record is clear, you were referring to 

13 North's calendar for that period of time just then, 

14 weren't you? 

15 A Yes. But what I was really after was what day 

16 the 24th was. 

17 MR. LEON: Ollie came to the CIA? 

13 THE WITNESS: I believe it was Saturday the 

19 25th. 

20 MR. LEON: For what purpose? 

21 THE WITNESS: To get the intelligence that the 

22 Finding had directed us to provide. 

23 MR. LEON: What kind of intelligence was it? 

24 THE WITNESS: On the Iran-Iraq front, military 

25 intelligence. 



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1 BY MR. BARBADORO: (Resuming) 

2 Q Between December 7 and January 17 did anybody 

3 discuss with you the specifics of any proposal to ship 

4 U.S. arms to Iran to gain the release of the hostages? 

5 A Well, at some point during that time period I 

6 think the emphasis on arms began to center around TOWs, 

7 but I don't recall anything other than they were thinking 

8 of sending TOWs. 

9 Q And who would you discuss this proposal with? 

10 A Oh, I'd pick it up in the hall if someone ran. 

11 into me or something like that. But I was content that 

12 CIA was not involved in what I would call any active 

13 operation to provide any weapons. I just don't recall us- 

14 being tasked to do that. 

15 Q Up until December 1985 the arms had come from 

16 Israel. When did you learn that proposals were under 

17 consideration to ship arms from the U.S. to Israel and 

18 then to Iran? 

19 A I don't know. 

20 Q Was it before you learned of the January 17 

21 Finding or after? 

22 A Oh, It was before the Finding, yes. In fact, 

23 it had to be December, at the December 7 meeting. 

24 Q Did you discuss at the December 7 meeting 

25 specifically what kind of U.S. arms you would be 



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UttCLASSIFIED 



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1 shipping? 

2 A No. And m fact, if I remember right, at that 

3 time it wasn't certain that we v/ould send the arms 

4 directly or we would have the Israelis do it and we would 

5 replenish it. I think that was, you know, still an 

6 uncertainty at the time. 

7 (A discussion was held off the record.) 

8 MR. BAR3ADCR0: Let's go back on the record. 

9 BY :iR. BAR3AD0R0: (Resuming) 

10 Q Mr. McMahon, is it fair to say that you were . 

11 unaware that Mr. Sporkin was working on drafts of the 

12 Iran Finding between January 1 and January 17? 

13 A I think that's a fair representation. I don't- 

14 recall any knowledge of his involvement there, and I was 

15 unaware of Findings being prepared at that time. 

16 Q And you also were unaware that the President 

17 actually signed a Finding on the 17th? You were unaware 

18 of that when he did it? 

19 A That's correct. 

20 Q And you didn't learn that the President had 

21 signed the Finding on the 17th until sometime on or about 

22 the 24th or 25th of January, when you were called down to 

23 the White House by Mr. Poindexter and informed of the 

24 Finding? 

25 A On the 24th of January, '86. 



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1 Q Is it also fair to say that between your 

2 December 7 meeting with the President and the January 24 

3 meeting with Admiral Poindexter that you were aware that 

4 there were ongoing discussions at the NSC as to what form 

5 the initiative should take but that you were not made 

6 aware of any specific plans as to how the initiative 

7 would be conducted? 

8 A I think that's a fair representation. Our 

9 involvement, as far as my recollection, was in the 

10 provision qf intelligence, of an intelligence collectioa 

11 nature, not in an operative way. 

12 Q What do you mean by that? 

13 A That we weren't involved m executing an 

14 action in behalf of the NSC on this initiative. We would 

15 collect intelligence. We would vet names of people that 

16 they asked us. So we were in an intelligence supportive 

17 role from the sense of production of intelligence or the 

18 collection of intelligence, but not in the role of 

19 carrying out or furthering a covert action. 

20 Q Were you personally involved in any planning 

21 sessions as to what f(rram this covert action should take? 

22 A No. 

23 Q To your knowledge did anyone else at CIA 

24 participate in any planning sessions as to what form this 

25 covert action should take between December 7 and January 



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1 17? 

2 A People may have been involved, but they were 

3 involved as intelligence representatives, not as covert 

4 action representatives. 

5 Q When Admiral Poindexter showed you the January 

6 17 Finding on January 24, what did he tell you about the 

7 covert action? 

8 A He said that the President had approved the 

9 provision of TCWs to the Iranians and that we were also 

10 to provide ^hem intelligence. In fact, the Finding was & 

11 very broad one as far as what we could do in this 

12 program. I objected to the provision of intelligence, 

13 feeling that it would give the Iranians a strategic edge, • 

14 and he said that we v/ould not risk tr.at much, that we 

15 would provide some TOv:s and sone intelligence and we 

16 would get a hostage, and then we would do another one. 

17 And if the Iranians didn't come through, then 

18 all we lost was a little intelligence. 

19 Q Did he tell you how many TOWs were going to be 

20 sold? 

21 A I thought the total was 4,000 TOWs. 

22 Q Did he tell you whether these TOWs were going 

23 to be sent all in one shipment or were they going to be 

24 sent in different shipments? 

25 A They would be in separate tranches. The exact 



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1 number in each tranche ■.-.■as never mentioned. 

2 Q Who was going to be involved in shipping these 

3 TOWS to Iran? 

4 A That wasn't specified at the time of our 

5 meeting, but I assumed that we were going to be the 

6 mechanism for getting the TOWs from DOD and shipping them 

7 over, and whether they were going to go to Iran directly 

8 or to Israel I don't think I knew at the time. 

9 Q What was Israel's role to be in this covert 

10 action? 

11 A Well, I think — and I'm not sure of the time 

12 phasing here -- originally I thought we would replace 

13 TOWs that the Israelis had, but I tr.nk that proved to be' 

14 a difficulty and so we ended up senimg them over there, 

15 and I had assumed that Israel would oe used as a trans- 

16 shipping point. 

17 Q In the meeting on January 24, 1986, did 

18 Admiral Poindexter explain to you what Israel's role was 

19 going to be in the transaction? 

20 A No. I don't think so. 

21 Q By that point did you know that Israel was 

22 only going to be a transshipping point as opposed to the 

23 entity actually providing the weapons to Iran? 

24 A No. It was unclear at the time. I just 

25 didn't focus on that. 



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1 Q Did Admiral Foindexrer rell you at this 

2 January 24 meeting what, if any, role General Secord was 

3 going to play m the transaction? 

4 A Secord 's nare ne'/er came up. 

5 Q Did you think that any private parties were 

6 going to play any role in this transaction as it was 

7 described to you on January 24? 

8 A No, not at that time. If someone mentioned to 

9 me private parties, I would look upon them as th« 

10 facilitator,s with the Iranians to get the shipment in if. 

11 we were getting the TOWs and moving them over there. I 

12 didn't see the role for anyone else. 

13 Q CIA was perfectly capable, through th« use of • 

14 its proprietaries, of shipping the arms directly to Iran 

15 itself, wasn't it? 

16 A I believe so, yes. 

17 Q Did you see any purpose for using private 

18 parties in this transaction at all? 

19 A Well, other than the point that the NSC had 

20 constructed this operation. Vou must bear in mind that 

21 this was an NSC operation and that CIA was in a you 

22 call/we haul type mode, that we weren't doing the 

23 planning or anything like that, and the NSC had all the 

24 contacts. They had the wiring mechanisms through their 

25 go-betweens, the Iranian go-betweens, the Israelis. 



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1 And so I thi-.k : •■.■ould be content to not 

2 rebuild that, that if that ~echanism was there to, you 

3 know, ir.ake use cf that. 3ut if someone came to CIA and 

4 said take this planeload of TOWs and deliver it to the 

5 Tehran airport on such and such a date and we have that 

6 wired, we could do that. 

7 MR. EGGLESTON: In fact, in November it had 

8 been your proprietary. 

9 THE WITME53: Yes. The thing that I would 

10 bear in inin(^ on this score is the fact that it's 

11 conceivable both governments -- and by both governments I 

12 mean the Iranians as well as the United States and the 

13 Israelis, whatever role they wanted -- wanted to have 

14 private parties involved as cutouts so that you didn't 

15 have an official government-to-government relationship. 

16 BY MR. 3ARBAD0R0: (Resuming) 

17 Q When did you learn that cutouts were to be 

18 involved? 

19 A I don't think I learned. I think it didn't 

20 bother me. It wasn't something I worried about. 

21 Q If cutouts had not been involved in this 

22 operation who would have set the price that Iran would 

23 have paid for the TOWs? 

24 A I think we would have asked them to pay 

25 whatever it cost the U.S. Government, plus the 



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1 transportation fees. 

2 Q If the c:a vere involved and no private 

3 intermediaries were involved and a markup were charged, 

4 what would have happened to that markup? 

5 A Any funds m excess of what it cost us, plus 

6 expenses, legitir.Jte expenses, would have reverted to the 

7 Treasury, the 'J. 5. Treasury. 

8 Q Let r.e ask you again, so that I'm sure of 

9 this, when did you learn that cutouts were going to be 

10 involved in, this operation? 

11 A Well, I guess I learned that they were used 

12 when I watched the hearings. You know, that seems like 

13 an asinine answer, but how that transpired wasn't of 

14 interest to me, you know. It was just low noise. The 

15 point was, we were taking arms and -.ve were getting them 

16 over to Iran, and hopefully some hostages would get out. 

17 Q So up until the time you left the CIA you had 

18 no idea that there were in fact cutouts used in this 

19 operation? 

20 A Oh, I knew that there had to be. Who, I 

21 didn't care. I do know that we set up a Swiss bank 

22 account for the NSC to use, and if cutouts were involved, 

23 I don't think they really needed CIA. Anybody, you know, 

24 can get a bank account. 

25 Q At any time when you were with the CIA did you 



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1 know that General Secord was being used as the cutout in 

2 this operation? 

3 A ;io, not as we know it today, only the 

4 reference that I r.ave m :^y 7 December 85 memo. 

5 Q And that's the only knowledge you had at any 

6 time while you were •.-.■ith the CIA that Secord was involved 

7 in any way with this operation? 

8 A I'm nodding yes. I'm trying to recall. I 

9 have no specific knowledge, really, and it wouldn't have 

10 mattered if. I did or didn't. 

11 Q Do you know who r.ade the decision to employ 

12 cutouts in this operation? 

13 A I assume the rrsc did. It wasn't CIA. 

14 Q I'd like to mark as the r.sxt exhibit, McMahon 

15 12, a cable dated 25 January 36, Cornittee number 1-566, 

16 and it doesn't have a CIIN number. 

17 (The document referred to was 

18 marked McMahon Exhibit Number 

19 12 for identification.) 

20 (Pause.) 

21 Have you had a chance to loolc at that exhibit? 

22 A Yes. That is my cable which I sent to the 

23 Director. 

24 Q What prompted you to send that cable? 

25 A One, to advise him that a Finding was signed; 



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two, that we were to provide intelligence; I guess, 
three, that I didn't like it and I wanted to make sure 
that he was aware of what was happening and I wanted 
confirmation of his knowledge. And that's why I asked 
that this cable be, delivery be confirmed. I did not g 
confirmation and the Director had moved on to^^^^H 



8 
9 

10 
11 
12 

13 
14 
15 
16 
17 
13 

19 

20 

21 

22 

23 

24 

25 



So I sent It again tc^^^^^^^Hand asked 
that they please confirm the Director has read this, and 
then I got .'confirmation that the Director had read it. • 
But to me this was big enough for his personal attention. 

Q Why did you ob;ect to providing intelligence 
information to Iran? 

A Because Z felt it could give the Iranians an 
edge against the Iraqis and that would work to the 
detriment of the United States and the whole balance in 
the Mideast. 

Q It's fair to say your objections were 
overruled? 

A That's a fair assumption. 

Q The proposal also involved the shipment of 
4,000 TOWs to Iran. In your judgment, what kind of 
effect on the balance of power could 4,000 TOWs have on 
the war? 

A If they are good shooters, it would be 4,000 



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1 tanks. 

2 Q Is It fair to say that could have a 

3 significant effect on the balance of power? 

4 A Yes. I think it could. It could have a 

5 significant effect in any given battle if they could 

6 muster that kind of firepower, but I'm not a military 

7 mind and I can't really say. 

8 Q Did you ever discuss this cable with the 

9 Director? 

10 A jNot per se . v;hen he came back I told him I 

11 thought it was a lousy idea to give intelligence, and 

12 that kind of leads into Ollie North coming over, I 

13 believe it was the next Saturday, the 25th. 

14 Q The cable is dated the 23th of January. Let 

15 me first ask you, though, v/hat was the Director's 

16 reaction when you discussed your concerns with him? 

17 A Well, I think he v/as content to see how it 

18 played out. I felt that -- and I may be wrong — but I 

19 felt that the Director and I were somewhat of the same 

20 mind when it came to Iran. One, we believed it was very 

21 important, but where we may have differed is on timing, 

22 and I didn't think the time was right at the moment to 

23 move forward to opening an initiative -- but who does. 

24 And I think he was prepared to give it a try. 

25 And, you know, who is to ]udge who was right? 



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Q Tell us about your neeting with Colon«l North 
on th« 2 5th. 

A Well, I say then the 25th, and I assume, 
because I think it was a Saturday, that North came over 
and his purpose was to get the intelligence that we would 
offer them. He was, I understand, going over, or some 
emissary was going over, to meet with Iranians and they 
wanted to show our bona fides and say here's the kind of, 
you know, intelligence we can provide you. 
And they v/a n t ed 

land I raised my concerns, as did 
Bob Gates, with North and v/e finally convinced him to 
accept intelligence which, one, was .ndeed of the battle 
front but not in an area that was that important. 
Additionally, in order to establish oona fides you had to 
give them information that they already knew was valid, 
so with our analysts we picked a section of the border — 
I believe it was to the north of the fighting — where we 
were content they had knowledge of what was going on, and 
we showed them the Iraqi emplacements and what have you. 

And North agreed then to limit it to that, and 
that's what he took. And, if I'm not mistaken] 

We gave them artist's drawings 
Ithat were annotized, and I may be 
/rong here, because we had a debate whether or not to 




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give ther 

^^^■artist's drawings that were annotate^^^And I think 
we ended up giving them artist's drawings, but I can't be 
sure. 

Q Did you think it was a mistake to use 
Ghorbanifar as an intermediary in this transaction? 

A Yes, I do. I said that personally to 
Poindexter. We discussed that at a meeting with Casey. 
And I believe we also sent him a memo at some point in 
time saying .'that we didn't trust Ghorbanifar, that we had 
sent out several burn notices on him throughout the 
intelligence community, and I thought it was a bad idea. 

Q Do you know why they continued to use 
Ghorbanifar over your objections and the objections of 
the other people m the Agency? 

A I have no idea. Maybe he was a viable contact 
because of the nature of his business. Whether he was 
good, bad or indifferent, he had channels and maybe the 
Israelis were saying that he was all right. I don't 
know. 

Q Charlie Allen became in effect the case 
officer for Ghorbanifar. Do you know why that happened 
and why it wasn't a DO official that took charge of the 
.-natter? 

A I'm not sure I would characterize him as 



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1 Ghorbanifar's case officer, what we were interested in 

2 doing in introducing Charlie Allen into the NSC loop as 

3 the point of contact for CIA was, one, get it out of the 

4 operational channels so that we didn't get sucked into an 

5 operation and keep it where it would be in an 

6 intelligence and analytical sense. So Charlie was used 

7 to provide intelligence background, to vet names and what 

8 have you and to help establish the bona fides of th« 

9 people that the NSC was dealing with. 

10 Q Charlie Allen, though, was Ghorbanifar's point 

11 of contact with the Agency, wasn't he? 

12 A You surprise me by asking that. Charlie Allen 

13 was Ollie North's and Foindexter's eyes and ears to 

14 intelligence and they would often, -r.en they would have 

15 meetings with Ghorbanifar, they would get information 

16 from Charlie and Charlie traveled overseas in a 

17 supporting role, but I don't think that Charlie was ever 

18 in a direct mode except Charlie received some photographs 

19 at one point in time, and I'm not sure whether it was 

20 from Ghorbanifar or someone else. 

21 Q Didn't he have extensive debriefing sessions 

22 with Ghorbanifar and didn't he also have numerous 

23 telephone conversations with Ghorbanifar? 

24 A I can't say. 

25 Q I'll represent to you that he did, but as far 



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1 as you know Charlie Allen -.-.'as r.ot involved in an 

2 operational role •■/xtr. Ghorban. f ar? 

3 A He should r.ot ha-.-e been. 

4 MR. BAS3AD0R0: I don't have anything else, if 

5 you guys want to go. 

6 MR. EGGlESTCti: 1 don't thinlc I have anything. 

7 I have been asking as 1 have been going along. 

8 MR. LEON: I don't think I have much because I 

9 have been doing the same thing. 

10 . EXAMIMATION 

11 BY MR. LEON: 

12 Q Let me just go back to that one thing that I 

13 asked you about before because I kncv this is something I ' 

14 just want to make sure I've covered adequately for my own 

15 mind, and that relates to the impact of Buckley on Casey 

16 to the extent that you observed it. 

17 He was kidnapped in March, I guess it was, 

18 '84, right, and there had been very shortly after that 

19 North was dispatched to start efforts to try to locate 

20 Buckley and to get him out of that. For example, were 

21 you aware that North was dispatched to try to raise money 

22 to ransom Buckley? 

23 A I don't believe that. No, I'm not aware of 

24 that. 

25 Q Did Buckley cor"e up m conversations 



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155 



1 
2 
3 
4 
5 
6 
7 
8 
9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 



frequently between you and the Director? 

A Buckley was very much on the forefront of our 
minds m the sense that, you knew, what are they going to 
do with him, what do they want to get out of Buckley. 




But we didn't -- we didn't agonize over the 
Buckley sil)uation. I think that was taken with the 
thought of, you know, that's part of the game of being 
over there. And Buckley knew what he was going up 
against. So we felt that that was cart of the service 
and why we would do everything that ./e could to get him 
out. We didn't agonize any more over him than we would 
over any other hostage. 

And I have heard the reports that Casey was 
upset and really in anguish over that, and I say that I 
never saw any instance where that was the case. He was 
concerned, but he was concerned in a human sense and a 
loyal sense but not to the point that he would say the 
hell with the law, we're going to do this or we're going 
to do that. 

Vou mentioned >Jorth and money. Does that 
refer to the DEA thi-g! 



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Q No, this IS a separate thing I'm referring to 
-- North being dispatched to arrange for ransom money 
from Ross Perot, the industrialist. 

A I see. Well, that's private funds and we 
wouldn't get involved m Ross Perc 




think- 
that where we threw some caution to the wind was that we 
were prepared to pay money to anybody that would tell us 
anything about the hostages. But we did have specific 
ground rules that we held true to, and they would be 
reflected in cables going out. 

Under no circumstances can we pay any funds 
for ransom. We'll pay money for intelligence, but we 
can't pay any money for ransom. And that was a pretty 
solid policy that we all agreed with. 




159 



1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 




Q Let's move over to the contra side for a 
second. There's a couple of things I wanted to ask you 

' 3 D^^^^^^^^Hhad 
infornation with respect to an air strip being put 
together^^^^^^^^^^^^and there some evidence to 
indicate that he was aware that! 

was involved m assisting, let's say, with 
that air strip, 

Were you aware o: that going on? 

A No. No, I -..-as r.oz . 

Q He would have been report. ng that, or should 
he not have been reporting that to t.-.e chief of the Latin 
American desk? 

A No, he shouldn't have reported it. He should 
have relieved^^^^^^^^K^r. the spot because that was 
contrary to our instructions. 

Okay. ^^^^^^^^B-.as testified to receiving a 
KL-43 encryptographic cor.nunication device in January of 
'86 with an eye towards using it to assist in the 
coordination of infor:nation, intelligence information, 
that was being provided for the supplying of munitions 
and other supplies to the contras. 

Were you aware of that in January of '86? 



UN<^^SStF3ED 



160 



UNettSSfftEl? 



158 




A No. 3ut I think you have to look at, if I can 
recall right, in the end of '35 we were given $3 million 
by Congress to provide communications to provide 
intelligence to the contras, and if I'm not mistaken at 
that same time^^^^^^^^^^^^ 

but there were strict 
ground rules that this could be used only for 
intelligence or for advice that was not battle advice. 
We couldn't give them, you know, here's how you ought to 
fight the w^r routine. 

Q Well, these devices were being used for a 
private communication network between the private 
benefactors, who were making supply runs to the contra 
forces on the southern front, betweer^^^^^^^^Hand them 
and their people and 01 lie r.'crth. And that was the 
purpose of having this machine. 

A Now we're probably talking about two different 
things. What I'm talking about is what CIA was 
authorized to supply through government channels. I have 
learned through the course of these hearings that^^^^^H 
provided North some encryption devices which he gave out 
to favorite contacts. He gave one to Charlie Allen so he 
could talk to Charlie Allen at home. He gave one, I 
guess, ^^^^^^^^^ 

had one and a guy named Chi-Chi 




UNOLA^FED 



161 



UNCiftSStf^ED 



159 



Quintero had one dc:;r. tr.ere, ar.d it was being used as a 
communications device. 

A Well, I ' 71 unaware of that. 

Q If^^^^^vas avare of that as early as that, 
the first few months of 'S6, should he have reported that 
to the Latin American desk? ^^^^^Bwasn ' t the head of 
that at that time, I don't think. 

A If^^^^fwas aware of that, he should have 
asked the question why because a CIA person was involved 
in communications that was outside of the CIA loop. He 
ought to have known the reason for that. And, knowing 
^^^^^K I have total confident ii^^^^^^B and if he was 
aware of that and didn't do something about it, if he 
knew that they were doing it to go around the law, I'm 
confident he would have blown the whistle. 

MR. POLGAS: Of.f the record, please. 
(A discuss icn ■■.■as held off the record.) 
MR. LECM: I think that's all I'm going to go 
into right now. If I ccr^e up ■..■ith anything else, I'll 
call or something. 

BY MR. BARBADORO: (Resuming) 
Q A couple of questions that Mr. Polgar is 
interested in. Do you know why Colonel North went to 
Charlie Aller 




opposed to going directly tc 



162 



UHCtASSIfJiO 

1 A No. In fact, I had tnought he went tc 

2 because I thought that whe.-T^^^^B asked me about that down 

3 at the IC Staff one day, he said do you know that NSC has 

4 tasked us to provide inforTnation on these cats, and I 

5 said yeah, they are r'jr.ning an operation and I guess 

6 that's a legitir-ate thing to :io. 

7 And I suspect that vas late in 1985. 

8 Q Do you know why Colonel North chose to involve 

9 Charlie Allen in this initiative? 

10 A 'No, except I think we picked Allen, but we 

11 picked him for a reason, that, one, he was an Intel guy, 

12 but, two, that we knew he was compatible with Ollie 

13 North. 

14 Q When you say "v.'e", v.-ho dc you mean? 

15 A CIA, DDO, myself and the director and what 

16 have you. 

17 Q Do you recall sore meeting where it was 

18 determined that Charlie Allen should work with Colonel 

19 North on this initiative? 

20 A No, ether than the name came up and we said 

21 yeah, that's a gcod idea. Get it out of ops. And it was 

22 not put to me that ^!orth thc-^-int of it. I think that it 

23 was ]ust thought that Charlie -.as the NIO for terrorism 

24 and therefore the hostage situations fall under the NIO 

25 for terrorism and he'd be the right guy to provide that 

UNOtASMED 



163 



UN6tASStF3ED 



161 



'.er. t^.at meeting was? 
'. i-:e ^^^vember or December 



kind of intellign.-.ce. 

Q Do you rerer're: 

A No. :t r.ai to 
•85. 

Q Well, C!-.arl:e Alls" '.as collecting 
and briefing you^^^^^^^^^^^H as early as September '85. 

A Yeah, that ray be, cut I'm not sure -- well, 
okay. But he could have been. 1 see what you're saying. 
I'm not sure that there was a cause and effect from Ollie 
North and tjhis operation as opposed to guys who had 
information on terrorists or other dealings. It probably 
goes back before that, though. 

MR. BARBADCRO: I have nr-hing else. 
MR. EGGLESTCN: Actually, now that I've sat 
here for a minute I just have a couple. 
EXAMIMAIION 
BY MR. EGGLESTON: 

Q When you indicated that in the November 
meeting you had what ■.■as called the r.mi-Finding and 
there was the instruction not to notify Congress, you 
indicated in response to :;r. Leon about the hostages and 
various reasons. Did you have your own sort of mental 
time frame about how Icng you thought the delay of 
notification would last? 



No. 



.aured it would have to last 



UneLASSfFEtLl 



164 



mtctftssifxo 



162 



1 through the hostage negotiatior. until we got the hostages 

2 out. But, you kr.ov.', somecp.e accused me in the press of 

3 writing a CVA T.er.o, and m a sense it looks like a CYA 

4 memo. The purpose really m ny mind was that if there's 

5 a delay in notifying Congress somebody we'd have to 

6 notify them and T voul(i like to have that as a mental 

7 jogger of what happened, v'hetl-.er it was a month away or 
S two months away. 

9 And I '.vanted to ha'.'e that on the record, 

10 because I ffelt in spite of counsel or whatever that we 

11 had violated the law, and if I didn't get the Finding 

12 signed then I'd have to tell Congress we violated the law 

13 anyway. And with the Finding signed I was quite content " 

14 to hold off until it played out. 

15 Q Was there any discussion oetween, I guess, 

16 November or December 5 of '85 and the time you left the 

17 Agency that maybe the time has come to notify Congress, 

18 for example, maybe after the February shipments when no 

19 hostages came out? 

20 A No. That wasn't m the forefront of my mind 

21 as I was leaving. The hostages were still, you know, 

22 under wraps, and as far as I knew that operation was 

23 still puttering along. 

24 Q Let me ask you a question in a different area 

25 that will be my last question. In your experience, was 



UltCLASSIRED 



165 



UN^AS^^i^D 



1 this a greater MSC mvolverert m an operation than you 

2 had seen in your experience? 

3 A It was the only MSC involvement in an 

4 operation that I witnessed of this magnitude. Now the 

5 NSC has been involved before m what I would call 

6 diplomatic initiatives on their own quite apart from the 

7 State Departxent initi2ti"es, but usually when the NSC 

8 undertook something they ■■ere trespassing on State 

9 Department turf, net CIA's turf. 

10 Q ; But m term's cf chartering an aircraft and 

11 moving people around and stuff? 

12 A I've never heard of that. 

13 Q Did you at the time suggest that it was a 

14 prescription for disaster? 

15 A Privately, m ~y c--.'n mind, yes. Again, you 

16 have to come back, and I had no recourse. I did not 

17 think that the Agency was serving the President well with 

18 intelligence on the hostages. Damned if we didn't try, 

19 but I knew that the President was very upset over the 

20 hostage situation and the hostage families would come in 

21 and they'd cry in the Oval Office and they'd pound on his 

22 desk, saying what are you doing for my uncle, cousin, 

23 brother, what have you. 

24 And he was also well aware that President 

25 Carter kind of went through this same thing, so he felt 



UN6iASS(FaED 



166 



UNCt#SStPFD 



164 



very frustrated that he wasn't accomplishing anything, 
and he would look to CIA to help solve this, and we 
weren't solving it, and I could see why, you know, the 
old saying, somebody do something, and I think State was 
energized. They worked the diplomatic loop very heavily. 




■.d : think the NSC finally 
grabbed the ball and said well, those guys out at the 
Agency can't hack it, so we'll do it ourselves. 

Q dne more, and that's to an outside observer it- 
looks as if there was a meeting on December 10 of '85_ 
where things pre tty •■■el l see-^ed to be closed dowr 

■s of Tctuall; dealing with the 
initiative through Ghcrbanifar and -.aapons and everything 
it looks pretty dead. 

I know this is us two years later looking 
back. By January 2 there are CIA lawyers drafting 
Findings again. And I at least have been unable to come 
up with an event that I thought justified the sort of 
getting things back on track. 

A Sure, I'll tell you. 

Q Was there an event? 

A No, it's known as the Christmas vacation. 
People start going away around the 15th of December for 



l/N^#aW£D 



167 



bifCLASSIFTE'^ 



165 



1 Christmas leave, so you ^.ave Christmas and New Year's 

2 off, and then people core bac:< to work. So I think you 

3 had a hiatus m gcvern-ent. Vcu know, the President's 

4 out at the ranch and all like that, so I think it was the 

5 down time over the vacation that looks like no one was 

6 interested. 

7 Q So then we get to the New Year and it's time 

8 to get the hostages out? 

9 A Yeah, so we're back up. What's first on the 

10 agenda? ' 

11 BY MR. lECrr: (Pesuming) 

12 Q Just a couple quick things that just occur to 

13 me. One is that Neil T'.ade the point about and was 

14 discussing with you that the hostages were in crying and 

15 pounding on the desk and v.'hatever you pointed out. 

16 Did Mr. Casey ever tell you or did anyone else 

17 ever tell you that there v/ere people suggesting to the 

18 President that he might be better off in making his 

19 decisions on these T'atters if he didn't get so close to 

20 the families of the hostages so that the emotional 

21 overflow might influence hin? 

22 A No. Not if I gauge the President and those 

23 who know him. He is very personal and loyal in that 

24 sense, and he does take a great compassion with people 

25 and that's evident ]ust anytir^e a serviceman is killed, 



yNOLASSIFED 



168 



UNCLASSlf?tO 



166 



1 you know. The President ■■.'ants to go to their funeral. 

2 You know, he is very -'ovee. hy f-.at. 

3 Q Did you get any sense from Mr. Casey that he 

4 thought the President should distance himself a little 

5 bit emotionally from the fanilies? 

6 A No. 

7 Q The other thing is this that I'd like to ask 

8 you about, Mr. Mcl'ahon. There's an impression out that 

9 that some people have that there is a group of people as 

10 part of a RTIG made up of north !^^^^Hand — 

11 A Abrams? 

12 Q Yes -- It just slipped out of my mind — and 

13 that^^^^H as the CIA representati'. e on this RIG, was — 

14 that the three of them were acting together to avoid -- 

15 going around certain restrictions. This is an impression 

16 that's out there, and that^^^^^Hrole in it was to serve 

17 in that capacity in such a vay to handle the CIA 

18 dimension of it, vis-a-vis^^^^^^^^^^for example, and 

19 perhaps in other ways. 

20 Did you see any evidence to indicate that 

21 ^^^^^^^^^^^^1^^ conducting r.ir, position while you were 

22 there, would deal directly with Mr. Casey on the 

23 Nicaraguan-related matters and go around all the levels 

24 between himself and V.r . Casey at CIA in order to act 

25 secretly only with the knowledge of Mr. Casey? 



DNCtassr.Ea 



169 



UHClASSIflED 



167 



1 A No. think that 'cjld be contrary ^'^'^^^^^^1 

2 makeup, and I would be surprl^ied if that was the case. 

3 As I said, I had great cor.fider.ce in^^^^^^^^^Vand in 

4 fact was relieved vhen he took over the Central American 

5 Task Force, because I had a feeling that he would take a 

6 burden off watchdogging that activity. 

7 And It's not because, you know, anyone else 

8 would be dishonest; it's : .;5t that when you're running a 

9 paramilitary program or fighting a war and you get caught 

10 up in the Biomentum of things and you're not always 

11 turning around reading the regs or what have you, but 

12 ^^^^^^H^^ sharp enough to, you know, stay on top of things 

13 like that. 

14 And the RIG is not new. The RIG went back, if 

15 I remember right, Enders vas the first one that composed 

16 a meeting of that nature, where he would have the Central 

17 American people and later the DDO. And then that was 

18 followed by Motley, who had the same thing. And they 

19 would at time get/^action oriented. 

20 And I recall one point in time when I learned 

21 that we had^^^^ 

22 ^^^^^^^^^^^^^^^^Hand all those folks coming in there. 

23 And Dewey at the tiTie vas representing on the RIG or 

24 whatever they called it before then. And that caught me 

25 by surprise, so I •.■.ent in to Casey and said, hey, did you 



yNei:flsfiT?Hfi 



HO 



UNeiA^«^«^i) 



168 



1 authorize this. And he said no. So I had Dewey up and 

2 we had some pillow talk together and it turned out that 

3 the RIG, you know, thought it '-/as a good idea and it was 

4 permissible withm the la-/ for us to do it, but I fe lt 

whenever ::c : i :;'l^^^^^^^^^^^^^^^^^^^^^^Bthat 

6 I'd like to kno'v ^^^^^^^^^^^^^^^^^^^^^^^ 

7 And so •■:e r.ad a fireside chat. 

8 Q When would that have been, roughly? 

9 A Oh, '33, '34 -- something like that. 

10 Q ;Vou saw no evidence of Casey dealing directly. 

11 with^^^^^Hon these matters? 

12 A No. Bill worked a lot with Dewey. They were 

13 very compatible because Casey put a lot of energy into 

14 the Central American program, but, you know, if I could 

15 characteriz^^^^^^^^^A he tended to stay in channels. 

16 I think he would have gone more to -- 

17 Q You mean chain of command? 

18 A I think he would have gone more to Clair 

19 George. Now he certainly had meetings a lot with Casey 

20 because Casey would call him m, and I have walked into 

21 the room when^^^^f'.'as i- there, but there was always 

22 Clair George or Juchniewicz there. And, as I said, you 

23 know, I thin)<^^^^^^|a super guy and I had great 

24 confidence in him. 

25 Q And you had no knowledge of meetings between 



UMCtftssrj^f^s 



171 



UNOLASStFED 



1 just Casey, North anc^^^^^^H: -ist the three of them 

2 meeting -- weekends, 'veekrights? 

3 A Mo. 

4 MR. LICM: Tha-.-; ,■ = ■.;, ::r. McMahon. 

5 THE WITN'ESS : Z'r.ar.k you, gentlemen. 

6 (Whereupon, ?.t 4:3-; p.m., the taking of the 

7 instant deposition ceased.) 

8 



9 Signature of the Witness 

10 Subscribed ;and Svorn to beforo :^e this day • 

11 of , 1987. 

12 



13 Notary Public 

14 My Commission expires: ______^_^__ 



UNCUSSIFSEO 



172 



ONCJLMS;^^P. 



:orag3ing iao;3i:ijn was t3<an, io hareDv c a r t i : 7 that the vitnas; 



ao a a r ; 



ha tjragoin? de?03iti:;n was i-lv sworn 
: that tha tescirnonv of said vitnass •. 



taken b 
under a 
given b 



ne to tha best of 71 7 abilit7 and thereafter reduced to tvpewritin 
direction; that said deposition is a true record of trie testi^on": 
said witness; that I aa neither counsel for, related to, nor 
mploved bv an7 of the parties to the action in which this deposition 
as taken, and further that I an not a relative or amplovee of an7 
ctornay or counsel employed by the parties thereto, nor financially 
r otherwise interested in the outcome of the action. 



■ ;TARY ?':3LI( 



Commission expires 



■^%^hc 



UNCLASSIFIED 



173 



9RN0GRAPHIC mNinn 

UanrlMd and UMditcd 
Not for QaotatkMi or 



^1 






mm 



HSITS /^7 /r 



DEPOSITION OF JOHN MCMAHON 

Vednesday, September 2, 1987 

J.S. House of Representatives, 

Select Committee to Investigate Covert 

Arms Transactions with Iran, 
Washington, D.C. 

r 



Committee Hearings 

ortiM 

U.S. HOUSE OF REPRESENTATIVES 






3'ffS' 



OmCB OP THE CLKBK 
Ofltlc* of Offlciid Bcportcra 




ONCUSM 






_COP''-S 



174 



175 



MCGINN/bap 



mimm 



DEPOSITION OF JOHN MCMAHON 

Wednesday, September 2, 1987 

U.S. House of Representatives, 

Select Committee to Investigate Covert 

Arms Transactions with Iran, 
Washington, D.C. 

The Committee met, pursuant to call at 8:30 a.m., in 
Room 2203, Rayburn House Office Building, with Richard 
Leon, House Select Committee, presiding. 

Present: On behalf of House Select Committee: 
Richard Leon, Diane Dornan, and Pat Carom. 

On behalf of Senate Select Committee: Paul Barbadoro 
and Tom Polgar. 



musMi 



176 



BNDU^IW 



Whereupon, 

JOHN MCMAHON 
having been first duly sworn, was called as a witness 
herein, and was exeunined and testified as follows: 

MR. LEON: Let's go on the record, and we will 
introduce everyone for the record. We have our deponent 
here, John McMahon. My name is Richard Leon. I am the 
Deputy Chief Minority Counsel. Seated to my right, Diane 
Dornan, Associate Staff Member for the Minority House Committe 

]Why don't you guys introduce yourself for the. 
record? 

MR. BARBARDORO: Paul Barbadoro, Deputy Chief 
Counsel of the Senate Sele^ Committee, with me is Tom 
Polgar, one of our investigators. 

MR. LEON: Mr. McMahon, just for the formalities, 
let rae hand you the subpoena for your appearance today, 
and let me not«^or th^record how much we appreciate 
your willingness to shuffle your busy schedule to come 
across the country and take part in this continuation of 
your prior deposition. 

You have been s*iorn in as the record, I am sure, 
has noted, and we have called you back to follc5w-up in 
some areas of inquiry that had initially been posed to you 
during your initial deposition and some new areas of 
inquiry that have arisen as a result of the testimony 



IINIlUS£ifl£llcp 



177 



imetAssifiEtT 



during the course of the public hearings, some of which 
you may have watched on T.V. or heard about or read about 
or what have you. 

THE WITNESS: Right. 

EXAMINATION ON BEHALF OF HOUSE SELECT COMMITTEE 
BY MR. LEON: 

Q I would like to follow up on some of those areas 
and amplify on some others. With that introduction, 
let me start off with one area that I don't believe we 
have ever had an opportunity to discuss with you, and it 
did arise during the course of the hearings, and you may 
have read about or even heard. 

That relates to the testimony of Colonel North. 
At one point in his testimony, he talked about discussions 
between himself and Director Casey with respect to the 
possibility of having what I think he referred to as off-the- 
shelf covert operations capacities. He described what 
they were thinking about in terms of an operation that 
would be funded by non-government sources, non U.S. 
government sources, and would have the capacity to 
selectively conduct covert operations on behalf of the 
United States. 

Did you happen to hear about that testimony 
or witness it on T.V. or read about it? 

A I think I have heard news clips of that, and I also 



wmm: 



178 



WNBUSPH^ 



read accounts of it in the newspaper, but during my tenure 
I saw no evidence of any such arrangement, nor am I 
familiar with any discussions. 

Casey was very anxious to build a capability 
outside^^^^^^^^^^^^^^^^^^^^^^^^^^^Hand have 
you, but done through^^^^^^^^^^^^ftnechanism, but 
part of the Central Intelligence Agency, nothing on the 
shelf or as described by Colonel North. 

Q And when you say he had this desire to set up 
that kind ,of organization, let's say, was it your 
understanding that that would have been an organization 
consistent with the law? 

A Oh, definitely. The agency for years has what 
I dabbled,^^^^^^^^^^^^^^^^ principally 

because we never had extremely effective mechanism for 
working a^^H^^^^^I arrangement , though we have tried 
a number of times over it. But under Casey's tenure, he 
began to put some teeth in that. 

The purpose of this was to have operatives in 
countries when availabl« 




it was very different re-establishing 

in a place that we didn't have a mechanism 



already existing there. 



jtkir\i:. 



wmm^ 



179 



UNCBl^^T 



9 
10 

11 

12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 




Q Now, would the need for something like that or 
the perceived need for something like that, Mr. McMahon , 

been security-related, 

^^^^^^^^ Would that be 

A Yes. 

Q -- notivated by a need for heightened security 
let's say. 

A Well, I won't say heightened security. The need 
was to have available a mechanism to acquire intelligence. 




always start from scratch to reestablish some intelligence 
collection mechanism. 

Q So in a sense it is sort of a desire not to put 
all your eggs in one basket from an intelligence point 
of view in a given country. 

A Correct. 

Q Would you say that the Director's desire along 
those lines, the former Director's desire along those lines 
was a reaction or response in part tol 



A I would say so, yes. Definitely. 



MU^lHi&T 



180 



uM&mfi^ 



1 

2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 



Q Now, I believe that Colonel North in his testimony 
relating to this area made reference to the Mossad and this 
idea, this proposed idea that he and Casey were supposedly 
discussing we have no independent corroboration of it -- 
was an outgrowth of discussions with and experience with 
Mossad. 

Were you familiar with the Mossad organization 
having similar type of operations in any way? 
A 




Did you have any knowledge 

having systems by which they could 
obtain money, methods by which they would obtain money 
aside from their government appropriations 
to fund their own covert programs? 
A 

Q Because the explanation, as Colonel North, as 
I recall as Colonel North testified to, the idea was the 
idea of getting the funds *rom the sale of the arms to 
Iran, and then the residue or the profits from it, using 
that to fund covert programs. 

A Yes. I was_not_familiar_with any mechanism such 



imnnssiEii- 



181 



bap 



DNttASSIPIEST 



1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

1 

19 

20 

21 

22 

23 

24 

25 



as that. 

Q With respect to the time you were there as the 
Deputy Director at the agency, did you see an> 




Q Did you have any reason to think that Director 
Casey was frustrated or felt frustrated in any way^^^H 
^^I^^^^^^^^^^^^^^^^^^^^^Hw i th 

or financial restrictions that Congress was putting on the 
agency? 

A He may have been frustrated at times, but I don't 
think over 



Q Certainly not enough to warrant the desire to 



182 



msimF 



have some kind of special program with special funding, 
for instance? 

A No, not at all. I didn't think that was necessary. 




Q How about^^^^^^^^^^^^^^^^B during the 
time period you were deputy director. Did you see any 
evidence to indicate Director Casey might want to have 
some special operations progriun 




Q As I stated before, I don't believe we have 
any corroborative evidence of Colonel North's testimony 
on this particular point, and what he did relate were 
conversations that he had and discussions he had with the 
Director apparently one on one in this area. 

A Casey never related that or even gave a hint to 



wmm: 



BKJMSSRffiT 



me that anything like that was fermenting in his mind. 

I guess you have pretty much answered the question 
I would ask you, which is does that sound like the kind of 
program or programs that he would be interested in trying 
to initiate from your experience in dealing with him 
now? Granted you didn't have any evidence from him 
directly or any conduct that indicated that. 

A No. I saw no evidence of that, Richard. 

Q Let me move to a little bit different area here; 
that is, spend a little bit of time on your relationship, 
when you were the Deputy Director, your relationship 
with the Director and what you perceived to be the 
relationship of other people with Director Casey during 
this time. 

First of all, with respect to the conducting 
of your office as the Deputy Director, was your working 
relationship with the Director such that you were in 
regular contact with him on almost a daily basis? 

A Definitely. 

Q Would you say you had almost had free access to 
see him whenever you had needed to see him? 

A We had just a single door separating our office 
and that swung in both directions nany times during the 
course of a day. 

Q And in divying up your responsibilities between 



UHuLfiifUM ^bv' 



184 



HNIimiEIF 



10 



yourself and him, was your scope of jurisdiction, for lack 
of a better word, agency-wide or was it restricted to 
certain component parts of the agency? 

A Agency-wide and community-wide. 

Q And community-wide. Okay. Were there any, during 
your tenure th^'-e as Deputy Director, were there any 
sections or projects under the umbrella of the agency 
that the Director took on for himself alone to deal with 
exclusively? 

A ,1 would say one stands out. He didn't do it . 
exclusively. I was certainly knowledgeable what he was 
doing, but he tried to work! 




Q For intelligence-gathering purposes? 

A For intelligence collection purposes. And when 
Casey got this role in and it looked like there was 
something to it, we then took that officer and assigned 
him under the^^^^^^^^^^^^of f ice 

that there was adequate day-to-day supervision. It was 
kind of Casey throwing out the possible opportunities, and 



IW^^ 



185 



\j(Ki^Sa8%' 



11 



then this officer following up on them. And then it was 
tucked into the fold. But since Casey had^^^^^^^^^^^H 
you know, I was useless. So Casey worked that himself. 

Q Would he from time to time discuss with you new 
possibilities in that area? 

A No. But often when he would talk to the officer 
involved, I would sit in on it. 

Q I see. 

A So he wasn't trying to exclude me. It was just 
that I wasp't very helpful in working on it. I can't think 
of any other project where I would say it was really 
Casey's to the exclusion of me. I just don't think it 
existed. 

Q Were there any areas substantively that there 
was an unofficial understanding between the two of you 
that he would pursue, besides the one you have just 
described, that he would pursue without checking with 
you or bringing you up to date on but would deal directly 
with the personnel in the agency at a lower level than you? 

A He did that all the time. Often he would call 
an officer or an analyst directly, but it wasn't an 
exclusion. It was just that he wanted an answer or 
wanted to find out what was going on. 

Q Short circuit the chain of command so to speak. 



mmm. 



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12 



Q It wasn't unconnnon for him to, if he was interested 
in something, to go right to, for example 
the Central American area? 

A Right or talk to an analyst or talk to an NIO, 
or, you know, to go get an answer. 

Q Now, with regard to, let's say. Central America 
in general and the Latin American Division, there, was 
it your experience that you were being kept up to date on 
the developments in those areas vis-a-vis the Latin 
American Dj.vision, the Central American Task Force? 

A I think so. If I wasn't up to date, it was my 
defficiency, not the mechanism's deficiency. 

Q Did you have any instances that you can recall 
where new projects were being undertaken or new policies 
were being initiated in those areas at the direction of 
or, suggestion of Director Casey and you were not being 
informed about it or you were not being told about? 

A No. The only occasion of that nature that I 
recall was! 
which was permissible. It was legal. 

Q Roughly when would that have been? 

A Oh, I would probabaly say it was in the 1983-1984 
time frame. And the direction for that came out of what you 
now know is the RIG, the Central American Interagency Group. 
[sitting on that at the time? 



UMtUSSIHEB. 



187 



WKkASStKBr 



A No. Dewey Clarridge was sitting on that. I went 
in and asked Casey if he was aware of that, and he said 
no. So I called Dewey up and sort of alluded to him 
that RIG wasn't running CIA; that Casey 
and I were -- that! 
unless we knew about it. 

Q Did that get straightened out? 

A I think so. 

Q There were no instances of that that you know of? 

A Not that I am aware of. 

Q When you brought that to the Director's attention 
did he back you completely on that? 

A Oh, yes. The Director never challenged me if 
I went to him and said I don't think we ought to do that, 
or we are missing the boat here. He was always very very 
supportive . 

Q Was he supportive of the idea of chain of 
command within the agency as a general rule? 

A I don't think he was a disciple of the chain of 
command. He went to where the answer was and he relied on 
the person that he was talking to to make sure that the 
chain of command was duly informed. 

Q But in terms of getting the proper authorizations, 
he was in favor of the senior level people who were 
empowered to make those decisions to actually make them. 



I HwilTll ■nWP pU I If 



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wmm 



14 



A He wouldn't exclude them, no. But I mean again 
if he wanted an answer or wanted to cause something to 
happen, he would go to where the action was to cause that 
to happen. 

Q How about the other way around? Would he 
expect--if he wasn't the initiator of the action, let's 
say, would he expect those below him to follow the chain 
of command to insure those above them, who had the 
authority, actually exercised it? 

A I would think so, but I wouldn't say that was. 
very high on his list of things that he ought to worry 
about. 

Q You were more concerned with that as the Deputy 
Director? 

A Indeed I was. 

Q In those instances where you thought the chain 
wasn't being complied with and brought it to his attention, 
he backed you on that? 

A I don't think I ever approached it in that 
context. I always made sure that if I knew something that 
the individual involved, like a deputy director, would 
know about it. But it wasn't a big deal. 

Q It wasn't a big deal. Now, how about with 
respect to covert actions in general? I believe you have 
testified — and correct me^^i ^n j^npg — that you 



T 





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might personally not have been as inclined toward covert 
action as other people might have been in the agency 
and indeed, maybe even the Director, himself. Would that 
be a fair statement? 

A I think that is a fair statement, but I think 
you have to appreciate whc.e I was coming from on covert 
actions. I felt that the agency activities had to be 
complementary or supplemental to a policy. It had to work 
within that policy. You just couldn't have it hanging 
off to the. side by itself. 

Further, that there is a limit to what the 
agency could do, and I did not want to undertake covert 
actions for the sake of covert actions to give the feeling 
that you are doing something. If it didn't have a chance 
for success, then I didn't think it was worth a candle. 
And in the case of Central America, which is probably 
where a lot of folks would say I was w/impish, I felt that 
the South, the Central American covert action got too big 
for us. It began to exceed what I felt was our control of 
the situation, and it was also so open that I felt if 
this is the U.S. policy, and we are supporting it, then 
let's go in and do it right. 

Don't try to do it through contras or anything 
else. 

Q Did you sense that your desire to curtail covert 



IMUSSMH. 



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16 



action by the agency in Central America created a 
friction between yourself and the Director as to the 
conducting of the — 

A Not a ^^ction, but once he asked me to go] 

Iwith him just so I could see first 
hand the threats down there, which I did. But I didn't 
come away, you know, changing my mind as to what ought to 
be done down there. I think the U.S. has to take action in 
Central America. We can't let Nicaragua proceed the way 
it is proceeding. 

But I don't think the answer is try to hang a 
monkey on CIA and say go solve this with some contras. 

Q Did you find any instances where your desire 
to curtail covert action resulted in the Director's 
sponsoring or initiation of covert action behind your 
back without your knowledge? 

A No. I never saw any evidence of that. 

Q Did you find or have any experience or find any 
evidence to indicate that your differences of opinions with 
regard to the need for and the use of covert action resulted 
in him dealing directly more frequently with, let's say, 
Clair George, let's say, for example, with regard to covert 
action, cutting you out so to speak? 

A No. I never felt cut out of anything. If I wasn't 
into something up to ray arm EJ-tS ^it J**j3ecause I decided 






191 



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17 



not to lay into it. 

Q With regard to the dealings between -- to the 
extent we know about them — dealings between Colonel 
North and Director Casey there has been lots of testimony 
you might have read about some, heard some other on the 
T.V. , radio, of meetings, regular meetings between 
Director Casey and Colonel North. 

I believe you even testified in your last 
deposition that you aren't aware that they were having 
any kind of regular meetings whatsoever. 

A That is right. 

Q Assuming that they were having these kinds of 
meetings, and since you weren't aware of them, is there 
any explanation you can think of as to why it would be 
that the Director would have not brought you up to speed 
on that or kept you informed of his meetings with Colonel 
North? 

A My opinion, having learned what I have read in 
the papers and the testimony, is that the Director was 
not operating as Director of Central Intelligence, but he 
was operating as an individual who knew where the power 
and money was in the United States. 

Q When he dealt with Colonel North? 

A When he dealt with Colonel North and where 
Colonel North, in.44?_ efforts to raise money for the 



n.his efforts to raise mone 

JKIussra. 



192 



wnmflffiT 



That is right. 

Jt is not based on any knowledge that you have 



contras privately could go to hit these people up. Casey 
knew, you know, everybody in the United States. He was a 
source of knowledge. And I would say that if he had all 
these meetings that it was probably in that context. It 
was not as an official of CIA, but as a guy who knows where 
money is in the United States. 

Q Now, what you just stated is assumption on your 
part. 

A 

Q 
per se. 

A No, no. In fact, if I can recall right, 
Richard, I only remember seeing North's name on the 
Director's schedule once in the four years that I was there 
as deputy director. And if he did have those meetings, 
he had them when he was down EOB. They were not on his 
schedule. He walked in and dropped in on him. 

Q How about Saturday meetings? Were there some 
Saturdays that you were in the office and the Director was 
also in his office? 

A Yes, but Colonel North wasn't there. 

Q Okay. 

A No. It could be very easy for the Director to 
see North because the Director had an office in EOB. 



All he had to do was walk down the hall. 



rji 



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19 



Q Exactly. So it would be your expectation or 
surmise that when Casey was dealing with North it was not 
with his Director's hat on, but more of a private citizen 
type hat on? 

A I believe so. 

Q How would you think Director Casey would 
rectify his desire to scrupulously abide by the law, the 
Boland Amendment and other laws that may apply in his 
dealing with Colonel North with regard to Nicaragua? 
Do you think he would be uneasy about that? 

A I don't know how to answer that. I do have 
total confidence that Casey was a very shrewd lawyer, and 
he would never put himself in the position where he 
would be cross-wise with the law. He might nudge it and 
push it and stretch it as far as he could — 

a, 

Q Without braking it? 

A But not break it. 

Q Was it always your sense in dealing with him 
that he wanted the agency at all times to stay within the 
boundaries of the law? 

A I never saw any indication that he wanted 
anything else but that. 

Q Now, there has been, if I could move to a different 
topic area, there has been some testimony, there have been 
some stories, suggesting that ^he_a5ency at different points 



82-720 0-88-8 



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iflnBusnifiaFT 



in time under Director Casey's tenure as Director and 
under tenure as Deputy Director, was engaged in cooking 
up intelligence is one way to put it. That is kind of 
a slang way of putting it. Another way would be modifying 
or adjusting intelligence information in order to achieve 
certain results. These accusations crae up in terras of 

modifying intelligence in order to fit policy objectives. 
I wanted to ask you a few questions in that 
area with respect to your experience at the agency in 
evaluating ,the intelligence work of those under you. 
First of all, during your term as Deputy Director, did 
you have occasion to learn that intelligence produced 
by those under you was in any way misstated in order to 
accomplish some form of a policy objective? 

A None whatsoever, and I just don't see that 
happening in CIA, If one appreciates how an analyst works, 
there is a certain arrogance and pride in their analysis 
and they are very independent people. They will argue 
with each other as to their position. They would argue 
with Casey. They would argue with anyone that disagreed 
with them. And if you look at the intelligence process 
and how finished intelligence is ground out, there is 
never a uniform agreement that, boy, this is the perfect 
way to say that. 

A lot of it is a compromise analysis. 



195 



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21 



Q It is rarely black and white.,. 

A It is rarely black and white, and that is the 
beauty of an analysis, because if you had all the facts, 
then you wouldn't need the analysis. And there were some 
notable cases that I >:hink demonstrate the problem. 

One came x'ron^^^H^^HNational 
estimate. You must remember that this is all members of 
the intelligence community, not just CIA. 

Q Would you state for the record some of the 
other members of the intelligence community? 

A Sure. Intelligence community is composed of 
INR from the Department of State, DIA from Defense, 
the Army, Navy, Air Force intelligence organization. 

A ^^^^^^^^^^^^^^^^^^^^^^^^^^^1 the 
the intelligence part of the Department of Energy, the 
Department of Commerce and they sit and deliberate on 
drafts that have been pulled together by the National 
Intelligence Officer with representatives from all of 
those organizations contributing to the piece or passing 
upon the deafts. 

In the case of^^^^^^^^^draft, the NIO who 
left the agency apparently in somewhat disagreement, went 
public and made a statement that Casey was cooking a 
^^^^^^lestimate. And the House Permanent Select Committee 



iiMrimiEiFO 



196 



UNCttSSIFlpi' 



22 



decided to look at that, and — 

Q Intelligence Committee? 

A Right, Intelligence Committee. And they came 
in and they looked at the fact that we had — there were 
five drafts within the NIO process before it even got 
^o Casey and myself. So there was great disagreement 
within the community to start with. Then when we went to 
the National Foreign Intelligence Board where all the 
principals of those agencies I cited earlier were 
located, tihere was disagreement there and we had what is 
a very rare occasion, two me«tings of the board on that one 
subject. 

So there was still disagreement on it and finally 
it was published, and everyone agreed to the publication. 
And the HPSCI said as far as they were concerned this 
was clean as a hound's tooth as far as trying to cook 
the intelligence. So I just think that was a bum rap. 
I also took some umbrage at George Shultz' comments on 
intelligence. 

The agency just doesn't cook intelligence. 
Now Casey may have his own opinions, and he is very forceful 
in challenging analysts on that, but you have to remember 
that opinion didn't necessarily come from policy. It 
came from friends and people who have knowledge in those 
countries, who operate in those countries, businessmen 



IIMPLA^SlCICn 



197 



UNCBimEF' 



23 



who write Casey personal letters and say, "Hey, Bill, 
you ought to look into what is happening here. ' ' So 
he generated a lot of ideas out of this personal flow 
of mail coining into him. 

Q So in a sense, correct me if I am wrong, when 
the Director would read an analytical evaluation of 
intelligence, when he would read it, he would be passing 
it through the prism of his own experiences and his 
special sources of intelligence — 

A Right. 

Q — that he would bring to bear to it and that 
might result in him having a conflicting analysis of the 
same facts. 

A Right, right. 

Q In those instances where that would happen, 
however, would he force or direct them to change their >»' 



analysis of those facts? 



the^fam( 



A No. What we would do is put in tl;^ famous 
footnotes that you see in the National Intelligence 
Estimates or we would put it some feel — others say or 
on the other hand this is a possibility, so that people 
reading the intelligence estimate realized that there 
isn't a single viewpoint; that others have some disagreemer 
or another opinion. 

Q Were there any instances that you can think back 



198 



uiraftOTiff' 



24 



to, Mr. McMahon, where Director Casey's feelings or 
analysis of facts were so well known ahead of time that 
the intelligence analysts there were tailoring their 
opinions in order to please their boss, so to speak? 

A No, I don't think so. I think there was 
enough discussion and arguments that would suggest that no 
one was intimidated by Casey's opinion. 

Q And he welcomed the free flow? 

A He welcomed it. He loved it. He was like a 
fire horse* going hearing the bell. He liked to have a good, 
animated discussion. 

Q So there was a free flow of ideas with regard 
to an analysis of intelligence while you were there under 
him? 

A Yes, definitely. And we wouldn't have it any 
other way. I think I would be derelict in my duty if I let 
it happen any other way. 

Q It certainly is in the Jesuitical tradition, isn't 
it? 

A Correct. 

Q Let me be a little more specific on this, having 
talked about it in general now. With regard to Iran 
intelligence, there has been some suggestion in the 
testimony of some, perhaps Secretary Shultz, one would 



say, and others, that the ag 



wmm 



telligence reports 



199 



WKHSBfiHFT 



25 



1 with regard to Iran that were being provided to the NSC, 

2 the President, were being skewed or misstated in some way 

3 in order to encourage the arms initiative with Iran or to 

4 bolster the arms initiative with Iran, which Director 

5 Casey was in favor of as opposed to Secretaries ShJltz 

6 and Weinberger. Did you see any evidence to indicate 

7 that the agency's intelligence with regard to Iran 

8 during that time period, '85 and early '86, was being 

9 tailored in any way in order to support the arms 

10 initiative? 

11 A No, and I don't think the record will substantiate 

12 that statement. I think.-we knew Iran for what it was. 

13 We knew that they were terrorists. Casey made speeches 

14 in '85 and '86 about Iran as a terrorist organization, 

15 public speeches how they were sponsoring terrorism as 

16 a country. I think the thought of moderates in Iran 

17 probably was prompted by the Israelies and not by us. 

18 If there were any in the agency who thought they 

19 were moderates, it was because they adopted that INTEL 

20 coming in. But I don't think many people in the agency 

21 thought Iran was anything but trouble, and I certainly 

22 spoke to that fact, and I thought I was representing Casey 

23 as well as the agency. The document that causes the biggest 

24 trouble was kind of a think piece that Graham Fuller put 

25 out. 



mmm 



200 



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26 



Q Was that in '85? 

A That was in '85. And he was expressing concern 
about the U.S. having no leverage in Iran whatsoever 
and he felt with the passing of Khomeini the only influence 
in Iran would come from the Soviets; that they were 
in far better position than certainly we were. But he 
also thought that it would be different for the U.S. 
to do anything there and suggested that we encourage our 
Western allies to try and develop a dialogue 
with Iran. 

That was typical of Graham. He would kind of 
reach out trying to think of things that were really 
the unthinkable. I thought that he was ahead of his time 
with it. What probably caused the trouble is Casey was 
enamored with this thought and floated it down to the 
NSC and to State and I hope that is what George Shultz 
was talking about, because I can't think of anything 
else that would skew it. 

Q How about with regard to the Iran/Iraq war? 
Were you aware of any instances where the status of the 
war between those two countries as to who was winning or 
who was in a more favorable position was being shaded in 
any way in order to influence how we would deal with Iran? 

A No. 



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201 



UWHaRBFT 




Q And certainly there was no evidence to indicate 
that we were misstating our intelligence or shading our 
analysis. 

A It wouldn't happen. That is just so god-damn 
outrageous 1 can't stand it. That is just so damn false 
and I think George Shultz got away with murder on that 
one. In fact, I asked the Director why the hell he didn't 
challenge Shultz on that. He said — 

Q Director Webster? 

A Yes. He said he asked Shultz to point out where 
is the case of this happening. And I guess he hasn't heard 
from Shultz yet. 



Well, 



mfmm 



forward to hearing 



202 



the response, I'm sure. How about shifting to the other 
point in the globe that this committee has been' focusing 
on in the area of Nicaragua, Central America? Were there 
instances, if you can recall any, during your tenure as 
Deputy Director where you were concerned about the 
accuracies and the fairness of the intelligence analysis 
that was being provided by the agency to the NSC and the 
President about events down in Nicaragua and Central 
America? 



IINtLASSm 



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TIE WITNESS: No, because I don't think it mattered what was 
going on there. There was enough acquired through the 
embassy and people who traveled there that events in 
Nicaragua, you know, weren't very much of a secret, and 
whether the contras were doing things or not doing things 
didn't matter. 

What did matter was the fact we knew the Soviets 
were sending in a great deal of supplies through East 
European countries and through the Cubans, and that we knew 
for sure. ' And we could see the hardware end up on the ' 
ground. So the fact the Soviets were building up in 
Nicaragua was no big secret. And the political nuances, 
saying what to whom in Nicaragua, really didn't matter. 

BY MR. LEON: 
Q You weren't aware of any instances where we 
falsified any intelligence or purposely skewed our intelli- 
gence in order to get greater congressional support, let's 
say, for funding for the contras or anything along those 
lines? 

A No. In fact, there was so much debate on both side ; 
we had a hard enough time competing with the flow of news on 
the evils of what the contras were doing. We were putting 
out brush fires, saying the contras weren't murdering little 
children and things like that. There was a war going on, 



and obviously y; 



iim'Siii 



ou wouldn't be proud of. 



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uRCOssmerr 



30 



There was not a policy, there was not an intent to the 
contras movement. ■ » 

Q There have been allegations with regard to 
intelligence misstatements regarding troop strength. Were 
you aware of any instances while you were there where the 
troop strength of the Sandinistas were being exaggerated 
or vice versa, the contras were being exaggerated, in order 
to get more funding out of Congress or for any other objec- 
tive to support the policy of the administration? 

A Wo. I think we had a pretty good handle on those 
under arms in active military in Nicaragua, and we always 
pegged that around ^^^^^^^^Hrategory. Where the numbers 
might have been a little softer is in the militia, which we 
also said was around^^^^^^H 

But there was never any intent to cook the numbers 
at all. We didn't have to. We didn't have to. We were 
dealing with really, in the initial times, a handful of 
contras. 

Q Part of the reason I ask about these things is 
because there are impressions people form out there, and the 
accuracy of them is important to debunk them if they are not 
accurate, that the people in the agency serving under 
Director Casey in the lower levels in the intelligence 
gathering and analysis area knew he felt strongly to be in 
favor of the contra movement and policies of the 



contra movement ana pom 

iiNnii^.<;iFiFn 



205 



UIM^SiilET 



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administration to support the contras, and there is this 
theory in some quarters* out there, because they knew that 
they ad]usted or tailored their intelligence analysis and 
intelligence reporting in order to give him the ammunition, 
so to speak, to work the administration's \.ill on Capitol 
Hill; and if I understand you correctly, you are saying there 
was no evidence you are aware of? 

A There is no way. In fact, if you held a lot of 
those analysts up by the heels, I bet you would find more of 
them against the contra program than for it. There is ao 
way they are going to serve Casey something on a platter for 
him to use that way. 

And also you must bear in mind we prepared a number 
of national intelligence estimates and special estimates on 
Central America, and that included community participation, 
including the Department of State. So if there is any 
cooking involved, I think you have to lay it at everyone's 
door-steps, not Casey's or CIA's. It included the Department 
of State. 

Q Let me move to a different area, if I could, that 
relates to the much-discussed and sometimes much mythified 
area of mining of the harbors in Nicaragua and the degree to 
which the agency notified the appropriate committees in 
Congress with regard to that mining of those harbors. 

Ther^lias^been testimony during the hearings that 



i^fcl^is^lieen testimony dui 

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you may be familiar with, you may have observed, regarding 
this notice question, and some questions have arisen with 
regard to it, and I wanted to ask you some questions in that 
area. You were Deputy Director, were you not, during that 
time period -- 

A Indeed. 

Q -- prior to and during the incidents in question? 

A Right. 

Q During the questioning of Mr. McFarlane, I believe, 
there was. some reference by Congressman Hyde to the state- 
ments reported in the papers of various members of the com- 
mittees with regard to the degree to which they were noti- 
fied. 

I would like to point a few of those out to you 
and get your reaction to them, if I could. 

A Okay. 

Q There was a, apparently there were meetings on 
March 8 and March 13 of 1985, prior to the mining of the 
harbors -- 1984, excuse me, 1984 -- with the Intelligence 
Committees, and there was some dispute as to the extent to 
which the Senators and Congressmen felt they had been 
notified adequately. 

Patrick Leahy of Vermont at one point, for example, 
contended that he was fully informed with regard to the 
mining of the harbors. He said that many others were also 



iiNPI h^WB 



207 



UNCEliSSirtEP^ 



fully informed and that they voted for the covert aid in the 
Senate, but because of the public outcry against the mining, 
switched their position later on. 

By contrast, Senator Moynihan claimed that he 
hadn't been adequately notified with regard to the mining of 
the /.arbors, that the references to that as a proposed covert 
action were minimal during the time period. Senator Biden, 
who was present during the various briefings, as was pointed 
out in an article in the Washington Post, stated that he had 
his committee staff on April 3 look for further information, 
and his staff gave him a lengthy briefing with regard to the 
CIA initiative. 

Chairman Boland, Chairman of the House Intelligencs 
Committee, was reported as saying the CIA had informed his 
group on January 31 about the mining, and he had no complair.t 
about the CIA requirements even though he opposes the covert 
aid. There has been a difference of opinion reported as to 
the extent to which there is adequate notice. 



Let me ask. you, as someone 



who was involved in 



the notice process, can you give us a little background on 

It? 

A I was not personally involved in any of the heari: 
where this was discussed, but we did brief the HPSCI on 
the 31st of January. We tried to get to the Senate, but 
for some reason the Select Committee couldn't meet right 

lll\U!LIL<;^[Fi£0 



208 



Uil£USSKtfiflET 



away. I think it was on the 16th of February we mentioned j 
that we wanted to brief the Senate, and they picked Februar.- ' 
20 as a date for us to come down and brief them. They ther. I 
changed that to the 28th, because they wanted to bring 
Shultz in and have him discuss Central American policy sc 
that the 




Then at the last minute, Shultz couldn't make it, 
and so March 8 was then picked as the date, and on March 8, 
Casey and Shultz went down. Casey gave kind of an order cf 
battle, here is what is going on in Nicaragua, 

mining the harbors at Puerto Cabezas, 
Punto Huete, and one other one, I forget. If I am not mis- 
taken, a notice was also issued by the FDN to all manners, 
It IS a public notice, saying we mine these harbors. I car.'' 
attest to that, but I was told the FDN did that. 

Pat Leahy said, "I don't like this mining, I want 
to hear more about it." So some of our^^^ people went 
down and briefed Senator Leahy 




one thought they could actually 



sink a ship. 



iMMSsim 



the Appropriations 



209 



UNMSattk&T 



33 



1 Corrjnittee in the Senate saying our colleagues tell us ^^^^V 
^^^^^^^^^^^^^^^^^^H come us So the 

3 sent some information down to brief the Appropriations 

4 Ccr.T.ittee , and, if I am not mistaken, if my memory serves 

5 me right, there were 13 Senators of the Appropriations Ccrr- 
'6 mittee at that briefing, and that took place on the 12th. 

7 On the 13th, Casey was back to the Senate Select 

8 Corrjnittee and said -- 

9 Q On Intelligence? 

10 A ' Intelligence. -- and said "I want to remind -you 

11 ^^^■^Dmining the harbors", and went through that again. 

12 Still not a word. We then, on March 28, got a letter frc- 

13 Senator Pell in Foreign Relations saying, "Tell me about tr.i; 

14 mining", so we prepared a written response, sent it to 

15 Senator Pell through Barry Goldwater, who was then Chairma.-. 

16 of the Senate Select Committee on Intelligence. Not much 

17 happened until the latter part of the first week, m April, 

18 when there was a great deal of furor in the press, which 

19 generated in Europe, about the mining of the harbors, was 

20 picked up by the Post and Times here and a lot of noise, 

21 and suddenly amnesia struck Capitol Hill, no one renemberei 

22 hearing about the mining. 

23 Barry Goldwater sent a letter to Casey telling 

24 him he was pissed. When I got this letter, I went in to 

25 Casey and said ,^ J'^^^^the Jie^l^ ^s_ JTe_^talking about, wher« 



210 



(iNCDrnpr 



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has he been for the last two months?" So we called down to 
see Barry Goldwater, and he had left to go to Taiwan. 

So we went down to see Pat Moynihan, who was 
then Vice Chairman. It was a Friday afternoon, we had a 
meeting, I think, scheduled at 6:15. We got in there, and 
we were held up, we were told Pat had press in his ^'fice. 
So after about 15 minutes, they left, and we went in. We 
said to Pat, you know, "We are just amazed about this letter 
from Barry Goldwater." He said, "Well, you know, that's 
how it gops," and he spoke about trust, and we talked about 
everything else. 

We found out on Sunday that while we sat outside 
Pat Moynihan 's office is when he had the press in to 
resign as Vice Chairman, because he hadn't heard about the 
mining. 

Q He didn't tell you that when you came in right 
afterwards? 

A No. 

Q Did he -- 

A Then when Barry Goldwater came back, Casey con- 
fronted him at a hearing, and Barry -- and Casey showed him 
then the transcript from the hearings on the 8th and on the 
13th of March, and Barry said, "You know, I don't know, I 
]ust don't remember." And it's my understanding that Barry 
wanted to send a letter of apology to the agency but was 



UMASSIQED 



211 



UNeassifiiFT 



urged not to do so -- because the Senate apologizes to no 
one . 

Q So as far as you know, based on your first-hand 
experience and based on your studying of the records as you 
had them back then, the House and the Senate were both in- 
formed before any mining took pla^e and while it was taking 
place. 

A You said a key word. . I can't say if it was before 
but our intent was to notify them as soon asj 

When the mines first hit the water and when we 
got around talking to the Senate, I just don't recall. 
Q But certainly contemporaneous with it. 
A Right. The intent was to tell them, and so, yc-j 
know, It wasn't an issue as far as we were concerned until 
all the noise happened. 

MS. DORNAN: Do you have any complaints from the 
House side about not being informed? 

THE WITNESS: None whatsoever. The House kind cf 
chided the Senate a bit, and I think that exacerbated the 
situation somewhat. 

I will give you another piece of hearsay. You art 
probably in a better position to check the record than I. 
But I understand during the first week in April the Senate 
Select Committee on Intelligence was asked to vote upon a 
resolution or a proposal^ ijitip^ufff ^ to a Senator regarding 



212 



UNCM^RI^T 



38 



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2 

3 

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10 

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Central America, and they voted against it 14 to 1, and the 
one who voted for it, or against it, and I don't know how 
the resolution was phrased, it is like those voting state- 
ments, the one who voted against it was Pat Leahy, because 
he said he didn't like the mining. 

So tl.e rest of the committee voted for it m spite 
of the fact they knew about the mining. That's hearsay. 
You will have to check that yourselves. 

But as far as I am concerned, there was no intent 
by the agency to keep the mining of the harbors from the com- 
mittees. We did everything we possibly could to tell them 
about it and tell them about it in a timely fashion. 

BY MR. LEON: 

In fact, you did tell^them about it. 

In fact, we did tell them about it. 



Both H*us« ftnd Senate? 
Right. 

And the Director was personally involved in doing 



A The Director personally was involved. 

Q When you went in to see Senator Moynihan after the 
press left that day in early April, did he criticize you 
personally — not you personally, but the agency? 

A No. The only word I remember him saying -- now, 
in retrospect, we should have followed up on it -- he said. 



UNCI JlS^EIfD 



213 



umsaEKfer 



39 



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25 



"It's always an element of trust" or "There's always a great 
deal of trust involved", something like that. But he gave 
us no indication that he was resigning or that he was 
particularly ticked off about anything. 

Q It is interesting to note that on April 17, 1984, 
the Washington Post ran an editorial relating to Senator 
Moynihan's announced resigning txom the Intelligence Com- 
mittee in which it discussed his doing that, and I will 
read a portion of that to you here. "When a month ago the 
Central intelligence Agency briefed the Senate Select Com- 
mittee on harboring mining operations in Nicaragua, Senator 
Daniel Patrick Moynihan was snoozing or otherwise occupied, 
and the significance of the briefing sped past him unobserved 
Now, in a characteristic piece of stagecraft, the Senator 
has resigned as Vice Chairman of the Cosanittee to make a 
point, as he puts it. What point? That during briefings on 
important espionage operations, members of the Select Com- 
mittee on Intelligence ought to stay awake? No, this is 
not Senator Moynihan's point exactly. His point is that the 
Committee was not properly briefed. 

"If that is so, shall we examine the facts then? 
Let's. CIA Director William Casey met with the Committee 
last month, on March 8 and 13, to be precise. At both 
meetings transcripts show Mr. Casey mentioned the harbor 
mining operation. 'Yes '_, ^qii!P.lAJiAfitU?enator Moynihan , 'but 



Mmm 



214 



WSMSStr 



40 



Mr. Casey was too brief,' encapsulating the mining operation 
in a single sentence of only 27 words. All right, Mr. 
Casey might have been more expansive, but then Mr. Moynihan 
might have been more inquisitive, as inquisitive as Senator 
Biden, Jr., the Delaware Democrat. 

"Intrigued, Senator Biden asked his staff committee 
to find out what was going on. The staff, brought up to 
speed by the CIA, briefed Senator Biden in detail. Senator 
Biden shared this information with other Senators, though 
not for some reason with Senator Moynihan. 

"We put it to you: Does this suggest the CIA was 
holding back information? Or does it suggest instead that 
Senator Moynihan, entrusted with oversight of the CIA, 
performed this important duty indifferently, missed out on a 
telling disclosure, found himself looking rather foolish, 
and so resigned his semi-exalted office to save face?" 

That is an editorial fro*, the Washington Post about 
the CIA's involvement there. 

A I thought we were very straightforward with them. 
Q I bring that up because this is one of those myths 
that continues to endure. 
A Yes. 

Q And you were one of the people during that very 
time period who was privy to what was going on, and it is 
important that the record reflects what accurately took place 



. iiimi^&ra 



215 



IINCM^»^ 



41 



1 and what the agency's intent and desire and actions were to 

2 ensure that Congress was properly notified. 

3 A Right. 

4 Q Is there anything else on that subject you would 

5 want to add at this point before I move on to something 

6 else? 

7 A No, I think that wraps it up as far as I know. 

8 MR. BARBADORO: Before you go on, I want to put on 

9 the record, I don't intend to ask Mr. McMahon any questions 

10 about thi's area, but I would like, and I am sure you wouldn't 

11 ob]ect since this portion of the questioning tends to be 

12 critical of Senator Moynihan, particularly the reading of 

13 that editorial, that I would like, after the deposition is 

14 transcribed, to make this portion of it available to Senator 

15 Moynihan and give him an opportunity to respond if he so 

16 desires before we make public use of the deposition. 

17 MR. LEON: I have no control over that, Paul. 

18 MR. BARBADORO: You wouldn't object if I did that? 

19 MR. LEON: I would have to refer you to whatever 

20 the rules are of the House Committee, because I am not even 

21 certain what they are. 

22 MR. BARBADORO: Assuming that the rules don't 

23 prohibit it, that is what I intend to do. 

24 MR. LEON: Yes, assuming the rules don't prohibit 

25 It, I would have no problem. I would note for the record 



.!» jBji 



IINCUf^ElED 



216 



DNBHSSflBFT 



that which I read ]ust now is an excerpt from the printed | 
records of our hearings, and it was read into the record 
during the hearings, the public sessions of the questioning 
of Mr. McFarlane. 

MR. BARBADORO: I understand. I am not suggesting 
you made it up. I want to give Senator Moynihan an opportun- 
ity to respond to something that tends to be critical of hir. 
before we disclose the deposition to the public. 

MR. LEON: When would he respond? Not in a deposi- 
tion. 

MR. BARBADORO: I will leave it at that. 
MR. LEON: Like I say, I am prepared to abide by 
whatever the rules are. 'I have no control over that. If 
the rules of the committee permit him to see a deposition c: 
this committee that is classified, code word, whatever, and 
the committee so votes that he is entitled to do so, then 
that is the will of the committee. 
BY MR. LEON: 
Q One last topic I would like to ask you a few 
questions on, Mr. McMahon, before I turn it over to my 
colleague, Ms. Dornan, is the area of^^^^^HB^H ^ 
]ust wanted to follow up on a few things there with regard 
to the trip that you — you took one trip I believe, one 
(.^^p ^HIHI^^^^H during this timeframe, and there 
also a trip by Mr. Clarridae|HH|^^|0 



I wanted to 



217 



(wsu^j^m^' 




ask you a few questions in that area wirh regard to those. 

First of all, with regard to your own testimony, 

you have previously testified, I believe, that while on a 

or you were about to make a tripfl^H 
is suggested to you that perhaps you should 
suggest to ^^^^^^^^^^^^^^^ that certain weapons that they 
had in their possession and control might be sent to, 
provided to the Nicaraguan Opposition. Do you recall that? 
A Yes. 

Q Now, that suggestion was coming to you from who 
at the agency? 

A Well, it came from Headquarters. I think I was 
overseas when the cable came over. I was in' 




I planned to go^^^^^^^^^^^^^^^^H- think I 
was ^^^^^^^Hf/hen I received a cable, I didn't recall this 
until I read it in a cable a few weeks ago, asking me to 
raise the issue of availability of arms with 



As It turned out, he wasn't available for a meeting 
and so nothing transpired. But when I came home m, or looke 
into that a little further, I ^found-flUt that there was some 



nWWitlCi^ 



218 



generation of interest in the agency to havel 

larms^^^^^^^^^H to the 
contras, and I thought that was a non-starter -- 

Q What do you mean by that? 

A I ]ust didn't think it was a good idea. 

Q Why? 

A Becaus 





I talked to the Director about it, and he agreed. So he 
backed off of the thought of doing that. 




Dewey Clarridge, I think, had planned a trip 
to go over to talk about the Nicaraguan situation, and I 
told him to stay away from talking 





Nothing ever came of that, I don't think the 
ere really keen on getting involved^H 



Q Just to be clear about this, with regard to Mr. 

Clarridge, when he made his trip, you had directed him spe- 
cifically to avoid requesting that those arms be sent or 



llMCLASSIHFn 



219 



UHSSSfffflP 



that any money be solicited from them for the benefit of the 
contras? 

A Yes. Money was never an issue. We never even 
talked about it. 

Q So during your tenure as Deputy Director, you were 
unaware of any solicitations of money froi 
support the contras as well as any requests by the agency 
or agency personnel to^^^^^^^^^^^HIH to give 
and weapons to the contras? 

A bight. 

Q And if either of those happened, it was without 
your knowledge and without your blessing. 

A Right. 

Q Let me finish, and then I will turn it over to 
Ms. Dornan, with one last question, not a specific factual 
question, but a more general type of question here. I 
don't know if you have read^^^^^^^| unclassified testi- 
mony yet. 

A No, I didn't. I stopped by the agency last night 
to see if anyone said anything untoward about me, but I 
didn't find anything. 

Q Let me — 

A I heard that he kind of came unglued a bit. 

Q Let me point out one small aspect of something he 
said and see if -Viflii.want to comment on it, or whatever. 



SSiflfn 



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UNBEiWeET 



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I am kind of putting it in shorthand terms, but I will 
expand on it if it is not clear to you what he was saying. 
At different points^^^^^^Htestif ied about being in a 
situation he characterized as a nutcracker situation where 
he was caught in a no-win situation; in essence, the agency 
itself also, not just himself personally, caught between an 
administration and Congress that had diametrically opposed 
intentions with regard to Central America, and the agency was 
kind of in the middle, so to speak, and he was sort of in the 
middle in trying to assist the contras under the restrictions 
problems that the Boland Amendment provided with regard to 
supporting and assisting the contras, it made for great 
friction in difficult situations. Do you have any comment 
about that? 

A He may feel that way, but that's the nature of the 
beast; we are called upon by the administration to perform a 
covert action, we get a finding, we carry it out, the 
Congress doesn't like it, they change it or legislate changes 
and we are caught bound by law, but an administration that 
still wants to move forward but, you know, that happens all 
the time. 

I think that's life in CIA. And it's like being a 
fireman and saying you don't like to go to fires. We get 
caught in those things all the time. So I could see why he 
might feel, beina a very conscientious officer, here he is 



Lng a very conscientious 

llNnii<;f;iPirn 



221 



UNttHSSilEltET 



47 



trying to run a program and people start yanking his chain a 
bit and say "You can't do this and can't do that". 

We then build up, you know, our lobbying efforts 
and get Congress to change their mind a little bit or all 
the way, but that is life. 

Q Did you find him to be an officer who wa^ trying 
to abide by the law? 

A You bet your life. I have the highest confidence 



Q You never had any evidence to indicate he was 
trying to skirt the law in any way? 

A No. I hcd a lot of evidence that he was a well- 
regarded professional officer, and I doubt if^^^Hwould do 
anything to violate the law. 

Q One last thing that has 3ust occurred to me I 
would like to ask you about is that November, 1985 finding 
that you sent over, the agency sent over to the new NSC 
Adviser, Admiral Poindexter. It just occurred to me I wanted 
to ask you something about that. As I recall your testimony 
the last time, you had sent him over the draft finding of 
Mr. Sporkin, the General Counsel of the CIA's Office had 
put together, and I remember you testifying you were 
constantly keeping in touch with him to find out if it had 
been signed by the President, and finally in early December, 
he notified you. it .^44. been signed by the President. Is that 



illifflBfilFiFi)' 



222 



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48 



accurate so far? 

A Almost. I think McFarlane was still the National 
Security Adviser up to December 4. 

Q Right. 

A So when the finding went down, McFarlane was still 
there. 

Q Okay. 

A But I believe the Director took it down to Poin- 
dexter, that is my understanding of how it got down there. 

Q • Prior to December 4? 

A It was like the 26th, 27th, something like that. 

Q Right. 

A And both the Director and I followed up trying to 
get a status report on the finding, because we hadn't heard, 
didn't get a copy back. And finally on December 5, I recall 
in this 7 December memo where I said we were advised, and 
unfortunately I wasn't clever enough to say how we were 
advised. It could have been the Director told me, it could 
have been Poindexter told me at 7:30 on the 5th and gave 
me a telephone call, or it could have come up in a meeting 
that I had with a number of analysts and operations people on 
Iran. 

But how and who informed us, I just don't know 
except that we were informed. I was still a little uneasy 
because we didn't get a copy back. And all during December, 



IIHICUS^EIED 



UMHi^Bttrr 



49 



1 I would talk to Claire George, and I would say, when he was 

2 going down to have a meeting with Poindexter on any given 

3 subject, "Find out where the finding is". 

4 I also asked -- 

5 Q That lo what I wanted to ask you about. How about 

6 getting a cop> of that finding? 

7 A Right. 

8 Q You never got a copy. 

9 A We never got a copy. 

10 Q ''Of the signed finding. 

11 A Of the signed finding, and when I came back here 

12 for I think the first session I had with the Senate Select 

13 Committee, after the Iran situation became public, they had 

14 a hearing, and I came back for that, I stopped by our 

15 General Counsel's office in Headquarters, and they informed 

16 nie then that that finding was never signed. Although Charlie 

17 Allen told me that North told him that the only copy, the 

18 only copy of the signed finding was in his safe. 

19 Q His, being North? 

20 A He being North. I think Bernie McCufka, a lawyer, 

21 overheard that conversation when North told Allen that. I 

22 was of the opinion from the General Counsel that it was never 

23 signed afterwards, and I was quite surprised to hear 

24 Poindexter say it was signed and that he shredded it. 

25 Q So when you were being told it hadn't been signed 



UNCLASSIEIED 



224 



UNttftSmtt^T 



50 



1 you were being told that by people who wouldn't necessarily 

2 have known whether that was true or not? 

3 A That is right. 

4 Q All they knew was they never received a copy of 

5 the finding after it had been signed. 

6 A Correct. 

7 Q That was unusual, as I recall you testifying that 

8 had never in your experience happened before? 

9 A I don't recall another instance. 

10 Q Throughout December of 1985, you were constantly 

11 attempting to get the NSC to give you a xeroxed copy of the 

12 finding that was signed. 

13 A Right. Or at least get confirmation that it was 

14 signed. 

15 Q Did It ever reach the point you talked to Poindexte 

16 again and said, "How about a xeroxed copy of that finding?" 

17 A No. In retrospect, I have asked why didn't I, and 

18 the only conclusion I can come to is we went into the 

19 Christmas Holiday season, and everything stood down for a 

20 few weeks, then the next thing you know we are into January. 

21 Q Do you recall ever getting a response to these 

22 inquiries about getting a xeroxed copy of the finding 

23 signed, do you recall ever getting a response along the lines 

24 of, well, we are not happy with the condition it is in now, 

25 we are going to redraft if 



imASSlQEIi 



225 



IMSQKSIREV^T 



51 



A No. The only inference that -- I can't recall the 
specifics, but the only feeling I have is that the NSC was 
so up tight over the security of the hostage situation that 
they were holding this very close. 

Q And, therefore, you have no recollection of ever 
being informed that there was a desire to have that November 
25 finding that you sent down to be signed redrafted to 
different language that would more fully encapsulate the 
policies that underlie the stance in that shipment from Israel 
to Iran? 

A Nothing whatsoever. In fact, I was -- used is the 
wrong word -- maybe perplexed by Admiral Poindexter's 
testimony when he kept saying he didn't like the finding, 
and he was asked, "Why did you have the President sign it?" 
He said, "Because McFarlane kept pestering me." It wasn't 
my pestering. The finding reflected a historical event, the 
event of that whole situation turned out to be arms for 
hostages. It wasn't couched in any other way. 

What we were doing, we were writing history after 
the fact. 

Now, at the time I had never focused on the arms 
angle of it, even though there were indications of arms, 
the Israelis' dealings with arms before that, going back 
into August-September. But my focus on that finding and the 
need for it was, I felt, the agency was m violation of the 
law, they did so at the request of the NSC, and I wanted 



re were doing, we were wr 

UNCLASSIFIED 



82-720 0-88-9 



226 



IfflGH^RI^T 



52 



1 the President to fix it. 

2 Q That was your perspective. 

3 A I didn't care whether it was baby carriages or 

4 what was in the airplane, the fact is they used our airplane, 

5 and we didn't have a finding to use it. If they had done it 

6 on their own without our knowledge, no sweat. But once they 

7 got Headquarters involved and then started using our people 

8 overseas, then we needed a finding. 

9 Q And Sporkin as General Counsel to the Agency had 

10 advised y,ou, the Deputy Director, that legally you needed 

11 to have some kind of finding. 

12 A Right. He said he didn't think it was necessarily 

13 so for the proprietary, but for the use of our people and 

14 influencing foreigners overseas, and that was a new angle to 

15 me. But I didn't care what the reason was as long as he got 

16 a finding. And I told him to make it retroactive. 

17 He came back to me and said, "Yes, we need a find- 

18 ing, but not necessarily for the use of the proprietary." 

19 And I said, "Okay, make it retroactive." He said, "I am 

20 going down and talk to the White House Counsel and to 

21 Justice." I said, "Great". He went away and came back with 

22 two paragraphs on a piece of paper which constituted the 

23 basic finding. It didn't have all the other boiler plate 

24 that goes on a finding. 

25 Q That was the one you ultimately sent down? 



IttUSSIHyU 



227 



DNflS^flf^T 



53 



1 A That was the basis of the one I had sent down. 

2 I never saw the finished product going down, but I did note 

3 It had that one paragraph, or a few lines, that forgave all 

4 original sin in CIA. 

5 Q So the bottom line to you was you needed a finding, 

6 and you sent it down to get it signed. 

7 A Right. 

8 Q And you were told early in December by either 

9 Casey or Poindexter it had been signed? 

10 A .Right. And it was confirmed to me later by Charlie 

11 Allen, later in December. 

12 M'^. LEON: Off the record a second. 

13 (Discussion off the record.) 

14 (Recess. ) 

15 BY MS. DORNAN: 

16 Q Let's start up again where we left off, which was 

17 on the retroactive findings, the November, 1985 shipment. 

18 There has been a lot of focus on this particular time period, 

19 sometimes I wonder why, but I think largely because an 

20 illegality may have been involved, perhaps technical, perhaps 

21 unintentional, and, secondly, because that fact has led to 

22 suspicion there was a conspiracy to cover it up. 

23 But what strikes me in all this testimony is every- 

24 body has a different idea of what the illegality may have 

25 been between thgt _tj.!ag. a^d^lui iVi& A? well. It appears to 



MMe 



228 



"n&mifF 



54 



me from your prior deposition and your comments today that 
you thought it may have been illegal simply because of use 
of the aircraft. You said Mr. Sporkin thought it was illegal 
because of use of CIA personnel. Mr. Clarridge, in his 
testimony, said he did not distinguish between the cargo, 
oil drilling or arms, because he thought the issue was the 
embargo, if there was an issue, and oil drilling equipment 
was embargoed as well, so there wa» really no distinction 
in legal terms. Mr. Juchniewicz an d^^^^^^^^^H thought there 
was no illegality involved at all, so they approved the 
flight. 

My first question to you is: Was there any thought 
in your mind regarding the Arms Export Control Act? 

A No. In fact, I can't say when I knew arms or Hawks 
were involved. Juchniewicz told me it was oil drilling 
equipment. In looking back, that makes a hell of a lot of 
sense, because the Iraqis were pounding Kharg Island, the 
Iranians could only prosecute the war through the sale of 
oil. Therefore, oil drilling equipment was as much of a 
war machine as weapons. 

It just didn't faze me. Even when Sporkin gave 
me that finding, that draft finding, where he mentioned 
either the words "munition" or "weapons", or whatever it was, 
"military equipment", that didn't register with me, I don't 
know why, but my focus was getting the finding. The fact 



IIMCI 



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55 



9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 



of weapons or the weapons being more of a violation than the 
use of a proprietary just didn't come across my scope. I 
felt we had done something wrong, we had to fix it. 

Q Another point m focus in the hearings has been 
when did CIA find out that arms were involved? Now, you 
said M- . Juchniewicz told you that it was oil drilling equip- 
ment, and this was November 25. Is that correct? 

A Right. 

Q You also said in your prior deposition that you 
asked Clair^ George to collect together all the cable traffic 
involved in the operation. 

A Right. 

Q Did he show that traffic to you? 

A Yes, he did. He came back with a packet of papers, 
and he said, "I don't think there is anything else in here 
you have to worry about", something to that effect. If I 
am not mistaken, he may have left them with me, but I never 
went through and read all the things. I just flicked 
through, and it all centered around getting landing rights an^ 
things like that. 

But I don't think there was any cable that men- 
tioned military weapons or arms. 

Q When he brought those in, he never said anything 
about arms being involved in the shipment? 



A No. 



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2 

3 

4 

5 

6 

7 

8 

9 

10 

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14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 



Q Because this has become an issue because there is a 
missing cable. Have you heard about that? 

A I have heard about that. In fact, missing two 
cables from the same source. Just one cable? Okay. 

Q One of them was a cable from 




Q That IS right. Which related a conversation with 
Secord, who said the shipment actually involved Hawk spares. 
So, to youir knowledge, until very recently, such a cable' had 
not existed; therefore, i^ it was lost, presumably it was 
lost before Clair "George brought those cables in to you? 

A Yes. I can't testify th<re that cable wasn't there 
or not, because I didn't go through it. 

Q Apparently from what Clair/ George told you, he 
had flipped through this, aivd h*. hadn't seen such a cable, 
IS that correct? 

A That is correct. 

Q In your experience in CIA, how would such a cable 
get lost? 

A I don't think it would get lost in CIA if it were 
sent. But the trouble with that cable and the trouble with 
that whole channel is it has limited distribution to the 
Chief of the Division and the DDO. I just don't see some- 
thing like that getting lost. .Hjgjflfi ought to have it if 



[\m 



231 






57 



It is not in the Division files. But it doesn't get the 
normal dissemination in CIA. 

Q Well, the people in the DDO's office have said 
they never saw it. Dewey Clarridge has said that he does not 
recall it , and he has said that he collected all the cables, 
saved all the cables, and that he never destroyed any of 
them. Of course, people suspect he destroyed it, but the 
problem is here there was another copy he would have had to 
destroy and, secondly, apparently he would have had to 
destroy i,* immediately and realize the legal implications. 

A Yes. And that is what I don't think makes any 
sense. The focus in CIA for me, because I was the noisest, 
centered around the use of a proprietary, and I don't think 
anyone in CIA was going to discriminate what was in that box; 
whether it was an arm, a baby carriage or oil drilling equip- 
ment, that wasn't the issue at the time. The issue was if 
we did something wrong, we would have to fix it. I doubt 
if there is anyone at CIA other than the lawyers who would 
talk about an Arms Control Act. 

Q You never had any discussion with Mr. Clarridge 
in the one meeting you had with him afterwards about the 
content of the shipment? 

A No. And you can't say it was a meeting. When I 
came back, after that morning, that Monday morning, 
Juchniewicz told me about the use of the proprietary, I said 



lUilCUSSIED 



232 



WiftASStPKBT 



1 a few words to him, and then, if I remember right, I buzzed 

2 him on my direct line and told him to get Sporkin briefed 

3 on It. 
MR. CAROM: When you say "him", Juchniewicz? 
THE WITNESS: Right. I went back down to the 

DDO around 9:00 o'clock. When I went back to the DDO -t 
9:00 o'clock, Clair/ George wa« in his office, had the door 
shut, and there was a bi^ch of people in there. -^^ opened 
9 the door, and he said, "I am just trying to find out what 

10 went on."' I said, "You make sure yoB get^ome guys over to 

11 brief Sporkin on what happened", aiid I walked out. 

12 And then I think it was iater I told him, "Hey, 

13 you pull together all the cables and «ee Wha^ the hell is 

14 involved here. 

15 BY MS. DORNANi 

16 Q Just on* o^er question on that particular issue. 

17 You mentioned briefly today tS»€ you thought tFrat this was 

18 simply an arms-f or-hostage deal, it wasn't a strategic 

19 thing in your mind, at least at that time. In your prior 

20 deposition you also stated that the hostage issue was 

21 through which you interpreted this, because you had settled 

22 that early in your mind. Whatever the fact may have been, 

23 that is the way you interpreted it. Up to this point, had 

24 you had any full briefings on the extent of this program; 

25 



UNCUSSIFIED 



233 



UNOA^BfltT 



Q So it was all kind of by word of mouth, I gather? 

A If I had anything, it was snippets of comments. 
But, again, you have to go back to why I was pre-conditioned 
for arms for hostages, and it came from our inability to 
get the hostages out of Lebanon, and cur failure to even 
come up with good intelligence, and ^he NSC began to move 



into a vacuum. 




So the NSC was sitting^there, I am sure, with 
a PresiderVt who was genuinely concerned over the hostages and 
the NSC couldn't get anyone to help them out, so they began 
to improvise and do things on thair own. 

Q But you didn't have any real firm evidence this 
was solely a hostage — 

A No. It was just because our whole thrust was 
get the hostages out. No one ever came to us and said, "Hey, 
we ought to look for ways to open relationships with the 
Iranians." That was never a dialogue at all. 

Q When Sporkin then wrote this retroactive finding 
and made it solely a hostage thing, did he have access to 
people who were the real policy makers at that time, who 
had a full vision of it? Did you give him a direction on 
how to couch that? 

A No. I simply called him up and said that I thought 
^e had screwed up, and we needed a fyiding. Then he got 



llfJiSP 



234 



drg-32 



)otson/drg 

end 
IcGmn fols, 



UNgfeBSMaET 



60 



briefed. Apparently, as I understand now, the two guys who 
went over told him there were arms involved, but he never 
came back to me and said "There are arms involved", although 
the finding does cover that contingency. 



iltl£li<L<UEl£Il 



235 



McGinn/jm 
10:30 



inVOtASSOHtT 



Q But he never talked to anybody at the White House 
first, or anybody who was actually making the policy? 

A I don't know. Not that I know of. 

Q Let's go to a different area then. I would like 
to talk about Israel's role. 

A Who? 

Q Israel. 




236 



WEhA^df^' 




Q To your knowledge, did Casey have any personal 
i n vo 1 V erne n t^^^^^^^^^^^^^^l 

A No .more than anyone else. Casey was a sought 
after individual by everybody, heads of state and intelligence 
organizations alike, but I don't think he gave more deference 
to the Israeli question than anyone else. Usually when he 
would take a trip he would make sure he touched base with all 
of the organizations of the heads of the state he was visiting. 

Q In your prior deposition it indicated to me you 
indicated considerable suspicion about the Israelis in this 
whole operation and about their intentions. Let me cite 
a few examples. 




You felt that this Iran initiative 
was an Israeli initiative actually, and that Israel actually 
wanted a sale of arms so they could be used against Iraq. 
And finally, Israel was using the ruse of a strategic 
relationship to lure the Americans into this arms sale and. 



IIN(!US^FIFn 



237 



inmssdt&T 



63 



in fact, an arms hostage deal. 

Could you expand on this? What do you think Israel's 
motives were? 

A Principally to have one of their lifetime enemies 




So I thought it served the Israeli national policy 
to have the Iranians put the squeeze on the Iraqis, and if 
you could bring the United States into it, that makes it all 
the better, particularly when most of the arms that the Israelis 
have come from the United State 



IINCUSSIFIFn 



238 



UNeiASSiiikT 



Now, they do generate and produce weapons of their 
own, but what better way to get the liberty and the license 
to ship U.S. arms into Iran than to get the U.S. involved in 
an arms deal with the Iranians. 

I have no fact to that, but what I do have is 
glimpses over time that suggest that was their mov« 




Q The current Iranian regime, however, is very anti- 
Israel, I would say, as much as Iraq, probably? 

A Maybe — you don't know that. You are aware of 
theatrics and statements, but whether or not deep down that is 
the case, I don't know. 




uHtmsra 



UNCLASSIFIED 



240 



UNCiMIt^ 




Q You said previously you think it was Israel that 
sold us on the idea there were, in fact, moderates within 
Iran? 

A More than that, I think it is a fact. When Bud 
McFarlane began his briefing to the President on 7 December, 
1985, for the Iranian initiative, he began with the words, 
"David Kimche says." So, it started that way. So I didn't 
have to interpret that. 



ONa/^IFlf 



241 



HNililSSIflieT 




Q There has also been a lot of wonder about this view 
that was given to the President by Admiral Poindexter that 
Iran was actually the one that was gradually loosing the Iran- 
Iraq war, even though, as you pointed out previously, all the 
intelligence estimates said the opposite from the United 
States. 

Do you think the Israelis were the ones that sold 
Admiral Poindexter or others on that? 

A I don't know, and I don't know where he got that 
idea. 



242 



IK 



Mmvm 



243 



jm 9 



UMmtRH^ 




Q Let's go to another area now. There has been a lot 
of wonderment over several things . One, over use of why 
Ghorbanifar was used when he was considered to be a liar 
by the agency, and secondly, why the agency put up with, so 
to speak, letting North take over this operation rather than 
insisting they should be doing it themselves. 

Now in reading your prior deposition, it appears 
to me that the agency was — at least some people within the 
agency, including yourself, .vere more than happy to stay out 
of this, in fact, didn't want to be operationally involved. 

We have a lot of evidence that^^^^^^^^^^and 
Clair^ George, people from the DDO, didn't want to have 
anything to do with Ghorbanifar, didn't want to have anything 
to do with an operation involving Ghorbanifar. 

You, yourself, said in your prior deposition, 
for instance, that you didn't want any DDO people involved 
and that was one of the reasons why Charlie Allen was put 
in so that the agency wouldn't be in an operational role; 
is that correct? 

A Right. 

Q So is it possible then that if Casey supported this 



operation he, in f 



llliiniESlFlfft 



utside the agency 



244 



jm 10 



UHftBSWffT 



that in effect, the agency didn't wart to do it. The people 
below him in the agency didn't want to do it, and he didn't 
feel they would prosecute it enthusiastically if he ordered 
them to do it, so he felt he had to let the NSC take the 
operation? 

A Yeah. I think you have to start 
with the fact that this was an NSC operation from the very 
beginning. 

Q But you were happy to leave it that way? 

A Wd were happy to leave it that way, and then when 
North ran into trouble and needed some help, then he turned to 
the agency for that area. 

You have got to remember he had Secord all lined up 
on his own, and I think if Secord could have gone through 
with it, you know, we would have never been involved. And 
as far as I am concerned, that would have been great. 

Where the trouble started is when they started 
using us, and I was somewhat depressed to think that our 
national security mechanism didn't appreciate the limitations 
of CIA's involvement. It is not a question of willingness 
to be involved; it is a question of legality to be involved. 

I was dumbstruck that the National Security Adviser 
didn't realize that when you call upon CIA to conduct something, 
that you need a finding to do it. And most people in CIA will, 
you" know, salute and go do something because that is the 

llilPLAQ.&lCI£D 



245 



llIWtA$afl9:T 



nature of the beast, especially when it comes from the NSC. 

But we were very — we were reluctant dragons in this, and peopl* 

say that you know Casey was very much in the forefront. 

I think the way I assess it, Casey didn't disagree 
with anything I said or feit even about assessment about 
Iran until the President said, I want to do this, and then 
Casey saluted and it was a legal act then because we had 
a signed finding. 

Now, if Casey got involved in saying it was a 
great idea, he was only saying it from a support from the 
President, not from an intelligence standpoint. And maybe 
with Secretary Shultz concerned about intelligence, it was not 
intelligence that was his real concern, because if it is, he 
is absolutely wrong. 

What he may be concerned about is what Casey may 
have been saying personally; saying, yeah, boss, this 
is a great idea. But it wasn't the institution of CIA or the 
intelligence community that was saying it was a good idea. 

Q But, in effect, after December, let's say in December 
and January, when the possibility of a new finding and 
action being continued and U.S. taking over rather than using 
Israel as an intermediary, in effect, they had to rely on NSC 
and the Secord operation to do it because the agency was 
really unwilling; isn't that correct? 

A No. We are notAinvill^\g^l^^have a legal 



TWffiwrr'- 



246 



UNRnssm^ 



72 



instrument that says it is okay. 

Didn't^^^^^^^^|and Mr. George go to Casey and 
say DDO is absolutely unwilling to become involved in any 
operation dealing with Ghorbanifar? 

A That's absolutely right. That's Ghorbanifar. 
In fact, we advised both McMillen and Poindexter that Ghorbanifa 
was a nogoodnik. But our role was basically one of support. 
If they wanted something, you know, you call, we go. 

Q Going to a somewhat different aspect of that problem, 
let me look at it a little more broadly. Sometimes in yovir 
career you have been looked upon as kind of a protector of the 
agency. You have been there for what, 36 years? 
A Thirty four and a half. 
Q Thirty four, you were? 

You went up through the ranks, and you had dedication 
to it as an institution, protecting it. You weathered the 
Church and Pike years, and all the criticism. You didn't 
want to have to go through that again. Do you feel that 
Casey felt the same way about the agency, or do you feel he 
was a little more reckless with it, if you want to put it that 

way? 

A I would say Casey by nature is forward leaning, but 
I don't think he's dumb enough to do anything that's against 
the law and I don't think he would ask the agency to do anything 
that was against the law 



iiNr.iAf;<;iFiFn 



247 



jm 13 



DNeEAS^REF 



Do you think Casey so'-;ght 



A It's hard to say. Being Bill Ca^ey . - ■ 
Tj kr.~w, you don't change that tiger's stripes. 5.- I ; 
•.o evidence of it. In fact, he used to proclai- quite 
proudly that he took a view of political chastity when he. 
.as sworn m as the DCI 




-.ave to rea. 



So I just don't see evidence. And yc. 
work with the analysts to realize that you don'' 
sheep around at all. They are independent cats 
great pride in what they produce. 

There are very few yes men out at CIA 
are, I have yet to meet then. 

Q What I'm getting at in a round about way is kind o: 



there 



248 



mWH^REV^T 



74 



an alternative interpretation. The interpretation I gave you 
previously was that perhaps Mr. Casey felt he couldn't use the 
agency in the Iran thing. 

What I am getting at now is perhaps a motivation of 
his was that he wanted to keep the agency clean also, not only 
in the Iran thing, but let's consider the contra thing also. 
Let's assume, if he was involved personally in advocating those 
actions, as Mr. North has said, perhaps he wanted to protect 
CIA as an institution, protect its reputation, therefore 
he was more t)han happy to go with NSC as an executor in the 
Iran operation and perhaps he also was more than happy to 
have Ollie North spearhead the effort to keep the contras 
alive and keep the agency out of it. 

Now, maybe you would want to comment on that in 
general, but I would also like to focus you on one or two 
allegations or suspicions that have been raised in this 
connection. 

One is that Casey actually kept the agency out of 
the contra business officially during the Boland Amendment, but 
that he may have gone and personally tapped people such ^^^^H 

whom he knew would be 
supportive of the contras, and perhaps even gave them personal 
directions that they could do what they wanted despite the 
official agency policy? 

A I don't subscribe to that. I don't subscribe to it 



UNflASSIfP 



249 



WH^HSfflffl 



75 



as far a s^^^^^^^^Hi s concerned, and^^^^^^^^^^B X think, 
had directions in writing which proscribed him from being 
involved. 

Do you think Casey would have done that, would have 
picked specific people? 

A No. I know that's a very popular belief that 
you know he kind of set up his own network, and it's obvious 
that he worked easier with some than others, but I don't think 
he would use the agency at all. I think he knew that the agency 
wouldn't do stuff like that. 

He wouldn't ask the agency so do it, nor would the 
agency do it if he did. So I just don't buy that. 
Q Okay, good. 

I wanted to cover that because you knew him 
nd you were involved there. 

Then let's skip to another area now. The issue 
of leaks has been a prominent one in these hearings, and you 
have already raised them at least tangentially 
a few times yourself in your prior deposition and also 
again today. 

You kind of indicated that the fact that this had 
become not just such a big program, but that there were so 
many leaks on the Central American situation and the contras 
that you felt the CIA could not be running such a program: 



it had become so open. 



UMPLlMiP 



250 



«WttMffffFT 



Secondly, on the Nicaraguan mining issue we discussed 
today, you already indicated that although the Intelligence 
Oversight Committees were briefed, and they probably had 
the jjurisdiction over CIA covert actions, that before you 
knew it, both the Foreign Affairs Committee and the 
Appropriations committee on the Senate Side had been told, 
apparently by members of the Intelligence Committee. 

Finally, also in your prior deposition you indicated 
that the signed retroactive finding was not circulated, but 
you did not find that surprising, although it was unusual) 
you did not question it because you felt it might have leaked 
otherwise. So you, yourself , have indicated that there 
are problems with leaks. It appears to have been, from Mr. 
Poindexter's testimony, a major factor in the White House's 
withholding of information from the Executive and Legislative 
Branches on this issue. 

Do you think that a permissive culture about leaks 
has developed which undermines the policy process and consulta- 
tion with Congress? 

A If not in fact, at least perceived, and the end 
result is the same. I never felt uneasy about advising Congress 
of any intelligence activity, no more bo than I would the 
Executive. While there have been some leaks out of Congress, 
my experience has been that Congress has been very protective 
of the information that we gave them I would say that if you 



n that we qave tnem. i w 



251 



jm 17 



m^ssm' 



really look at the litn^y of leaks that we are concerned about, 
most of them come not from Congress. I can see the 
Administration being concerned about the lives of the hostages 
and, therefore, didn't want to have the 5 December finding 
shipped around and also didn't want us to tell Congress, and 
I accepted that. 

What I don't accept is the same Administration 
willing to deal on that matter with a guy like Ghorbanifar 
and not tell our elected representatives. 

Q Yot, however, said previously that — in your 
first deposition -- that you were not concerned -- you did 
leave in March '86, and you were more concerned with the 
departure preparations at that time. But although several 
months had elapsed since the January finding, you were not 
concerned about not having yet told Congress. Why was 
that? 

A Because the House had just gone out and I was quite 
concerned that it would be a drawn out affair, that the Iranians 
would piecemeal it so they could get as much out of exploiting 
the U.S. arms as possible and that we had to give the same 
protection to the last of the hostages that we gave to 
the first. 

Q Didn't you feel there would be some political price 
to pay for having withheld it so long? 

A Not if we got them out. I think all of Congress 



iiftmssiflRiL. 



252 



(INOAMiO^T 



would have been quite happy. 

Q So you think they vrould have been heros instead? 

A Yes. 

You said whether or not it is true that Congress 
leaks a lot, there is a perception that it does. How do 
you think we can reestablish the trust between Congress 
and the Executive? 

A Twofold, and it has to work from both sides, and 
both sides have not worked it very well. I think that Congress 
has to discipline itself from not intruding upon the President! 
prerogatives, that Congress should not become the Secretary 
of State, which it often likes to do by sending Senators, 
Congressmen, Committees overseas to enter into agreements 
or assurances with foreign governments. I think that's 
a matter that the Secretary of State ought to worry about. 
By the same token. Congress should not be blindsighted 
by policy, and therefore, should be brought into the policy 
deliberative process early on so that Congress can get a 
sense of where the Administration is going with a given 
country on a given issue so that there are no surprises and that 
there's a full communication. And basically, I think it's 
a question of the White House personally and the Secretary 
of State sitting down and talking to Members of Congress, 
and Congress appreciating the fact that the information 
has to be maintained_in 4 confidential jnanner 



ASSIEP 



253 



jm 19 

1 
2 
3 
4 
5 
6 
7 



10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

end jm 20 

drg fls 21 
take 4 

22 



uimsfffo^ 



25 



You can't conduct all foreign policy on the front 
pages of the papers. Foreign governinents don't like that. i 
one likes it. 

Q That leads into another issue which is the legislation 
presently being considered to tighten the reporting requirements 
and oversight over the agencies, intelligence agencies. 
These have included provisions for notification within 
at maximum 48 hours of a finding, notification of private 
individuals being involved, and so on. Do you have any 
comments on our wisdom of that? 

A Yes, I sure do. I believe that oversight committees 
ought to be advised immediately upon the signing o: a finding, 
and if there is a concern about certain sensitivity of 
the finding, given the timeliness, to maybe delay that no 
more than 48 hours, but after 48 hours, advise the committees 
if it's so sensitive there is an existing mechanism where we 
can advise the chairman and vice chairman of both committees, 
and the Speaker of the House, and the Leader of the Senate. 
And that should suffice. 



UNCLASSIFIED 



254 



Dotson/drg 
Take #4 
11 :00 a.m. 



Ufffiffl^RlffT 



1 BY MS. DORNAN: 

2 Q There have been only two incidents in which Con- 

3 gress was notified, isn't that correct? 
* A Yes. 

5 Q Both involved the hostages? 

6 A Right. 

7 Any administration has to remember that CIA has 

8 to live with its oversight committees, and the way you live 

9 best is to develop an element of trust with one another. 

10 The only way you can do that is making sure the committees 

11 aren't sand-bagged and that you go down and tell them what is 

12 going on so they can apprecia-e what is happening. It is 

13 very difficult, I think, we're asking too much of our 

14 Representatives and Senators if we come down and ask them 

15 for money to support certain programs and then the next day 

16 don't tell them something because we don't trust them. It 

17 is just not in the cards. 

18 I think if we are going to have proper oversight 

19 and if we are going to have a good cooperative effort with 

20 Congress, we ought to keep them advised. And if there is a 

21 problem of leaks, then let Congress discipline itself. 

22 Q Following up on that a bit, on the private 

23 individual's part, which you did not address, do you think 

24 it is -- in your prior deposition, you indicated that the use 

25 of private individuals, such as Secord, I believe was the 



IIKlPLAS£l£ifD 



255 



wffia^flWT 



context in which this was raised, did not bother you and that 

2 It was a good way to disguise this was a government-to- 

3 government operation, so philosophically it didn't really 
^ bother you, although you had problems with Ghorbanifar, as 

5 you Stated today. 

6 In his own deposition, Mr. Gates attacked the 

7 practice, and he said it was totally unnecessary, that CIA 

8 could have taken care of the operations such as these that 

9 involve a distrusted party and involved transfer of money. 

10 He said there are established procedures, and you didn't 

11 need a middle man to raise bridge money for this sort of 

12 thing. In general, he attacked the whole thing. 

13 Could you comment on that? 

14 A He is absolutely right. That is, if the CIA had 

15 the program to start with. But when we got into it with the 

16 signed finding transfers already an existing mechanism, 

17 albeit shaky, shady and everything else, it was there. And 

18 I saw no need to try and take over that program and run that. 

19 We could have easily have done that. But it was there, they 

20 had the contacts, they had the mechanism. All they needed 

21 was our help, and we gave it. 

22 Q Do you have a problem with reporting the use of 

23 private individuals to Congress? 

24 A Only if they are in an agent sense of a clandestine 

25 agent. But if we were going to use a New York businessman. 



llNriASSlEP 



256 



»lffiHSSffl{»r 




1 or something like that, I would see no problem in telling 

2 the Congress that we are using a New York businessman. It 

3 IS a strange way to do it, but it can be done. 
4 
5 
6 

^^^^^^^ 

MR. BARBADORO: In addition, you can report the 
9 program to Congress without identifying the individual in- 

10 volved. 

11 THE WITNESS: Sure, 

12 BY MS. DORNAN: 

13 Q Let's get to another one of Mr. Shultz's concerns, 

14 in addition to charging the CIA with having slanted intelli- 

15 gence, he also attacked the NSC staff itself. He said it 

16 was too big, it should be cut back, and he basically said 

17 all that should be his business anyway, and the NSC was far 
too strong. 

19 It is striking, if you go back in the press 

20 articles, until this issue broke, the NSC consistently was 

21 portrayed as weak, the NSC staff was. And it appears that 

22 this was perhaps an exception to that rule. Would you agree 
with that, or do you think the NSC was a strong staff under 
this administration? Do you think -- what do you think the 



25 proper role of the NSC staff is? 

IIMCIiSSJElfn 



257 



mmm 



1 A It IS not operational. I don't think the NSC 

2 should be involved in any operation, that they should use 

3 the mechanisms that exist in government to perform the 

4 functions that are needed. But the NSC is a reflection of 

5 the President's personality and how he wants to go about 
conducting his business and should be built in the image ^".d 
likeness of the President and how he wants to conduct his 
national security matters. If he wants a staff to package 

9 that for him, then, fine. I cannot criticize the size of 

10 the NSC gtaff when one looks at the tremendous interest that 

11 the U.S. has worldwide on any given issue and the responsi- 

12 bility that the President has to coordinate all the organs of 

13 government on those issues. 

14 And NSC staff was a perfect mechanism for causing 

15 that coordination and permitting an assessment of differing 

16 views to be registered with the President. If it's left to 

17 any one department, whether it is Commerce or State or Defens< 

18 to package it for the President, then he may not be getting 

19 the benefit of his full Cabinet. 
So I think the NSC is a necessary organ, and it 

should be designed the way the President likes to do business 
If he wants to pick a Cabinet and let them run everything, 
then he can do it that way. I wouldn't comment -- they shoul i 
not be involved in operations, they should be a coordinatm 
function and a facility function of getting policies 



UNCLASSlEia. 



258 



misms 



84 



1 promulgated throughout the government. 

2 Q In conclusion, I would ]ust like to go back to the 

3 question of Senate Intelligence, I know Dick has already 

4 discussed this with you to a great extent, I want to go over 

5 a few more general points and add a few specific ones, as 

6 well. 

7 In general, on the issue of commenting upon 
intelligence draft, estimate drafts that come to him, what 

9 is the proper role of the DCI? In the papers sometimes you 

10 think they come at it from the point of view the DCI should 

11 accept whatever is given to him and should never ask for any 

12 re-look at it or anything. Oth«rwise he is slanting 

13 intelligence. What is the proper role? 

14 A The DCI is the principal intelligence adviser to 

15 the President, and the national intelligence estimates are a 
15 means by which he passes that intelligence to not only the 

17 President but others in the National Security Council. They 

18 are his personal advice, though, to the President, and 

19 therefore they should certainly bear his signature. He would 

20 be very foolish to not accept advice and counsel of others, 

21 and he does that through footnotes. 
But the intelligence, when it comes to the Director 

in draft, has been well coordinated through the entire 
intelligence community at a working level. And it repre- 
sents the best working level throughout, all the Intelligence 



WUS.Cia»,. 



259 



OffftflMHF' 



Community can offer the DCI and the National Foreign In- 
telligence Board on that estimate. The Director then has a 
board meeting with all the principal players of the 
Intelligence Community, and they give them, the Director, 
their advice as to the -worthiness of that estimate, and then 
the Director approve^ it, accepts it as is, or changes it. 
If he wants to change it, he changes it m the dialogue, in 
the discussion with others. And if someone really objects 
to how the Director is going to end up writing that report, 
so to speak, for that estimate, they get a footnote. 
He says, "Fine, put your footnote in." So it is a very open 
function. 

Q What you are saying, there are institutional safe- 
guards built m so intelligence can't be slanted. 

A Definitely. And there isn't an intelligence 
officer I know that would let a false estimate be put out 
where there's differences of opinion, you know, we can all 
differ, but usually those differences show up in the report 
or in the estimate. 

Q It was striking m reading your previous deposi- 
tion, m fact, you said one of the things you feel Mr. Casey 
really contributed to the intelligence community was a 
considerable analytical process, and it is ironic he is now 
being criticized for having destroyed the analytical process. 
A Yes. AiliirLthat analytical process, he brought m 



hmm 



260 



HNSMSSfWjT 



86 



1 he caused seminars to be had, he brought in and encouraged oui 

2 estimates to be given out to college professors to get their 

3 views, and if you look back, and probably ^^^^^^^^^^| can 

4 get this for you, the number of seminars we had on the Near 

5 East and what is going on there, where all views of all of the 

6 U.J. experts from academia participate. Shultz ]ust did an 

7 outrageous thing when he criticized the intelligence as being 

8 covert. Casey's opinion may have been covert, but only 

9 Casey and Shultz know that. The intelligence was pretty 

10 straightforward, and I think it can speak for itself. 

11 Q In fact, I think you said today that Mr. Casey 

12 liked to vociferously sometimes -- well, very strongly pre- 

13 sent his opinions. When I was out at CIA interviewing other 

14 people, including Graham Fuller and some people in the DDO, 

15 they said that as well, and they said sometimes he would 

16 stick to his opinions, but he always accepted them when the 

17 intelligence community came back and said "We have considered 

18 your views, and these are still our views." He accepted 

19 that. He just wanted to be sure his views were considered 

20 in the process. 
A Like Br^nd^n Sullivan, he is not a potted plant. 
Q The Near East Division also said you could always 

tell when he went away for the weekend, he had all his source 
and he would come back with these great ideas and send them 
off investigatinf.av^ja'l.hina in the world. Apparently, 



lifflKiriFn 



I 



261 



I1M8MSSFIEFT 



that IS what led him to initiate in CIA a process whereby 
everybody would have exposure outside the agency as well 
into other opinions. 

Was he concerned the agency or analysts themselves 
could be bound and take a view and e^ver change it even thoug 
events changed? 

A It takes a very good analyst who, with sketchy 
information, comes up with an analysis and then as other 
information comes in will change that analysis. It takes a 
lot of guts to do that. Your opinions are now being 
assailed. You have to make sure there is enough dialogue 
people don't look into a certain rigid decision and then 
anything else that happens is viewed against that earlier 
decision. 

Q Isn't that what in fact happened on th^ 
estimate? Some people view it that way at least 
never changed his views, m essence, he insisted on sticking 
by his original views, and others began to question them, 
and he said, "No, I am right." 

A That is probably the case. I am not sure I can 
speak for what prompted^^m^ to do what he did or 

" is a difficult estimate, at best, 
^^^^^^^^^^^^^^^^^^^_^_ It IS a 
tough situation. 

Q Another aspect of this has_been the issue of whethe 





llMCUSSlElfl 



262 



msmsF 



1 the CIA becomes politicized if the DCI has Cabinet rank. I 

2 believe the first time he has had Cabinet rank is under this 

3 administration, is that correct? 

4 A Yes. 

5 Q So there is an issue here of whether intelligence 
and policy should be completely separated and whether that 
will, in fact, separate them. In the past we have had DCIs 
who have been influential in policy, even though they haven't 

9 had Cabinet rank. Do you agree with Shultz's recommendation? 

10 A No. I think there is merit in having the DCl' a 

11 Cabinet member. Intelligence by itself is useless. It is 

12 only useful if it is used by our government, and the best 

13 way to do that is to understand what the policy makers are 

14 driving at or where they are going. In that way, you can 

15 make the intelligence relevant. There is no sense writing 

15 something about Iran if the policy maker is looking at anothe 
17 aspect of Iran. You want to write about what they are 

concerned about. 

^g The only way you can really do that is have a good 

20 dialogue, and the best way to do that is through the Cabinet 

situation. The NIOs are often accused of becoming co-opted 

by the policy makers because of their constant iteration of 

the policy makers, and while it is a concern, I think it's 

a necessary dialogue and one that you ]ust have to keep an 



25 eye on. 



UmASSlFlFJL 



263 



mmm 



89 



By having the Director Cabinet rank, then intelli- 
gence doesn't become subservient to any department. While 
Shultz may want to make sure that intelligence reflects the 
best policy, I don't think that is a good idea. I think yoi 
want to have a strong independent intelligence organization. 

Q Mr. Shultz also stated specifically that he felt 
the Director of Operations had had excessive influence on 
estimates and had been biased m this way. I believe he 
cited specifically the Iran case and terrorism. Have you 
had, getting it down to those specifics, have you seen ahy 
indication of that? 

A None whatsoevei 




Q I want to ]ust run over very quickly, as I conclude 
here, a couple *f thespecific cases in which there has been 
an allegation of biased intelligence. One of them, I gave 
you this article before we started that appeared in the New 
York Times on August 31. In there it was cited Mr. Casey 
urged his analysts to, when there was a danger of Congressic 
al cutoff of funding in Central America to help the contras, 
to make more stark the view that the contras would be 
eliminated by this cutoff. 

I don't know whether this occurred or not, you 
might speak to that, but m addition I would like to know: 



lIMCUiS^EiED.- 



264 



Mmm 



90 



1 Did the analysts disagree with the view that the contras 

2 would, in fact, die if there was a funding cutoff, or did 

3 they, m fact, agree with this and Casey simply wanted them 

4 to state it more clearly? 

5 A I don't know if there is one opinion on that or 

6 not. It IS obvious that if you looked at how the Nicaraguans 

7 handled their propaganda here in the United States, they were 
constantly striving to have a hiatus in support to the contra 

9 in hope that they could dry up, and it's very difficult to 
■)0 you know, .get the gang going again once they have dispersed 
^■^ or gone back to the farm, what have you. 

■^2 Q I was wondering, because the people I had talked 

12 to had said subsequently they had under-estimated the 

contras' staying capability. So I thought maybe it seemed 
that most of them thought they would die. 

A I think you have to put it in the context of the 
time. I don't know if we were sizing the financial flow to 
the contras to the degree that it was, and we would probably 
if there is any under-estimating, it was the fact that the 
contras would get support from outside. And maybe that is, 
you know, the result of Ollie North and all his speeches. 

But we looked on it, what happens when we pull 
away, and I thought we saw a vacuum there, and everyone said 
it IS going to dry up. 

Q To clarify the record, the New York Times article 



.. imA^lH£&. 



265 




was August 31, 1987. Another issue" PPMted to Central 
America, another issue is whether there were any directions 
to withhold from the House Intelligence Committee some cable 
traffic related to contra affairs. In this respect, Richard 
Giza of the Hou.= e Intelligence Committee was getting this, 
and It turned out after this investigation began, we found 
out there were some pieces he did not get. ^^^^^^^^H s a i d 
this was ]ust a slip-up, and it had not been directed. Do 
you have any knowledge of that? 
A No. 
Q All right. 
A That would be fool-hardy to do something like that. 

MR. POLGAR: It was long after you left. 

MR. LEON: But from experience, is^^^Hthe kind 
of person who would intentionally do something like that? 

THE WITNESS: No way. 

BY MS. DORNAN: 
Q Another area is Angola. Although the Secretary of 
State did not mention this, there have been allegations in 
the paper by un-named State Department officials CIA slanted 
the intelligence on Angola to show there was more of a 
threat of an offensive than there really was in order to get 
the Congress to rescind the Clarke Amendment. Do you have 
any comment on that? 

A No. I think the various intelligence showed as 

...MM.pii<j(:iFiFn 



266 



mms 



92 



1 proof Angola can cause trouble when they want to. I really 

2 can't comment on that other than to say I don't think it is 

3 true. 

^ Q Just briefly, another one was Mozambique, that was 

5 mentioned in this August 31 article, and it stated in a 

£ similar fashion, the CIA had over-stated the prospects for 

7 Rename, the resistance to the Communist Government there, 

8 because Casey hoped to get U.S. aid for Rename. Was this 

9 true in your experience? 

10 A No. You must bear in mind that again CIA doe'sn't 

11 exist in a vacuum, it exists in the Intelligence Community 

12 of which the Department of State is a leading part. And if 

13 you look at the process of our intelligence, the President's 

14 daily brief, the National Intelligence Daily that is put out, 

15 most of the articles in that come from political reporting 

16 originated by the Department of State. 

17 Q There are estimates, however, not National 

18 Intelligence estimates, but other publications, that are put 

19 out by the agency itself, in coordination with other agencies 

20 Have you ever seen any slanting of those by the DCI? 

21 A No. But I would not be privy necessarily if Casey 

22 wanted to write the President a letter and said, "Dear Mr. 

23 President, you ought to worry about something". But that is 

24 not an intelligence estimate, and that's not slanting 

25 intelligence, it's Casey's personal opinion. 



267 



DNeBISSfFiF 



Q The last thing I would like to ask you about is 
something which appeared in the Tower Commission, and it 
stated the NSC had had excessive influence over the CIA, 
and particularly with regard to the Fuller memorandum. We 
interviewed Graham Fuller, and he rejected this and said 
that, in fact the Tower Commission had not understood the 
role of a NIO. He also said that he didn't usually agree 
with Howard Teicher, but in this particular case it ]ust 
so happened they agree, and he had to get feedback from the 
policy mak,ers on areas of their interests and so on. 

Could you comment on the Tower Commission's report 
in this respect? 

A I will say that I don't think Graham Fuller was 
impressed by anyone, that that paper that Graham prepared is 
a typical Graham Fuller, he, you know, thinks beyond and out- 
side of things, and I think that's very healthy m trying to 
stimulate thought, and if you read that document carefully, 
he ]ust finished saying "what if" sort of thing, he is not 
saying this is the way it is; it is something you ought to 
worry about to get people to think, are we prepared for a 
change of government, and if so, are we prepared to move in 
there or are the Soviets going to case us out? 

If that is the case, what ought to be done to 
mitigate against that? And to me, that is a very legitimate 
worthwhile responsibility of the NIO is to make the policy 



mmm 



268 



mums 



1 makers think of possible contingencies. It is not 

2 intelligence, he is just lighting a fuse. 

3 While I didn't necessarily agree with what Graham 

4 said, I didn't have any reason to really argue with him. 

5 And I don't think anyone else did either. In hindsight now, 

6 it looks like he was serving up soft balls for the NSC to 

7 have a rationale for their initiative, but I don't think 
that was the case. 

9 Q Mr. Fuller wasn't informed of the Iran Initiative. 

10 I think It, was sort of a sore spot with him afterwards. In 

11 fact, it is ironic since he was the NIO in that area, and 

12 subsequently there were charges the intelligence was slanted, 

13 that he never even knew about it, even though he was putting 

14 out all the intelligence subsequently. 

15 A Yes. 

16 Q Do you think one of the reasons Casey did not 

17 inform him was because he wanted to keep the intelligence 

18 estimates pure, so to speak? 

■^Q A No. I ]ust don't think Casey thought about it in 

20 that context. 

Q He just kept it within a small circle for security 
reasons? 

A Well, I don't think Casey kept it any place. It 
was a NSC OP, and they called us they needed us. I don't 
think Casey made a conscious decision. I think he just 



IMASSim. 



269 



1 

2 

3 

4 

5 

:son/drg 6 

;nd 

Jinn fols. 7 



10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 



,t qu.et for the security of the hostages. I 
xd "Don't tell Graham Fuller", I ]ust 



don't think anyone sa 

don't think It came across his desk 



MR. POLGAR: Off the record. 
(Discussion off the record.) 



IINCU^Eia, 



270 



McGinn 11:3( 
Take 5 
jm fls dx 

3 
4 
5 



HNStASSIBEfrT 



EXAMINATION ON BEHALF OF THE SENATE SELECT COMMITTEE 



96 



BY MR. BARBADORO 

Mr. Carorn^ is going to ask you questions about the 
November, December, January time frame, so I won't ask you 
any questions about that. 

I want to focus on ]ust a couple of areas that 
have been raised previously in questions today. 

At the beginning of the deposition, you testified 
that Mr. Casey wanted to increase the use of J 
^^^H^y the agency. Is it fair to say that there is a big 

betweei^|^H^^^^^^^^H|as term is 
the agency, and the kind of full service, off-the-shelf, 
private covert action entity described by Colonel North 
in his testimony? 

A Definitely. I should have made that point clearer, 
Paul. ^"^ 




271 



WW^BWfflT 



Q Another difference is that operations 

Bare funded with appropriated funds, whereas 
the entity Colonel North described would get its money from 
unappropriated funds; is that right. 

A As I understand what Colonel North had in mind. 

Q And finally, another major difference is that 
operations^^^^^^^^^^^^^H^^^^^^^^I^^^^H still comply 
with the U.S. laws regarding the requirement of Presidential 
findings and notification to Congress, whereas Colonel North's 
entity as he described it, would not necessarily involve 
Presidential findings and notification to Congress. 

A You are correct. 



MR. BARBADORO: I think you answered these questions 
with Mr. Leon, but let me just make sure I understand your 
answers. 

BY MR. BARBADORO: 
Q Setting aside this issue of Director Casey's 
to expand^^^^^^^^^^^^H^^^^^H^^^^Hdid 
Director ever discuss with you the possibility of funding 



mm.i 



272 



mmfw 



98 



covert operations out of private funds, non-appropriated 
funds, rather than appropriated funds? 

A No. If he did, I think I would have reacted. 

Q And did the Director ever discuss the possibility 
of conducting covert operations without complying with U.S. 
laws regarding the requirement of Presidential findings and 
notification to Congress? 

A Never. 

Q I assume if he had discussed those with you, you 
would have objected to those discussions? 

A Indeed, indeed. 

Q The last area I want to touch on, because there 
have been so many questions asked about it is this issue 
of the slanting of intelligence. I want to focus not on the 
question of slanting the intelligence producted by the 
analysts, but rather on the possibility that the intelligence 
could be slanted in the way that is communicated to the policy- 
maker. Let me ask you a general question first. 

Do you see any potential problems if the people that 
are responsible for communicating intelligence to the President 
are also people involved in making policies? 

A Often they are one in the same. If the Secretary 
of State discusses a proposed policy with the President, he 
usually has to set the stage of why the policy and why he wants 
to do it that way, that that suggests a briefing which provides 



'rlW-^^H5SHT 



273 



1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 



nnssmw 



or sets the stage, and that stage setting we call intelligence, 
or information, or background, or what have you. 

Q Is there a danger though that a person who has 
a particular policy to advocate will slant the reporting of 
intelligence to support the policy that he's advocating? 

A I guess it depends on how much integrity he has, but 
this is a key issue with Casey. Casey was a great believer in 
pushing intelligence out. 

We went from the production of like 9 to 12 
national intelligence estimates a year, to over 80. In fact, 
I think this past year it was probably over a hundred. 
And his whole philosophy was get the intelligence out on the 
table and force the policymaker to kick it aside before he 
makes the policy. 

But he says the policy that you give to a policymaker 
or the intelligence you give to a policymaker the day after 
he made policy is useless. So he wanted to push, and push, and 
push, and he did very well at that. 

So his desire was put intelligence out. And I don't 
think we ever got in the business of writing report cards on 
why certain policy was great because this intelligence 
now supports it. He just pushed it out. 

Q The point I am getting at though is Director Casey 
served as the President's principal intelligence adviser. 
He also served as a person who he had make policy and who 
advocated policy. 



UNOASSKB 



274 



mmm 



100 



In your view, isn't there a danger when the person who 
is the President's principal intelligence adviser also becomes 
an advocate of policies? 

A I don't think it's really a danger. In a way it 
may be a delightful benefit because you are having a well- 
informed policy being created. It's far better that poi:.cy 
be borne amid good intelligence than in the absence therefore. 

I g.iss it comes back to the question of the integrit 
of the person. Is he advocating a policy because he knows 
what's happening, or does he just like to have a certain 
policy and then tries to make the intelligence support it. 

Q The Central Intelligence Agency separates the func- 
tions of analyzing intelligence from the function of carrying 
out operations even where -- even to the point where people in 
the intelligence side of the agency are providing intelligence 
directly related to operations that are being conducted by 
the operations directorate. What is the reason for that 
separation of intelligence from operations within the agency? 

A I think the principle of separation is historical 
in nature, prompted by the compartmentation that's desirable 
around agent operations. You want to limit the knowledge of 
the agent operations. It also goes to he nature of the people 
involved in the finished product. 

A good analyst does not necessarily make a good 
operations officer and adviser and. ^i.Q£.^ersa . 



■ and adviser and vice versa 



275 



mmm 



101 



Q Isn't another reason the fact that there is concern 
that a person running an operation might not be able to do the 
kind of objective analysis of the operation that a good 
independent intelligence analyst would? 

A It would be hard to argue with the wisdom of what 
you say, but I don't think it's necessarily so. I would like 
to think that our intelligence operatives conduct their 
business with the best of intelligence very much by their 
side. 

I don't think you need that separation of church. and 
state in the intelligence business. 

Q And on the level of the Director of Central 
Intelligence I take it then you also feel there's no particular 
problem with having the DCI also be a policy adviser to the 
President? 

A No, I don't, so Icbng as his policy is based on 
honest and adequate intelligence and not a semblance of 
intelligence. Again, it goes back to the integrity of the 
individual. 

MR. BARBADORO: Let me mark this document as McMahon 
Exhibit A. 

It's a January 17, 1986 memorandum for the President 
from John Poindexter. The document number is N 10046, I guess, 
to N 10048, 

(Exhibit No. JM- 1 was marked for identification.) 



llNllilSiUEIEIL. 



276 



UttCEA^BIftiT 



102 



BY MR. BARBADORO: 

Q Take a look at the exhibit and tell me if you have 
seen it before? 

A Other than last night in a stack of papers that I 
saw at CIA, I can't say that I recall seeing it. Nothing 
here is knew to me, but I can't say that I saw this document. 

Q You certainly don't remember seeing it at or around 
the time it was produced? Is that fair to say? 

A I just don't know. 

Q Mr. McMahon, this memorandum, according to the 
notation on the bottom and according to, I believe, Admira-1 
Poindexter's testimony, was used to brief the President 
when he signed the January 17 Iran finding. 
I want to ask you 

A I am not aware of that in that context. 

Q Okay. 

What it says — let me just read you this handwritten 
note. It says at the bottom: "President was briefed verbally 
from this paper, VP to be, Don Regan and Don Fortier were 
present." And it has Poindexter's initials on it. 

In any event, let me represent to you that this 
document was apparently used to brief the President when he 
signed the January 17 finding. Let me ask you some questions 
about it. 

In the first paragraph of the memorandum it states 



in the middle, 



Ha^m; 



ncerned that Iran's 



277 



UNSamUFT 



103 



deteriorating position in the war with Iraq, the potential 
for further radicalization in Iran and the possibility of 
enhanced Soviet influence in the Gulf, all poses significant 
threats to the security of Israel." 

Mr. Gates has testified that the statement that 
implies that Iran's position in the war with Iraq was 
deteriorating on January 17, 1986, was not consistent with 
U.S. intelligence reporting about Iran's position in the war. 
Would you agree with that statement by Mr. Gates? 

A Definitely. 

May I go off thf. -. -uord? 

(Discussion off the record.) 
BY MR. BARBADORO: 

Q At the beginning of the second paragraph in the 
memorandum states, "The Israeli plan is premised on the 
assumption that moderate elements in Iran can come to 
power if these factions demonstrate their credibility in 
defending Iran against Iraq and in deterring Soviet intervention 

Mr. Gates testified that it was the position of the 
U.S. intelligence analysts at the time that there were no 
moderate elements in Iran. Would you agree with Mr. Gates' 
statement? 

A Not only would I agree to it, but that's what I 
told the President, and I was quite upset when George Shultz 



began his testimony, 



ImblftwWnwIT 



278 



MR. LEON: When did you tell the President? 

THE WITNESS: On 7 December, 198 5 -- when George 
Shultz said in his testimony before the committee that the 
President, you know, was getting secured information, he also 
commented that he thought I was rather passive at the meeting. 
He remembered that I informed the President that we had no 
knowledge of any moderates, that they were all slaughtered 
by Khomeini when he came in, and that any weapons given to 
any so-called moderates would end up at the front line support- 
ing the Khomeir-: 'overnment. 

He remembe.- l said that, then I guess the rest of 
his testimony about the President not getting good intelligence 
or advice to the contrary would go by the boards. 

BY MR. BARBADORO: 
Q Let me focus on this memorandum and what the 
President had before him on January 17. This memordum 
does hot contain any reference to the position of U.S. 
intelligence at the time that there were no moderate elements 
in Iran, nor does it contain any reference to the position of 
U.S. intelligence that at this time Iran was not losing the war 
with Iraq, but, in fact, if anything, had the upper hand 
in thewar with Iraq. 

Based on the absence of any reference to the U.S. 
intelligence position on those issues, would you agree that 
this memorandum is, in fact, an instance of slanting of 



mmm 



279 



IINSa^RIF 



intelligence reporting to the President? 

A I won't say it's slanting intelligence reporting. 
It's misinforming the President, but it's not intelligence 
derived from the U.S. intelligence organization. 

MR. LEON: Would you say it's failing to report 
U.S. intelligence? 

THE WITNESS: It's an absence of the U.S. intelligence 
BY MR. BARBADORO: 
Q Is it also misleading because of the absence of the 
reporting? ' 

A It's definitely misleading and that was not our 
position at that time, as Mr. Gates reflected. 
Q That's all I have. 

MR. LEON: Could I follow that up for a second. 
MR. BARBADORO: Sure. 
EXAMINATION ON BEHALF OF THE HOUSE SELECT COMMITTEE 
BY MR. LEON: 
Q It just occurred to me tht when Mr. Barbadoro was 
asking you about the President's being made aware of the 
intelligence community's product that something we hadn't 
asked you about was the President gets daily briefings from 
the CIA, does he not? 

A He gets a daily brief that usually the National 
Security Adviser brings into him. Whether the President reads 
all of it by himself or whether the National Security Adviser 



wy\SM[i.T 



280 



ONHJSSI^T 



briefs the President from it, I don't know. 

Q So who controls 

A The National Security Adviser 

Q what it is the President gets? 

A The National Security Adviser. 

Q Does the agency send over to the National Security 
Adviser on a daily basis intelligence informatirn on various 
subjects? 

A Indeed. 

Q And he then, the National Security Adviser then in 
turn decides which portions of that, if any, to give to the 
President? 

A Right. We prepare a daily Presidential brief. 
We bring it down. The courier brings it down, gives it 
to the National Security Adviser who takes it to the President. 

Q You keep those? Those are on file with the CIA? 

A Yes. 

Q They are in writing? 

A Yes. I think that the committee is also on dis- 
tribution of all our finished intelligence, the national 
intelligence daily, and stuff like that, and the committee 
would be well aware if suddenly we started producing 
intelligence that suggested different things in Iran than 
what we had been saying before. 

MR. BARBADORO: I have no further questions. 



UnhLnuijlrldrT' 



281 



jm 12 



1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 



mmm 



Could we go off the record just a second? 

e 

MR. CAROM^: Why don't we see h6w quickly we can 

rap this up. 

Just for the record, my name is Patrick Caromf I 
am one of the lawyers on the House Committee. 

EXAMINATION ON BEHALF OF THE HOUSE SELECT COMMITTEE 
BY MR. CAROM: 
Q Let me show you a copy of your December 7, 1985 
memorandum. 

For the record, it's already been made an exhibit. 
We don't need to mark it again. 

In the beginning of the third paragraph, you refer 
to the fact that;"! immediately informed our general counsel 
after confirming with Dewey Clarridge our involvement." This 
was referring to the activity over the November 24, 25 weeken 
Do you recall speaking to Clarridge on November 25 prior 
to Sporkin? 

A No. I'm not — I can't follow the turn of events. 
Do you think you may have spoken to him and you 
can't recall or do you think you probably didn't speak to 
him at all prior to speaking to Sprokin? 

A What I probably did was call Clarridge after 
I came back from seeing Juchniewicz, which would have been 
in the -- you know, after 7:30 in the morning. 

Q So it would have been early in the morning on the 
25th. 



mmmv 



282 



jm 13 



mimm 



A 25, right. 

Q Do you recall what was said in that conversation? 
A No. Just I guess ~ no, I can't. The only thing 
that really sticks in my mind on Clarridge is in the night when 
he came in around 6:30, 7 o'clock at night, with a cable going 
out^^^^^^^H turning o f f ^^^^^^^^^^^H ove r 

Q Now just so It's clear, you think you may have 
spoken to Clarridge in the morning, but you can't recall 
the substance of the conversation? 
A I can't recall, no. 

Q if it occurred; is that right? 

A Right. 

MR. LEON: Just for the record, the exhibit you 
have been referring to here is marked^^^No. 6, in the upper 
right-hand corner? 

MR. CAROM: Yes. 
It was made an exhibit to the 
deposition that was taken some time ago. 

MR. LEON: How do you spell his last name? 
MR. CAROM^: I believe it 
MR. LEON: It's dated 6, 19, '87. 
THE WITNESS: What probably happened, Pat, is 
Juchniewicz told me that Dewey called him or something 
like that, and so after I got through to Juchniewicz I probably 
went back and called Dewey. But the context of the coversation 



'H'iil^lfjisijil'i^lp^ 



1 



283 



IWflSI^HIffT 



I can't remember. 



MR. CAROM^: Let me have this document please 
marked as an exhibit. 

(Exhibit NO. JM-2 was marked for identification.) 
BY MR. CAROM^: 

Q Mr. McMahon, I show you what has just been 
marked Exhibit No. 2 to this deposition. I imagine you have 
probably not seen this exhibit before. I will represent 
to you that it is a page our of Oliver North's notebooks, 
which the committees have received. At the top it's dated, 
October 26 or 25. We can tell from the place that it occurs 
in North's books, however, that it's actually November 26, 
was the date of the document. At the very top there is an 
entry that appears to have the — the time is 0005. That 
would be five minutes after midnight. 

It reads: "Call Clarridge." This would be a call 
from Clarridge to North at five minutes after midnight on 
November 26. Then it says in quotes, "This is criminal." 

My question to you is did you some time on November 
25, prior to this phone call, together with Clair^ George, 
summon Dewey Clarridge into a meeting of some sort? 

A No. I think Clair^ may have done that with the 
whole group of people at that 9 o'clock meeting that I 
referred to. 

Q The quote here, "This is criminal," is that somethmc 



Jwrm&Hi&rp 



284 



]m 15 



CNftussffe^T 



110 



that you said to Clarridge on the 25th of November, 

referring perhaps to the activity that had happened that weekend 

and the involvement of the air proprietary? 

A I don't recall saying it, though it wouldn't 
surprise me if I did. I just don't recall meeting with 
Clarridge except when he came in with that cable on the evening 
of the 25th. 

MR. LEON: If you said it, would there have 
been a question mark after the word "criminal"? 

THE WITNESS: I question mark? 

MR. LEON: Would you know? 

THE WITNESS: I felt — there was no question in 
my mind that I thought we had violated the law. There was 
no doubt about that. 

MR. LEON: But a criminal law? 

THE WITNESS: No. 

MR. LEON: It isn't a criminal violation? 

THE WITNESS: I don't know. 

BY MR. CAROM^: 
Q But it would not have been out of tenor with the 
way you felt at the time; is that correct? 
A Right. 

But if I used the word, "criminal" it would be 
criminal in a political sense, not a technical, legal sense: 
Q But specifically you do not recall a conversation 



HHhijWp^WnicrT 



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jm 16 



iffieasfflHEffT 



HI 



later in the evening on November 25, perhaps after Sporkin had 

from the^^^^^^^^^^^^^^^^^l peopXe ; 
is that right? You don't recall speaking to Clarridge again? 

A No. Clarridge came in my office around 6:30, 
7 o'clock, but it was just on a cable going out 
tellmg^^^^^^^^^^^to back that this was a 
National Security Council operation and there was no need 
to re-raise it 

Q Do you recall whether when you had that conversation 
that you do recall with Clarridge whether that was before or 
after you had heard word back from Sporkin after the — he' 
had been briefed by the operations people? 

A No. 

You've got to come back to me again on that. When 
I saw Clarridge at 6:30, 7 o'clock on the night of the 25th, 
was that after Sporkin talked to me? 

Q That's my question. I believe that that was probably 
about simultaneous with the time Sporkin was being 
briefed by the operations people. I am wondering if you 
may have spoken to Clarridge again after that conversation 
about the State Department people? 

A No. 

Q You have no recollection of that? 

A No. 

MR. LEON: Pat, this exhibit that says October at 



UtULASSra 



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jm 17 



BlffitlgBfflHF 



the top? 

MR. CAROM^ I have already covered that. From the 
notes It's obvious it is a November 26 entry. 

MR. LEON: Did North testify to that by any chance? 
MR. CAROM: I'm not sure. 

THE WITNESS: In fact, Pat, after I released that 
cable, I went home because Dewey caught r^e , I was packing 
up at my desk. I was standing up. I read the cable, saw 
It was a turn off, and sent it out. That was it. Then I 
went home. 

BY MR. CAROM^: 
Q Did you express any anger to Clarridge at that time: 
A No, more dismay than anger. I think the only one I 
really vented with was Juchniewicz. 

Q And that was in the morning? 
A That was in the morning. 

But I also told him that day nobody was going to 
do a God damn thing until we got a finding. 
Q You told that to Clarridge? 

A I told that to everybody in that room, and I told 
Clair^ George to make sure everybody at the DEO knew it. 

Q And you are referring to the 9 o'clock, or so, a.m. 
meeting; is that right? 

A Around there, yes. I saw Clarridge several times 



that day. 



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jm IJ 



jnd jm 
drg fls 



IMASStniD' 



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. Q Did you speak to anyone else at the agency other thar 
Clarridge and Mr. George after that 9 o'clock briefing about 
this? 



mSSIflEIL 



288 



UimSSIflEr 



THE WITNESS: I spoke to Sporkin several times. 
BY MR. CAROM: 

Q Anyone else? . .• . 

A Well, certainly my assistant 
but : don't recall talking to -- none of the officers in 
DEC or anything like that. 

Q Do you know why the briefing of Sporkin would have 
been delayed or would not have taken place until after the 
end of the working day? 

A No. That surprised me, other than Sporkin 's 
availability. I thought I had left word for those fellows 
to get over there right away, but why the delay, I don't 
know . 

Q You may have been asked this before. When did 
It first dawn on you that the cargo or^^^^^^^^^^^Hair- 
craft was weapons? 

A To this day, I can't tell you. I don't know 
whether it was the 26th, the 27th, the 5th, the 7th, or 
when. I ]ust can't pin that down. But you have to remember 
that didn't mean anything to me, I didn't care what was m 
that cargo. I just felt we had violated the law, and it 
didn't matter what was in it. Even if I knew it was weapons 
at the time, they wouldn't have rang a different bell to me 
than oil drilling equipment. 

You missed out, I think, on my comment, to me, 



mmm 



289 



mmssiREi^^ 



Oil drilling equipment is probably far mere important to t:.-. _ 
Iranians than weapons. Because they live and prosecute th-: 

war by their oil. 

MR. POLGAR: Off the record. 
(Discussion off the record.) 
MR. CAROM^: Back on the record. 
BY MR. CAROM^: 
Q Did you know the communications that were gcir.g or. 
over the weekend that CIA personnel were participating m 
had to do with problems with landing clearances for aircraft: 

A The only cominunication I saw was on the previous 
Saturday, Juchniewicz showed me a cable, and I think it was 
going from the Deputy National Security Adviser to the 
Charge. It spoke of, it was more or less what I have 
described as bemoaning the f act^^^^^^^^^^^Hdidn ' t help 
out. I told Juchniewicz, I said, "Okay, it is okay to send 
cables, but don't get involved." And we often sent cables 
for Secretary of State, Secretary of Defense, anybody, ycu 
know, and so to me that was a mechanism of using CIA securit 
to go from the White House to the Charge. We were ]ust a 
conduit to do that. 

Q Did it surprise you this sort of high-level crisis 
involving landing rights -- 

A I don't think the cable spoke of landing rights. 
All this cable sooke of was^^^^^^^^Hnot willing to 



UNCUSSML 



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290 





116 

help out. It didn't describe, if I remember right, it didn't 
describe anything else. 

Q There is another entry in North's notebook, I don't 
have It here with me, dated November 26, 1985, in which it 
appears that North is being told by Poindexter that the 
President has directed that the operation proceed. 

Did you have any indication, or did you receive 
any word at any time in that timeframe that there had been 
some direction from the President for the operation to go 
forward? 

A None whatsoever. In fact, the ground rules I 
left IS we weren't going to do anything without a finding. 

MR. LEON: Did the Director back you up on that? 

THE WITNESS: Yes. In fact, I recall, I can't get 
I don't recall the point in time, but I can remember walking 
in the Director's office, and he was on the phone, and he 
said, "Well, we need a finding", and he hung up, and we 
talked about something else. I don't know who he was talk- 
ing to. 

BY MR. CAROMT 
Q In th« period November 25-26, that week, did you 
have any discussions with Charlie Allen about the activity 
over that weekend, the^^^^^^Hplane and the hostage 
release operation? 

A I don't recall, but it wou^n't surprise me if I 



mm 




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117 



1 

2 

3 

4 

5 

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did. Wait a minute now, Charlie wasn't m that group at 
that time. I 3ust don't recall. There is no reason why I 
should, but at some point we made Charlie the point of con- 
tact for North in supporting this operation, and I think 
that was later in December. 

Q All right. 

General Counsel Sporkin and Oliver North met at 
North's office in the evening of December 9, 1985. Sporkin 
has testified that it is his recollection that that was 
originally to be a meeting among himself. North and you and 
that the purpose of the meeting was for you to talk to North 
about getting the agency out of the Hostage-Iran Initiative. 
Does that conform at all to your recollection? 

A No. But I do recall being scheduled to go to a 
meeting with Sporkin, I don't think it was ^ust with North, 
but it was down at the White House, and for some reason I 
couldn't make it, and Sporkin went down by himself. There 
was no, you know, big deal about it. It was ]ust that I 
was tied up, and I couldn't go. And I don't think it was a 
question to get us out of it. I just don't know. 

Q What was the purpose of the meeting? 

A I don't know. I just don't recall that. 

Q That would have been just two days after the 
meeting with the President that you attended. Do you recall 
if It was connected with the Iran operation? 



mmm. 



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WiftAoOTncD 



118 



A I would suspect that it was, but I just don't 
recall. 

Q And you can't recollect what the purpose of that 
meeting would have been? 

A No. Nor can I recollect why I didn't go. 

Q But you do not believc it was a question of getting 
the agency out of the operation at that point, is that 
right? 

(No response. ) 
,MR. LEON: It could have been? 
THE WITNESS: It could have been. I just don't 
know, Patrick. You know, one thing that you must bear in 
mind, and I have probably said this before, but when you 
put focus on Iran, everything lays out and looks like you 
have a continuous stream, but in our daily life, this is 
like a four millisecond burst, and then you are on to 16 
million other things, and then four days later something else 
happens. When you put it together, it looks like it is a 
big deal going about, but it really didn't come across our 
screen that often. 

BY MR. CAROh^: 

Q Did you prepare your December 7, 1985 memorandum 
for the record before or after the meeting with the President 
do you recall? 

A It had to be before. The reason I say that is 



JsHwfcndDfrKi/'r 



293 



WBltiBSfFBBT 



119 



two-fold. I think, if I did it afterwards, I would have made 
some comment or note to that effect in this. But I had my 
assistant check with my secretary, who prepared that, and 
she said that that was prepared on a Saturday morning, and 
she left the agency or signed out the agency around 1:00 
o'clock. We -lidn't break up with the President until about 
12:00, and I doubt if I would have dashed back and dictated 
that and have her type it before she checked out. 

To me, I probably dictated that on a Friday even- 
ing, and she typed it Saturday morning, or I could have, gone 
and dictated it to her Saturday morning, and she typed it 
up. But that was done before the 7 December meeting with the 
President. 

Q Why did you do this memorandum at that period? 
A Because I knew at some point in time in the future 
we would have to get honest with Congress in advising them 
of the finding, and what I wanted to do was make a note of 
what happened so that when they got excited about not being 
advised, at least I could walk them through what transpired. 

MR. LEON: I just want to stop you there a second. 
You said get honest with Congress. 

THE WITNESS: Correct the record. 

MR. LEON: Is that a poor choice of words? 

THE WITNESS: It is a poor choice of words. 
Eventually we would have to advise Congress. 



.JiGLASamr 



294 



mSHEF 



MR. LEON: There hadn't been any dishonesty on the 
part of the CIA? 

THE WITNESS: No. It is just we didn't advise 
them in our normal timeframe. 

MR. LEON: Pursuant to the finding. 
THE WITNESS: We eventually have to do that. 
Good point, good point. 

MR. LEON: We don't want some report coming out 
the CIA was being dishonest if it wasn't. 

,THE WITNESS: Thank you for the correction. 
BY MR. CAROM: 
Q Do you recall whether or not the Hawk shipment 
over the November 24-25 weekend was discussed at the December 
7 meeting? 

A Not at all. 

Q You don't recall, or are you saying it wasn't 
discussed? 

A No, it was not discussed. I have no memory of 
that being mentioned at all. It was just this new initiative 
which David K a wke had talked to McFarlane about. 

Q How about the finding, was that discussed? 

A That was not discussed. 

Q Didn't that strike you as extraordinary? 

A Why? No, not at all. 

Q Wasn't this a continuation of -- wasn't the 



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2 

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4 

5 

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7 

8 

9 

10 

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12 

13 

14 

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16 

17 

18 

19 

20 

21 

22 

23 

24 

25 



discussion on December 7 focused on continuing precisely the 
initiative that had been going on before? 

A No. It centered around a rationale of developing 
a dialogue with moderates in Iran, and that was kind of the 
foundation for the whole discussion. 

MR. LEON: Who was claiming there were moderates 
at that meeting? 

THE WITNESS: McFarlane was relating what I believe 
he got from the Israelis, assuming it was David i««Rte«f' 
since he mentioned David Kemka to start with. 
BY MR. CAROM^: 

Q I believe earlier when Mr. Leon was qviestioning 
you, you said that Sporkin had said something to you about 
going down to talk to the White House Counsel and the Justice 
Department about the finding. Could you expand on that? 

A No. That's the extent of it. He was standing in 
the doorway of my office when he said that. 

Q What time was that? Was this on the 25th? 

A I don't know when. I would say it was probably the 
25th, evening, or the morning of the 26th. 

Q And what did he say? 

A And he came back and said, "You need a finding, but 
not necessarily for the eyes of the proprietary." I said, 
"What are you talking about?" He said, "Well, for the 
influence that our overseas personnel had." I said, "You 



WPWSIHfflr 



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WvL/focWnro 



122 



mean like getting landing rights and things like that?" 
And he said, "Yes." I said, "Okay, then prepare a finding, 
and I want it made retroactive." He said that he was going 
down and talk to the White House Counsel and Justice. And 
I said, "Great", and he walked away. 

Q Did you think he was about to immediately go down- 
town to do that? 

A I don't know. That didn't register one way or 
the other. 

Q Did you ever find out whether he had in fact talked 
to the White House Counsel or someone at Justice about the 
finding? 

A No, the next I saw Sporkin, I was standing around 
the table in my office with a number of people, and we were 
looking at something, I forget what it was, and Sporkin 
came to the door and showed me a finding, two paragraphs on 
a piece of paper, it wasn't a finding, ]ust two paragraphs, 
I read it, I said, "Great, get it to Casey, get it down 
there. " 

Q Did you on November 25 say anything to Sporkin 
about what you thought had been carried on the plane? 

A No. If I remember correctly, I simply said the 
DDO screwed up, and we needed a finding, or I thought we 
needed a finding, and I was sending some guys over. He 
said "Fine." In his testimony, he mentioned words like 



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ll»CBtS»BfflFT 



123 



1 

2 

3 

4 

5 

6 

7 

8 

9 

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11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 



I said a super-sensitive deal and stuff like that. That is 
not my nature. I wouldn't say that. We were very straight- 
forward. We screwed up, and we needed a finding. 

Q Did you tell anything to Sporkin about the fact 
agency personnel had been involved in cominunicating and 
trying to get clearances? 

A No. 

Q When was the first time that you had any hint 

about the possible involvement or the involvement of the CIA 
proprietary in this November 24-25 operation? 

A At 7:15 to 7:20 m the morning of the 25th. 

Q You received no hint of that on the 23rd, is that 
right? 

A None whatsoever. 

Q Referring again to your December 7 memorandum, 
the last sentence of the second paragraph says, "General 
Secord then took it from there and made arrangements for a 
flight on a strictly commercial basis." 

What did you mean when you wrote "strictly com- 
mercial basis"? 

A That was part of Juchniewicz ' s response to me, 
when he told me they had used the proprietary, I said, 
"God damn it, I told you not to get involved." He said, 
"It wasn't us, they came to us, and we said no, and they aske^ 
for the name of a secure airline, and we gave them the name 



UtlGlASSIIVgT 



298 



10 

11 

12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 



HN^SSIPIttT 



124 



rcial arrangement 



of our proprietary, and they made the 
between them and the proprietary." 

Q But, in fact, I mean, this was a flight closely 
monitored from agency Headquarters, it wasn't really handled 
in a normal commercial manner, was it? 

A I don't know. I don't think we monitored it. I 
am not sure what you mean by monitored. 

Q You knew that the Chief of^^^^^^^^^^Hand the 
Liaison between the agency anc^^^^^^H^Bwere closely in- 
volved in ^he operation of that flight over that weekend, 
didn ' t you? 

A No, I didn't know that at all until I was informed 
about It on the 25th. 

Q But by the time you were writing this memorandum, 
you knew that. 

A Oh, yes. It was open knowledge then. 

Q And whilfl^^^^^^^^H some times does flights that 
are commercial, it is not the norm on those commercial flight 
for agency Headquarters to be involved in the monitoring of 
flights? 

A No, where I was concerned was that Headquarters CIA 
got involved in this. If North or Secord or anyone called up 

land said, "Hey, we got a shipment to go" and we 
weren't involved, then no sweat. But once they involved us 
we needed a finding. So I thought. 






299 



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2 

3 

4 

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8 

9 

10 

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MR. LEON: That was Sporkin's opinion, too, wasn't 
It? 

THE WITNESS: No, Sporkin said he didn't think, it 
was necessarily for use of the proprietary but for the 
influence our people used overseas to get landing rights. 
BY MR. CAROM: 

Q You said a little earlier this morning that 
Clair^ George had collected all of the cables at your 
request related to the activities over the weekend and had 
said he saw no problem with anything that he saw in the 
cables. Is that right? 

A Well, no problem in that there wasn't anything else 
other than this event. 

Q And you did not look yourself through the cables, 
IS that right, at that time? 

A I think I gave it the executive scan, as we call 
It. I didn't sit down and read all the cables, no, I did 
not. 

Q On the question of whether a cable was lost, you 
certainly don't know one way or the other whether a cable 
was missing at that point, is that right? 

A No, I have r^^nowledge of that other than CIA 
Headquarters feels it didn't exist, and thayis ]ust not 
Dewey Clarridge saying that, it is all the people that 



hunted for it. 



(TWw/taDffiiii'P 



300 



mtrnm 



126 



Q You don't know if a cable was lost when it might 
have been lost, is that right? 
A No. 

Q You don't know whether it was lost in 1985 or 1986, 
is that right? 
A No. 
Q Did -- 
A If it existed. 
Q If it existed, certainly. 

MR. POLGAR: Off the record a moment. 
(Discussion off the record.) 
BY MR. CAROM: 
Q Back on the record. 

One of the cables that does exist was a cable from 
to Headquarters reporting the] 
pilot had said to grounc 

^^^^^|that he was carrying armajnents of some sort, I don't 
know if it was missiles, but it was military equipment. 
Did you know of that cable at the time? Did Mr. George 
point that out to you? 

A No. What cable was that? 

Q That cable would have been received by the agency 
early in the morning, maybe 4:00 or 5:00 a.m. on November 




25. 



No, I wasn't aware of that. 

IIMCLASSIQEIL 



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6 

7 

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9 

10 

11 

12 

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15 

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18 

19 

20 

21 

22 

23 

24 

25 



Q Jumping ahead -- well, let me ask you one more 
question on the November time period. Did you connect in 
your own mind the activity that went on over the November 
23 through 25 period with the meeting that you and Mr. Casey 
had had, I guess with Mr. McFarlane on the 14th of November 
when Mr. McFarlane had mentioned there wa= an operation, at 
least under discussion, at that point involving the shipment 
of arms for hostages? 

A No, X didn't connect it, and the reason is that 
McFarlane '.s comment dealt with the Israelis shipping arijis to 
Iran and not the United States. The two didn't come together 
for me. Now you look at it, and you say, "Gee, why didn't 
that ring a bell?" It didn't ring a bell because he was 
talking about the Israelis doing something, and our operation 
was on oil drilling equipment, so I ]ust didn't connect the 
two . 

Q When did you become aware that Secord was playing 
a role in the NSC operation? 

A Well, I thought when I -- on the 25th that 
Juchniewicz used the term "Secord". Since then he said, "No, 
I didn't say Secord, I told you it was North." I ]ust wouldr. 
have picked Secord' s name out of a hat. I felt he had to say 
It since I wrote it there, and I just don't know. 

Q By, say, late January, what was your understanding 
of Secord's involvement in the operation? Late January, 1986 



UiUSffill, 



302 






128 



A One as kind of the expediter, so to speak. 

Q Did you perceive him playing any other role? 

A No. 

Q Did you have any knowledge in January, 1986 that 
a bank account under Secord's control was being used in 
connection with the tre-.sfer of money as payment for the 
missiles? 

A I don't think we got around to bank accounts until 
February when we were asked to set up a Swiss bank account, 

the Director of Administration, came 
in to me and said, "Hey, the Director has asked us to set 
up a Swiss bank account to support the NSC operation." I 
said, "Well, we have a finding, so we can do that." And I 
think that was in the first part of February. 

Q But as to a bank account under Secord's control, 
you are saying you don't have any knowledge of that? 

A No, heavfens no. 




Q Were you aware in the January, 1986 time period 
)f discussions going on between Oliver North and Mr. Nir 



UNCLA^IEIFA 



303 






m 


fEAS 


«»RE§:t 








129 


from Israel regard 


ing 


]oint 


:overt operations 


to 


be 


run 




jointly by the Uni 


ted 


States 


and Israel? 










A No. 
















Q Did you 


ever prior 


to these hearings 


learn 


any 


- 


thing about that? 
















No. ^1 


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■1 


^■■H 


1 


■ 


■ 


fl 



9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 



But, no, I was not 
involved in the North-Nir arrangement. 

Q And you didn't hear anything about it? Is that 
right? 

A If I did, I don't remember it. It ]ust doesn't 
register with me. 

Q I have a last few questions on the December 7 
meeting that you attended in the White House residence. You 
have already testified that one of the positions you ad- 
vanced is that there were no moderates left in Iran. Were 
there any other arguments that you made against proceeding 
with the initiative? 

A Yes. That whatever arms we supplied would end 
up m the front lines against the Iraqis, and that would be 
to the detriment of Iran arms balance. 



UMACCinrn 



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n/drg 

nd 



McGinn 
fols. 



UNtHssiFiee^ 



130 



Q Was there any discussion at that meeting about 
Ghorbanifar? 

A Not that I recall. 

Q I believe that Mr. Allen has testified that you 
told hira later in December that you had advanced the positior 
of the December 7 meeting that Ghorbanifar was not reliable 
and that that was another -- 

A I advanced that position, but I don't recall it 
being the 7th. I know I told Poindexter and McFarlane he 
was no go6d. But I don't recall it being brought out at 
the December 7 meeting. 



25 



mmm. 



305 



fWftASSMES'^ 



131 



1 BY MS. CAROM,: 

2 Q When was the earliest you would have told that 

3 Ghorbanifar was unreliable to either McFarlane or Poindexter? 
'* A I can't put a time on it. It had to be when they 

5 talked to us about using Ghorbanifar. They started name 

6 tracing people that they met or were involved in with us 

7 and our nearest division came up with the fact that 

8 they had burned those out on this individual, and he was 

9 not reliable and I can remember telling Poindexter and 

10 McFarlane that. But I don't think I mentioned that at the 

11 7 December meeting. 

12 Q You have no recollection of Ghorbanifar coming up 

13 at that meeting, is that right? 

14 A No. 

15 Q What was the outcome as you recall of the December 7 

16 meeting? What was decided? What was the next step? 

17 A There was no decision. In fact -- no evident 

18 decision. The President left, and he was rushed out to 

19 make his 12 noon Saturday broadcast. He kind of said, 

20 "Well, why don't you just keep talking about it," and I 

21 think someone commented, either Shultz or Weinberger, 

22 "Well, what is there to say? We don't think this is a good 

23 idea." And we then got in the elevator and went down 

24 and I got out first and walked away, and Shultz was in 

25 back of me and Weinberger walked separately in back of him. 



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UKCH^HFT 



That was kind of the end of it. And I was 
quite surprised to find out that McFarlane left the 
next day to go to London. 

Q That was not discussed at the meeting that you 
recall? 

A Nope. I didn't learn about it until these 
hearings. 

Q 
come up 

A 

Q 

A 

Q 

A 



Do you have a firm recollection that that didn't 



No, I don't know. But — 

That is your best recollection? 

Best recollection. 

What did you — 

It could not have come up because that would -- 
it would have been suggestive that the proposition was 
going forward and at that point in time Shultz and Weinberger 
had laid down across the tracks and they just, you know, 
were arguing this was a dumb idea and that is why when the 
President left he said, "You keep kind of discussing it." 

But as far as they were concerned, I am convinced 
that it was going no place; that there was no decision. 
And I am sure they walked away with the same feeling. 

Q When was the next point in time where you had some 
inkling that the operation was in fact proceeding after 
the December 7 meeting? 



JHH^bftWPff ttPT 



307 



iiiieu^»T 



133 



A Well, the most concrete one was on the 24th of 
January when Poindexter called rae down and showed me the 
new signed finding. 

Q Had you not been aware prior to the 24th of a 
finding being in the works? 

A No. There were two othe- drafts I now understand, 
but I was not aware of them. 

MR. LEON: Did you happen to turn to him at that 
point, Mr. McMahon, and say, "How about that November one? 
Can I take a look at that one while I am here and see If 
that one is signed?" 

A Well, this one was very expansive, you know. 
The November was very tight, and this one was kind of 
give them the whole nine yards, including intelligence 
and everything else. 

MR. LEON: Did he say to you this is the way 
I wanted the other one to be? 

THE WITNESS: No, never mentioned it. 
MR. LEON: The November 25 one never came up? 
THE WITNESS: It never came up. But I tried to 
talk him out of the intelligence part, but he wouldn't 
listen, and he felt that we didn't have that much to lose. 
Give some TOWs, and again there it shows you as arms for 
hostages, because he said, "You know, all we would lose if 
they don't come through is a thousand TOWs and some 



pnUSSiElEL 



308 



iweigi^Kffir 



134 



intelligence and coming through was getting the hostage. 
You know, you give them something, you get something." 
It was going in tranches. 
BY MR. LEON: 

Q You were trying to convince him to keep the 
exchange of inte'' ligence out of the January 17 finding? 

A Right, right. 

Q But it was signed by then at that point when you 
saw It. 

A .Right. 

BY H». CAROM^: 

Q Did you perceive any differences in the operation 
laid out by Poindexter on January 24 and the operation that 
was being discussed at the meeting with the President 
on the 7th, putting aside the decision of providing 
intelligence to the Iranians? 

A No. It was a little more specific and more 
encompassing. The discussion on the 7th centered around 
let's open a dialogue with Iran and try and get them into 
the Western orbit kind of thing. That was the whole context 
of that. 

Q Do you recall what position Admiral Poindexter 
took at the December 7 meeting? 

A I recall that he said very little. He made 
some supportive comments, but they were, you know, very 
short in transmis#i|AIA|e 4 IW%^-ff PI^X very much. 



IttlCKAmWWp^ 



309 



UtKUSStWkT 



135 



1 
2 
3 

4 
5 
6 

1 

e 

9 

10 

11 

12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 



It was basically Bud McFarlane laying this all out, and 
then Shultz and Weinberger arguing and the President then 
took over the conversation, and you know, he kept 
postulating various possibilities of improving relations 
and what might come of that, and Shultz and Weinberger 
just challenging him. 

Q Was McFarlane advocating going forward? 

A I thought he was an advocate until this all 
happened, and when I look back on it, I think I am 
accurate in saying that .La messenger. He was saying, 
"Mr. President, here is an opportunity." But I don't think 
he had his heart in it when I look back on it. And 
that is a late perception. 

Early on I thought that he was very much in 
back of it. But I am not sure that is the case now. 
BY MR. LEON: 

Q Did you report that meeting to Director Casey, 
what happened at it? 

A Oh, yes. 

Q When would that have been? 

A In fact, probably the 10th, 7, 8 -- ihe 9th, 
whenever he got back in town. I think he may have been in 
New York, and tftat is why he didn't make the meeting, but 
whenever he came back. Then he went to kind of a follow-up 



meeting on the 10th. 



Hwub AdwH^Hwr 



310 



BNttASStFSr 



136 



1 
2 
3 
4 
5 
6 
7 
6 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 



BY Mf. CAROM^: 
Q That would have been after McFarlane returned? 
A Had gone. 

Q Returned froin London and was providing the 
President with a briefing on what went on. 

A I think he said that McFarlane, if I remember a 
memo which I have seen recently — McFarlane said, "Look, 
we are not going to ask you guys to do anything other 
than provide intelligence right now." So it was like it 
was all on hoiu, 

M#. CAROM: I .'cn't have any further questions. 
MR. LEON: Just one follow-up on one thing 
that you just raised, Pat. 
BY MR. LEON: 
Q When you saw the January 17 finding on January 24, 
I think you said — 
A Right. 

Q — were you aware at that point that Director 
Casey had known about it the January 17 finding prior to 
that? 

A No. 

Q Now, having learned about it on the 2 4th, you 
were empowered with a sense or clear in a sense to discuss 
It with him, were you not? 

A Sure. I sent him a cable. 



masmi 



31] 



bap- 7 



Mmrn 



137 



1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 



Q So did you share with him after the 24th of 
January, did you share with him your analysis or evaluation 
of It about the giving of intelligence over? 

A Yes. I sent him a cable, I believe it was the 
24th, when I came back from the meeting with Poindexter. 
"^ ^^^^^H^^H ^ ^°^'^ ^^^ there was a new dimension 
on this; that they wanted us to provide intelligence, 
etcetera, etcetera, and I explained how I objected to 
Poindexter on this, giving the Iranians a military edge, 
tactical edge, and that was all bad. 

Q Did he respond along the lines of, well, I 
had known this before hand, and I had okayed it. I had 
blessed it? 

A No. In fact, I had asked it be confirmed that 
he had seen it because I thought this was a whole new 
dimension of dramatic proportions, and I wanted the Director 
to have the opportunity to weigh in on it. That is why 
I sent him the cable. He didn't respond. He had moved 
on then, the next day when I learned he didn't answer me 
or didn't acknowledge receipt. 

i t^^^^^^^^^^^H 
and then I got confirmation back the 
Director had seen it. 

Q Had seen the January 17 finding? 

A Had seen my cable. Then I was content if he 



UNOASSra 



312 



lllffifflMWT 



wanted to weigh in he had the opportunity to do so. 

M«. CAROM^: Did you ever have a subsequent 
conversation with Director Casey about your objection to 
the providing of intelligence? 

THE WITNESS: I think I talked to him quite a 

bit. I thought I told him it was a lousy ide'. 

[I ^ 

M». CAROM^: What did he say? 

THE WITNESS: Well, I don't know at that time, 
but at some point in time, and I think it was in the 
December/January time frame, he said, "I think this is . 
crazy." He used those terms. 

M«. CAROM: What was he referring to being 



crazy? 



THE WITNESS: The sending arms to Iran. 

BY MR. LEON: 

The whole initiative idea? 

The whole thing, yes, sir. 

After the December 7 meeting? 

I don't know. I can't put it in a time frame. 



Richard. It was in the January/December time frame. 

MA. CAROM: How about specifically about the 
providing of intelligence? Did Director Casey say 
anything about that to you? 

THE WITNESS: No. The analysts. Gates and myself, 
were kind of depressed on that, but we had a specific 



lELASSMD. 



313 



UNHiASSnEflET 



Presidential directive, and we went ahead and did it. 
We were able to mitigate it somewhat with Ollie North 
by providing intelligence, with his concurrence, that 
would have limited military value. It would be such that 
the Iranians could establish our bona fides by having 
knowledge of the Iraqi positions, but it would not be 
enough information which would permit a major breakout 
on the border. 

And North went along with that, at least for 
openers. 

Q The reason why I asked those questions at the 
end, Mr. McMahon, is because here you were learning 
about something on the 24th that the Director knew about 
before hand, and he learned on, I guess what you could 
characterize as a need- to- know basis because the group 
of people who knew about that initiative was extremely 
small, correct? 

A Right. 

Q So you were being brought into that very small 
group on the 24th for the first time. 

A Right. In fact, I was quite surprised that the 
findings in the first week of January took place, and I 
didn't know about it. I wondered if I was traveling or 
something like that, but I don't think I was. 

Q In your service as Deputy Director, was that a 



UNDUS&UVft. 



314 



bap- 10 



WtEASStPSlT 



140 



rather uncommon experience that something was so highly 
classified that the Director knew about it and you didn't 
know about it at all and learned about it at a later time? 
A That was the only instance that I can recall. 

MR. LEON: I don't think we have any further 
questions. I would like to conclude this by, again, on 
behalf of the Senate and on behalf of the House Committees 
and their staffs thank you very much for being 
extremely cooperative and giving so freely of your time 
under, I know, a very, very busy schedule that you have, 
at Lockheed and your cooperation and your staff back 
at the office have been very helpful to all of us. 

We just can't thank you enough for fitting us 
in as you have so generously in your schedule. Thank 
you again, Mr. McMahon. 

THE WITNESS: Thank you. I wouldn't want it 
any other way. Appreciate it. 

(Whereupon, at 12:45 p.m., the deposition was 
concluded. ) 



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jfecORD 

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ncral Counsel 



Nicaragua 



>.0G7&08 



ftours today, the Director and I attended a 
nect^B^^^^R^rney General Smith, D. Lowell Jensen and 
Mary La^^HBroncerning Nicaragua. The DCI explained Oiat . 
the funds to support the current Nicaragua program were 
running out and that he wanted to discuss the legal liaits 
of the options available to the government. The DCI awntioned 
that he was at a y^«^fp^ m«;p/: ■■«»»<]^ where he had been 
requested to discuss the matter - informally with th« Attorney 
General. The DCI said one proposal being considered involved 



other nations in the region 
Contras. After a discussio 
,that he saw no legal concer 
discussed this natter with 
made clear that 'they would 
support the Contras and no 
used for this purpose. The 
any nation agreeing to supp 
United States to repay that 
DCI made it clear that if 
might be used, he would' adv 




ding aid to the Nicaraguan ' 
Attorney General stated 
e Onijced States Government 
nation* so long as it was 
ng their own fiinds to 
ppropriated funds wOuld be 
ney General also said that 
could not look to the 
tment in the future. The 
s a possiblity this option 
e CIA oversight committees. 



■ 2. Mary Lawton suggested that a specific written 
statement might be developed to make clear to cooperating 
nations that any decision to provide further assistance to 
the resistance in Nicaragua would be made without any 
monetary promises or inducements from the Onited States 
Government which would expect them to take steps to assure 
that no O.S. appropriated funds would be involvedin the 
program. ' 

3. The DCI thanked the Attorney General 
for their assistance and said he welcomed the 
and their general views on this matter. 






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15 March 1985 



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MEMORANDUM FOR: THE RECORD 

SUBJECT: Breakfast with Secretary and Deputy 

Secretary of Defense, 15 March 1905 




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7. Question of the support to the Contras cane up. The Director 
noted that we should have another meeting on it but following last week's 
meeting of the LSG we tended to be leaning towards non-lethal aid. I 
described the assignment given to Motley to develop different options 
which could be packaged and tnen played against Senators Lugar and 
Durenberger to see what co«t)1nat1on of options in a single package mlgtit 
be acceptable to Congress. But I noted at the meeting that there was no 
agreement that we would be limited to non-lethal aid. The Director said 
that McFarlane was 'to meet with Lugar and Durenberger today. 

^heSecretary stated that he had heard that! 

^M|m had earmarked S25 million for the Contras in Yj nil lion 

^Krementt 



c 



^,j;'ohn 



N. McHahon 



DDI 

ODO 
-fA/DDCI 

EA/DCI 

Exec. Sec. 
Exec. Registry 



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_ '^ ~Z 




'fttfnar 



c: vr Mms* taktf OMvar OtiMf — 
COMMINTS Should b« lt*n by; 



(%C\ti\ 








342 



I 



To 



N«m« «nd Add'Mt 



Rot;>Tt McTai 



'tr'^ ^mmm^ 



SENSITIVE 



^ 



if 



^ 



PHEPARE KEPLV 



C0NCURH6NCI «EC0MVIfN0ATlON 



CMMcr«PtY ;«ffu«N 



OIVATCH 



MCMAKKS 
ec:' Oliv«r Noi't (»2,aif: 



EYES ONLY 

N 741S 



NSGIC5 CONTROL NO 400587 

COPY NO / OF ^ 

HANDLE VIA SYSTEM IV CHANNEL ONLY 

EYES ONLY 



NSC INTELLIGENCE 
DOCUMENT 



5 



'armngNoiK 



Warning Notice 

inwIliqtTKt $o«rct» and M«0>od» involved 

NATIONAL SECURITY INFORMATION 

UnagthOf>itd O.KlO»urt S«b|«ct to Cnmm*! V»n<tio«n 



EYES OWLT 



^ ^SiM^vm - rorstcRET 



,«<■ A 



343 



„.o..c.M ""wtnoiofrity 


SYSTEM IV 
NSC/ICS-40058- 


NATIONAL SECLRITV COLNCiL 




T0^=««« 


^ 7419 


, EYES 


ONLY 


MEMORANDOM FOR ROBERT C. MCFArAnE 




fROM' OLIVER L. NORTar 




SUBJECT I Status of Ho«t«6« R«ccv«rv Ifforta 





Th« two ind«p«nd«nt ho8t«9« r«cov«ry activltiti bri«f«d latt. 
S«turd«y b«v« proceeded aa follovts 




OacTieiTFy 



344 



liNdl^SfRSEYES ONLY 




PEA opration . At th« r*qu««t of th« two DEA offlears who 
orl9lnat«d th« contact in Lebanon, I a«t with their astat in 

Washington. Last w««)c, thair intaraadiary axprataad concarn with 
procaadlng with tha oparation basad on tha irstability incida 
Labar.on. In raspcnaa to thair urgings (the CIA officers ware 
mada awara o2 tha possibility that tha Dawa prisoners could b« 
exacuted shortly after tha end of RanadaA — June 19) and the da*t>« 
of ona of his contacts inside t.ebanon, he has now agreed to 
proceed as fellows: 

Re will depart Saturday, June 
contact in Europe as well as i _ 
secondary contact inside Lebanon, 
reton to " 
ogfic< 



Once contact has been esteblished and a aeeting arranged, 
the two OKA officers will depert for Cypns via Vienna v^*^* 
they will deposit the $200K and establish an account for the 
$2M ($SOOX of which will be availableimediataly in O.S. 
dollars caah for use in Lebanon) .^^^^B^will then proceed 
to the meeting indicated above. ^^^^^^ 




e e » sMUf i x T - 



UNCH»S»«6D EYES ONLY 



345 



Cfife^XCJXT 



UNCfeSMSir^^ ONLY 



Th« priatry OCA cont«c 

hottA^ci can b« bribed fr«« 




[•v«t that th« $200K 

••tabliah bona fldas t( 

p4ss«a« of at least 2 hostic 

^.-.c tne r.zs-.acti art t.^rcuch l 

iwill b« provided wtth $s60K in cai 




. turn the hoatagea over to| 

•■^«r• the-.- wiH be placai atca; 

rented yacht Cor tranaport to Cypnia. 

One of the DBA of ficera|^^^^ will have proceeded to 
Cyprus to rent a aafehoui^a^a teoiporary holding 
location in the event that all hoata^es are not 
recovered in the first attempt. 

The remaining Sl.SM made available by the donor will b« 
released from the account in Vienna as aoon 
hostages are aboard the yacht and at aei 

funds will be used to 




It is aaauaed that th« price cannot be negotiated dc 
nuaber of p«opl« requiring bribes. Beth the DBA an^ 
b«lieve that this effort will produce two hostages and that 
additional hostagea will b« released for $1M each. The aafshouae 
will be used to harbor/treat the first two hostages while 
arrangeaents (both fina ncial and o perational) are being Bade for 
the reoaining hostages. ^^^■^^Abelieves that 72-96 hours would 
b« required for • second rounT^^hls assuaes that additional 
funding is available on a near real-tiaa basis. The donor is 
aware that the price being asked is flM each. He is unaware that 
we are proceeding with a plan to release only two if the price 
does not come d< 

Tof Stem 



lueyi^^iB^ 



YES ONLY 



346 



UN 



l£\i MfffftT 



ouasjHfYEs 



s c;n!l^ 



N 7422 

Th« DEA of fic«r^*rt£r«p«r«d to tJ»k« l««v« «> ioon as th«y arc 
cont*ct«d by^^V^H^ Travel arrangements ar.d operational costs 
«r« currantly b«inq rinanced from funds nornally available to the 
Nicaraguan resistance. Our normal point-of-contact in the 
resistance for these matters Is not yet aware. 

SvunaarY . As discussed with ADM Polndexter, It appears that both 
these plans c*n proceed slaultaneously without undue concern for 
conpromlse or- mutual jeopardy. Given that arrangeaents for the 
DEA operation will take considerable time (contacts Inside 
^♦banon, financial transactions, and rental of yacht/sefehouse) 



RJCOMMCTDATIONS 

1. Th^t you approve proce-dinc with the rlar.s outlined above. 



Approve 



>i^^ 



Disapprove 



2. That you contac^the Attorrev General and ask that the two 
temporary detail to the NSC for^^erXo^oT 30 days. 
Approvy y 8^^ */q Disapprove 



l^My < 




TQ^r^^eeitta 



UNOUiSiBEaYES ONL 



347 



UNCLASSIFSED 




7 DECEMBER 1^86 5 3 32 
7:00 D.m. 



RE THE HOUSE APPROPRIATIONS COMMITTEE 
8 DECEMBER 1986 



IFIED BEFORE OUR TWO CONGRESSIONAL 

n-rrTiTinpniTTrrimi 21 November, it wasn't until three 

DAYS LATCT^BKHKEirOF THE DAY ON MONDAY, THAT I LEARNED 
FROn_THE_P^R_ES|DENT'S CHIEF OF STAFF THAT THE ATTORNEY GENERAL 
HAD UNCOVERED GOOD EVIDENCE THAT SOME OF THE IRANIANFUNDS .1ADE 
AVAILABLE FOR ARMS PURCHASES HAY HAVE BEEN.DIVERTf D TO THE ■ 
CONTRAS. AT YOU KNOW;' ON THE N^|DArTHE PRESIDENT ANNOUNCED 
THAT ADMIRAL- PO I NDEXTER AND LI El 
RESIGNED FROM THE NSC; STAFF.. ,- 

RIGHT now/ my inspector GEN 
AND SYSTEMATIC REPORT ON CIA'S 
0PE,RATI0N. BUT«I-CAN-TELL YOU Ttf^^ 




OLONEL-NORTH.HAD-:^;- ^'J, 



PULLING TOGETHER A broad: 
(1ENT-IN THE IRANIAN. ;' 
<E TESTIhOKY 1 GAVE OUR' - 




OVERSIGHT COMMITTEESON 21' NOVEMBER REMAINS ACCURATE ON WHAT WE 
KNEW AT THAT TIME. I CAN ALSO TELL YOU THAT CIA WAS NOT 
INVOLVED IN ANY DIVERSION OF IRANIAN -FUNDS. 



:^ BEFORE I GIVE YOU THE ESSENTIALS OF CIA'S I 
LIKE TO SAY SOMETHING ABOUT THE RATIONALE BEHIND 
OPERATION. OVER THE LAST FIVE YEARSl MUCH THOUg' 
HAS BEEN DEVOTED TO HOW WE MIGHT DEVElV CONTACfj 
RELATIONSHIPS WHICH WOULD PROVIDE A BETTER UND*E 



♦a»lk.y*iD FOR RELEASE 
0^ 'go APR 1987 



DO 



cilfy jijJ4^ 



MSCiSSO 



■s=E:::r-R-E^ 




348 



UNCLASSir^cO 



1^ 



WHAT WAS HAPPE;n:,G THERE AND HOW WE ttlGHT ESTABLISH CONTACl"^ ^333 
AND RELATlMSjlifiSjiHlCH COULD LEAD TO IMPROVED RELATIOMSHIPS 
LATER 



IDENTIJ 

IRAN. 

.l&ST-CRAf^ATK-fVANNER,] 



THE inPORTANCE OF OUR 
IIN6 CONTACT WITH LEADERS IN A FUTURE ■ 
IN HIS 
ISAID THAT Vx. DO NOT KHOW 



WHO WILL EMERGE TO LEAD IRAN IN THE FUTURE, BUT THAT WE rtUST 
GATHER ALL THE STRANDS AND HOLDTHER 1J< OUR HANDS SO THAT WE 



WILL BE READY. THAT'S ABOUT WH 




DTD FOR SOME FOUR YEARS, 



FARLANE, AFTER ONE OF THE 
TY HAD WITH HE AND MY 

LD HE ABOUT DISCUSSIONS 
SRAEL URGING THE 



IN'THE EARLY FALL OF 1985, 3 
WEEKLY MEETING^" WHICH HE AND HIJ 
DEPUTY, ASKED HE TO STAY BEHIND 
HE HAD HAD AT THE HIGHEST LEVELS 
DESIRABILITY OF DISCUSSIONS WITH OFFKIALS IN IRAN AND OFFERING 
CHANNELS OF ACCESS. HE TOLD ME THAT, FOR OBVIOUS REASONS. ONLY 
A HANDFUL OF PEOPLE IN THE ISRAELI AND AMERICAN GOVERNMENTS 
WERE TO BE TOLD ABOUT THIS EFFORT. TdISTINCTLY RE( 
ncFARLANE EMPHASIZING THAT THE PURPOSE OF SUCH 
WOULD BE THE FUTURE RELATIONSHIPS WITH IRAN AND 
IMPORTANCE IN THE EAST-WEST AND MIDDLE. EAST-PERSl 

EQUATION. . 

HiVlEWtfl F0« RELfASe 

20 APR 198/ 




349 



^r'nrnromMm began on fr 



I3l> 



CIA'S INVOLVEIEN^'ftrTflrflfTETATlON BeIa^ ON FRIDAY, ^ 5834 
22 NOVEfTOg|I||AJ TinE LIEUTENANT COLONEL NORTH ASKED FOR 
^^^^ ^^B^^SSt^^ COMMERCIAL CARRIER THAT COULD CARRY 
CARSOlTi^NSPECI^R MIDDLE EASTERN DESTINATION. HE WAS 
PROVrgOTrHE NA-IE of a CIA air cargo proprietary in EUROPE I^AT 
R0UTINE|^6CEPTS^>^Ng&L COMMERCIAL BUSINESS. OUR OFFICERS 
WERE ToS^j^^Af THE CARGO WAS TO BE OIL FIELD DRILLING • 
EQUIPMENT. ODirPROPRIETARY WAS SO IHFORHED BY HEADQUARTERS. 



OUR PROPRIETARY DID INDEED FLY TO 
23 NOVEMBER^ FROM THERE IT CARRIED A 
2'* NOVEMBER. TO THE ;BEST. OF OU 
ISRAELIS NOR THE'IRAnVan's^KNEW; 
PROPRIETARY. IT WAS NOT UNTIL 
ANYONE IN CIA MANAGEMENT- WAS AW 
OTHER THAN OIL DRILLING EQUIPME 
THEM. THE AIRLINE WAS PAID AT 
AMOUNTED TO ABOUT $127:700.. , 




TEL AVIV ON SATURDAY, 
XARGO TO IRAN ON 
[6E, NEHHER THE 
EIDEALInG WITH^A VlA^' 
lEllVERY OR THE CARGO THAT 

THE CARGO WAS ANYTHING 
[ad. BEEN REPRESENTED TO ■• 
MAL COMMERCIAL RATE WHICH 



I WAS OUT OF THE COUNTRY AT THE TIME. THE ACTING DC 
McMAHON. did HOT LEARN THAT A CIA PROp'rIETARY FLIGHT 
ISRAEL TO TEHRAN HAD OCCURRED UNTIL MONDAY MORNING 
25 NOVEMBER. HE THEN IMMEDIATELY INFORMED THE CI 
COUNSEL A,^D DIRECTED THAT WE WOULD NOT f ACILITAl 
FLIGHTS INTO IRAN IN THE ABSENCE OF A PJ^ESIDENT 
RimulD f OR RELEASE 

DM .f?P AP8 mf 



I, joh;< 




HSC ^iSC. 



c 1 1 V aa 



'>^ UNCliiiSlFlED 



350 



UNCLASSir.cD 



THE FOLLOWING DAY. 26 NOVEHBER. 1 RETURNED FROM OVERSEAS 
A DRAFT FlNUiHI^mPARED BY OUR GENERAL COUNSEL'S OFFICE 
AND I .SEl^^FV^n^BlTE HOUSE FOR CONSIDERATION AND APPROVAL. 



I^\ 



C 5835 



THlKWSODE T OOK P LACE OVER A WEEKEND AND UNDER SOflEWHAT 
UNUSUA^HIU1STAn3B'..LTC north HAD ALSO INFORflED US THAT AN 
inPORTANmKiMXm^NDERWAY IN GENEVA THAT WEEKEND INVOLVING' 
IRANIAN OFFICIALS AND THE POSSIBLE RELEASE OF AMERICAN 
HOSTAGES. ~HE:7iADE IT CLEAR THAT HIS REQUEST FOR FLIGHT 
ASSISTANCE HAS RELATED TO THIS MEETING. AT THE TIME, HE SAH NO 
REASON TO STeP WHAT CLEARLY HAS AONGOING, SENSITIVE NSC 
OPERATION BY DENYING THE USE OF ^KftPJ^IETARY.AIRLINE ON A. 
COMMERCIAL BASIS 



THE DRAFT PINDING WE HA 
DISCUSSED AND REVISED OVER THE N^ 
PRESIDENTIAL FINDING FINALLY S16 




HE WHITE HOUSE WAS, 
WEEKS. THE 
17 JANUARY 1988 DIRECTED 



THE CIA TO PROVIDE SUPPORT FOR A PROGRAM AIMED AT 

(1) ESTABLISHING A MORE MODERATE GOVERNMENT IN IRAN, 

(2) OBTAINING INTELLIGENCE TO DETERMINE THE CURRENT IRANIAN 
GOVERNMENT'S INTENTIONS WITH RESPECT TO ITS NEIGHBORS^MklTH 
RESPECT TO TERRORIST ACTS, AND (3) FURTHERING THE RE^^^ 
AMERICA.*; HOSTAGES HELD IH BEIRUT AND PREVENTING FUfi 
TERRORIST ACTS BY THESE GROUPS. 



REVlEWtO FOR RELEASE 
Dtto 21 APR 1987 







351 



miCLRSSIF^tO 



IT WEHT ON TO SAY THAT THE US6 WOULD PROVIDE MODERATE 
ELEflENTS WimiiiAiULMnHOUT THE GOVERNMENT OF IRAN WITH ARMS. 
TERIEL IN ORDER TO ENHANCE CREDIBILITY 
IR EFFORTS TO ACHIEVE A MORE PRO-U.S. 
N IRAN BY DEMONSTRATING THEIR ABILITY TO OBTAIH 
COUNTRY. IT WAS PROVIDED THAT 
NUED IF THE U.S. GOVERNMENT LEARNS 
ABANDONED THEIR GOALS OF MODERATING 
THEtR-€0VE1««M£RT AND APPROPRIATED THE MATERIEL FOR PURPOSES 
OTHER THAH THAT PROVIDED BY THIS FINDING. . 





ED THE CIA TO REFRAIN 
SS UNTIL OTHERWISE 
CONCURRED IN BY. THE 



IN THE FINDING, THE PRESIDEN 
FROn REPORTING- TMFfNDING 'To' TH 
I DIRECTED. THE FINDi'kG- WAS REVIE 
ATTORNEY GENERAL^'- ' ■' 



AT THE TIME THE PRESIDENTIAL IWHWG WAS BEING DRAFTED. T.SE 
CIA'S OFFICE OF GENERAL COUNSEL PROVIDED THE LEGAL OPINION THAT 
THE PRESIDENT HAS THE AUTHORITY TO WITHHOLD PRIOR NOTICE OF 
OPERATIONS FROM THE CONGRESS. SECT10N_50i OF THE NATIONAL 
SECURITY ACT EXPRESSLY PROVIDES THAT NOTIFICATION OF 
INTELLIGENCE ACTIVITIES TO THE CONGRESS SHALL BE 
THE EXTENT CONSISTENT WITH ALL APPLICABLE AUTHORITi 
DUTIES. INCLUDING THOSE CONFERRED BY THE CONSTT 



REVIEWeC FOR RELEASE 
D«t« 20 APR 1967 



caNf ^-^-5^ 



/isc aS^c 




fiUQtftSWtB^ 



352 



UNCLRSSlFitO 



THE ACT ALSO STATES THAT THE INTELLIGENCE COflMlTTEES BE ^ 
INFORMED O^A^m^^JES FOR WHICH NO PRIOR NOTICE WAS GIVEN AT 
DETERMINED BY THE PRESIDENT. 
AWYERS HAVE ALWAYS HELD THAT 
Y CIRCUMSTANCES COULD LEAD THE PRESIDENT TO 

AN OPERATION SHOULD BE WITHHELD. IN 
PERIOD DEPENDING ON THE CIRCUMSTANCES • 
PRESIDENT. IN THIS INSTANCE,' THE PRESIDENT 
DETERHINEB-TttAf-IF THE FACT OF THIS PROGRAM BECAME KNOWN, THOSE 
CARRYING OUT THE DIALOGUE (BOTH U.S. AND IRANIAN) AND.THE 
AMERICAN HOSIAGES IN LEBANON WOULD BE P.UT, AT:A\6REATER-RISK. 





IHATiWERECUHDERTAKEN 3Y' 
CONTM NED> I N|THE^ FINDING 

5fu1S.^S'"" 
Ht\lSRAELI:;pR;; 

FFlCIAi:\METU" GERMANY.' 



NOW LET ME GO OVER THE ACTP 
THE CIA IN CARRYING OUT THE DIRI 
OF 17 JANUARY 1^86. ON 5-7 FEBF 
REPRESENTATIVES, A REPRESENTATT 
MINISTRY, AND A SENIOR-LEVEL IR/ 
AT THIS MEETING, THE U.S. SIDE EnPHASJZED^fTSJDESIRE- TO ENTER 
INTO A STRATEGIC DIALOGUE WITH THE IRANIAN SIDE.''" JHE IRANIANS 
RAISED THEIR DESIRE TO RECEIVE U.S. WEAPONS. THE U.S. AGREED 
TO EXPLORE THIS POSSIBILITY. WORKING^WITH THE I! 
FOLLOWING MECHANISM FOR TRANSFER OF THE WEAPONS WAS|g^^iyL.HED : 



-- THE IRANIAN INTERMEDIARY WOULD .DEPOSIT FU, 

ISRAELI ACCOUNT. 
— THE FUNDS WOULD THEN BE TRANSFERRED "TO 
_ U.S. -CONTROLLED ACCOUNT IN AN OVERSEAS BANK 
REVIEWED FOR R£^^3^ ' I) 





353 



UNCLASSlFiiS 



-- USING THESE FUNDS. THE CU WOULD WORK WITH THE ARMY 
L06iS-U£i*tOMnAND TO OBTAIN THE MATERIEL. 

PLD THEN BE TRANSPORTED TO ISRAEL FOR 




PRBaBW-EGATjOliSiTttAT IRANIAN MONEY PLACED IN CIA ACCOUNTS 
HERE DrVSBHBfilfiiflER COVERT ACTION PURPOSES ARE COMPLETELY • 
FALSE. A TOTlTDf $12. 2 MILLION WAS DEP OSITED INTO 
CH^-<:^NTRetlED'ACCOUNTS^^H^^BBETWEEN FEBRUARY AND 
OCTOBER OF THIS YEAR. THE FIRST THREE DEPOSITS, TOTALING 510.2 
[LLION, HERE MADE INTO THE ACCOUNT 



ON 10 FEBRUARY, $1.8S M 

ACCOUNT. 

AN IDENTICAL DEPOSIT HAS] 

ANOTHER DEPOSIT OF $6.5 

ACCOUNT ON 15 MAY. 





^ON 11 FEBRUARY. 

IN HAS MADE INTO THE 




- REVIEWED FOR RELEASE 



Atsc>^ 



OMO-s^^^tO 



82-720 0-88-13 



354 



yNCLASSIFSED 

IRANIAN PAY.1ENTS. THE FINAL DEPOSIT OF J2 MLLION INVOLVEt IM^^^^ 
THE IRANIAN^JI^^^WAS MADE INTO THE 3EC0.ID ACCOUNT ON 
29 OCTOB&B^HH^ 



\ 



A^WP^SITS INTO TH^m^^HACCOUNTS WERE hADE VIA 
ELECTRpj«ffUNDS TRAjg^Ell. THE AGENCY MERELY PROVIDED THE 
ACCOUNT^^fe^^f use STAFF, WHICH THEN ARRANGED FOR 
DEPOSITS INT^^WCOUNT. OUR REPRESENTAT! VESl 
WEM -INF ORflED -WHEN A DEPOSIT WAS MADE, AND THIS INFORMATION, 
TOGETHER WITH AUTHORITY TO SPEND THE FUNDS, WAS THEN 
TRANSFERRED ELECTRICALLY TO CIA HEADQUARTERS. WE UNDERSTAND 
FROM THE NSC STAFF THAT^THE DEP OlMh IkNT THROUGH SEVERAL 
INTERMEDIARIES BEFORErRE^ACHING^OE^KQUNl 

THE DEPOSIXS OF' IRAN UN HON 
TIMED TO COVER THE ESTIMATED CO 

OF A TOTAL OF 2,008 TOW.MISSILE 

E3UIPaENT.. ALL OF THIS. WAS- ACQUIRED .FRO:^ THE DEPARTMENT OF 

DEFENSE. NONE OF THE WEAPONS CAME FROM CIA STOCKS. 





RKHVACCOUNTS WERE 
REPARATION AND DELIVERY 
VARIETY OF HAWK MISSILE 



ON 15 FEBRUARY, WE DELIVERED 1,000 TOW MISSIL7& 
KELLY AIR FORCE BASE FOR SHIPMENT. THESE WE'A 
BEEN PICKED UP AT REDSTONE ARSENAL, TRUCK^ 
^miJ^^FOR PACKING, THEt;. TRANSPORT^ 
WHERE WE SURRENDERED CONTROL. .THIS SET^I 
TOGETHER WITH CHARGES FOR GROUND TRANSPOJ 




KiviEAE.DFORREi£AS£' 

it hfn i9ir 



DO 






355 



UNCLASSIF.'ti) 



GUARDS, THE SERVICES OF DEPARTMENT OF DEFENS 

LS, AND PACKING - IS ESTIMATED TO HAvf 




/V/ 



C 5 8 4 



HAYrffrTRANSPORTED S08 TOW MISSILES AND HAWK 
IE PAR TS (IN CLUDING A RADAR) TO KELLY AIR FORCE 
,FOR|S^kD(T. THESE WEAPONS HAD BEEN TRUCKED 
IRSENAL TO KELLY AIR FORCE BASE YI 
WHERE THEY WERE PREPARED FOR TRANSIT. 
THlS'SHIPHENT IS ESTIMATED TO COST $6.1 MILLION. 
INCLUDING THE COST OF THE WEAPONS, GROUND 
TRANSPORTATIO N, THE SERVICES OF DEPARTMENT OF DEFENSE 
mi^foFFicERS, A 
ON 6 NOVEMBER, WE;>REPA 
SHIPMENT OF 500 TOW MIS: 
MEDICAt. SUPPLIES. AS W 
THE WEAPONS WERE TRANSPO] 
FORCE BASE VIA CIA' 




TRANSPORTED THE FINAL 
D A SMALL AMOUNT OF 
F THE OTHER SHIPMENTS, 
OM REDSTONE TO KELLY AIR 
THE n&OlCAL 



SUPPLIES WERE PURCHASED IN WASHINGTON AND 

THEN PACKED FOR SHIPMENT FROM KELLY AIR FORCE BASE. 

THE ESTIMATED COST OF THIS SHI_PHEHT IS 51.9 MILLION. 

IN THIS INSTANCE, AND IN THIS INSTANCE ONLY, 

ESTIMATED COST ALSO INCLUDES CHARGES FOR A 

FORCE C -1'41 TO F LY THE SHIPMENT FROM KELL\ 

BASE ToHHHa.ND THE COSTS-QF A PLANEi 

PROPRIETARY, WHICH TOOK THE SHWMENT FROr 

ISRAEL. ■ " ■ 




*<c»ii.».uj run rttLEASE 

o«to to hf 



JLCu 






hiD 



44 / 



356 



liNC 



C 5S41 



SPREAD ACROSS ALL OF THE SHIPMENTS ARE 5^02,00O IN 
£OI^^^^«LTO PREPARE THE TOM HISSILES AND HAWK 
^^k5Bll52'«.000 OF THESE ESTIMATED COSTS WERE 
[HCURRED because U.S. ARMY REGULATIONS REQUIRE THAT TOW 
,1LES PAQMCED BEFORE A CERTAIN DATE MUST BE 

iTiJ)K£ORE THEY CAN BE WITHDRAWN FROM STOCKS. , 
^itft^Biftmia^HANGES WERE MADE AT AN ARMY DEPOT IN 
ANNISTON, ALABArtA. 



CIA OBTAINED QUOTES FOR THE COSTS OF THE TOW MISSILES AND 




OF DEFENSE 

tHER ASSOCIATED "" 
CIA'S COSTS FOR PREPARING 
UIRIN6 THE MEDICAL 
AND A SINGLE BILLING FRpM 
ALL OTHER BILLING FROM 



HAWK EQUIPMENT THROUGH THE DEPAj 
SYSTEM. WE THEN ADDED, ESTIMATES 
EXPENSES. TO DATE, WE HAVE ONl| 
AND TRANSPORTING THE EQUIPMENT 
SUPPLIES (WHIc'h total AROUND $5C 
DEPARTMENT OF DEFENSE FOR $5.6 
DEPARTMENT OF DEFENSE IS STILL PENDING. IF OUR ESTIMATES ARE 
ACCURATE. SOME $350,000 OF THE IRANIAN FUHDS'wiLL REMAIN AFTER 
^LL BILLS ASSOCIATED WITH THE OPERATION ARE PAID. WE CLOSED 
^^^^KaNK ACCOUNT ASSOCIATED WlTTi THE IRANIAN OPERATION ON 
25 NOVEMBER. AS OF THAT DATE, NO FUNDS ASSOCIATED 
IRANIAN OPERATION ARE HELD IN ANY CIA-CONTROLLED 



IN ADDITION TO THE ACTIVITIES I JUST DESCRl 
PROVIDED TO THE NSC INTELLIGENCE SUPPORT AND TR 




C II ^'-^> 



J^EVIEWED rOR «£LfAS€ "> * 



357 



,Mi.MfM 



ANALYTICAL SUPPORT, INCLUDIN 

TO THE NJ^EM^^^^)^ ANNUITANT AND ANOTHER OF OUR OFFICERS 

PARTIgf|iB^rTO|A MEETINGS BETWEEN THE UNITED 

STATES1»W THE INTERflEDIARIES, AND THE IRANIAN SIDE. 



/V4t 

C 5£4? 
SECONDED 



SUPPORT 




N APPROPRIATED CIA FUNDS WERE USED II 



VITY. 



- STAFF EXPENSES (CHIEFLY TRAVEL AND TUY COSTS) OF 
$13,193. 

INDEPENDENT CONTRACTOR COSJS OF 523,085 (FOR TRAVEL AND 
TDY EXPENSES OF THE RETB|^HUITANT-WHO WAS INVOLVED 
IN THE OPERATION), 

OPERATIONAL SUPPORT COSj^mil ,015, FOREXPENSES 
ASSOCIATED WITH HEETING^^ 



-- USE OF AN AIRCRAFT OWNED BY A CIA PROPRIET ARY (5'«0,185) 
THAT CARRIED THE U.S. TEAN ON THeHH- TO- ISRAEL LEG 
OF A TRIP TO IRAN. 

SINCE ALL TRAVEL SY CIA OFFICIALS IS ROUTINELY CHA.RI 
ACCOUNTS. TO DO OTHERWISE IN THE CASE OF THE TRI^i 
DURING THIS PROGRAM WOULD HAVE COMPROMISED THE S 
ACTIVITIES. • ^ 




«V»£WED FOR RELEASE 
DM 120 APR 1987 



ClI Kl »v 



iM go APR 1987 • BO 



44 



358 



UNCLA3SiF;Eb 



C 5843 



FINALLY, LET ni REITERATE THAT NONE OF THE IRANIAN MONEY 
DEPOSITED JN^^^A|^^[ACCOUNTS WAS DIVERTED To| 

.PURPOSE. IF ANY SUCH DIVERSIONT DID 
TAKEMH^^EY OCC-UW^D BEFORE THE IRANIAH HONEY REACHED US. 




D 
HAD PL 
RESISTANCE 



THE PERIOD IN QUESTION TODAY, CONGRESS 
AINTS ON CIA SUPPORT TO THE NICARAGUA!! 
PEOPLE HAVE BEEN INSTRUCTED TO 60 OUT OF THEIR 



WAT ID AVCHD'nRCUMSTANCES THAT COULD 3E INTERPRETED AS 
PROVIDING UNAUTHORIZED ASSISTANCE. . " " ." 




_ICT10NS_WERE PUT INTp_ 

TO' ouE F lELD Ttat Ton?. 



AS SOON AS THE BOLAND AMEND 
EFFECT IN 198H, INSTRUCTIONS WE 
AND r QUOTE: 



"^FIELD STATIONS ARE TO CEAS^^gESIST FROH ACTIONS WHICH 
CAN BE CONSTRUED TO BE PROvSBRnY TYPE OF SUPPORT, 
EITHER DIRECTLY OR INDIRECTLY, WITH WHOM WE DEALT UNDER THE 
NICARA6UAN PROGRAM. ALL FURTHER CONTACT WITH THESE 
> ENTITIES. UNTIL FURTHER NOTICE. ARE TO BE SOLELY, REPEAT 
SOLELY, FOR THE PURPOSE OF COLLECTING POSITIVE A^ 
COUNTERINTELLIGENCE INFORMATION OF INTEREST TO 
STATES. 

THIS MESSAGE WAS PERIODICALLY AMPLiFlED AND 
THE SPRING OF 1986, WHEN WE" LEARNED OF A PRIVAT 



REVItwtD FOR RELEASE 
Datt 20 APR 1987^ 



DO 




(t W M >VV 



c^imm^md 



359 



UNCLASSlFlEiT 



SUPPLY ACTIVITY BEING CONDUCTED OUT 

FOLLOWING INSTRUCTIONS T 





5844 



jRTERS WISHES TO REAFFIRM GUIDELINES THAT NO, REPEAT 
nONETARY SUPPORT CAN BE PROVIDED TO 



"VI MZnUai AWARE THAT THE NICARAGUAN RESISTANCE MUST HAVE 
BEEN RECEIVING FUNDS FROM A VARIETY OF SOURCES DURING THE 
PERIOD IN QUESTION, JUST AS ALL OF YO U WERE AWARE. BUT WE DID 
NOT KNOW ANYTHING ABOUT THE SOUI^BftjHE MECHANICS OF SUCH 
FUNDING."'' '■''.* 




LET ME CONCLUDE BY TELLING mMBMT- WE DID BEGIN TO LEARN A 
FEW MONTHS AGO ABOUT POSSIBLE Ilffi^^RITIES IN THE OPERATION • 
AND WHAT WE DID ABOUT IT. FIRST^WPlS IMPORTANT TD UNDERSTAND 
THAT THE NSC'S OPERATION HAD ENTERED A CRITICAL AND SENSITIVE 
PHASE BY THIS FALL. TWO OF OUR HOSTAGES ALREADY HAD BEEN 
RELEASED --BENJAMIN WEIR IN SEPTEMBER 1985 AND FATHER JENCO IN 
JULY OF THIS YEAR. IN SEPTEMBER, THE NSC WAS ABLE \0. 
A NEW AND DIRECT CHANNEL TO MAJLES SPEAKER RAFSANJA 
HAD DECIDED THE CHANNEL WAS RELIABLE, THE NSC PROGE. 
HIGHLY SENSITIVE NEGOTIATIONS BOTH TO EXPAND OUR 
INSIDE IRAN AND TO TRY TO SECURE THE RELEASE 

HOSTAGES IN LEBANON. 

REVIEWED FOR RELEASt 

Dtt. 2 ^^mr 



^{\bJ vWC^ 




eiftCtftSSlF!ED 



360 



uNCUSSwrto 



THE NSC'S FIRST MEETING WITH IRANIAN OFFICIALS INVOLVED IN 
THE NEW CHAHNEanttilRRED IN LATE SEPTEMBER. THE IRANIANS WERE 
jl^IjI^y^H^I^^U WHETHER THE U.S. WAS SERIOUS AND COULD 
THE TALKS WERE CONCLUDED. THE IRANIANS 
AND NArtED THE FOUR IRANIAN MEMBERS OF A JOINT ' 

EXPLOlSpW TO OPEN RELATIONS BETWEEN THE TWO 

N HOSTAGES IN LEBANON WERE DISCUSSED AND- 
FFICIAL ATTENDING THIS MEETING AGREED TO 
TRAVft TO-tEBW<ON TO ASSESS WHETHER ADDITIONAL AMERICAN 
HOSTAGES COULD BE FREED. 



S845 





EjIRANlAN-U.S. MEETINGS 
PER-ON^rNOVEMBER.'- ON 

atement about mcfarlane'^ 
of^*an"intensive effort 
ctober and the early days 
merican hostages 



THE FIRST NEWSPAPER STORY AB; 
AND TALKS APPEARED INX^LEBANES 
H NOVEMBER RAFSANJAnV'MADE A PUB 
VISIT TO TEHRAM. THAT. visiT. WAS] 
TAKING PLACE DURIU6 THE LAST DAYj 
OF NOVEMBER TO GET TWO^_^OR THREE 
RELEASED. DAVID JACObVeN, IN FACT, WAS RELEASED ON 2 NO VEMBER 

AS A RESULT OF THIS ^^''OI^^^|^|^|H|^B& 
^^^^^^^THE IRANIANS WERE MAKING STRENUOUS EFFORTS TO 
GET THE HIZBALLAH CAPTORS IN LEBANON TO RELEASE ADDl 
HOSTAGES. 

IN THE MIDDLE OF ALL THIS, I RECEIV£D A TELEP, 
ROY FURMARK ON 7 OCTOBER 1986. I HAD aONE SOME 
HIS COMPANY SOMETIME INTriE -LATE 1970sAND"r H 



0*to 



dw^ y^^y^Hsc^s 



LW^OrtREL£AS£ * 



eNcmsinEO 




361 



urKtftssmt^ 



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£46 



SAID ON THE PHONE THAT HE HAD SOflETHING 
D TO INFORrt HE ABOUT. I HAD HIM COHE 
_^ TLY. IT QUICKLY EMERGED THAT HE KNEW 
NSC PROJECT WITH IRAN THAN I DID. HE HAD BEEN 
1985 OR EARLY 1986. HIS ROLE WAS 
BEHBER OF THE STAFF OF ADHAN KHASH06GI. ■ 
RBANIFAR ALMOST FROM THE INCEPTION OF THAT 
GEKILEHAfL'-S-EFJORT TO DEVELOP AN AMERICAN-IRANIA-^ELATIONSHIP. 
THE OCCASION OF HIS VISIT TO HE WAS HIS CONCERN THAT HE AND 
KHASH0G61 HAD BRO\)GHT TOGETHER CANADIAN INVESTORS TO PUT UP 





iS SALES BY THE U.S. AND 
VES TORS WERE STILL 0WE"d 
OUSED BY THEIR INABILITY 
._ HE SAID THEY INTENDED 
R THEIR MONEY. HE WAS . 
PECTS OF GETTING 



MILLIONS OF DOLLARS T8 FINANCE 

IRAN. HE TOLD ME THAT THE CANA 

SOMETHING LIKE $10 MILLION AND ' 

TO COLLECT THE^HONEY THEY HAD AD] 

TO BRING FORMAL LEGAL ACTION TO 

CONCERNED THAT THIS WOULD DESTR 

ADDITIONAL HOSTAGES OUT. THIS WAS ALL ENTIRELY NEW TO HE. I 

THANKED HIM FOR THE INFORMATION AND SAID THAT 1 WOULD CHECK 

INTO THE SITUATION. 

THAT SAME AFTERNOON, I CALLED ADMIRAL POINDEXTE 
REPORTED THIS ALARMING INFORMATION TO HIM. HE 3 
AND CLEARLY CONCERNED. IT WAS, IN FACT^ 03VI0US 
THAT THIS INFORMATION REPRESENTED A MAJpR RISK 

OPERATIONAL SECURITY OF THE NSC-IRANIAN INITIAlil 

JEITHER OF US AT THE TIME WAS SURE ABOUT THE AC 




362 



UNCLASSIFIED 



/^' 



C 5£47 



INFORHATION, 1 ADVISED HIH TO PREPARE A COMPREHENSIVE STATEMENT 
FULLY COVEyKfi^^SPECTS OF THE IRANIAN INITIATIVE AND TO 
CONSULT^gJ^pR^HOUSE LAWYERS ON HOW TO HANDLE IT. 

9B|MED DEPUTY DIRECTOR BOB GATES AND CHARLES ALLEN. 
CIA'sfll|lAL I NTEM SENCE OFFICER FOR COUNTERTERRORISM, WHO 
HAD P^^B^^^IeIICE support TO THE NSC'S IRAN INITIATIVE' 
FROM THE^WPW^ I ASKED ALLEN TO PREPARE A COMPREHENSIVE 
HEMORANDOIT lAHNS OUT OUR CONCERNS AT THAT POINT ABOUT THE IRAN 
PROGRAM AND ARRANGED FOR HIM TO GO UP TO NEW YORK TO INQUIRE 
■ FURTHER INTO THE LARGE AMOUNT O F INFO RMATION WHICH FURHARK HAD 
ACCUMULATED. THE NEXT DAY I WrSKeMORANDUM TO THE DIRECTOR 
OF OUR NEAR EAST DIVISION REPOR^J^»IEFLY THE INFORMATION 
RECEIVED FROM FURMARK. 




ON 9 OCTOBER, THE DDCI AND HKillTH LIEUTENANT COLONEL 
NORTH WHO HAD COME OUT TO BRIEFBBBBRECENT PROJECTS. WE 
POINTEDLY ASKED COLONEL NORTH IF HE HAD ANY KNOWLEDGE OF CIA 
INVOLVEMENT IN THIRD PARTY SUPPORT EFFORTS TO THE CONTRAS. 
COLONEL flORTH REPLIED THAT, BASED ON HIS KNOWLEDGE OF THE 
PRIVATE FINANCIAL EFFORTS UNDERWAY, CIA WAS COMPLETEj^^jiAkRAN ON 
THE QUESTION OF AMY CONTACT WITH THOSE INVOLVED. 

ON 15 OCTOBER, THE DDCI AND I MET KITH ADMIR^ 
IN HIS OFFICE. WE GAVE HIM THE MEMORAHDUM I 
ALLEN TO PREPARE AND SAT WITH HIM HHILE HE READ 



REVIEWED FOR RELEASE 




16 



LO 






363 



UNCLASSIFIED n^<^ 

REITERATED OUR CONCERM THAT THE NSC PROJECT WAS ABOUT TO SPlJl 
>UT OF CONTRQl 
COUNSEL, 



>U66ESTED AGAIN THAT HE CONS'JLT WHITE HOUSE 



Afftfi^^OlHDEXTER EXPRESSED APPRECIATION AND AGREED TO 
CQNSI DEI^WL TO DOl^lfc SAID THAT HE HAD CONSULTED HIS OWN NSC 

COUNSE^I^BBa^P^^^"^ ^"^ '■"'^^ '^'^"^^ ^^ ^"^ "^^^^'^' 
HE INDluSHP^NTED TO TAKE A LITTLE MORE TIME BEFORE 

FOttOWlHG-eURH^COHMENDATIONS IN ORDER TO SEE WHETHER ONGOING 

DISCUSSIONS WITH THE IRANIANS COULD BE MAINTAINED AND 

PARTICULARLOHETHER IT niGHT BE POSSIBLE TO GET ONE OR TWO 

ADDITIONAL HOSTAGES OUT. 



MEANWHILE, IN SUBSEQUENT CON 
AND 22 OCTOBER* ALLEN HAD GOTTEN 
UNHAPPINESS OF THE INVESTORS AND| 
MIDDLEMAN 60RBANIFAR BELIEVED TH 
THE INVESTORS HAD GONE TO THE CONTRAS 




iONS WITH FURMARK, ON 16 
R DETAILS ON THE 
>LD THAT THE IRANIAN 
$15 rtlUlON^RAISED BY' 
THIS WAS THE FIRST 



INDICATION I RECEIVED THAT IRANIAN PAYMENTS WERE BEING DIVERTED 
TO THE CONTRAS. THIS LATER INFORMATION FROM FURMA^C WAS PASSED 
TO COLONEL NORTH BY ALLEN. 

IN TRYING TO DECIDE HOW MUCH WEIGHT TO PLACE 
INFORMATION THAT BEGAN TO SURFACE IN OCIOBER. AND 
TO DO ABOUT IT, WE HAD TO BALANCE A NUMBER OF 1 
OF-ALL.-THE INFORMATION. WHILE DEEPLY DlSTURBl 
_D1FF1CULT FOR US TO INTERPRET AND WEIGH - ESP 

><iV>^%^,5r#_ l/ CO 




7 



364 



UNCLASSIFS^D 



/5J 



5849 



HAD NO KNOWLEDGE OF THE FINANCIAL MECHANICS OF THE NSC 




ED NATURE OF THE INFORMATION FROM MR. 
IMPACT. BUT THE INFORMATION HE PASSED 
ERSION OF FUNDS TO THE CONTRAS WAS STILL LITTLE 
ECULATION HE HAD HEARD FROM THE IRANIAN MIDDLEMAN. 
MO^^tOPRIATE THING TO DO HAS PASS THE 
fCH WAS BETTER ABLE TO EVALUATE IT. 



IN FACT. WE WERE TAKEN BY SURPRISE BY THE ATTORNEY 
GENERAL'S STATEMENT OF 25 NOVEMBER TO THE EFFECT THAT HE HAD 
UNCOVERED GO'OD EVIDENCE THAT IRAHMiLaONEY HAD BEEN DIVERTED. 
HIS STATEMENT MUST B^ BASED ON SaRT^ON THATIS STILL 
UNAVAILABLE TO US. 




IN CONCLUStOH, I BELIEVE THA^UID ALL THAT COULD 
RESPONSIBLY BE DONE GIVEN THE N/QMlF'THE INFORMATION WITH 
WHICH WE WERE DEALING AND THE EXTRlffEUY CRITICAL PA'SS IN WHICH 
WE FOUND OURSELVES IN OUR EFFORTS TO FREE THE HOSTAGES, 




'l.iVMLi FOR RELEASE 

go AP< tM7_ 



^//A^ >> 



"^•""l^mmm 



CO 



365 



UNCLASSi,*B«e,r, 



n nio^, ^ 2309 




OfJ/^J^^ 



yNCLA^y\5:S£0^^ 



366 



EYES ONLY 

pLASsra 



23 S«pttai6«r 1985 



MEMQAANOUH FOR THE RECORD 

SUBJECTt'OCI/OOCI Hctting with Assliunt to tht Prtsldtnt 
»iS: ,V; '"" "i^^""*' Security Aff»lr$, 19 September 1985 



1. AdHi1r«1 Po1n4«xter tnd Ken 0e6r*ffy«Biid w«re «Uo 1i» «tten4«nce.- 



r^ 



^ 
J 




3. McfirUnji-mjtrt'to" 
extremely well dOfW,.-inrf: h*:^ 
McFjrUne $*ld .hit Ji«d i#eff- _ 
ueir hid been re1««sed, bec4u«e. 
provide weapons t<^ Ir«n oriet. 
I$r«e1 or other countrie*-.-to inn. 
celled Oivid K1«cht."6lrector.§r«V 
Affiirs, on the open line to 
that no deel hed been struck for the' 



tUisc of Ueir. 



case and 



s^,:\^ 






< ^^<^'''' ^^' 



x^^'' \c.#^ \%*^' 



-l;;-*^ 



:^d 







ilof L.C- 



367 



UftlMSf]f5ED 



C 2310 




23 September 1985 
^» 

FOR THE RECORD 

SUBJfeCTrtOCI/DOCI Meeting with Assistant to the President 
f^;^*-''"" Najlonal Security Affairs. 19 September 1985 



1. AdBlr*l Poindexter and Ken DeGraffenreld were also In attendance. 



3. McFarlane -BoteU t(r t^ifc^flCl - 
extremely well dont^.amd h»: 

McFarlane said M -had i»ij-i«fiTJ^ 

Weir had bceir released bec4u^,"^» 
provide weapons x^ Iran'otiat \east: 
Israel or other countries- to Jran 
called David K1«ch«, Director ieoeVi 
Affairs, on the open line to assure 
that no deal had been struck for 




tharwas not tfiiTcase and 
•ease of Weir. 




;^^ 



liNCLASS'r:ED 



_£_of ^ Corie; 



368 



(iNeLASStPSED 




C 2311 



C\- - <; /UohnM. McMalfen''^ 




/;?^4/ 



W^WIEB 




369 









370 



^"f^HssT^o 



C 2329 




m^ 



^^mm ^ 




371 



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D 



ocu me^n 



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372 



UNCLASStFii^ 



%%tirn- 



26 November 1985 



0400 



MEMORANDUM FOR: Vice Admiral John M. Poindexter, USN 
Deputy Assistant to trie President 
for National Security Affairs 



SUBJECT: 



Presidential Finding on Kiddle East 



Etftfi 



Pursuant to our conversation this should go to 
the President for his signature in<\ should not be 
passed around in any hands below our level. 



Attachment: 
As stated 





CL BY 00C8074 
RVW OADP. 






l/NCLASSlfJED 




373 



UNCLftSSlritS tm^ 



2864 




-i~to Section 662 of th« Foflg n 
1961, Ai Amended, Conctrnlng 
*- n by the Centf 1 Intelligence 
untries, Other Tfian Those 



the Purpose of Intelligence 



I have D%ft3'/ let t j ^ff **- ^ efforts being inade by private 
parties to o^liVij^VCB&^se of Americans held hostage in the 
Middle East, a%fj»«| JB|'-'^ Ind that the following operations in 
foreign countr ieT^f^liffclGding all support necessary to such 
operations) are importaitt to the national security of the 
Dnited States. Because of the extreme sensitivity 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 SOI of the National Security Act of 1947, as amended, 
until such time as I may direct otherwise. 

SCOPE 



Hostage Rescue 
Middle East 



Central Ii 
private p. 
obtain th« 
held host 
Such assi 
provision 



-DESCRIPTION 



The provision of assistance by the 
elligence Agency to 
ties in their attempt to 
release of Aner leans 
$, in the Middle East, 
is to include the 
nsportation, 
communications, and other necessary 
support. As part of these efforts 
certain foreign material 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, 
Government officials in furthi 
of this effort are hereby 
ratified. 



The White House 
Washington, D.C. 



"IT 



I 



UNCLA^Slr 




374 



V 



«NCUSSffj£o ^"^'"'"^ 



^ 



CII\ NO. 11. 



TITLE J ohn 'IcM aJion 's note^pad reference to .3ecembcr_ 5,_193:, 
approval "of riniluitr "related to ".SC nroject. 



DESCRIPTOR - TO/FROn 



I 0395 







UNCLASSfRED 



375 



(JNCLASSiFSED 



k-^ob'iK 



28 Noveabcc 1986 



0396 



MEMORANDUM FOR "HE 'RECORD 




The foLiowinq is a recons tr jct ion of cryptic notes t.lat I nave from a 
5 OecemDer L9^^^^n^n ODCI John N. McManon's Office with then 
gjtes; O/NESA^^H^^^chen AD DO, Ed Juchniew iez: then C/NE Oivisionl 
H^^^and I iilTeve then OC/Europe 

° The ODCI requested facts on the foUowinq Sy the next day: 

"The poUtical scene in Iran, including any possible 
ii35eruion, unrest, 'tc; 



— 3ioqrapny of 
— Ve 



—Was it true that Iran was trying to get J.S. Hawk aissiles 
to <nocit out Soviet Bear aircraft over Iran or the 
Iran/Iraq oorder. 

— The statJS of the Iran/Iraq war, including a prognosis 
3£ what each inight do and a table reflecting an order of 
oattle for each side. 

° DDCI noted that he would be attending a meeting at 10:00 am en 
Saturday, 7 :;ece.'nDer, with the President regarding the expansion of the 
mfor.Tial lin< oetween the Iranians and the Israelis; 

— He noted that a new 'private interlocutor was working 
with Israeli Foreign Ministry Official David Kimche; 

—Noted that Iran wanted to get closer to the Jnited States 
and wondered (DDCI) whether this could be a ruse to get 
Hawk missiles. 

DDCI noted that Saturday's meeting would take stock of the two-track 
program now jnderway: one to free the hostages and the other to expand our 
ties with Iran. Meetings were planned m Geneva between the United States and 
Iran in the short term. 



yNCLASSlF^Ei) 



376 



UNCLASSIFIED 



previewed what had been done so far: 

--One plane Load had been 3ent to the Iranians on 
24 SovemOet; we did not Know if that included 
HawK missiles; 

■-Oliver North was to get to London that weekend 
for discussions; the following week he was 
arranging up to five plane loads, including 



I 0397 







In response to a question abo^^^^^e^^nce for the landing 
rights, someone noted thati^H^^H^H wer* standing by; 



A question was raised regarding a plane goi 
salem and possibly stop 




available. 

A review of recent Iranian reporting noted t.-e 'ollowing: 

--No real opposition that we could capitalize on; 

--Khomeini seemed to be in better nealtn; 

— The economic situation was deter lorat .ng; 

— The possibility of a new .najor offensive could 
stimulate opposition within Iran; 

— Key players were Ki.-nche and the private J.S. citizen — 
interlocutor. 



-Weir released for one planeload 




f^NCLASS^^D 



377 



INCWmiFJlD 




30 far speni^^^^^^^foc a total ^^^^^^H^on 
the hostage issue. ^^^^^^mphasi zed money spen^tocontinue I 
the intelligence flow regarding the location of the 
hostages was permissible. 



0398 




iiNCLaSSir.ED 



378 



UNCLASSJfSED 



10 December 1985 



MEMORANDUM FOR: D«p«^.Di rector of Central Intelligence 
FROM: -X' 01rector\f Central Intelligence ?.afla^^^ 




1. Atlthe 1030 meeting today. Bud reported offj^ls discussions over the 
weekend wItlVGorbanlfehr In! London. He did not have a good Impression of 
Gorbanlfe hr and recomme nd ed that we not pursue the proposed rel ationship 
with hin 




2. Everybody supported this In our roundtable discussion. Other options 
which Bud had suggested were to let the Israelis go ahead doing what_th^y_>jguld 
^ably do anyway, hope we some benef K^^HBHUJ^H^mi 
The President argued mildly for letting the operatTo^g^nead without 
^nnltments from us except that we should ultimately fill up the Israeli 
p ne In any event, or the Congress will do It for us. He was afraid that • 
te atlng the ongoing discussions, as Bud ^ad speculated they might, could 
lea. :o early action against the hostages. Jhe trend of the succession of 
this was that It was a little disingenuous ind would still bear the onus of 
having traded with the captors and provide aft incentive for then to do some 
more kidnapping, which was the main burden of the argument against going forward 
on the program. The President felt that anjl ongoing contact would be justified 
and any charges that might be made later coujld be tnet and Justified as an effort 
to influence future events In Iran. I did point out that there was historical 
precedent for this and that was always the rationale the Israelis had given 
us for their providing arms to Iran. 




would maintain contact with any of the Iranians who turned up^ 
this affair who are willing to do business on the basis of exchanging 
Information and looking for ways to collaborate with respect to Iran'sXfuture, 

4. As the meeting broke up, I had the Idea that the President had^oot 
entirely given up on encouraging the Israelis to carry on with th«Iraniwis. 
I suspect he would be willing to run the risk and take the heat ly the fu 
If this will lead to springing the hostages. It appears that Bu^has the"^ct1on. 



William J. Gas 



Cj//\/ /093 



UNCLASSih£D 



r 



^c^& 



CL 

RVW OAOR 



ibrt^.H^e 



379 



0/OCl 
OUTGOI**: 







PRESENT STATUS IN SAQi REGARDING THE MOVEKENT OF TO* 



PLEASE PASS TO DC! FROM OOCl EYES ONLY AT START OF HIS OAT AND 
PLEASE CONFIRM DELIVERY. 

1. A NEW DIMENSION HAS BEEN ADDED TO THIS PROGRAM AS A RESULT 
MEETING HELD IN LONDON BETWEEN NORTH AND GHORBANIFAR. WE HAVE 

N ASKED TO PROVIDE A MAP DEPICTING THE ORDER OF BATTLE ON THE 
«»AN/IRAO BORDER SHOtfING UNITS. TROOPS. TANKS. ELECTRONIC INSTALLA- 
TIONS. AND WHAT HAVE YOU. THE GAME PLAN IS FOR A SEGMENT Of THE MAP 
DEPICTING A PART OF THE FRONT TO BE PASSED TO SHOW OUR BONA FIDES 
AND THAT WILL START IN TRAIN A SERIES OF EVENTS. WHEN THE MOVEMENT 
OF THE MISSILES TAKES PLACE. THE REMAINDER OF THE MAP WILL BE PASSED 
AND THAT WILL PROMPT ALL THE RECIPROCAL ACTION ON THE PART OF THE 
IRANIANS. TIMING IS FOR THE FIRST SEGMENT OF THE MAP TO BE 
DELIVERED LEAVING HERE TOMORROW, SATURDAY. 25 JANUARY. THEN ON THE 
9TH OF FEBRUARY. A THOUSAND TOWS WITH THE REMAINDER OF THE MAP AS 
THE FIRST TRANCHE OF A 4.000 COMMITMENT. 

2. WE ARE TO GET THE TOWS FROM THE US ARMY AND ARRANGE 
TRANSPORT OVERSEAS. 

3. EVERYONE HERE AT HEADQUARTERS ADVISES AGAINST THIS 
OPERATION NOT ONLY BECAUSE WE FEEL THE PRINCIPAL INVOLVED IS A LIAR 
AND HAS A RECORD C« DECEIT. BUT. SECONDLY. WE WOULD BE AIDING AND 
ABETTING THE WRONG PEOPLE. I MET WITH POINDEXTER THIS AFTERNOON 

TO APPEAL HIS DIRECTION THAT WE PROVIDE THIS INTELLIGENCE. POINTING 
OUT NOT ONLY THE FRAGILITY IN THE ABILITY OF THE PRINCIPAL TO 
DELIVER. BUT ALSO THE FACT THAT WE WERE TILTING IN A DIRECTION 
WHICH COULD CAUSE THE IRANIANS Ta HAVE A SUCCESSFUL OFFENSE AGAINST 
THE IRAQIS WITH CATACLYSMIC RESULTS. I NOTED THAT PROVIDING 
^.FENSIVE MISSILES WAS ONE THING BUT WHEN WE PROVIDE INTELLIGENCE 
I THE ORDER OF BATTLE. WE ARE GIVING THE IRANIANS THE WHEREWITHA 



yDt4»i4fe^flH^ 



COPY / 




380 



tnwjnmtfii?^ 



P1GC002 
TOT: 29HBJAN 16 DIRECTOR 70S774 

fOR OFFENSIVE ACTION. '^""QS67 

4. POINOEXTER 010 NOT OISPUTI OUR RATIONALE OR OUR ANALYSIS. 
BUT INSISTED THAT IT «AS AN OPPORTUNITY THAT SHOULD 8E EXPLORED. HE 
FELT THAT 8T DOING IT IN STEPS THETiOST ITE COULD LOSE IF IT DID NOT 
REACH FULFILLMENT WOULD BE 1,000 TOWS AND A MAP OF ORDER OF BATTLE 
WHICH IS PERISHABLE ANYWAY. 

5. WE ^RE NOW PROCEEDING TO PREPARE 'HAT MAP AND DELIVER IT 
TO NORTH AT tiOO SiTuROAT MQfiNlNG WASHINGTON n« . 

£ : "-J/S ^-iD 'nE SIGNED f.NCING DiTP; :? ^luv:.'- ■ '986 *'-:c:-' 
'^.ili lS '^i io'->C5.*' *C OC *--: Tnc NSC '.: k.* :S'':>«C -£NCc. IN 
SPITE OF OUR COLNSeL TO THE CONTRARY. WE iRE PROCEEDING TO ?0LL0W 
CUT ORDERS AS SO AUTHORIZED IN THE FINDING. 

7. NO FILE. OECL' OAOR DRV HUM- 4 -82. ALL TOP SECRET 
ORIG: DOC I • MCMAhON f.SSi 
:nO of MESSAGE 



UNCLASSIFitD 



[iN'^.USS".?"™ 



381 



THC WHITC HOUSC 

WAS M I XOTON 





January 17, 1986 

ACTION 

MEMORANDUM FOR THE PRESIDENT ' ^ 

FROM: JOHN M. POINDEXTErHv^ 

SUBJECT: Covert Action Finding Regarding Iran 

Prime Minister Peres of Israel secretly dispatched his special 
advisor on terrorism with instructions to propose a plan by which 
Israel, with limited assistance from the U.S., can create 
conditions to help bring about a more moderate government in 
Iran. The Israelis are very concerned that Iran's deteriorating 
position in the war with Iraq, the potential for further 
radicalizatton in Iran, and the possibility of enhanced Soviet 
influence in the Gulf all pose significant threats to the 
security of Israel. They believe it is essential that they act 
to at least preserve a balance of power in the region. 

The Israeli plan is premised on the assumption that moderate 
element* in Iran can come to power if these factions demonstrate- 
their credibility in defending Iran against Iraq and in deterring 
Soviet intervention. To achieve the strategic goal of a more 
moderate Iranian government, the Israelis are prepared to 
unilaterally commence selling military materiel to 
Western-oriented Iranian factions. It is their belief that by so 
doing they can achieve a heretofore unobtainable penetration of 
the Iranian governing hierarchy. The Israelis are convinced that 
the Iranians are so desperate for military materiel, expertise 
and intelligence that the provision of these resources will 
result in favorable long-term changes in personnel and attitudes 
within the Iranian government. Further, once the exchange 
relationship has commenced, a dependency would be established on 
those who are providing the requisite resources, thus allowing 
the provider (s) to coercively influence near-term events. Such 
an outcome is consistent with our policy objectives and would 
present significant advantages for U.S. national interests. As 
describad by the Prime Minister's emissary, the only requirement 
the Israelis have is an assurance that they will be allowed to 
purchase U.S. replenishment* for the stocks that they sell to 
Iran. We have researched the legal problems of Israel'! selling 
U.S. manufactured arm* to Iran. Because of the requirement in 
U.S. law for recipient* of U.S. arm* to notify the U.S. 
government of tranafer* to third countries, I do not recommend 



that' you agree with the specific details of the Israeli plan. 
However, there i« another po**ibility. Some t^ ^go Attorney 

TOP SECRET Part,:;;. Crlassified /released on__J[^3^^^J^^ ^ 






i« another po**ibility. Some t^ *^°/co°"15^ 'l5' 

n-' rriassified /released on.^'T-^WSsP^itaHii^D , \ ^^ 

,^der provi: . r. M E.J. 123. 
, -er, uM/. al Security C 

TOP SECRET 



Declassify on: OADR ,^der provr/.r, M E.J. 123:5 

'- ; -er, uM/. al Security Ccjncil y<^ «>o iQi« 



Copv 's ^eceipj. 



382 



UHCLflSSIF^EO 



jTOHKM >/ ;6«y7 



General William French Smith determined that under an appropriate 
finding you could authorize the CIA to sell armi to countries 
outside of the provisions of the laws and reporting requirements 
for foreign military sales. The objectives of the Israeli plan 
could be met if the CIA, using an authorized agent as necessary, 
purchased arms from the Department of Defense under the Economy 
Act and then transferred them to Iran directly after receiving 
appropriate payment from Iran. 

The Covert Action Finding attached at Tab A provides the latitude 
for the transactions indicated above to proceed. The Iranians 
have indicated an immediate requirement for 4,000 basic TOW 
weapons for use in the launchers they already hold. 

The Israeli's are also sensitive to a strong U.S. desire to free 
our Beirut hostages and have insisted that the Iranians 
demonstrate both influence and good intent by an early release of 
the five Americans. Both sides have agreed that the hostages 
will be immediately released upon commencement of this action. 
Prime Minister Peres had his emissary pointedly note that they ' 
well understand our position on not making concessions to 
terrorists. They also point out, however, that terrorist groups^ 
movements, and organizations are significantly easier to 
influence through governments than they are by direct approach. 
In that we have been unable to exercise any suasion over 
Hizballah during the course of nearly two years of kidnappings, 
this approach through the government of Iran may well be our only 
way to achieve the release of the Americans held in Beirut. It 
must again be noted that since this dialogue with the Iranians 
began in September, Reverend Weir has been released and there 
have been no Shia terrorist attacks against American or Israeli 
persons, property, or interests. 

Therefore it is proposed that Israel make the necessary 
arrangements for the sale of 4000 TOW weapons to Iran. 
Sufficient funds to cover the sale would be transferred to an 
agent of the CIA. The CIA would then purchase the weapons from 
the Department of Defense and deliver the weapons to Iran through 
the agent. If all of the hostages are not released after the 
first shipment of 1000 weapons, further transfers would cease. 

On the other hand, since hostage release is in some respects a 
byproduct of a larger effort to develop ties to potentially 
moderate forces in Iran, you may wish to redirect such transfers 
to other groups within the government at a later time. 



JEOP-&SCttBT 









Th« Israallf have as)ced for our urgent response to this proposal 
so that they can plan accordingly. They note that conditions 
inside both Iran and Lebanon are highly volatile. The Israelis 
are cognizant that this entire operation will be terminated if 
tiie Iranians abandon their go.Al of moderating their government or 
allow further acts of terrorism. You have discussed the general 
outlines of the Israeli plan with Secretaries Shultz and 
Weinberger, Attorney General Meese and Director Casey, The 
Secretaries do not recommend you proceetl with this plan. 
Attorney General Meese and Director Casey believe the short-term 
and long-term objectives of the plan warrant the policy risks 
involved and recommend you approve the attached Finding. Because 
of the extreme sensitivity of this project, it is recommended 
that you exercise your statutory prerogative to withhold 
notification of the Finding to the Congressional oversight 
committees until such time that you deem it to be appropriate. 

Recommendation 



a 



That you sign the attached Finding. 



V^ 



Prepared by: 
Oliver L. North 



Attachment 

Tab A - Covert Action Finding 







(^. 






384 



r'4» 



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unne' provisinr.? of'E t2356 

by K Jolinson Na(iQna» Security Council 










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385 

-UNttASStflEfl 

TRANSCRIPT 
OF PROCEEDINGS 

CONFIDENTIAL ij-i^ ^^ ^^ 

UNITED STATES SENATE 

SELECT COMMITTEE ON 

SECRET MILITARY ASSISTANCE TO 

IRAN AND THE NICARAGUAN OPPOSITION 



DEPOSITION OF STEPHEN M. McMAHON 



UNCIASSIFB 



Partially Declassified/Released on Jj"-^ " - 
under provisions ot^t.U. u-^^<^ 
by N. Menan, Nati 



.onal Security Council 

Washington, D. C. 



Monday, April 13, 1987 

COPY NO Id OF- 



Ace-Federal Reporters, Inc. 

Striotype Reporters 
444 North Capitol Street 
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(202) 347-3700 
Nationwide Coverage 



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CONFIDENTIAL 
UNITED STATES SENATE 

SELECT COMMITTEE ON 

SECRET MILITARY ASSISTANCE TO 

IRAN AND THE NICARAGUAN OPPOSITION 

DEPOSITION OF STEPHEN M. McMAHON 



Washington, D. C. 
Monday, April 13, 1987 

Deposition of STEPHEN M. McMAHON, called for examina- 
tion pursuant to notice of deposition, at the Hart Senate 
Office Building, Suite 901, at 1:45 p.m. before JOEL 3REITNER, 
a Notary Public within and for the District of Columbia, when 
were present: 



JAMES E. KAPLAN, ESQ. 

W. THOMAS McGOUGH, JR., ESQ. 

United States Senate 

Select Committee on Secret 
Military Assistance to 
Iran and the Nicaraguan 
Opposition 

Suite 901 

Hart Senate Office Building 

Washington, D. C. 



UNCLASSIFIED 



continued -- 



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APPEARANCES (Continued): 



THOMAS FRYMAN, ESQ. 
KENNETH R. BUCK, ESQ. 
Assistant Minority Counsel 
United States House of 

Representatives 
Select Committee to 

Investigate Covert 

Arms Transactions with 

Iran 
H-419, The Capitol 
Washington, D. C. 20515 



ELAINE R. LUBIN, ESQ. 

Swidler & Berlin 

1000 Thq^mi' Jefferson Street, N.W. 

Washington, D. C. 20007 

On behalf of the Deponent. 



ALSO PRESENT: 



12 THOMAS CIEHANSKI 

General Accounting Office 
Ij Special Agent, Investigations 



LOUIS ZAWARDI 



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CONTENTS 



WITNESS 

Stephen M. McMahon 
by Mr. Fryman 
by Mr. Kaplan 
by Mr. Buck 



EXAMINATION 



98 
122 



9 
10 
1] 
12 

13 : 

14 

13 
16 
17 

18 ', 

19 jl 

20 li 
21 
22 



McMAHON EXHIBITS 
Exhibit 1 
Exhibit 2 . 
Exhibit- 3 
Exhibit 4 
Exhibit 5 
Exhibit 6 
Exhibit 7 

Exhibit 8 

Exhibits 9 thru 11 

Exhibits 12 thru 14 

Exhibit 15 

Exhibits 16 and 17 

Exhibit 18 

Exhibits 19 and 20 

Exhibit 21 

Exhibit 22 



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1 PROCEEDINGS 

Z Whereupon, 

3 ; STEPHEN M. MC MAHON 

4 was called .iS a witness and, havimj first been duly s-worn, 

5 was examined and testifie(J as follows: 

6 I EXAMINATION 

7 BY MR. FRYMAN: 
Q Would you state your name for the record, please? 

9^1 A Stephen M. McMahon. 

10 I Q Where are you employed, Mr. McMahon? 

1 1 I A « I'm self-employed and dcj much ot my wotk for the 

12 I Chaniie] 1 organizations. 

I 
13;l Q Have you always been self-employed? 



A No. I went out on my own in about the si 
1984. 

Q And what did you do before that? 

A I have been in the field of accounting; 
approxj mate] y 9 to 10 years. 

Q Here you employed by a firm before the s; 
•84? 

A Yes. 

Q Which firm? 



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^ I A I have worked Eur Pi ice Wdterhouse, Alpx-in.lfr & 

21 AJexatider, and United Mine Workers. 

J j Q Which PW of Eice were you employed af 



A Rd J t i more . 

Q When were you employed there? 

A T^lat was when I first came out of schooi , and that 
w>5ul.d have been 1978 through 1980, '81, somewhere around 
there . 

Q Now, since 1984 you have been sel f -einpl oyed? 
A Yes, sir. 

Q How much of your professional time has been 
devoted to work for Mr. Channell or organizations aftiliiteJ 
with Mr. Channell since the summer of 1984? 

A It was variable. I would say, around the -- late 
in 1985, early '86 is when the majority of my time has been 
devoted to his organizations. 

Q Well, let's focus, then, on '85, the period 
January through July, 1985. 
A Okay. 

Q Approximately what percent of your time was 
devoted to Mr. Channell and his organizations? 

A Oh I would say somewhere in the nature of 60 to 



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70 percent. 

Q And from August through December 1985' 
A 



perceri t , 
Q 



It steadily grew until, I would say, abouL 90, 'S 

Whdt about jn 1986? 

A About 115 percent. (Laughing.) 

Q And has that continued in 1987? 

A Yes . 

Q You have basically been full time with 
Mr. Channell? 

A Yes. I would -- I concentrate most of my time for 
him. 



mts that I continue to 



I have a faw small business 
do work for, but they don't take up a good deal of my time. 

Q How are you compensated by Mr. Channell? 

A I get paid a flat fee each month. 

Q Is that fee negotiated? 

A Well, we started out on an hourly basis, and as 
more and more hours were getting put in on the organizations, 
I didn't think it was quite -- it seemed too expensive to be 
paying me that way, and we changed it over to a flat fee. r' 
has stayed on that basis, and I think it has been raised onct 
-- twice -- maybe three times. 



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Q What is the present monthly fee that you ruceivo? 

A Right now it's $6000 per month; and that's divided 
across the various organizations. We tiy to break it down as 
to how much time I spend on each one. 

Q When was that monthly fee raised i.o 36000? 

A WelJ, T wrts being paid S1500 and then in March, I 
think it was, of '86, when we started doing the work with 
Western Goals, it was agreed that I would get paid §1500 per 
month for the Western Goals efforts and the additional work. 

I didn't actually get paid that Western Goals 
thing until, I think maybe August, I got my first payment. 
And then T got a lump for all the back months in around, oh, 
October and November. Somewhere around there. And it has 
been at that steady $6000 since then. 

Q And for what pericjd of time were you paid §4500 a 
mont h? 

A I think, I'm not positive on this, but I think it 
was around April or May of '85 up until the Western Goals 
change in March of '86. 

Q Now, where do you maintain an office? 

A In my home. 

Q Where is that? 



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Q Have you ] i ved at that sane address since the 



A Yes, I have. 

Q Do you also maintain a working area in the ofEices 
of Mr. Channell's oi'ijani za tions? 

A I have a desk there, which has only been since we 
moved over to the new offices. 

Q Where are the new offices located? 

A 1331 Pennsylvania Avenue. 

Q When did that move occur? 

A August 4th of '86. 

Q So, since that time, you have had a desk at the 
Channell office? 

A Yes. There's a desk there that I can work at. 
Sure. 

Q And did you have a desk at the office before 
August of 1986? 

A Not as such. 



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Q In rhe old oftice? 

A Not AS such. 

Q How much of your time since August of 1986 would 
you estimate that you spend workimj in the Chaniiell oCtices' 

A In their environment? 

Q Yes. In their offices. 

A Oh, weJ ] , that depends on the different timing, 
but I would say overall it's probably less than half of my 
time. I do most of my work at home for them. 

Q But on overall approximation, it would be 50 
percent of your time in the Channell offices? 

A I would say maybe a little bit less than that. 

Q 40 to 50 percent? 

A Yes, that would be -- 

Q Was the percentage of time that you spent in the 
offices o£ the organizatjions essentially the same before thf 
move to 1331 Pennsylvania Avenue? 

A No. There was no place to work at the other 
offices . 

Q So approximately how Buch time did you ."ipend in 
the offices there? 

A Very little. 



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Q 25 percent? 

A Less. 

Q Less t-.h^n 2'5 percent? 

A Yes. Most of the time I would need to go and picK 
up the books and the records and the documents and take them 
back home and work on them at home, because there was just no 
place to sit and actually have a table to even write on. We 
were rather cramped. 

Q WouJd you estimate you spent more than 10 percent 
of your time physically in the Channell offices beEoie the 
move to Pennsylvania Avenue? 

A I would say yes. 10 percent, that would be safe 



to say. 



Q Between 10 and 25? 

A 10 to 20. 

Q Do you have an undergraduate degree in accounting? 

A Yes, sir. 

Q Where did you receive that degree? 

A The University of Maryland. 

Q Do you have any graduate training? 

A I have my CPA certification. 

Q What state? 



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A Maryland. 

Q When were you licensed as a CPA i rj Maryland? 

\ I believe it was 1979. 

Q Are you a member of the ATCPA? 

A Goil, I don't know. I know I am ot my state 

6 I board. I don't know i f I am for the national. 

7 i Q The state boaid beinq Maryland^ 
I 

A Yes. 

Q Do you have a license in any other jurisdiction 
than Maryland? 

A No, sir. 

Q Were you ever a member ot tlie-AICPA? 

A I beJieve I was when I was with Price WAterhouse. 
In fact, I'm pretty certain I was. And I know I went out, 
when I went into Alexander & Alexander, which is a private 
corporation, I didn't maintain my MCPA involvement. 

I remember looking into it a year or so ago, and I 
don't know if I actually did it or not. 

Q So you are not sure if you are presently a member? 

A No, I don't think I am, because I would probably 
be getting lots of mail from then if I was, and I don't, so I 
probably am not. 



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1 ,| Q [idve you ever been Lhe subject of any disciplinary 

2 I proceeding by Lhe state board i ri Maryland? 

3 1 A Oh, no. 

4 I Q You are aware that several subpoenas tiave been 

5 I served by the House Gelect Committee and the Senate Select. 

6. Committee oti you personally and also on various organizations 

7 associated with Mr. Channell, are you not? 

8 A Well, r was made aware that they actually existed 
9; today. I have never seen them. 

10 Q Hid you liave any role in collecting documents to 

11 produce in response to those subpoenas? 

12i A I don't know how I'd answer that. 

13 MS. LUBIN: I had a role in collecting documents, 

14 but we started collecting them before your subpoenas were 
15; served, because other subpoenas had preceded them. He 

16; collected a whole mess of documents. We'll start with that. 

17 BY MR. FRYMAN: 

18 Q What did you do in the way of collecting documents 

19 in the response to any subpoena that has been served? 

20 A Basically we gave the subpoenas to Elaine's firm, 

21 Swidler & Berlin, and they took it from this to help u:5 get 

22 this, help us get that. They came and took a sweep oC the 



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oftice to see what was hhere. 

RasicdUy our e£[ort has been to turn over the 
documents to them for their review and production. 

Q WeJ ] , what have you done to make suif^ that all 
documents called Eor in any subpoena have been produced^ 

A We've given -- 1 have given everything that I kr 
exists to Elaine's firm. 

Q Are you talking about documents in your own 
particular area? 

A Yes. Because I'm not familiar enough with the 
rest of the organization tcj know. 

Q Have you had any role in collecting documents ir 
other parts of the organization, other than the iccounting 
area? 

A No. Not -- no. Except to just show these guys 
where the file cabinets were. 

MS. LUBIN: That's true. The first weekend he <. 
the only person there, and he showed us where drawers were. 
Showed us where the cookies were, too. 
BY MR. FRYMAN: 

Q You said that you began to work for Mr. Channel] 
organizations, I believe, in 1984; is that correct? 



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I 'I A Yes. 

?. Q Do you know the reason that Mr. Channe)! retained 

3.i you? 

4 I A We].l, not spec i E ica 1 1 y . I had advertised in local 

5: newspapers, and I got a call from Wilber^ Beehlei', who was the 

6' treasurer for Mr. Channe]], ChanneJJ Corporation at the time. 

7 Q Could you spell the name? 

8| A B-e-e-h- J -e-r . He contacted me, we met for lunch, 

i 

9| and we discussed my background and my knowledge and things 

lOJ ] i ke that, and he offered the position to me at the time. It 

111 was very much a part-time thing then. Roy had a Eiill-time 

i 

121 corporate position himself and was doing accounting work for 

131 Mr. Channell part-time, like on Saturdays and things like 

14 1 that, and it had grown beyond those needs -- had grown beyond 

15! that. 

16 At that time I came in, worked there maybe one 

17 day, two days a week, something like that. 

18 Q Had you known Mr. Channell or had you ever met him 

19 before placing this advertisement? 

20 A No, sir. 

21 Q Where was the advertisement placed? What 
22 



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A I think I ran one in L h a P out Ai v i fher a w^s-a 
Jocal business guide. I had several ones out there at the 
time. I think one o£ the loral ne i<;hboi hood papers. 
Q You were interviewed first by Mi. Beehler? 
K Beehler. 

Q At what point did you meet Mr. Channell? 
A It was at least several weeks after I started 
doing, work there. 

Q Who hired you? 
A Mr. Beehler did. 

Q You have indicated that you continued to do a 
12: substantial portion of your work for the Channel! 
13! organizations at your home; is that correct? 
14;j A Yes, sir. 

15 I Q Do you maintain at your home records reJating to 

16 the Channell organizations? 

17 A Not as such. Once we moved into the Pennsylvania 

18 offices, there was plenty of filing space that I could move 

19 those things back to their offices, 

20 Q How do you work at home if you don't have any 

21 records there': 



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1 Q And yiju have computer disks there or sojne sort :)f 

2 data source there, a journal? 

3 • A Yes, I can carry the diskettes back and forth wvLh 

4 me . 

5 Q And you keep a duplicate set at your tiome, of 

6 I disks? 

7 A I had some diskettes, yes, at home, that were 
8' duplicates of what was there. They have all been turned 
9 over. 

lOi Q Anything other than disks? 

11' A I have a haid memory drive on the computer, and 

12J all o£ that has been printed out and turned over as well. 

13 j Q So your search for documents in response to 

14: subpoenas included any materials that were in your home as 

151 well as the office? 

16 A Oh, absolutely. 

17 MS. LURIN: We sent a memo to all employees asking 

18 for all documents -- all employees and consultants. 

19 BY MR. FRYMAN: 

20 Q Mould you say your responsibilities with respect 

21 to the Channell organizations -- and by the Channell 
221 organizations, I mean the National Endowment Cor the 



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Preservation ot Liberty as well as other organ i /at ion j Miat 
are associated witfi Mr. ChanneJl -- that's a meaninqful 
phrase to you, is it not^ The Chaniiell or'jani /a t ions "i" 

A Yes. Yes. 

Q You said that you began to do work for the 
Channell oi ga ni za t ions in the summer of 1984. 

A Yes . 

Q Have your responsibilities tiasically been the sairii 
trom the summer of 1984 to the present? 

A No. In the summer of '84 and most of '85, I had 
to actually do the accounts payable log and the rec<; i vab 1 -^s , 



12' prepare the financial statements, the bank reconciliations. 

13 things like that. 

14 I By early '86 the volume of that work had gotten 
15! just way out of hand for one person, and we hired someone to 
16' take over and do the recei vabl es/payab 1 es kind of thing. T 

17 think it was in February of 'B6, I continued to do the review 

18 of it, the bank recs, payroll, tax filing, all of those -- 

19 everything else. 

20 Q So is it fair to say that you have fiad general 

21 responsibility for the day-to-day accounting functions of the- 
2?l organizations, but in the later period you have performed 



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those les pons ibi i i ties In more ot a supeiv i soiy i-ap.ic 1 ty 1 nan 
in a direct etitry-mak i riy capacity? 

A Yes. To the best I could. I mean, i:heie sfill 
isn't adequate staff to handJe it, I don't think. Sn my 
supexvisory efforts were limited. But, yes, you could say 
that I was sort of in charge of that. 

Q You say you were sort ot in ch.irqe, Mr. McMahon. 
Were you the person in charge of the accounting side? 

A Right but what I don't wajit to construe is that I 
was in a day-to-day review capacity. Time didn't allow me to 
do that. That's, you know, what I'm trying to get out. But, 
yes, I was in charge of the staff person that assisted with 
the accounting efforts. 

Q And you did it as best you could? 

A Yes, sir. 

Q Now, you say in February of 1986 a staff person 
vAa hired to work -- 

A Yes, sir. 

Q -- under you or for you? 

A Yes, sir. 

Q Was that person an employee of the Channel! 

organi zations ? 



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K Yes . 

Q Who was thdt {lersonV 

A Philip Meo . 

Q Did yciu hire Mr. Meo? 

A Yps . 

Q lldd you known him previously? 

A Yes . 

Q' What led yn\' conclude that he was the person 

that you needed a? your assistant? 

A Well, I knew -- I needed someone as quickly as I 
could get at the time. We were ]ust inundated with the 
work. And I knew that Philip was looking for work, and I 
thought at the time that the job <:ould be handled by a clerk 
type. 

I later discovered around May, not many months 
later, that the position was Ear -- far and above his level 
of experience and knowledge. 

Q So what happened then? 

A We began pursuit, then, to get resume.s and 
interview to have someone else take over the position. 

Q Did you hire someone else? 

A Yes, we did. 




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1 i Q Wh(j did you hire? 

2 A Reeky Pri tchet t . 

3 Q When did you hire her? 

4 AT ttiink she began on August 11th. We had gone 

5 thiough the process and selected a candidate, made an otTer 

6 I to him. By that time, hy the time we got around, like two 

7 [ weeks later ■■-■> finally give him a firm offer, he had already 
I 

8 accepted another j^ ■ :ion, so we were back at square one to 

9 start over again with the whole process. That's why it took 
10, 1 three to four months to finally get someone in there. 

11 j Q When did Mr. Meo leave Lhe employ of the Channeli 

12 [ organizations? 

13 j A In mid-August. 

14 Q Have there been any other employees in the 

15 accounting area, other than Mr. Meo and Ms. Prii:chett? 

16i A There is now. Becky is -- she's quit. She left 

17 in February. And Michael Barnes has taken cjver her position. 

18 Q What was Mr. Barnes doing before February of 1987: 

19 A He worked for a custom carpet firm, the Design 

20 Center. And prior to that he was in the economics field. 

21 Q He had no prior association with the Channell 
organizations before February? 



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A I knew Michael. In fact, he lives in the nnit 
that is in my house. We have been friends for several 
years . 

In December he was like my right arm in helping me 
with aLl the year-end work for the Channell companies. When 
Becky decided that she was leaving, I asked Michael if he 
would be interested in stepping into her position, especially 
because he was so familiar with it by that point, and I asked 
Dan if that w(juld, you know, if that was okay, at least >5n a 
temporary basis. And he said, you know, it's fine with me, 
but of course we have to discuss it with Spitz and see if he 
wants -- if he agrees. 

That finally took place late in March. 

Q Does Mr . Barnes have a CPA? 

A No, he doesn ' t. 

Q Does he have a degree in accounting? 

A I don't believe so. 

Q You believe that Mr. Meo was — did not have 
adequate training to fulEill the duties -- 

A Right. That was nore demonstrated after he began 
to work in the position and the same kinds of errors and 
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Q Well, does Mr. Barned have any trainirn; thaL 
Mr. Meo did not have in the accounting areal' 

A I -- he has told me that he's worked in rhe area 
of finance and economics for many years, earlier on. And, 
with woi'kinfj with him day to day, on a day-to-day badi:i from 
eariy December tfirough January, he demonstrated to me by 
those efforts that he was 'jrasping what I needed him to and 
it was working out quite well. 

I'll have to tell you, I was veiy hesitant to even 
offer any kind of a position to him, especially in light of 
what had happened with Phil, you know, a friend ot mine. Bn'. 
he had demonstrated the skills necessary to do the ]ob and he 
is doing a very good job. 

Q You had, I take it from your position, extensive 
contact with Mr. Meo while he was an employee there and with 
Ms. Pritchett while she was an employee there, did you not? 

A Yes. 

Q Ms. Pritchett was still an employee at the end of 
1986; is that correct? 

A Yes, sir. 

Q In December 19B6. 

A Yes, sir. 



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Q YeU I believe you indicated that you relied 
extensively on Mr. Rarnes in that period to assist you? 

A Well, yes. 

Mr. rhannej ] closed the offices down in Tjece-inber 
-- I don't know the exact date, but it was mid- Decembei , 
l?th? 1.3th? 15th? Somewhere around that time frame. 

Q What was the reason for that? 

A Well, the reporters kept coming into the office 
constantly. We were (juite visible in the press, ami he just 
felt it was best to shut the offices down and for us to go 
home for Christmas. 

Q But Becky Pritchett stayed on the payroll at t fi i s 
period, did she not? 

A Oh, everyone did, yes. But Becky -- she was on 
home and on leave as everyone else was, but Michael, as I wa: 
telling you, he lived in the house with me and I asked him 
for his help and he said, sure, I'll do what I can Cor you. 
So he was my right arm through those last two weeks of 
December in trying to finish out the year-end work and 
prepare the financial statements and get ready for payroll 
filin>;3 and W-2s and all of that stuff. 

I mean, for me -- for an accountarit to .''hut down 



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1 on December 15^.h is ludicrous -- I mean you c.in't. You jus'. 

2 Ccin't. That's not the time at year to take a vacation in 

3 that area. 

1 Q Why didn't you ask Ms. Pritchett to report to woi h 

5 at your house ? 

6 I A I asked her if she would be available. 

7 I Q What did she say? 

I 

8 I A She said yes, that she would be. Rut in light ol; 



the whole circumstances ijoing on, I just felt it was best to 
not involve her with any of this stuff. 

Q What do you mean by thit, in light ot the whole 



12 1 circumstances going -- 

13i A Well we kept reading things in the papers I w<is -- 

14' trying to associate Mr. Channell's operations with the Iran 

15 ' affair. She was very nervous about that, asking have we dcme 

16 I things wrong? I said I don't know. 



She was very uneasy about it. 

Q Was Mr. Barnes uneasy? 

A No. 

Q Did you ever discuss with anyone else in the 
Channell organization using Mr. Barnes and not Ms. Pritrhett 
for the work durjng this period? 



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1 ■' AT think that t passed it by Dan ur .^pitz, at leai'. 

2 i| thdt they were aware that MichaeJ was assisting me. 

3 I Q Did you also tell them that in suijstance 

4; Ms. Pritchett was very nervous and it would be better not to 

5^ have hei involved? 

6' AT did have discussions with Dan on that exact 

7! issue. Hut this was probably early January, as I didn't 

8 realize the extent of how bothered by it that she was until 

9| we got back from the holiday when she said -- that was when 

10, she informed me that she was resigning. 

11; It was kind of a shock to me, to say the least. 

121 Q In the -- in 1986, when you were spending 115 

13; perceiit of your time in the -- 

14 i A I would say that's probably late '86 and 

j 

15i definitely '87. 

16! Q -- in work for the Channel 1 organizations, and you 

17 were spending, in 1986, a substantial amount of your time 

18 actually in the Channell offices at your desk, 1 take it you 

19 had, basically, daily contact with Mr. Meo, while he was 

20 there, and Ms. Pritchett, while she was there? 

21 A Yes. I would say for the most part, yes. 
Q Now, how frequent was your contact with 



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1 Mr. Channell? Did you have daily contact with him? 

2 A No. 

3 Q Did you speak with him -- 

4 i A Weeks could go by and I wouldn't speak to rum. 

5 i Q Weil, in the aveiaije month, say during 1906, how 

6 i many times a month would you speak with him? 
A Once, maybe twice. 

8 ij Q Would he send you written notes from time to time'' 

9 A Not written as such. Sometimes -- I mean — well, 

10 I I can think of a couple, maybe. When he wouJd give someone n 

11 j raise he'd put a note in there to me: Steve, you know, raise 
12.|| Angela's salary. Things like that. But I didn't get written 



memos from him as such. 

Q But you had occasion to see written notes from h i iti 
from time to time, be it notations on forms or -- 

A Yes. Yes. 

Q Did you become familiar with his handwriting from 
seeing these notes? 

A Oh , yes . 

Q So you consider yourself familiar with the way he 
writes? 

A Yes. 



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II Q Okay. What about your contact with Mr. (~oniad^ 

2 How frequently did you m«-et with him in 1986? 

3, A That would have buen much mote frequenl:ly, becai 

4 Dan was in the offices most of the time. I would say 

5 routinely. 

6 I Q Would you see him every day, on the average? 

1\ A No, not necessarily. 

I 

8 I Q Approximately three or four times a week? 

91 A Yes. Yes. 



101 



Q Would you have discussions with him about various 



11 I financial or accountincj questions' 



-I 



A Yes . 



13 I Q Is he the principal person in the organization 

I 

that you would report to on financial ur accountim; mattei 



A Yes. 

Q Did you receive notes or messages from him from 
time to time? 

A Yes . 

Q Are you familiar with his handwriting? 

A Yes. 

Q Did you have contact with Mr. Smith? 



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1 Q How Ereijuently in 1986 would you meet with 

2 Mr. Smith oti the average, in any week? 

3 A 1 1: ' 3 like Mi-. Conrad, two or three times a week. 

4 They weren't like meetings tis you'd think of meetings. 

5 IE I had a quick question I'd pick up the 

6 interoffice and ask him, you know, that kind of thing. 

7 1 Q Did you consider that you reported m any way to 

8 Mr . Smi th? 

9 A No. 

10 I Q What was the reason for the contact oi meetitigs 

11 { with Mr. Smith? 

12 i A Well, he and Dan would be generally in, at least T 

13 thought anyway, in discussion with Spitz on day-to-day 
I 

14 j business and operations. If I had a question C figured that 

i 

15i Cliff or Dan would be the one -- would have the knowledge tc 

16 

Q Did you, from time to time, receive written 

18 messages from Mr. Smith? 

19 A Yes. 

20 Q Did you become familiar with his handwri tingl 

21 A Yes 



22 



t. So that's why jtar wouJd go to then 



Q Did you, during 1986, ever have any face-to-face 



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1 'i meetings with Mr. I.iLtledale? 

2 ■{ A Not meetings. He would stop into our area arid 

3 I chat. Rut not meetings, no. 



Q Would these contacts be infrequent? These 
eaco-to-face contacls? 

A Yes . 

Q Would they, on average, be more than once a week' 

A No. It was no more than just idle, y(3u know, 
office workers passing by: "How are you doing today?" 
"Fine. " 

That kind of thing. 

Q So you generally didn't have any substantive 
discussions about the operations of the organization with 
Mr. Littledaie; is that correct? 

A Yes. That's correct. 

Q Did you ever receive any written messages from 
Mr. Littledaie in your work? 

A No. Not that I'm aware of. 

Q Do you believe you would recognize 
Mr. Littledale'3 handwriting? 

A Not necessarily, no. 

Q What about Ms. McLaughlin? 



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A I'm not sure I would recognize Jane's either. 

Q riid yoii hdve much contdct with her? 

A Just thu same with Kris. With the rest ot the 
woikers, it was on a normal office, "Hi, how are you today"'" 
That kind of thine;. 

Q When was the last time you spoke with Mr. Meo? 

A August -- I'm trying to i;ive you the last date, 
but the last day he was there,Vthe office <^»-working. 

Q You haven't spoken with him by phone since then? 

A No, s i r , T haveri ' t . 

MR. FRYMAN: I ask the reporter to mark this 
document as McMahon Deposition Exhibit 1 for identification. 
(McMa)ion Depcjsition Exhibit 1 identified.) 
BY MR. FRYMAN: 

Q Mr. McMahon, I show you McMahon Deposition Exhibit 
1 for identification, which is an article in The Washington 
Post of March 12, 1987, appearing on page A-26, headed "Donor 
Intended to Ruy Contras Arms." Have you seen that article 
tief ore? 

A Yes, sir. I have read it. 

Q Are you aware that thei e is a statement in that 
article that Mr. Meo attributes to you? 



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1 ' \ Yes , sir. 

2 Q And that article indicates that the reporter 
,1 

3 j contacted you and you declined to coinment. Ti it correct 

4 that you decJined comment? 

5,1 ft He called and asked me it I wanted to talk about 

6] the ChanneJ ] organi7ati ons , and I declined to. 

7 I Q Mr. McMahon, : would like to ask you some ijeneral 
I 

8 I questions about the bookkeeping for the ChanneJl 

9' orijani^ation, if I mi<jht. 

10 A Okay. 

11 ] Q What were the sources of funds for the Channel] 

12 ■ onjanizations? 

131 A Well, all individual people. 



Q Basically contributions? 

A Yes, sir. 

Q And was there any other source of funds? Was 
there any interest income or any dividends? 

A Slight. Slight. But not -- it was not a major 
part of our financial revenues. 

Q So the major — by far the major portion of the 
revenues was donor contributions? 

A Yes, sir. 



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II Q If you i:ould just lead me i-.hi'ouijh an example ot 

2 how the bookkeeping would work on a contribution? Just 

3 assume that, in August of 1986, an individual donatod 

4 \ $100,000 to NEPL. 

5 A Okay. 

6 I Q What would be each specific bookkeeping step aftei 

7 I the check arrived at the office? 

8' a' Once the check arrived, typically tfie maiJ would 

9'| be opened by Ai\gela, at which time she would enter -- she 

1 

10 j kept a logbook, handwritten logbook. She entered the 

11 contributor's name and the date, i he amount of the chectc ind 
l?i which organization it was Cor, and I believe at that point in 
13,1 time she was also trying to maintain a log of what project it 
14 was raised for and which solicitor raised the money. 

15; She would then make a photocopy of the check for 

16 1 her files; a photocopy of the check and send it -- and mark 

17 -- she would sometimes mark on there what project and who the 

18 solicitor was. Because we, in the accounting area, we didn't 

19 know that information. We had no way of knowing it. 

20 Q You had no way of knowing the solicitor? 

21 A Right. By that point in time, I mean certain 

22 names we knew, that maybe they were Cliff's person, or 



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certain ones were Jane's, thincjs Like that. Bur. .jent^rally 
sjieakinq, we would wait to get the indication from AtigeJd. 
And if she didn't know, she would ask the various 
fundraisers. And ;;he would generally try to indicate on 
there what project it was or, when she carried the i-hurk cr)py 
back to accounting along with the check, she would verbally 
indicate to Phil, this is CliEt and it's for £ood. And then 
they would haridwrite on thei e what it was. 

Q All right. 

A Then it would be deposited into the bank, 
appropriate bank account. And then -- well, when it - back 



1 2 ! up a mi nute . 



When it would come into the accounting area, Phil 
also kept a manual log and indicated the same kinds of things 
that Angela had. 

The manual log was intended to be phased out, 
because we had set up a screen on the computer to log this 
information in. I didn't phase the logbook out, though, 
while Philip was there, because he never managed to get much 
hang of the computer. It was riddled with errors. 
Q The computer was riddled with errors? 



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1' Q The locjbook t:ontinued in operation lor how lon<;? 

2 ;i ^ I continued it all the way through 1986. And tha 

3 I started -v h n ry Phil came on. 

41 Prior to that, the only information we had in 

5 i accounting for a contributor was on the check stub itself 

] 
61 with the deposit, and that was a year-end task, to puJ 1 

together the complete listing. 

Q How would you have a check stub on a deposit? 

A Check stub in the checkbook. Like in your 
checkbook where you write the deposit. 

Q You would fill In the deposit? 

A Yes. We put the person's name. ^^ 

Q On the logbook that was maintained from February 
1986 through the end of 1986 by, I assume, first Mr. Meo and 
then-- 

A Then Becky. 

Q -- then Ms. Pritchett; is that logbook still in 
existence? 

A Yes . 

Q Has that been produced? 



rt.av*'. 



A Yes. I think. 



(Discussion off the record.) 



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li THK WITNKSS: If d the handwritten one? 

P-i MS. LUHIN: HdS it got d blue back and see-thiouqh 

3 I cover? 

. i 



THE WITNESS: Yes. 
j 

5 MS. LUHIN: Yes, it has been produced. Yours 

6 I wouldn't have a bJ ue back and a see-through cover, thouyt 

7 1 BY MR. FRYMAN: 

8 i Q Trie check wouJd come from the fundraiser to 
91 account in<j, as I understand what you said. 

lO; A WeJl, from AngeJa it would -- 

111 Q Or from Mr. Channell's secretary, Angela D.ivir 

1?. I would come -- 

13 I A Right. 



Q -- to the accounting department? 

A Right. 

Q And what, generally, what she have noted on the 
check? What sort of information? 

A She would generally try to discern who was the 
solicitor, who raised the money, and what project it was 
for. I don't know really how she did that, except by asking 
fundraisers, I guess. I don't really know. 

Q And then Mr. Meo and later Ms. Pritchett would 



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1 make entries in the Loc;book. 

2 A Yes. 

3: Q And the check wouJd he deposited to a b.ifik 

4 account? 

5 A Yes, sir. 

6 I Q Who decided which bank account it would be 

7 depos i ted to? 

8 A Again, that would geneiaJiy be written on the 

9 I check, it it was to go into any particular one. And I don't 

10 1 know, again, who made that decision. I don't know if it was 

11 ' -- I don ' t know. 

12 I Q Suppose it wasn't written on the check. WouJd you 

13, make the decision? 

1 
14, 1 A If it wasn't written and Phil asked me, where do I 

i 

15: put this, I would generally have to make the judgment call. 

16 ! Put it in special 1. Or put it in regular. And that was 



generally dependent on where the other deposits had been 
going for that time frame. 

Q You mention that during the period Mr. Meo was 
there, there were a lot of problems with entry of data into 
the computer. 

A Yes, sir. 




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1 ; Q When W4S that mateiidl coriected, if over? 

2 A Til December, when I was doing the year -end 

3 rec(3nc i I iat ionri . IL was a iiirjhtmare. 

4 (Discussion off the record.) 

5 BY MR. FRYMAN: 

6 Q You have spoken of the logbook that was 

7 maintained, and you have said that that had various i.ypes ot 

8 information on the Jog. 

9 I A Yes . 

10 I Q Were there also entries made that would be the 

11 I traditional accounting journal entries? A debit and ^ credi-. 

12 fo reflect -- 

13 ; A On that log? iJo . 

14 I Q Or someplace else? 

15 j A Eventually. At month end we had a general jouinal 

16 where journal entries would be made. Rut I did that. 

17 Q You did that yourself? 

18 A Yes. 

19 j Q And on the example I've given of $100,000 

20 contribution, the debit entry for the journal entry for such 

21 I a contribution, would that be a debit entry to a paiticular 

22 bank account? 



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I A Yes, sir. 

2; Q Such as the PaJmer regular account? 

I 
J J A Palmer regulai. Palmer special I -- yei. 

4 ! Q And the credit entry on a contribution such as 

5 ' that, what would be an example ot a credit entry? 

6 1 A It would go to contribution income on the income 

7 j statement and the logbook and the computer -- which was 

8:! supposed to he a matched picture of the Jogbook -- was the 

9: supporting journal, subsidiary ledger that supported the 

lO; contributions for that month, who it came from and how much. 

IX Q You referred to project designation. 

12i A Yes. 

13 1 Q WouJd the credit entry in the journal reflect a 

I4'j project designation in any way? 

15 j A No. No. In the subsidiary ledger we tried to 

16 I track project information, but not in the general journal and 

17 the actual journal entry. That was on a very summarized 

18 basis . 

19 Q The logbook that you referred to, you indicated, I 

20 believe, listed the solicitor and the project? 

21 A Yes. 
221 Q Was the information in that logbook also entered 



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1 : into a C(jmpiitet' data base ot some aort? Ajid spei: i f ic il ly the 

2 ■ information about the project and the solicitor -- 

3 ^ The logbook that we kept in accounts^ Yes. Tha . 
1 was the Lotus spread sheet that we had developed that was 

5 supposed lo be i he miriur imaije oC the handwritten oni», whic.i 

6 we found was not the case. 

7 Q All right. Ail right. 

a! Now, turning from revenue items to expense items, 

9 if you could lead me through the accounting steps when a 

10 1 check or payment of some sort was made by the Channel 1 
11. organisation? 

12 A Okay. 

13 Q Take a specific example, suppose there was a check 

11 I for $100,000 to International Business Communications. 

15 A Okay. 

16 Q What would be the different steps of processing 

17 that transaction? 

18 A On the checks that went to IBC, we were given 

19 verbal instruction from either Spitz, Cliff or Dan to make a 

20 check out to I HC for $100,000, and we would generally have to 

21 ask them, did they want from a specific bank account, and if 
22I they said yes, special 1 or special 2 or something, then we 



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1 :| would draw it trom that account. It they didn't, you know, 

2 give any indication, we would look and see which bank account 

3 I had, you know, the Eunds in it. And draw it from ihat. And 
I 

4 we 'd ] eg t^ia t i n . 

si The way the financiaJs keep the project 

6 expenditures i.s by the various pi eject vendors. It is nol: 

7 until after year end, preparing tax returns, that we go back 

8 and try' to establish what projects specifically, what 

9i piograms were worked on, to develop the 990 information. 

10 It is tracked strictly by vendor, project vendors, 
I 

11 during the course of the year. 

12| Q So you would -- in the example I gave, you would 

13 receive a direction from Mr. Channell to pay $100,000 to IBC. 

1 
14: A Right. Hira or Dan -- 

15 1 Q Or soneone. 

16 } A Yft3. 

17 Q And they might or might not specify the account 

18 that that was to come from. 

19 A Right. 

20 Q Would you draw the check? 

21 A Me write it personally? 

22 Q Yes. Would you prepare the check? 



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2ii 

;i 

3 'I 

j 

4 ! 

I 

5 ; 

6 

7 

8 

9 
10; 
11 ' 
\2: 
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141 
IS 
16 
17 
18 
19 
20 
21 
22 



UNCLASSIFIED 



41 



A SomeLimes I might have. Oi Becky may have, or 
Phil m.:iy have. 

Q Al] right. There would be an entry made m the 
check stub at the time you drew the check -- 

A Right, right. 

Q -- as to the payee? 

A Right. And then we had a cash disbursements book, 
ledger, where the check numbers would be logged in, tlie 
payee, the dollar amoujit. And then what general expense 
heading it went under. 

IBC would go under project expenditures. 

Q Right. At the end of the m<jnth, did you go 
through the checkbooks and make more formal journal entries 
with a debit to a particular project and a credit to a 
particular bank account? Or what was the process? 

A Well, it would get posted into the cash 
disbursements ledger and we generally had -- we would do all 
the regular bank accounts, all those checks, spread them oui; 
to the various expense accounts, the next page might be the 
special ones, and the bottom line from that would be what 
would develop the general entry, debit and credits, ^^^*te*=t' the 



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I 4 2 

1 I Project expenses, like I told you, they were tjuly 

2 trdcked by the pdrticvilar vendor in any particular mcnth. 

3:j Q Ail rii;ht. 

4! A So that month it might show "Projects: IHC, 

I 

5.i Robert Goodman Agency," things like that. We don't have in 

61 automated system. We were getting one, but we didn't have 

7 one at the time that gave us a nice detailed breakdown, 

tracking system for all the different projects. That's a 

91 manual task that we still have yet to do. 

101 Q Okay. Now, going back to the discussion about the 

llli specific example, what would happiMi if Mr. Channel! or 

121 Mr. Conrad would tei ] you to draw a check out of a particuJar 

13 bank account and there were inadequate funds in that account 

14; to cover that check? 

1 
15; A He would usually have to make the judgment call 

16 1 and transfer monies in from one of the other NEPt. accounts. 

.7 I think Spitz had a concept of project accounting 

18 via bank accounts, but that's not how it worked. I mean th« 

19 monies moved between the bank accounts of NEPL as they were 

20 needed. The general, NEPL regular, was for paying bills. It 

21 there wasn't money in that account, then it would get 

22 transferred from whichever/^ bank account had money in iL. 



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1' Q Okay. And you said that duriny the period at yt;^ 

2 ' end l'^86, you s[ieiit a substantia] amount of time corrrcting 

3 1| some of the computet data base; is that correct? 

4 A Yes . Yes . 

5] MR. FRYMAN: Why don't we recess for about five 

'1 

61 minutes. 

7 (Recess . ) 

81 RY MR. FRYMAN: 

9! Q Mr . McMahon, before we commenced this afternoon, 

lOi we had a brief discussion about various subpoenas that had 

11 I been served by the House Committee and the Senate Committee. 
12' Specifically, you have been served, have you not, 

13 with a deposition subpoena from both the House Select 

14 1 Committee and the Senate Select Committee directing -- 
15; MS. LUBIN: I think they were served for him. 

16 BY MR. FRYMAN: 

17 Q Is it correct your coun.sel accepted service on 

18 your behalf? 

19 MS. I.UBIN: We'll stipulate to that. 

20 THE WITNESS: Yes. 

21 BY MR. FRYMAN: 
Q And you understand that you are appearing and 



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91 

loj 

11 I 
12 

13 

i 
14| 

15i 

16| 

17 

If 

19 

20 

21 

22 



testiEyinij here today pursuant to subpoena? 

A Yes, sir. 

Q And you are testifying under oath? 

A Yes, sir. 

Q And that the various criminaJ, federal criminal 
piovisions relating to perjury would be applicable to any 
testimony in this proceeding; you understand that? 

A Yes , sir. Yes, sir. 

Q With respect to your work for Mr. Channel 1, which 
began in mid-1984, did you ever have a formal engagement 
letter with the Channel] organizations? 

A No , s i r . 

Q Before we broke, we were talking about information 
that was entered on a logbook and was also entered iiito a 
computer data base. Do you recall that discussion? 

A Yes, sir. 

Q Now, the information in the data base was then 
U3ed, was it not, to prepare various financial reports for 
the Channell organization and for various Channell employees? 

A Yes. 

Q Is that correct? 

A Yes. 




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II MR. FRYMAN: I dsk the leporter to mark as McMahoi 

2i Deposition Exhibit 2 for identification, pages ?7583 through 

3 i 27586, which have been produced by counsel for the Channell 

4' organizations. 

5' (McMahon Deposition Exhibit 2 identified.) 

6i BY MR. FRYMAN: 

7< Q Mr. McMdhon, would you look at the four pages 

8 which comprise McMahon Deposition Exhibit 2 for 

9l identification, and teli me what those pages are? 

101 A Okay. They look to be the April '86 

11: contributions. Each page is sortt-d by a different 

12 identifier. 

13i Q Which is the first page? 

14l A The first one I'm looking at is sorted by date, 

15! original entry. 

16 Q And the second? 

17 A By project. 

18 Q And the third? 

19 A By solicitor, and finally by bank account. 

20 Q Has this exhibit prepared from the computer data 

21 base that we have been discussing? 

22 A Yes, sir. 



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1 'I 

2'i 

3 I 

:| 

4 I 

.1 

5 i 

6: 

7| 
8i 

9! 

loi 
11, 

121 
13! 

14| 

15' 

i 
16 1 

17 

18 

19 

20 

21 

22 



Q Can you teH approximately the time that it was 
pr epared? 

A No. 

Q This is a report for the month o£ April, is it 
not? 

A Right. But I don't know whether this version oC 
it that is in front of me is one done back in April or if 
it's the reconciJed one at year end. I don't know. 

MR. FRVMAN: I ask the reporLer to mark as McMahon 
Deposition Exhibit 3 for identification the following pages, 
which have been produced by counsel for the Channel I 
organization: Pages numbered 16113, 16148, 16152 and 161S3. 
(McMahon Deposition Exhibit 3 identified.) 
BY MR. FRYMAN: 

Q Would you look at those four sheets. Mi. McMahon, 
and identify those sheets? 

A They look to be sorts of the contribution data 
base by the individual fundraisers, certain of them. And 
they look to be from a period January '86 through sometime in 
August. It looks -- I see one here, August 28th, so that 
would be all the way through August of '86. 

Q Were these printouts prepared from the same dati 



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base that we have been discussim;? 

A Yes, sir. But, again, that data base is -- it's 



2 'I 
I 

3 J on a diskette and it's constantly worked on and updated, so 

4 ' can't telJ you what version this is of that. 

5 1 Q But this inateiiai came Crom what was the dara b.i; 

6 I at some point of the Channeli organization? 

7 j A Yes, sir. Yes, sir. 
a: q' Is that correct? 

9 1 A Yes. 

10' Q And these are reports of contributions for Chris 

11 ;j Spitz, Cliff, and Jane, are they not? 



A Yes, sir. Yes, sir. 

Q Separate sheets for each ot those individuals? 

A Yes, sir. 

MR. FRYMAN: I ask the reporter to mark as McMahon 
Exhibit 4 for identification, pages numbered lhl26 and 161P.5, 
produced by counsel for the Channel 1 organizations. 

(McMahon Deposition Exhibit 4 identified.) 
BY MR. FRYMAN: 
Q Would you identify those sheets, Mr. McMahon? 
A Again, they look to be from the contribution data 
base diskette, and they appear to be tl\e NEPL coni.i ibut ions 



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1' from January '06 f-.hrough it least August 2B of '86. Piobably 

2 : prepared at that point in time, the datd that was oti the 

3i diskette, probably August, September. 

41 Q And T take it fiom your answer that these were 



5 
6, 

7 
8 

9! 

loi 

11 
12! 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 



prepared from tiie NEPL data base at that time? 

A Yes, sir. 

Q Now, I direct your attention to McMahon Exhibits 
2, 3, and 4, and I ask you to look in those exhibits at a 
contribution from Mi. O'Boyle, in the amount of §130,000 on 
the 1st of April. 

A Yes, sir. 

Q Do you see that contribution? 

A Yes. 

Q What is the project that is identified in those 
exhibits for that contribution? 

A It's called "Toys" on Deposition 2. 

Q Does it also appear on 3? 

A Yes. Under -- it's on Jane's page, on Deposition 
3. 

Q And what is the project? 

A It's indicated "Toys" on that one as well. 

Q Would you look at Exhibit 4. 



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A AnJ, dqain, it is on the first pai;e oC Exhibit 1 , 



2:; the very first entry. The project is called "Toys" there as 

3'! well. 
I 

4 [ Q Would you look i ri those three exhibits again and 

5 i locale a contribution on April 9, trom a Mr. Giddens? 

6 I MS. LUHIN: Giddens? 

! 

7 I BY MR. FRYMAN: 

8' Q Mr. Giddens (!or $32,500? 

9 A Okay. I found that one. 

10 Q What is the project identification for that 

1 1 J contribution? 

12 I A It's also indicated as Toys. 

13 i Q Doea that appear in each of those three exhibits' 

14 I A Yea. For deposition 3 under "Kris." And yes, on 

15 I Depo3iti<3n 1, page 1. 



Q I direct your attention, again, to Exhibits 2, 3 
and 4, to a contribution from "Garwood" in the amount of 
9470,000 on April 16. 

A Yes, sir. 

Q What is the project identification in those 
exhibits for that contribution? 

A "Toys" on Deposition 2; "Toys" on Deposition 3; 



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111 and "Toys" on numbef 4. 

2 I Q I again direct your attention to those three 

3 I exhibits, to a C(jn t r ibut ion in January 1986 by Mr. Ciaiji;ei:t 

4 I for $?.0,OnO. T ask you what is the project i dent if i ca L ion 

5 ! for thai contribution? 



A "Toys" on number 3; "Toys" on number 4. 

Q And is it "Toys" on number 2 as well? 

A It doesn't appear on number 2. That's just 
April . 

Q Now I direct your attention to a contr i but i or» on 
May 20, by Garwood, of $350,000, i iid I ask you to identity 
the project? 

A "Toys" on number 3; and "Toys" on number 4. 

Q And I direct your attention with respect to those 
exhibits for a contribution on May 29 by one Hooper for 
!;i00,000 and I ask if there is a xiroject identification for 
that contribution? 

A "Toys" on number 3 and "Toys" on number 4. 

MR. FRYMAN: I aak the reporter to mark as McMahor 
Deposition Exhibit 5 for identification, pages produced by 
counsel for the Channell organizations numbered 2B659 throucji- 



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I I (McMahon Deposition Exhibit 5 ideiU 1. 1 ied . ) 

2] BY MR. FRYMAN: 

I 

3 I Q Would you identify McMahon Exhibit S tor 

4 • i dent i f i cat i on? 

5 i A This is cash receipts -- I think it says through 
6:j 10/31/86. 

7 I Q Is that 1986 cash receipts? 

8 ; A ' Yes. 

! 

9!i Q Was that prepared at some point from the computer 

10] data base of the Channell organizations? 
Ill A Yes . 

12'! Q "="3 that prepared at your direction? 

13 I A How do you mean, printed out? 

14 I Q Yes. Did you ask to have this schedule prepared? 
15i Or printed? 



A No. I probably printed it. 

Q You probably printed it. Would this be on your 

computer at home? 

A No. 

Q Where would it be? 

A Probably at work. 

Q All right. Now, in this schedule, Mr. McMahon, T 



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11 direct your at t-.en t ion C(j the aame ti ansae t iona that I've 

2; asked you dbout on trie other scheduJes, and particularly a 

3: 5130,000 contribution by O'B.jyle on April 1. 
4; What is the project referred to for that 

5 contribution in McMahon Deposition Exhibit 5 for 

6: identification? 

7- A It is called "TV ads." 

8' q' And I direct your attention in this Exhibit S to 

9! contribution on April 9 by (Jiddens for $32,500. I ask you 

IQi what is the project identification for that contribution in 

11 this exhibit? 

12 A It's also "TV ads" on this one as well. 

13; Q I also direct your attention to the April 16 

14| contribution by Garwood for $470,000. 

15i A That says "TV ads," also. 

16| Q And the same question with respect to the 

17 contribution by Clagyett for $20,000 in January 1986? 

18 A It says, "TV ads. " 

19 Q And the same question with respect to the 

20 contribution by Garwood for $350,000 on May 20? 

21 A "TV ads. " 

22 Q And the same question for the contribution by 



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11 Hooper on May 29, for $100,000? 

2! A "TV ads . •' 

3i Q Now, foi each of those contributions the project 

4' liesiijndLion has been chan<jed from "Toys" to "TV ads." Is 

5j that correct? 

6' k Yes, sir. 

7 Q Did you direct one of your subordinates to make 

81 that chantje in your computer data base? 

91 A Yes. 

lOi C Did you direct Becky Pritchett to do that? 

Ill A Yes, she assisted me in helping doing it as well. 

12' Q And why did you tell her to do that? 

131 A Because Spitz or Dan, I don't recall whi>:h one, 

14 asked me to do it. 

15 Q Did they tell you why they asked you to do it? 

16 A To the best of ray knowledge it was because they 

17 didn't feel that "Toys" was a good name for the project and 

18 to that same extent, for our program, expenditures and tax 

19 return preparation, we consolidate everything that is the 

20 Central American Freedom Program and report it as one main 

21 effort, and it was aJong those lines that they said to change 

22 all the "Toys" indications to "CAFP." 

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1' Q You had told Philip Mao, had you not, th.it "T.^ys" 

2! was a designation for weapons? 

3' A I have testified to this in the grand jury. Whjt 

4 I recdl] of it, I do reca]] jokingly saying to him that I 

5 doubted if "Toys" was the kind of thing you buy in a toy 

6 store. And I may have said guns and ammunitions. T don't 

7 recall if I did or not. Rut all of that is really my own 

8 assumption. I don't have anything that I have seen, heard, 
9! been told that tells me that. I .ion ' t know. 

lOi Q You said -- you also told Becky Pritchett, did you 

11 not, that "Toya" was a designation for a weapons account? 
12! A I probabiy did, because my curiosities were such 

13i that it was my own assumption. 
141 Q Well, I don't understand how your curiosities were 

15 I such that it was your own assumption that "Toys" represented 

16 weapons. 

i 

17 Could you explain that? 

18 A Well, I just didn't think that that kind of m.^ney 

19 was being raised to buy Toys, as you would think of m a toy 

20 store. It just seemed like too much money for playing toys. 

21 Q You were aware, were you not, that code names were 

22 used in the Channell headquarters? 



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A I didn't know that until it came out i ii the news. 

Q You were not aware that "Green" was a code name 
used eoi Mr. North? 

A No, s i r . 

Q Isn't it true, Mr. McMahon, that you were- told 
that "Toys" was a code name for a certain project? 

A I don't know what the certain project was. That's 
what I mean. 

Q But were you not toJd that "Toys" was a code namel' 

A No. All I knew was that monies that were coming 
in at that time, we called them "Toys," as far as our project 
indications . 

Q And what was the reason, again, that you 
understood you were told to change this at the end of the 
year? 

A Basically that they didn't -- the name "Toys" 
could open up a bag of worms, so to speak, as to what i i. 
■eant. That's the best I know. 

Q Who told you it could open up a bag of worms? 

A That's what ay interpretation of the conversation 



IS , 



Q Who, again, toid you to make the changes' 



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l! A I don't recall-iC iL wds Dan or Spitz. One of the 

2 !| two of them. 

31 Q When were you to]d to make this change? 

4: AT think it was in early December. 

5i Q Of 1986? 

6, A Yes, sir. 

7' Q Arid you were told by either Channel 1 or Coniad? 

8' A ' Yes, sir. 

9i Q And was this at the same time that the offices 

lOi weie being closed down? 

11' A Right about then, yes. 

12 Q Was one of the reasons Lhat the (jffices were being 

131 cJosed was to make various changes in the accounting records? 

14J A No, sir. 

1 

15r Q Did you ask Mr. ChanTiel 1 or Mr. Conrad the reason 

16 for the changing of this "Toys" designation? 

17 A Not specifically. I didn't really want to know. 

18 Q Why not? 

19 A I just didn't. I already had my curiosities, and 

20 I just didn't want to know. 

21 Q You had been joking on -- as you phrased it -- on 

22 several occasions during the year with Mr. Meo, ind 



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1 I separately with Ms. Pritchett, that "Toys" was a designation 

2 Cor a weapons account. Correct? 

3 A Yes, sir. 

4 I Q You made those comments to them, independently 
5i spread over a period oE time? 

6| A Yes. 

! 

7 Q Same joke? 

8 1 a' Yes . 

91 Q Isn't it true, Mr. McMahon, that you also had a 

101 conversation with Mr. Littledale about the meaning ot the 

t 

Hi "Toys" account? 

i 
12l A People have asked me this question before. I 

13j don't recall a specific conversation with Mr. Littledale. I 

14 1 believe that he may have been the one to jokingly come up 

15 1 with that project name back in the early part of '86, but I 

16 do not know that for sure. 

17 Q Well, why do you believe he may have come up with 

18 that designation? 

19 A I have a vague remembrance of it and that's all I 

20 have of it. 

21 Q Did you discuss the "Toys" designation with Jane 

22 McLaughlin? 



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I A I don'l. know it i >Ud oi not. I woulJn'L have 

7 reason to, but I don't know if I did. That's ■jual the pciint, 

3 I d<3n't know what the\'Toys" desi(;nation really is, anyway. 

4 Q Prior to this decision in December o£ 1906, with 

5 Mr. rhannell or Mr. Conrad, about changintj your computer d i t.a 

6 I base, had you ever had a discussion with either of them atiout 
I 

?! the ineanincj of the project desicjnation "Toys"? 

fl| A I don't recal] specific conversations. 

9 I Q Well, I'm asking Cor your best lecollec t ion . Do 

lOi you recaJl any discussion at all with either of them about 

11 the designation "Toys" prior Lo Dt^cember 1986? 

12' A The only conversation that I recall at all, and it 

13' is vague, is the one we've talked about befoie where Kri.s - 

14 it was in the evening in the offices. Kris was there, I was 

15i there. Spitz waa there. I don't remember who else may have 

16 1 been there or not. And we were getting monies in at the time 

17 and it was going into the special 2 account and we were 

18 labeling it "Nic 2" at the time. I can remember asking, what 

19 should I call this? Is there anything — any other name 

20 besides "Nic 2." And that's when "Toys" came up as the name 

21 to call it, but I don't know why and I don't know what it's 

22 for. 



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2 

3-1 

4 

5 

6 I 

7 i 

"I 

12 

13 i 
I 

15 

16- 

nl 

18 
19 
2ol 
21 
221 



Again, all I have are my uwn as sump r ions and 
curiosities on that. 

Q WeJU let's take them separately. Wtiat are your 
own assumptions? 

A Wen, I didn't think that they were for tcys and r 
knew that we were supportim; the Nicaraguan efforts, and I 
guess I let my imagination wander about what "Toys" might 
have meant. 

Q What were your curiosities? 

A Well, did it have anything to do with weapons and 
military involvement? 

Q Ts it your understanding now that these 
contributions that I have specified were used for TV ads? 
A I don't know that for sure. 

Q Well, I asked you what your understanding was. 
MS. LUBIN: I think he answered the question. 
THE WITNESS: I don't know for sure. Our system 
doesn't tell us that kind of detail. 
BY MR. FRYMAN: 
Q Have you had any discussions with anyone about 
what they were used for? 

A I've discussed, I think with Spitz, and was told 



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t's all humanitarian aid. 
Q Not TV ads? 

A That's hard to say. We have done TV ads 
»S . LURIN: Aift you speaking about these 



spec i £i c' 



I7th. 



MR. FRYMAN: Yes. Yes. 

MS. LUHIN: The April 1 and April 9 and April 



MR. FRYMAN: Yes, the six contributions that I 
have specified in my questions were the project designation 
for each was changed from "Toys" to "TV ads." 

THE WITNESS: I can't be certain ot that. AU I 
can tell you is I can be certain of this CAFP indicaticin. the 
final bottom line ot how much got spent on TV ads wovildn't 
come from a donor's file. It would come from the project 
efforts, the expense aide of it. I can't tell you this. 
This was for internal information purposes only. You don ' t 
track program income. 

BY MR. FRYMAN: 
Q Ml. McMahon, have you ever denied that the "Toys" 
account was a designation for weapons? 
A I don't know. 



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1 I Q You have no recollection of teilim; anyonp i-.h.ii. 

2 ' that WAS not the case? 

3, A I don't know if it's for weapons or not, so I 

/[ don' I- kntjw if I've denied it or affirmed it. I don't know. 

5) Q WeJ 1 my question is, apart from youi knowing or 

6 I not knowin<;, have you ever told anyone that the "Toys" 

7 I account was not a name or a code or some sort of designation 

8 ! for funds to be used Cor weapons? 

9 j AT don ' t know. 

1 

10 I Q You don't know if you ever said that to anyone; i; 

11 1 that youi- testimony today? 

12 ' A Right. Yes . Yes. 
13, 
14. 
15 
16' 
17 
18 
19 



Q Can you determine Exhibits ?. , 5, 4 and S, which 
bank account the five contributions I have referred to were 
depi5sitftd into? 

A They went into the Palmer special 2 account. 

Q How can you tell that? 

A By looking at the "Patton" under "bank account" 
c<jiumn. 



Q Which exhibit are you referring to? 
A I'm looking at number 3. I saw the first one on 
number 2, O'Boyle. It's indicated under b<tnk account as 



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1 ■■Patton," but Ihat's the s^ime name as the speciril two accoi 

2 at PaJmer. They are one and the same bank account. 

3 Q Was P.itton a code name tor that account? 

4 A Hardly a code name. It was the name of the fir^ 

5 contributor. 

6 ' Q The name of what? 

7 A The first deposit that we opened the acc(juni. up 

8 with was from Mr. Patton. 

9 MR. FRYMAN: I'll ask the reporter to mark as 

10 McMahon Deposition Rxhibit 6 for identification, seven paqf 

11 of printouts headed, on the first paije, "ciient/KP" and a 

12 fina] page with a handwritten sheet headed "NEPL 

13 contributions subsidiary by month 12/31/06." 



(McMahoTi Deposition Fxhibit 6 identified.) 
MS. LUBIN: May T ask where you got these? 
THE WITNFSS: They J ook iike they are ours -- 
MS. LUBIN: They don't have our nvimbers on iht^m. 
BY MR. FRYMAN: 
Q Mr. McMahon, do you recoynize the sheets tliat 
comprise McMahon Exhibit 6? 

A For the most part, yes; they look like the year 
end pri 



ntouts that we didVfhe auditors. 

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1 ' Q These are materials you gave ho ^ iinrne rmarhi-r >» 

? i FeJ t s-;' 

3 ; A Yes , sir. 

4 Q Were thpse prepared at your direction? 

5 A Yes. 

6 Q Now, if you would ] ook at the same transactions 
7j tliat I had referred to in these sheets, par t ir u lar 1 y the 
a' April 1 O'RoyJe contribution for §130,000; the April 'i 

9 Giddens contribution Cor $32,500; the April 6 Garwood 

10 I contribution for $470,000; the January 1986 Claggett 

J 

111 contribution for $20,000; the May ;!0 Garwood contributions 

12 1 for $350,000; and the May 29 Hooper contribution for 

13 I $100,000; if you would look at tho.se contributions and i.eU 

14 j me the project designation on each of those? 



A CAFP TV. 

Q That is different, is it not, from tfie project 
designation on McMahon Exhibit 5? 

A Yes, sir. 

Q And for each of those, on McMahon Exhibit 5, tt 
designation is "TV ads"? 

A Yes, sir. 

Q Now, what was the reason Cor that cfiange? 



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1 ! A H«i:ause when I tried to sort these thini;s, r 

2 ' needed it to be the same indicator. Becky and T were both 

^ wurkiiig on it making the 4m if i 9 n . ii change of Toys ovei^fv, \\\>i 

4 ; some were putting "CAFP TV ads," some were putting "TV ads." 

5 I So, to make them ail the same indicator, I think, that's Live 

6| best I can le-member. 

i 
7 Q When did you make this subsequent change? 



\ Oh, when T was reconciling the stufi; in late 



Q Did you make the change yourself in the computer 



Hi data base? 



A Yes. From this to that. Yes. (Indicating.) 

Q The change that is reflected in Exhibit "5, you 
directed Becky Pritchett to make; is that correct? 

A She did sone of them and I did some of them. 

Q But the change that is reflected in Exhibit 6, did 
you do all those yourself? 

A Yes, sir. 

Q Did you have any conversation with Mr. rhannell oi 
Mr. Conrad about tliat change? 



i 



A No. 



Q Anyone else? 



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A N.). 

Q You ]ust did that on your own? 

A L did that to help me sort my information. 



1 j Q When did you say that the "Toys" project name was 

5 ij first ijiven to you? 

6 1 AT think that at was in early '86; late '85, earJy 
i 

7 1 '86. 

8 Q What did you understand was the reason for a new 
9' project name at that point? 

10: A They had estabJished another bank account. 

11 I Q What was the reason for establishing another bank 



account? 

A You'd have to ask Mr. Channel 1 that. I don't 
know . 

Q You have indicated that projects and bank account 
were not necessarily synonynxDus . In other words, a project 
was not necessarily coextensive with a bank account? 

A Right. 

Q Is that correct? 

A Yes . 

Q So why would the opening of another bank account 
rei^uire the opening of a new project? 



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A That'o to my -- to my knowledge, that's liow 
Mr. Cfiannell tended to tfiirik of it. But that's not in 
reality how it really woiked. 

Q Going back to McMahon Deposition Exhibit 1 Cor 
identification, Mr. MirMahon, in that article Mr. Meo is 
quoted as saying: "I was toJd that the special account was 
for weapons only. Ml ot our accounts had names. NEPL 
Number ? was for 'Toys,' that was ammunition and weapons. 
Steve McMahon told me that." 

Do you dispute in ariy way that press report of 
Mr. Meo ' 3 account ot his conversation with you? 

A yes . 

Q In what way? 

A I don't believe I specifically said to him it was 
for weapons only, because I don't know that and T didn't know 
that at the time. "All of our accounts had names. Number 2 
was for Toys" -- that is probably correct because anything 
and everything that Phi] deposited into number 2 he called 
"Toys . " 

Whether I said it was for ammunitions and weapons, 
I don't know, as I tolJ you before. 

Q I believe you have indicated that you were not 



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I denyinq f.hat you 1.i)ld h i in iL W4:> foi ammun i t j ond -ind weapons. 
? A [ indicated th^t I jokingJy said thdt I didh'c 

3 think thi^y were the kind of toys you buy in * toy stoti-?. 

4 Whether I said dramunition and weapons, I don't recall that 

5 specifically. In a jcjkiiig way T may have. I liave no l)a.-,is 
ft for that. T do dispute one further thing that he says up 

7 : above, where he says, "Meo, former bookkeeper: a select few 

a con tri bvitoi s wtire solicited specifically for the 'Toys 

9 ! .iccount . ■ ■■ 

10 ' Q I don't believe that is specifically attributed tc 

U you. 

12 A No, but it says, according to Philip Howard Meo, 

13 -- what I'm establishing here is he would have no way of 

14 I knowing. That he was not involved with the (undraiseis. 



What I'm trying to point out further is his involvement was 
so 1 i mi ted -- 

Q The question, Mr. McMahon, is whether you are 
disputing any statement that Mr. Meo particularly attributes 
to you. 

A Okay. 

Q I don't believe that paragraph is particularly 



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I ■ A Okay. 

?. , Q Was the Patton account or the t:pecirt.l ai-count 2, 

3 was that used for anything othei- than contributions \o ' hp 

4 "Toys" ^jro ject ^ 

5 ' A Used -- do you mean how it was spent? 



Q No. Here there contributions deposited to that 
acccumt that were designated for anything other than 
the|"Toy3" project? 

A I don't thinic so. Hecause I think the "Toys" 
project, as such, for a name, was default. 

Tf Phil got a check copy back that was marked 
Patton on it, or special 2, he would automatically call thai: 
"Toys . " 

Q Al] right. FJo you know if there were any 
transfers to this account known as the Patton account from 
other accounts? 

A Within the NEPL organization? 

Q Yes. 

A I would say yes. We transferred money in and out 
of all the different accounts regularly. That's why it was 
so frustrating to work with all of these different bank 
accounts . 



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1 Q While we are on the subjec:!-. ot bank dccounts, can 

2 ymi quickly -- cr not so quickly, Ec.r that matter, just 

J idenLify all ot the bank arccjunts that you a;e aware of, thai. 

1 were used by the Channel I organization in any way? 

5 A Yes. I'll do it by o ri;an i za t ion . 

6 For NEPL the plain accovints were at the Palmer 

7 National Rank. We referred to them as the regular acoounL, 

8 special i, special ?, special -- no, there wasn't special .1. 

9 That was called "Future Freedom." 
10 Special 4 and special 5. 

U There were alao accoum s at E.F. Hutton, regular, 

12 special 1, and special 2. 

13 I We have an account -- I guess you could call it ar 

14 1 di!count -- somebody gave us a contribution to the Irving 

15 Trust Bank that sits there. We get the interest from that. 
,6, I don't think there are any more for NEPL. 

He have a certificate of deposit at Palmer 

18 National. That's not a bank account as such. And for the 

19 American Conservative Trust, that's also at Palmer. Ther* 

20 only one for that. The Mnerican Conservative Trust state 

21 election fund. That account is also at Palmer National 



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1:1 ■i'^." AnLi -Terroria ts American C(5rnm i tteu Eedpral 

2 account is rtl Madison National. Ant i -Ter r or i s t Committee, 

3 I state election Eund, that's at Madison, Madison National; tn>- 
1| Channel] Corps itseJf is at Rigqs National. 

5i Sentinel is at Palmer National. 

6 I Grow Washington is at Pajmer National. I think 

7 I I • ve hi t them ail . 

8i ' Oh, Western Goals, at -- 

9: MS. LURIN: Western Goals Foundation? 

10! THE WITNESS: Well, Western Goals Foundation -- 

11 I Western Goals was at Sovran National; Western Goals Endow(nenf 

1 2 [| was at Sovran National. 

13 What we picked up as Western Goals Foundation, T 

14, believe was at Riggs National. That was very unclear in 

15 1 their records to us. 

16i BY MR. FRYMAN: 

17 Q Let me stop you. Western Goals was at Sovran 

National. Western Goals Endowment was at Sovran National, 

19 A Right. 

20 Q That's S-o-v-r-a-n? 

21 A Right. 

22 Q And the last one" 



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1 'I A Western Goals FcMindation. 

2 i Q And where was that? 

3'! A That, I believe, was at Riijgs, when we ij<jt. the 

4 books for them in Mdy^«»^-- April, May, that realm. Tfiis 

5 account -- Western Goals, itself, no iomjer exists. Westf r'\ 
f) I Goals Endowment and Western Goals Foundation, we have rhanqed 

7 ! theii- bank acirounts, mam accounts over to Palmer National. 

8 And we are in the process of closing out the Sovran Bank's iri 
9i Virginia. And the Western Goals -- Western Goals Foundation 

10 and Fndowment also have an account at Hutton. 

11 I ACF, that has an account at Palmer. Does i i: have 
I 

12 one -- I believe it has one at Hutton as well. 

13' Q The account referred to as the "Patton account" 

14 you said was the special 2 at Palmer; is that correct? 

I 
15' A Yes, sir. 

I 
16, Q Wiis the special 2 account at Hutton also referred 

17 to as the "Patton account"? 

18 A No. 

19 Q That's independent? 

20 A It's -- yes. 

21 Q It's a separate -- 
A We called that "Hutton number 2." 



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1 ' Q Hut-.Lon numbei- 2 . 

2 MR. FRYMAN: I'lJ ask the reporter to mark a.s 

3 McMahon Deposition Exhibit 7 for ident i E ic.a t ion , a pai;e 

4 numbered 2;i0fl0, p/odiiced by counsel for the Channel! 

5 onjaniz^ tions . 

6 I (McMahon Deposition Exhibit 7 identified.) 

7 ; BY MR. FRYMAN: 

B' Q ' Do you recognize that document, Mr. McMahon? 

9i A Yes. 

10 i Q What is it? 



11 



A That looks like the full 12-month statement of 



I2i| operation for NEPL for 1986. 

13 i Q The YTD totals column, does that stand for year to 

M i date? 



A Yes, sir. 

Q That's for the full 12 months? 

A Yes, sir. 

Q What is the amount reflected Cor contributions? 

A $7,024,939. 

Q Is that the amount that you understand was the 

total of the contributions received duriny 1986? 

A Yes . 



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Q I:i l.hdL Eor NEl'L? 

A Triaf s NEPL. 

Q Thai, repoit indicates -- il says, "noUai 



4 : additions." What does "additions" mean in that Jine? 
S\ \ That's a term you would typically u.se in fund 



accciunting. "Additions to the fund balance." You start with 
your Cund balance at the beyinninq of the yeai -- 

Q You would use that term in place of "income" which 
would be in a prof i tmak i ng -- 

A Because it has profit and loss and things in there 



U I as well. 



Q Right. And the total additions is $7 , 068 , ? 35 . 0-1 ; 
isn't that right? 

A Yes, sir. 

Q Beneath that total there are -- theie is a list of 
disbursements, is there not? 

A Yes. 

Q And various projects; is that correct? 

A They are project vendor names. 

Q That's what you indicated earlier, project 
identifications were carried by vendor on your internal 



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1 ' A Yes . 

2 Q What does the amount $3,533,458.79 on the line 

3 "IBC" represent? 

4 A That wouJd be the total that NEPL disbursed to 

5 International Busirtess Communications for 19H6. 

6 ' Q Were you involved in the preparation of those 

7 I checks or money transfers? 

8 I A How do you mean "involved"? 

9! Q Well, did you draw the check.-^? 

10: A I would have occasion to, if T was told to, yes. 

11 I Q Or you would tell somebody else to who was working 

12' for you? 
13 j 

U]| would tell Becky directly or Phil directly. 

15 Q Do you recall drawing cfiecks to IBC? 

16; A Yes. 

17 Q Do you recall making any wire transfers to IBC? 
A Yes. 

19 Q At whose direction did you do this? 

20 A Again, that's always either Dan, Cliff or Spitz. 

21 Q Did you have any invoices to support these 
22 j disbursements that you were making? 



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1 I A On occasion we had Invoices fiom IBC but: .jenerdHy 

2 ! speaki ny , no . 

3 I Q They just said transfer a certain amount ot mon« y 

4 ' and you did it? 

5 : A Yes, sir. 

6 I Q Did you ask any questions? 

7 I A Not rea 1 ly ; no. 

g I Q ' What did you \inderstaiid those Evinds were being 

'i 

9:| used for? 

10'! A I thought they were part of our Central America 
I 

11 j Freedom Pioyiam effot t. 

12 ! Q Did you understand they were being used at le^st 
j 

13 i in part to buy weapons? 

A No, I didn ' t . 

151 Q The next total is $838,018.67 for Goodman. 

161 A Yes, sir. 

L7 Q What does that represent? 

13 A That would be the monies that NEPL spent with the 

19 Robert Goodman Agency. 

20 Q And what is the Robert Goodman Agency'; 

21 A They are an advertising firm that helped us in thf 

22 production of our various television media campaigns. I 



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1 I believe tht^y dCtiidLly may have piodncft'l Llie videolapej-. 

2 Q Were checks drawn to that vender supported Ly 

3 invoices? 

4 • A Y e s , s 1 r . 

5 : Q Mways? 
I 

6! A Yes, sir. Not always up front. We may be 

7 I instructed to send a wire to them in order to place the TV 

i 

81 media bti'y . Rut they -- it was followed up with invoices. 

9 Q But there was no such follow-up with re.spect to 

10' TRC? 

11 A No. Not that I'm aware of. 

I 

12: Q The next line indicates $90,190.07 to Piodemci. 

13' A Yes. 

14! Q What does th.iL represent? 

15 ; A I don ' t know . 

16 i Q Do you know what Prodemca is? 

17 A Not really. 

IB Q Were you involved in drawing any checks to 

19 I Prodemca? 

20 A Not that I recall. 

21 Q Any other sort ot money transfers? Any other wi 

22 transfers? Were you involved in preparation of any wire 



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I transeeis i-.o Proilemca? 

■} A It's possible. I don't know. 

3 Q Ale you sayiny you've never heaid of Prodemci" 

4 A No. r have heard of them. T know w«- spent - 

5 sent money to ihem . 

6 Q But you don't know what they are? 

7 A No. I know they are not one of our typical 

fl administrative vendors so they, by default, go into project. 
9 Q The next line is 322,500 to Edeiman. What does 

10 that represent? 

11 A KdeJman is -- I don't recall what kind of firm 

12 they are. T remember they did wotk for us. What it was I 

13 don't know. I don't remember. 

14 I Q The next line is -- T may have misread the last 

15 I Jine. The Edeiman expenditure was $92,324.38. After that 

16 there is an indication of 322,500 to Blackwell. 

17 What does that expenditure represent? 

Ifl A That could be -- they were an advertisinij ai;ency. 

19 They were lielping us develop some of the TV campaigns, ads. 

20 Q The next line indicates 36000 paid to Cameron. 

21 What does that represent? 

ll\ A That's Bruce Cameron. That's all I \now about 



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1 ; that. 

2 Q Whdt dees he do? 

3 ' At do(i ■ I. know. 

4' Q The next line indicates $202,906. ?7 to "Other." 

5 What does that represent? 

! 

6i A Tn eac^i month when I would make the journal entry 

7 if there were other insignificant amounts to what I thought 

-- considered a project vendor, they would go under this iint 

9i item. So that's made up ol: various and sundry different 

10' project vendors and I'm sorry but I haven't had time to 

11' prepare a subsidiary suppoiting schedule of that tor anyone. 

12! That's on my "to do" list. 

131 Q 



The next Line indicates $100,000 to Patricia 



14 I Heck. What is that expenditure'; 



A She had given roughly $100,000; I guess $101,000 
something or other — during the tail>6f '05, as a project 
effort. I believe they were going to have a speaker -- 
meetings, things like that. And the project was never kicked 
off and the money was refunded back to her. 

Q The next line indicates $84,900 to Blakemore & 
Kiewiow. What does that represent? 

A They were an ad agency as well and helped with the 



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1 TV ads. 

2 Q The next line shows $-150,000 to 

3 "Intel-Cooperation." What does that represent? 

■1 A Thrtt was the other firm like IBC. I thought they 

5 were one and the same thing when we were told to write checkd 

to them. 

7j Q , Did you have any invoices supporting those checks^ 

BJ .A No, sir. 
9'| Q And what was the reason you drew checks to that 

10 j corpora t ion ? 

11 A He were instructed to by the executives and Spitz 

12 ' or Dan or ClifE. 



Q i?114,900 to Finkelsteiri is on the next iine. What 
do those expenditures represent? 

A Finkelstejn -- it was like a marketing research 
project, I believe. 

Q Is that a polling organization? 

A I don't know, really. 

Q All right. The next line shows $11,810 to 
Kuykendall. What does that represent? 

A He was a consultant for project efforts. 

Q The next line shows $40,000 payable to Nofziger. 



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What d, 



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\'it [■ e p r e 3 e n t ? 
A He was also a consultant. 
Q For what^ 

A General consulting, I gues 
never attended any meetings with him. 
the man i .'; . 

Q Finally, the last disbursement for projects is 
5nS3.2ri for Public Affairs. What does that represent? 

A Theie was -- I think it was a demonstration that 
tliey staged the late -- latter part of '86 and they were the 
expenses of that. 

MR. MC GOUGH: Let's go off the record Tor a 
sectjnd. I'm Tom McGouyli, I work with Jamie Kaplan. 
(Discussion off the record.) 

MR. FRYMAN: I'll aak the reporter to mark as 
McMahon Deposition Exhibit 8, a docursent headed "National 
Endowment for the Pieservation of Liberty, Statement of Net 
Assets, December .31, 1985." The document is composed of 
pages 27812 through 27B18; produced by counsel for the 
Channell organizations. 

(McMahon Deposition Exhibit 8 Identified.) 
MR. FRYMAN: I'll ask the reporter to mark as 



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McMdhon DepcJSiMon Exhibit 9 tor idpn n i E ic^ t ion , d ■lurament 
headed, "National Kndowment lor the Pr fser va t ion of Liberty, 
Statement o f= Nel Assets, January U, 1986," which is compOoP'i 
of pages ?9197 through P9199, produced by counseJ for *he 
Channell onjan iza t ions . 

(McMahon Deposition Exhibit 9 identified.) 

MR. FRYMAN: E ask the reporter to mark as McMahoi; 
Rxhibit 10 for identification, document headed "National 
Endowment for the Preservation of Liberty, Statement of Net 
Assets, April 30, 1986," which is composed of pages 29125 
through 29130. 

(McMahon Deposition Rxhibit 10 identified.) 

MR. FRYMAN: I'll ask the xeporter to mark as 
McMdhon Deposition Exhibit 11 for identification, document 
headed "National Endowment for the Preservation of Liberty, 
Statement of Net Assets, November 30, 1986," which is 
composed of pages 165*^0 through 16559, produced by i:ounseL 
for the Channell organizations. 

(McMdhon Deposition Exhibit 11 identified.) 

MR. FRYMAN: I'll ask the reporter to mark as 
McMdhon Deposition Exhibit 12 tor identification, a .iocument 
headed "The National Endowment for the Preservation of 



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1 Libei-Cy, Si.dLemeiit ot" Net ftsset-.s, November 30, 1986," whicU 

? is (.-(jrnpusi'd of: p^qes 27870 throuyh 27827, p/odured tiy roun.sei. 

3 Tor t.he Chdnnell. o njan i /a t ions . 

4 (McMahon Deposition Rxhibit 12 identified.) 

5 MR. FRYMAN: I ask ttie reporter to m.aik is McMahon 

6 ' Deposition Exhibit 13 for iderit i fj cation, a document headed 

7 I "Ant i -Terror istn American Ccjmmittee Federal Election Fund, 

B December 31, 1986," which is composed oC pages 26628 through 

9' 26635, produci-'d by counsel Cor the Channell organizations. 

i 
10 I (McMahon Deposition Exhibit 13 identified.) 

U; MR. FRYMAN: I ask the i eporter to mark as McMahon 

12 i Deposition Exfiibit 14 for identification, a document headed 

13 "American Conservative Trust, Feileral Election Fund, December 

14 31, 1986," which is composed of pages 26615 through 26627 

15 produced by counsel for the Channell organizations. 

16 I (McMahon Deposition Exhibit 11 identified.) 

17 BY MR. FRYMAN: 

18 Q Mr. McMahon, I ask you to examine Exhibits H, 9, 
19' 10, 11, 12, 13 and 14 and tell me if those exhibits were 

20 prepared under your supervision? 

21 A Yes. 
221 Q Do they represent the financial statvis of the 



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1 i] par t iiTular organ i z-i tiona' that i.hey purporn to represetH. ^s ot 

2i the date indicrtted on each exhibit? 
I 

3 I A Yes, Hie. 
i 

4 Q Directing your attention to Exhibit B, 

5 Mr. McMahon, when we were discussing Exhibit 7 we reviewed 

6 I the particular project disbursement.'!. Where does the 

7 I comparable information appear in Exhibit 8? 

I 
8- A It wasn't broken down at the end of 1985 that same 

I 

9 wdy, but it w>5u1d be under a line called -- do you see 

10: "disbursements"? 

1 
11, Q Yes. 

12' A Going down, the line called "Contributions." That 

13; line item as well as, if you go to the next page on there 

14 where it has July through December, there's an additional 

15, line iten there called "Promotional Advertising." 

lej Q The total for contributions is $1,600,032. 

17 Withdrawn. 

18 §1,632,644.10; is it not? 

19 A Yes, sir. 

20 Q Can you determine how much of that represented 

21 transfers to IBC? 

22 A For the months of August and September, 



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1 I spec i f icd L i Y fof IRC -- prior Lo Auijust -- in the trootncjtes 

2 yc.vi ifidy want to follow along -- prior to August the category 

3 included ail persons, trusts and (Ji gan i za t ions that received 
1 tundsf from NEPI.. 

5 After, I would say August, r)eptember on through 

6 i the end o£ 1985, that category would have been strictly IRC. 

7 j Q Did you receive any invoices or any other 

8 I docuraen'tatioii from IBC? 

9: A Not to my knowledge. I don't think so. 

I 

10 1 We would occasionally get an invoice for 

11 I consulting fees, things like that. But not the major money 
12i| that went to them. 

13 ! MS. LtlBIN: That's it for those? 

14 I MR. FRYMAN: I'd ask the reporter to mark as 

15 ( McMahon Deposition Exhibit 15 for identification, a file 
16 i relating to Eric Olson, pages 57152 through 57163 of the 
17 documents produced by counsel for the Channel 1 organi zat ions . 

(McMahon Depositi.in Exhibit 15 identified.) 

19 BY MR. FRYMAN: 

20 Q If you'll examine Exhibit 15, Mr. McMahon, you 

21 will note that page 57158 is what appears to be an invoice 
221 dated October 8, 1986 for consulting services for $10,000 




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1 ' duriiiij October. The next patje, 57159 is uhat appears lo be 

?. i ariother invoice for consulting services rendered during 

1 

3 ;! *lovember 1986 for 57500. Page S7 160 appears t<j be an invnice 

1 dated December 19 for consvilting seivicfes during r)erember Tor 

5i $10,000. 

el Page 57161 appears to be an invoice for consulting 

services rendered in January 1987 for $10,000. Page 57162 

8' appears to be an invoice for consulting services rendered 

9' during February 1987 for $5000. And page 5716T appears to be 

10 an invoice for consulting services rendered during February 

11 I 1987, again for $5000. 

12 I Can you tell me what the consulting services were 

.1 

13 I tliat Mr. Olson rendered to t\\e Chaiinell organizations? 

14; A He did some help with us, as far as our allocaticn 

15 systftiii for the accounting efforts are concerned. But as to 

16 i the nature of the remainder of his consulting services, you'r 

17 have to ask Mr. Channell because I am not aware nt what that 

18 was. 

19 Q So these invoices indicate he was paid 

20 approximately $40,000, do they not? 

21 A Yes. 

22 Q And the only thing you are aware of that he did 



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was some work on wliaL you describe as allcjcaLion of 
accounting services? 

A No. An allocation system. 

Q What do you mean by that? 

A Well, with all of our or(;ani zat ions we have to 

dUcicate our administrative expenses and costs to the varioi 
orijanizations that they appropriately belonij to. And he 
helped us in the discussions on that and occasionally S* 
would go over financial information with me. 

Q Did he naintain an office at the Channel] 
organizations at any time? 

A No, sir. 

Q The address on this invoice is|| 

do you know if that's Mr. Olson's home? 

A I believe it is, yes. 

Q Does Mr. Channell also live there? 

A Yes. 

Q Do Mr. Olson and Mr. Channell share a house? 

A It's a condominium building. 

Q They share a condominium? 

A I think they have — I think Eric's address is 
and Channell's i s ^^^H 



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1 ' Q Do the coiidotnin lums adjoin? 

2 A I think they do. 

") Q There is alao in here, at pages 'oTlSe ami iTl-iT, 

4 what a{ipeai to be bills cu a bilJ for lamps, mirroiy, ef 

5 cetera, for $191S, tvom something caLled Olson Futniture. 

6 I A Yes, sj r . 

7 I Q What is Olson Furniture? 

8 I A These were things that W Mii j i «c bought from 

9 ' Mr. Olson when we went into our new offices Lo furnish our 

10 i lobby and some of the other areas around us. 

11 Q Does he have a furniture business? 

12; A No, sir. .These were used items that we bought 

13 from him. 

11 1 Q What is it you understand Mr. Olson's occupation 

A I think that he's a management consultant. 

MS. LUBIN: Can we have a short break? 

(Discussion off the record.) 

MR. FRYMAN: I ask the reporter to mark as McMahor 
Deposition Exhibit 16 for identification, a check dated 
.January 1 , 1986 from the National Endowment for the 
Preservation of Liberty, payable to Shank, Irwin and Conant, 



15 1 to be' 

16! 

17 

18 

19 

20 

21 

221 



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1 I for $217,500. 

2| (McMdhon Deposition F.xhit.it If, identified.) 

3, MR. FRYMAN: Th i a i:herk is re£lei-l-ed on page 100! 

of the mateiiais prodviced l)y rounseJ for the Channel] 
5 I orqaniza t ions . 



T also rtsk the reporter to mark as McMahon 
Deposition Exhibit 17 for identification, a ijroiip of checks 
which appear on page 16657 of the documents produced by the 
Channell onjaniza t ions , inciuJim; a cashier's check purchased 
by Shank, Irwin and Conant for $237,000 payable to the 
National Endowment £oi' the Preservation of Liberty dated 
March 17, 1986. 

(McMahon Deposition Kxhibit 17 identified.) 
BY MR. FRYMAN: 
Q Now, Mr. McMahon, what was the purpose of the 
January 7, 1986 check payable t(3 Shank, Irwin and Cijnant 
which is Exhibit 16? 

A Okay. To ray knowledge, back in '85 we were given 
a contribution through this attorney firm. Shank, Irwin and 
Conant, and it was in the ball park of around $500,000. 

Shortly after we received it they notified us that 
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I j contribute to us, they weie qointj to dci.udily make a Loan tf 



3 i decision that they said: No, we don't want your Loan. If 

4 you ai e not going to give it to us, Corget it. 

5.;| ReCeri ing back to Deposition Number fl -- 

6.1 MS. LUBTN: 18? 

7 I THE WITNESS: n. Statement ot net estates For 

8| December 31, '85. This item here called "Note Payable." It 



says "Office Equipment" there. I believe it's an error on my 
template. It should say just plain "note payabJe" Cor the 
$237,500, that's the 1 iabi 1 i ty%J e- i i Ife had at the end of 'flS 
to pay that back to them. 

As you see in early January we, in fact, did send 
that money back to them. 
BY MR. FRYMAN: 

Q You say the contribution was made by this law firm 
on behalf of someone. 

A Yes . 

Q On whose behalf was it made? 

A I believe it was Bunker Hunt. 

Q Do you have -- do you know why he didn't make tlie 
contribution in his own name? 



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1 ■ A No, t r eal ly don ' t . 

2 Q WelJ, did anyone ever say anything to yciu dbout 

3 why he didn't make it in his own name? 
1 A No. 

5' Q Would you examine Exhibit 17 for i den t i f. ira 1 1 on . 

6 which contains the cashier's check payable to NEPL for 

7j $?3 7,000. 

i 
a I What do you know about that transaction? 

9I A Again, I think it came from Mr. Hunt throuyh his 

10 attorneys that he used. And I really don't know why -- we 

11 paid it back to him and then he turned around and gave it 
12-1 back to us. T don't know. 

13 I Q So you understand that that $237,000 was a 

14 j contribution? 

15 ! A Yes, sir. 

16 I Q Going back to Exhibit 16 for identification, you 
will notice that the explanation on the check says "repayment 

18 of note." You have referred to the note payable entry on 

19 Exhibit 8 for identification. 
2.0 A Right. 

21 Q As I understand your testimony, Mr. Channell was 

22 I rejecting the idea ot there being any money or any note with 



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1 l| regaid to t.his amount but was just teturninq the 

2 j rontr i but i on . 
3ii A Yes. 

4 ' Q Do you know why there was both the entry 

5 ' "repayment of note" on the check and "note payable" on fhe 
f j statement of net assets which is Exhibit 8? 

7 I A Really it's just a matter of terminology. It is 

8' possibje -- I mean -- it could be argued that it should be, 

9' maybe, under "Contribution Refiind." We put it on there as a 

rO- liabiiity, though. 

11 j MR. FRYMAN: I ask tfie reporter to mark as McMahoi 

12' Deposition Exhibit 18 for iden t i 1 1 t-a t ion , vaiious handwrittei 

13, notes produced by counsel for the Channell organizations. 

14 Specifically this exhibit includes pages .?0567, 70591, 27631, 

15 27632, 27633, 27634, 27635, 27636, 27704, 27705, 27671, 
16; 27672, 27406 and 27406-A. 

17 (McMahon Deposition Exhibit 18 identified.) 

18 BY MR. FRYMAN: 

19 Q Mr. McMahon, I will direct your attention to the 

20 first page of that exhibit, 20567. Is that Mr. Channel! 's 



handwr i ti ngl 



A No. I don • t think so. 



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6 

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8 
9 I 

10 ! 

11 I 

12 i 
13 

14 i 

! 

15:! 

16 ! 

17 

U 

19 

20 

21 I 

22 I 



Q Whose handwriting is it? 

A It Icioks more to me like Mr. Conrdd ' i; . 

Q T direct your attention to the next p-iMo, ;0S91 
Whose handwriting ir that? 

h This also looks like Mr. Conrad's. 

Q T direct yovir attention to 27631, whose 
handwriting is that? 



T don't know. I don't know. 

Same question with respect to page 27632? 

Again, I don't know. 

Same question with respect to page 27(n3? 

I don ' t know . 

Same question with respect to 27634? 

I don't know on that either. 

Same question with respect to 27635? 

This looks similar to Mr. c:onrad's. 

t direct your attention to page 27701. Whi: 



handwriting is that? 

A I don't know. 

Q Ts that Mr. Channel] 's handwriting? 

A rt doesn't look like it. 

Q Ts i t Mr . Conidd ' s'> 



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I .1 AT rion'l. know. I .Ion ' t know whose it is. 

?. ' (J Would you look at iaqq 2nOb. Wfiose handwriMny 

3 i 1:3 that? 

4 A Sdfflf person as the other page but I, again, T 

5 i don ■ t know. 

e! Q Returning to page 77701, that is dated 1/0/86, is 

7 I it not? 

A Yes, sir. 

Q And there is a reference at the top to "nunkers 
237.5 on Monday"? 

A Right. 

Q Underlined, "January ?0-February 5." 

Do you recall any discussion oC a contribution ot 
funds in that amount from Mr. Hunt about that time? 

A No. I think his ultimate monies came in in Man-h. 

Q There's also a reference to "Green's 400 K on 
Tuesday"? 

A I'm not familiar with that. 

Q Turning to page 27671, do you recognize that 
handwr i ting? 

A This looks like Dan's, I think. Dan Conrad. 

Q Turning to the next page, 2767?? 



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A I ' m ni) t sure . 

Q Turning to page 27106? 

A This looks like Dan's again. 

Q Do you spe the reCerence to "Green .shopping 



5 1 i s t . " 

6 1 A Yes . 

7 I Q Did you ever hear any reference to a "Gre 

I 
8 'I shopping list"? 



9 




10 




11 




12 


I'm no 


13 




14 


ASAP"? 


15 




16 





A No, sir. 

Q Turning to 274nft-A, whose handwriting is that? 

A I don't know. It looka a little like Dan's but 

t sure on t hat . 

Q You see the reference at the top "60 K to Ollie 

A Yes. 

Q Are you aware of any sort of transfer of money to 
Oliver North? 

A No, sir. 

Q You were never aware of any transfer of money? 

A I didn't even learn «A that Ollie North had any 
involvement with us until after things came out in the 



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Q So Lhe answer to my question is no.' 
A No. 

MR. FRYMAN: I <isk the reporter to mark an McMdticri 



4 Depob-iti>5n P:xhibit 19 Cor ideii t i t i ca t ion , d .;roiip of 

5 handwritten notes which appear on pages 2?in09 through 23018 
6, in the materials produced by counsel for the Channell 

7 j organi nations . 

a (McMahon Deposition Exhibit 19 identified.) 

9 ' BY MR . FRYMAN : 

10 I Q Mr. McMahon, would you look at Exhibit 19 for 
I 

11 i identification and tell me whose handwriting appears on i.ho; 

1 ? pages'' 

13 A This looks like mine. This is mine. 

IH'\ Q l3 it yours on every page? 

15 ! A Yes, sir. 



MR. FRYMAN: I'll ask the reporter to mark as 
McMahon Depositi.jn Exhibit 20 for identification, a document 
dated October 14, 1985 which is composed of pages 20014 
through 20025 of the materials prcjduced by counsel for the 
Channell organizations. 

(McMahon Deposition Exhibit 20 identified.) 



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1 ' BY MR . FRYMAN : 

7. Q Tf you wouJd look as Exhibit 20, Mr. McMahon, hdv- 

3 you seen Lhat Jocumeiit or that type oE document bef(jre' 

4 A No. 

5 Q Were you aware that extensive outlines or "to do" 
b lists were prepared on a periodic basis within tl\e ChannelL 

7 j organization? 

8 A No. T had heard reference to Dan's "to do" lists 

9 \ but T didn't know what they were oi ever see them. 

10 ! Q When you say "Dan's 'to do' lists" what do you 

1 1 I mean by that? 

12! A Mr. Conrad, you know, \? like he and T had a 

13 discussion he might say: Well, t'il put it on my "to do" 



list. I didn't think much of it. 

Q But the "to do" lists were not circulated to you 



16 I or the outlines? 



A Oh, no. Oh, no. 

Q Would you look at this exhibit and the handwriting 
and tell me if you can identify the handwriting <3n this 
exhibi t? 

A It appears to be Mr. Conrad's. 

MR. FRYMAN: I ask the reporter to mark as McMahcr 



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I DepositiDH Exhibii: 21 tov ident. i E ica t ion , pai;es IS572 LIuoiiu 

? 1SSV1 produced by rounrel for the Channel] orqa n i za t i ons . 
-) (MrMahon Deposition Rxhibit 21 i.len t i r ied . ) 

4 RY MR. FRYMAN: 

5 Q Would you examine Exhibit 21 for identification, 

6 Mr. McMahon, and tell me it you recognize those payes ? 

7 A Yes. It looks like the logbook that Angela keeps 

8 of the checks that come in. 

9 Q Do you believe thrtt those entries were made by 

10 Angela Oavia? 

11 A Ye;s . I think they are. 

12 MR. FRYMAN: Mr. McMah<5n, I have no further 

13 questions at this time. I believe, however, that the 

14 d<jcument production by the Channell organization is noi yet 

15 I compl ete . 

Ifi I MS. LUBIN: That's correct. 

MR. FRYMAN: I want to reserve the right (o raisf 
further questions that might relate to further documents to 

19 be produced so I have no further questions at this time. 

20 I say that with the reservation that I may have further 

21 questions after I look at the further documents. 
22! THE WITNESS: I understand. 




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14i 

15i 

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17 

11 

19 

20 

21 



MS. LURIN: Are we to assume that fuither 
questions reJate onJy to furthei documents? 

MR. KAPr,AN: Not on my part. 

As eveiyone here knows we fiad approximately aQ- . 
25,000 pages worth of diicuments produced on Wednesday or 
Thursday. In fact I tfiink we are all too familiar witri 
that. So, to the extent that I reserve a right for Euithei 
questioning at the end of my questioning today, I don't want 
to limit myself just to documents that haven't been produced 
prior to thi.s time. 

MS. LUBIN: How about informally, do you mostly 
think you have covered most of what you have? 

MR. KAPLAN: I will attempt to do so. 
EXAMINATION 

BY MR. KAPLAN: 
Q Mr. McMahon, as you know my name is Jamie Kaplan, 
I'm an associate counsel with the Senate Select Committee 
that is investigating the Iran and Contra affair. I will ask 
you a few questions and will try not to duplicate what 
Mr. Fryman has asked you already this afternoon, although T 
certainly may touch on some areas that Mi. Fryman has 



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1 I If you have any ijuestiona thai I -iik you, Ih-it yo' 

2 dun't understand, pJease fee] free to stop me ind ask me to 
"i be a biL more clear. 

1 A Okay. 

5 (Disc\i3sion off the record.) 

6 ; BY MR. KAPLAN: 

7 Q Mr. McMahon, I'm going to take you back to a 

8 document that has been marked as McMahon Exhibit 4; which I 

9 I believe is a listing entitled "NEPI. 1986 Contributors." 

10 I A Okay. Got i t . 

11 Q It covers the particular time that looks i.o run 
12; from January of ' B6 -- 

13 I A Through August. 

14.1 Q Through August, I guess. Although they are not 

15 i all in their right order. 



16; 

17 
18 
19 
20 
21 
221 



Can you tell me what the CAFF project was? 

A The initials there stand for -fe^w*. "Central America 
Freedom Program." 

Q Do you have any idea what that project is? 

A To my understanding it was humanitarian efforts 
for the Nicaraguan -- Contra fighters there. 

Q WorkiDg_apW.n. a.lLtUS^dlLS^ii ^■^'^ pa>;e, can yc- 



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1 ! tell ne what the "food" pioject was? 

2 ,j A Tfidt was, from what I understand, they wfre 

3 j raiding money to try and buy and purchase food tor the 

4 I fighters i ri the gap before the money from Congress got tci 
5! them to help them. 

6 1 Q A little further down the page, what about REK 

7 Omaha TV? 

8[ A That was a refurid from the Robert Goodman Agency 

9[ for a time buy that we had placed in Omaha. 
1 
lOi Q Two down there there, ran you tell me what the 

111 "radio project" was? 

I 
12i A That was the project that Western Goals embarked 

13i on. 

14 1 Q And, can you tell me moving down the page, what 

15. Nic I was? What was that proje.rt? 

16j A I don't know any further distinction from that as 

17 opposed to CAFP. Generally speaking Nic 1 is what it was 

18 called if it was deposited in special account 1. 

19 Q So your general understanding is that CAFP and Nic 
?0 1 stood Cor the same project? 

21 A Basically, yes. 

22 Q Let's work to page 2 of McMahon Exhibit 1 -- 




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1 :| MS. t.UHIN: Number 4? 

2 J MR. KAPLAN: I ■ m sorry. Number 4. 
1 I BY MR . KAPLAN: 

4 ! Q The secorid from tfie bottcmi viiider the project 

5 i heading says "SDI." Do you know what the SDI projeci. was? 

6 I A That stands for -thre "Strategic Defense 

i 

7 Initiative." 

8, Q What did that project entail? 

9 i| A I believe that they were hoping to raise monies t 

lOi educate the public through the media on what SDI was. 
Ill Q So I take it you had an understanding as to wliat 

.2 each of these projects that we just went through stood Cor 

13, and what activities fell under the iiibric: of each project 

14 1 title? 

15i A WcFy generally, yes. 

16: Q Yet you testified a little earlier today that yoi 

17 didn't have any understanding as to what the "Toys" project 



19 A I don't. And I don't know exactly how the food 

20 project, either, ended up getting into the Nicaraguan 

21 people. I just don't know. 

22| Q I'm not talking about how the food projeci. made 



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1 ' its way to Nicaragua. But you just described for me a mi 

2 ' dqo that the food project was designed to provide food fc 
3^ i.he Nicaraguan lebelrf; is that correct? 



5' Q And you aJso told me, simiJarly, what the CAFP 

6 j project was -- money for that project was to be uaed for? 

A T said that was Central America Freedom Program. 

Q Right. 

A What that encompasses, I'm not real sure of. 

Q But you gave us a bit of an explanation and the 



same for radio, the same for SDI ; is that correct? 

A Yes . 

Q And your testimony earlier today is that you could 
not even come up with the same general explanation of what 
the "Toys" project stood for? ^ 

A No. And I still can't. 

Q Okay. You testified earJier today that you didn't 
want to know, in December 1996, why you were instructed to 
change the designation of the "Toys" project; is that 
correct? 

A Right. 

Q Did you think you were doing something wiong? 



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A TL occurrf^d to me. 

Q Why did thdt occur to you? 

A Well, I didn't :5ee ^ny -- I didn't k.nou of any 



4 [ reason to need to change "Toys" to CAFP. 

5 ! Q IE you thought you were doing something wronij, why 

6 ; wouldn't you have wanted to know that you were doing 

7 I something wrong? 

8:1 A I just didn ■ t . 

9 il Q IE someone asked you to go steal a car on the 

•I 

10 I street would you ask why? 



MS. I-IJBIN: I'm going to object. I'm going to 
object to that, Jamie. 

BY MR. KAPLAN: 

Q Would you please answer the question. The 
objection has been noted. 

A What was the question, again? 

Q If someone asked you to steal an automobile, would 
you ask why? 

A No, I'd probably tell them no. 

Q If someone asked you to engage in an obstruction 
of justice, would you ask why? 

A IE I knew that's what was going on, probably yes. 




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Q ^nd if yo" ^><*'l ■^n intuition as to what was ijoimj 
on, or that something wrorig -- to use your language -- was 
going on, would you generally ask why? Of fot what purposed 

A T don't- know. I suppose I would. 

But your testimony is that in this instance you 



2 

4 : A 

si Q 

fii djdn't^ 



No. 



8| Q And ran you tell us why you didn't? 

91 k I said betore, I didn't want to know. 

lOi Q Yoii testified a little earlier that the "Toys" 

11 I designation prompted the thought of guns and ammun i t i(jn ; is 

12 [i that correct? 

13 j ^ Yes. 

14 i Q Why did the phrase "Toys" prompt, in your mind, 

15 the image of guns and ammunition? 

16 A Because my image of Nicaragua at the time was that 

17 there was a war going on there. 

18 Q How did you know that the "Toys" project related 

19 to any of the activities conducted by NEPL relating to 

20 Nicaragua? 

21 A As I said before that's only my assumption, my 
curiosity. I don't have any basis for it^ cytctfrt \+ ^"to 

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MS. I.HHTN: That it related to Nicara^ua^ 
THE WITNESS: No, that it related to yvin.'; and 
weapons . 

BY MR. KAPLAN: 
Q But why did you even assume that the "Toys" 
project related to Nicaragua at all? 

A Why do you all question me as to what "Toys" is? 
You are under the same assumption. That ' ."! -- I mean that 
would seem clear to me. 

Q We have had the benefit -- 

MS. LUHIN: They get to ask the cpiestions. 
THE WITNESS: I'm sorry. My curiosity -- 
BY MR. KAPLAN: 
Q I'll answer this. My curiosity is piqued by press 
media reports over the course of the last four months. 

Your curiosity arose at sometime prior to any of 
the media reports about the affair that we are in the process 
of investigating. And I'm asking you: Why did you even 
suspect that the "Toys" project was related to efforts on 
behalf of the Nicaraguan rebels? 

A Drawing on what you have just said, when you first 
read about "Toys" in the newspaper, along with many other 



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I I people, their dsswmptiiun jumped and their ira<i(ji ii.i t: ion jumpe^i 

7.' to whdt Toys might be, i.e. weapons, ammun i t ion , e t reteia. 

3 I My curiosity did the same thing to me back the-n when the Toy; 

4 terminology first came about. 

5 Q When someone says "toys" to me, I diin ' t l-hink 

6 about guns and ammvinition. 

! 

7 I A Do you think about spending millions on toys? I 

8 ; don ■ t . 

9; Q So then I take it that your testimony is that the 

10 reason why "Toys" prompted the image of guns and ammunitions 

11 j purchase in your mind is because of the amount of money that 
12' was being spent on that project? 

13 I A As welJ as that there was a war going on in 



Nicaragua . 

Q Okay. So it was both the amount of money that was 
being spent on the project, and the fact that there was a wai 
going on in Nicaragua, that led you to imagine that the Toys 
project was a designation for guns and ammunition? 

A Yes, sir. 

Q Didn't Kris Littledale show you a magazine in 
which guns and ammunition were featured and tell you that the 
Toys project was raising funds Cor that purpose? 



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1 ^ T doii' t recdl I that. 

2 Q Did you see anytfiing around the office ttiat would 

3 have ted you to believe I hat the Toys project was rivsiiKj 

4 funds for guns and ammunition'' 

5 A No , I (lidn ' t . 

6 Q With respect to the Shank, Irwin & Conant checks 
7! that Mr. Fryman showed you a little earlier, I believe (hat 

8 they have been marked McMahc.n Exhibits 16 and 17, was there 

9 I ever a note that evidenced the so-called repayment check tha 
loj constitutes Exhibit 16? 

11 MS. LUniN: A note that evidenced the rfpay men t ? 

12 I THE WITNESS: I dt^n't know what you mean. 

13 BY MR. KAPLAN: 

14,1 Q Was there ever a note that existed that reijuired 

15 I the repayment that is evidenced by Exhibit 16? 

16 



A I recall something like that. I haven't Looked at 
it in a long time but I do recall something along those 
lines , 

Q Along what lines? 

A That we owed this money back to them. T can ' t 
tell you for sure. 

Q Isn't it true that under generally accepted 



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\ 'I accounting principLes, that a note would be reijuiteil in ociei 

2i for you to reflect it as a repayment such as is reflected on 

J 

3, McMahon Deposition Rxhibit 8? 

4 j A You would hope to have a note to support it, yes. 

5i| But even it you didn't, you would show your liability it you 

I 

knew it to exist. 



Q Would you show your liability under the rubric ot 
"note" or "repayment of note"? 

A Yes. It would be a liability of the company which 
offsets its fund balance, and it wouldn't be a part of your 
operations as such. 

Q And that would be consistent with generally 
accepted accounting principles? 

A I would say so. 

Q Are you aware of the retention by NEPL of a 
company to sweep the telephones of a Barbara Newington in 
Greenwich, Connecticut, in an effort to check for electronic 
recording devices? 

A Yes, sir. 

Q What can you tell me about that retention and 
sweeping activity? 

A We got an invoice in from a company called 



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11 

12: 

13, 
Ml 
15 
16 
17 
18 
19 
20 
21 
22 



Interpdss and I dskt»d whal. it was for? They, I think Clief 
or fjdn. told me that they went up to Barbara Nt-wington's home 
and checked it Eor surveillance devices. 

Q Did they telJ you why they checked it Cor 

surveillance devices? 

A No, sir. 

Q Did you ask? 

A ' No. 

Q Did you think you were doing something wrong? 

A No. 

Q You described a little earlier today how deposits 
of NEPL income were designated and made to the various bank 
accounts. Were all deposits into NEPL bank accounts 
attributable to private contributions? 

A To my knowledge they were. He had a couple, a 
handful that would have been from a corporatVor foundation, 
but it was generally solicited through an individual. 

Q Are you aware of any deposits that were not 
attributable to contributions? 

A No. I'm not sure I know what you mean. 

Q Were there any deposits made into any of ttiose 
ai:count3 that came from a source cjther than a contributor to 



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1 ■ NEPL? 

2 A No. 

^ I Q riid you ever see d deposit on a monthly statement 

4 or otherwise that you didn't rei-ognize as havim; been made 

5 either by you or orie of your assistants? 

6] h No. That is what I meant by the year end to 

7 I reconcile it. And all of those are on tlie financials. 

8 I Q 1 take it you paid close attention to the monthly 

9| statements from financial institutions? 
I 
lOil A Yes. I had to. 

11 I Q Do you pride yourself on having your books check 

12' ouf 

13 i A Yes. I 

14 Q Was there ever a time when you were under the 

15 I employ or retention of NEPL in which your books didn't check 

16 I out? 

17 K No. 

19 Q Did anyone ever write checks from any NEPL 

19 financial institution, or mak« wire transfers, other than you 

20 or any of your assistants? I 

21 A Yes. Dan or Cliff or Mr . »> ni- »d^would . In the 
22! very early stages Roger may have been instructed tci write 




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some th i nij ou t . 

Q Did Mr. Cri<inneU also write checks uut cif those 

accounts .•" 

A Yes. 

Q How would ycia account f;or those checks by way cl 
check ledijer? Lei tne back up a minute. 

Did you compile and maintain a check ledger with 
tespect'to the various financial accounts' 

A Yes. They would be listed in check number 
sequence . 

Q Right. 

A It I -- if one were mjssing, that would be an 
immediate flay: What is this? But I don't -- that situation 
has n ' t occurred . 

Q If a variety of people were writing checks out of 
a variety of accounts, how wiiuld you stay on top ot the check 
ledger to make sure that each check was recorded and the 
purpose of each check was written down and so on? 

A That was difficult. But each month we were to -- 
I would do the bank reconciliations and accovint for all the 
checks that came -- you know, that cane back in the bank 
statement. Basically do a bank reconciliation like any oc us 



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y penny 



would do on our own a<:coiints. And account foi 
thdL went jn or out oC those things. 

Sometimes the descriptions ot what went out were, 
yciu know, not very descriptive. 

Q What would you do if you got a description i.h.ii; 
you didn't feel was adequate for your purposes? 

A I would try to go bark and ask tl\e person who 
wrote the check if they remembered what it was for. It that 
wasn't helpful enough, I'd try to get an explanation from Dar 
or Spitz. Sometimes I still didn't get a real clear 
unde t s tanding what it was for and, like TBC, for ex>jinpla, I 
dc)n ' t really know what that money went for and it got tracked 
as IHC. 

That's something that at year end we have to go 
back and try to evaluate. 

Q Did most checks get mailed when they were paid'' 

A Some got mailed. Some were hand-can led . Some 
18 1| went out Federal Express. 

19 Q What checks were hand-carried that you recall? 

20 J A Scimetiaes the ones to IBC would be hand-cai r i ed . 
2l'| Sometimes the consulting fee to Mr. Kuykendali might get 

22 hand-carried if Spitz or Dan were going to have a meeting 



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1 with him that day; they may take the check along with rhem. 

2 Q Was there ever an urgency as to a check that was 

3 issued, either to IRC or Co Inl.-l Cooperation or IC Inc.^ 

4 A There always seemed to be. 

5 Q There was always an urgency with respect to those 

6 checks? 

7 A Yes. 

8 Q How would that urgency be expressed to you? 

9 A "Need a check immediately." Tliat was like thp 

10 language. 

11 Q What would you do? You described a bi t earlier 

12 that if you didn't have money in a given account lo cover i 

13 check requested to XBC , that you then transferred money from 

14 accounts to get into the account from which you were wiiting 

15 the check. 

16 : A Right. 

17 i Q Is that correct? 

18 li A Yes. 

i' 
19i Q How would you get a check immediately if you had 



an account that just simply wasn't going to cover that check. 
A Well, we were on a first-name basis with the 



22. 1 people at Palmer National. If we needed to do a wire 



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1 transfer, we'd call them up and they would do une for us 

2 i mmedia te] y . 

3 Tt was between internal accounts oC NEPL there at 

4 their bank, so for them I guess it was a paper entiy. 

5 Q So wire transfers could be handled by telephone? 

6 A Yes. Yes. And Y^>+t probably -- i nterna iX"*^ Lweer 

7 the NEPL account^fcw tc , the bank doesn't even call them wire 

8 transfers because they are not to somebody on the external 

9 outside world. They were within that same organization. 

10 Q Do you recall a check that was written to I D V i n 

11 May 1986 for $1.25 million? 

12 ^ Yes. 

13 Q Can you tell me what you recall about that check: 

14 A That was rather large, but then again the 

15 contributions that had come in at that time frame were also 

16 relatively large as well. That's about it. 

17 Q Did anyone explain to you why the contributions 
18: that had come in around that time frame were relatively 

19, Jarge? 

I, 

20 I A No. 

21 I Q Did anyone explain to you why a check for SI. 25 

22 I mi J lion was needed? 



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A No. 

Q Was the need for the !jl.?5 mi.nion check to TBC 
expressed with some urgency? 

A I don't know. I wasn't the one who did it. 

Q Why didn't you do that check? 

A Because I was working at my office at home at that 



7 period in time. There was no place to work over -- 

8 Q Did someone call you and ask you about that 

9 ; check? Or notify about that check? 

10 1 A Not as part of that transaction that day. I don't 

11 i recall lliat. I learned of it, I think, after the fact -- 
\2 wow, that's a lot of money. (Gesturing.) 

13 I do -- I should back up. Because on thai check r 

14 do remember that once I found out that Phil had done the 

15 i check out, there wasn't adequate monies in that acci^unt he 

16 i wrote it on, and it was kind of crazy getting the monies into 



that right account. I can remember being a little bit teed 
off at him for having written it. Casually saying, oh, we 
wrote a check for Sl.P million. 

On what account? There's not that much money in 
any one of those accounts. 

I do remember that part of it. 



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1 :| Q What did you do Lo rectity that problem? 

2 ll A He had to do the transfers to get the money in t fic- 
^ il right place to cover it. 

4 I Q And the transfers came from which other accounts, 

5 i do you recal 1? 

6 A Offhand, nci . It would have been whdtever hrtd the 

7 I mcjney in at the time. Offhand I don't know. 

8 I q' Would tfie transfer have come from a number of 

1 

9l| other accounts? 

lO'l A It could have. Special 1, I think, had been 

11 j active around that time; the Hutton accounts had also bei;n 

12ll active. 

{ 

13 ' Q Did you ever have any contact with a Kichard 

llj Miller during your time at NEPL? 

I 

15 I A No. I've seen him. 

16 1 Q You never talked to him? 

17 { A Just to say hell o. 

19 I Q What about Frank Gomez? Did you ever have any 

19 contact with Mr. Gomez? 

20 A I don't know who he is. 

21 Q What about David Fischer? Did you ever have any 

22 contact with David Fischer? 



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I I A I never met him. 

21 Q Were you ever aware of a telephone conversation 

3 l| that Mr. Channel L had with President Reai;an? 

4 i AT heard that he had talked to tfie president on the 

5 ' telephone. 

I 

6 1 Q Do you recall when that occurred? 

7 ! A No. 

8 I Q Who told you? 

9: A I think it was the general buzz in trie office, 

10 I because it was something that doesn't liappen to everybody /i i I 

11 < the t i me. 

12 Q How long was he on the phone with the piesiderit? 
A Oh, I don't know. I have t\o idea. 
Q Do you recall any other phone conversations that 

Mr. Channel 1 might have had with the president? 

A No. I remembered that -- that one, around that 
time, whatever -- oh. Spitz got a call Erom the president. 
That's all I know on that. 

Q Did you ever know Fawn Hall? 

A Never met her. 



Q Was her name familiar to you? 
A NO. 

MR. KAPLAN: I have no further questions. Thank 



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1 l| you. You have been very cooperd l i ve . 

2 j! Mr. Ruck may hdve a few questions. As T stated 

3 j earlier, T, too, reserve tl\e right to recall you to ask 

4 j questions relating to documents, either that our weaiy nye-j 
5] haven't quite yet been able to consume or that will be 

produced by yo\ir counsel in the very near future. 

THE WITNESS: I would just like to ask or state, 
if you all could wait until after April 15th, I would 
9t appreciate it a great deal. 
101 MH. KAPLAN: Okay, I understand. Today is the 

111 13th. I think we are all goimj to go home and -- 
121 THE WITNESS: I think I'll be up alJ night for the 

13' next couple of days. 

14| MR. KAPLAN: I appreciate your cooperation in 

15i coming in during this period. 
L6i THE WITNESS: Thank you. 

MR. KAPLAN: It was a request -- and a demand -• 
that worked out with your covinsel made on my behalf. I 

19 realize the difficult season E<:r you as an accountant,, ami 

20 that's the other reason why I appreciate your showing up here 

21 tonight. 
22| MR. BUCK: Could we go off the record. 




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1' (Discussion off the r»»cotd.) 

2 ;| MR. KAPLAN: I'm going to go back on the record. 

3; I havft two further questions provided to me by Mr. Z^naidi. 

J 
4 I BY MR. KAPLAN : 

sj Q What was the reason for sending funds diiectly to 

6 I ic Inc., rather than sending them to IBC, if ycju know? 

I 

7 I AT don ' t know. 

a Q Did you ever ask why a check went to IBC as 

9; opposed to IC, Inc., or vice versa? 

10 A I might have, and T think the only answer I 'jot 

11 : was that we were instructed by IBC to make it out to ttie 
12'i Intel Co-op. 

13 j Q I see. Do you ever recall making out checks, 

14,1 either to Palmer National Bank i^r to cash, in any substantial 

15 I amount, say more than $^00? 



A Yes. 

Q Let's talk about Palmer National Bank, first. 

Why would you have made out any checks to Palmer 
National Bank? 

A Well, some get paid out to Palmer National Bank 
for the federal withholding deposits. They are generally 



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1 The others, we should probably have other cjines ii 

2 there for Palmer National, because we have a loan for our 

3 ofEice furniture. That would probably be it tu Palmer 

4 Nati onal . 

5 There was an occasion, T tfiink, they bought some 

6 travelers checks. Maybe they went to Palmer National. I'm 

7 I not sure of that . 

8 I Q Do you recall the amount of travelers checks that 
were purchased? 

A It was 510,000, maybe $12,000. Somewhere in that 

11 ba 1 1 park . 
1? Q What was the purpose of those travelers cherkl" 

13 1 A They «*««^«- Spi tz and Dan and all the fundraisers 

14 were traveling to Europe, I believe Germany, in the initial 

15 efforts of the Torch project that they are workincj on now. 

16 I Q When would that traveler check purchase have beet 

17 j! made? Was it in November of '86? 



A I would say late October, early November. 
Probably sometime befcjre Thanksiji viiiq , early Ncivember. 
Somewhere around there. 

Q Were checks ever made out to Palmer National Rank 
in order to derive cash from the check? 



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i; A No. IE they wanted cash it was cjener^lly maile our 

2:1 to rash. 

l| 
3: Q Do yciu rf-raJ] making out any checks to car.h in 

1 amounts of more than ^SOO? 

5, A Yes. When they would do traveling, travel 

6 ! advances would get made out for cash and sometiiiit?3 they i-oulJ 

7 I be more than that. If a group of them was going, generally 
I 

8 I Dan would get the cash and he would distribute it to the 

9 I various people as necessary on the trip. 

10:| Like, okay, here's your 325 for dinner i.oni.jht. 

11 That's how they handled it. Not the best approach, but 

12, that's how they did it. 

13 ! Q What was the largest cash check you recall inakinq 

14 j out? 

15' A I was going to say $10,000 maybe. I don't think 

16; it was over that. 



Q Was that check in connection with travel ? 
A With travel, yes. 

MR. KAPLAN: Now I really don't have any more 
questions for the time being. And I'll tuin the floor over 



to Mr. Buck. 



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1 1 EXAMINATION 

2! RY MR. F3UCK: 

3 Q Mr. McMahon, my name is Ken Buck, I'm ri.s s i s t an t 

1 minority counsel with the House Committee. First let me 

5 thdril< yciu for showing up today and spending your time with 



7 I I want to go back to a part of the early - e,=irly 

8 I part of the deposition in which yciu said that you were told 

9 I to change the name of the "Toys" account because it didn't 

10!| cleaily reflect the project? Is that a fair summary of whai. 

1 

11 ' you said^ 

12.!' A Yes. 

13 i Q And the name was changed to "TV ads"? 

14 A CAFP TV, or "TV ads." Reeky and I were both 

15 working on the file. It's a huge file. Both of us were 

16 working oii putting those changes in. 

17] Q My question is, does "TV ads" oi "CAFP TV ads" 

18 1 more clearly reflect what that project was? 

19 A I don't -- I can't answer that. The detail 

20 wouldn't necessarily tell rae that. 

21 TV in there right now helps me to identify what 
22! used to be "Toys." But I don ' L know if that's a good 



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terminology tov what that was. Probably shi5uld just say 
CAFP, I gviess. 

Q What I don't understand is whether the project 
itself clianged along with the name, or whether (here was j'ls 
a name change and the basic project continued as it was 
before? 

A I would say it was just a name change. 

Q So Toys led you to think ot guns and ammuniticMi 
before; but TV doesn't lead you to think of guns and 
ammunition any mcJie? 

A Right. 

Q But the project remained the same? 

A Yes. Whatever the money was raised and .spent on 
remained the same. 

Q Who determines project names? 

A I don't really know. I think Spitz. 

Q Has Spitz told you any project names directly? 

A Well, the discussion that went on when Toys came 
up -- but I don't know that it was him that said that. I 
think Kris did. 

Q Any other projects? 

A Food, SDI I think was his terminology. 



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1 l| Q Spitz told you directly that this project should 

2 i| be (.-ailed SDI? 

.T I A Yes. And we set up another bank account Cor 9.01. 

4 1 Q Mr. McMahon, are you familiar with S01(c)(^) 
i 

5 ; corpora t i ons ? 



6 ! 



A Yes. 

Q How many 501(c)(3) corporations are set up with 
the Channeil onjani za t ions? 

A Two, three. 

Q Could you name them, please? 

A National Endowment -- 

Q That would be NEPI,? 

A NEPL, Western Goals Foundation, and ttie Amoricrii 



14 I Conservative Foundation. 



Q Okay. Would you describe -- has money that he 
gone into the NEPL foundation ever been used tc5 sponsor 
television advertising? 

A Yea . 

Q Has it ever been used to sponsor partisan 
television advertising? That is, television advertising 
involved in an election campaign? 

A T don't think I have an answer for that for y 



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1 : because I'm -- I don't -- I .Ion ' t know the true nature of all 

2 I uf those ads . 

.3 I Q Okay. It has been used to pay the Robert Goodmnn 

4 Advettising Agency? 

5 A Yes, sir. And to my knowledye, Mr. ChanneJl made 

6 ' A cjreat deal of effort to have attorneys help him in deculimj 

7 what kind and nature of these ads were and whiich organ i 7.at ion 

8 should sponsor them and pay for them. And made every effort 

9 to see to it that thatACompany did pay for them. 

10 I Q Were all the Robert Goodman Advertising Agency ads 

11 paid for by 501(c) (.3) corporation? 

12 A No. 

1.3 Q Some were paid for by another corporation? 

14 i A Yes. 

15 I Q Could you tell me what other corporation? 

16" A Some of them were paid for by Sentinel, which is a 

17 I 501(c)(4). Some of them were paid for by a political action 

18 committee. 

19 Q Would you help me now, which ones were paid for -by 

20 a political action committee and which ones were paid for, if 
?1 you know, by a 501(c)(3). Or do you know why they were paid 
22! E"i' separately? 



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1 || A They were, fo my knowledyt-, they were paid for 

2 jl separately because the nature of the ad belonged with that 

3 :| type o£ organization. I.e., like a nonpr<3Eil can't r'ln ads 
■I 

4 1 that wouJd be political. So that's, to my knowledge, thrtt'; 

I 

5 ' how they are broken down. 

6 1 Q So you ran nonpo J i tical television advertising 

7 I also? 

8 ! A ' Yes. 



Q And you ran political television advertising^ 

A Yes. 

1 ij MR. BUCK; I'm going to ask the court reporter ti 

2! mark this as McMahon Deposition Exhibit 22. 
3 I (McMahon Deposition Exhibit 22 identified.! 



THE WITNESS: Roy, that one has gotten around. 
BY MR. BUCK: 
Q Mr. McMahon, I'm going to ask you to look at 
McMahon Deposition Exhibit 22. Can you identify what it is' 
A Yes. It's a list ot top 25 contributors tor the 
National Endowment. It is dated April 3, '86. 
Q Did you prepare this? 
A Yes . 
Q One more question. Do you know of any in.sLanres 



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in which 501 (c) (3) corpcjra t i on , Mie three corpiMa n ions that 
yoii mentioned, made campaign contributions or paid foi 
political -- what we dii; ti mjuished as political television 
advert i s i ny ? 

^ Not to my knowledge. 

MR. BUCK: Thank you very much, Mr. McMahon. 
(Di.scussion off the record.) 
BY MR. BUCK: 
Q Mr. McMahon, I'm the cleanup hitter here. 

You mentioned that there were transfers between 
NEPl, a<:counts. 

A Yes, sir. 

Q Were there transfers between different NEPL 
organizations — different Channell organiza l:ion3 , .such as 
NEPl- and Sentinel? 

A Yes. From time to time we had transfers between 
NEPL and Western G(jals, which was another nonprofit. There 
was a transfer from NEPL into Sentinel, when Mis. Newington 
gave stock to NEPL and she intended it to be fiM Sentinel, ; 
we had to put that money over there. (^ A -y^^ 

I think I transferred money from NEPL to a PAC 
early in '05, to pay some -- there was a very small pciyrul i 



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tax, $700 or something -- I didn't know that NFPL couldn't do 



that, and I did it. I^shouldn't have but I did it anywrty. 

But othei- than that, no. We didn't .jonerally :|.i.- 

transfer money back and forth across the board. There was 

ijeneraliy a specific reason why. 

Q So it's fair to say that you were carefuJ in noL 

iiransferr ing money from a nonprofit (jrgan i za tion to a 
I 
8j poJJtica] action committee -- 

9i| A Yes. Yes. 



or a "for 



Mwy««^" organization? 



10 1 Q 

U'j A Yes. 

I2II Q And who gave you the instructions that made yovj 

13 i careful in that regard? Or did anybody give you those 

14 I instructions? 

15 I A Spitz was adamant about that. 
16!J Q Directly to you? 

17 I A Yes. Yes. And there were times, in fact, if we 
I 

18 I wrote checks out on the wrong company, he would void them ai 

19 send the« back and say, no. This is a NEPL bill. Or this i 

20 a Sentinel bill. 

21 He was very careful in looking at ttiat. 

22 MR. BUCK: I don't think I have any more 



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II questions, Mr. MrMdhon. Thank you very much for your t;ime. 

2 MR. FRYMAN: I hdve no further questioTis at this 

3: time. We'll adjourn the deposition. In case there's any 

4 I ambiguity in my earlier statement, I am reserving thf right 

5j to question further on the same basis as Mi-. Kaplan. 

6 MS. LUBIN: I'll reserve any questions on my 

7,j behalf. 

ej (Whereupon, at 5:50 p.m., the deposition was 



ad joui ned . ) 



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REPORTER 



I, JOEL BREITNER , the officer before whom 

the foregoing deposition was taken, do hereby certify 
that the witness whose testimony appears in the 
foregoing deposition was duly sworn by me; that 
the testimony of said witness was taken in shorthand 
and thereafter reduced to typewriting by me or under 
my direction; that said deposition is a true record 
of the testimony given by said witness; that I am 
neither counsel for, related to, nor employed by 
any of the parties to the action in which this 
deposition was taken; and, further, that I am not 
a relative or employee of any attorney or counsel 
employed by the parties hereto, nor financially 
or otherwise interested in the outcome of this action. 



Notar^tiublic in and for the 
Di«€rict of Columbia 



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DEPOSITION OF FRANK MC NEIL 

Wednesday, June 24, 1987 

U.S. House of Representatives, 

Select Committee to Investigate Covert 

Arms Transactions with Iran, 
Washington, D.C. 



The committee met, pursuant 



to call, at 10:10 a.m. 



in Room H-128, the Capitol, Timothy E. Traylor (Investigator, 
House Select Committee) presiding. . 

Present: 

On behalf of the House Select Committee: Timothy E. 
Traylor, Investigator. 

On behalf of the Senate Select Committee: Terry 
Smiljanich, Associate Counsel. 









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1 Whereupon, 

2 FRANK MC NEIL, 

3 was called as a witness by the House Select Committee and, 

4 having been duly sworn, was examined and testified as 

5 follows: 
EXAMINATION BY COUNSEL FOR THE HOUSE SELECT 
CONiMITTEE 
BY MR. TRAYLOR: 

9 Q Mr. McNeil, my name is Tim Traylor. I am with the 

10 House Select Committee, and at my side is Terry Smil]anich. 

11 As you know, he is with the Senate Committee. 

12 Could you state your name for the record, please? 

13 A Francis Mc Neil. 

14 Q And your current employment? 

A I am retired. 

Q The mandate of both the House and the Senate Com- 
mittees, which have just recently concluded the first phase 
of the ]oint hearings to investigate the circumstances 
surrounding primarily the Iran affair, but also the United 
States Government involvement with the contras, this investi- 
gaition is being conducted pursuant to resolutions and variou 
enacting rules under which both committees were established, 
and if you want copies of either for any reason, we will 
certainly be glad to provide them to you. 

Just let me ask you at the outset to tell us a 



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little bit about your background if you could. 

A All right. Beginning with the Foreign Service, 
military? 

Q If you could start with providing your schooling. 

A I graduated from the University of Florida in 1954 
in Gainesville, Florida in political sciences; I went into 
the Army for two years, and when I came out of the Army, I 
had already passed the Foreign Service exam, and I started 
within a month into the Foreign Service m September, 1956. 
I was sent to FSI to study Spanish and then sent 
to Tokyo. 

Q Sounds like something the Bureau would do. 

A Where I spent three years as a consular officer, 
returned to Washington in 1961 and in 1959, late 1959, 
served for two years as the junior adviser on our delegation 
to the Organization of American States. 

Then I went to Guatemala as a political officer in 
the embassy in Guatemala for three years, returned to Japan 
in 1964 to study Japanese for two years at the Foreign 
Service Institute's Yokohama Japanese Language and Area 
Studies Center. 

I then served in the embassy for a year as 
political officer and then went to Nagoya as principal 
officer in the American Consultate in Nagoya. I returned 
to the embassy in '67 to serve three years as Chief of the 



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1 Internal Branch of the Political Section of the American 

2 Embassy in Tokyo 

3 I then went to Stanford for a year on a sabbatical 

4 at the Institute of Political Studies at the Hoover 

5 Institution 
From thence we went to Washington where I served as 

Alternate Representative and then as Acting Deputy 
Representative of the United States before the Organization 
9 of American States. I left that post in 1975 to go to 

10 Madrid as Political Consular of the American Embassy in 

11 Spain 

12 I returned to Washington in 1977 as Deputy 

13 Assistant Secretary for Inter-American Affairs covering 

14 South America. I served in that position for a year, and 

15 then in late 1978 became an inspector, senior inspector 

16 running inspections of missions abroad, which I did for about 

17 a year-and-a-half except that it was interrupted by several 
months' service as Deputy Assistant Secretary for East 

19 Asian Affairs under Richard Holbrook, what we called the 

20 rent-a-deputy program. He borrowed me on an airplane because 

21 he had run out of deputies 
From then -- after one more inspection in the Far 

East I went, I was nominated by President Carter to be 
Ambassador to Costa Rica. I received confirmation from the 
Senate in late June, as I recall, of 1980 and arrived in 



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Costa Rica in 1980, in July, I think it was July 5, 1980. 

2 I left Costa Rica after three years as Ambassador on July 3, 

3 1983. 
I then went to — after doing some public diplomacy 

5 appearances trying to explain Central America and Peru to 
Europeans, six countries in Europe, I began a year — nine 
months really -- as Ambassador in residence teachi..g and 
writing, teaching a little bit, writing at the Fletcher 
School of Law and Diplomacy in Boston, and that service, 
that sabbatical was interrupted by service as the President's 
special Emissary to the leaders of the Caribbean States in 
the Grenada mission. I went down to Grenada and — I went 
down to Barbados on a very urgent call from Washington. 
I was asked to come down and bring my tropicals, and I 
brought my tropicals, and I was told that I should go down 
and talk to the leaders of the Caribbean States on behalf of 
the President to assess their request for American inter- 
vention and to assess the security situation of the students 

I took General George Crist of the American 
Corps with me on a special mission airplane. After lengthy 
discussion with the leaders of the Caribbean States, who 
had made the request, and assessed considerable time spent 
assessing the situation of the students on the Island, I 
recommended we send in the troops. 

subsequently, I was asked by Lawrence Eagleburger 



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if I would become Senior Deputy Assistant Secretary in the 
2 Bureau of Intelligence and Research, and I accepted that post 
and began work in June of 1984, and which ]ob I held until 
February 3, 1987, when I retired on a point of principle. 

5 Q I must say a very impressive Foreign Service 

6 career. 

7 A Well, it was fun anyway. All but some of the most 
recent parts 

9 Q I would like to start the interview today by asking 

10 you some questions about your knowledge of the Iran arms 

11 initiative. The first area that I want to discuss is your, 

12 what indication, if any, that you had that certain segments 

13 of the administration wanted to develop a new policy toward 

14 Iran. 

15 A Well, at the time certain segments seemed to be, 

16 Graham Fuller and the Director of Central Intelligence, 

17 because the memo — I have a terrible memory for dates and 

18 do not have documents. 

19 Q May, 1985, I think. 

20 A That is right. 

21 When that memo was given to us, we thought it was 

22 kind of crazy. That is the Bureau of Intelligence and 

23 Research, that it postulated a larger Soviet threat than 

24 existed and that the notion tiat there was anything we 

25 could reach out to in Khomeini-era Iran was not -- didn't 



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seem tenable. 

I guess we didn't have the wit to say it, but Art 
Buckwald's phrase applies, we thought m retrospect that 
an Iranian moderate was an Iranian who had run out of 
ammunition . 

No one argued the importance of Iran, but it just 
seemed to us, and it seemed, as I understood it, to most 
people in the Central Intelligence Agency, and certainly 
to the Bureau of Near Eastern and South Asian Affairs in 
the Department of State that you couldn't talk about doing 
anything in Iran as long as Khomeini was so firmly in 
saddle, nor did we believe the rumors of Khomeini's impending 
death nor that the, that Iran was about to fall apart. 

Q I see. 

A I would say that that was a fairly consensual 
view within the Intelligence Committee except, of course, 
that the DCI I think shared Mr. Fuller's views, and obviously 
that document we now know or now surmise played a role in the 
development of this so-called initiative. 



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Q You Stated, and I wanted to asV,you about this, 
about the DCI -- he shared Fuller's views. Why do you think 
he agreed with the memo? 

A Bcause of two things: 

One, because, as I understood, he subsequently 
understood, he pushed it forward to the President in some 
fashion. 

And secondly, because at the same time we were 
hearing stories -- this sort of, it is not on the street, it 
is in the corridors, as it were, that the Central 
Intelligence Agency was very concerned, understandably 
concerned, by the former station chief, the late William 
Buckley's situation, and were looking for some way to get a 
handle on the Iranians in order to get them to exercise their 
influence over the Hizballah ,*Vrf were presumably holding 
Buckley, by the intelligence we had at the time. 

Q You say this was corridor gossip. Is there anyone 
that you could take this back to at the agency -- the rumor? 

A I mean, the concern in the agency was very real. 
It was expressed to me, when Hugh Montgomery — it was Mort 
Bramowitz, who was Assistant Director, and now Assistant 
Secretary of the Bureau of Intelligence and Research, 
attended the weekly lunches when they were not in town, or 
otherwise unavailable, so I knew of Mr. Casey's concern about 



Mr. Buckley. 



UNCmSSIFIED 



525 



BNttASSIBEBT 



I know Clair George was concerned. In fact we 
were all concerned. We had a American official in the hands 
« of these people who seem to have later killed him. 

I recall talking about it to Bob Oakley on one 
occasion, but I don't recall that -- we were expressing some 
concern to each other about the fact that perhaps the agency 
might be willing to break the no-deal policy on hostages for 
Mr. Buckley. Please note that I did not say the no- 
negotiations policy, because that I think is a popular 
misunderstanding. We obviously tried to negotiate with peopl^ 
who are in cockpits to get them to release people, but what 
you don't do is you don't make concessions, you don't pay 
ransom for hostages. 

Q Aside from yourself and I&R, who else at the State 
Department, as you know it, was involved in the review of 
this memo? 

A Well, the Secretary saw it and I think — this is 
recollection, it may fail me — I think we probably did an 
exegesis on the memo for the Secretary, saying we didn't 
agree with it. We thought it was overstated for all the 
reasons I have expressed to you. And I know those views 
were shared by the people in the Bureau of Near" Eastern 
and South Asian Affairs, who saw it, which would not have 
been a large number. 

It was a fairly restricted memo but our senior 



IMURHiEKh. 



526 



ims^b 



10 



4 experts, for example, looked at it and I am sure, you know 

2 the appropriate senior officers of the Bureau of Near Eastern 

3 and South Asian Affairs would have also done what we call the 
. NEA, if I may use the acronym 

Can you briefly explain to me why the memo like 
the Fuller memo would be sent to the State Department 

A Well, we are part of the intelligence community 
and it was purported to be an intelligence analysis 

We also,f rankly , took exeption to it, because it wa:i 
a policy paper in our view. It was an -- intelligence 
community doctrine requires that intelligence agencies not 
make policy recommendations. Now, clearly, if you analyze 
rainfall in the Gobi Desert, that is of no use to policy 
makers. So if what you do is of any good to them, it will 
be policy relevant and conclusions may be drawn from that 
memo that may lead people to change their minds about policy. 
It IS a fine line to walk, but it seemed to us that Graham 
had gone way over the line in sort of frankly, urging a 
policy change, and of course, it seemed to us as well that 
his analysis was exaggerated 

Q Now, were you also familiar with the June 1985 
NSDD that I believe came out of the NSC? 

A I am not sure that I was. I may have been, but I 
don't recall this removed. I really don't. Which one was 
that? Was that the one drafted by State or 



IMAMl^MBE^m 



527 



mmms 



11 



Q I think it was drafted by NSC and that — 

A Because there were two. I know that now from 
looking at the Tower Commission Report. 

Q The State Department and the Secretary opposed 
it. 

A I probably heard somethingi^bout it, but I may not 
have seen it. Mort Abrainowitz may have seen it. In the 
course of these kinds of sensitive discussions on various 
parts of the world, if you didn't see something in my 
position, I normally heard about it on NSDDs. It was the 
practice of the Near Eastern Bureau, I think generally, to at 
least bring in our intelligence, senior intelligence people 
like George Harris, our Director of Near Eastern Analysis 
and ask him sort of informally what he thought about the 
analytic lines in it. 

But I honestly don't remember whether I saw that 
particular piece of paper or not. 

Q Were you familiar — 

A I remember that -- 

Q Were you — 

A The Fuller memo produced considerable argument 
and there was an effort to make sure that -- there was an 
effort in State to make sure that this, what we thought 
was erroneous analysis, did not become policy. 

Q Mr. McNeil, were you aware of any arms transfers, 
that is, of course contemporaneous knowledge at the time? 



um^^MfiT 



528 



WiM^ 



12 



A In 1985, yes. 



2 Q And can you describe that m detail as to how you 



obtained that knowledge and exactly what you knew? 

A Well, to the best of my ability, because there is 
still some confusion, I have talked to one of my colleagues 
the other day, we still have some discrepancy on whether it 
was the September or th t November shipment or both, that we 
knew about. 

My recollection is that I learned about the 
September shipment, and I think I probably learned about it 
from Bob Oakley, and Mort Abramowitz may have been out of 
the country. The story I was told at the time was the one 
that is in the Tower Commission Report according to North, 
which is that he bumped into a plane^^^^^^^^^ In hindsight 
that may have been a cover story. Bumped into an Israeli 
plane. 

But there was discussion in that fall period of 
'85 about this on a very restricted basis. I did not 
personally participate in any discussions of it with the 
Secretary, but I did, as I recall, discuss the horrifying 
potential of it not only with Oakley but with Mike Armacost, 
and, of course, Mort Abramowitz, who became aware at the 
same time I did or shortly thereafter, or shortly beforehand, 
as I say. 

And I actually -- it is an aside -- but I think 



llUCl /LCT'inr-n- 



529 



ufmmt^T 



1 

2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 



that there were probably not a large number of people, but 
maybe as many as ten or fifteen people in the Department of 
State, who must have known about this flight, because some 
of our analysts stumbled on I believe the November flight -- 
two of our analysts 



Q Who were they, the analysts? Do you recall their 
names? 

A Probably Wayne White, and maybe Steve Grumman, who 
no longer works for us, but works for the NSCT, the old 
Oakley and now Bremmer office. 
You know, we got 

and we stikted peaking around and suddenl 
a veil was dropped over the intelligence^^HHB told us to 
not -- that they were not going to give us any more on this. 
Q When did that occur? 

A I think in the fall of 1985. Another deputy 
assistant secretary in the department, Richard, Dick Clark, 
probably has a better memory of the timing and certainly 
Wayne White, who was the analyst who first looked at this, 
would have a better memory of the precise timing. 




IlUCl /LGLTiniia- 



530 





WSSWT 


1 


^ 1 V ^r ■■■ 

Q When this occurred, I mean, this was unusual Ij^H 


2 


^^^Bliterally cut you out of -- 


3 


A ^^^^^^^^^ I better be careful. It couldhave been 


4 

£. ( 


the CIA cut us out of further inf ormation^^^^^^^^^^^^^J 


5 \ 
6 


H^I^^^^HI^^^ 


7 


MR. SMILJANICH: That is true. That is all right. 


8 


THE WITNESS: I think ^^H|^^H but Dick Clark 


9 


has a better memory and White will have the best memory on 


10 


this. I :ust remember the incident. 


11 


BY MR. TRAYLOR: 


12 


Q What I am driving at is what did you do when 


13 


suddenily you were cut out of this intelligence? 


14 


^mHilUHBil^^H 


15 


BIHB^Bi^^^^^^^^^^^^^^^^^^ 


16 


Q Is that the first time anything like this had 


17 


happened? 


18 


A Well, you never know what you don't know. 


19 


Q Well, let me ask you this way -- 


20 


A In retrospect, given the behavior in this whole 


21 


affair, it is not clear to me that some other things were not 


22 


withheld from us on other occasions. 


23 


Q Who cut you out, as you understand? 




A Was it the White House? No, I don't know. 


24 


^^^^^^^^■^^^^^^H^H 




Who instructed? ^^^^^^^^^^^^^^^^^^^^^^| 


25 


1 1 . . 




liMmi^ifO'P 



531 



PlMfflr 



1 

2 There is another part of this story where I did 

2 but not on this aspect 

^ At that time, and I think it is well to sort of 

c understand that clearly the Secretary knew about this and I 

was aware that he was opposed to it, although I did not speak 
to him directly. There may have been a meeting in which 
asides were passed from those of us who knew what we were 
talking about, about concerning North's adherence to terrorism 
policy or something like that. 

I think there was at one of the weekly -- the 
almost daily security meetings that the Secretary chaired 
dealing with embassy security and terrori-sm in general, I think 
there may have seen some asides at that. Most of the people 
in the room were not privy to the existence of this flight, 
which I think was the September flight. It is the one I think 
I remember. 

But we were told -- Oakley told me, and I think, 
and Mort had heard also, from Armacost, I presume, that it 
had been turned off, this, you know, in the late fall, that 
the President had decided that — I say late fall. If one 
looks at the Tower Commission Report, it would look like an 
early December time frame when this, what people thought was 
a tentative decision to turn it off took place as McFarlane 
was leaving. 



ummiciri). 



532 



iMftsamfcT 



16 



•] But that was the extent of the knowledge that we 

2 had, that we had protested, that the President decided not to 

3 do this sort of thing again, and that was where that knowledge 
of a flight stops as far as I am concerned. 

g Q Let me back up. I believe you said you learned 

g It from Oakley or possibly Abramowitz? 

A I think I learned it from Bob first. 

Q Is the flight what he told you about? 
Th e^^^^^^^^^^H s t o r y . 

Q What did he tell you exactly? 

A That Ollie had apparently okayed -- this is all 
vague. 

Q Sure, I understand. 

A And I assume you will check these things with 
Oakley in whom I have considerable -- for whom I have respect 
and his memory. He certainly knows more about this than I, 
and I trust his memory is better than mine on this. But m.y 
recollection is that Bob and perhaps Arnie Raphael, at the 
same time in the same conversation, but Bob certainly said 
that Ollie had -- he had learned that Ollie had okayed an 
Israeli flight and the implications, of course, were the 
United States okaying arms for hostages, and everybody started 
moving, and the Secretary obviously was opposed to it from the 
instant he found out about it. 

Q Once he told you this, what did you do with that 



ii^i:ii<:mii;ru. 



533 



iws^ii^eT 



1 A Well, I may have spoken to Abramowitz about it - 

2 I certainly did speak to Abramowitz about it, but whether 

3 Abramowitz knew first or I knew — in a sense the Secretary 

4 was ceased with the issue. The Department mustered its 

5 forces at the Secretary's level to try to stop this thing. 
We thought it was stopped, and that was the last word that I 
had. 

I have to add that I smelled rats later. 

Q Did you talk to anyone at the NSC? 

A No, I had very little -- the only person -- I 
occasionally went to NSC meetings, but normally Mort did if 
someone from I&R were to be present. There was really the CPP 
which Armacost would go to. That Iran caper was never under 
discussion at the few meetings I went to over there. I 
occasionally had contact with Ollie North -- very occasionally 
by choice. 

Q For what purpose would you be in contact with 
North? 

A Well, my first contact came with North, the first 
time I met him, was at the time of the Grenada intervention 
and he was present at the meeting where I was briefed and 
went over my instructions for that. That is where I met him. 
I don't recall him saying anything at that meeting. 

I guess the second time was in late 1984 when I 
went over to a meeting on what could we declassify about -- 



■IVUIIl 1I!!*VTM f U III 1 1 



534 





iiNSbHSSI^T 


1 


I went over with Otto -Mii'jIiL to a meeting at the NSC -- what 


2 


could we declassify about Nicaraguan assistance to the 


3 


Salvadoran insurgents? This was before the congressional -- 


4 


before the Presidential elections and Ollie started off by ^ 


5 


saying, I think, I suppose we all realize our purpose for bein 


6 


there is to get the President reelected. 


7 


And I guess I probably demurred mildly, sort of 


8 


suggested we were there to help the President's policy and do 


9 


what we could to get this information properly declassified. 


10 


because I remember he asked me afterwards, who are you? 


11 


Took my name, rank and serial number. 


12 


llH^HH^HJU^IiHi 


13 


^^^^^^^^^^^^^^^^^^^^H 


14 


^^^^^^^^^^^^^^^^^^^^H 


15 


^^^^^^^^^^^^^^^^^^^^H 


16 


^^^^^^^^^^^^^^^^^I^^H 


17 


^^^^^^^^^^^^^^^^^^^^H 


18 


^^^^^^^^^^^^^^^^I^^^H 


19 


^^^^^^^^^^^^^^^^^^^^H 


20 


^^^^^^^^^^^^^^^^^^^^H 


21 


^^^^^^^^^^^^^l^^^^^^l 


22 


^^^^^^^^^^^^^^^^^^^^H 


23 


^^^^^^^^^^^^^^^^^^^^H 


24 


^^^^^^^^^^^^^^^^^^^^^H 


25 


:mmmL 





535 



■m 






) r^u 



uiussro 



536 



\|l«GiSS>U^ 




Q Aside from your knowledge of the one arms 
transaction, which you have described to us, do you have any 



iWlimi^T 



537 



oifflBsaffipET 



1 knowledge first or second hand, of any of the other arms 

2 tranactions? 

3 A No. Not until the stuff came out, you know. 

4 I wondered when Father Jenko came out what was 
g going on, but since we had been obviously cut out of everything 
g which I could get to in a moment, we didn't know what we 

J didn't know, cind so I must question how did he get out, you 

know, that arose in my mind. 

Q Was there any corridor gossip? We have talked, 
Terry and I have talked to several people at the State 
Department and we know that there was some rumors that Ollie 
is up to something. They would hear something and they would 
hear it would be off, on, and off again. 

A You see generally the thing was that we didn't 
get any hostages out to speak of. Consequently, you know, 
what we looked at now as we come to see it on the record, is 
an exercise in enormous futility. A couple of hostages out 
and a couple of hostages taken. 

If you are using your analytic mind on this, it 
doesn't look like anything is going on. Maybe for some reasor 
or other they decided to get rid of a priest because there is 
so much international interest in a man of the cloth. 

At the time Jacobsen went out, which is just 
before the Shar'a article, there was a lot of -- at that time 
there was corridor speculation, and I remember I was in 



iOixsiam,. 



538 



URBEft^Er 



23 



9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 



charge of the Bureau and when Abramowitz cajne back, I said 
I think something is going on on the hostages. I ajn not sure 
what It IS and I have chosen not to inquire because we just 
don't know what is going on. But there is something going on 
and you ought to know that. 

That is the only time I really had a suspicion, 
not really personally, at the Jenco time, because it seemed 
tied to his status as a religious figure. 
Off the record for a second. 

(Discussion off the record) 

MR. TRAYLOR: Back on the record. Why don't 
you go ahead? 

THE WITNESS: After the story brokg^ of course, 
we found out that we had been cut off fron 

^^^^^^^^^^^^^^^^^^Jall that stuff 
that was going on. 

I should add parenthetically, if you have a 
situation in which most of the Executive Branch charged with 
dealing with sensitive actions, the Congress and the American 
jeople are all frozen out of it, but you know that every 

knew 

exactly what was going on, and you know that every sleazy 
arms dealer in Western Europe knew that somebody was trying 
to make a killing on the Iranians with the U.S.'s blessing, 
you know, it is a very sad commentary. 

You know the reason they cut everybody off was 




539 



8N%imtli&r 



10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 



they knew people would object to it. That is essentially -- 

and that if enough people were witnessing the noise would 

become too loud for this stupid initiative to bear. That is 
essentially I think why. 

But we found that out, and I then calledl 




I said, look, I want 
to get this stuff. The Secretary needs it. There is no 
reason now, it is on the street. We want to see all the 
stuff you have and we would like to get a package of it right 
away. 

He said, you know, Frank, I understand what you 
are telling me, and I think you are right, but I can't do it 
without checking with Poindexter, who was still NSC Advisor 
at that time. 

I said, all right, I understand that. 

He called me back, say, 24 hours later ^^^^^H 

to say he had spoken with Poindexter, who said 
I am still in charge and they can't have it. 

Poindexter then left office about two days later 
and we then made arrangements in fact, not to take the stuff 
into the building, but in fact to have our Director of the 
Office of Terrorism, Jerry Sutton, go over and take extensive 
notes on it and bring back a precis for the use of the 
Secretary and Armacost and Whitehead, and that is what we did. 



umnssiJiiMr 



540 



mii&stt 



25 



Jerry spent I think two days over there being 
briefed, or you know, a full day or two half days, getting 
briefed, and we did an extensive memo summarizing the 
principal points. 

The thing that stood out obviously from this was 
that It seemed to be an arms for hostage deal. Occasionally, 
the Americans would raise something about wider relationships, 
and Iranians would keep talking -- Ghorbanifar or whoever 
It was -- would keep talking about arms and hostages. 
BY MR. TRAYLOR: 

Q You know, I am intrigued about that. You say the 
Secretary of State knew that the State Department had been 
cut off? 

A We all knew at that time, because it was now on -- 

Q I am going back to the period of time when you 
were actually cut out. 

A Did he? I don't know. 

Q You are not aware of the Secretary of State being 
knowledgeable of — 

A No, because none of this information was 
distributed to the department. Except for the PDB, the only 
vehicle for the distribution of sensitive intelligence, highly 
sensitive intelligence in the Department of State, that is, 
we handle and manage the distribution of highly sensitive 



intelligence 




i^sm^fu 



541 



miissffiHr 



1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 



Q Maybe I missed it. Let me cover it again. When 

you learned that you had been cut out | 
what did you do with that information -- the fact that the 
State Department wasn' t being given this information? 

A Oh, we told, you know, we told the department 
principals, but this was after the thing had blown now. 

Q The revelations? 

A I don't remember how we knew, we may have -- 

Q After the November revelations? 

A That is right. We may have surmised and I may ha\ 
in fact querie 




I personally may have initiated a query on this. 

You didn't know contemporaneously that you were 
not being given 

A No. 

Q I am sorry. I misunderstood. 

A If I said that, I would have to go over it, but 
no, I did not. Only^m^|^^|Hand the arms dealers knew 
at the time. 

MR. TRAYLOR: Terry? 
BY MR. SMILJANICH: 

Q Let me jump in and cover some matters concerning 



ll&IGIJGXUnniL.-. 



542 



end mhl 
take 2 



uBsa^siWT 



27 



the Central American part of this whole story. 

THE WITNESS: Is it possible for me to get a drink 
of water? 

MR. TRAYLOR: Sure. 

Off the record. 

(Discussion off the record. ) 



ONCIASSIFIED 



543 



QHnissifeT 



THE WITNESS: Could I return to the question of 
Jacobsen for a second. 

MR. TRAYLOR: Yes, let's go on the record then. 

THE WITNESS: As I said, you know, there was 
skuttlebut it seems to me at that time that there was 
not only Jacobsen but something was going on in the 
hostages in general and that is what I now think inspired 
me to sort of say they must -- are they resurrecting this 
sort of arms deal because that was the one time I was 
really suspicious. It wasn't just one hostage, it sounded 
like there were more coming out. 

MR. TRAYLOR: Did you talk to anybody about it. 
Did you tell anybody about it? 

THE WITNESS: As I said, I don't remember where 
I heard it. One talks with people in SCT and NEA which 
is where I would have heard it and I told Mort as soon as 
he got back and I said I have not inquired but there is 
something going on in the hostages and I don't know what it 
is, but it raises questions. 

And he said, Mort said that may be right and 
he was going to go check into it but I think the whole 
thing just blew then. It seems to me within — the 
Shaar'a article was within a day of Mort ' s getting back 
if I recollect these things correctly. 



llMDUSSIEia- 



544 



VNfili^Hpr 



29 



The other thing I was going to say is that in 
returning to the thing where, a handful of people at 
least knew something about it, you know, what were you 
going to do about that? As far as I was concerned at 
least when we heard that we had won -- thought we had won - 
and this wasn't going to happen again I think everybody 
breached a sigh of relief. It was clear that if anybody 
said anything in a way that got out, it seemed we might 
be endangering the lives of the hostages, so I think that 
is the reason why I assume other people felt the same way, 
I certainly felt that way. 

You knew it was wrong, it raised questions about 
not only policy but it raised potential legal questions 
as far as I was concerned and as one who knows about the 
Arms Export Control Act and the requirements for FMS 
material and third country transfers. 

MR. TRAYLOR: Okay. 

BY MR. SMILJANICH: 
Q Let me go back to your starting tenure as 
Ambassador to Costa Rica. 
A Yes. 

Q During that time period Thomas Enders was the 
Assistant Secretary for Inter-American Affairs, is that 



right? 



liMfi Aocjjn^n 



545 



1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 



30 

A That IS right, Too Tall Tom. 

Q When did Tony Motley come back? 

A Tom and Dean Hinton and I all left at the same tire 
in July '83. And Tony became Assistant Secretary -- well 
he was nominated when the announcement of Enders going 
to Madrid, leaving ARA and going to Madrid and Motley 
':ecoming Assistant Secretary, it was made at the same 
time . 

Q While you were Ambassador to Costa Rica and Enders 
was Assistant Secretary, was there a restricted interagency 
group in existence dealing with Central American affairs? 

A Probably, whether it was called by that name or 
not there was certainly some kind of restricted group. 

Q Were you aware of it? Did you deal with it? 

A No, not in any -- I may have gotten instructions 
emanating from its discussions but there was a small 
group of people who were dealing with the Central American 
contra program and that included in State Tom Enders, 
Craig Johnstown, and Steve Bosworth, who was Deputy 
for a long period of time before moving over to Policy 
and Planning; and Tony Gillespie was then the Ambassador 
to Colombia. But it was Special Assistant to Enders 
at that time and later became Deputy Assistant Secretary 
of State. 

Q When you came back to Washington from Costa 



IIUCIASSIEL 



546 



QHtUSSit&T 



Rica and became Senior Deputy Assistant Secretary INF -- 

A After a year's interval. 

Q After a year's interval, tell me what you saw 
with regard to any RIG that was in place under Mr. Motley 
or how it 




And there were and had been meetings I guess at 
one stage of the game throughout with all the regional 
bureaus, not necessarily RIGs but meetings in which a 
senior officer from I&R, usually the office director, 
would meet with, say, the principal deputy of a regional 
bureau and one of the senior people from the Central 
Intelligence Agency to discuss on a periodic basis. This 

lUmi «nAirirn_ 



547 



SNOkA^tEGr 



32 



didn't uniformly work but that was the theory and it 
was honored more in the observance than in the breach. 

That was not in effect as I understand during 
the Enders period as I now -- as I understood during the 
Enders period or the early Motley period. With the Secre- 
tary's instruction Tony invited I&R to the RIGs and my 
predecessor Herman Cohen went to some RIGs. When I got 
there I guess I went to a RIG or two and I found a lot 
of the stuff being discussed was not really within the 
perview of I&R and we worked up a separate meeting which 
I , as I set forth in my letter to the two chairmen, which 
we have in effect in some other bureaus for discussing 
covert sensitive intelligence matters which was I think 
sort of chaired by Gillespie, John Wiant from our bureau 
went and someone from CIA's DDO, Latin American Operations 
would go, and they met fairly frequently. 

Q This was a separate meeting from the RIG? 

A It was in lieu of going to the RIG which I 
frankly didn't want to. I went to a couple and as I 
say my predecessor went to some and I tried to get 
Tony Motley to permit John Wiant to go but Motley pointed 
out as was his right, that he was perfectly prepared to have 
me go but he wanted no one lower because he didn't want 
that room filled with people of lesser rank from Defense 
Department and other places. He wanted senior representationj 



lUIAI^^CUcO.. 



548 



llOKlit&SlRET 



33 



1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 



and if he broke it for me he would never be, broke it for 
I&R he would never be able to hold the line with other 
agencies who were present in this RIG which I must add is 
a fairly large group. 

So we set up to fulfill the Secretary's 
instructions as a separate meeting which I thought worked 
rather well. 

Q Although you didn't attend -- 

A I attended some, maybe a couple. 

Q Although you didn't -- 

A But I had a standing invitation from Motley to 
go. 

Q That was what I was going to ask. What was his 
attitude up to the time he left concerning your presence 
at a RIG meeting if you wanted to attend a RIG meeting? 

A He was always open to us to go, having worked out 
these other arrangements. It was not necessary to go, 
however, to fulfill the Secretary's desires but I did as I 
say, my predecessor went and I went to a couple of them. 

Q Did you -- 

A I may have gone to some special RIG after these 
arrangements were on, the one that we had a particular 
interest in, but I can't remember, I certainly didn't go to 
more than 3 or 4 RIGs during that period personally. 

Q Did you know when a RIG meeting was going to 



iiNMi<ismEa 



549 



UBBH^RBF 



34 



take place? You or your bureau? 

A I think we did. 

Q Now, did that standing situation change when 
Elliott Abrams became Assistant Secretary? 

A Yes. 

Q How did that happen? 

A Well, I don't know how it happened but I do 
know what happened. At the time of the announcement we 
offered to sort of brief him on how covert, particularly 
covert programs and coordination of clandestine intelligence 
were handled, the rules for handling it. He never took us 
up on that offer. 

Later he was to designate after Mort Abramowitz 
talked with him a couple of times, he was to designate his 
special assistant, Mr. Kagan, as his representative but 
we never saw anything of him, either. It was a stone wall 
frankly and we never — until much later after admonitions 
from Armacost that I&R had to be brought into the process, 
the Senior Deputy Assistant Secretary in the ARA, my 
counterpart, Mr. Michel, tried to institute the old arrange- 
ments under Motley, but with the caveat that Central America 
would not be discussed and we ran immediately into 
problems in even doing that with the Central Intelligence 
Agency whose people by then were aware of, shall we say, 
the difficulties in the relationship between the ARA and 



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I&R and didn't want to get m the middle, and the 
senior fellow of the Central Anierican Task Force guy 
obviously^^^^^B didn ' t want anything to do with us. 
So there were some meetings held, rather desultory and 
others were useful really because of dealing with events 
outside Central America. 

Mf. Wiant went to them and if you were 
interested you could talk to him about that. But 
essentially we were frozen out during the entire period 
despite protests from I&R. 

Q Approximately when was this that Jim Michel 
started to start some other type of process excluding 
Central America? 

A I don't remember but it was say six months out 
after an admonition from Armacost. I could find out 
the date or you could ask John Wiant or Mort Abramowitz 
who have the files and could tell you. 

Q Was it sometime m 1986? 

A I believe that to be the case. That seems right 
to me. Probably the spring of '86 but I am not sure. 
My memory on dates is very bad without files to refresh 
myself and I have not refreshed myself. 

Q Now, it seems that when it comes to covert 
activity -- 

A There weren't very many of those by the way. 



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either, of those meetings. 

Q When it comes to covert activity in Latin 
America the action if I can use that word really is in 
Central America. Were you told why Central America was 
excluded from this subsequent process? 

A Well, we were given to understand that 
Mr. Abrams didn't want us in and he particularly didn't 
want me in. 

Q Were you ever told why? Did you ever have any 
indication as to what the problem specifically was? 

A No, but it is in the context of Mr. Abrams 
complaining to the 7th floor, that is to Mr. Armacost, 
and Mr. Whitehead, j;hat the Bureau of Intelligence and 
Research and Frank McNeil in particular were seeking to 
undercut policy by its analysis and in the context, after 
all, of this bizarre exchange of memos that we had at the 
end of the year, at the beginning of 1986 in which 
Mr. Abrams sent a memo to Ambassador Abramowitz saying, 
three-page memo attacking one sentence in a one-page 
analysis by one of our analysts of the situation, political 
internal opposition situation. The one sentence said, 
sort in the context of what would happen if the 
contras won, and the sentence said, we don't know anything 
about the political attitudes of the contra military 
leaders. 



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That was the sentence he attacked. 
The things I remember he said were that it was 
neither intelligence nor research analysis. It was sort 
of indistinguishable from that of the critics and 
that the CIA knew all there was to know about contra 
military political attitudes. 

And there were a number of other pleasantries 
in the three pages, all sort of pointing at the notion that 
I&R was not part of the team, it was out there sabotaging 
the President's policy and anyway didn't know what it 
was talking about. 

Q Was this an analysis by Evangeline Monroe? 

A Yes. 

Q Going back to when Abrams first became 
Assistant Secretary — 

A Let me add one thing about that. I replied in 
equally pleasant terms to Mr. Abrams because Ambassador 
Abramowitz was out of the country and our analysts drew 
up the reply and I went over it and signed it out to him, 
and we had in fact checked with the CIA, both the DDO 
and analysts, and they really didn't know anything about 
the political attitude of the military leadership and 
subsequent to this exchange of pleasantries between Elliott 
and myself, subsequently the Bureau of Inter-American 
Affairs spent six weeks in response to congressional 



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requests seeking to answer something about the composition 
of the contra military commanders. Evangeline Monroe 
assisted Mr. Inodi's office in preparation of this to some 
extent and it was a very good and accurate listing of 
their origins, that is were they ex-Sandinistas , were 
they next Somoza National Guard, were they peasants, 
teachers, but it didn't say anything about their 
political attitudes. They may have been, you know, 
devotees of the Federalist Papers but I don't think we 
still know. 

Q When Abrams first became Assistant Secretary 
though I am still trying to pinpoint what changes; in 
other words, for example, did you know as you used to 
know under Assistant Secretary Motley when a RIG meeting 
was going to take place? 

A No. 

Q You meaning I&R? 

A No, and if we did know we were not invited. It 
was made clear we were not invited to RIGs and the old 
statute arrangement which worked perfectly well was 
discontinued upon his arrival, not to be resurrected, 
and then only in very limited form by Jim Michel much 
later. 

Q Can you be any more specific as to how it was 
conveyed to you that you were no longer invited? 



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A We kept -- 

Q Did they tell you? 

A For a while we got what might be called the 
silent treatment I suppose. We kept asking, John Wiant 
in particular, I instructed him to check with Jim and Walker 
and for a while there was no answer, and then Mort spoke 
to Abrams, Mort Abramowitz spoke to Abrans once or twice 
and Abrams said he would consider it and then he designated 
Kagan but Kagan never showed up. 

We finally were able to convince them of the -- 
we had one kind of security problem involved because 
there are very special arrangements, what the White House 
calls available material. They were not observing those 
arrangements because they didn't know about them. 

The new bureau, there were a number of changes. 
It took us as I recall some months to get them to finally 
handle the paperwork better and there were still times 
when they didn't. That was part of the problem they brought 
on themselves by not in fact observing the 
arrangements because we were actually there among other 
things to insure that the rules are kept and if we got 
documents we would get revised findings from the NSC, 
of course, and we handled them under the rules applicable 
to available material, but if they were getting th-,ngs on 
the side f rom^^^^^^^^l we had no assurance of how those 

T, 



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were being handled. 

Finally we arranged a list of available cleared 
people in that bureau which they should have had from the 
beginning but did not have. 

Q How was -- 

A It was very sloppy. 

Q How was I&R''5 relationship with other regional 
bureaus? 

A Good. We would ]ust have fights over analysis 
but people might cast doubts upon our intelligence, our 
brains on some of the things we were saying and sometimes 
they were right and sometimes they were wrong, but it was 
collegial. It was a collegial relationship. 

Q How would you compare the relationship with other 
bureaus to the relationship with ARA? 

A Like night and day. The other bureaus -- ARA, 
It is ARA under Abrams we are talking about. We had the 
same kind of collegial relationship with Tony Motley and 
Tony is not a shy man. He has a rather rich vocabulary and 
he would pick up the secure phone and occasionally call 
me and use that rich vocabulary on my asking why we had 
done something stupid and occasionally I would agree 
with him and sometimes I would convince him that actually 
we were right. 

But it was a collegial relationship dealing with 



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very sensitive issues that brought about contention and 
sometines that contention was heated. But no one else m 
the Department of State ever thought that we were disloyal 
or seeking to undercut policy, and I include Tony Motley 
in that with whom I worked rather closely on a number of 
sensitive matters. 

Q Were you ever aware that, or did you ever have 
any indication that there was in addition to the rather 
large RIG in place at ARA under Abrams ' tenure, that 
there was anything known as the mini RIG? 

A Well, I don't know if it had a name, sub RIG 
or mini RIG. Depends on what they called it. I'm aware 
of course that^H^|^|H and North and Abrams met 
frequently. I had thought that Nester Sanchez was part of 
those meetings. I gather from the record of the hearings 
so far that that may not be the case, but at least the 
three of them got together quite frequently. 

Q According to the record developed so far it 
looks like the three of them may have gotten together in 
addition to William Walker, who was another frequent parti- 
cipant with them. 

A Yes. 

Q Talking about contemporaneous with these events 
now, you had a perception there was a smaller group, what- 
ever they called themselves or however official it was, a 



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smaller group of these people meeting to discuss matters 
m connection with Central America. 

A Oh, yes, well there was nothing secret about it. 
The people came over, it was well known. I don't think 
there was anything secret about the fact that these 
people met very frequently in a small group. Whether they 
called it a sub RIG or mini RIG or if that is a tag somebod 
else put onto it because people liked to make up acronyms 
or what have you, maybe they did call it a sub RIG but 
I don't know what they called it but they had a small group 
meet mg . 

Q Did you ever have any discuss ion s^^^^^^^^^^H 
ibout his activities in Costa 
Rica concerning the secret air field or resupply of the 
contras? 

A Not about the secret air field, but m 1985 
when I made my trip to Central America for the first time 
since I had come back from San Jose Lou Tarns was ]ust 
coming in and^^^Bof course had been there for some time 
by tha t__time.,_^^Kh ad not worked for me^^^^^^^^^^^^B 

think It was something to do with the fable of the contras' 
new uniforms. 

So I met ^^Mf or the first time. I had about an hour-and-a- 

half discussion with him on Costa Rica in general, and we 



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talked about the southern front. As I talked with Lou 
Tarns also. But it was sort of in the context when the 
funding comes or that was my understanding of it. And I 




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And he also remarked to me that the Cuban 
Americans, hindsight is very interesting, Cuban Americans 
were going to be a very big problem, and that was the 

substance of the discussion with him. 

b 
Q Tell us about the discussion with Ambassador Tarns. 

b 
A It was somewhat similar with Tarns saying, you 

know, this place, the fight is mside -- as he said on the 
stand -- the war is in Nicaragua, it is not in Costa Rica 
and they have to be in there if they are going to do any- 
thing and the tenor of the discussions as I recall them 
was quite similar. 

Q Did you -- 

A Except it was in more detail with^^^^^^^^fwho 
had been there so we were comparing notes from my time and 

all that sort of stuff. 

b 

Q Did you talk to Ambassador Tarns before he went 

down to Costa Rica? 

A No, I talked to him in Costa Rica. I guess I 
had met Lou before but actually the time I had the 

longest session with him was we probably had two conversatior 

in August or late July of '85 on that trip. We had lunch 
once and we had a conversation another time. 

Q Did he tell you about instructions he had been 



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given? 



A No, he did not. 

Q When he went down there? 

A No. Nor did either of them mention the air 
strip . 

Q Did ^U ever tell you at any ti.-ne that he was 
concerned about his activities and the high risk nature of 
them? 

A Well, he expressed -- in a sense he was 
expressing concern about -- again I thought it was in the 
context of projected renewal of official U.S. funding. He 
did express concern about the risks in Costa Rica and he 
expressed concern about the activities of the Cuban 
Americans which might get, might either had or might get 
out of hand. I don't recall because he didn't give me any 
details . 

Q When did you first hear -- 

A So in a sense I suppose the answer is yes, that 
he did express concern about the risks and the difficulties 
of a contra program in southern Nicaragua. 

Q When did you first hear about the air strip in 
Costa Rica? 

A I still keep scratching my head on that and I am 
not sure but it would have been, I think, when it became 
public. When there was this non-press conference m 



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46 



September, but it started leaking out right afterwards 
that there is something wrong with ail the testimony in the 
sense that Minister Garron did not give that press 
conference but in fact, the Costa Ricans did announce 
their closure of the strip and that is not on the record 
and It ought to be on the record that despite the so-called 
threats levied against them, they went ahead and 
announced the closure. They delayed it but they announced 




Q What was your reaction when you saw the Tarns 
cable relating the Singlaub-Pastora agreement? 

A I had two reactions. I must say I did have a 
reaction that I don't see anything -- it says the United 



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utifiu^t^eT 



states and how can he do that given the Boland Amendinent. 
I don't see anything in that cable that makes clear that 
Tarns in fact said you can't commit the United States. 
It didn't say it in the cable. I did have that reaction. 

But the other reaction, one that I think Ambassador 
Abramowitz and John Wiant and I shared upon looking at that 
back channel was that isn't it nice that someone is actually 
reporting what is going on since there was very little 
reporting of -- no reporting of what we knew to be a 
"private", private in quotes now, what was supposedly a 
"private" support effort under way, and you knew that 
people knew more than they were reporting and it was hard 
to get a fix on what was going on without having better 
reporting. I mean it became in this time one of the most 
under reported, presumably critical foreign policy issues 
facing the United States, the whole sort of contra war 
question. 

Q You mean the extent to which there was private 
U.S. involvement with that war? 

A Yes, that is right. So I was actually sort of 
glad to see some reporting and quite frankly, quite 
surprised by the tenor of the response going back to Tarns 
because I would have thought there were a couple of ways 
to do this and one was to pick up the phone and say, did 
you tell him, and if you did, would you please send a 



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supplementary cable and the second ihb was to send him a 
cable saying, what did you say to him? "Did you say" -- 
instead of sort of assuming that he had somehow or other 
become part of the Singlaub effort which is what the 
assumption underlying of the return cable is as written. 
I didn't understand why and I must say I had a suspicion 
then which is now larger which was that it was a way o^ 
telling Tarns not to report anything any more. 

Q Okay. 

A In which case I would think John Whitehead did 
not know that assumption. 

Q Tell us about the situation that arose in the 
spring of 1986 concerning a reported incursion of a large 
number of Sandinista troops across the Honduran border. 
There was, I know, a flap that was created, another flap 
between I&R and ARA over the matter. Tell us what you 
recall about that? 

A I set forth the bare facts in my letters to the 
two chairmen of the select committees. 

Q Excuse me, for the record you are referring to 
a couple of letters you have just recently sent. 

A I sent last week to them in response — you have 
them? 

MR. SMILJANICH: I haven't seen them. 
MR. TRAYLOR: I haven't seen them. 



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THE WITNESS: Here it is. I will now recount 
them for you. In the holy week of 1986 the Sandinistas sent 
a substantial number of troops into what is known here 
m the United States and the Community as the Las Vegas 
Salient. It is sort of a bump in the map created by a bend 
in the river. It is really a rather small area. I don't 
remember the kilometers across but it is not very large, 
although it is sort of jungled and sharply hilly and lots of 
brush and trees . 

the 

Sandinistas put in a large probe and force, something 
they had done once before on a fairly large scale. The 
initial intelligence as it always is in cases like this 
was skimpy, you had a feel, you knew from the intelligence 
that It was a sizeable incursion, you could not tell how 
many people had gone in. There is ]ust no way of doing 
that. And you were actually in affairs like this generally 
getting a more precise fix later on which I think we may 
have . 

But at the time the Defense Intelligence Agency 
analysts and our analysts drawing on this fragmentary 
intelligence assumed a number of about 800. People I think 
m the analytic side of CIA were talking about 1500. The 
Central American Task Force , ^^^^^^^^| in particular. 



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pushed a considerably higher figure with North I gather 
pushing for, and Abrams as well pushing for it, over 2000, 
2400. 

I got a call from the National Intelligence 
Officer for Latin America, Bob Vickers. This thing is 
going on, we are trying to get the Hondurans to announce 
the incursion since we have announced it up here but they 
have not announced it down there and I got a call from 
Vickers and in somewhat agitated state saying the NSC -- 
as I recall I think he mentioned both Poindexter and 
Ollie North, but I may be wrong -- but he said the NSC 
wants us to get up a Community estimate. We have to get 
one right away. And either he or I said the natural thing, 
let's get a range which is what we, the Community 
traditionally does, how many Cuban advisers are there m 
Nicaragua, well the ranges vary but say it's 
security and military advisers. 

That range may be wrong as we are often finding 
out in the case of El Salvador where we found out the 
numbers of insurgents was smaller than originally th»ought. 
But it is an intellectually respectable intelligence tool 
for dealing with an issue that is not completely quantifiable 

So Vickers and I agreed with a range of 800 to 
1800. I thought the problem was over with but it wasn't. 

Abrams sometime during this period had announced 



rams sometime auring tnis pern 

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as I recall in the press 2400 coming in. Not only didn't 
we agree with it, but there was no way to put that precise 
a number on it. 

At that time Armacost gets a call from Admiral 
Poindexter complaining about our analysis, complaining 
about our analysis and I think complaining that somehow 
or other it had found its way to the intelligence 
committees and I don't know how that happened or whether 
that in fact is a sin anyway. Normally one -- we didn't 
have a briefing of the intelligence committees so I really 
don't know, but in briefings before the committees 
intelligence agencies do disagree on matters of analytic 
nature and I called Vickers back and I said, what is going 
on? I said, I thought we had agreed on a range. 

He said, well, it wasn't satisfactory to the 
NSC -- or words to that effect. 

This thing sort of ground on and I think 
eventually we probably, the Community probably concluded 
that there might have been at one moment as many as 
1500 inside Honduran territory. So our estimate was low 
but it illustrates the Vietnamization of the intelligence 
process in a very big way that now we have to have 
politically taylored intelligence to suit our national 
needs. You know, there were other examples but this 
one just stands out as a bad way to do business. 



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BY MR. SMILJANICH: 

Q Well, for example, when this problem comes up, 
when there is a situation involving some type of incursion 
whether it be small or large, wouldn't it be normal for the 
Inter-American Bureau to actively involve I&R and have 
meetings and discuss these matters. Wouldn't that be the 
normal process? Was that done in this case? 

A Not to my knowledge. It was not done to my 
knowledge. I am sure there were a few thunderbolts hurled 
or views which differed from theirs. I would have to say 
in all fairness that the geographic bureaus have as much 
expertise on any given subject, perhaps as the Bureau of 
Intelligence and Research, and the purpose of the Bureau 
of Intelligence and Research is what you might call an 
institutional second opinion. So I have no difficulty 
with a geographic bureau holding a different view from 
the State Department's member of the Intelligence 
Community. 

What I have a difficulty with obviously is the 
attempt to tailor, to cook to taste the analysis, short 
order intelligence in this case in order to impress the 
Hill I suspect with the gravity of the incursion. 

It's also kind of stupid because no one disagreed 
that there was a sizeable incursion in Nicaragua. It was 
unnecessary. All one had to do was give a reasonable 

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range and it would have been accurate and reasonably 
accurate and quite clear that there had been a sizeable 
Nicaraguan invasion -- not invasion, incursion, so why 
they did this remains a mystery to me. 

Q Was there any follow-up to that or is that it? 

A I think that was the end of that one, yes. 

Q Well, in summary is it fair to say in addition 
to the problem with as you term it "cooked intelligence", 
the fact IS that during 1985 and 1986 when you were at 
liR and Elliott Abrams was Assistant Secretary, that the 
process of using I&R as a resource for expertise on 
covert matters as a resource for a second opinion in connec- 
tion with intelligence matters was m fact something that 
wasn't used by Inter-American Affairs? 

A I think to split the two things of liR. liR 
has two functions after all, one is analysis and the 
other is coordination of sensitive intelligence activities. 
In respect of coordination of sensitive intelligence 
activity we were not used. 

Q Okay. 

A Except with in certain things with respect to 
South Ainerica andl 




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But aside from that we were not used on Central 
America in the coordinating role prescribed by the 
Secretary. 

Now as far as analysis was concerned, as far as 
I said earlier Abrams spent a great deal of time attempting 
to discredit our analysis and our motives for producing it 
and our analysis in some said that the contras -- the 
point of contention was how well are the contras doing, and 
we were saying that for both political and economic 
reasons, political and military reasons they were not doing 
very well, and that projections of the repeated projections 
being given to the committees, give me six months 
and another 100 million, you know, and things will be a 
lot better, were not justified by the intelligence on the 
ground of what was actually going on, and there was enough 
of that for us to be able to make those judgments and the 
events of course have proved us to be correct. 

What happens next I don't know, but during this 
period our estimates were correct and the Optimistic 
Polyanna estimates were not. 

But I do have to say, and it is very important 
that when Abrams went to Whitehead, John Whitehead and 
Mike Armacost on a couple of occasions and I guess sent 
one memo saying, at least one saying the same thing, in the 
fall of 1985, they told him to take their complaint, to 



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end boyum 
11: 30 am 



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take his complaints to us and they never told us to trim our 
intelligence analysis and so far as I know, the Secretary 
and Armacost in particular read it all with considerable 
interest . 

So we did serve as an institutional second 

opinion for the 7th floor of the Department of State. They 

j 

never told us to trim our saKas. 



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STEIN 1 BY MR. SMILJANICH: 

11:35 2 Q Okay. Tell us about the occasions in which you 

CAS-1 3 were -- you and your Department were made the subject of 

4 leak investigations pursuant to complaints by Elliott Abrams ' 

5 bureau? 

6 A The first occasion happens right after I returned 

7 from my trip to Central America. I don't« write very much. 

8 The ;job was more operational management of the Bureau 

9 from Ambassador Abramowitz. I don't write very much, 

10 but I took a trip and saw some things that I thought weren't 

11 out there. 

12 I went to Panama, Costa Rica, Guatemala and 

13 Nicaragua, and I spent four or five days in Nicaragua and 

14 travelled around the countryside, as well, near the 

15 fighting, as a matter of fact. There was heavy fighting 

16 going on at that time. 

17 I didn't get into it, but close to it. I came back and 

18 I wrote a trip report for the Secretary, some of it highly 

19 perishable, but there were two things I really wanted to 

20 write about. 

21 First was Guatemala, although I spent less 

22 pages on it, to point out that after lengthy discussions 

23 with Guatemalan military officials I had the feeling that 

24 the Guatemalan military would permit free election and 

25 accept Cerezo if he won, which he did, and they did. 



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The other part, the more lengthy part of this r^emo 
that bears telling was about Nicaragua and the contras. I 
pointed out Nicaragua was in economic rums, that these 
people didn't seem to be able to manage themselves, and that 
their military effort, however, was growing and the contras 
didn't seem to be able to respond. 




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I heard afterwards that the Secretary, when 
Abrams was, I guess, giving some kind of an optimistic 
estimate after the Secretary had received my paper, the 
Secretary said you are saying things are going fine, but 
Frank has just come back and is taking a different view. 
I gather that didn't please Elliott too much. 

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CAS-4 1 
2 
3 
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Shortly thereafter, after this, I think it was 
in early September, I have given you copies of my files 
so you know the date, but it was something like September 2nd 
I received a visit from two security investigators -- no, 
sorry -- prior to that an article appeared in the Washington 
Post quoting a document which the authors, the Post 
correspondents, obviously had, of a memo for Abrams for a 
chief-of-mission meeting. 

The memo was a draft written by someone named 
Lamay, who worked in the Bureau of Interamerican Affairs. 
I remember I called both Jim Michel and Rick Melton, who 
by then had become the office director for Central American 
Affairs, and asked them why I had to read their damned 
memos in the Washington Post. 

Wouldn't it be useful for them to share these 
memos with us as a means of providing an ambience in which 
we can do better analysis. 

Both of them kind of fobbed it off and that 
was the end of that until I received what was an urgent 
visit — I got a call at, say, 1:30 from security officers, 
Annette -- I can't remember her last name, it is down 
there -- and another fellow whose name I don't remember, 
saying they had to see me right away. 

They came in and they said we are told that you 
may have been ^''y^ffKJ" J*'^ j^'yJilfifi-this memo. And I got 



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UmUSSffifflET 



CAS- 5 1 
2 
3 
4 
5 



kind of upset because it wasn't -- it was clear to me it 
wasn't a normal leak investigation. The way they had 
started was "have you had access to this document". They 
were told that I may have leaked this memo, suggested that I 
leaked this memo, and I pointed out to them that I 
hadn't seen the memo until I read it in the Post, and moreover 
I didn't know either of the two correspondents. 

I sort of almost lost my temper and said who did 
this, that sort of stuff, which they couldn't tell me. 

They then went on to say that they understood that 

V 

I had a relationship with someone by the name of Larry Birns, 
who has an outfit called Council on Hemispheric Affairs, 
and they were told that I had leaked information to him about 
Otto Reich, who was a candidate for the embassy in 
Caracas, for use in the Venezuelan press. 

I pointed out that I hadn't seen Blrns since I was 
in Boston and that he and I didn't like each other and I had 
a rather heated argument with him at a seminar at Dartmouth. 
This says that someone is accusing me of giving information 
to use against Reich in Venezuela so I can get the job, and 
that is a serious allegation. 

You will note in that file that is a flat 
statement to that effect, he leaked information about Reich 
to Mr. Birns. I then spent the fall attempting to 
force people to a conclusion on this part of the investigation 



iiMCIiS^I^EIL. 



576 



mmm 



CAS-6 1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 



and, in fact, I was able to do so in the first part of 1986. 

As the file will note, the chief investigator 
says I was not at fault in this matter -- without fault or 
not at fault in this matter. 

Which takes me, of course, to a question that 
Abrams got before the Senate Foreign Relations Comniittee 
in which I think Senator Sarbanes asked him did he not 
know that security had not developed any evidence against 
me, and he said yes, he had heard that, but then they 
never catch anyone, sort of implying that if they had looked 
harder they would have found me. 

So that was that leak investigation. 

I finally got to my files, really under Freedom of 
Information, eventually with -- in October, I think, after 
I had written my letter to the Secretary on the resignation. 

But that -- the head of security knew, Mr. Schwartz 
who sent me my files, when I spoke to him to thank him for 
calling, he said, look, Frank, you understand I can't say 
anything about the details of this, but I now understand 
why you were so angry. 

So that is the one leak question. 

The second leak question, of course, is the 
memos which were discussed with Mr. Abrams and I don't know 
what you would like me — there is one thing, the author -- 
I never met the iiUthpL. of the Miami Her«ld article. 



577 



USWd^BHfeT 



Mr. Chardy, I had not met or spoken with him until about a 
month ago, when Congressman Gephardt's staff people put 
together a lunch so that Chardy could meet his putative 
source . 

Chardy has told me with the authorization of his 
editors that no one in the Bureau of Intelligence and Research 
was ^ source for that story. 

Q Okay. That is all I needed to get on that issue. 
One last matter I would like to touch on. 




82-720 O-88-20 



578 






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579 



lEa^nitT 




Q Okay. That is the information I wanted to 
get on the record. 

Tim, any questions? 

MR. TRAYLOR: No questions. 

MR. SMILJANICH: Okay. That will conclude -- 

BY MR. SMILJANICH: 
Q Is there anything you wanted to add before we go 
off the record about any of the matters we have discussed? 

A It seems to me that the Tower Coirjnission ' s 
observations about the failure of the process, and they made 
it, with respect to the Iran initiative, also apply to the 
Central American program. Expediency sort of took over. 

The Sandinistas are a great problem for the United 
States or at least to their neighbors and we don't need 
Soviet and Cuban troops in Central America or Soviet 
bases or a Soviet presence. 

But I just have the sense that what happened 
essentially is that people who didn't know much about the 
reason, who were driven to please the President at all cost, 
began to tell him what he wanted to do here, much as 
happened in Lyndon Johnson's day, and that any sort of 
critical examination of the program fell by the wayside at 



IIMOliiaCICiCD 



580 



umimf 



76 



:as-21 1 
2 
3 



the same time clearly as the sort of bars expressed in the 
Boland Amendment were sort of ignored by some of these 
people. It is very unfortunate. 

We are probably fortunate that it is a small area 
of the world, because had this happened to us in an area 
where hostilities could have resulted from this sort of _ 
incompetence, large numbers of Americans might have died. 
We really need to do our business in a more professional 
and sensible way. 

MR. SMILJANICH: Thank you very much. 

That will complete the deposition and we appreciate 
your making yourself available to both committees and apprecia 
the information. 

(Whereupon, at 12:12 p.m. the deposition was 
adjourned. ) 



iiKiPi h^^mta 



581 




/87 



1 DEPOSITION OF BERNARD MAKOWKA 

2 Friday, May 15, 1987 

3 United States Senate 

4 Select Committee on Secret 

5 Military Assistance to Iran 

6 and the Nicaraguan Opposition 

7 Washington, D. C. 

8 Deposition of BERNARD MAKOWKA, called as a 

9 witness by counsel for the Select Committee, at the 

10 offices of the Select Committee, Room SH-901, Hart Senate 

11 Office Building, Washington, D. C. , commencing at 2:20 

12 p.m., the witness having been duly sworn by RAYMOND R. 

13 HEER, III, a Notary Public in and for the District of 

14 Columbia, and the testimony being taken down by Stenomask 

15 by RAYMOND R. HEER, III and transcribed under his 

16 direction. 
17 



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No. 



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582 



UNCi'fiSsra 



1 APPEARANCES : 

2 On behalf of the Senate Select Committee on Secret 

3 Military Assistance to Iran and the Nicaraguan 

4 Opposition: 

5 TIMOTHY WOODCOCK, ESQ. 

6 On behalf of the Central Intelligence Agency: 

7 R. BRADFORD STILES, ESQ. 

8 RHONDA M. HUGHES, ESQ. 



UNEWWiB' 



583 



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CONTENTS 




EXAMINATION ON BEHALF OF 




WITNESS SENATE HOUSE 




Bernard Makowka 




By Mr. Woodcock 4 




EXHIBITS 




MAKOWKA EXHIBIT NUMBER FOR IDENTIFICATION 




1 24 




2 24 



UNEU^e 



584 



ni»^S0 



1 PROCEEDINGS 

2 Whereupon, 

3 BERNARD MAKOWKA, 

4 called as a witness by counsel on behalf of the Senate 

5 Select Committee and having been duly sworn by the Notary 

6 Public, was examined and testified as follows: 

7 EXAMINATION 

8 BY MR. WOODCOCK: 

9 Q , First let me- put on the record who I am. I am 

10 Tim Woodcock. I'm an Associate Counsel with the Senate 

11 Select Committee on Secret Military Assistance to Iran 

12 and the Nicaraguan Opposition. And this is a deposition 

13 pursuant to the authority of the Committee. Accordingly, 

14 this is considered part of the official inquiry of the 

15 Committee. 

16 Why don't we begin by having you state your 

17 name and spell it for the record, please? 

18 A My name is Bernard Makowka — M-a-k-o-w-k-a. 

19 " I am Associate Deputy General Counsel for Intelligence 

20 Law and Special Studies in the Office of General Counsel 

21 in CIA. 

22 Q I would note for the record that Mr. Makowka 

23 is the only one that has a title that even approaches the 

24 length of the name of our Committee. 

25 Mr. Makowka, if you would, would you just 



wmwB 



585 



MASSKJED 



1 briefly outline your professional life with the CIA? 

2 A Okay. I joined the Agency in 1967 and got my 

3 law degree at Georgetown in the evenings and moved over 

4 to the Office of General Counsel in 1975, where I've been 

5 ever since that time. My particular area of expertise 

6 within the office lies with providing guidance to our 

7 operational components. I'm responsible for 

8 interpretation of the President's Executive Order guiding 

9 intelligence activities-. 

10 Q Is that 12333? 

11 A That is correct, and CIA's implementing 

12 procedures. I deal with the sort of stuff like 
y|HH|H||HH^^^^^^Vgetting the necessary 

14 Q That is assorted stuff rather than sorted 

15 stuff? 

16 A Assorted. 

17 (Laughter.) 

18 Consistent with the intelligence order ^^^^H 
19 

20 Q And you now have the title of Associate Deputy 

21 General Counsel for Intelligence Law and Special Studies; 

22 is that correct? 

23 A Yes. 

24 Q How long have you had that title? 

25 A It is about a year since our office has been 



UTOSSPT 



586 



UNfti^W 



reorganized, but essentially I've had this position for 
several years. 

Q So there was no real substantive change in 
your position when you acquired this new title? 

A No. 

Q Your immediate superior then would be who? 

A Dave Doherty. 

Q Dave Doherty is now General Counsel? 

A General Counsel. 




587 






J 



588 



umffliD 




Q Let me turn now, if I may, to the fall of 
•1985. At that time you became involved in drafting a 
proposed Finding for President Reagan; is that correct? 
A Ves. 

Q I'm going to show you what I will have marked 
as Exhibits 1 and 2. 

(The documents referred to were 
marked Makowka Exhibit Numbers 



yNM«D 



589 



\SWWSSW 



24 



1 1 and 2 for identification.) 

2 Let me direct your attention to what has been 

3 marked as Makowka Exhibit 1. Have you ever seen that 

4 before? 

5 A I never have. 

6 Q Does the date, November 26, 1985, place that 

7 in the time period where you would expect to find such a 

8 cover sheet? 

9 A Yes, it does. 

10 Q Let me ask you to then direct your attention 

11 to what has been marked as Makowka Exhibit Number 2. Do 

12 you recognize that? 

13 A Yes, I do. 

14 Q What is that? 

15 A That is a draft Finding related to the Iran 

16 matter that I was asked to draft. 

17 Q Let me then turn to the development of that 

18 Finding. When did you first become involved in drafting 

19 what is marked as Exhibit 2? 

20 A I was called in to a meeting by the General 

21 Counsel at the time, Stan Sporkin, as well as a couple of 

22 colleagues within the office — Ed Dietel and George 

23 Clarke. 

24 Q Where was that held? 

25 A In the General Counsel's office. 



uimsm 



590 



iiHEy&sw 



25 



1 Q And when you came in to this meeting what 

2 happened? 

3 A Stan described that the Agency — or not the 

4 Agency but somebody was contemplating making several 

5 shipments, as best I can recall, of missiles and related 

6 matters from Israel to Iran and the number four or five 

7 seems to stick in my mind, and that one of those 

8 shipments had already taken place the previous weekend, 

9 Q Let me back you up to just clarify for the 

10 record. Your reference to four or five refers to 

11 airplane flights or shipments, is that correct, and not 

12 to missiles? 

13 A Right, to shipments. And I'm not sure. It 

14 probably was flights, but I can't be sure of that, but 

15 certainly shipments. 

16 Q Of some mode of transportation? 

17 A Yes. 

18 Q So who is providing the information on this 

19 activity? 

20 A Stan Sporkin, the General Counsel. He said he 

21 had been asked by the Acting DCI, John McMahon, to look 

22 into this matter and to see if there were any legal 

23 problems with doing so. 

24 Q Now did you receive any understanding from Mr. 

25 Sporkin as to whether any o^these shipments had already 




591 



iimwffli 



1 occurred? 

2 A Yes. One had occurred the previous weekend. 

3 Q Did he give you any information on the 

4 particulars of that shipment? 

5 A NOt other than apparently it had been a 

6 proprietary of ours, the CIA's, had been involved in 

7 that, so our people had been involved in that in sone 

8 way, transporting it, and it was very clear that it was 

9 military equipment or missiles that was on that 

10 particular shipment as well as the others that were 

11 contemplated. 

12 Q This is Mr. Sporkin that is conveying this to 

13 you; is that right? 

14 A Correct. 

15 Q You say Mr. Clarke and Mr. Jamison were also 

16 present? 

17 A Not Jamison — Dietel. 

18 Q Excuse me. Dietel. 

19 A He's the Deputy General Counsel. 

20 Q And are they participating in this as well? 

21 A Well, he gathered all of us to raise the 

22 question of what should be done, not just me. 

23 Q So advice is coming from all three of you; is 

24 that correct? 

25 A Well, we discussed it. George Clarke is 



WNRttSSIftED 



592 



uHWsn 



27 



1 responaibl* for covert action within the office, and so I 

2 think it was obviously why he was there. And Ed Dietel, 

3 the Deputy General Counsel. Stan mentioned that he had 

4 been briefed or was about to be briefed by some people at 

5 McMahon's request from our proprietary or the unit that 

6 manages our proprietary, and I do remember that it was 

7 considered better if they would be briefed on the facts 

8 and we were not. And so we never talked to individuals 

9 directly and so the facts came from John McMahon plus 
10 these individuals that bri6fed Stan. 

H Q I see. And your recollection isn't clear on 

12 whether at the time you met with Mr. Sporkin he has 

13 already been briefed by the people from, 

14 not? 

15 A Yes. My initial impression was that it 

16 occurred before we met. But I have seen evidence that it 

17 may have occurred right after. 

18 Q After your meeting? 

19 A Right. 

20 Q Do you recall whether this meeting that you 

21 had with Mr. Sporkin is the day following the weekend? 

22 A I do recall that the last flight was over a 

23 weekend, but I can't pin it down as to the Monday, 

24 although the 2 6th is the Monday. That would be logical 

25 that that would _b^J:hi 




593 



mumm 



1 Q Your best recollection is that the 25th Is a 

2 Monday; is that correct? 

3 A I think so. 

4 Q At any rate, let me approach it this way. 

5 Your meeting with Mr. Sporkin, do you understand that to 

6 have been on a Monday or a Tuesday? Can you pinpoint it 

7 that closely? 

8 A I think so. 

9 Q Which do you think -- Monday or Tuesday? 

10 A I really can't pinpoint it. I believe from 

11 looking over the facts that it took place on the 26th. 

12 Q Maybe we can approach it a different way. 

13 From your testimony, you participated in the drafting of 

14 Exhibit 2; is that correct? 

15 A Yes, correct. 

16 Q And Exhibit 1 is dated November 26 and is a 

17 cover sheet for Exhibit 2; is that right? 

18 A Yes. 

19 Q Now when you drafted this Exhibit 2, was that 

20 done on the same day that you spoke to Mr. Sporkin? 

21 A It was, but it wasn't finalized until the next 

22 day, it is my recollection. I believe, in fact, there 

23 were two meetings on it. There was the meeting at which 

24 we discussed what we needed to do, and there was also one 

25 to review the draft. 



iimsMii 



594 



29 

1 Q So the second meeting would have occurred the 

2 following day; is that correct? 

3 A Yes. 

4 Q Now if it is correct that Exhibit 1 is the 

5 cover sheet for Exhibit 2, and Exhibit 2 is the final 

6 Finding, then it would appear that the final Finding was 

7 prepared for conveyance on November 26; is that correct? 

8 A As a matter of fact, I'm a little confused as 

9 to this cover sheet, because it is signed by Casey and at 

10 the time the meeting went on my recollection is that 

11 McMahon was the one in charge. So it must have been 

12 before the 2 6th. 

13 Q That is, your having drafted the final version 

14 of the Finding must have been before the 26th; is that 

15 correct? 

16 A Yes. I really can't recall the date. I have 

17 no way of verifying when it was. 

18 Q Well, with that understanding why don't we 

19 then — 

20 A Could I elaborate a little more on the 

21 meeting? 

22 Q Certainly. Go ahead. That is what I was 

23 about to do, was return to the meeting. Now you are 

24 returning to the first meeting; is that correct? 

25 A Right. 



IINCtllSSIfttD 



595 



UNDUiSnD 



30 



1 Q Why don't you elaborate on that, if you would? 

2 A My recollection was that Stan mentioned that 

3 there were these shipments that were contemplated, and 

4 the focus of the meeting was more on the ones that were 

5 going to come up rather than the one that had taken 

6 place. I think the feeling is the focus was on that. 

7 The feeling is that the one that had already taken place, 

8 that stood or fell on its merits. That was water under 

9 the brid(^e at that poin^. 

10 But it was characterized as NSC was involved 

11 in some way. There were others involved in this in some 

12 way. And the only way in which the Agency would be 

13 involved would be in transport and was there a problem 

14 doing this, and a couple of additional things were 

15 discussed. 

16 One, that it was necessary or advisable to get 

17 a Finding. Was our participation sufficient so as to 

18 require a Finding? And I recall that the group, after a 

19 ■ lot of give and take, decided that we should not be 

20 involved in any more shipments without getting a Finding. 

21 And Stan agreed with that recommendation, and he was 

22 going to take it back to John McMahon or senior 

23 management and pass that on. 

24 And my recollection is that he was not 

25 entirely sure how well that would be received. 



mmms 



596 



Kfv^^ra 



31 



1 Q Why was that? 

2 A Well, it elevated what arguably was just 

3 peripheral involvement in something to something that 

4 required approval by the President and implicates the 

5 CIA. It was making a Federal case out of it. 

6 Q Did you get any understanding from Mr. Sporkin 

7 that Mr. McMahon himself might have suggested that a 

8 Finding was in order? 

9 A Not during the meeting, no. But I do recall 

10 that he said sometime subsequent to the Finding having 

11 been prepared that management was enthusiastic about 

12 going the Finding route and thought that was a very good 

13 idea and was proceeding along those lines. 

14 Q Now I gather in the course of a meeting you 

15 were called upon to do the actual initial draft of the 

16 Finding; is that correct? 

17 A The way it sorted out is there was a 

18 discussion as to what should go into the Finding and in 

19 ■ fact I have seen a document which we may have called the 

20 General Counsel's secretary in and dictated a rough 

21 Finding. The one I saw looked like Stan would have 

22 dictated it. 

23 Then the meeting concluded and I was to take 

24 this draft and polish it up and turn it into Finding 

25 format, and we would reconvene, which I did, and I did 



iiNfiriiOTED 



597 



uNwra 



32 



1 stay late that evening and work on it. 

2 Q Now the document that has been marked Exhibit 

3 2, I gather, is the final version of the Finding; is that 

4 correct? 

5 A Ves. 

6 Q The one that you stayed late and drafted is 

7 not identical to this; is that correct? 

8 A That is correct. 

9 Q Do you recognize ways in which your initial 

10 draft differs from Exhibit 2? 

11 A For one thing, I had an option as to whether 

12 or not the oversight committees would be advised of this 

13 Finding. When I was in the process of drafting it, I 

14 just didn't know what was desired or what would be 

15 appropriate, and so I put it in an optional form, I was 

16 also a little more specific in terms of the description, 

17 and I do recall mentioning Israel. 

18 And I do recall being a little more specific 

19 -as to the nature of the arms. 

20 Q In what way were you more specific? 

21 A I believe that the original draft, which I 

22 don't have a copy of, probably said missiles or missile 

23 parts or something like that. 

24 Q And your reference to missile parts would have 

25 been based upon your earlier conversation with Mr. 



iraOTED 



598 



\lWilSSffB 



33 



1 Sporkin; is that correct? 

2 A Right. Also, I can recall a third thing. 

3 That is that there is a phrase concerning facilitating 

4 release of American hostages, and I don't believe I had 

5 that in the earlier drafts. So those three changes were 

6 made the next day or whenever we reconvened. 

7 Q Why don't we then proceed to that meeting and 

8 discuss the atmosphere in which your draft Finding was 

9 discussed and when these changes were incorporated into 

10 it? When does the next meeting take place? 

11 A I believe it is the next day. 

12 Q Who was present? 

13 A Stan Sporkin and George Clarke, and Ed Dietel 

14 was not at that meeting. 

15 Q I gather, then, that you produced your night's 

16 efforts for their review; is that correct? 

17 A That is correct. 

18 Q What happened when you did that? 

19 A Stan was a little surprised, and I'm surprised 

20 that he was surprised because I had converted it into 

21 Finding format and he was concerned that the original 

22 draft may have lost something in the translation. And so 

23 we really went through almost line by line what was in 

24 there. 

25 Also, he made the changes I have just been 



IINetftS«D 



^^■•■720 596 



599 



muswD 



34 



1 talking about. 

2 Q Why don't we direct our attention, then, to 

3 those changes? You originally had a reference to Israel 

4 in your draft Finding. How was that changed? 

5 A I believe the language -- and it's curious, 

6 but the reference to private parties was substituted for 

7 Israel. 

8 Q You say that that's curious. Does the curious 

9 element arise from "private parties" being a good deal 

10 more ambiguous when one is otherwise referring to foreign 

11 nations? 

12 A Yes. 

13 Q Did you have any understanding at the time 

14 that indeed there might have been private parties 

15 involved in some of these prospective shipments? 

16 A I didn't know any particulars, but I did have 

17 the feeling that there were intermediaries involved 

18 somehow. In the course of my job I am familiar with 

19 other transactions in which there is always a whole host 

20 of intermediaries and hangers-on in commercial deals of 

21 this sort. 

22 Q So you assumed that perhaps this broad term 

23 was intended to govern not only just foreign states like 

24 Israel but also these private parties? 

25 A I didn't know. I took Stan at his word. I 



UNetmiFtED 



600 



UHWW 



1 assumed this was the replacement for Israel, but I could 

2 see why it could be considered as broader. 

3 Q Vou could see that at the time or you can see 

4 it now? 

5 A I can see it now. I saw it at the time, too. 

6 Q But I gather there was no discussion as to the 

7 broader term encompassing something more than simply the 

8 State of Israel; is that correct? 

9 A Right. 

10 Q Let me then direct your attention — 

11 A If I could, in the previous meeting another 

12 issue besides the Finding issue that we discussed was 

13 whether or not such shipments would violate the export 

14 control laws. 

15 Q What did you perceive the problem to be there? 

16 A Well, I'm no expert in that particular area, 

17 but somebody mentioned that before a foreign state, such 

18 as Israel, could transfer military equipment the 

19 ■ President had to make some sort of determination if that 

20 foreign country had obtained the military equipment from 

21 the U.S. or if it would be replenished from U.S. stocks. 

22 And as I recall the discussion of that issue, 

23 on the one hand nobody seemed to have any knowledge that 

24 the U.S. was going to do either at that particular time, 

25 that it had originally come from U.S. stocks or that it 



UNtUSSIFIED 



601 



i)m*ssw 



36 



1 would be replenished. 

2 Q Was that left open to be determined? 

3 A Well, the idea being to get more facts as this 

4 thing sorted out, but if that were the case, that would 

5 be helpful not being a legal problem. 

6 Q Was there a way in which the Finding could 

7 have been tailored to address that or was that simply 

8 beyond the ambit of Finding authority? 

9 A _ Well, the second theory that was discussed at 

10 the time, as I recall, is that if a Finding were obtained 

11 it would resolve this sort of problem. It would be 

12 superseded by the Finding process, and that would be the 

13 determination by the President. So there was a general 

14 comfort on those aspects. 

15 Also, we knew that in the Finding process 

16 normally when you prepare a draft those things are sorted 

17 out as they are considered by the various parties and 

18 agencies, including the Department of Justice. 

19 ' Q So in the ordinary course the Finding is going 

20 to go through some other agencies anyway and, therefore, 

21 these problems would be raised and vetted at that level 

22 as well; is that correct? 

23 A Right. As a matter of fact, we came out of 

24 that meeting feeling very comfortable with ourselves 

25 because we're saying we've got to go get a Finding on 



mmsmw 



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«HWW 



37 



1 this, and that's it, or we can't participate. 

2 Q Let me direct your attention back to the 

3 wording of Exhibit 2. You said that your original draft 

4 had a reference to what you felt was either missiles or 

5 missile parts. That phrase is not present in Exhibit 2. 

6 What language supplants it? 

7 A I believe it is "certain foreign materiel and 

8 munitions". 

9 Q Now why was that change made; do you recall? 

10 A I believe for a couple of reasons. Stan had 

11 whatever facts there were. He had better knowledge than 

12 we did. But I believe he wanted that change to be 

13 broader and more encompassing because he wasn't sure 

14 whether he had all the facts or what it would turn out to 

15 be, and he wanted to make sure that it was covered. 

16 Q Now the use of the broader terminology, I 

17 gather, is really directed at the prospective shipments; 

18 is that correct? 

19 A The way it is worded, but there is a fourth 

20 change, and I will get to that in a minute. As I said, 

21 the focus was on prospective shipments, certainly in 

22 terms of our discussion and my drafting of it, and the 

23 last phrase, the fourth change that Stan made, was adding 

24 the phrase "all prior actions taken by U.S. Government 

25 officials in furtherance of this effort are hereby 



ONClftSSIfffiD 



603 



mmsmw 



38 



1 ratified." 

2 Q And that is directed at the shipment that — 

3 A At the one that had already taken place. 
, 4 Q Fine. I want to get into that in just a 

5 minute, but let me go back, if I could, to this language 

6 on the foreign materiel and munitions as the supplanting 

7 language for missiles or missile parts. 

8 Now at the time you and Mr. Sporkin and Mr. 

9 Clarke are examining this on the second day at least one 

10 shipment has already occurred and you are aware of that; 

11 is that right? 

12 " A Yes. 

13 Q Now presumably there is no need really to use 

14 broader language to encompass that, because that is an 

15 accomplished fact, and whatever was in it was in it; is 

16 that correct? 

17 A Yes, but I'm not certain how detailed a 

18 knowledge that Stan had. I mean, I believe and I've 

19 ■ since checked with him that it indeed encompassed 

20 missiles, the first shipments. But as to the different 

21 types or whether there were also parts and that sort of 

22 thing, I'm not sure that he knew it in that detail, even 

23 with respect to the original. 

24 Q That is really what I was driving at, was the 

25 quality of your collective knowledge at that time as to 



mmwi 



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39 



1 the original shipment. And I gather from what you are 

2 telling me that the broader language was intended to 

3 apply to the earlier shipment because it wasn't crystal 

4 clear that in addition to missiles or missile parts that 

5 perhaps something else might have been on the plane; is 

6 that correct -- or in the shipment; is that correct? 

7 A I agree with the facts, but I believe that 

8 this first paragraph was drafted before that next one 

9 was, and when that was originally put in -- well, I guess 

10 it was modified. Yes, that is correct. That does refer 

11 to the original as well. 

12 Q Let me direct your attention, if I might, to 

13 the retroactive ratification provision. I gather that 

14 that was added by Mr. Sporkin himself; is that correct? 

15 A Yes. 

Ifi Q And I gather the theory was that this flight 

17 had already occurred and that there should be some 

18 provision for encompassing it within the Presidential 

19 Finding; is that correct? 

20 A I think it's my recollection that we really 

21 didn't debate in our discussion whether that required a 

22 Finding or not, and we didn't really know all the facts 

23 at that particular time. But Stan I think put this in on 

24 the basis that it probably wouldn't hurt to put it in to 

25 get acknowledgement and Presidential blessing, not that 



W|(J-"* 



605 



UNIMSSIFtfD 



40 



1 he felt that it was necessary. 

2 There was a little debate as to what the 

3 effect of such a thing would be, and I can recall George 

4 Clarke saying there's no precedent in his recollection 

5 for this sort of language, but also someone saying 

6 there's no precedent for not using it and it couldn't 

7 hurt. And so I think it was added on that basis. 

8 Q Sort of the same theory that causes people to 

9 wear belts and suspenders simultaneously; is that 

10 correct? 

11 A We have since looked into this and there is 

12 some justification for ratification in statutes and other 

13 places. We have a legal memo on that. And when I was in 

14 my factfinding phase with Stan he recollected this 

15 original Finding on the basis that it was the nunc pro 

16 tunc Finding. So his memory focused him on that last 

17 provision. 

18 Q That is a concept that I'm sure he's applying 

19 now in his application of the speedy trial act. 

20 (Laughter.) 

21 I think there's plenty of judicial recourse to 

22 that policy under that Act. 

23 Now let me direct your attention before 

24 leaving Exhibit 2 to your earlier reference to that 

25 portion of the Finding that refers to the release of 



IINClKSSmM 



606 



UKgU^lElED 



41 



1 Americans held hostage. I gather from what you testified 

2 to earlier in your draft that was not present; is that 

3 correct? 

4 A Right. Stan added that. 

5 Q What was the rationale there? 

6 A Well, he believed -- and this is on the basis 

7 of whatever knowledge he had — that these all related to 

8 the hostage negotiations, and I didn't know that coming 

9 out of our first meeting, that it was tied that much to 

10 it. So he knew more about it than I did. 

11 And, secondly, he thought it would be more 

12 saleable or look better if it had "blood and guts", in 

13 his terminology, type issues apparent on its face rather 

14 than abstractions, a deal that would benefit our foreign 

15 policy or something like that. 

16 Q Is that the language that was supplanted, that 

17 there was a reference of a rationale being that this 

18 would be of general benefit to our foreign policy or 

19 something along those lines? 

20 A No, I don't think that was ever in there. 

21 Q What was the rationale before the importing of 

22 "the release of Americans held hostage" phrase? 

23 A Well, we knew there was some connection, or my 

24 original understanding was that there was some connection 

25 with the hostages. It was just the emphasis. Stan 



ttmssmED 



607 



letAWliB 



42 



1 •jnphasized it more than I did. 

2 Q Do you recall how it was that you phrased the 

3 rationale? 

4 A I really can't. 

5 Q Now after this Finding was redrafted were you 

6 given the task of going and putting the changes into it? 

7 A I believe that it was given to the General 

8 Counsel's secretary. 

9 Q And that was- who? 

10 A |^^^H^B| But I was responsible for making 

11 sure that it was done properly for reviewing. 

12 Q '^^a^'^HBHIS ^^ ^^3^ right? 

13 A Right. And I do recall looking at the typed 

14 version after it was typed. 

15 Q I gather that your looking at it after it was 

16 typed was rather a proofing process; is that correct? 

17 A Correct. 

18 Q What happened then? 

19 A That IS the last I really knew about it. In 

20 fact, I must also relate the instruction to Stan was — 

21 from Stan was that I should not keep copies of any of my 

22 drafts or any other copies of this particular Finding, 

23 and I dutifully got rid of them. And that's one of the 

24 reasons why I can't claim more accurately what happened 

25 in my initial drafts of this Finding. 



BNCtASMD 



608 



\mm^^ 



43 



1 Q You testified earlier, I think, that you saw 

2 not long ago something that approached the draft of this 

3 Finding; is that correct? 

4 A No. You want nie to get into how I discovered 

5 this Finding? 

6 Q Well, I don't want to get into that, but as I 

7 recall your testimony -- 

8 A Oh, all right. Yes. 

9 Q I gather that wasn't among your notes; is that 

10 correct? 

11 A It wasn't among my notes. It was among (^ 

12 ^JHHldictation notes. 

'l 

13 Q What are those -- shorthand or written out? 

14 What's the status of those? 

15 A I think originally they were in shorthand, but 

16 they've since been written out. 

17 MR. WOODCOCK: Let's go off the record. 

18 (A discussion was held off the record.) 

19 MR. WOODCOCK: Let's go back on the record. 

20 BY MR. WOODCOCK: (Resuming) 

21 Q Now did there come a point when this Finding 

22 was brought back to your attention -- and I'm thinking 

23 particularly in the December 1985 period? 

24 A Yes. I went to a meeting with Lieutenant 

25 Colonel North and Charlie Allen down in his office in the 



mmmm 



609 



mM&\m 



44 



1 Old Executive Cffice Buildir.g. 

2 Q And that was Colonel North's office; is that 

3 correct? 

4 A Yes. 

5 Q How did this subject arise? 

6 A Well, r had previously dealt with Charlie on a 

7 terrorism matter involving the Achille Lauro. In fact, I 

8 spent a lot of time assisting the Department of Justice 

9 in that incident, m which there were some people who 

10 were in France, I believe, or Italy, the terrorists, or 

11 potential extradition, and that sort of thing. 

12 And after we had gone through that it was 

13 apparent to us that it ought to be easier to get these 

14 people back and prosecute them, if that was what the 

15 government wanted to do. And Stan had one of my 

16 subordinates, Gary Cole, who you have spoken to, work on 

17 what we call an enterprise theory of liability. 

18 Q And that's analogous, I gather, to the 

19 Racketeer Influence to Corrupt Organizations Act; is that 

20 right? 

21 A Yes. So the idea was to develop that 

22 rationale on the basis of existing law and, if necessary, 

23 perhaps propose some legislation comparable to RICO, 

24 which we informally referred to as TICO -- Terrorist, 

25 blah, blah, blah. And Gary did a very fine job of doing 



ONMSm 



82-720 0-88-21 



610 



um^sw 



45 



1 that, and Stan had wanted to bring this to Ollie North's 

2 attention. 

3 And so there came an opportunity to make a 

4 proposal of this nature. We tried for some time to set 

5 up a meeting on this subject, and Ollie is a very busy 

6 guy, and we saw hiin on Christmas Eve, December 24, 1985. 

7 Q Now this meeting occurs, I gather, in North's 

8 office; is that correct? 

9 A Yes. 

10 Q In the Old Executive Office Building? 

11 A Yes. 

12 Q Now what happens when you and Mr. Allen 

13 arrive? 

14 A Well, we couldn't see North immediately 

15 because he had some surprise visitors, two individuals 

16 who walked in, and North's secretary advised us that our 

17 meeting with him had been delayed for a few minutes. It 

18 turned out to be about twenty minutes. 

19 Q And that was Fawn Hall who advised you of 

20 that? 

21 A Yes. 

22 Q Did she tell you who these people were or what 

23 their status was? 

24 A She mentioned that they were Israeli 

25 intelligence types, and from their appearances that fit. 



ifflwsirffii 



611 



DNMW 



1 They were older individuals who knew Fawn Hall and had 

2 obviously been there before. 

3 Q They were at Morth's office? 

4 A Yes. 

5 Q Now after these individuals left, what 

6 happened? 

7 A Then we went in and had our meeting. 

8 Q Just you and Charles Allen and Oliver North 

9 and no one else; is that correct? 

10 A Nobody else. And we spoke for about an hour 

11 on the general subject. 

12 Q That being the TICO legislation? 

13 A Right, and terrorism m general and how to 

14 deal with it. And then m the course of that discussion 

15 or towards the end of that discussion North made 

16 reference to something that Stan, some document that Stan 

17 had prepared pieviously that North was very happy with, 

18 that he had taken this document to the President. The 

19 President had agreed and had signed the document. 

20 Q Now who was he directing these remarks to — 

21 to you and Charlie Allen both or ]ust you? 

22 A I got the impression it was to me, which 

23 surprised me because I had never met the individual 

24 before. 

25 Q Mr. North' 



UNEttSSm 



612 



,tmA»B 



47 



1 A Right. Ar.d I jumped to the conclusion that it 

2 was the Finding that I had previously worked on because I 

3 hadn't worked on other Findings at that time, and that 

4 would be the only thing that would be important enough to 

5 take to the President and have him sign. 

6 North went on to say that I'm really concerned 

7 because I have the only copy and it's in my safe, and I 

8 could cross the street tomorrow and get run over by a 

9 truck and so no one would ever know. And so if anything 

10 ever happens to me, it's here. I want you to know that. 

11 Q Were you still under the impression he was 

12 talking to you directly; is that right? 

13 A Right. And I'm a little — my thoughts at the 

14 time -- I mean, if I were alone I would say what are you 

15 talking about, but Charlie was there and sometimes if the 

16 other individual doesn't know anything about what's being 

17 talked about I didn't want to ask those kinds of 

18 questions. I don't think it would have been appropriate. 

19 But I was stuck by the fact that, one, North didn't know 

20 me, and, second, that even if he did he would be 

21 mentioning something as sensitive as that in this sort of 

22 context. 

23 Q And I gather at this point then you had no 

24 knowledge that Charlie Allen would have been aware of 

25 this Finding; is that correct? 



BNMSStftED 



613 




48 

A I had no knowledge of that. 

Q Did North give you any instructions of 
information to bring back to Mr. Sporkin? 

A He asked that -- m fact, his note of 
appreciation to Stan, in fact, I did. when I got back 
from the meeting I advised Stan what he had said, and 
Stan sort of acknowledged that, but I didn't really 
pursue it with Stan at the time. 

Q What do you/ recall saying to Mr. Sporkin? 

A I think I said that Ollie had made reference 
to a document Stan had prepared. I may have said I think 
it's the Finding. He indicated his appreciation at that 
particular time. It was among a number of other things I 
was talking to him about. We were busy and he really 
didn't do anything other than acknowledge that he heard 
me on that particular point. 

Later on m discussions with Stan I've asked 
him whether it could have been anything other than a 
Finding. Was he working on something else that I was 
unaware of that could have been the reference to, and 
Stan has told me that he could not recollect anything 
else that would be taken to the President. 

Q Now this later conversation you are referring 
to would have occurred sometime after the revelations of 
November 1986; is that right? 



lINStSSSIFlin 



614 



UN^frSSffl 



49 



1 A Right. 

2 Q When ycu left North's office I gather you 

3 didn't discuss the matter with Charles Allen at all; is 

4 that right? 

5 A I don't believe I did. 

6 Q In the post-exposure -- let me say post- 

7 revelation period in November of 1986 I gather, however, 

8 that you did have occasion to talk, to Mr. Allen about the 

9 Finding; is that right? 

10 A Yes. 

11 Q Why don't we proceed to that period in time? 

12 MS. HUGHES: Could we take a break just for a 

13 few minutes? 

14 MR. WOODCOCK: Sure. 

15 (A brief recess was taken.) 

16 BY MR. WOODCOCK: (Resuming) 

17 Q In the post-revelation period — why don't we 

18 call that the period of November 1986? -- I gather you 

19 were involved in developing for the Office of General 

20 Counsel the chronology of the involvement of the Office 

21 of General Counsel m the Iran initiative; is that right? 

22 A I was helping and assisting that, yes. 

23 Q Now why don't you ]ust briefly describe what 

24 obligations were visited on you and discharging that 

25 responsibility? 



IINCBimlH) 



615 



wci-ASsra 



1 A Well, first of all the primary responsibility 

2 developed on George Jaztisor.. He's cur counsel to the DO. 

3 Q And he, too, is a r.erser of the Office of 

4 General Counsel? 

5 A Yes. And the reason is OGC did not know very 

6 much about the facts or details and Stan was no longer in 

7 the office. He had assumed a Federal judgeship. Casey 

8 was not around at that particular time. He was out of 

9 town. He was down in Latin America, I believe. And 

10 there weren't too many people left who knew much about 

11 any of this. 

12 So Jamison was tasked to start off and discuss 

13 things with Charlie. He referred to Charlie as being 

14 somebody who knew some facts in the Agency. Even within 

15 DO the knowledge wasn't extensive at the time. 

16 Q At the time that George Jamison was tasked 

17 were you aware that all this was afoot? 

18 A All what:- 

19 Q Were you aware that there was an effort under 

20 way to begin to explain the Iran initiative? 

21 A Yes, indeed. 

22 Q So what happens thereafter? George Jamison 

23 was tasked. 

24 A I was called upon to assist in a couple of 
25 



different ways. 



l!Ntt*mffiD 



616 



mmM 



51 



Q Let re st:p ycu there. Who was directing 
this? Was this Da-ze Doherty who is directing George 
Jamison? 

A Yes. The Agency, I believe, was trying to get 
at the facts of our involvement at a time under -- I 
think Bob Gates was really in charge and trying to pull 
things together, and the Office of General Counsel was 
involved. The IG was involved. DO was involved in 
trying to get at the facts. 

Q Bob Gates at this time is the Director of 
Central Intelligence; is that right? 

A Yes, and it's kind of awkward because Casey's 
out of town and my recollection is that they sent him a 
cable or asked questions and part of his response was to 
talk to Stan Sporkin because he knew an awful lot about 
this stuff. And since I had worked part of the Findings 
back then Doherty asked me to see what I could dig up 
from my files on the subject and also to go talk to Stan, 
which I did on three different occasions down at the 
courthouse . 

Q And we're dealing with the period, I gather, 
immediately preceding the delivery of the Director's 
testimony before the House and Senate Intelligence 
Committees. 

A Right. Actually my participation began when 



UNCffiWIED 



617 




52 

1 the Attorney General began h.is investigation and some 

2 time prior to that m which he ultimately came out with a 

3 press conference m which he talked about the contra 

4 connection. But prior to that one of his people, Chuck 

5 Cooper, did an ir.vest igation and talked to Ollie and he 

6 also came out to the Agency and talked to anybody who 

7 knew anything about the subject, including Charlie Allen 

8 and including me, including Dave Doherty. 

9 Q Let me try and fit this m some kind of a time 

10 frame. We have the announcement of North's and 

11 Poindexter's departure on November 25, 1986. On the 

12 preceding Friday, November 21, the Director gives his 

13 testimony before the House and Senate Intelligence 

14 Committees. Where m respect to the Director's testimony 

15 do you believe that you become aware that or at least 

16 that you are tasked to begin to reconstruct the Iranian 

17 initiative? 

18 A Well, m my records I note that on the 17th of 

19 November Dave Doherty and George Clarke and Ed Dietel and 

20 I went to an initial meeting with Stan about the Iranian 

21 matter. It was at least then and probably a little 

22 earlier than that. 

23 Q Why don't we go to that meeting? I gather all 

24 four of you go down to visit. 

25 A Well, before we get to that meeting I have 



UILISSIFIK 



618 



Dscy^e 



53 



1 B«arched the office at OGC to try to find whatever 

2 information I could, to search my records, and I had very 

3 little because I had destroyed it in connection with 

4 Stan's instructions -- my drafts and that sort of thing. 

5 Q Now what are you looking for in your office? 

6 Are you just searching your files or OGC generally for 

7 anything? 

8 A George Jamison was also searching OGC files 

9 and some of our files are down m the Directorate of 

10 Operations in his office, but at the main office I was 

11 searching for anything, any OGC involvement or any 

12 information wa j^^ our participation, OGC's involvement in 

13 any of this. And I started with my own records, and then 

14 I went to my calendars and I went to Stan's calendars and 

15 I talked to his secretary. 

16 And we searched his files while he was General 

17 Counsel, and there was not very much available — very 

18 little, virtually nothing. 

19 Q Now when you say you spoke to his secretary, 

20 that isJlJHi^' ^^ that correct? 

21 A Yes, who had at that point left the office 

22 herself and went to another office. 

23 Q And she's no longer with CIA at all? 

24 A No. She is with CIA but another office, not 

25 OGC. And she mentioned to me one of the explanations may 



IINCttSStfffil) 



619 



UNOIASSW 



54 



1 be that when Stan left she did a very thorough cleaning 

2 job of his files and she got rid of a lot of stuff back 

3 then. 

4 Anyway, so we hadn't come up with very much. 

5 I knew that I had vorked on the Finding, but there was no 

6 corroboration to that. So we went down and had this 

7 meeting and asked Stan what he recollected. And about 

8 the only substantive thing that I took down there to that 

9 meeting was his calendar dates and there are several 

10 references, primarily m January, but some in November, 

11 to meetings with Ollie and meetings at the White House. 

12 And we went over with Stan to try to get his 

13 recollection as to what went on, and his memory was not 

14 very good on many of the points, but he did recall that 

15 there was "nunc pro tunc" Finding even before we had even 

16 mentioned anything earlier. So he had recalled that 

17 there was such a thing. 

18 Q And I gather that term rung familiar to you; 

19 is that correct? 

20 A Right. 

21 Q And did you and he both recognize that as 

22 being the Finding that you had worked on in late November 

23 of '85? 

24 A Right. :t was then ]ust a matter of trying to 

25 find it, and I cane back from that meeting fairly 



wmm 



620 



\mJ&i^^ 



55 



1 desperate as to try to find sone indication of this 

2 Finding. And eventuallyBH suggested we loo)t at her old 

3 mag cards which she had taken with her, half of which had 

4 been typed over on her new job, on the chance that it may 

5 still remain on the cards. And so another secretary in 

6 the office, ^^^I^^^^^^^B went through and put each of 

7 these cards in the machine and then we typed the 

8 beginnings of every memo. 

9 This was a humongous job over a year's time, 

10 and eventually she found it. But before we get to that, 

11 I was sort of in a position of saying that there was this 

12 Finding. It's not a figment of my imagination. 

13 Q Was there a group of people who were arguing 

14 that such a Finding never existed? 

15 A Well, there was no other corroboration of that 

16 anyvhere within the Agency, and in fact there was a 

17 meeting that I have heard secondhand or thirdhand in 

18 preparation for testimony at the White House to which 

19 Gates had gone at which a question was asked, I believe, 

20 of Poindexter and maybe directly of Ollie North, but 

21 maybe not, as to this Finding. 

22 And the word was that there was no such 

23 Finding, there was no November Finding. 

24 Q Now were you aware of the concern that perhaps 

25 there was no November Finding at the time you were trying 



HNBMriFn 



621 



w 



1 to get it run off or. these mag cards? 

2 A Well, I got the word back from that meeting. 

3 I knew there was a fi-ding. 

4 Q I understand that you were satisfied yourself 

5 that there was a Finding and you were satisfied from 

6 talking to Stan Sporkm that he understood there was a 

7 Finding, and yet you also felt the need to produce the 

8 Finding if you could. And therefore you asked 

9 to help you in that regard. 

10 A That's right. 

11 Q However, I guess what I'm driving at to you is 

12 in the course of that search were you also cognizant that 

13 there was, that either the NSC or Poindexter or North or 

14 some combination thereof was disputing that there even 

15 had been such a Finding? 

1^ A Yes. As I just mentioned, someone told Gates 

1'^ directly that there was no such Finding. Also, I had a 
conversation with Charlie Allen at the time, and I 
remember calling him and without mentioning that there 
was a Finding, because I didn't want him predisposed to 
it, I said apart from the January 17 Finding were there 
any other Findings that you are aware of in connection 
with this, to which he rather surprisingly said, yes, 

24 there was the mini-Finding in November. 

25 Q And that was the first time you had heard that 






622 



0liim 



57 



1 term; is that correct? ' 

2 A That was the first time I heard that term. 

3 Also that surprised re because I didn't know that he was 

4 even aware of it, and he obviously was. He mentioned 

5 that after that meeting with Gates that Ollie had called 

6 him, Charlie Allen, and said the subject came up and 

7 there is no Finding and made it very clear to Charlie 

8 that there was no Finding. 

9 And Charlie's remark to me was well, we know 

10 there's a Finding but we can't prove it, and until we 

11 could find such a thing it is just our word against 

12 theirs. 

13 Q Did he tell you how he had responded to North 

14 when North had asserted that there was no such thing? 

15 A He didn't say specifically, but I did not get 

16 the impression that he quarreled with him about it. He 

17 just heard him out and let it go at that. 

18 Q Now when this mag card process was completed I 

19 gather that the Finding was then produced; is that right? 

20 A Yes. 

21 Q Did you review it and determine it to be the 

22 same Finding you had worked on? 

23 A Yes, I recognized it once I saw a copy of it. 

24 And in fact this was found and reported to me like noon 

25 and Dave Doherty was going over to attend a meeting of 



llNetAS«D 



623 



autis^e 



58 



1 Gates' group pulling toget!-.er all of the facts, and I 

2 stopped him and made hm late f = r the meeting to make 

3 sure he had a copy of this and vould take it to that 

4 meeting. 

5 Q Now let me bacx up for a moment and go to the 

6 November 17 meeting that you had with Mr. Sporkin. You 

7 have already testified that you discussed the nunc pro 

8 tunc Finding at that meeting. 

9 A ^ Yes. 

10 Q And you also went over his -- you and the 

11 others there went over his calendar for January 1986; is 

12 that right? 

13 A Yes. 

14 Q Now was there any discussion that you can 

15 recall about his involvement in the subsequent Findings 

16 that ultimately resulted m what we now know to be the 

17 January 17 Finding? 

18 A There was some discussion. As a matter of 

19 fact, I did find withm the office a couple of documents 

20 on a different typewriter on two draft Findings of the 

21 2nd and 3rd of January. And I was not — in late 

22 December '85 I went on leave and then I had to take sick 

23 leave and I was out of the office virtually the entire 

24 month of January, and so it was surprising to me that 

25 there would be anything on my typewriter, but I was 



Uilt^fFtfB 



624 



M^\ 



59 



1 searching everyt.-.i.-g, ap.d I s'ur faced two drafts and they 

2 turned out to be drafts of Iran Fir.dmgs that were 

3 prepared by my staff ir. my abser.ee -- Dave Roseman, my 

4 deputy, and one of my subordinates, Gary Cole -- and we 

5 did indeed take these drafts down and discussed them with 

6 Stan. 

7 One of those drafts also had a cover sheet on 

8 it saying hand-carried by Stan Sporkin to Ollie North, I 

9 believe on 3 January. 

10 Q So by the time of your meeting with Mr. 

11 Sporkin on the 17th of November ^ou have already 

12 uncovered the January 2 and 3 versions; is that right? 

13 A Right. 

14 Q Was that the first you had heard of those? 

15 A Yes. I had not heard that there was a January 

16 17 Finding. 

17 Q Was there any discussion about a meeting that 

18 Mr. Sporkin had had with Colonel North and others in 

19 approximately mid-January to discuss the January 17 

20 Finding? 

21 A I recall that Stan mentioned there was a 

22 meeting. I guess Ollie was at the meeting. But it was a 

23 fairly significant meeting at which the Attorney General 

24 was present and Poindexter was present, and I'm not sure 

25 who else — Ollie, Stan. The Secretary of Defense was 



KlOflffl 



625 




1 not present, but they vere to float, to discuss the 

2 Finding. They were to float it at that meeting. 

3 Q Did you discuss his participation the meeting 

4 in which Richard Seccrd was present? 

5 A No . 

6 Q And that would be true of your November 17 

7 meeting? 

8 A If Secord had been present at that meeting, I 

9 didn't know it at the tine. There was no mention of 

10 that. 

11 Q Do you recall or have you discussed with any 

12 member of your staff their participation in any of these 

13 meetings in January that Mr. Sporkin was at? 

14 A Certainly it wasn't Dave Roseman or Gary Cole 

15 or myself. The only other possibility is if there were 

16 others in our office. Aside from Stan would be George 

17 Clarke or George Jamison. 

18 Q Let me -- 

19 A I do know that they were involved in much of 

20 the January work on the January 17 Finding. 

21 Q So either George Jamison or George Clarke? 

22 A Yes. 

23 Q Let me put the same question to you in a 

24 little different fashion. The testimony of Richard 

25 Secord is that sometiTie shortly before January 17 he went 



i[NetAS»n 



626 



* 



RV^iVwi 



61 



1 to a meeting, and I believe he places at the meeting 

2 Clair George and Stanley Sporkin and I think possibly^H 

3 J^^^H^ and he also places, m addition to Stan Sporkin, 

4 a person whom he believed to be a CIA lawyer from 

5 Sporkin's staff. Other than George Jamison or George 

6 Clarke, do you have any idea who that might be? 

7 A No. If I could amplify on that answer there, 

8 there is a unit in the Directorate of Operations^^B^B 

9 |Bi^^l^^l^^lHf^^° frequently between our 

10 office and DO components. And some of their personnel 

11 have legal experience, so that's another possibility. 

12 Q Who's in charge of that office? 

13 A Right now it's 

14 Q Do you recall who would have been the head of 

15 that division back in January 1986? 

16 MS. HUGHES: Off the record. 

17 _ (A discussion was held off the record.) 

18 BY MR. WOODCOCK: (Resuming) 

19 Q Do you recall who would have been the head of 
20. that office in January of 1986? 

21 A I believe it ^^^IH^HJHH Sometimes 

22 personnel from that office are mistaken for OGC 

23 personnel. 

24 Q Let me turn now, if I might, to what I think 

25 and what you probably hope will be the last area that we 



627 



\mmB 



62 



1 cover today. T^iere was a point, I gather, in the ongoing 

2 engagement with Mr. Ghcrbanif ar where Charles Allen found 

3 the need to see'< a'-thor i zat icr. f:r the tape recordings 

4 that he was making of Mr. Ghorbanif ar ; is that correct? 

5 A That is correct. 

6 Q And I gather that you yourself were not 

7 personally involved m giving him that authorization; is 

8 that right? 

9 A I don't believe I was. Z do know that Gary 

10 Cole, who worked for me, was. 

11 Q Could you tell us what you know of the request 

12 for authorization and the granting of authorization, as 

13 you know it from your standpoint as Mr. Cole's superior? 

14 A I believe that sometime, I believe in July of 

15 '86, Charlie came to our unit and talked to Gary Cole, 

16 and said that he had wanted to -- was contemplated or was 

17 involved in conversations regarding the release of the 

18 hostages on his office phone and he asked whether there 

19 was any problem, legal problem, m doing so. 

20 And he wanted to make a record of these 

21 conversations and record them so he could go back and 

22 verify exactly what was said. Cole advised him that such 

23 recordings would be legal under the relevant statutes, 

24 that they would be consensual, one party's consent being 

25 sufficient, but that there was an Agency regulation that 



mmmn 



628 



\j«lilP® 



63 



1 required that before any such recordings were made on 

2 Agency phones that approval v/ould have to be obtained 

3 from an appropriate I^eputy Director and it had to be done 

4 for legitimate operational or security purposes. 

5 So Gary suggested that Charlie obtain such 

6 approval and in fact drafted a request for such approval, 

7 which Charlie obtained. 

8 Q That is Gary Cole drafted the proposed 

9 approval? 

10 A Right -- the request, which embodied the 

11 approval and it was approved by the DDO at the time. 

12 Q Now that, I gather, did not extend to any 

13 phone calls that had been taped prior to that time; is 

14 that correct? 

15 A Well, I have looked at the form and it doesn't 

16 speak in terms of being purely prospective. That really 

17 doesn't have a time element m it, but I understand from 

18 Gary that his impression was that these were calls that 

19 . would be made in the future and he had no knowledge at 

20 the time the request was made of any prior telephone 

21 calls that had been recorded. 

22 Q Let me put the question a little differently. 

23 The Agency has a regulation that prohibits this kind of 

24 telephone taping without prior approval; is that correct? 

25 A Yes. 



umftssm 



629 




64 

1 Q Where t!-.3t tapir.g does occur without prior 

2 approval, is there not a mechanism for providing 

3 retroactive ratification m a sense for it? 

4 A Not really. The way we handled that 

5 regulation m the past is once it was discovered or once 

6 there had been such tapings going on, the thing to do was 

7 to get approval for any future tapings, and that has 

8 generally been considered the end of it. If in fact such 

9 approval was worth ccmmenti-r -n, there had been other 

10 tapings not involving .i where they were terminated 

11 because senior management did not wish to approve sich 

12 tapings. 

13 And I do know that this regulation is 

14 knowledgeable to sore people but to many people it's 

15 buried away in Agency regulations. The DDO is very 

16 familiar with it because they have occasion to make these 

17 sorts of recordings, whereas Charlie Allen was not really 

18 in the DDO. 

19 Q He's not an operational officer; is that 

20 right? 

21 A That's right. 

22 Q However, let me put a hypothetical to you and 

23 if you can field it go ahead. Let's assume that 

24 unauthorized taping has occurred. However, it has 

25 occurred in circumstances where the tapes have maintained 



IWJSSfl!!! 



630 



«#*.sstt® 



65 



1 a value, an intelligence value; therefore, it becomes 

2 important to gain some kind of legal standing for these 

3 unauthorized tapmgs. Isn't there a way to gain some 

4 kind of legal standing for them? 

5 A Do you rean scmethmg like a retroactive 

6 approval? 

7 Q Right. 

8 A Well, one would think, without researching the 

9 matter, that " ^ was rne case, but I know in researching 

10 Title III, the legis" ative history which specifically 

11 argues against retroactively val^idating a consensual 

12 recording -- 

13 Q This kind of recording is not a Title III 

14 problem, really, is it? 

15 A No, it's not. But there is a sense of 

16 retroactivity in that. 

17 Q The reason I asked this is that when I 

18 interviewed Gary Cole he suggested that there was some 

19 kind of a process whereby you notified the Intelligence 

20 Oversight Board. 

21 A Whenever there is -- if we violate anything, 

22 an Executive Order or procedures or regulations of this 

23 nature, and it is considered sufficiently serious we will 

24 notify the Intelligence Oversight Board via a regular 

25 report that the General Counsel makes to that particular 



631 



UHSW^W 



66 



1 Board. And, as a natter of fact, the extent of our 

2 obligation to that Beard goes beyond violations. 

3 Anything that raises questions. It's a much broader 

4 standard than the ere ve have with respect, for instance, 

5 to our oversight intelligence committees. 

6 So something like this we would normally 

7 advise the lOB about either in a report or orally, 

8 something like that, and with the admonition that we have 

9 looked into it and we have taken care of it. We either 

10 obtained proper approval so we can continue it or stopped 

11 it. That is our practice m tho^se kinds of cases. 

12 Q I see. Mow this is maybe a walk into real 

13 esoterica, but if you have a tape that has been made m 

14 this kind of a manner and yet it remains a valuable thing 

15 in your intelligence construct, what does it status 

16 become? Are you prohibited from using it or can you 
17 _ still use it, or how does that work? 

18 A Well, generally if this were a non-consensual 

19 problem and there was no consent and this was arguably a 

20 Fourth Amendment type problem, what we would do it 

21 basically constructively destroy it. We would impound it 

22 and we would not permit intelligence use to be made out 

23 of it. We would not physically destroy it because then 

24 questions might be raised as to why we destroyed it. 

25 So we would seal it, put it away, and if 



o we wouia seal it, put x 

\mmm 



632 






67 

1 anybody raised quest ir-s it vv-cjld always be there. But 

2 that is our general •.-.•ay to proceed. In this particular 

3 case I don't belie'.-e ve had any knowledge at that time 

4 that there had been prior recordings. 

5 Q Well, : think that concludes my questioning, 

6 unless you have any random thoughts you want to put down 

7 on the record. 

8 A I do ha'/e a couple. 

9 Q Why don't ycrj go ahead? 

10 A One IS that when I went through the meetings 

11 with Stan, when ve were getting all the facts, Dave 

12 Doherty asked me on the 20th of November -- and this is 

13 the day before Director Casey's testimony -- to go back 

14 and check one fact with Stan, and that had to do with 

15 whether there were missiles or arms on the first or 

16 original shipment. 

17 And I had mentioned to Dave that I had already 

18 gone over that with Stan and that was his opinion, but he 

19 nevertheless wanted me to do it one more time to make 

20 absolutely clear en that point. And the reason was, I 

21 think, in part because the testimony -- and I hadn't seen 

22 it personally -- that the draft testimony had said 

23 something to the effect that nobody knew about arms 

24 deliveries until January. And if we knew about them in 

25 November that wculr: be an incorrect statement. 



iwstfie 



633 



\iittSSiP 



68 



1 Now t.-.is IS a-, t.-.e ti-e -- well, I went back. 

2 I went back to Star, ar.d discussed tr.e niatter with him and 

3 he was very vehement m saying yes, it was arms and we 

4 can't be saying anything other than that. And you've got 

5 to go back and have hin change this thing. If you can't 

6 do it, tell me about it and I will call Casey up and it 

7 will be changed. It's get to be changed. 

8 And so I returned that evening, late that 

9 evening -- it was like 9: CO -- sefore the testimony the 

10 next day and mentioned this, brought this to the 

11 attention of Dave Doherty and he immediately called Casey 

12 and said Stan says this and he's absolutely clear on it, 

13 and so Casey said we've get to change it. 

14 And he advised Dave to get in touch with a guy 

15 named McCul lough. 

16 Q Jim McCullough? 

17^ A Right, and get that done. I think that is 

18 helpful in several respects. It shows that we were doing 

19 our best to make an accurate record. 

20 Q Under difficult circumstances. 

21 A Under difficult circumstances, and we had no 

22 problem doing so when it cane time to do it. 

23 Q I gather, then, that you would dispute the 

24 now-famous story that the correction was really made at 

25 the behest of the state Department. 



Hll»l.-t-.,'i5s^ «i.. 



634 



mMwm 



69 



1 A Well, : dor. 't know whether I would dispute 

2 that. I have no knowledge to dispute it, but there may 

3 have been another reason why it was changed or it might 

4 have been sixultarecus cr soirethmg like that. 

5 Q At any rate, from yo'jr perspective, 

6 irrespective of the in"olvement of the State Department, 

7 the CIA had already started the process, the means by 

8 which that statement was going to be corrected; is that 

9 right? 

10 A Right. And I recall in my conversation with 

11 Stan that the earlier draft Find^ing, that doesn't say 

12 missiles but it certainly talks about munitions, military 

13 equipment, that sort of thing, and that is sort of 

14 contemporaneous conf ir^iation of that. 

15 There was an idea, to be fair, we didn't have 

16 all the facts and there were a lot of rumors -- not 

17 rumors, but there was a lot of speculation, sort of 

18 suggested things, and I know that the Agency tried to 

19 just make assertions on that on which there was some firm 

20 foundation for speculating on a number of different 

21 things. 

22 Q Wait a minute. You're losing me in time here. 

23 Are we back in November of '85? 

24 A No. We're back m '86 when we're trying to 

25 reconstruct the record. And there is some evidence of 



pWSifffl 



635 



»RS»D 



70 



1 this and some evidence of that and try to limit. I know 

2 an effort was made to try to liTit that testimony to what 

3 we knew about. The probler', with that is that we knew 

4 very little. And if you limited it to what we had firm 

5 knowledge on, we weren't saying rr,uch about anything. 

6 Q Then you are liable to the charge that you are 

7 not revealing things. 

8 A Also, Casey was out of the country again. 

9 Basically the Gates group got together and then in 

10 frustration I think they cabled him and said come back 

11 early because we're having trouble getting this all 

12 together. 

13 Q Now who has really got the knowledge in 

14 advising, in the absence of Casey, what is happening or 

15 what has happened in this Iranian initiative? 

16 A Within the Agency? 

17 Q Right. 

18 A Well, the person probably with the most 

19 knowledge is Charlie Allen. 

20 Q And where is George Cave? Is he involved with 

21 this? 

22 A Well, he's around. 

23 Q Is he helping, though, to your knowledge in 

24 providing information on this? 

25 A As far as I know, but Charlie is the 



iiNEr' 



636 



1«SW 



71 



1 knowledgeable person, pl'js Zc'r.r. McMahcn, who is no longer 

2 around. He's out o- t^.e vest rsast, and there were 

3 efforts made to talk with hiTi long distance and 

4 eventually he did come back. 

5 Q Now do you know whether McMahon was ever 

6 questioned on the point of what this cargo was? 

7 A I seem to recall that he did not recall it as 

8 military equipment. I think he thought it was oil- 

9 drilling equipment. 

10 Q Now IS that m your discussions with him or is 

11 that through someone else? , 

12 A Well, I'\'e seen some documentation also. I 

13 mean, there is some indication that he would have thought 

14 a Finding necessary even if there had been oil-drilling 

15 equipment. 

16 One thing also I recall on the nature of that 
17^ first shipment, there are a number of different versions 

18 of what precisely went on and who approved what at what 

19 " time. I was involved m another aspect a little bit 

20 later and I helped the IG in getting their chrono 

21 together as to these events, and so I participated in 

22 trying to reconcile these various versions as to what 

23 went on that one weekend of that shipment. 

24 Q I see. So you assisted the IG, even following 

25 the delivery of Director Casey's testimony on the 21st of 



IKHSSfflffl 



637 



MkMSM 



72 



1 November? 

2 A Right. We had developed in house in our 

3 office, in OGC, a chronology which is very sparse, but it 

4 is what we knew at the time. The Director ordered the DO 

5 and IG and Charlie Allen and OGC to get together and come 

6 up with a complete chronology. 

7 Q Were you involved at all m getting the 

from ^^l^^^^^^^^l^l^^^^^^^^^las to 

9 what his involvement was in getting landing rights and so 

10 forth? 

11 A No, but I did see son^e contemporaneous cable 

12 traffic relating to that. 

13 Q That portion of the IG's investigation, I will 

14 tell you for your information and I will ask you to 

15 comment on this if it rings a bell, contains a reference 
fromH^^^^^^^^^^^^^^^^^^^^^BHTto the on 

17 _ November 23 he had a meeting with General Secord 

18 ^I^H^^I^^H ^"^ that General Secord advised hia both 

19 ■ of the purpose of the mission and of the contents of the 

20 airplane that was involved, which he said was HAWK 

21 missiles. 

to f^^^^^^^^^^^^m he 

23 information down in a cable and cabled it back, cabled it 

24 back to CIA. Do you recall coming across any information 

25 like thati 



ll!«SiaEi) 



638 






WiW^ 



fW^Rti,; 



73 



1 A No. But I do recall there is information that 

2 the pilot of the plan? described it as military equipment 

3 somewhere along the route, and you are probably aware of 

4 that. 

5 Q Right. That's a cable that was generated 
he was over ^^^^^^^^^^^^^H. Rhonda 

7 looking for the cable, I hope, 

8 A It seemed to me -- and I don't know if I saw 

9 documents but I heard from somebody along the way that 

10 the pilot had seen the cargo and that it was missiles. I 

11 guess that is when it was being loaded. 

12 Q Yes, but it had to be unloaded from a 747 and 

13 onto a 707. 

14 A Well, they had -- there was a U.S. flag 

15 carrier -- I mean an aircraft. 

16 Q U.S. -registered aircraft? 

17 A Right. And when he found out where he was 

18 going and what he was taking he figured that wasn't the 

19 most sensible thing to do, to be shot out of the sky 

20 regardless of the nature of the cargo. But then they 

21 transferred it onto a non-U. S . -registered aircraft. 

22 That's all I have. 

23 MR. WOODCOCK: Well, we appreciate your time 

24 and' patience and we will have an opportunity for you to 

25 take a look at the transcript and review it and make sure 

TV 






6 



639 






1 that It is accurate as you feel you have given your 

2 testimony. We appreciate your time. 

3 THE w:r;:H:35: Tha-k you. 

4 (Whereupon, at 4:25 p.m., the taking of the 

5 instant deposition ceased.) 



7 Signature of the Witness 

8 Subscribed and Sworn to before me this day of 

9 , 1987. 

10 



11 Notary Public 

12 My Commission Expires: 



640 



CERTIFICATE OF REPORTER 



RayiTond R. Heer III 



, Che officer aefora whom ;he 



jragOLP. g ieo = 5i:L0a was :a-<an, do lereoy carcirv ;• 
'-lose :esciao-iv aooears in Che foreg.omg deposicion 
V ^'^ jchacchecesciaonvo: 



; n e s 5 ■- a i 



caken bv ae co cna besc of 31 y abilicy and chereafcer red 
under ly direccion; chac said deposicion is a crue racor 
given by said vicness; chac I an neicher counsel for, ra 
enployed by any of cha parries co Che action in which ch 
was caken, and furcher chat I am noc a relative or esplo 
accorney or counsel employed by che parties chereto, nor 
or otherwise intaresced in che ouccome of tha action. 



^ c e d CO c V p e w r i ; 1 -. g 



•. e tascicion- 



: a c : , -. : 



deoositio! 



2 



r.., ...^A k - 4e^\mz 



TAR? ?U3Li: 



DISTPICT OF COLl^BIA 



Commission axoires; f^Y 31, 1989 



iSli,SS!Fe 



641 



ONbliK^fity . 






Z5 J.'overter 



KE^iCRANDUK FOR: Vice Admral John K. Poiniexter, USN 
Deputy Assistant to the President 
for National Security Affairs 



Presidential Finding on Kiddle East 



Pursuant to our conversation this should go to 
the President for his signature and should not be 
passed around in any hands below our level. 



Attachment: 
As stated 




iode5iB«tf« .M. 12355 



CL BY 00CS074 
RVW OADR 




CrrAj 



mrnm^^ 




«42 



UNCLASSIFIED 



'^rsuant to S< 



Aoe.ncv m 



Underta ken bv :.-.e CentrT T 
' e X 3 n Countr 
"'snci ej Sole 



on £62 of the roreio -i 
s A.-anc:ea, ConcgrnT^ 



nteU_i^enc« 
han Those 




Hostage Rescue 
Middle East 



DESCRIPTION 

The provision of assistance by the 
Central Intelligence Agency to 

oh^T^^.?^'^'f= ^" ^^ = i^ attempt to 
obtain the release of Americans 
held hostage in the Middle East. 
Such assistance is to include the 
provision of transportation, 
cotTjTiunications, 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 
-.acilitate the release of the 
American hostages. 

All prior actions taken by U.S. 
Government officials in furtherance 
of this effort are hereby ratified. 



Tha White House 
^'ashingtcn, D.C. 

Date: 






mmm 



dJrjTA/ 




a^9 b 



tR TS0188 85 
CY of CYj 



643 



UNCUSSIFIED 



In the Matter 


of the Oral 


Deposition of 




Don Marostica 





SENATE SELECT COMMITTEE 
ON SECRET MILITARY ASSISTANCE 

2 TO IRAN AND THE NICARAGUAN OPPOSITION 

3 
4 
5 
6 
7 

3 Waahington, O.C. 
9 Nadneaday, May 20, 1987 
10 

11 ORAL DEPOSITION OF 

12 DOM MAROSTICA 

13 was called for exaaination by the Associate Counsel for 

14 the Senate Select Coaaittea on Military Assistance to 

15 Iran and tha Hlcaraguan Opposition, pursuant to 
1€ afreeaent, in rooa 901, Hart Senata Office Building. 

17 Washington, D.C.. coaaancing at 2:15 p-a, whan ware 

I 
13 present: 



V/^^ 



Piiliany Dwlt8sifi«d/Rel«M«d on h^l -^^ 
22 under provisions of LO. 12356 

by N. Menan. NationaJ Security CouncS 

234-4433 NEAL B. GROSS f. CO., INC. 232-6600 
1323 RHODE ISLAND AVE., N.W. WASHINOTON, D.C. 20005 



UNCLASSIRED--^^-^ 



— - C 0P1£S 



644 



s I 
I 

7 '{' 



ALSO PHESeST: 
17 Ij SENATOH PA'.T 
19 
13 
20 
21 
22 



UNCLASSIFIED 



■ct Counitt( 



o- ;;£.c.i-ct Military 
1.1 t h . Nicaraguaii 



^IgcI Coirmitt'^e: 



;: . •- o ". : ne to Invest igatr> 

Cove ■.'.".• --lioim with Iran 

r:.r,;,o., V- or. . •- Pnildiiig 

V:r-l;ir^^ !> . C . 

Or. bth-. ■ ' 1 It.-, r. i.oncnt: 

C. nor • -, ..- ciii: .;■:■, Esq. 

C. Gcr z~ cl:i;iM-.i i Associate 



V.n. ;, .■ , - ■ . 

So. rr.. , .• r:.,i1 .A' 1. 

Steiliii,-, CO 80751 



?j,1-i: ■- AL n. (iROSS & CO., INC. 232-6600 

13.':^ PI.- -IND .VE:., N.W. WASHINGTON, D.C. 20005 



yNOIiSSlFIED 



645 



ONCUSSIHED 



C ON _T _K .. V T S 

K XAMINAT TON 
VOt;? dire DIRFCT CROSS 



'AR";t-.;> 52 6 

53 



EXHI HITS 

ji ■. '^ FOR IDENTTFICATIOV 

I; ' ''AA r.cj hcjnJwriLten notes) 12 

I 

I (i;-,.-,. -ei,.o) 31 

II 

',i CC:..-Ii.t Gaissc Dubit device) 32 



(St r'lc ■ are diag) - 36 

(MuU i-colorea brochure) 37 



Hi 

I b-A (AA Iro Bus. Plrty) 38 

J-^ 1 •---? (AAI lU II w/App A-D) 38 

|i e-r (AM i;k ill w/e-g) 38 

^"^ i b-a KPhoto in App 6B ) 41 

^ - ll - (File •.v/nult pa-'O 44 

1 '-.. ("Coli'.c of doc) 48 

i- li -A l(App] foi- exp RM Equip Inc) 48 

}■ "-r, (handwritten notes on Quad Mount) 84 

-^ |l y ■•: (note oi. back of phone note) 93 

'1 ;. J {File v./:nult p«s ) 44 



23^-1-i<3 NEa; !(. GROSS L CO., INC. 232-6600 
!3 I.:.; [SLAND AVK., N.K. W A.';HINGTON . D.C. 20005 



UHCUSSiFlEO 



646 



2 


NUMBER 


3 


9 (Holding Co. file) 




9-A (Sec of holding co. 


1 


9-A-l(Ltr) 




9-A-2(D)agrara org cht) 


^ 


9-A-3(Diagram) 




9-A-4(nandwrittcn notes) 


6 


9-A-5(notes. 7-29-86) 




9-A-6(notes, 7-30-86) 


7 


9-A-7(notes, 7-31-86) 




9-A-8(notes, 8-5-86) 



UNCUSSIFIED 



EXHIBITS (Continued) 

FOT( IlirNTlFICATIOM 



70 
71 
73 

9-A-9(notes, 8-10-86) 74 

9-A-10(notes, 8-12-86) 7G 

9-A-ll(notes on conversation re sig cards) 77 

9-A- 12( " " " .. » „ J 77 

9-A-13(Dotes, 8-23-86) 78 

9-A-13-A(Ltr. 9-4-86) 80 

9-A-14(Waiver Si Tera Agmt ) 81 

9-A-14-A(I,tr, 9-10-86) 82 

9-A-15(Fed Ex trana slip) 83 

9-B (Fin Rec/Ptship) 86 

9-B-l(Handwritten notes DM/PT THI-AA) 86 

9-B-2(cy» 2 $30,000 chks.AAI fc Elec Met) 87 

9-B-3(cy chk $25,000 9-16-86) 90 

9-B-4(cy stop py»t req) 96 

9-C (Tri AA file) 97 

9-D (Section of Tri AA file) 97 

9-D-l(Ltr, 12-29-86) 97 

9-B-(file, actf out docu) 99 

9-B-l(h«ndwritten actg out doc) 99 

10 ($200,000 Albin Val Suisse) 91 

11 (phona not*) 94 

12 "(Tri Red Cadar Assoc file) 106 

13 (CERBTECH Int. file) 107 



234-4433 NBAL R. GROSS & CO., INC. 232-6600 
1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005 



ONCLASSIFIED 



647 



UNCLASSIFIED 



OJiJ.illi;^ (Cont inii-^d) 

2 NUMBEB K OR I l;r\7I F IC A T 1 0' 

3 14 (Eio-FiiT? file) 110 

4 15 (I.tr) 124 

5 16 (Memo rR m '; g 1-12-07) 125 

6 , 17 (handwritten chron) 138 
7 



9 

10 
11 
12 
13 
14 
15 
16 
17 
13 
19 
20 
21 
22 



234-4433 NEAL H. GROSS t, CO., INC. 232-6600 
1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005 



OMWSSiFIED 



648 



UNCLASSIHED 



PnOC!:' PTNG 

{2:ir. p. II 
Whereupon , 

DOK :-AHOSTICA 
was called as a witness i-nd, having fir<5t been duly 
sworn, was examined and to-stified ar followr>: 
DIRECT l-.XAMTHATICV 
DY MR. HOLMES: 
Would you please slite your :nme? 
A Yes, Don Matoatica. 

Q Mr. Marostica, this is a (deposition taken on 
behalf of the U. S. Senate i-elect C..uii..ittee and the House 
Select Coniaitte with regard to th4' Iranian Nicaraffuari 
Covert Aras dealinj- And wc are particularly inquiring 
about General Richard Secord and Albert Hakitn. 

Ar« you faailiar with either of those 
individuals? 

A Yes, I aa faniliur with both of those 
individuals. 

Q I wonder if you could tell ne as a background 



22 matter what your general business is. the place ii 



which 



234-4133 NKAL R. GROTS L CO., I.N'C. 232-C600 
1323 RHODE ISLAND AVE., N' . W . WASHINOTON, D.C. 20005 



UNCLASSIFIED 



649 



UNCLASSIRED 



7 

you hii.TsfTe in that Iiusme^s? 

V,.-,, I h.ivc- -- wi-tii- two halt., I r.nt a st-curities- 
invc . '>-i:.f;nt !,:o;.:t, j ndei'ciideii l contractor with Inlograted 
Re'_o>.;ces Kquily Corporation out of Npv; York. Any ray 
othiii hrtt is a i.rivatc .'nveator .ind entrepreneur, located 
in Stc-rlinfi, Colorado. 
I Q Is that whero you Bukc your residence? 

I A Yes. I live in Sterling, Colorado. 

Q How did you meet Hichord Secord, for the first 
t ime? 

/. I »,ai. introduced to Richard Secord by way of 
Lar: y Royar, on apprcx ia::tely -- the end of April 19S6. 
Larry Royer was a business partner i:i another venture 
that I was involved with in Sterling, Colorado, a 
commtrcial fiali food nanuf actur ing business. 

Q And it was somctiae after that that you were 
contRcted by an investigator froa the House, a 
Mr. ncastein? 

A Yes, Mr. Remstcin contacted ae about two weeks 

ago. - 

And you indicated at that tiae that you would 
be willing to appear here without subpoena, is that 

2:j4-4433 NHAL B. GROSS S. CO., INC. 232-6600 
1323 RHODE ISLAND AVI-.. N.W. WASHINGTON, D.C. 20005 



UHClASSiFIED 



650 



UNCIASSIRED 



correct? 

A Yen, I am apjiooiirg voluntoiily ami 
vo 1 un t eer iiic al) the records llu-it I liavo. 

The records thjit wc have nrf the sum total of 
the records -- 

A Yes, there are no other records, besides what 
we have here today. 

Q That is any records with regard to either 
Sccord or Hakim? 

A Yes, all records rrfnrding Secord and Hnkin arc 
here. 

Q Whet wa« the busii.ess that ycu had with 
Mr. I.arry Koyer? 

A Originally, Lorry Royer was a partner, about a 
6 percent stockholder in a coapony in Sterling, that 
I aanufactured coaaercial fiah food products from local 
grain products. 

Q What was the naae of that business? 



19 A First Aaerican Sterling Mills. 



^ And your role in the business? 

A Chairaan of the Board, and I owned 
approxiaately 12 percent of the stock in that business. 



234-4433 NEAL B. CROSS & CO., INC. 232-6600 
1323 RHODE ISLAND AVE., N.W. WASHINGTON, D.C. 20005 



UNCLASSIFIED 



651 



UNCLASSIFIED 



9 

1 I And what was tl-.c period of lime that you were 

2 involvcrl vlh l..:i-y Roj-r m th:il husinc 

^ ! A Well, l.arry Rcyer stiU is on the board of 
'1 ' dircTlors of that busincHS. First American Sterling 

Hills ID a Col CM- a do corporation. 
^ And you are no longer associatod with it' 

7 A Well, I am still associated with the 



corporation, we have sold most of our cquipDcnt. The 



9 j corporation is still in place, but we have sold the 

10 I equipment to another concern in Colorado, and they are 

11 going on with the- canuf ar tur ing process. 

12 I G When '.liey sold the equipment, does thai mean 

13 that they distributed the nssets of the corporation? 



14 



All of the assets of tlie corporation wer 



15 distributed and the loans paid back to the Sterling Urban 

16 Renewal Authority, and that sort of thing. 

17 Q So, the fish food business is 
13 I A Is no longer in existence, right. 
19 I When did it cease its operation'? 



20 



Approximately, March -- I ' ■ sorry, August of 



21 1986. 

22 How was it that you came to first meet Richard 



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A I'll' ? I ^ - . 1. 'r.iiit '-' • Deinr t ivfp t received a 
pacl.-jge f 1 u' Mr,.--. -. f:.:.-. - Hill Cioff, Senior and 

Juiiio:, w.) 'J lo.)i„. to ^locate tlieir manuf oc tur i ng 
plant to Colors'' . And i.:.: li t a L e Commerce Department 
sent the bi-iincT:; '.■.•,clciii',( to our local Chamber of 
Coii'uiorce and Ihe I'C I .huaj'x.:' contacted uie, and asked ne 
to look at tlie pn-voi.,!, sc: if there was a way that we 
could brir.s that r - nuf ,-;c ' ■. ;■ inj plant to Sterling, 
Color Jido . 

So, I I'.okeJ it ovo;-, went back to Salt Lake, 
visitfd will. the Gorfs, a.-.d hroufiht back all of their 
business pl.i.a und ;> i c '. iirei. , jnd nonie of their contacts 
they had -- arms riealers thioughout the West. And aet 
Larry Hoyer the ne':t day, he was in town doing business 
with the First Ami r -i :.;i Sterli-ij ^fills. And I showed hia 
the package, and Larry Royer '; i i d that he had a friend 
that would be v*ry i.retestfcd in it. 

Q And whe.i wdr this'.' 

A That wa-. prchablv -round the first week of 
Apri 1 , or so . 

Q Of \0H6- 



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A Of 1986, correct. 

And he nancd his friend to you a;; Richard 
Secord? 

A No, I didn't know wlio the friend — he didn't 
give me a naroc at that tine. Then approximately the 
third week in April, on a Tuesday or Wednesday, Larry 
called ne and said that he was in Salt Lake with a 
fiichard Secord, wanted to meet roe at the airport, at the 
C)arion, in Denver, to discuss the American arms 
proposal . 

And I net the« then that day at 7:00 o'clock in 
the morning. 

Q Who was present at that ueeting? 

A Larry Royer, Richard Secord and myself. 

And that was In Denver? 

A That waa in Denver. 

Q Did you bring with you the documents that you 
had obtalnnd froa the Goffs? 

A I had ay file that day, I don't know what 
exactly was in it at that tiae, I think probably business 
plans, soae brochures and that type of thing, was brought 
to that aecting, yes. 



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12 

Q Ho yv 'r--\'-- :I'm u • •. h<»rc- wi Ui you today 

llia L 1 e i' I r-i 1- I. 'i ( c li :. . . ■. » '. ■. - . t ncc' t. i iiC 

A The.-' 1.5 ,,i,ic ■ I 1..31 i.-a-. brought to the 

nioetiiig and i- i jt: ;.-..t ; r.:, outline to discuss 

5 I A in e I I r □ 1 

C MR. l:r;.MrS: : :, goi,-: Ij mark in red on these 

7 I docuwrriits SO t'lcil lh>- ■• '. w,ll i.iuicata whether or not 
3 1 thot is the ori„iiijl. i' T i... .^-iT.o- to hand you what is 

9 j marl<ed c.nd ask ycu if : > i "-n i>';.--i : : f y that dociment' 

10 I THE Kr-ViSr.. 'r;i:sir.^ ■.'r-cuwent) Yes, this is 

11 1 the uociTT:.- r.t tl-'. Wci :. [- ;t;h» ' '. (.l.e ner,tini{, either by 

12 ; Larry Koyrr, tr !.ich.-.r; '. 'iford, . '. we used this as our 

13 I basis for discu'sion 1 ■. (-i.-.t -■■''. .rc- 

^^ I (Who .- f.i:ri'. II , the document was 

15 marV'.-l Tor identification as 

16 I :;;.:hj;.;r -io. 1) 
1'' BY MR. liOLY'c.S: 

13 I Q And this wa; .i r'-ctiii'' in a motel room? 

15 A No, it w.->s i. t ne C 1 a ••■ . o . -- we have a Clarion 

^'^ suite" for buain-jss loct- ■n.--:., thpif at the Clarion Hotel. 

21 How IcriU di ' Mm ii.eetip.; • r ke? 

22 A We wfi'> ill !i>-re most of the morning, I think 



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15 

le II 

17 






11 
ij 

i' 



13 
llKit larry and Dick -- Hichatd Secord had a flight out 
r.nht after lunch, so we were in that meeting the entire 
tinip, from 7:00 o'clock. 

Q And was this document No. 1 the primary source 
of discussicn there at that meeting'' 

A Well, primarily we discussed nanuf actur ing 
''.,000 rcceivc-i as collector's items, we spent a lot of 
time on tliat, to break that down and the profitability. 
Acti::^lly, it was in two phases, that was phase one, to 
get IhK receivers manufactured prior to the signing by 
the President, that no longer allowed tha sale of 
a'.'.toir.at i c firearms to private citizens. So, we were 
tiyxiig to beat a deadline, so we probably talked about 
thijt phase one, being the government deadline at that 
meet ing . 

Q Now, this document No. 1 is a handwritten 
document, titled American Arms Project, is that correct? 

A That's correct. 

9 And I don't believe that you answered me 
directly when I asked if this was the document that 
scr^/cd as the discussion basis for that meeting? 

A Yes, that is the document for the basis of that 



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discussion that morning. 

And the numb<?rr; that you havo just mentioned lu 
us, the 4,000 arms before a govcnii.icnt deadline, is 
referred to ir this document unilcr I'hase One on page 1? 

A That's correct, on paRc 1. 

Q And the document goes on to delineate a per 

unit price -- 

A Of $1800 for 4.000 units. 

Q Of $1800 for 4,000 units, and that is the 

selling price, is that correct? 

A Correo';. 

For total gross income of $7.2 million? 

A That's correct. 

Q The document goes on to refer to a cost per 
unit of $250 t i oea 4,000 units, for a total cost of $1 
■ ill ion? 

A That's correct. 

Wa« the figure of a million dollars discussed 
as to where it was to come from'' 

-A Basically, I understood at that nceting that it 
was going to co«e from Richard Secord himself. 

Q Did you understand that from Mr. Secord? 



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15 

A V 3 , Ihe jn'cnl ot tn.it mpotiniJ -- I kii.rh- thnl 

2 it. \-asii'l ,. irij.' !u • ..,i. e froi; l..iri> "o:>m-, r.o th.-.t it was 

BOins tu r • ii y nf.r.s;; ., f I! i c K -? . d ?,-.<:ord, yes. 
"^ 'it las til fiifurc ; 1 million the determinant 

5 o( how ni2i'i V i.iiits ivc" r: goinj to be inacJe? 

A Ye.'. In otl.er wnrdr. if I he cost per unit wns 

7 $200, a tloru.^d ti/i.o^, that l.iV^O is $1 million figure. 

Q V' ; t I .iTi: getting at, you were reasoning 

9 bccl.i.ard f : >:.. the availability -)f Jl Billion, instead of 

13 forwards f t r.m tlio desirability of hnvinf, the 4, TOO — 

11 A Ex.tctly. In other w.-rds, w l- nerjcied $i million 

12 in order to product- '1,000 copiileted unite. 

13 Q You had a laillion, so tliit is v/hat you were 



14 



goi ng to 



15 A That's correct 

^* Th^ docuB:e;.t on pace one continues to show a 

1^ >argin of $6.2 Billion, that would have been the sargin 

13 of profit' 

19 A Thut's correct. 

^" Q Ar i then therj; i r n reference to paybnck, 

21 $200,000 ani that nuul.er is subtracted <"rom $6.2 Billion 

22 to get tb nil! ion, coirect? 



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wmsim 



)G 
V1.-3, tli.-il- is correct, that is what the document 
■lop't i-'-.-,ll thu- JLOO.OOO iciyback, what that is 

Q A]! right. Then there is a notation of 30 

-::t I 'J American Arms -- 

\ ui.Thl, oi that -- 

C -- ami the calculation as $1.8 aillion? 

A That's correct, that would be the 30 percent of 



' i; 


'■^■ 






iO i' 




Q 


And this figure to the left of $4.2 million. 


-!■ 


t. ,t 


] 3 


M,e remainder of the piocc.^s of subtracting $1.8 


"1; 


r,,:^. 


ion 


from th. $fi million? 


13 ; 




A 


That's correct. 




Q 


And the notation above the $4.2 Billion figure 


15 I 


\z D 


on. 


Fiohard, Larry? 


16 1 

1, 




A 


That's split — 


n 







That is you, Richard Secord and Larry Boyer? 


13 




A 


That's correct. 


'U 







ri^ferrJnu now to page 2 of Exhibit No. 1, thet e 



20!; i-. annotation "Dick, Capital"? 

21 || A Wl'at we ere doing there, you will see above it 

22 I sj.s "a-;s Kiiments", ;ind the partnership -- we have broken 

I; 2''-| ■.'.■.1 NF.AT. R. GKOSS fc CO., INC. 232-6600 

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17 
the partnership down lo c\erybody'r. ns s i gnri.-n t . My 

2 ass i nnrnpnl was to ncgotiutc oiicl slnrt into proccifs Pht 

3 One and Two of manufacturing the collectors firearms and 
also moving American Arms to Colorado. 

5 It has "Dick", whicii refers to Richard Secord 

6 I as furnishing the capital for this venture, and Larry 

7 needed to get the extra 2,000 receivers nade before th 
3 deadline. Thorc was a rush for hia to find manufacturing 

9 plents to got that finished. 

10 The balance of p3j(e 2 refers to the second 

11 phase of the operation, is that correct' 

12 A Correct . 

13 g And that is the topic of particular interest ti 

14 you, in that it involved aoving the site to Northeastern 

15 Colorado, where you were enfeKed in industrial 
1€ development? 
17 A Correct. 
13 Q The last page of Exhibit No. 1 refers t( 

19 projection of sales, first year, correct 

20 I A Correct. 

21 It says "No domestic sales predicted", and on 

22 the next line "1,000 to 1500 Saudi ind Gulf State", and 



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18 
'4,000 Contra". f:V nuestnn is wl.'si- was l!ie first time 

2 ycu dio(u:;scil i „ ] c r to t;.t 

3 A Well, bar.icclly o t t h .. I cjetine "" we didn't 
spend very much t ivie on tlii:; phase .-nd projections, but I 

5 see it on the ;;rapli at thuL meeting And they basicall/ 

6 -- the notes here, that wasi goinU to be the efforts cf 

Stanford Technology, was to begin to sell the M-180 units 

o I 

° off-shore, rather than in tiie Unilsd States. 

9 I was p'-.ra.Tril" concerned ivith tl-.e collectors 

i t ems . 

11 Q The M-J!-:0 — 

12 A Thi-.t is the basically, patentfd firca.n., 

13 correct. 

14 And the collector iteu is distinguished from 

15 that by gold or -- 
A Yes, sjurcinl woods, inlnids, that kind of 



10 



16 



17 thing. 

13 Q So it was discussed there that Stanford 

19 Technology was going to liar.dle the off-shore sale of the 
prodxrction line model? 

21 A Yfs, we didn't talk about that at that time, 

22 the off-shore, thct came at a later meelinff, when thf-y 



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19 
talked about itanuf.; clurinj: '^ ■' )' shoii-. Wiiat they were 

tall, inc alio,!l was : I'lnt ■■•,■ tlif co rj. <.ra t i on orf-sliorc, 
tax advontav,'S i" <-'":i.C tbaL. Having them manufacturn 

them in the I' . S . , hul (ho .- oi i .■ . . t i or. off-shore. 

Noiv, thei'.^ IS a rlo^^' ion on this last pa(je that 

says, "Don, Larry, I'lrli and A ^bcrt". 

A n)Ght. 

Q I f^.ither tluil tlir.t ; , ou, Roycr, Secord, and 
who is A Iber t '^ 

A Well, it L-.u: ( be r'.ll.irt li.iliii, but he wos ne"cr 
brought up >n thf fust mceLiiii. Wf; dicin't get this far 
in talking r.bout thf .nffprtT.! !-. us ine^ ses . I didij't know 
! that Albert was even invclvcd, ii n t i 1 a later -neeting. 

Did you disruss dtt.^^^;in(^ the Philippines'' It 
says "attack Phil i ppi.'ies" . 

A Well, I Hiscussi^d with Larry, before this -- 
Larry was saying thai he had a narkat for farn equipnent 
and in our area there were .n nci.iber of rquipneiit dpolers 
goinf oat of business .ind you could purchase John Deere 
fam 'equipment, in ?oiBe :;;• i-s 30 cenLs on the dollar. 
And I had nentioned t!iat to Lurry before. 

But we didn't liUk ctw)ut that at this first 



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20 

1 meeting. In fact, this was tin' only Im-.c -- this w&s 

2 never brought up again, ui.mr I ' i- fnii'. i v,u i itich 1 . Ari 

3 they wanted to complete the pic- . ^, but I d^r.'t know what 
<! "attack Philippines" is, what tiity irn talking about. 

Philippine market? 

5 A The Philippine market for the equipment, 

7 exactly. Richard nusl have hcd a contact for that, we 

didn't talk abo^ ^ i. tVat fi.ct me':tiin.'. 

9 Q So tho refer..) . r- to lii.; John Dr-et-e o^uipnient 

^0 and attacking the Philippx lea was sor.ielhiiig tlKit had 

11 previously been discusifd on th». tclephot't, or -- 

12 A Well, Lorry sr.d I haJ irtlKr^J rtbout contacts 

13 that Larry had hinself, spJlinif John Ppare equipment 

14 outside the U.S. 

15 1 see, very well. 

16 MR. TRIBBLE: Counsel, may I ask a question 

17 re£ardiii£ that docuaeot? 

13 MR. HOLMES: Would you lihc to -- 

19 MR. TRIBBLE: Vcs , pl-ase. Do you know who 

20 prepared Docuaent A, or Documenl J,o. 1? 

21 THE WITNESS: No, th.il was brought to our 

22 neeting. 



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MR. TfillibLE: A n<j that »a-. brought by whom' 

2 THE KITMl:S: J iim not sure who hrouL'hl that (n 
the meeting, I think that F.nrry brought tht document in, 
bt.-c«use Dick was on the telephone -- it wa«i a little late 
and It seems like I was reviewing tliat, before Richard 

^ cnme iiitt, the meeting. 

7 MR. THIBDLE; But this is the working papc 

3 "sed by Secord, Royer and yourself, during the course of 

9 that first meeting' 

10 THE WITNESS: That's correct. 

11 MR. TKIEBLE: And each of you referred to this 

12 docuncnt, and it was on the basis of this docuuent that 
13 



14 



THE WITNESS: We were sitting around the coffet 



15 table, and that was in the Middle of the table and w« 



16 



17 



;re going down through those phases and dif^cussing thaf 



docunen t . 

13 MR. THinRLE: You indicated that you understood 

19 the $1 Billion would come froM Secord. Was that 
^ I understunding based on a conversation that you had with 

21 I record and Royer that day' 

22 THK WITNESS: Really, thnt day, end also 



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1] rreviou', to tliat, when Larry called me a couple days 
lu-forr MiiJ biiiu that his ■friend would be able to furnish 
the million dollars for thic American Arras project. 

MR. TRTBIILE: And that earlirr conver3ation wna 
confirci^d by your substqucnt conversations at this 
I'icetinc with Mr. Secord? 

THE WITNESS: Sure, because you can see on th«t 
document, Senator, that in order to produce those units, 
1 you hcd to have that much money. 

I MR. TRTBBLE: The starting nssurcption, as 

rounscl pointed out, was the million dollnrs in hand? 
THE WITNESS: That's correct. 
MR. TSIBLIE: For this enterprise? 
THE WITNESS: That's correct. 

MR. TRIBBLE: And Dick's contribution to thi.-i 
enterprise, afain, as underscored by the notation on page 
2 of this Exhibit 1, which says "capital"? 

THE WITNESS: Yes, under the assignments there 
it saya "Dick-Capital". 

MR. TRIBBLE: Now, tell me what kind of arras 
nte conteuiplatod by this enterprise. What kind of guns 
',\ arc wc talking about? 

f 

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TlIK WIfNrSS: V,v-ll, bac),.ally, Ihe first r.OOO 
unit;. wrre i.<.'ni; t., l,t. all -■ ,> I I ec I i ■ •. itfn-:, v,;,ich 
consisted of soii i -sut or '. > c ajid an f cuin t i r firean;.;-. And 
they y.-crc goii.rf to ;- rr.llc:t,..- items b;ised upon the 
bill that was fioing to b? 3J£rn?( by Piesidnnt Reagan. 

MR. TPIBBLK: Now. thnt bill would mi-.Ur. it 
illegal to pos-iess these items in the Uiiit'd States' 

THE WITNESS; Well, no, it woulcn't be illej^al 
to porsess thee, but you couldn't m-muf ac t ui c anyr^->r'.- for 
private citizens use, \i. the way j \inderi loocI that. 
(Discussion off the rtco-J) 
MR. TntRBLE: Back on the record. 
BY MR. HOLMES: 
Q So, these are, again, automatic and 
se»i-auto«at ic firearms. To what purpose wert th-ise 
firearms put? 

A Would you ask that question another way? 
Yes, what is the use c " these fiitarnis? 
A Well, basically an au t o.-:.it ic --- 

G I moon, the;-.e don't look li!;-,' Ihe kinu of 

firearms that one sees in their l.ixt. 

Q Basically, the units that had been sold prior 



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to that, a lot of them were collectors iteirs, gun drolors 
in the U.S. wore selliiiij them Lc. indi vi clu j Is who h.id a 
license to ov;n an automatic, and they had been sold 
numerous -- 10,000 units had been sold to police 
departments in the United States, prisons. They ha.i been 
manufacturing these for many years. 

MR. HOLMES: Off the record. 

(Discussion off the record) 

BY MR. HOLMES: 
iO Q Okay, after this meeting of April 1986, did you 

11 have further contact with Mr. Hakim at anytime? 

12 AT originally met Albert Uakia in Virj^inia, and 

13 that was in June of 1986. We net at the Shtralon Inn at 

14 Tysons Corner, with Richard Secord, Albert )lakiin, Larry 

15 Royer. That was an evening neeting, I flew in late in 

16 I the afternooD, left every early the next morning. 

17 Q What day waa that In June? 
13 A June 23rd. 

19 Q And at that meeting did you discuss the 

20 progress of the Tri-A»erican — 

21 A Well, at that meeting I was introdurod to 

22 Albert Hak ■<• , and what Albert asked me to do -- Ihcy 



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broueht in ;< b Incl.lj..., i il inli 11,. mum uc,:l <.s;:.:d ne 1 " 
explnir tin l.u. ^ ncss c :. thfit j '.mx-', ;- r c-^ •. n I eiJ ic. inn-,' 
Hoyor and RicharJ S.i;. ic!. 

So, we storied w i t li the American Arr:s, tlicn 
moved into CKI.'JiTECH Interne t icn-j 1 ami the Senttle Woo: 
Project, r.nd we also talked about the pharaiaceut ic:. i 
thine- 

So hy this time thero weie several deal:;? 

A There wers a nuirbcr of prf sentat j ons end 
business plans that I reviewed. I had actually reviewed 
numerous more plans, and I was tlnowin? r.ioot of I licm cut 
because they didi.'t sopn like i:o'>'; busil.^■^,s pl2;i-, ^jnd .. r 
got down to these foui . 

Q And at whose requesi had you revirrwed other 
business plans? 

A Larry Royer said to ne that throuj^h their 
investors, and contacts that they had crounU the world, 
that they would be interested in loo^infi nt other 
AaericaD ventures. 

(T KLo is the "Ihey" that he was rrferrinj: to? 

A He was telkinj; about Europi:^!. invcstorj and 
Middle Eastern investcis. 



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|: 

'i 26 

Q When you say "through tlieir invEstois", was it 
Pcyr r or -- 
- ' A No, I don't think it was Roycr's investors, I 

:, tl'.juk Iir was talking about Richard Secord's investors. 
Anc' I h( n at t Ii i K June 23rd meetinc, I realized that maybe 
' I Alleit i:akim was also part of his investors, but I didn't 
T I kno..' hiDi before that time. 

^ jl Q I see. And by that time you had culled out 
•' ,: varicj? business opportunities? 
^ '' i! A That ' s correct . 

1' , Q What business opportunities had you examined, 
1? |, but diJ net survive your scrunity? 
1-' A Wcl\ , there were a number of business 



|. enteiprises that the Chamber of Coniierce was presenting, 
if I remember, there was a camper manufacturing 
business. We looked at a company that makes trash 
containers, I just don't recall some of the ether ones, 
but there were numerous -- our Chaaber was receiving 
every day people nut there with some low interes'^ money 
were sending thest- -.rojects to our Chamber. 

Just as matter of background on the state of 
your Chamber of Con-^irrce at that time, I gather that 



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tlir-ro W.13 low it.t'^rer.L loTi. money i ii Nor t !.r:;i<; t er-.i 

2 I Col (.1 n flu at t li. I I iinj-' 

3 I A Yes, I.'or (. li:.asi i. prn Ccilorndo uai, in h very 
deprr.ssed elate in 1984-83, and the stnlo had 

5 I appi<>i>rialed certuin anounts of mori'. f-?^ to brinfe' in 

G inJuyt-iidl and manufacturing lo put individuals to work. 

7 1 And t)iey Knew that I was inle-rested in indll^tria] 

3 I development, and were forwarding all of thosi' state 

9 I p" tltiiRca to niysclf. 

10 I Q So there wns low intert?3t nuncy availTble by 

11 I jfnvtnnent subsidies — 

l?. A Government subnidic-^, boi.ds -- induatriol bond 

13 issui's, numcrou- public monies. 

14 1 see. And by the June 23rd mtfuting, thcr.c had 

15 been reduced by you to four potential projects? 

16 A Well, basically, the wood situation wnsn't a 

17 project that I reviewed very audi, it was one lh?t was 
13 biought to DC through llichard -- I'm sorry, thro\iu,'h DicV 

19 Fincke at CERETECH International. 

20 And as we were talking about the b'l:, Int^ss 

21 structure of CCRETECK International, then that project 

22 didn't come through tlio Chamber, the rest of then' h-ul . 



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1 All righl, I ara jjoing to recap tJivs-.- projoct, 

2 if I inii.ht, and see jf ] ar.i up lo whrre w- r.,c. Tli.,; 
projects as they shook out wer-.- the A;:.t' r icati Arr 
Inc . pro j cc t ? 

A Correct. 

Q The CERTTECH International, Inc. project? 

A That's correct. 

Q The Tri-Rcd Cedar Associates, Inc. project? 

9 I A Yes, and that is the seme as Ouinalt 

10 As the Quinalt Indian Reservation Wood Project' 

11 A Correct. 

12 I Q And the Bio-Fine t'harnaccut ical , Inc. project' 
A That ' s correct . 

l"! j Q Now, I aa going to, for the sake of 

15 exaaination, aove along one line at a time, so thai we 

16 I are not discussing all four projects at once as wo 30 

17 I through time. And I a* going to aove forward alone ^^'■ 

13 American Araa, Inc. project line, all righfi 

19 A" Thafa fine. 

20 Q Now, did there come a tine in July, when you 

21 met again with Albert Hakit 

22 A I think there — yea, in July, but prior 



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29 
early July, J met with Albc-rt Hp.kira .tnd W i 1 1 a : -< riickci- i .-. 
Seattle, V.'oiiliington, July ?.u(\ and July :<r<J. 

Q All right, and who else w^s piesoni at tha! 
laeet ing'' 

A Well, Richard Secord, T.nrry Royor, Wiilai>l 
Ziicker, Albert Hakim were at that meeting, and then cil 
various times, Pick Ficke from CEIH^TECH Inlei nat ional , 
and his group was there, as well as individuals thiit 
represented the "wood" projects. 

Q So that was a general review of what projects 
were on the table? 

A Yes, I was asked by Albert Hokin to review fll 
of those projects in detail with Willard Zucktr. 

Q And did he introduce you to Willard Zucker at 
that ti»e? 

A Yes, I was introduced to Willard Ziicker an'.l 
Willard Zucker w«a — he said that Willard Zuckttr was 
their legal representative. 

Q Whose legal representative did he introduce hin 
as? 

A Albert Hakia and Richard Secord. 

Q And what projects did you review foi WiUaifl 



23-1-4433 NKAL R. CROSS & CO., INC. 232 6G00 
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A t;.l- American 'm-jju ^.tojcrt, CCnETECll 
■i 1 ill ei nal 1 on.i 1 , the Quinalt Wood r>rojccl, nnd also the 

I pluir macoul 1 ra 1 conipaiiy. 
G Dio-Fine' 

S A Bio-Fine, yes. 

7 Q Aii to the American Arms project, what was tht 

I'logress on that project at that time'/ 

9 I A Wc;ll, we funded -- on Mcy 16th wc funded 

10 I Ai:.3rican Aims with 560,000 as a loan, and by this meeting 
I 

II I ill July, \<e talked about how Ai.ierican Arms was going to 

12 i'?.y the loan bock to uc 

13 Q Uid you iccet .-ii;ain later on in July with 

14 Mr. Hakim' 

15 A Yes, we net in VJasliington , D. C. on July 17th, 
IS at Stanford Technology. 

17 I Q And who was present nt that neeting^ 

13 I A That Bceting was Richard Secord, Albert Hakim, 

19 I Larry Roycr, and I also met Robert Sutton at that time. 

20 I Qr Dutton*; 

21 I A I'm sorry, Dutton. 
o, it was Secord, Dutton, Hakim, Hoyer and 



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12 i 

15 ll 

16 |i 
17 

i: i| 

HI 

2: i 

I! 



your -,c If 

A Yes , that ia coi met . 

MR. HOLMES: for the rr?rord, I run using the 
ori^in.-il of this document, I have numbered it in red 
No. 2, pursuant Lo an agreement with counsel that all of 
the originals that we so mark will be copied and the 
origjnals will be given to you and the copies will be 
rettined for our records. 

(Whereupon, the documont w:is 
nprlced for identification as 
Exhibit No. 2) 
BY MK. KOLMES: 
I ani handin,-; you what is norkcd as Exhibit 
No. 2 to this deposition, a document entitlr.d Memorandum, 
two- pages. Could you tell me if you have ever seen that 
document before? 

A (Perusing document) Yes, that mcitioranduin was 
given to me by Albert Hakia. 

At the July 17tli meeting? 
A That was at the July 17th meeting. 
And does this meno recap ngsin the four 
projecvs under discus.^lon at tliat time? 



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A Ym. . it oor.-^. 

Q .'.(.• i l; ^1 1 ■■♦■.•t^TCo h.-rr.. to an Arab 

Pi-vpI op.i ■ • C(.rpc re '. : nil , i,.-(rj you up until thi- lime heard 
c. [' the Ai-o'.. !)c.-ve 1 opi ■•II t Co r por,; ' ■■ on V 

A I heard r. f tbi- i\r:-b Devplopment Corporation 

b-.ick wli>T. ihe ciitjinnl C.ir.0,000 was wired to the 
Tr i- Aireri c .-IP Arns pij r t ner^li i p , and then this was the 
second tiiic tliat T liciird tliat nMme. 

All ric.hi. How ri i d you come to hear of the; 

Aint Dove-lop.r.cn t Aiiis Corpor.iLion in connection with the 
wiring of ' (:f or i,-;i i: .-. 1 tl'iO.OCC? 

A The bnnk offic< r t',.ztt w;!a dealing with the 

irrnming v;iri; spni.e with Ihvif con* i.r. ponden t bank, and 
told me th:it: it wnr, comir.s by way of Arab Developnent 
Corporat ion . 

(\'ho:reupon , 1 lie document was 
ntirked for idont i f icat ion as 
-.•yl.ibit No. 3) 
PY MR. HOLMES: 

Q" 1 am handing yoi- what htr. been barked a.s 

K:.':;^it Uo. 3 to this deposition, it is a Ciedit Suisse 
DtbiL device, debit ii>2 ar ;ie-counl n:.i.ifd Alvin Values 



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33 



rori'oral 1 on , referrinj; Ar.ib De ve 1 i)pi;ien t Corpoi ci I i on . I 
Lako it that you, yoursrW, haven't seen this docunicht 
bfifore' 

A (Pprusing dt.curaeiil) That's correct, I haven't 
seen that document before. 

Q But it would hove been this date, May 16, 1986, 
that the $150,000 was wired into your account? 

A Yes, that is correct, May 16th. 

Q And the account referenced on this document is 
I he Commercial Bank of Sterling, Sterling, Colorado, with 
an account number, is that rifiht? 

A That's correct. 

Q And is tliis the bank and thu account number of 
your account at that tine? 

A No, that is the actual bank account nuaber, 
that is not Tri-A»erican Arms' bank account ntiraber. 

Q Okay, thin other nuaber, 013250, is the 
Tri-A»erican Aras -- 

4 That is the Tri-Amcrican Arus account number. 

Q The correspondent bank that you mentioned a 
moment ago, is that Morgan Guoranty Trust Company on 
Church Street, in New York? 



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A Kill, iv was tlic Mor-aii Cuaraniy Trust (Jowpany, 
I dor' I )<!.<.> n.cir ] ::.tior., L ii L it was New York, Mcrgan 
Gu.iraiily Trur-l in New YoiK. 

C I ceo. 3ac4; 1u Kxhitict No. 2, — 

M:i. I'OLrifS; Anrf also for the record, you will 
^ have- access to the t r iiiiscr ip t , which will include all of 
7 the exhibits to this deposition after it is prepared. 
3 CY MP. HOLMES; 

9 Bad; t ;> Exhibit No. 2, wos the Arab Development 

10 Corporation introduced to you by explanation at any 

11 mcc'l II,,; lip to, and including th>' July 17th meeting? 

12 A The Arab D ev i_- ! opmcnt Corporation was never 

13 ! discussed. 
I'* Q At anytime'' 

15 A At anytime. 

16 Q Whiit was your understanding of STTGI at the 
1'' July 17th, ' 8G meeting? 

IZ A When I received business. cards at that time 

19 from .jverybody, and I asked what STTGI was, and they caid 
^^ it >.ap set up ac; an export ing- ir'port comi-nny. And that 

21 was the -- wh.it I was told the puipo-'Je of STTGI was. 

22 g Do you know who the principuls were, were you 



234-4'lo) i.'hAI. n. CHO.'.S (i i.O., INC. 232- 
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told who the principals were of KTTCI'' 

A V.Vn, on Lhc business caitls il had /.ILi.mm Hal. ir.i 
as Chairman of the Doard, and Riihard S'-cord lit. the 
President, and then Robert Dullor,, I think, Vicp 
President -- I have those cards. I'm not sure -- 

Q This document Vo. 2, was it introduced at 1 h '_■ 
meet ing itself" 

A No, that was handed to me at the same tir.ie, or 
abcut th«? same time that Robert Duttcn :,3ve me a 
structure of how our subsidiaries would be a part of 
STTGl. 

Q And that was sometiBc shortly after the July 
17th ncetinj? 

A That was at the July 17th meeting. 

Oh, I see, so both aeaorandua No. 2 and the 
structure No. 4 were handed to you at the- ncetint,, is 
that correct? 

A That's correct. Actually. Robert Dutton wa;,ri't 
in that meetinj. Afterwards we were standing out front, 
and he walked up and Albert and I were tall.inj^, and lir- 
handed this to Albert and said, "This is hind of h:^'. 
have structured everything" and Albert took a look i;t it 



23-1-4433 NFAI. R. GROSS t CO., TNC. 232-GCOO 
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and handed it to me. 

(','.'l.ci-eupon , t lie f!ocu. .,':;> f w;:k 
rraUed for i .'en t J f i c j I > en a = 
rxliibit Ko. 4} 
BY MR. HOIMES- 
So you got the memc -- 

A Actually, earlier that day in a meeting with 
Hakim, Secord nnd Hoyor. 

Q And the memornndum Nc. 2, the cont*:nts \tpre the 
focol point of the discuss.) o.) at that aeetir.^, the 
project progroES on the four projects'' 
A That's correct, and -- 

3 And it was right allcr Lhiit meeting that you 
got No. 4 froB Hakim, who had ju»t received it in your 
presence fron Dutton? 

A Tes, just as I was leaving the premises, I was 
waiting for a taxi cnb that I had callsd, and that was 
handed to Me, just as I was getting ready to leave. 

Q. And this writing on the bottom of No. 4, it 

says "Thuradny, 17 July, P.M., Albert and Bob ((ave rae 
this outline in Hasliington. P. C", is that in your 
writing? 



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37 

1 A Yec , thai is my "li'.iriij. 

2 So tlie b^iancc- if lit- u.>.u:er.i. i -. \.)int Hal:ini 

3 actually handed to ycu'' 
-1 A Yts, tliat lb coi-r-:r. 

(\. loroupcr. , a document was 

6 u.jrked fo. identification as 

7 r;chibit No. 5) 
3 BY MR. H0I.^;ES; 

9 Q I am hn:)c!ing ycu (ihat has been loarked as 

It) Kxliibit No. 5 tc this d'.position, a multi-colored 

111 brochure titled Ai;,crican \i.C, , T!-.fi Lor.cr.J Crows. Is this 

12 an advertising brochure fft vhe Ab't ) car- 180 firearm Ih.Tt 

13 was under discussion at tlu^ic neetjuijs? 

14 A That's correct. 

15 Q And there are sitvcral nodols of firearm under 
1* discussion here, right? 

17 A That's correct. 

13 MR. HOLMES: Now 1 iun goin^' to hand you what I 

19 will aark as 6-A, C L , and 6-C. described as follows: 6-A 

^^ is an Aacrican Arms, Inc. businer.2 ;>lan, a mul t i-pagcil 

21 commercially prepared ctuvcr t is; in; and commercial 
solicitation, wo\ild thut \i-i h fair d.. •■ cr ipt ion? 



234-'1433 NEAL I;. GHOc.S f. CO., T'C. 232-L,C00 
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38 

THT WITN-..SS: That's cotrcrl. 

; KlicreuiMj!) , the doru;,uMits wero 
"■u allied for identification ns 
rxhibits G-A, 6-B and 6-C) 

nv y,n. iioi.i-ius: 

C-3 is American Arms, Inc. Book II, with 
I appendices A throucli D, is that right? 

A Thai 's correct. 

This is noant as an nn-i 1 i f icBt i on No. 6-A? 

A That's correct. 
I And 6-;; i.s an Auerican Arms, Inc. Book III, 
.-^i.r-indicer C tlitouijh G, ? further- anipl i f ical i en of the 
Amc:ricaii Arms business, ia llial cor reel? 

A That's correct. 

Now, I will ask >uu to look at 6-D, and turn to 
Appendix B-3. 

A (Perusing document) 

Q And on through B-9, and ask you to lell ma what 
device it is Iha'L is beinc described in these pages, and 
v.'hat was the name of the Aniorican ArniS lexicon? 
! A I believe this was called the Quad-Mount 
System. 



23';-'^^:i3 m:/.t. r. ckoss t co., inc. 232-C600 
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1 i; 

6 

7 

3 

9 

10 

11 

12 

13 

14 

15 

16 

17 

13 

IS 

20 

21 



3!) 

Did y. ;; have oi:v:asion to discuss specifically 
tlif -:■■■;!,: •••:.■■ ten will. Hicliaid Secord? 

r At o -• point ill time Lari y Royer and the Goffs 
Hfid '■ ; : ,.-d St. crd wore talking about having the 
L' . S . ..'i.*«ry li.El this Quad-Mount Systea. 

Whcrt 'Ud this convc-Tsat ion take place? 

A I don't recall that, when it took place, in 
fdcl , tr;i may l;avc been a telephone conversation, I 
doii'1 •■ nbe;- i.!isther that was in person, or by way of 
tolt,.^-<r,r . 

I btjli c in our notes wo have a reference to 
• ii3t .11 I fclc;.hoi.>. call, that Richard should jo ahead and 
[■ur^uf! this, .Tic^ltcr, pushing this through and have it 
tested . 

Q Okay, vhat was the project of having — that 
Rich.r-d iiis going to be pushing through in those notes? 

A nasicRlly, to see if the U.S. ■ilitary was 
intcrer.tcd in thj= systen. 

C And (Hi\ ho represent to you that he had any 
rarlicular abi'iLy to Jc; that, or expertise at getting 
that .; K..'' 

That wj. , represented, that he hod the necessary 



;-, i4::r' iT.'i n. cnoss «. co., inc. 232-6600 
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oiitarts to Cot the Quad-Mount System tested, l' t least 

2 for raunuf ad urc . 

3 Q Referring you back to Exhibit Ko. 2, tl.uic is <i 
paragraph numbered one on the first page, Project A, 
American Arras, Inc. The second sentence of that says, 
"Through its subsidiary American Research Developaient 
Company, Inc. , it is to develop the "Quad-Mount 180 
Weapons System" for various military and security uses. 

9 { Ib tliia the Quad-Mount System that is being referred to 

10 i here? 

11 A Yes, I believe so. 

12 Q On the second page of Exhibit No. 2, in the 

13 paragraph numbered eight at the bottoi.-i it says, Richard 
Secord will be responsible for lobbying and the 
■arketing? 

A That's correct. 
1^ I Q And wa« that discussed there at that meeting, 
13 is thia the diacuasion you were referring tol 

19 A Yea, that ia an uasignment of everybody 

20 involved. 

21 Q And Albert Hnkim's notation soys, "Albert Hakim 

22 will be responsible for establishment and supervision of 

234-4403 r.'EAl, R. CROSS A CO.. INC. 232-6600 
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41 

'i.h*> distributors (domestic and intprnat tonal )" , and that 
i.'.jS a 1 :: <■. d 1 r. ciis s cd as his role'' 
|| A Correct . 

|1 I refer you to Hxhibit 6-B again. 
A (Perusing documents) 

Q On a page that follows an Exhibit A, one pag(>, 

7 |i il)ich T will number separately as No. 6-B-l for 
3 I vdentificntion. 

9 i (Whereupon, the document was 

10 i marked for ideot i f icat ion ar. 

11 ! Kxhibil 6-H-l) 

12 I BY MR. HOLMES: 
ji 

12 Q I 3sk you what that is a photograph of? 

1-i A (Perusing photograph) It looks like the 

15 I briefcase model that is in the brochure. 

IS 1 And I will get you the brochure in just a 

17 |! second. First, would you refer back to Exhibit No. 2, 

1^ ; the memorandua, and I will read you from the sar.u- 

15 - laragraph number one. Project A, the first sentence says, 

^^' :. 'American Arms, Inc. owns and manufactures Axerican IRU 

21 ','. I c (pons syntem, the laser-lock sight, the security 

2:^ ;; b; iefcabc and several related products". 



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4 2 
secur J L y 



2 j l.ripfcar,.-' 

3 I A That's correct. 



Q And to make the reference coaplete, I wil] 
lefer you back to No. 5, on the sixth page of this, is 
this tlie security briefcase, again, aa it iu explainer! 



3 ] A (Perusing document) That's correct. 

9 Q Now, after your meeting on .luly the J7th, wrs. 

13 I it your understanding that Albert Hakim wanted to preceod 

11 hy way "f a so-called holding company? 

12 A That's correct. 

13 Q Could you explain -- if you would like to use 

14 the diagram in Exhibit No. 4, or the text in Exhibit 

15 No. 2 to help you explain — would you explain to me what 

16 I is meant by the holding company concept, as explained to 

17 you by Albert Hakim in those conversations? 

13 A Hell, basically, we have the S'fTGI Holdin.: 

19 Coipaoy as tlie primary company, and it has ifol Richard 

20 Secord, Larry Royer, Albert Hakim and myself ti.ere at the 

21 toi>, with Richard Secord having the domestic and 

22 I international customers. Larry Royer involved with sales 



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I and marketing, Albert Uaklm clso responsible for domcrtic 
and inlernutiorial dislribuliors, and inyi.elf v.s 
comptroller of these four concerns: American Aims, 
CERETECH International, Tri-Red Cedar Associates and 
Bio-Fine Pharmaceutical. Each one of those being a 
subsidiary of the holding company. 

And Dutton Diagran, No. 4, labels the holding 
company as STTGI, is that correct? 

A That ' s correct . 

Q Now, there was a holding company of sorts 
formed, was there not? 

A No, there was never a holding company formoci, 
there was r. partnership formed. 

And that waa Tri-American Arna? 



15 I A Tri-Aaerican Armi 



Q And among who were the partners? 

A The Tri-Aaerican Arm* waa Richard Secord, Larry 

Hoyer and ayaelf. 

Q Did it function aa a holding compony, of surls 
for tJxa four ventures under discussion? 

A That's correct. 

So, but for the name difference, it would have 



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r.iilar function to that outlined by Dutlon? 
A Vcs, that is correct. 

Q Now, let's start with the holding company — I 
: !| ;;;.!: probiibly before we go into the holding company, let 
i| ,.:. ■- you hove produced for us today two file folders 
J li i.'.tini; to Ainerican Arms, is that correct? 
V jl A Correct. 

: ! MR. HOLMES: I am going to label them for the 

■:^ 11 r.fo.d as Exhibit No. 7, and Exhibit No. 8. Bach of 



t'.'.pf exhibits consists of multiple pages, and embraces 
I .• folder together with all the page* therein. 

(Whereupon, the documents were 

marUed for identification as 

Exhibit Nob. 7 and 8) 

BY MR. HOLMES: 

Q Now, as to Exhibit No. 7, these documents are 

I t'.ie business records for Tri-American Arms as they relate 

U !l !.. .«..u!ricon Arms, is that correct? 

il 
19 1] A That's correct. 

2C I Thesp particular documents ore the original 



' ■ I; 



Tbat s correct. 



! 

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AiiJ will be rcLuriii^c' ^o ■, nu aft"- number i n;' and 

2 copym;, todoy. Dow. t b .. j h.;;;.c>!. 1.. fi<? in ;.oroxcd forDi, 

3 is that coripct 
A That';, correct. 

5 Why it that^ 

6 , A Or July 24th of 1986, the Alcohol, Tobacco nnd 

7 Firearrcs, Division out of Salt Luke City, came and 
3 confiscated all the oricin.il record:;, we nadr copies that 

9 day with the atcnt, and I have Just copits of those 

10 original docuiBr.-nl& . 

11 Where did thf Alcohol, Tob.-icc^ and rirt.;rnp 

12 I agent cone to? 

13 I A fie ctine to ny offWre, i ■-• h-jvcl ■<!•;■'. . Colorado. 

14 And did they have a search warrant? 

15 A The agent case in and soid they were there to 

16 confiscate the files, I could eitiier wait for a search 

17 warrant, or go ohead and give him .t copy. I hud nothing 
13 I to hide, so I said there was no sc:ife in c--^^'-"£ <* ii-ai-ch 

19 warrant, I will provide; you with everything I li.ive 

20 concerning this matter. 

21 And he allowed \ou to co^'V Iheso •.iifiiinentK that 

22 I are ir front of us today from th<? oritii'al^, ;ind to letup 



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Ihi-sp na copi.is'.' 

A Corrcrt. 

Q Arc those arranged in roughly chronol oc^cal 
order? 

A Yes, they are. Those on top are the oost 
recent, and then back to the -- unless we have shuffled 
these . 

Q Witli the exception of Exhibit No. 1, they are 
now in original order, rs that corrnct? 

A Yes, they are. 

Q And Exhibit No. 1 was taken from thin Exhibit 
No. 7? 

A That's correct. 

Q Now, as to Exhibit No. 8, these nre original 
records of Tri-Anerican Ar«s relating to American Arms? 

A ThMt's correct. 

Q And these are original-original in form, is 
that right? 

A~ Thone are records after ity records were 
confiscated by the Alcohol, Tobacco and Firearas 
Divi.oion, then these were notes and record.s that I have 
kept since that time, in chronological order. 

234-4133 JJEAL R. GROSS & CO., INC. 23:2-6600 
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47 

j Apionn' these Hocuinon ti is a set of docunents 

|; Llu' U.C. District Oourt, United States District 

li 

Ij '- ■ . ; ^ for tiv- District of Utah, Central Division, is that 

A Tii;\i's correct, thoue records are for the 
< ■:::li !•. cnt ion of the receivers. 

Did you notify Richard Secord of t' 
':■■: r;scation of the receivers that is described in the. 
o> . .M.-nls'' 

A Vcs , that's correct. 

2 Vi'licn did you do so? 

1*. Lftl's see, that originally happened — the 
CO ■. '■ i :-ca t ioii of the receivers happened et the end of May 
<i I.I i:(.- was notified imuediately of that confiscation of 
tec Wers. These docuaents case such later, tl 



16 dc^.nents you were just talking about didn't coae unti 

17 I Cfce.'jer of 1986. But they were actually confiscated in 

L.; I ::..: of 1986. 

\'j [ CI lenders tand . You notified hia iaaediately 

2] iJ /. lie l:iow that they were confiscated. 

.'2 Ij r I!o\; ijid you notify hia? 

l! 

1] ::3i ""t; j-'cai. p. Gnor.s «. co. , inc. 232-6600 
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A Uy letter, and also by te l«;i'lione conversation. 
Arc you able to fiiiu th..- Icttei !)> i.hich yod 
notified li ) .n , about Item Mo. 8? 

A Lot n:e see if i1 is in tliose letter -- but I 
believe those letters are in the holding conpany file. 

Q Oh, very well. And that's an item that we 
haven't yet — 

A We haven't looked nt that yet. All 
cor respon.Jence there that we did with anyhn'^y in the 
lioldinj' company would have been in the holfling compuny 
file. Those letters are piimarily between th.- Goffs -- 

Q Okay. I would like to drnv; your attention to .•» 
particular series of items in Item Ko. 7 now. 

MR. IIOLMHS: This ia a collection of document'-, 
that I am going to separately item No. 7-A, in particular 
a page that I am going to number separntely Item 
No. 7-A-l. 

(Whereupon, the docuuents wcrf- 
marked for identification iu 
Exhibit Nos. 7-A nud 7-A-l) 
BY MR. HOLMES: 
Q First, as for Item No. 7-A, what is this 



?.?^.-A423 NEAI. R. GPOSS t CO., INC. 232-nBCO 
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4 '.I 



G 



H: 



.-o 1 1 i-'c ^ '- III! or cJocuntint.s? 

/: At H r.tM.Uiit; Iti.^l I att_-p.;-a ill Sjlt lake City, 

I'np Sn^ri'^ i-< r- talking jbrul tli'jir ability to sell this 
/.iiicri. ..; ■.rns M-IRO thrt.u-lu.ul Ihi- world, and that tlicy 
had visif'jd liUJT.frous coi'ntiifc and had licensing 
ngrooinci.' ts to talce the firoarm outside of the country. 
And I iirkc-d th^'l what type of authority thoy had to do 
that . 

And tliat's w!ic:i thoy produced thrre documcr.La 
thct showed that they were currently approved by way of 
the -- M.-. p'.T .-:« appljcaijoa of license for export of 
unci -ji-s i Tied liufcnae articles. 

And who was prci-cnt at this BP'^ting in Salt 
Lake City? 

A Bill fioff, Jr., and Bill Coff, Sr., and Larry 
Royer . 

And yourself? 

A And Byself. 

a When did it tal.i. place? 

j\ Probabjy somelin'; after the confiscation of the 

recei\e!-:., so I r.uppo.se in early June, or aiidUle-June . 

Q Now, I ar.i drawing your attention to a document 



:'■'-, A'.'.rj ITAI n. C!?0SG t, CO., inc. 232-C600 
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within 7-A, whjc!i I htivo iiuobered 7-A-l. This pHrticular 
(JocuiiKnl is oni' of tlic :.; p 1 i < at a .nm for export in this 
collection, is t!iat right? 

A That ' T. correct . 

Q This p;4rticul<4r one the applicant's nain«! is 

R.M. Equipiveni, Inc. with an address ofl 

^^^^^^^^^^^^^^^ is that correct? 

A Correct . 

Q And the nario, ilnl.e and trlephone nuwher of th* 
applicant in Jsuios L. McCoy, Florida? 

A That ' s correct . 

And it Koes otj to describe, as do nil of this 
series, the Aiocrican lHO-M-2, 22 l<.ng rifl^, laner site, 
extra nagazines, et cetera, is that right? 

A That's correct. 

The source of manufacturer here is Aiierican 
Aras International, Inc., that is th« coapany that you 
were dealing with? 

A That is the conpany that we were dealing with 
through Tri-A»erican ArBs. 

Q This pnrticulai- applUttion reliiles to the 
country of Haiti, correct? 



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j; 

; A That ' o correct . 

It ):. diiLcd 12 9-85? 
A That'T correct. 

Q Heftrr J ng to those othor applications, they 
■ '■ refer io American Research and Development Coapany, Inc., 

Uo yen know who that entity was? 
V jj A Yes, that is a subsidiary of American Arms, 
:. ;i Inc. 

*) :i Q And cfo you know if they were controlled, alnc, 

1 

^y the C'.ffs? 

;.: !. A It was controUc-d by the Gofls. 

! :: Q And this first page -- first two pages, I 

relievo, nf nxbihit 7-A -- 

ii ]. A I think they ere copies, I think there is one 

12 r page -- 

Q Are copies one of another. And there are 29 



1^ 

17 ij countries in which the export — 

ll 

l" ; A Currently approved for, it looks like. 

i ' I Q -- Qk you understood it? 

?•- A. That's correct. 

2J. The second one on this is Saudi Arabia, is thnt 



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1 A Yf;s, that IS correct. 

2 Th.ink you. 
Mn. DICKINSON: CoxinrrA, could 1 voir dire ju.-t 

a couple of questions with rc-^ard to the exhibita thot 
you have been refcrrim to? 

6 MR. HOLMES: Sure. 

7 VOIR DIRE E)CAMINATIO\ 
BY MR. DICKINSON. 

9 Q Mr. Marostica. thcrn has be'-n tin* use; of tho 

10 I teira "holding coapany", and 1 Jhin!; in two di-fferenl 

11 contexts. Number one, the holv'inK co^i; .i„y STTCI , insofar 

12 as yju are awore, im this file r rort cl An STTC5I Il'-ldin^ 

13 I Company? 

14 A No, thi« file im a Tri-Aser ica.i Arns Tile. 

15 Q So you are referring to holding company in the 

16 context of Tri-Aaerican Araa? 

17 A Nhen I apeak of a holding company as 
13 Tri-A»erican Araa. 1 had nothing to do .-ilh STTGl. 

19 Q" Okay. Number two, in regard to the 

20 applications for arms sales thnt you have just testiiiec; 

21 to, were those applications acide duriii vour involvement. 

22 or the partnership's involvcwtnt with Ti- i -Amer ii nn Arus? 



234-1433 NEAL n. CROC? f. CO., I I.T . 232-6600 
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i; ... 



, I ,., 

I, ■■ 



ij 



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s«i3 
Ko. 

■:-,■ '■'.'. \ou ( f.-.:ic into pos:;<ssioii of those? 
At • o' thu rcptings -- I has questioning the 
'f Ll.( Coff= to be able to nanufucture and sell 
jrra ••utsjrte the U.S. And they produced those 
:..-. procT, hovinf the ability to do that. 



7 'I '; Th^l ,..is your only involvr^raent with it? 

S I'' Vcy, thci e was no other reason for those 



10 ji f!n. i:f;!;TI.t;OK: Thank you. No further 

I; 



Ij ni'-i.CT r\/.MINATTOH (PKSUMKD) 

ii 

riY \\l. !;01.KES: 



■1 You npver looked into whether that was 

I aprr.p::jtp or necessary, or final, or anything like 



n No, I simply usked the Goffa -- 

Q WbaluvLi they said about those docunents you 



13 
14 
15 

IC Ji Ih 

17 

10 

IS |i tooV iA <.o he wh'.t they rcrTe.-.ented it to be? 

I 
^C ji •. Corr'cl, in fact, I just, out of the clear blue 

21 I' !.;:j.I, ' '. y don't you p.iv nic a copy of those?", and they 

22 -j 'ii.il, ^ . , or i.u ether rrabons than to have then in my 



'. M H. O.r.i-.S t CO., INC. 232-6600 
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f i les. 

Q Sure, okay. Now, we will pass on lo what ycu 
referred to as the holding company file, and that iz 
understood lo moan Tri-Ancrican Arms, the partnership? 

A Tlial's correct. 

The only time STTGI came in as the holdiiit; 
i company wa.s Button's notional diagram, is that right? 

A Exactly. 

Q It was yoLT understanding at that time thai 
they, meaning Hakiui, Socord and Dutton, wanted STTGI to 
liove a greater role over the four projects, but yo'j 
resisted that? 
I A Exactly, it was as if we were just going to c<.-i. 
rid of Tri-Anerican Arms and bring this whole thing undcr 
thcir uBbrella. And I resisted that. 

Q That was soaething that they proposed in the 
July 17th neeting, but it never caae to paaa? 

A It naver came to pass. 

Q- And' thf' reason it never csMe to pass is because 
you felt that it shouldn't ccoc to pass? 

A Exactly. 

Could you go into a little More of why you 

I 

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didn'l -- 

2 A Kf.ll, I didi.'t I:now •.,li-.. STTfl! w..'-, I 

3 Idiow what tlii'ii- huojiVii;;; i>'a-. . T di'Ji.'l knoi 

I businfis relationships, nnd I did V.ijow wl;;,t Tri -/uiic r i can 
5 Arms was, so I, basically, wont.-d Tr i- A;.:t:?r ican At 
5 handle any ol the busiioss to be handled with the 
7 I projects, 
3 1 undi-rstand. Man thci'c any sloe!' purchjJc' 

9 A Theri! was in^vcr nny r.toc);, it ws.n't a 

10 corporf.l -ion , so there wr.m't any it'.rk to h-^ i.urchncid . 

II 1 undtistand ■ i:at it nevfr c.-juc to pa-s, but 

12 was there in tl.-; July 17tli mec'inj soiiit- J i :.r u-.^si or 'h;-!t 

13 perhapc caiu^ to ba neni-ionod in ExMbit ?. , i-l.ojt si or' 

14 STTGI stock in companies related to these four projccLr,? 

15 A Yea, we didn't really talk nbout that nuct 

16 because when 1 brought up, you know, if (»'- are goin?? to 

17 have stock, what arc we (Join;: to ur,e, a rcgul< 
13 corporation or a Sub-S corporal io:i . And no ono 

19 speak intelligently with me abot^t that, so it was J'. 

20 dropped. 

21 They r.nid stock. but v.lii.n I »,-id whal tyn^ 

22 entity are we c^'ing lo h.iv»». aiit li'.T j zed stock, proff 



234-4433 ^n:AL P. CM.OSS t Oc . . tr;c. 2'I2-6G00 
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stock — there was no one thf,i« who coiilJ speal; to that, 

2 so then that wns the end of thul, lalki;:, ;ibout tti 

3 stock. 
Q Your concern was you wi^re Hr-nid you v.'c! e goi:i 

5 to lose control as an equal anJ open partner of 

6 j Tr i-Amer i can , if there was some kind of stock deal with 

7 STTGI? 

3 A That's exactly right. 

9 Q Now we will go on to Kxhibit No. 8 -- excus.r 

10 ue, Cxhiliit Nu. 9, which collectively is t)ic so-callod 

11 holding company file, that being ».he file of thn internal 

12 workings of the partnership T:i-Aneri.ron Arirs . 

13 A Right. 

14 (Whereupon, the document wa:; 

15 Barked for identification as 

16 Exhibit No. 9) 

17 BY MR. HOLHBS: 

13 Q Now, you have been good euouj^h to ijo tbrouji'ti 

19 thia file with ua, and I would like to revis.t cfrtain 

20 portibna of it because the central part cf thi- 

21 partnership — and this file is also in cliroiulogictil 

22 order? 



SS-l-KSa NEAL H. GH03S R CO., M:C. 232-CGOO 
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S7 

corroct . 

;■; frciji th«! bo t Loo workiiie "P? 
'.auh one of these sections is in 
I chro:'-j1 oijic _ ■ '.-;lor, ojic in documents that pertain to — 
coitie o~ the., -i ^tie bank documents, so each one of these 
scctiof'E has i ^ own chronological order. 

Vr > V '.tai. Could you select out for me the 

first sectic.-r ji: you ori^ariized it? 
A Yc"^, -iiat wouli! be — 

Tl.iL i'j now iEiirl<ed as Exhibit No. 9-A. 

(Whereupon, the docuaents were 
Barked for identification as 
Exhibit 9-A) 

BY ?;:;. holmes: 

Q And wc will start S-A froa the bottoa. And I 
8B going to 3>iOM you a liocuannt now aarked aa 9-A-l, a 
letter addre'".. r< to Albert Hakia at Stanford Tacbnology 
Trading Grou-, Inc., written by yourself on June 24th, 
•86, i-» that fo.iccl? 

A That':, corrtc;! . I wus asked by Albert at our 
June 23id m'-clin", to rr^rtp and send a brief description 
of all the c..::ii>. nica thut we rpoke about for the first 



2r5.;-4^".' T.\L V. :r0SS t, CO., inc. 232-6600 
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58 
til"? '■: t. in ■■.. ■.jngton, n. C, and that's what I did, 
.,!..: .! • - v.;i..' Ln^l lei tor is. 

(Whereupon, the document was 
raarl:ed for identification as 
Exhibit 9-A-l) 

BY •;::. wolmes: 

Nott, '(.'lis I assume would have been preparatory 

to tie July 2.i.i .ii;d 3rd raeetine in Seattle. is that 
cnri • 1. " 

.0 Th<«t. '5 correct. 

Tii(-de • .uic descriptions also cone forward into 
Alijr;': Hr;;3iu'.^ :t,:.".:t, Exhibit No. 2, handed to you on July 

: 7 1 f, -' 

A That's correct. 

MH. noi.MES: Kext we have 9-A-2 and 9-A-3, 

thpsL- ^re diP-erKjis, speaking of diagraM* and explanatory 

mater: al, spetiking of 9-A-2 first, this is an 
I 
j orgui>;?ational chfrt, is that right? 

I THE WITNESS: Yes, those are notes of aine, as 

I we h^Yi? spe.-ikiiig about the structure of a holding 

j coiiii^o,: \ , thos« cire notes that I was just doing for nyself 

! to p. Mi of keep trick. 

1 j:<-i ns.; N'i '.L R. cross & co., ikc. 232-66OO 

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59 
(Whereupon, the docuaents were 
narked for identification as 

3 Exhibits 9-A-2 and 9-A-3) 

4 BY MR. HOLMES: 
Q Who was present when you aade these notes? 
A Albert Hakia, Larry Royer and Richard Secord. 
Q Is this your aeetinf in Seattle? 
A That is the neeting -- yes, this is the aeeting 

that waf: held in Seattle, so there would also have been 
^ Willard Zuckcr at that aeeting. 

11 Towards the top of the page in the center there 

12 is a box labeled DLAR. 

1 3 jl A Correct. 

^4 I Q What do those initials signify to you? 

15 A That is Don, Larry, Albert and Richard. 

IS I Meaning yourself, Royer, Hakia and Secord? 

17 A That's correct. 

1':! 11 Q There are notations relating to China and 

-9 I Korea, what was the discussion surrounding those? 

2'^ A Those countries were brought up as countries to 

2^ jl export and aarket to, priaarily, if I reaeaber, China was 

^2 |! the exporting of the CERETECH International Food Product, 



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60 
Korea was for the Wood Product, the Red Cedar. 
2 Q Okay. There is a notional service company 

^ written over Korea, $1,000 that's an exanple $1,000 is 

that right? 
5 A Yes. 

^ j Q And the $1,000 is then split up in various 
7 portions, a 30 percent, 25 percent and 15 and 45 percent? 
^ A I think the way that is set up, if we look here 

9 on a $1,000 cxaaple, if Korea kept $30, then with flow 
through to STTGI, $970; which would flow through to 

11 another conpany — I don't recall right now what these 

12 figures — it sceas like on each one of these there is a 

13 percentage basis, based upon how each individual was 
involved with these particular areas. 

If the coaptrollar. for exaaple, if I reaeaber, 
I would get 15 percent of the profits here, Larry would 
get 15 percent of the profits, Albert would 45 percent of 
the profits, and Dick or Richard Secord 25 percent of the 
profits, of anything sold through the Wood Project in 
KoreaT based upon the aaount of work that was actually 



In the upper right-hand corner there is whst 



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61 

|| looks like a division of labor: lobby, market, production 

I, aiiJ M.--'ii thcic is -.- 
il 

I A I think that is a log product. 

Q This is the log products? 

A Yes, I think they are talking about the wood 
products. 

I| Q And these are notes that you took 
jl extemporaneously? 

I, A Yes, I was just sitting there with a yellow pad 



and taking down notes as they were speaking, listening to 
the structure. 

Q On the left-hand side at the top there la a box 
1? j: wic!i STTGI and within thnt a box labeled CTT . 

14 jj A Right. 

15 Q What was the discussion surrounding those 

16 ij notations? 

17 I A CFF was Mentioned, but I didn't tie it in to 
i: |i that conversation at all. I didn't know what CTT aeant 
19 jj at the' tiae. 

^^ li Q And hnw waa STTOI presented to you, in such • 

21 II way that it becaee part of this chart? 

'•^2 jj A That they were going to be the priaary holding 

[i 234-4433 NEAl R. CROSS fc CO., INC. 232-6600 

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1 company for everything involved, Ihat everything that 

2 Tri-Americaii Arms was involved in. 

3 Q So this DI.AR boy. was a stand-in for 

4 Tri-American Arms? 

5 A Actually, a atand-in for Tr i-Ancrican Arms, 

6 correct . 

7 Q Thank you. There is a notation at the bottom 
3 saying "flow of cash, where does it go, and where can I 

9 top it", that is your writing? 

10 A That's correct. 

11 Q Did you bring this concern up to — 

12 A No, I didn't bring it up, but I wroto that in 

13 ay notes, how waa the cash going to flow throughout this 

14 whole entity, because in ay nind I was questioning, you 

15 know, how were we golDg to be taxed, wliich entities were 

16 going to have tax ID nuabers. 

17 And ao a concarn to ae was, you know, where was 
13 the cash going to flow, where docs it go, and what part 

19 was I going to play. I had a feeling there that soaehow 

20 I aigftt get squaased out of the whole thing, when I was 

21 sitting there in that aeating. 

22 Q How aany dollars are wa t<»lking about as a 



234-4433 NKAL R. GROSS t CO., INC. 232-6600 
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G3 



tctal investment necessary ns you sat there in Seattle, 
with all of these projects? 

A Well, if you add then; up, wo wore going to use 
$1 Billion for the American Arms project, and that waa to 
complete the first 5,000 unila. At that tiae we were in 
the middle of a contract with the Seattle Wood Project 
for approximately $6.5 million, that was a leverage 
project. Still there was probably $1.5 cash that waa 
needed up front. 

Q So there was $1 million cash up front needed 
for American Arms — 

A Approxinmately, somewhere between $1 million 
and $1.5. on the Wood Project; CERETECH International 
needed probably $1 million, to $1.5 million. And 
basically, that Is what m« are talking about at this 
point in time, bacaus* Bio-Fine, we were just doing the 
research and ■ study to see what that total cost waa 
going to be. 

9 Was there any discussion about the availability 
of these funds? 

A Basically, we didn't discuss it much, becsuse 
it never seemed to be a problem, it never seemed to be — 



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C4 

1 the cash that was coming into the projoct wasn't a 

2 drastic problem. 

3 Q During your meetings there in Seattle, did you 

4 have occasion to tallt with Zucker about investments? 
A Yes, I did. 

6 i Q What was that conversation? 

7 A Willard Zucker and I spoka about ay role as a 
securities broker, and he brought up the point that he 

9 had many investors in Europe and in the Middle East, that 

10 sight ba interested in purchasing securities proilucts 

11 here in the U.S. And that was aside from these projects 

12 I that we were talking about. He seemed to have a lot of 

13 contacts in the European countries. 

14 Q By aside from you aean — 

15 A Just in conversation between the two of us, 

16 outside the ■••ting — 

17 Q This was additioDal money? 

13 A Yes. that was additional money, that didn't 

19 have anything to do with this. 

20 Q Did ha tall you what amount of money he had 

21 available for investments in the United States? 

22 A Basically, he didn't give me an amount, but 



234-4433 NKAL K. GROSS & CO., INC. 232-6600 
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65 
it he had a large amount -- just from a number of very 

2 ly c ri 1 1 h y c 1 i c- n I s . 

3 Q Did he say there was any limitation, or did ho 

I say that it was unlimited'; 

5 Alt appeared to nc that it was an unlimited 

6 i amount of money. In fact, I even asked at one point of 

7 time, you know, what are we looking at for funds from 
investors. And he said there is plenty of Money, or 

9 there is a lot of money, or — I got th« feeling that 

10 there was unliaited. 

II Q Referring you now to Exhibit 9-A-3, these are 

12 additional notes takeu at the Seattle aeeting, is that 

13 correct' 

14 A That's correct, 

15 Q There is a reference her* to Arab Oil Coapany, 

16 can you explain how that caaa to be on your notes': 

17 A Yes, we talked about the Sterling Manufacturing 
13 firs that we ware going to use to aake tha Aaarican Aral 

19 180, .waa a coapany that aade specialized oil tool 

20 equipaant. And at that point in tiac, Albert said he had 

21 a contact with an oil coapany that would be interested in 

22 buying that equipment and that coapany in Sterling, 



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t II 

' i 



6C 
.do. 
! I Calhcr they were in need of equity funding at 



A Yes, they needed equity funding, they had a 
- large loan with a local bank, and they needed 
-• |. cnri*^!, needed to sell their corporation. 
7 1 So he was going to find a buyer for that 
3 I coT!jn:>ny, that wa* an Arab oil coapany? 
3 Ij A That's correct. 

Q I refer you now to 9-A-4. 

(Whereupon, the document was 
■arked for identification as 
Exhibit 9-A-4) 
Q This is, again, in your handwriting, is it not? 
15 II A Correct. 

5 I Q Can you tell ae how these notes were aade and 
17 when? 

]1 I A Yes. at the July 17th ~ on July I7th, I went 
19 11 through with Larry Royer a list of points that I felt — 
?0 I the w3y I had aet Richard Secord, and when I aet hia. et 
21 j cetera, and he agreed to those 10 points. 

Q So this was sort of a recapping of how it had 



22 



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1 gone? 

2 A Yes. 

3 U What was th«' occasion for the rrranping? 

4 A Well, they were trying to break up the 

5 relations at that point, and L.irry was saying to me that 

6 j we didn't have a partnership. And I said, now, wait a 

7 minute, Larry, let me explain how this happened, and see 
3 if we — if we don't have a partnership in writing, we 

9 have an applied partnership — implied partnership. 

10 Q Point No. 4 says that Dick and Larry wont to 

11 Salt Lake to see Goffs, met with them one full day? 

12 A Yes, prior to meeting them for the first time, 

13 meeting Richard in Denver, they were with the Goffr, the 

14 day previous. So, Larry had taken — before I even knew 

15 Richard ~ 

16 Q Out to sea the Goffs in Salt Lake? 

17 A That'* correct. 

13 Q And it was after they had spoken to the Goffa 

19 separately, that Larry Royer invited you down to join the 

20 group? 

21 A Well, he said the next day they were coming to 

22 the Denver airport, and he wanted me to meet with Secord 

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that day. 

2 Q Yes, I didn't nie;in to imply that he invited you 

3 to Salt Lake City. 

4 A He invited ne to Denver. 

5 Q To sort of Join the group that was already in 

6 I the fomative process, having Bet in Salt Lake City the 

7 day before? 
A That's correct. 

9 Q At this point in time, $50,000 has Already been 

10 invested in CERETECH, is that correct? 

11 A Correct. 

12 Q And how did that transaction tak« place? 

13 A Well, by that tine Albert Hakia met Richard 

14 Fincke, the president of CERETECH International, and they 

15 really didn't care for each other. And consequently, 

16 they were trying to figure out froa this whole situation 

17 how they could back out of CERETECH International, and 
13 that is how th« conversation caae into play. 

19 (T Pag* 9-A-5. dated 7-29-86. 

20 _ (Whereupon, the docunent was 

21 Marked for identification as 

22 Exhibit g-A-S) 



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1 Q This i« after your 7-17 BeetiiiC, is thnl 

2 correcf 

3 A Correct. 

4 Q Again, your handwritten notes? 

5 A That's correct. 

6 Q What does this refer to? 

7 A I had a conversation with Albert Hakia, and 
3 Albert was saying that they wanted the $50,000 back from 

9 CERETECH International. Albert said in that conversation 

10 that his group — and when I asked who his group was, he 

11 says Larry Hoyer, Richard Secord and Albert HakiB has 

12 lost trust in myself, because they were afraid they 

13 weren't going to get back their $50,000. 

14 And be was asking ue at that tiae to send them 

15 $50,000. 

16 I Q And what was your poaltlon on that? 

17 A Baalcally, that that project waa approved, it 
13 waa approvad by Larry Royer and Richard Secord, and 1 

19 reallr didn't know what part Albert played in the 

20 $50,000. I juat siaply said, I don't know, Albert, why 

21 you are asking for thla back, because I never realized it 

22 was your aoney, I thought it waa Richard Secord's. 

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What is this reference down here to a $2.4 
laillion letter of credit? 

A Oh, there was a point in tiae where the 
Federal Land Bank, on the wood project, in lieu of cash, 
said they would take a $2.4 Billion letter of credit. 
Q Referring you to 9-A-6. 

(Whereupon, the docuaent waa 
■arked for idantif ication as 
Exhibit 9-A-6) 
This is dated 7-30-86, alao phone notes in a 
conversation with Hakia? 

A Yes, that is correct. 
Q What is being discussed here? 

A It looks like that day we dis'cussed — Albert. 
I again, was trying to figure out how m« w«r« going to 
collect the tSO,000 from Dick Fincke and CIBBTBCH 
International, ha felt that Dick Fincka was trying to 
sell soae of the license agreeaents to pay back the 
$50,000; he thought that it couldn't ba done. And he was 
going 'to giva Dick Fincke exactly one aonth to produce 
that $50,000. 

He wanted Dick Fincke to produce soae kind of 



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goodwill, collateral, et cetera, he wanted Richard Fincke 
to put his own ooney in the ot.count, basically that's it. 
Okay, 9-A-7. 

(Whereupon, the document was 
■arked for identification as 
Bxhibit 9-A-7) 
This la your phone notes of 7-31-86, is that 
correct? 

A That's correct. In those conversations on 
7-31, I had spoken to Larry, Larry said that Albert was 
really on hia about this project, about the wood 
deal. And Albert was upset with ae. 

I would like to draw your attention to thia 
line, it aays, "Larry said Dick Secord said tine to go 



15 H after ATF". 



A T«a. 

Q Th«s« ar* your notes of a call with Larry 
Royer? 

A- Tas, exactly. 

Q Naa ha tailing you what Dick Secord told hia? 

A Yaa, Dick Secord he aaid told hia that it was 
tiae to (o after the ATF at that point in tiae. 



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1 Q And had you had other discuaaiona with Dick 

2 Sccord -- 
A In fact, at th'at tiae they nentioned a John 

Barr that wns repreaentinc Richard Secord, and they were 
going to go after thia Max Wheeler, with ATF. 

(> Q Max Wheeler ia an ATF eaployea? 

7 A Actually, Max Wheeler ia th« .attorney for the 

3 Goffa. 

9 Q So, John Barr — 

10 A In other worda, he waa (oing to try and find 

11 out — John Barr waa an attorney that waa hired by 

12 Richard Secord, I believe, and Larry Royer, to (o after 

13 the ATF. 

14 Q What did Larry Royer tall you John Barr waa 

15 going to do, when he waa going after Max Wheeler? 

16 A Well, they wanted the thing aettled with ATF. 

17 1 %••. Did you have other diacuaaiena about 
13 the ATF with Saeord. hiaaelf? 

19 A Yea, there ware converaationa with Richard and 
Albert Hakim concerning the ATF. 

21 What Saeord tell you, Juat generally, and — 

22 A Well, he got very upaet thea, ha thought that 



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73 
they were takinf advantage of the Gofft. They had do 

2 case against the Goff* and the receivers, and thought 

3 they should be returned. 

4 Q Did he solicit aoney from you to fund that 

5 lawsuits 

6 A Tea, once upon a tiae they asked that the 

7 partnership each put in t7S00 to hira an attorney, to sue 
3 the ATF. 

9 Did you do that? 

10 A I thought it very coaical. 
^^ Q So you declined? 

12 A I declined. 

13 Q I aa ahowing you 9-A-8. 

14 I (Whereupon , the docuaent was 

15 I aarked for identification as 
1« I Ixhibit 9-A-8) 

17 1 Thasa ara year haBdwrlttea notss of 12:20 p. a.. 

13 and I assuaa froa this other docuaent associated with it, 

19 it was approxiaataly the 5th of August, or thereabouts? 

20 t Tas, about thst tiae. 

21 Q Batwean the 1st and the 5th of August? 

22 A Yes. 

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1 Who is Ronnie Gale that is bein^ nentioned in 

2 this? 

3 A You know, T don't know, I wrote this on iny 

4 notes, but at that tiae Larry said that he spoke with 

5 Ronnie Gale about a couple of the projects that we were 
^ in the aiddle of, he was going to send information on 

I Bio-Fine, which was the pharnaceut ical concern, and the 
3 wood project to Ronnie Gale. I don't know who that is. 

9 Q 9-A-9 is your notes of August 10, '86, is that 

10 right? 

II A That's correct. 

12 (Wbereupon, the docuaent was 

13 narked for identification as 

14 Bxhibit 9-.\-9) 

15 Q Now, ara thasa notes of a phone call with Dick 
K Sacord? 

1-7 A No, theaa notaa are convarsation I had with 

13 Larry Royar. 

19 0- And- ha is reporting to you what Secord — 

20 A' Ha is reporting to ae what Secord wants to do 

21 at that point in tiaa. 

22 Q During this period of tiaa are you able, or 



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7S 
have you atteapted to coBBunicate in writing with Second? 

A There were numerous occasions when I tried 1o 
write to Secord, but I wasn't getting any response by 
written correspondence. 

Q He was not answering your letters? 

A No, be was not answering ay letters. 

Q But he was willing to talk to you on the phone? 

A Yes, I spoke to hi» on the telephone and Larry 
was on the telephone with hia constantly. 

Q larry Hoyer? 

A Larry Hoyer. 

Q And what did Larry Royer report to you that 
Dick Secord told hia as of August 10th? 

A Dijk Sacord wants to do the wood deal, and Dick 



15 I wants to know how wa ara <oing to get tha •50.000 back 

1< froa CBRBTBCB Intarnational . We needed to find an extra 

17 $38,000 Aaarican krum, and how wa would do that. 

18 Thara la a note here that Larry aaid the Saudi 

19 reprasistativaa and Dick Secord will ba in Washington, 

20 D. C. ^oaorrow on the wood deal. 

21 Q Thay ware intending to sell the Red Cedar to 

22 Saudi Arabia? 

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76 
A No, I don't think so. I never heard that, of 

2 the Saudi representatives before that, we hod always 

3 talked about the Red Cedar to the Korean concerns. 
Q 9-A-lO, is your notes of August 12th? 
A That's correct. 

(Whereupon, the docuaent was 
■arked for identification as 
3 Bxhibit 9-A-lO) 

9 Q And this is a continuation of round-robin 

10 discussions on the fate of the wood deal, is that right? 

11 A That's correct. 

12 Q And it says here that Richard Secord is going 

13 to Salt Lake — 

14 A Yes, Larry was telling ■• that Richard Secord 

15 was going to Salt Laka, and than on to Washington, D. C. 

16 Q They were trying to sake th« wood deal go? 

17 A Tes, that's correct. 

13 Q Referring to 9-A-l], doaa this refresh your 

19 recollection about any dlacuaaioo with ragard to the 

20 signature cards on tha Tri-Aserican bank account? 

21 A Yes, in a conversation with Dick Secord, on 

22 8-12, he asked ae to go ahead and send the signature 



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77 
cards to Larry Royer, so that two naaes could be put on 

2 the Tri-Amcrican Ar«3 partnership bank account. 

3 Q So items No. 9-A-ll and 9-A-12 are two pages of 
'1 the saae thing? 

5 A Yes, those are notes on that conversation. 

6 j (Whereupon, the docuaent was 

7 Barked for identification as 

Exhibit 9-A-ll and 9-A-12) 

9 Q And were you ever able to get thea to sign on 

the partnership bank account? 

11 A At that point in ti»e I just — I aade the 

12 decision that I was going to work on figuring out how to 

13 terminate the partnership. And I wasn't going to put 

14 anyone else — I wanted to control that account, I didn't 

15 I want any other signatures on that account. 

16 I Had you asked the* to sign — 

17 I A Nuaarou* tlaaa, both Id writing and in 
13 telephona convarsation. 

19 Q- And had they done so? 

20 £ xh.y had not responded. The first day that I 

21 opened the account I sent the necessary foras froa the 

22 Commercial Bank in Sterling to Hlchard Secord and Larry 

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7B 

Royer, and I never received those. 
2 Q How did you end up on Ihsl account, 

financially, who ended up with the money from the 

account? 
5 A Well, the total aaount of the funda had been 

disbursed out of the accounts, and as par docunents that 
7 wc have — a little bit later on I will show you the 

breakdown of that account and the aonias and how it was 
9 disbursed. 

1-0 Q Referring to 9-A-13, these are your notes of 

11 August 23rd. '86? 

12 A That's correct. 

13 (Whereupon, the docuaent was 
1* aarked for identification as 
15 Exhibit 9-A-13) 
1€ Q Now. there ia a reference here to "Dick will 

put own aoney into deal*. 
13 A Tea, I was talking with Larry Royer, and thc-y 
19 had • 'aeatlnc lo Seattle, they were working on this wood 

project. I asked hia what happened in Seattle, and he 

21 said that the wood agreeaent was on its way to 

22 Spokane. They talked about the $50,000 for CERETECH 

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79 
International that Albert's portion needed to be paid 
off. And I questioned that, I said, "Well, it is Richard 
Secord's, or Dick's money, and now all of a sudden why 
are you paying Albert Hakia soae aoney?" 

Because I still didn't understand the 
relationship in Tri-Aaerican Aras with Albert Hakia. 

Q So it was your position that Albert Hakia not 
being a partner, had no interest in that aonay? 

A Absolutely not, no interest in that aoney. 

Q And it was your position that it was Dick's 
aoney -- Dick Secord's aoney that you put in all along? 

A That's correct. 



Q And they were then changing that; 



^* A Yes, all of a sudden I was hearing that it 

wasn't Dick's and I was quastioning that fact. 

Q Did thara coaa a tiaa whan you sent $15,000 
froa the partnarabip account to Larry Boyar? 

^3 H A Taa. 



Q And ea whose instructions did you do that? 
K Those instructions ware froa Richard Secord and 

lorry Boyar. 

Q How did that happen? 



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1 A We had money sitting in the account that wasn't 

2 being used, and we simply said instead of having money in 

3 that account, we will send it back to the partners. And 

4 so I had a cashier's check drawn in the name of the 

5 partnership, Larry Royer as a partner. 

^ Q And did you then deliver that check, send it to 

7 Larry Royer? 

A Yes, by certified receipt mail. 
9 Q I refer you to 9-A-13A, a letter dated 

^^J September 4, 1986, addressed to Richard Secord. at STTGI. 

11 (Whereupon, the document was 

12 marked for identification as 

13 . Exhibit 9-A-13A) 

14 A That was a letter that I. sent to Richard 

15 Secord, stating that Larry Royer had requested a refund 
^C of a total of $18,369 from our partnership banking 
1^ account, and that was returned from Erickson and 
13 Barkshire, trust account. And I outlined why there were 
19 soma expenses involved, and that I wasn't willing to send 

all that monay back, until the expenses were taken care 

21 of. - 

22 You were in the process now of trying to 



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^ extricate yourself froa the partnership'? 

2 A Well, basically, we were -- yes, I was tryinj 

to terainate the partnership. 

Q And did you eventually receive a letter on 
^ September the 10th, 1986 froM Secord, which is now aarked 
^ 9-A-14? 

7 (Whereupon, the docuaent was 

^ marked for identification as 

9 Exhibit 9-A-14) 

^^ A Yes, I received a letter, based Upon ay 

11 orifinal letter, of the $18,000 refund. In that letter 
^2 be said that we were prepared to pay for all necessary 

fees and foes on to say that "Although we agreed in 

principle to fora the partnership, no actual agreeaent 

baa actually been reached". 

Q He la taking the poaition that there bad been 

no partnerabip? 
13 A Exactly. 



And waa there finally a dissolution of the 
partoarship, signed by the three of you? 
21 A Tes. A docuaent — there was a waiver and 
teraination of agreeaent eventually that split whatever 



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82 
implied partnership there waa -- it was broken. 

Q I an showing you now what is narked as Exhibit 
9-A-14 to your deposition. Is this the waiver and 
termination of partnership agreement? 
A Yes, that's correct. 

(Whereupon, the docuaent was 
■arked for identification as 
Exhibit 9-A-14} 
Is that signed by yourself? 

A Tes, that is signed by ayself, it is also 
signed by Larry Royer and Richard Secord. 

Q And is this the original-original? 
A That is the original-original. 

MR. HOLMES: Let's go off the record for a 
second. 

(Off the record) 
BY MR. BOLMBS: 
Q And were there ■ nuaber of origiaal-originals 
created so that each of the partners and probably counsel 
would get original-originals for their files? 
A" That's correct. 
Q And this is one — 



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83 

1 A That is one of those docunents that was sifned. 

2 Q I notice this document is dated this blank date 

3 of November 1986. But we have already passed that in the 

4 chronology. It wasn't signed in any blank date of 

5 Noveaber 1986, was it? 

6 A Actually, I believe this docuaent wasn't signed 

7 until January of 1987. It was originally prepared in 
3 Noveaber 1986, but we received froa Stanford Technology 

9 Trading Group on 1-7-87, the actual docuaent. 

10 Okay. I show you a document 9-A-15, a Federal 

11 I Express slip fro» B. V. Secord, at Stanford Technology 
Trading Group International, 8615 Westwood Center Drive, 
Mo. 262, Vienna, Virginia, is that correct? 

A That's correct. 

(Nbereupon, the docuaent was 
■arkad for identification as 
Exhibit 9-A-15) 
Q And was it this Federal Express package that 
delivered the docuaent that is now aarked 9-A-14? 

A That's correct, the teraination of partnership 



And it is dated 1-7-87, ia that correcf! 



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84 

That's correct. 

(Off the record) 

BY MR. HOLMES: 

^ Q Okay, Mr. Narostica, returning to the record, I 

^ would like to refer you back for a second to the 
6 



Quad-Mount and I aa going to hand you what is Barked as 
Exhibit No. 7-B, and ask if that is in your handwriting? 
A Yes, that is ay handwriting. 
^ (Nhereupon, the document was 

■arked for Identification as 

11 Bxhibit 7-B) 

12 Q Approxiaately when and how would that have been 
created? 

A That — I don't have this dated, but it seeas 
at on* point in tiaa, in dealing with Aaerican Aras, and 
this would have bean after wa had alraady funded Ihea 
with the $60,000 that wa thought — this waa the aethod 
to go ahead and recoup onr original loan by giving 
Richard Second the right to push the proposal of the 
U.S. Aray to develop the Quad-Mount. 

ft- This was soaething you were proposing to — a 
right that you were proposing to distribute to Mr. Secord 

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separate 1 y? 

A I think that wai just a thought, and I was 
talking with -- 1 think ut the tine Larry Royer, about 
what we could do to solve our preblen of collecting our 
money from American A-ms, and this was one thing that 
could be done. 

Q And it makes a reference here for use in a 
variety of combat and security situations, and joint 
venture net profits? 

A Yes, in other words, maybe we could joint 
venture that product, if we didn't have enough money with 
American Arms, maybe there was a possibility of joint 
venturing it with other firearms manufacturers to make 
that particular project. 

With the idea being to split out the Quad-Mount 
product as m separately marketable product and try to 
■•ke money separately marketing thai? 

A That's correct. 

Q And you discussed that possibility with Secord? 

A I don't recall. I did discuss it with Larry 
Royer,' but I don't think I discussed it directly with 
Richard Secord. 



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Q Did Royer tell you that he had discussed it 
2 with Secord? 

A I was passing the inforaation to Royer, so that 
he would discuss it with Richard Secord. 

Q And did he coae back to you with a response 
froa Richard Secord? 

A I don't believe so, I don't recall that. 

Thank you. This is the next section of Itea 
No. 9, this section is aarked 9-B, and apparently 
consists of the financial records of the partnership, is 

11 that correct? 

12 A That's correct. 

(Whereupon, the docuaents were 

■arked for identification as 
Exhibit 9-B) 
Q Ne will fo through these docuaents la 
chronolofical order, approxiaately. 9-B-l is a 
handwritten note referring to reaitter, DM/Partner 
1' THI-AA? 

A Yea. 



20 



21 



22 



(Nhereupon, the docuaent was 



■arked for identification as 



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87 

1 Exhibit 9-B-l) 

2 Q Could you tell me how this document was created 

3 and what it signifies' 

4 A Yes, when I went --it was ngreed upon to mend 

5 $15,000 check to Larry Royer, that waa for the teller, 
^ instructions to sake the cashier's check to Larry Royer, 

a partner for Tri-American Arns. 

Q Okay. 9-B-2 is copies of $30,000 checks to the 
9 order of Aaerican Aras. Inc., and Electronic Metal 
Products, Inc.' 

11 A That's correct. 

12 (Whereupon, the docunents were 

13 Barked for identification as 

14 Exhibit 9-B-2) 

15 Q Who is Electronic Metal Products. Inc.' 
1^ A Electronic Metal Products, Inc. was the coapany 
1^ that was aanufacturinc the receivers, 1,000 180 receivers 
13 for Aaerican Aras. 
19 Where were they located*! 
^^ k They were located in Denver, Colorado. 

21 Q. Were they a subsidiary of Aaerican Aras, or 

22 were — 



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A No, they were Just a Jobber, separate from 

2 thein. 

3 Have you ever heard, prior to today of an 

4 organization known as Four Ways? 

5 A No, I haven't heard of that organization. 

6 Q Did you ever discuss with Secord, or Hakia, the 

7 possibility of their having the Aaerican Aras products 
3 nanuf actured through a separate, aanuf acturer? 

9 A We discussed — not the Aaerican Ar«s product 

10 itself, but we discussed a laser unit, that they could 

11 aanufacture somewhere else. 

12 Q And did they tell you where? 

13 A No, they didn't say where. 

14 Q Did they talk about the Manufacturing in Korea 

15 at any tiae? 

16 A Yes, we spoke about — at a aeeting, 

17 Manufacturing — aoving the whole operation to Korea, 
13 because laborwise it was cheaper to do that. 

19 Q Whose idea was that? 

20 A I believe that waa Albert Hakia's idea. 

21 Q- And in what aeeting was that discussed? 

22 A That was at the aeeting in Seattle, Washington, 



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on July 2nd and 3rd. 

Q neferring back to 9-B-2, the second check is 
made out to Anerican Arns, Inc. and Advance 
Manufacturing. Is Advanced Manufacturing yet another 
jobber? 

A Yes, that's correct. 

Also located in Colorado? 

A Yes, also located in Colorado, in Denver. 

Q And they were to do a different part of the 
receiver? 

A No, they were actually going to aake 1,000 
receivers, there was too aucb Job for Just one 
nanufacturer , and so they were going to do 1,000 and 
Electronic Metal Products was going to do 1,000. 

Q I gather that the actual aanufacturing process 
of these receivers is aot a particularly difficult, or 
complex task than? 

A I don't believe so. 

Q So yen were Just approaching different Jobbers, 
and — 

k Well, the Goffs were, the Goffs were handling 

all of that. This was aoney that we were loaning to 



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them, to nanufacture the receivers. 

Q Referring to Exhibit 9-B-3, it's a copy of a 
check for $25,000 dated June 16, '86, to Brickson and 
Barkshire, P.S.? 

A Hi«ht, that is a law fir« in Seattle, 
Washington. 

(Whereupon, the docuaent was 
marked for identification as 
Exhibit 9-B-3) 

Q It is noted "earnest aoney deposit, Quinault 
Timber Project",- and signed by yourself, is that right? 

A That's correct. 

Q And it is on the partnership bank account? 

A It is OD the partnership bank account. 

Q This being Coaoiercial Bank of Sterling? 

A CoBBercial Bank of Sterling. 

Q What was the purpose of this particular 
payment? 

A On June 16th, we sat down and gave an outline 
for a contract to the Federal Land Bank there in Seattle, 
Washington, to buy approximately 10,000 acres of wood, 
and San Erickson asked for an "earnest money deposit" to 



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start doing that legal work, of 425,000. 

Q Had you discussed a contribution to the 
partnership equity with Hakia, or Secord, at around the 
saae tine as this check, independently of it? 

A Could you aak that question again? 

Q Why don't I just hand you Exhibit No. 10, like 
Exhibit No. 3, you wouldn't have had access to, but for 
the purpose of refreshing your recollection about the 
events, it notes « $200,000 payaent fron Alvin Values, 
Corp. account at the Credit Suisse, in Switzerland into 
the Coaaercial Bank of Starling, Sterling, Colorado. 

(Whereupon, the docuaent was 
aarked for identification as 
Exhibit No. 10) 

A (Perusing docuaeat) 

This is in favor of TAA, I assuae that TAA 
would be Tri-Aaerican Aras? 

A Tri-Aaerican Aras, that's our account number. 

Q And th* account nuaber of vHHfe is the account 
nuaber? 

A That's correct. 

Q This is for the aaount of $200,000. First, let 



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ask you if the account ever received the $200,000 

2 payment' 

3 A No, that was not received in the account, 
't Q And did you have discussions with Hakim or 
5 Secord about this amount coming ii 

A Yes, I did. I had a conversation with both of 
7 the» 

Q And what was the conversation that you had, 
9 first with Secord about that' 
^0 A Well, I asked Dick Secord if the money was 

11 being sent in, because we had on the contract for the 

12 wood project, there was $100,000 earnest money, and at 

13 the time we had only given $25,000 to Sandy Erickson, we 
^* needed another $75,000. We didn't have enough in the 
15 account for that contract. 
1^ So, on June 16th, I asked Dick about it, he 
17 said it was being sent by Federal Express, bank 
13 draft. And on the 16th of Jun« 

19 Q Did you make a notation of thafi 

20 A. Yes, I did, in my not« 

21 Q Let me hand you what is marked as Exhibit 

22 No. 7-C, a notation, apparently on the back of a phone 



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1 note, on which it is written "Dick Secord said tho money 

2 was being sent DHL above on Mondiiy, 6-16 and it says '76, 

3 but I assume that is '86? 

4 A '86, correct. 

5 (Whereupon, the document was 
S Marked for identification as 
7 Exhibit 7-C) 

3 Q Is that your handwriting? 

9 A That ia ay handwriting. 

10 Q And that is a phon* note. after a call with 

11 Dick Secord? 

12 A I believe so, that is on the back of a phone 

13 note, and typically, I -- once I return a call, I will 
1'' Just turn the phone note over and record the 
15 converaation. 
1^ Q And what waa your understanding of DHL at that 



17 



tiae-? 



13 A Well, I didn't know what DHL waa, so I called 

19 Coaaerclal Bank, Steve May, the bank officer, and asked 

^0 hia what DHL waa. and he said it was Federal Express with 

21 iaaediate value bank draft. 

22 Q So he explained to you that it waa a way of 

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transferring money? 

2 A That's correct. 

3 Q And did you discuss the precise method of the 
transfer with Albert Hakim at any time? 

5 A Well, after this date, where I discussed it was 

going to arrive by DHL, then on 6-24 the noney still 
7 hadn't cone into the account. And I spoke with Albert 
° Hakia about that, and he said that, yes, it had been 

9 transferred, and $200,000 had been transferred and it 

10 case froa Credit Suisse, Allied National by way of United 

11 Bank of Sterling,- then to Comaercial Bank. 

12 In fact, we even had a "swift" nunber, but it 

13 never made the account. 

1^ Q Let me show you what is marked as Exhibit 
15 No. 11 to your deposition. Is this your handwriting? 

A (Perusing document) That is my handwriting. 
(Whereupon, the document was 
13 marked for identification as 

19 Exhibit Mo. 11) 

Q And is that m phone conversation note, after a 

21 conversation or during a conversation with Albert Hakioi? 

22 A That's correct. 



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And what did he tell you in that conversation' 

A Well, in that con ver atit i on he told ine the money 
should liave been in our account a week ago. 

Q Did you discuss with his later on why the ooney 
didn't reach your account? 

A I don't believe I discussed it with Albert 
Hakiffl, but I discussed that with Larry Royer, why the 
noney hadn't entered the account. And by that point in 
tiae, in July, they didn't want to talk about the 
$200,000 anymore. They were going to handle th* project 
theaselves, and they said they would worry about the 
earnest noney for the contracts on the wood project. 

Q Well, could you tell ae more particularly what 
Royer said? Had they Just changed their aind in 
aidatreaa, or what? 

A Well, basically, X think about that tiae they 
were very unhappy with Richard Fincke about the loaa that 
was aade to CERETECH International, and they were trying 
to figure out how that aoney was going to be collected. 
They were unhappy — 

Q" Did Larry Royer tell you where the $200,000 
went? 



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li 
1 :[ A No, it was never discussed where that aoney 

a j| .... .«. 

3 |l Q Dut he gave you tu understand that a person 
'I ;i wr:;nt to Secord and Hakia, and the money wasn't coaing 
to the partnership account? 

A Ves, the aoney wasn't coainc into the 



I partnership account. 

I Q Let ae show you what is marked as Exhibit 



9-[t-4, a pa^e of copies, including ■ stop poyaent 
request, and an advice of charge dated 6-19-86. Can you 
e<plain whnt these docuaents signify? 

A Yes, on June 16th of 1986, I wrote a check to 
"inETECH luternational, check No. 4 out of the 

14 I Tr.i Aaerican Arns account, for $50,000. And on Monday, 

15 the 19th, I waa contacted by telephone by Richard Fincke, 
If^ j ani* their bank wouldn't clear the check for 10 days and 
17 they needed the aoney right then. 

13 So he asked ae if I would do a stop payaent on 

19 that check and wire the aoney directly to their bank 

20 -iccount in place of that check. And those are Just 

21 II advice ~ of the charges, and the actual wire, or stop 

22 || payment request. 



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97 

(Whereupon, the document: was 

2 Barked for identification as 

3 Exhibit 9-B-4) 

4 And the aaount of aoney that was sent to 

5 CBRBTBCH International. $49,990 because there was a $10 

6 i charge for wiring the aoney. 

7 Q Did the substitution of this wire for the 
3 original check have the effect of breaking the account 

9 chain? 

10 A Actually, it didn't break the account chain, 

11 but I don't have a copy of the check, which noted on it 

12 that it was actually a loan to CERETECH International. 

13 I Q So it divested you of the convenient ability to 

14 show that this was a loan, and not a mere payaent — 

15 A That's exactly right. 

16 (Whereupon, the documents were 

17 Barked for identification as 
13 Exhibit No. 9-C and 9-D.) 

19 Q Now, what I've aarked as 9-C and 9-D are the 

20 balance of your Tri Aaerican Aras file, is that correct? 

21 A " That's correct. 

22 (Whereupon, the docuaent was 



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■arked for identification as 
Exhibit No. 9-D-l.) 
BY MR. HOLMES: 

Q Referring you within 9-D to the letter dated 
Deceaber 29, 1986, which I have aarked as 9-D-l, is thi* 
a letter that aeaorialized your understanding of thff 
bottoa line financially, with this partnership, froa yoar 
lawyer to their lawyer? 

A Yes, that's a letter froa ay lawyer to Malcola 
Harris, the lawyer representing Richard Secord and Larir 
Royer, which is a part and portion of the final 
teraination agreeaent. It's not actually a part anH 
portion of that, it's just a letter of understanding fro* 
ay attorney to their attorney. 

Q And it covered a draft of the waivtsr and 
teraination of the partnership agreeaent, is that right? 

A That's correct. 

Q That brings us to the final accounting of the 
partnership. I wonder if you could start at the 
begi-Dning and tell us what aonies went into the 
partnership and what aonies went out and to «(hoD, 
understanding that there is a $200,000 aaount that left 



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Credit Sui,T;<v but never actually came under your control 
in thi piw I fic rsh i i> . 

A Y.>ii hav«» ;ill those notes for the Tri American 
Aims file, llie accounting. 

That would be 9-B. 

A No, thet'o's another sheet on top unless it's 
been intermixed with sonething, that has the total 
accounting of all that. 

(Off the record. ) 

(Whereupon, the docuaent was 
■arked for identification •• 
Exhibit No. 9-8 and 9-B-l.) 
BY MR. HOLMES: 
Wc are looking at a docuaent froa the Nuaber 9 
and we'll refer to this collection of docuaent* of you're 
accounting out as 9-E, all right? 
A That's correct. 

Q The first page of 9-B-l, which we will 
subdesignnte 9-1-1, is a handwritten accounting of 
$150,000, dated May 16, 1986, is that right? 
A That's correct. 
Could you explain this docuaent for us, please? 



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A Yes. What I've done is I've gone back through 

2 the hank statements and froa the day that the money was 

3 wired into the account on 16 May 1986, and I've accounted 

4 for the full $150,000. 

5 Q Could you run through it for us? 

6 A Yes. On 16 May 1986, check number 1 was a 

7 $30,000 check written to American Arms and Electronics 
Engineering in Denver, Colorado; 16 May, also same day, 

9 another check for $30,000 was written to American Arms 
^^ and another manufacturing company in Denver, Colorado to 

11 manufacture 1,000 receivers. 

12 On 16 June 1986 we wrote check number 3 for 

13 $50,000 to CERETECH International. 

^4 Q Now, let's go through these. The first check 

^^ and the second check, each for $30,000, were expended by 
^^ the payees, is that right, in their efforts to make 

receivers? 
13 A That's correct. 

19 Q And it was those receivers that were seized by 

20 ATF? 

21 A " That's correct. 

22 Q So, that was a total loss to the partnership of 

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101 
$60,000? 

A Well, there's still a note owed by American 
Arms that doesn't have to be paid until no later than 
December, 1988. 

And according to your dissolution agreement, 
what beca«e of that note? 

A That note now is owned by Richard Secord and 
Larry Royer. 

Q So, that's an asset of Secord and Royer? 

A That's aD asset of Secord and Royer. 

Q To the extent that it is collectible? 

A To the extent that it is collectible. 

Q And there is the $50,000 check to CERETECH. 
What becaae to that aoney? 

A Nell, that's also a loan to CERETECH 
International. That check was originally written on 16 
June. Then the check was — a stop put on the check — 
MB. DICKINSON: Could we go off the record? 
(Diacuasion off the record.) 
BY MR. HOLMES: 

Q' Now, as to the $50,000 aaount, what became of 
that June 16 aaount out to CERETECH? 



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A That was a loan to CERETECH International. 

2 Richard Fincke asked me to replace that with a wire 

3 transfer on Monday the 19th, and that check was 

4 cancelled. 

5 Then on the sane day, 16 June, there was a 
check -- actually, chronologically, the check for $25,000 

^ was written first. That should be check nunber 3, not 

3 check number 4. 

9 Q Well, in any event — 

A Okay. For $25,000 — 

11 Sticking with the $50,000 aaount, it was, in 

12 fact, transferred eventually by wire, not by check, to 

13 CERETECH, correct? 

14 A That's correct. 

15 Q And becaae an asset of the partnership and the 

16 fir»? 

17 A That's correct. 

13 And that is also now an asset of Secord and 

19 Royer parsonally, is that correct? 

20 A . That's correct. 

21 Q Pursuant to your dissolution agreenent? 

22 A That's correct. 



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Q And your last conversation with Royer was that 

2 they were, in fact, pursuing the CERETECH investment, is 

3 that coriect? 

'J A That's correct. 

5 Q Now, there was, on June 16, a $25,000 amount 

^ paid out to Ericson, and what was that for? 
7 A That was on earnest money deposit for the 

Quinault Wood Project. 

9 Q Have you spoken with Royer or Secord since your 

10 withdrawal from the partnership, about whether that 

11 project is goinf forward? 

12 A I understand that they are pursuing that 

13 project. 
Q And they are doing so without you, is that 

correct? 

16 \ Yes, as part of the termination agreement, 

1' they've taken on that project on their own. 
13 Q And you have no further interest in the 

19 project? 

20 A I have no further interest in the project. 

21 Q " Or in the $25,000? 

22 A Or in the $25,000. 

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1 Q Okay. Now, thore is an August 15 casliier's 

2 check to Larry Royer and that is the $15,000 amount that 

3 you have previously mentioned as having been requested by 

4 Roycr and Secord? 

5 A That's correct. 

6 Q And do you know what that was for and where it 

7 went? 

3 A They just simply wanted that -- the money froa 

9 the partnership returned to Lerry, as a partner of Trl 

10 Aaerican Arms. 

11 Q Why was the $15,000 amount selected? 

12 A Well, that's what was left in the account at 

13 that point in time. If we add up 30, 30, 50 and 25, 

14 there was $15,000 left over. 

15 And you transferred that by check? 

16 A Tes, by cashier's check. 

17 How, on October 3rd, $18,369.74 was transferred 
13 into the account? 

19 A That's correct. 

20 Q And whet was the purpose of that transfer? 

21 A ~ That was funds that after Sandy Bricson 

22 subtracted his legal fees from the 16 June check of 



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$25,000, that's what was left over in his trust account. 

Q So, this is money coming biick from the Quinault 
depos it? 

A That's correct. 

Q And on 16 December, that money was transferred 
to your attorney? 

A To my attorney's trust account, that's correct. 

Q And then in January, that was paid to Royer and 
Secord through their law firm, by your attorney, in a 
trust account, the trust account check, is that correct? 

A That's correct. 

Q With the exception of $3,000 which was 
reserved'' 

A That's correct, as per the termination 
agreement . 

Q And that's the amount, $3,454.99 that your 
accounting enda with? 

A I believe so. I think wc subtracted $180 for 
legal fees froa that, but that's what the accounting enda 
with, yes. 

Q And the $3,000, approximately, amount was 
pursuant to your dissolution agreement and that is to 



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>rotect you against grand jury and other expenses in 

2 relation to the seizure of the receivers? 

3 A That's correct. 

4 MR. DICKINSON: I'd say against any legal 

5 expenses -- that's how it's worded -- hut not just grand 

6 jury -- and other entities. T worded that one broad 

7 enough, too. 

3 BY MR. HOLMES: 

9 Q So, the bottoB linA is that with the exception 

10 of a thin margin of insurance against your likely high 

11 cost of the investigation and everything, you have not a 

12 nickel to show for these ventures? 

13 A No, that's exactly right. 

14 Q And all of the Boney that remains and all of 

15 the assets that were produced by the money that ever went 

16 into that account arc now the personal assets of Royer 

17 and Secord? 

13 A That's correct. 

19 Q Now we have the Tri Red Cedar Associates file, 

20 with the one docuaent that I selected from it, which we 

21 will siaply identify as nunber 12. 

22 (Whereupon, the docuaent was 



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marked for identification as 

2 lixhibit No. 12. ) 

3 BY MH. HOT,MES: 
Q Item number 12 is your complete Tri Red Cedar 

5 Associates file in its original form? 

6 A That's correct. 

7 Q And it reflects the various business 
arrangements, agreements and contacts that you had from 

9 the cedar -- so-called Quinault ' Indian Reservation 

10 agreement? 

11 A That's correct. 

12 Much of which we have previously discussed and 

13 we won't rediscuss. And ive have the CEHETECH 

14 International, Inc. file, which has been copied and is 

15 now marked as Exhibit 13 in its entirety. 

16 (Whereupon, the document was 

17 marked for identification as 
13 Exhibit No. 13. ) 

19 BY MH. HOLMES: 

20 Q Now, does Exhibit 13 consist of the entire 

21 businesi correspondence, agreements and documents 

22 I relating to the CERETBCH International, Inc. venture? 



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A That's correct. 

2 Q Could you briefly explain the business of 

3 CERETECH International, just a thumbnail sketch for the 

4 record? 

5 A Yes. That was a wood project that was 

6 introduced by Dick Fincke fron CERETECH International and 

7 — !'■ sorry — CERETECH International was introduced to 
le by way of the Chamber of Commerce in Sterling, 

9 Colorado and the President of that company being Dick 

10 Fincke. 

11 Q And within that? 

12 A That was company that we'd loaned $50,000 to 

13 and, basically, they were to make a human consumption, 

14 high protein wheat supplement and product for use 

15 domestically and internationally, and it was an interest 

16 to the partnership because of contacts that Albert Hakim 

17 had with World Food Bank. 

13 Q So, if I understand the chronology correctly, 

19 you had bean put together with Richard Secord through 

20 Larry Royer after you had contacted Royer in relation to 

21 the Amarlcan Arms opportunity, is that correct? 

22 A That's correct. 



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Q And then after neeting with Hoyer and learning 
that he had access to venture capital in the person of 
Richard Secord, you commenced to screen other business 
opportunities that you either had heard of in the post or 
were coning to your attention as tine went on? 

A That's correct. 

Q And this particular opportunity case to your 
attention through the Chamber of Coaaerce in your area 
because the Chantber of Coranerce was aggressively looking 
for business opportunities that aight help develop 
industry in northeast Colorado? 

A That's correct. 

And so you brought this one back to Hoyer and 
Secord and ultimately to Hakia for their asscssaent as a 
possible aoneyaaking venture for the partnership to 
engage in? 

A That'* corract. 

Q And that's how it got on the agenda for the 
June latter that you wrote to Hakia and then the July 
aeetint in Seattle and the mid-July meeting in 
Washing'ton, O.C? 

A That's correct. 



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And, eventually, they decided that it waa 
something that they could make money at, that their 
contacts in the Middle East and abroad would allow them 
the opportunity to tap the possibilities of the market, 
and they authorized $50,000 to go from Tri American Arms 
partnership to this venture, is that correct? 
A That's correct. 
Q Okay. 

MR. REMSTEIN: You stated that very eloquently. 
(Laughter. ) 

(Whereupon, the document was 
marked for identification as 
Exhibit No. 14.) 
BY MR. HOLMES: 
Q Okay. I'm handing you what is marked as 
Exhibit Number 14, and this is a copy of your Bio-Fine 
file, is that correct? 

A That's correct. 

Q Now, I wonder if you could describe for me, in 
similar, fashion to the way we've Just gone through 
CERETECH, what the business opportunity was and how you 
came to try to exploit it? 



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A Yes. Bio-Fine was a company that was also 
presented to nyself as a company that could be relocated 
to our area, and it was a pharmaceutical company 
established to produce opium-derivative pharmaceutical 
materials for sale to pharmaceutical manufacturers. And 
I looked at their business plan and it was one of the 
projects I then presented to Richard Secordand Larry 
Royer. 

Q And how did you get onto the Bio-Fine 
opportunity? What brought it to your attention? 

A I believe that Bio-Fine originally was 
presented to ayself by way of the state Coaaerce 
Department and by way of the Chamber of Commerce. 

Q Did you know any of the principals involved 
prior to it coming to you through those channels? 

A The principals of Bio-Fine? 

Q Right. 

A I've got a friend in Denver that eventually 
knew one of the principals, but prior to that time I 
didn't. know the principals, no. 

Q Your friend in Denver was who? 

A Ronald Frino, a real estate ' brokerage agent. 



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1 Q And who did he know? 

2 A Mr. Jock Hack. 

3 Q What was Mr. Hack's relationship to the firm? 

4 A He was a scientist, research scientist. 

5 Q I gather these notes, handwritten notes — 

6 I A Well, basically, those are notes on how to 

7 finance Bio-Fine Pharmaceuticals. Those notes were 
before I actually introduced it to Tri American Arms. 

9 Q And when did you first introduce it to Tri 

10 Aaerican Arms and through whom? 

11 A Well, it had to be about the same tlB« as the 

12 rest of the projects. so, in May — I suppose. May or 

13 June of 1986. 

14 Q Do you recall how you presented the opportunity 

15 and who you presented It to? 

16 A Yes. I gave the business plan — I had two 

17 business plans, and I gave the full business plan to 
13 Larry Royer, and then It was pursued — he talked to 

19 Richard_ Secord about it, and that's why we began pursuing 

20 the prmject. 

21 Q So you weren't present when Royer presented it 

22 to Secord? 



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A No, I wasn't. 

Q And you heard back from either Secord or Roycr 
that it was one of the ones they wanted on the final 
list? 

A That's correct. 

Q Do you recall talking to Secord about it at 
anytime, personally? 

A Yes. I — at our meetings both — you know — 
every aeeting that we had, we talked about all the 
projects, and the aeeting with Willard Zucker in Seattle, 
each one of these projects — we spent two or three 
hours or aore on each one, very detailed presentations. 

Q And what was the presentation that you aade 
there in Seattle, in financial terns, to Secord and 
Zucker? 

A Well, basically, we were going to provide all 
the equipoent, get tha licensing for Bio-Fine, and 
continue to have an operating business with this business 
entity. _ 

Q- Financially, what was the capital necessary and 
how was it to be raised? 

A There was approximately $1.5 aillion in 



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equipaent, $50- to $100,000 in legal fees to pursue the 
license, and then operating expenses, I suppose, another 
$500- to $750,000 for the business. So, we spoke about 
approxinately $2.5 aillion for Bio-Fine. 

Q la this the $2.4 aillion figure that we've seen 
elsewhere? 

A I believe so, yes. 

Q And that $2.5 ■illion, roughly, is aoney that 

9 I was needed to be expended before any Incoae was going to 

10 b« seen? 

11 A Tea, that's correct. 

12 H Q When you asy there was $1 aillion in equipaent, 

13 you're talking about in purchases necessary to get the 

14 equipaent? 

15 A Tes, exactly. That also included real sstata. 
1^ Q So, you were going to have to find a location, 
I'' get a building, purchase equipaent, and begin production 
13 all on equity capital? 

19 A _ Tas. Tha location had already been approved in 

20 Las Vagas by tha Drug Bnforceaent Agency. Dr. Saith and 

21 Dr. Hack aa wall as their third partner. Vines Gordecon, 

22 had been working on thia project a couple of years before 



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1 it was presented to me. 

2 So, a lot of their preliminary work hod been 

3 coapleted, and I think you'll see that in the business 

4 plan dated July 31. 1986. 

5 Q And what was the source of funds going to be, 
^ as you discussed it there in the Seattle aeeting in July? 
7 A Again, this was going to coae out of investors 
3 that Albert and Richard and Willard Zucker spoke about, 

9 as one of the entities, one of the businesses we ware 

10 going to have here in the United Statas. 

11 Q Was it your understanding that all of tbis 

12 aoney was coaing out of the so-call«d Arab Davalopaant 

13 Corporation, or were separate groups of investors? 

14 A You know, it saeaad like there were separata 

15 groups of investors. There were a nuabar of investors 
1^ and each ana of thaa aight have a different interest in a 
17 different entarprisa. I fait like that it nacassarily 
13 wasn't one big pool, that aaybc there were different 

19 contacta for different businesses. 

20 Q And who had control of these aonies? 

21 a' Nell, it seaaad like Albert Hakia had control, 

22 aa well as Willard Zucker. Rach one of thaa seeaed to 



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have their own control. And I didn't feel after our 
third meeting, that Richard Secord really had control of 
the monies. It seemed to be more Albert Hakim's and 
Willard Zucker's position to get monies raised for these 
projects . 

Q When was the third meeting that you're 
referring to? 

A That would have been the Seattle meeting where 
everybody was there, July 2nd and 3rd. 

Q And that's when you were introduced to Zucker? 

A Yes, that's correct. 

And was that the first time you met Hakim as 



13 II well- 

^') II A No. T met Hakim at the second meeting, that 

15 H would have been in June. That was June 23rd that I 



originally met Hakim. 

The third meeting — well, the second meeting 
with Hakim then was July 2Dd, and then the third time I 
met hi* personally was on July 17th. 

Q So, you had been under the impression that it 
was Secord that you were dealing with? 

A Originally, I was under the impreaaion, up 



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until the July 17th neetinc, that it was actually Richard 
Secord that I was dealing with. 

Q And it was his money? 

A And it was his money. 

Q And the July 17th time period you were given to 
believe that it was Hakim's money and that Zucker had 
advisory role with Hakim and Secord as their sort of 
financial advisor? 

A That's how I envisioned it. 

Q Whatever became of Bio-Fine, did you ever put 
money into Bio-Fine? 

A No, Bio-Fine — I understand that Thi-Ryder 
(phonetic) has funded that project at this point in time, 
but that is just hearsay, I am no longer pursuing that 
project. 

Q What was Bob Button's relationship to the 
Quioault Timber projact, do you know? 

A No, Bob OuttoD never had anything to do with 
that project whilo I wms working with it. 

Q- Whan you met with him in mid- July of 1986, July 
17th, was ha introduced to you as somebody who had a 
financial staka in these venturaa, or was he aimply an 



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1 STTGI eaployee who was there to give advice? 

2 A Well, I didn't know whether he was an employee, 

3 or not, but he was simply introduced as a partner 

4 organization and I didn't spend over throe or four 

5 minutes with him -- he handed me — he had a chart of 
^ organizations, and Albert Rakia then handed it to me. 

7 Q What do you know of an SRH Corporation? 

3 A I don't know anything about that corporation. 

9 Q Have you ever heard of it before today? 

10 A I heard of that by way of questioning from Don 

11 Bernstein, but I never heard it before that time. 

12 Q I see, so other than what the House 

13 investigator asked you — 

^* A I never heard of it. 

IS Q Had you ever discussed with Secord or Hakim any 
venture, partnership involving Secord, Hakim and Royer, 

^7 but not yourself? 

13 A No. 

19 Q _ Do yon have a Telex in your offica? 
A No. 

21 Q So you never communicated either backward or 

22 forward with Secord, or Royer, or Zucker by Telex? 



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A That's correct. 

Q Have you any knowledge of a Canadian Inperial 
Bank of Comnerce account? 

A No, I don't. 

Q Was on« ever discussed with you? 

A No. 

Q Was any bank account, other than the Credit 
Suisse bank account discussed with you by either Hakia or 
Secord, that is not located in the United States? 

A No. 

Q I father froa the paperwork in exhibit relating 
to the Quinault Tiaber project, that there was discussion 
on the $2 nillion ainiaua pre-aale. In other words, they 
wanted to know for sure that they could sell $2 aillion 
worth of tiaber, before they aade their — 

A That was discussed — that was one of the 
contiofcncies that Albert Hakia wanted to put with Bd 
Heraan, but I believe that is after ~ I had (otten away 
froa tb« — thay were dealing on that — I heard that 
figure froa Dick Fincke at a later date, the $2 aillion. 

Q Tou ara in touch with Dick Fincke because he is 
one of your local businessaen? 



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No, Dick Fir.cke is froa Seattle, but basically, 

2 I called him from time to time, just to see what Sccord 

3 and Royer were still doing with the Quinault Wood 

4 project, and also CERETBCH International. I have a very 

5 good relationship by telephone with Richard Fincke. 
Q Are you engaged in any other businesses with 

7 him, or -- 
3 A No, I am not. 

9 Q Have you ever heard of an organization known as 

Hydra? 

11 A No. 

12 That is H-y-d-r-a. 

13 A No. 
Q Tou did talk about a separate manufacturing 

^5 II capability for laser sights with Albert Hakii 
IS A They aentioned that they worked on — that 
^7 Hakim and Secord had worked on a laser device, previous 
13 to our involvemant with Tri-American Arms. 

19 Q Waa thare a discussion of substituting their 

20 devica.for tha so-called laser lock sight that was then 

21 being teamed with the American 180? 

22 A That's correct. 



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And when did those discussions begin on that 



2 project' 

A Well, those discussions were priaarily with the 

Goffs. And, in fact, I believe the Goffs (ave the laser 
^ locks to Albert Hakim to study and conpare to the product 

that they were faailiar with. But I didn't have anything 

to do with that, that was between the Goffa and Albert. 

I Just knew that that waa being transferred back and 
9 forth between thea, the devices. 

Q Well. whose property were the patents and 
^^ licenses associated with product of the Aaerican 180 

12 laser sights? 

13 11 A Those were -- the patents were a subsidiary of 
Aaerican Arias and the laser lock was a part of Aaerican 
Aras, a research and developaent coapany. 

Q What waa your understanding with regard to 
Tri-Aaerican Arm's right to produce that weapon, 
independently of Aaerican Araa? 
1^ A _ The aaaorandua of agreeaent was our contract to 
be abls to aanufacture that separately froa Aaerican 
Arns. 

Q You were receiving no rights to the patents? 



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A No, there were no rights to the patents. 

Q So you were, if not a licensee, something like 
a licensee to produce the weapon? 

A Actually, Aaerican Aras waa producing the 
weapon, we were simply the narketing am for then. 

Q You were a financier in Marketing? 

A Exactly, exactly. 

Q All right. If Hakia and Secord were 
contracting separately with another aanufacturer to 
produce the Aaerican 180. would that hava been • us* of a 
partnership asaat? 

A I didn't know anything about that — I guesa 
ask your question in another way. 

Well, I aa sort of ph-Mplexed by your lack of 
knowledge in this area, because Hakia and Secord ara your 
partners . 

A Bakia was nevar a partner. 

Q Well, excusa ae, Sacord waa your partner and 
Hakia was an associata of Secord's. Let's Just talk 
about Sacord. If Secord were contracting through STTGI 
to produce Aaerican 180s with another separate 
aanufacturer, what right did Sacord have to do so, that 



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you know of? 

A There wasn't any right to do that. If, in 
fact, he was doing that, I didn't know anything about 
that. And our partnership really -- we were contracting 
to do 5,000 unita, and basically, that was what I was 
locked in on. I don't know whether they were trying to 
do soaething outside that partnership. I have no 
knowledge of that. 

Q If he was doing that, he would hava had to 
obtain the right to do that, independently trom tha 
Qoffs, independently of your partnership? 

A Tes, that's correct. 

Q Now, you said earlier that you are not faailiar 
with a Four Ways Industries, Inc.? 

A That's correct. 

Q Are you faailiar with any discussions with 
Secord or Hakia of an organization in the United States 
that specializes in the Manufacture of out-of-product ion 
■ ilitarjr equipaent parts? 

A No. 

Q Do you know the naae Greg Zinc? 

A No. 



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Do you know the naae Jacob Farber? 

2 A No. 

3 Have you ever been involved in any aras dealing 

4 at that, buying or selling in wholesale quantities, other 

5 than with American Arnsl 
A No. 



7 Q Any defense-related industry? 

3 * No. 

9 Any industry outside the United States? 

^^ A No, I don't believe so, unless that includes 

11 Butual funds that invest in foreign companies. You are 

12 talking about manufacturing -- 

13 Q Tes. Let me show you what is now marked as 
Exhibit No. 15, a letter apparently sent to Mr. Albert 

1^ Hakim, Stanford Technology Trading Group International 

1^ but addressed to an organization known as SciTech Trading 

1^ Group in Monrovia, Liberia, on the stationery of Four Way 

13 Industries, Inc. and signed by a Ronald C. Wade. 

19 Do you knoM Mr. Ronald C. Wadel 
A No, I don't. 



(Whereupon, the document was 



22 marked for identification as 



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Exhibit No. 15) 
Q This Bakes reference to an agreeaent, or an 
inquiry concerning interest in nanuf act ur ing a laser 
sight unit which you have developed. It is a product 
which we can aanufacture and are very nuch interested to 
manufacture. And then it quotes manufacturing runs ad 
the unit price, all FOB Four Way, New Jersey, subject to 
obtaining the necessary export license. 

Are you familiar with anything that would fora 
the basis for such a letter to Mr. Hakim? 
A No, I am not. 

You never discussad the manufacture of those 
laser sights here in the United States with Mr. Hakim 
under the auspices of Tri-American Arms? 
A No. 

Q Let me show you a letter now morked as Exhibit 
No. 16 to this daposition, a memorandum actually to 
Mr. Secord from Mr. Dutton, memorializing a meeting of 
January 7th — mxcuse me, Janury 12th, 1987. 

(Whereupon, the document was 
marked for identification as 
Exhibit No. 16) 



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This is for a period of tine after you had 
2 broken your association with Hakim and Secord, is that 



correct? 



4 A That's correct. 

^ Q All right, are you faailiar with any discussion 



that would have formed the basis for such a aeaoranduffl? 



"^ A No. I aa not. 

^ Q So this aeaorialized Meeting aaong 

9 representatives of Four Way, STTGI and Mr. Goff, Jr. iL 

soaething that is entirely out of your knowledge, up 



10 

11 until this aoaent^ 



12 A That's correct. 

13 MR. DICKINSON: Could we go off the record here 
14 



for a second? 

MR. HOLMES: Sure. 
(Discussion off the record) 
BY MS. HOLMBS: 
Are you faailiar with the naae Frank Lucero? 
A I hava heard that naa* froa Larry Royer. as one 
of the individuals now involved with Bio-Fine 
Pharaacuet icals , yes. 

Q Do you know froa those conversations, were you 



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told what role Lucero had in the Bio-Fine venture? 

A It seens that he is involved with the capital 
phrasing for that venture. 

Q Do you know anything aore about Mr. Lucero? 

A No, I don't. 

Q Where he is fro», anything like that? 

A I have no idea. 

Q As for Mr. Royer, I gather that your own cereal 
related business is no longer operational? 

A No. 

Do you have any other business relationship 
with Mr. Hoyer? 

A No, no other business relationships. 

Q Do you know anything about any businesses that 
he now has? 

A No, I don't, except that they are pursuing 
Bio-Fioe Pharaacuet icals, and froa what I understand, 
they continue to pursue the wood project, but I don't 
know ofany othar businesses, besides those. 

Q And you don't know what the current state of 
CBRBTECH? 

A I don't know. 



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1 Q Other than what you have told us today, do you 

2 have any knowledge at all about Richard Secord? 

3 A No, I don't have any other knowledge about him, 

4 except what we have talked about today. 

5 There are no business opportunities, or 

6 financial transactions of any kind that he has discussed 

7 with you, or in your presence, other than the ones that 
3 we have talked about today? 

9 A No, he has not. 

10 Q Could I ask you the saae questions witb regard 

11 to Mr. HaklB? 

12 A Tea, he hasn't discussed anythlnf with ae. 

13 Did either Secord, or Hakia discuss with you 

14 any other eras dealing that they have ever done? 

15 A No. 

1* Q Did they ever give you to believe that they 

17 have contacts through which they could sell aras? 

13 A Yes, I thought that they could sell aras. I 

19 had tb* fealing that they had the contacts to sell arms 

20 internationally. 

21 Q~ Did they go into any details at all in that 

22 regard? 



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A Mo, simply that they had international 
contacts, and had used different countries that they had 
access to. Priaarily, when we spoke about the different 
countries that the Goffa already had licenses for, they 
felt like they had contacts in so«e of those countries. 

Was Saudi Arabia mentioned specifically? 

A No, I think it was the Middle East, but not 
specifically Saudi Arabia. 

Q And other than what you have told us about 
Mr. Zucker, the saae question? 

A Yes, I. don't have any dealings, or any further 
dealings with Mr. Zucker. 

Q Other than the discussions that we have talked 
about with regard to the Contras, were they ever brought 
up in your discussioos? 

A No. 

Did Secord ever tell you that he was supplying 
aras to the Contras, or getting money froa the supply of 
aras to the Contras? 

A Ifo, ha never aentioned the Contras at all. 

Q~ Did ha ever aantion — well, I gather that he 
did mention close ties with the U.S. government, in terms 



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130 
of the Quad-Mount? 

A When we talked about the Quad-Mount system, he 
had close ties with the U.S. government. In fact, in the 
study that you have with the M-180 and the United States 
government, I believe that Secord aentioned that he 
contacted the officer, or had soaeone contact the officer 
that did the study at Fort Banning. 

Q Why did he do that, did he say? 

A Simply to see how good the firearm was. 

Q What did he report to you? 

A That they had some problems at that time with 
the weapon locking up, and a couple other things about — 
I don't recall the exact conversation. When I mentioned 
that to the Goffs, they said, well, those problems had 
been overcome, they didn't have those problems with that 
firearm anymore. 



contacted, or had someone contact the officer mentioned 
in that report. 

Q The American 180 is strictly an anti-personnel 
type weapon, isn't it? 

A Tes, as opposed to — 



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Q Like an anti-tank gun? 

A Yes, anti-personnel, exactly. 

Q And in its automatic forsi it is not a sporting 
weapon by any stretch of the iaagination? 

A No. 

Q In effect, it produces an extreaely rapid 
streaa of .22 caliber bullets, is that right? 

A That's correct. 

Q And that's 1800 rounds per ainute cyclical rate 
per brochure? 

A Yes, that is correct. 

Q So, in a quad aount it's four receivers 
functioning together, in tandem, all at once? 

A That's correct. 

So that's — whatever it is — it would be 30 
rounds a second out of each gun, it is 1,200 rounds per 
second out of the quad «ount? 

A It would be 120 per second. 

Q Right. 

A Over 7,000 per ainute, 7200 a ainute. 

Q - What is that suitable for? 

A I don't think you are going to hunt Baabi with 



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1 that. 

2 Q Well, obviously it is not a sporting weapon, 

3 but its marketability would be for massive repulsion of 

4 hordes of people, is that the idea? 

5 A I don't know. You know, it is like any 
^ autosatic weapon, M-16, or anything else, uachinc gun, 
'7 they have tremendous fire power. 

Q It is a fairly shprt-range weapon, though, 

9 isn't it? 

10 A I think the range would be Bore than some of 

11 the higher calibers, you can actually -- the range is 

12 farther. 

13 Q But it would be like rajn -- 

14 A Sure, exactly, the iapact would be -- right. 

15 Q The primary purpose is what I an getting at. 
was strictly ail i tary-type? 

A It is ailitary-type purpose. 
13 Q And Military and quasi-military, or weapon of 

19 last resort in prison riots, or — 

20 A SWAT teams. 

21 Q ~ Or something like that, a military weapon. 

22 A It Is not something that is carried by the 



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1 average citizen, no. 

2 Q And the briefcase model that Hakim refers to 

3 would be further liaited to clandestine type activity, I 

4 gather? 

5 A I would think so. 

6 Q It is baaically an assassination weapon? 

7 A Yes. And security, it is probably also could 
3 be used for security. 

9 Q You could call it an anti-assassination weapon? 

10 A Exactly. 

11 Q I could envision two people shooting at each 

12 other with their briefcases -- 

13 MR. HOLMES: Do you have any questions? 

14 MH. REMSTEIN: No. 

15 MR. HOLMES: I have no further questions. If I 
1<^ can ask you a general question. is there anything that 
17 you would like to add to •■plify, clarify any of your 
13 statements, now is an opportunity for you to do that, or 

19 if you Mould like to confer with your lawyer, and touch 

20 up anything that you feel you nay have either aissed, or 

21 invertently aiastated, or — 

22 Let's go off the record. 



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1 (Discussion off the record) 

2 BY MR. HOLMES: 

3 Q Have you had any contact with Larry Royer 

4 recently? 

5 A Yes, I spoke with Larry, actually the 18th, 

6 which was Monday, yes, Monday -- okay, on the 18th. And 

7 he said he was very upset about the -- he saw a blurb on 
CBS on sone questions that CBS had asked me. And I said, 

9 yes, that I had answered their questions truthfully and 

10 factually. 

11 And he said that Secord said that I was a 

12 fiduciary, and I should not be talking about his 

13 account. And that if I was in Switzerland, I would be 
^4 in Jail. And he aentioned that he heard $1 nillion on 

15 the newscast, and I said, that's exactly correct, that is 

16 what we were going to — the question posed to ae by CBS 

17 was how Buch aoney was appropriated for Aaerican Aras, 
13 and I said $1 alllion. 

19 And that was the end of the conversation. 

20 Q How did he end the conversation? 

21 A Well, he just says — asked ae if I had been 

22 subpoenaed to coae to Washington, D. C, and I said, no, 



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hat I hadn't been subpoenaed, but that I wan goint to 

2 Washington, D. C. to tell what I knew. 

3 How did he respond to that? 

4 A His response was "Well, that's all you can do", 

5 or sonething very curt. "That's all you can do", I don't 

6 reneniber exactly. 

7 I had another call coaing in froa New York, and 
I said, "I've got another call coning in, and I need to 

9 go". 

10 Q What was his general tone of voice? 

11 A Very hostile in the beginning, he was very 

12 nervous and upset about this press coverage. 

13 Q And did he tell you how he knew that Secord had 



14 



said that you were a fiduciary, and for that reason 



15 shouldn't be talking? 

1^ A No, he Just said that Secord said that I was 

17 the fiduciary for that account and I should not be 

13 talking about th* account. 

19 Q _ He didn't tell you when he had that 

20 conversation with Secord, or how he knew that Secord felt 

21 that way? 

22 A No. 



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1 And prior to that conversation, when did you 

2 talk to Larry Royer last? 

3 A It has been a couple of weeks. Well, he called 

4 my office and I was out of the office last week, and I 

5 didn't return his call. But I suppose it has been a 

6 couple of weeks since I talked to him, I don't have it on 

7 these notes. 

3 But he has called my office a number of times. 

9 I have been working on an oil exploration project, and I 

10 haven't been in ay office very much for the last two 

11 weeks. 

12 Q Have you ever previous discussed with Royer the 

13 fact that Secord was mentioned prominently in these 

14 various investigations? 

15 A Oh, yes, when Secord first caae out in the 
1^ newspapers, in the investigatiuns, I asked larry what it 
17 was all about, and ha just said, oh. it is nothing, that 
13 everything will be fine, it will all work itself out -- 

19 like it was no concern. He seemed to be a lot more 

20 concerned yesterday. 

21 Q ' Did you discuss the investigation with Secord, 

22 meaning -- 

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A I haven't apoken with Second since, I don't 
know, September, October 1986. 

Q Had hia naae coaa out in the preaa at that 
tine? 

A Yea, previous to that -- well, let's aee, the 
last tiae I spoke with hia waa on returning the noney, 
whenever that was. And I don't know when hia naae first 
began coaing out in the pr.esa. It seeas like it waa 
towards the end of '86, wasn't it,' Noveaber, Oeceaber. 
So it would have been previous to that. 

Since his naae started coaing out in the press, 
I have never apoken to hia. 

Q And have you spoken with Hakia since? 

A No, I have not. 

Q Have you spoken with any of the other people 
that you have talked about today, about the inveatigative 
end of this, putting asida tha ATF investigation? 

A No, except for ay attorney. 

Q I would like to aake your chronology an 
exhibit, if I could, would that be all right with you? 

a" That's fine. 

Q This is soaething that you have been referring 



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138 
to during your testiaony, and I gather that you have 

2 confirmed these various dates through your records? 

3 A That's correct. 

4 MR. HOLMES: This will be Exhibit No. 17. 

5 And like the other ones, we will have the original back 

6 to you. 

7 (Mhereupon, the document was 
3 Marked for identification as 

9 Exhibit No. 17) 

10 HB. HOLMES: Mell, I have no further 

11 questions. 

12 The comaittee rules prohibit our disseainat ion 

13 of the transcript, so the only way you can review the 

14 transcript, in° order to verify it, is here at the 

15 coaalttee offices. And it will be aade available in 
K short order. 

17 And I suppose I can aake an atteapt to aake a 

13 copy available to you in Colorado, but in the past our 

19 policy has been that they don't leave tha coaaittee rooa, 

20 period,, for the reason that the news aedia and everything 

21 are likely to get bits and pieces of it, if we let thea 

22 go out to witnesses. 

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1 And I tell you that aa preparatory to the 

2 Doroal question of whether you want to review it, or not, 

3 prior to its becoming record? 

4 MR. DICKINSON: I think it would be helpful to 

5 review it, just fro« the documentary and accuracy -- but 

6 I assume you would get a voucher for Don to come back and 

7 review it in D. C? 

3 MR. HOLMES: I can't tell you that. I don't 

9 know. 

10 MR. DICKINSON: Of courae, accuracy la the aia 

11 of the committee, I'm sure. 

12 HR. HOLMES: Tou are absolutely right on that, 

13 but so is economy. In any event, we can try and work 

14 that out. 

15 MB. DICKINSOH: Let's sae what we can do on 

16 that. 

17 I would lika to pnt into the record that, onca 
13 again, my client has appeared voluntarily, at your 

19 requeat, but ha haa appeared with all of the 

20 documentation he haa on the matter, that that 

21 documentation haa bean reviewed, prior to the formal 

22 depoaition by the committee peraonnel. And that there is 



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nothing outstanding that he has at this tiae, absent 

2 something that night be brought to our attention later, 

3 which we certainly have no idea of now. 

4 MR. HOLMES: I wonder if you would exceed to a 

5 general request that if anything comes to your attention, 

6 that you would let me know? 

7 MR. DICKINSON: I have no problea with that at 
all. 

9 MR. HOLMES: Fine, rather than the normal 

10 standing subpoena method. And I am happy to put on the 

11 record that I am indebted to you for not only coming 

12 voluntarily and without immunity, or anything likm that, 

13 but for coming very rapidly at our request, so that we 

14 can get rapidly to the bottom of this thing. 

15 And with that, we will go off the record. 

16 Thank you. 

17 (Signatura not wmivad) 
13 (Whereupon, tha taking of the deposition of 
19 Mr. Don Maroatlca was concluded at 6:00 p.m.) 
20 
21 
22 



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HSITS^£Za-»/97 

- . TOP SECRET/ CODEWORD 1 

1 DEPOSITION OF JOHN O. MARSH, JR. 

2 Thursday, July 23, 1987 

3 United States Senate 

* Select Comalttee on Secret 

5 Military Assistance to Iran 

* and the Nicaraguan Oppositioi 
"^ Washington, D. C. 

8 Deposition of JOHN 0. MARSH, JR. , called as a 

9 witness by counsel for the Select Committee, at the 

10 offices of the witness, The Pentagon, Washington, D. C, 

11 commencing at 2:10 p.m., the witness having been duly 

12 sworn by MICHAL ANN SCHAFER, a Notary Public in and for 
the District of Columbia, and the testimony being taken 



13 

14 down by Stenomask by MICHAL ANN SCHAFER and transcribed 

15 under her direction. 
16 



byN.MeMn.N«IIOMlSacontyCooncl 



TOP SECRET/CODEWORD 

COPT "" I /> wf 




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— CO^fES 



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1 APPEARANCES : 

2 On behalf of th« Sanat^ Salact ConnStee on Secret 

3 Military As#l8t«nca to Iran and the NicK^^an 

4 Opposition: 

5 "" JOHH SAXON, ESQ. 

6 C. H. ALBRIGHT, ESft*-^;, ^. 

7 r Oi^^half <#«»• ffi>use Select ceaaittee to _,^f^^-- 

8 Investigate Covert Arms Transactions with Iran: 

9 JOSEPH SABA, ESQ. 

10 ROBERT W. GENZMAN, ESQ. 

11 ROGER KREUZER ^" ^ -jfe^^ 

12 on tagshalf_o|^e P if aUgBt CJC Defeap^ ~ "^ 

13 ^ MtPIRO, E«Q. ^ 

14 THOMAS TAYLOR, ESQ. 

15 Office of General Counsel 

16 COLONEL JOHN WALLACE 



«\WSSSSP 



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TOP SECRET/CODEWORD 







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N 


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EXAMINATION ON BEHALF OF 




WITNESS 












SENATE HOUSE 




John 0. Marsh, Jr. 














By Mr. 


Saxon 










4 




By Mr. 


Saba 










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By Mr. 


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By Mr. 


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By Mr. 


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By Mr. 


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By Mr. 


Saxon 










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ITS 


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MARSH EXHIBIT NUMBER 










FOR IDENTIFICATION 


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1 PROCEEDINGS 

2 Whereupon, 

3 JOHN O. MARSH, JR., 

4 called as a witness by counsel on behalf of the Senate 

5 Select Committee and having been duly sworn by the Notary 

6 Public, was examined and testified as follows: 

7 EXAMINATION 

8 BY MR. SAXON: 

9 Q Would you state your name, please, sir? 

10 A John 0. Marsh, Jr. 

11 Q And, Mr. Marsh, what is your position? 

12 A Secretary of the United States Army. 

13 Q I believe you've been Secretary since February 

14 of 1981; is that correct? 

15 A Actually since probably 29 January 81. 

16 Q And previously you served four terms in the 

17 United States Congress from Virginia's Seventh District; 

18 is that correct? 

19 A That's correct. 

20 Q And you were Assistant Secretary of Defense 

21 for Legislative Affairs? 

22 A That's correct. 

2 3 Q And you served as the National Security 

24 Advisor to Vice President Gerald Ford? 

25 A That's correct. 



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1 Q And after that you sarved in th« Ford White 

2 House when Mr. Ford was present as Counsellor to the 

3 President; is that correct? 

4 A Exactly right, with Cabinet rank. 

5 Q At the White House you chaired the President's 

6 Intelligence Coordination Group; is that correct, sir? 

7 A That's correct. 

8 Q Mr. Marsh, as you know, the natters that bring 

9 us here involve the arms sales to Iran and possible 

10 diversion of any proceeds froa those anas sales to the 

11 centres. But before getting to those natters 

12 specifically I want to ask about a few process natters 

13 involving how the Amy provides equipnent and nateriel to 

14 the Central Intelligence Agenc y, the process that's used, 
specifically th^^^^^^^^^^^^^H the 

16 with DOO, et cetera. 

17 And to do that I want to start with sons 

18 background. L«t ne introduce the first exhibit. I'll 

19 certainly give you time to read this because you probably 

20 haven't seen it in a while. This is a menorandun that 

21 you sent to Defense Secretary Weinberger on 9 May 83 

22 dealing with sensitive DOD support to CIA special 

23 activities. 

24 Let ne just give you a ninute to read that, 

25 sir. 



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1 (The document referred to was 

2 marked Marsh Exhibit NumJser 1 

3 for identification.) 

4 (Pause.) 

5 A I believe Del SpurlocX wrote this memo. He 

6 was General Counsel then. He's still here as the 

7 Assistant Secretary for Manpower. It seems to me he got 

8 a response to this. 

9 Q Yes, sir, and that will be Exhibit 2. Have 

10 you read it? 

11 A Yes. I've gone over it enough that I have & 

12 general familiarity. 

13 -^^^ yoi^rT^oaR iMft thiaaiml ean yoa verify that^ 

14 this is a memorandua you sent to Secretary Weinberger? 

15 A That's correct. I did. 

16 Q In a general sense, before any specific 

17 questions, is there anything in particular that triggered 

18 this or anything noteworthy that you remember that caused 

19 you to sand it? 

20 A I thinX what was happening at the time, Mr. 

21 Saxon, ia that this was occurri ng at a tima when we were 

22 having soma 
23 
24 
25 




789 




Mr. Weinberger was aware of this and was very 
helpful In that regard. And so this was an attendant 
type of problem that was pr oducing some of the problems 
that you are getting at 




So Z wanted tu surface It 
"with him and this memo was drafted for me by the General 
Counsel of the Department of the Army, who put a good 
deal of tine and study Into It, whose name was Delbert 
Spurlock. 

Q Is it fair to say that this memo captured and 
represented to Secretary Weinberger some of your concerns 
about these type of activities? 

A It did, and that's why I signed it and sent It 
up there, because the concerns that are expressed here 
were not just mine in the Army. The General Counsel had 
raised it with me. In fact, he drafted the memo. But I 
would say to you that there were others In the Department 



you that there were othe 



790 



oiussra 



1 of the Army, both military and civilian, who shared these 

2 concerns, because the Army ends up in many of these 

3 operations being a very key operating agency in carrying 

4 these things out. 

5 So we may carry a greater load than others. 

6 I'm not sure of that because I don't )cnow the scope of 

7 the Navy or the Air Force, but I ^ know that we are 

8 frequently called on to engage in these type of 

9 endeavors . 

10 Q All right, sir. Let me, while the memorandum 

11 will be an attachment t<? the deposition, let me highlight 

12 a couple of things that are in it to set the course of 

13 the next few minutes of the discussion. 

14 You indicate, and I quote: "With increasing 

15 frequency, due largely to the Presidential Findings 

16 relating to Central America, the CIA has been requesting 

17 DOD support which should be considered significant and 

18 raises son* difficultjji policy and legal questions." You 

19 indicate there are three examples that you have attached 

20 at Tab A that evidence this point. 

21 You continue in the second paragraph: "The 

22 purpose of this memorandum is to raise several issues 
2 3 regarding the manner in which CIA requests for DOD 

24 support are reviewed within the appropriate agencies of 

25 the Executive branch and are reported to Congress, if 



msswm 



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1 necessary. These types of Issues have taken on special 

2 significance in light of the increased Congressional and 

3 media interest in this area." 

4 Further, in the next paragraph you state: 

5 "CIA requests for DOD support are reviewed within DOD to 

6 determine whether DOD is willing to and capable of 

7 providing the requested support. There are, however, at 

8 least four important issues which ai^rnot be receiving 

9 sufficient attention in the review precess either within 

10 or outside QOD." *" - -r 

11 You go on to tallc about those /'and le^ae 

12 highlight a couple at them. In thm. snond paragraph of 

13 page two, halfway ^wn, th»|pBo 'Mates : ^^*Thj CIA, DOD 

14 and th« Department of Juatice have agreed th« ^ 

15 foreseeable and significant DOD support to be determined 

16 pursuant to a r easo nable litmus test will be noticed 

17 explicitly 9Cth^th*'4ir%.d«nti4grTlnilli^|j^'^ all 

18 other 8upportr-i^i|^«^ sat tor^ Oi thcr^o^MpME-Vhich ^ 

19 accoBpani«« tha Finding . " - "^ -^ ^ ^ 

20 ^Th* next "^paragraph begins: "The aacond major 

21 issue relates to the bread^^f ^ppkdential Findings and 

22 the question of whether DOD support which is requested is 

23 consistent with and authorized by the Finding." 

24 You continue with a particular example in 

25 which you signed off and stated: "Thus, while I executed 



ijilL^S«D 



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jiussiEe 



1 the approval memorandum, I conditioned my approval upon a 

2 priority notification to Congress of the exact nature of 

3 the operation. For this and various other reasons, the 

4 Amy raised objections to the support requested and it 

5 was eventually withdrawn by the CIA." 

6 To continue with a couple other highlights, at 

7 the top of the next page: "Additionally, and perhaps 

8 most importantly, requests for sensitive DOD support must 

9 be reviewed for compliance with the statutory 

10 requirements relating to Congressional oversight of 

11 special activities. The CIA must, of course, inform the 

12 Congressional intelligence oversight committees of all 

13 special activities." 

14 In the next paragraph you state: "Finally, 

15 with regard to Central America requests for support must 

16 also be reviewed to determine compliance with the Boland 

17 Amendment." 

18 In the last paragraph on that page: "The 

19 problem ^«tai^ I perceive relating to these issues is the 

20 eibaence of a system or process by which they are 

21 addressed. Unlike the more fomal process by which 

22 Presidential Findings are reviewed within the NSPG, the 

23 above issues relating to CIA requests for DOD support are 

24 reviewed for legality, if at all, in an ad hoc manner 

25 both within and outside DOD. Finally, within DOD I do 



793 



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2 
3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

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18 

19 

20 

21 

22 

23 

24 

25 



11 

not believ* that th« Deputy Under Secretary of Defense 
for Policy routinely solicits the review of the Office of 
General Counsel. 

Because of the subtle but volatile legal aspects of 
the issues discussed above, I believe it is important 
that all significant requests for sensitive DOD support 
be reviewed in a consistent and systematic manner, to 
include an appropriate role for the Agency's legal 
advisor within and among all affected agencies." 

In the next paragraph: "Within the Army I am 



pleased with the review aystea which lua 



••tablished 




Finally: "Based upon the foregoing, Z believe 
it is important that you encourage the establishment of 
formal intra and Interagency procedures, including the 
participation of the Department of Justice, relating to 
the review of requests to support CIA special 
activities." 

What I tried to do with those sections that I 
quoted was to capture the essence of what you put 
forward. Before asking you some broader questions 
probzUsly I should give you Secretary Weinberger's 
response, which was dated 13 June 83, aifiiorandua for the 
Secretary of the Army. _I'J.l Jl4^£a^i« marked as 

if 



(f 



794 



.^^HiL4SWD 



12 



1 Exhibit 2. 

2 (The document referred to was 

3 marked Marsh Exhibit Number 2 

4 for identification.) 

5 (Pause.) 

6 You've had a chance to review that, sir? 

7 A Yes. I have reviewed it and I remember having 

8 received it. 

9 Q All right, sir. For the record, let me read a 

10 couple of relevant sentences into the record from 

11 Secretary Weinberger's response to you. He begins with, 

12 "Your 9 May memorandum on management of DOD support to 

13 CIA special activities raises significant points." 

14 In paragraph three he states: "Your point 

15 concerning notification to the Congressional committees 

16 is well JB^*^. "Vbm Oepii^y Under Secreta^ of Defense for 

17 Polic^4Mj^mon^Mf/t io^ action on these notifications 

18 after appropriate coordination with the DOO General 

19 Counsel, DOD Legislative Liaison, CIA, the Joint Staff, 

20 DIA, and the military departments. We must comply fully 

21 with all statutory and Presidential direction on such 

22 reporting. 

23 "Beyond these requirements, I wish to be as 
diligent in inf ormtij^iy apyopi ^ ■ Congv^sionsl 



24 

25 Committees as good management and division of authority 



I good management and di^ 



795 



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13 



1 between the Legislative and Executive Branches permit. 

2 However, I must recognize the prioary responsibility of 

3 the OCX concerning decisions on reporting special 

4 activities to the Congress." 

5 At the top of the next page: "Our current DOD 

6 process for staffing CIA requests for operational support 

the special^^^^^^^^^^^His 

8 In paragraph three: "Legal counsel is readily 

9 available to all participants in this process. All 

10 proposals and requests for action in these areas referred 

11 to OSD are handled by the DUSD(P) . The latter staff is 

12 especially experienced in and attuned to policy, 

13 procedxiral conatrainte and general legal issues pertinent 

14 to theatt activities. In aM^on, in order to ensure 

15 that a complete legal review is carried out all such 

16 requests will be referred to the Office of the DOD 

17 General Counsel for evaluation. In view of the 

18 institutionalized legal review, the establishment of 

19 additional intraagency or interagency review procedures 

20 to evaluate and advise outside the current interagency 

21 coordination process is not necessary." 

22 I take it from that Secretary Weinberger felt 

23 satisfied with the system that was in place, and having 

24 that in the record let me asK you, without addressing 

25 specif ically Project SNOWBALL, which was the Army's term 



!lf.!ISSin!0 



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1 

2 
3 
4 
5 

6 
7 
8 

9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 



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for th« TOW slsslles which ultimately found th«ir way to 
Iran, or Project CROCUS, the HAWK repair parts, are you 
happy with the sy stem that was pu t in place, thc^^^^^H 
^^^Hsystem, the^ 
understandings between the Department of the Army and DOD 
and the Department of the Army and CIA for normally 
handling such transfers? 




That would provide an even greater impetus to 
institu te a ch ange and refora and oversight and control 




And these matters 
and probleas were all reported to the Secretary of 
Defense, and Z would say to you that Mr. Weinberger too)c 
a very keen Interest in that. 

He held meetings at his level in his office in 



ietftS«B 



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15 



1 which h« personally participated in support ot the Army's 

2 efforts to make very substantial changes, and he advised 

3 me on the phone, I can recall, one time in reference to 

4 that to do whatever was necessary to be done to get it 

5 straightened out. He was very concerned about it. Get 

6 it straightened out. That he would call or see whomever 

7 it was necessary in order to ensure that. 

8 But we would then institute the Amy program 

9 that would become better Icnown and which you )cnow ^^^^H 

10 ^^^B which has proved to be a very effective system for 

11 the management, for the approval and management of 

12 intelligence type programs. 

13 Q This exchange of memoranda would suggest a 

14 great amount of sensitivity on your part to the issue of 

15 Congressional notification, the need for proper legal 

16 review. Secretary Weinberger's response would seem 

17 likewise to share those same concerns. And what you've 

18 just told us of subsequent events in light of the 

19 ^^^^^^^Bea spray-yellow fruit problems means that you 

20 even went further and improved and tightened up the 

21 system. 

22 In your opinion, to go from the generic system 

23 and institutional stnactur* in place for handling these 

24 transfers to the specific matters tha t our Committees are 

25 concerned with, would you say that tht 



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16 



1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

IS 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 



wa« utilized or bypassed with regard to SNOWBALL and 
CROCUS? 

A It was utilized in part. And there's one 
point I would like to go to and mention before that 
because you talked in teras of sensitivity to what was 
occurring here. And the point I'd like to make is that 
when you saw this exchange of correspondence in May^^H 
^^^^^^^^^^^|and we a system 

that would handle any of the problems, handle all of our 
programs, t his was done unaware that there was ex isting 
in the Amy I 

I would say to 




not briefed on those two, nor were 
other senior civilian leaders, and in fact some very 
senior military people were not aware of its scope — and 
by "senior" I mean most senior military people were not 
aware of ita total scope. 

I want to make that point because it 
demonstrates how difficult at times it is to construct a 
system and be certain that you have within that system 
the programs that are either in being or that someone 
might conceive. ^^^^^^^^^^^^^ 

Now in reference tc/ th*^^^^^^^^^^^^Bl 
think it's important that the record be made that the 



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17 



do«s not ralat* sol«ly between the 
Department of Defense and the CIA. The 
^^^^Hie Intended to be a systea that will be used for 
sensitive types of activities and operations that might 
Involve Treasury, Customs, Justice, NSA, some other 
organization in government, and to provide a means 
whereby they can avail themselves of certain resources in 
a way that it does not become public knowledge. 

The^^^^^^^^^^^Vln the 
operation you might say was used on the back side, 
meaning execution and delivery, but it was not used a^ 
far as the Army was concerned on the front side of 
processing for review, legal review, and approval. So it 
was not wholly exercised. 

Q In your experien ce as S ecretary since the time 

jandTYELLOW FRUIT, are you aware of 
any oth«r ••nsitive transfers to the CIA which have gone 
forward from the Dep artment of the Aray_whlchJiave_not _ 
gone the full^^^^^^^^^^^^^^^^^^^^^^^^f 

A The only two I Icnow would be the ones you've 
mentioned, which would be SNOWBALL and the one involving 
HAWK, CROCUS, did not, but a portion of CROCUS did and 
was bj^^^^^^^^^^^^^^^^^^^^^^^H 

Q By which you mean the follow-on request for 



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1 

2 

3 
4 
5 

6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 



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18 





additional HAWK parts? 

A Right. That was captured. The system had by 
now become good enough that it was able to capture that 
follow-on request and indeed it disclosed that the big 
request hadn't gone through the system. 

Q I appreciate your correcting the imp ression 

on the that ^^*>^^^^^^^^^^^^K 
exists solely to service the CIA, but as a practical 
matter my understanding is that in excess of^^|percent 
of the business that goes through the 
would be for the Agency; is that correct? 

A I don't know a percentage figure,! 

As far as we 're concerned, 

relates to the 

Agency, although we have processed requests for agencies 
other than the Central Intelligence Agency. 

Q Mr. Secretary, before we go into any further 
discussion on the particulars of these HAWK and TOW 
transfers, let me ask you, if you would, to simply hold 
forth for a moment or two on the issue of Congressional 
notification and let us have your views on that on the 
record . 

You've been on that end of town and you've 
been in-between at the White House. You've had some very 
important responsibilities in th*..-ef%gress, at the White 



^6f ^'S^;f!Ji^jCJ9PE«(fe^ '^ 



ff 



801 



y iVln4«^i4»#?^.^ 



19 



1 House, and here, and, as you know, there's a lot of 

2 disagreement over need for secrecy in covert policy, the 

3 need for notifying the Congress, et cetera. If you would 

4 share with us your views on these subjects. 

5 A I lean very strongly toward and in support of 

6 Congressional notification and indeed Congressional 

7 liaison as you do these things because I recognize that 

8 ultimately to proceed with them without it will 

9 eventually, in my view, lead to their downfall because 

10 they will become disclosed for some reason or another. 

11 My own experience with the leaking of 

12 information, I'm certain that leaks have occurred on the 

13 Hill, but I also know that leaks occur in the Executive 

14 branch of our government. My own experience in dealing 

15 with the Congress on sensitive matters has been very 

16 good. I have no problems. I have not encountered 

17 problems with Members or Committees with whom I've dealt 

18 on sensitive matters, and I've been doing that for a long 

19 p«sriod of time. 

20 I did it on behalf — I handled a great number 

21 of the notifications for the President when Mr. Ford was 

22 President, and I have great confidence in the Congress's 

23 ability to handle these. I do think the danger that 

24 occurs on the legislative side is the proliferation of 

25 numbers of people, which is a danoer that you get also on 



people, which is a danoei 



802 



wsiimE 



20 



1 the Executive side. And so to the extent that you can 

2 limit the number of persons to whom you make your 

3 disclosures you are actually, I think, providing a 

4 safeguard. 

5 There has been a suggestion — we went through 

6 this, these issues in 1975, and at that time, I think I'm 

7 quoting him correctly. Senator Mansfield, the Majority 

8 Leader of the Senate, met with the President, and Senator 

9 Mansfield advocated a single joint committee not unlike 

10 the Atomic Committee, and he felt that that would be one 

11 of the most effective ways to handle it. 

12 There is a problem in the Executive branch 

13 when you have so many different bases to touch. One of 

14 those problems, I can tell you, in times of crisis — and 

15 I've had to do this in times of crisis — is time, being 

16 able to get to a number of Members and also being able to 

17 convey messages to them on highly sensitive matters in a 

18 secure fashion, particularly when they are beyond the 

19 Washington environs. And I have had to do that even when 

20 the Members were in foreign countries on matters that 

21 were of considerable national urgency. So the reduction 

22 of the membership would be helpful. 

23 I can tell you there is an area that I would 

24 hope the Congress would look at because there is an area 

25 of ambiguity on the reporting and who has the duty to 



llNtQiSSfFIHI 



803 



UNCLASSIFIEO 

TOP SECRET/CODEWORD 



1 report. In a general way your current statute places the 

2 duty to report on the Director of Central Intelligence, 

3 the Secretary of State, the Secretary of Defense, and 

4 heads of other agencies engaged in intelligence 

5 activities. 

6 There is a difference of view on that issue. 

7 The broad view is that that would mean the Secretary of 

8 the Army, because of the intelligence activities under 

9 the Department of the Army, and the narrow view is it 

10 would be the Secretary of Defense. We take the view that 

11 the burden or obligation is on the Secretary of Defense, 

12 and I think that's a very sound approach. 

13 But it's one that is of concern. I think that 

14 we must be frank as we look at the question of 

15 notification. Is it secrecy? Is that what we are 

16 concerned about? Or is it a concern that those to whom 

17 we have consultation do not agree with what we seek to 

18 do? Now that's a different issue, and I don't think you 

19 can use secrecy to screen differences of view on policy. 

20 There's a tendency, Mr. Saxon, I find looking 

21 back over a long period of time in dealing with matters 

22 that are sensitive, regardless of whether it's up at my 

23 level or down at a very low level, at the squad level, if 

24 it's secret it's legal. Now that should not be stated as 

25 a declaration. It should be stated as a question. If 



wkmm 



804 



UNCussra 



22 



1 it's secret, is it legal? 

2 Now if we were to approach that in that way 

3 and answer that question first, then it will make all of 

4 our efforts much more simple. But when you take the view 

5 that if it's secret it's legal, then all existing 

6 regulations and laws and norms and customs very 

7 frequently fall by the wayside, and people go forward 

8 with this objective because it's secret and therefore 

9 it's legal. 

10 Q You indicated that on* of t^ib* ^icerna aflbut 

11 Congressional notification is that you perhaps get too' 

12 many people involved. The flip side of that is that if 

13 you teem conc«me4dfeout th4^,Bai«d to ]e^& •oaethlng- secret 

14 you might hav*^oo f«w people invoked. ^PJ^^ai have a 

15 sense that that was part of what created our problems in 

16 these current matters, that there was a concern about 

17 letting too many people know and, therefore, too fur " 

18 people knew and we didn't use the systems we have in 

19 place to staff out things that should be staffed out or 

20 to debate policies that should be openly debated? 

21 A I'm not sure of that. I see the point you are 

22 trying to make and I really can't argue with it. I don't 

23 know whether it was applicable here. I think in the 

24 present case those who were engaged in it felt that a few 

25 people who were actually running the program could make 



ire actually running the ] 



805 



Mimm 



23 



1 the final determination and bring about its final 

2 conclusion in a successful way and that to involve 

3 others, both in the Congress and the Executive branch, 

4 would invite frustration and perhaps failure. 

5 Q Well, let me ask you about one particular 

6 individual who some Members of Congress at least believe 

7 should have been involved in this decision, and that's 

8 the Chairman of the Joint Chiefs of Staff. I can tell 

9 you from the fact that several of us in this room have 

10 interviewed and met with and deposed Admiral Crowe that 

11 he did not know w* were in the business of sending ann& 

12 to Iran until late June or early July of 1986 and that he 

13 found out more or less by accident. I don't think that's 

14 an unfair way to characterize it from what he's told us. 

15 I don't know exactly who made the decision 

16 that the Chairman of the Joint Chiefs not be included, 

17 and I'm not asking you to be put in an awkward position 

18 of reflecting negatively on whoever that individual was, 

19 but I would simply ask you in a broad general sense, 

20 knowing what you )cnow about the Iran initiative and the 

21 arm* sales, is that the kind of thing that should have 

22 included at least the knowledge of, if not the input 

23 from, the Chairman of the Joint Chiefs? 

24 A To look at the operation, I would have assumed 

25 that he had «€ Siastl^^ |^wledg«,~«n#the reason that I 



imtSMD 



806 



immm 



would have assuBMl that Is that there were thosf in the 
Amy at a high level who at" least had some knowledge of 
the operation or transfer as it was occurring, although 
they did not Jcnow to whom the transfer was being made, 
because the Army had to execute that. 

6 Therefore, I just would have assumed and did 

7 assume that he at least had the awareness that I had of 

8 the matter. 

9 Q And would you also think as a matter of policy 

10 or practice if we go through this exercise again that the 

11 Chairman of the Joint Chiefs should be involved in such 

12 decisions? 

13 A I would suspect that he probably would be the 

14 next time. 

15 Q I guess the question is should he be? 

16 A Yes, I think so. And I might mention a point 

17 of lav that has occurred by virtue of th«t^Reo qpp triMfen ^ 

18 Act. Under the Reorganization Act now the responsibility 

19 for the conduct of intelligence operations in the 

20 Department of tli* Army is the responsibility of the 

21 Secretary of the Army pursuant to the direction of the 

22 Secretary of Defense. You have an addition in the law 

23 there that relates to It, and then in the Reorganization 

24 Act there is also a provision that requires the Chief of 

25 Staff to advise the service secretary of actions that are 



Ise the service secretary 

UNWHflEb 



807 



•« ■'^.' ; ^: o 



;j(^ucsrtuwi>«i.u 25 



1 taken in the JCS that impact on his service. 

2 I mention those two points because they do 

3 have bearing now. 

4 Q Let me go back to a point you alluded to a few 

5 minutes ago. In 1975 I think you said that Majority 

6 Leader Mansfield proposed or suggested the creation of a 

7 joint intelligence committee. That is certainly 

8 something that has been talked about in the course of our 

9 hearings. We will reach a point when we complete the 

10 hearings and write a report the two Committees will make 

11 recommendations. And while this is the kind of question 

12 we might normally ask you toward the end of this session 

13 it kind of flows from what we are talking about now. 

14 Would it be your recommendation that our 

15 Committees should recommend to the Congress the creation 

16 of a joint intelligence committee? 

17 A Ye». I would recommend that. I think that 

18 would be the effective way to go. And apropos my views 

19 about the Congress, in dealing with the Congress 

20 Involving sensitive information the responsibility for 

21 the management and control and handling of that 

22 information by a Member is the responsibility of the 

23 Congress. And they must establish a system that they 

24 impose that discipline, because there is no other way to 

25 achieve an effective system. 



umitsstfe 



808 



\^m^*^ij 26 

1 You may recall back in '75, at that time one 

2 of the difficulties was a rule in the House which I think 

3 was called Rule 11(b), and in effect under Rule 11(b) any 

4 infomation that's made available to any Member of 

5 Congress, Member of the House, can be made, if he demands 

6 it, available to any other Member of the House. That was 

7 a very troublesom* situation and there was an incident, 

8 as I recall, a serious one, where that particular rule 

9 was availed by a Member and proved decidedly unhelpful. 

10 The only reason I cite the rule is that the 

11 Congress must structure its o%m mechanism within its own 

12 rules that handles those situations and accepts the 

13 position and takes a position that Members know and 

14 recognize that they must conform to certain standards in 

15 handling classified information. And only the Congress 

16 can discipline itself. So there must be a system 

17 developed to do that in the system. 

18 Q One more general question of a policy nature. 

19 Is it yo ur sense that if used as intended the 
^^^Plorks? 

21 A Yes. And to those that say you cannot conduct 

22 special operations and highly sensitive operations, I can 

23 tell you that we have a track record now for really 

24 several years of programs and projects that are currently 

25 being conducted, highly sensitive, and they are being 



IINfflOTI!B 



809 



1 

2 

3 
4 
S 

6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 



lii) 



«,D 



27 



•ffactlvaly carried out. Th«r« was an approval 
BcchanlsB. Thara la an ovaraight mechanism. And, very 
importantly, there are funding control systems. And it 
can be done, and we can show that it's being done. 

Q If any critics were to say, but wait a minute; 
you're talking especially sensitive mattei^here and maybe 
you need to handle sensitive matters differently. I take 
It froB what you are saying that we are currently 
handling soma very sensi tive transfers froB the Army to 
the CIA through the! 

A Wa are handling extreaely sensitive transfers 
and wa are handling extremely sensitive Batteral 




and thay are being dona in, I think, a way that's 

consistent with what the Congreas wants dona. 

Q And is it fair to say that thai 

^^^^Hwas designed as the axcluaiva Beans to handla 

thoaa transfers? 

A Yes, it was. That was the reason it was set 

up. 

Q Before I go into any particular Battera Baybe 

I should juat stop and sea if sy collaaguea have aoBa 

quaations of a general policy nature ao wa don't break 

the continuity 



iEy#^8 



810 



mmmi 



28 



1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 



BY MR. SABA: 
Q In regard, sir, to th« 
have had some testimony in our hearings that the system 
does not respond in a timely manner. There were examples 
alluded to, but it was not very specific in the 
testimony. The implication, however, in response to 
questions asked about why those procedures were bypassed 
in the case that we are concerned about was that these 
procedures were cumbersome and difficult. Specifically, 
as I recall, Colonel North said that former General 
Secord had been complaining vociferously about the 
procedures . ^•~-~ ^ 

Without reference to their conmente in 
particular, is it your opinion that thel 
^^^^^H.s capable of responding in a timely manner and, 
from what you do ]cnov of the particular transfers of TOWs 
in this case, I would like to hear your opinion as to 
whether had the systea been used it could have responded 
within the tine frame of the request that was made. 

A The system can respond very> very rapidly. 
The systea Is structured in such a way involving the 
major issues where I may have to make the approval and 
the Chief of Staff have to make the approval that we can 
do that turnaround time. We had one I can recalJ 




(i!3KSSfn!i) 



811 




W« can ihow you an inventory of l««u«» that 
hav« b««n rapidly handled and turned arou;id. Bat 
8oa«tlB«s things gat alowad down bKaus* you as)c th« 
questions and psopl* don't have tR« answers, and that's 
the reasoo^for the systfli. And the systea Is not 
Intended to be air expedient, ^t's Intended to^Jp an 
approval mechanism to ensure the integrity of the 
operation and that It's sound and that people have got 
their act together when they send It up here. 

And very frequently — very frequently — 
delays In the system do not originate ^"^^^^^H '^^^^ 
originate In the agency that's creating It themselves and 
at the last moment they send us a request over here that 
they have been sitting on Internall y sometimes for weeks 

expect us to turn It around in^^^^^^^^^^^^^^^| 
when they have had It for a long period of time. 

In the par ticular case here I thlnX had you 

used^^^^^^^^^^K-t have been 
the problems that you get when you start bypassing 
systems that are set up, you get dislocations and other 
attendant and Indirect and collateral problems that 
people never foresee. You must remember that we're 
dealing with an organization here that Is a very 



yit«Siffl 



812 



30 

1 institutional on«~with certain bureaucreM:i«« and that 95, 

2 98 percent of what we do are done in the open with 

3 established norms and hand receipts and accountability 

4 that's drilled into the private soldier and the officer 

5 who lives with it all his life and can conform with it. 

6 Now suddenly you move him into the sensitive 

7 world where you don't follow a lot of those procedures. 

8 When you begin to do a lot of these things orally and 

9 start transferring large quantities of materiel, you 

10 begin to lose any of the necessary history that you have 

11 to have for audit. And one of the problems that you've 

12 got with this system with this particular operation is 

13 going back and restructuring it as to who did what. 

14 You see, if you have a sensitive system for 

15 handling the transfer of property, this means that there 

16 are ways that it can be tracked by your auditors. 

17 There 'ar ways that the person who has to move it out of 

18 his warehouse knows that that's a legitimate request, so 

19 that when somebody comes along and takes an inventory he 

20 can refer him to an auditor or somebody else that 

21 accounts for the fact that that is okay and certifies it. 

22 And when you move into the system and start 

23 doing ti^n9» orally and^ere are- no written records you 

24 have no accountability to which you can go back and 

25 structure an inventory, and then^you end up with what did 



ISNEIWI 



H»ltu 



813 



mMm 



31 



1 v« sand and a whol* lot of other attendant questions. 

2 BY MR. SAXON: (Resunlng) 

3 Q Just so the record Is clear,! 

4 ^^^^^H Includes a number of processes and, if I 

5 understand it — and correct me if I'm wrong — there are 

6 three different legal reviews, one that takes place^^^^f 
^^^^^^^^^^^^^^^^Hand then goes to the Army 

8 General Counsel. There's a readiness review. What you 

9 are saying is, notwithstanding that there are all of 

10 these checks and processes built in, it can still work 

11 very quickly. 

12 A It can work very quickly and has, and we can 

13 demonstrate where it has. He can show you where it does 

14 not move as quickly as some would like, but in some of 

15 those instances the things that needed to be done or 

16 questions that needed to be answered are not answered, 

17 emd eometiaes they relate to cost, sometimes they relate 

18 to authority. 

19 MR. KREUZER: Mr. Secretary, a little while 

20 ago you were talking about security problems that are 

21 encountered when this sort of thing occurs and people on 

22 the Hill get involved and staffs get into highly 

23 sensitive information and numbers grow and there is a 

24 large number of people that know things. And then the 

25 membership gets in. Sometimes Members say things maybe 



BfWStFIED 



814 



liCU$«D 



32 



1 that they shouldn't say. 

2 Has there ever been any kind of an official 

3 recognition on the Hill of this problem? Has this been 

4 discussed from time to time about what are we going to do 

5 about security up here when we get into very sensitive 

6 areas? Do you recall being involved in anything like 

7 that when you were there? Can you kind of give a little 

8 background on that and where the Hill ia in that regard 

9 in solving those problems? 

10 THE WITNESS: In my view, those Members to 

11 whom classified information was made available by virtue 

12 of their position or committee assignment I think there 

13 is a very good track record. I think, however, as a 

14 general rule in the intelligence field that proliferation 

15 of information beyond what might be termed a need <:tOi; know 

16 basis is not a healthy thing for the intelligence 

17 community because you are Increasing the risk of 

18 disclosure. It's just inevitable with the more people 

19 that you tell. 

20 Vfhat I'm saying is that I have no problem with 

21 aaklng classified information available to Members of 

22 Congress who have to know it, provided it is clearly 

23 pointed out to the Member In advance that there is 

24 certain of this information that is sensitive and it must 

25 be held on a close-hold basis. 



m&tmm 



815 



•^tmm 



33 



1 I hava brea)cfasts wh«r« Z bring M«mb«rs of 

2 Congrass over h«r« and v« glv* thea briefings, soo* parts 

3 of which ar« s«n8ltlv«. I hav« b««n doing this for 

4 years. I have naver yat been embarrassed by any Member 

5 of Congress — and I can tell you the number Is very 

6 close to 400 who have come over here — by anything that 

7 was disclosed in this office. But I think it is a matter 

8 of management and handling. 

9 One of the problems — and I'm going back now 

10 12 years — I would say to you that one of the problems, 

11 and I'm sure that someb ody will raise the same question 
with the^^^^^^^^^Hhere, is you down 

13 compartmentalizatlon. There are safeguards in 

14 compartmenting intelligence data, as you know, and if you 

15 can maintain your compartmentalizatlon it's very good. 

16 There is a concern and we had a concern when I 

17 was on the House side. I handled the Intelligence 

18 Committee, the Select Committee headed by Mr. Pike and 

19 the one headed by Senator Church, and I worked with them 

20 for the President. One of our concerns was the 

21 accumulation of such a wide broad variety of intelligence 

22 Information in one place because we were breaking down 

23 compartmentalizatlon and I would say to you in 

24 structuring something for the Congress you must think 

25 about compar;tmentalization. 



mmm 



816 



!!»j^ACC' 



1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 



I think r«gardl«8a of th« amount of 
int«llig«nc« infonnation that I taiow it is still 

irtmsntalifd for ms and is dons intentionally. 




And ths maintsnanc* of compartmentallzation is 
very important to m«. Proliferation runs ths risJc of 
breaking down compartmentalization. Now this is just 
getting over on the intelligence Ttidm. 

MR. SAXON: But those are all very important 
points for us to hear about because they all are part of 
an undercurrent to these hearings and to the matters that 
we are looking at. 

MR. KR£UZER: Can you think of any instances 
where there has been a bitter experience, where we've had 
a situation perhaps something like what we're going 
through now, the Iran-contra, or even a situation where 
resulting revelations to the press by a Member have 
caused more problems, where a leak has been made? 

THE WITNESS: I really don't want to deal with 
the press because I prefer not to get out of the field. 
But I can tell you that i' yo«,90 ^^'^ ■"<* ^^^'^ ^" ^^* 



LI you that if you oo lijLC 



817 



mumm 




2 ^^^^Kou will find, I think, that cartaln classiflad 

3 information was moved from on* M«mb«r to another and was 

4 disclosed, and I would say to you that I don't think it 

5 was a violation of any rule of the House that did it. I 

6 think it was a part of what I have referred to as the 

7 Rule 11(b) . 

8 And I think the House took certain steps to 

9 remedy that, or at least in part, when they established 

10 the Select Committee on Intelligence. But thers were 

11 some examples. I could historically pull them out and* 

12 get it to you. I don't want to mention names in this 

13 sort of thing because I want to be sure of my facts, but 

14 I'm not far off. 

15 MR. KREUZER: Have you seen anything come out 

16 of this episode that has been damaging? 

17 THE WITNESS: I can't think of anything on the 

18 Joint Comaittee that you have now. I think the members 

19 have been pretty well disciplined or have exercised a 

20 certain diaclpllne in it. 

21 I can tell you as an aside that not just 

22 Members pX_Conc[re»s but any individua l who Is the center 
^^^^^^^^^^^^^^^^^^^^^^^^H — who is a center 

24 of interest and goes into a Congressional Committee and 

25 then walks out of that committee .and is faced with a bevy 



imi' 



ilUU 



818 



mmA 



36 



1 Of television cameras and reporters and is asked 

2 questions finds himself in an extremely difficult 

3 position in trying to make responses that are helpful as 

4 far as himself and avoids making disclosures. 

5 That's a difficult position for a Member to be 

6 in, to come out of one of those hearings and be asked 

7 questions. That's a hard thing to do. But I think 

8 they've done it quite well myself. That's not easy. 

9 MR. KREUZER: There's been some talk among 

10 some of the membership on th» Hill about a smaller 

11 professional combined intelligence House and Senate 

12 staff. Did you ever get involved in discussing those 

13 ideas? 

14 THE WITNESS: Well, the model that was 

15 suggested up there and was suggested by Senator Mansfield 

16 — incidentally, the Mansfield view was shared by a 

17 number of people and I think I could tell you that 

18 President Ford, as I recall, supported the Mansfield view 

19 — was to pattern something after the Atomic Energy 

20 CoBBittee, where you have a small combined committee 

21 utilizing a highly professional small staff. 

22 And I think that has a lot of merit, a lot of 

23 merit. 

24 BY MR. SAXON: (Resuming) 

25 Q Mr. Secretary, if my colleagues don't have 



mtt&WB 



819 



mmm 



37 



1 anything further in this general policy area I'd like to 

2 move on to a couple of different matters. The first has 

3 to do with the HAWK and TOW transfers from Israel to Iran 

4 in late '85. They precede the involvement of the 

5 Department of the Army in SNOWBALL and CROCUS. 

6 But I think they may be of some concern to you 

7 if you've not been made aware of some of the particular 

8 things that were being discussed, so I want to focus on 

9 that. Let me ask you first at what point you became 

10 aware that the Israelis had shipped TOW missiles to Iran 

11 in the latter half of 1985. 

12 A I can't recall being made aware of it anywhere 

13 near that time frame myself. I'd really have to say that 

14 I don't think I became fully aware of it until the recent 

15 disclosures of the last six or eight months. 

16 Q The same question, I guess the same answer, 

17 but with regard to the Israelis' shipment of what was 

18 intended to be 120 HAWKs to Iran and wound up actually 

19 being 18 HAWKs in November of 1985. When do you think 

20 you became aware of that? 

21 A The same response. I was just simply not 

22 aware that that was going on. 

23 Q There was an effort to, as I say, send 120 

24 HAWKs to Iran and likewise there was discussion at one 

25 point of sending 3,300 I-TOW missiles to Iran from Israel 



ItftSSffl 



820 



mii^m 



38 



1 with ultimat* replenishment by the United States, I want 

2 to have you look at something which I will have 

3 introduced as Exhibit 3 and give you a moment to read 

4 that. 

5 What you are looking at is a PROF memo from 

6 Colonel North to Admiral Poindexter. In the upper 

7 righthand corner you can see it's dated 11/20/85. I'll 

8 give you a moment to read that. 

9 (The document referred to was 

10 marked Marsh Exhibit Number 3 

11 for identification.) 

12 (Pause.) 

13 A Okay. 

14 Q First of all, sir, for the record I would 

15 assume you have never seen this memorandum until today. 

16 A No. 

17 Q You weren't on Colonel North's distribution 

18 list for his PROF meBos. 

19 A No, I certainly wasn't. 

20 g Let me highlight just a couple of items that 

21 are in this memorandua. The first se ntence st ates: "The 

22 Israelis will deliver 80 MOD HAWKs^^^^^Kt noon on 

23 Friday, 22 November." The first sentence of the next 

24 full paragraph: "There is a requirement for 40 

25 additional weaps" — abbreviation for "weapons" — "of 



wmmji 



821 



osimio 



39 



1 the same nomenclature, for a total requirement of 120." 

2 The first sentence of the next paragraph: 

3 "Replenishment arrangements are being made through the 

4 MOD purchasing office in NYC." And the MOD is Ministry 

5 of Defense for Israel. 

6 The next-to-the-last paragraph: "As soon as 

7 we have the release confirmed we need to move quickly 

8 with Defense to provide the 120 missiles the Israelis 

9 want to buy. They are very concerned that they are 

10 degrading their defense capability." — the "they" there 

11 making reference to Israel. 

12 Two questions, Mr. Secretary. Number one, 

13 were you ever made aware prior to these matters becoming 

14 public that we would need to replenish Israeli stocks for 

15 any HAWKs that were sent? 

16 A No, I can't recall if we did, certainly not in 

17 this context. Whether or not there might have been some 

18 request in here for some foreign military sales for 

19 Israel that did not disclose this, I don't know. But I 

20 cannot recall that there was. 

21 Q The second question, Mr. Secretary. I 

22 recognize that this may be hitting you cold and this is 
2 3 the kind of thing that would be staffed out, but do you 

24 have a sense right now that if we were to be asked to 

25 provide 120 HAWKs from AjMy.inVemtolrlee whether that 

". . . I ^ "i ' » *■ " ■ - - ■ 

.ajop-SBCRsW 



tT'>€ooi:W6Rb*- 



822 



1 would have any impact on readiness? 

2 A That would be an evaluation that would be made 

3 by the Deputy Chief of Staff for Operations. I would 

4 tell you that that number would be sufficient that they 

5 would have to review that and come back with a 

6 recommendation whether it would or would not. I really 

7 can't say because I don't have that much of a grasp on 

8 inventory. 

9 Q I can help you with my next exhibit^which I 

10 will ask be marked as Exhibit 4. I'll give you a moment 

11 to read it, but let me tell you what you are looking at. 

12 You are looking at something that we have come to call 

13 the TOW paper. This is a one-page memorandum or talking 

14 paper worked up at the request of Assistant Secretary 

15 Armitage by Mr. Glenn Rudd, the Deputy Director of DSAA 

16 in the late November-early December '85 time frame. And 

17 the top half deals with I-HAWKs, if in fact we were to 

18 consent to the Israeli transfer of 120 I-HAHKs to Iran, 

19 and the bottom half deals with I-TGWs, given that they 

20 were talking about 3,300 I-TOW«. 

21 Let me give you a moment to read this. 

22 (The docxunent referred to was 

23 marked Marsh Exhibit Number 4 

24 for identification.) 

25 (Pause.) 



liCtHimiED 



823 



I'miSSMD 



41 



1 A Okay. 

2 Q Let me direct your attention to the I-TOW 

3 discussion. We )cnow from this document and from PROF 

4 memos from Colonel North to Admiral Poindexter which have 

5 been made exhibits in our hearings that there was 

6 discussion of sending 3,3 00 I-TOWs to Iran by Israel, 

7 which we would then replenish. You can see the numbers 

8 there. If this information Mr. Rudd providd^ Secretary 

9 Araitage is correct , in the continental United States 

10 depot stocks we had^^^^Hc-TOWs. 

11 It says: "Based on the numbers, the impact* on 

12 the Army of shipping 3,300 I-TOWs immediately would be 

13 serious but not intolerable. No missiles would have to 

14 be taken from troops. Based on the seriousness of the 

15 requirement and keeping in mind that the Army would 

16 receive TOW-II replacement missiles, it is likely that 

17 the Army would reluctantly acc[uiesc« to immediate 

18 shipment of the entire quantity." 

19 Let me ask you first for the record were you 

20 aware that there was any discussion in late '85 of 3,300 

21 I-TOWs? 

22 A No. I was not. 

23 Q Second, Mr. Secretary, again this is the kind 

24 of thing you might want to properly staff out and have 

25 kicked around, but do XPV^WJtA A i^^^"*"* today as to 



mmm 



824 



mmim 



42 



1 whether If we had^^^^Hl-TOWs in our continental depot 

2 stocks, whether providing 3,300 would adversely Impact 

3 readiness? 

4 A Just based on my experience and reading this 

5 memo, the assessment here made by Mr. Rudd, it would be 

6 serious but not intolerable, I would suspect that the 

7 DCS/OPS would oppose that transfer. 

8 Q On the grounds of readiness? 

9 A Yes, because it says that they would be 

10 replaced with TOW-IIs, but there would be — I think 

11 there would be some time before you would get your TOW>- 

12 lis and generally speaking the DCS/OPS takes a pretty 

13 tough position on the readiness, and he should take a 

14 tough position on it. 

15 And from time to time I have overridden or the 

16 Chief of Staff has overridden that recommendation because 

17 we make a decision that the other interests override that 

18 particular issue. I would be glad to staff it out and 

19 find out, though. 

20 (Pause.) 

21 Q Mr. Secretary, for the record, let me ask if 

22 you've ever seen Exhibit 4 before today, and that's the 

23 TOW paper Mr. Rudd worked up? 

24 A No, I have not. I can never recall having 

25 seen it. I'm not sure who Mr_..Rudd is. 



825 



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43 

1 Q He's the Deputy Director of the Defense 

2 Security Assistance Agency. 

3 A Oh. 

4 Q Let me move from 1985 and the '85 shipments to 

5 the ones you've got a little more familiarity with, and 

6 that's the 1986 shipments in which the Army directly to 

7 the CIA provided 2,008 TOW missiles and a couple HAWK 

8 repair parts. Let me ask you first, sir, if you could 

9 tell us when you first learned that the Army had been 

10 tasked with providing TOW missiles to the Agency. 

11 A First I would say to you that some months ago 

12 when this first came up I was confused as to when I first 

13 learned it, but I have concluded that my impression of 

14 when I knew it was wrong and that of General Wickham was 

15 correct, and I will explain it this way. 

16 The activities that related to the shipment 

17 and what might be called an alert or warning order that 

18 the Army was going to be tasked to do this occurred on 

19 the weekend of roughly 17, 18, 19 January. That Monday 
2 was a Federal holiday, January 20. I thought I learned 

21 it Tuesday morning after that holiday, which was the 

22 weekend of the event^from Max Thurman, the Vice Chief of 

23 Staff of the Army. 

24 But I did not learn at that time because I was 

25 in Germany over that weekend with Army units, and I came 



826 



UNCUSSMO 



44 



1 back on Monday and before I came back Max Thurman left 

2 for Germany, so there was no way that Max could have told 

3 me. Max came back the following weekend and, as I 

4 recall, he came into my office and mentioned to me — 

5 told my Executive Officer he had to speak to me alone and 

6 indicated to me that he had received this request, 

7 warning order, that he had taken steps to implement it. 

8 But John Wickham, the Chief of Staff of the 

9 Amy, he was also out of the country and he'd come back 

10 in on the weekend. Max had briefed him before he. Max, 

11 left for Germany, and John WicScham had a little pencil' 

12 note or his secretary did that John had stopped over here 

13 on Tuesday afternoon, which would be the 21st, and had 

14 mentioned to me that he'd gotten a heads-up that there 

15 was going to be a shipment of some missiles. 

16 John did not make much of it and did not 

17 discuss it in great detail. He just said it was a 

18 shipment of, I think, TOWs, and did not know where they 

19 were going but we were turning them over. The manner in 
2 which John brought it to my attention really I didn't 

21 focus on it too much because I thought John was just 

22 telling me a JCS action or something like that occurred. 

2 3 When Max came in, I did focus on it because Max then said 

24 I've got this high priority order, nothing in writing. 

25 The knowledge that it's goingr to lia done is very limited. 



re that it's goingr to liac 



827 






45 

1 I really didn't even associate that with the same thing 

2 that John Wickham had given me five or six days before. 

3 So my first awareness of it was really the 

4 21st, from General Wickham, but focusing on it as a more 

5 significant action the following Monday probably when 

6 General Thurman came in and told me about it. 

7 Q All right, sir. For the record, I'm correct 

8 in saying that you never knew the missiles were intended 

9 for Iran? 

10 A No. In fact, later on one time John Wickham 

11 and I mentioned and debated where did we think they we're 

12 going, and he had one country and I had another, and we 

13 both were wrong. 

14 Q And in fact if we except General Colin Powell, 

15 who though he wears an Army uniform was serving at the 

16 time as the Senior Military Assistant to the Secretary of 

17 Defense, there was nobody anywhere in the Army who knew 

18 these were headed for Iran, correct? 

19 A To my knowledge I know of no one in the Army 

20 that knew it, either military or civilian, unless there 

21 was somebody over on the NSC staff that was detailed over 

22 there. 

2 3 Q Before I get to some of the chronological 

24 treatment of the TOW shipments, let me ask you in terms 

25 of a couple of ^roader ^issuAs Jm lAVMT knowledge was there 



Bli&iMI 



828 



nmh(^ 



1 •vr any pressure put on the Department of Army or any of 

2 Its civilian or military personnel to come up with a low 

3 price on the TOW missiles in order to create some 

4 residuals, as Colonel North would describe them? 

5 A No, there was not. 

6 Q Second — this question goes just to the TOWs 

7 now — we have, I believe Admiral Crowe told me, 

8 basic TOWs in our inventory. If that ficfure is correct, 

9 would there have been any readiness impact, adverse 

10 readiness impact to us providing the 2,008 TOWs that we 

11 actually provided or, for that matter, if we had provided 

12 the full 4,508 that were Initially requested? 

13 A I don't think there would have been of the 

14 basic plain vanilla TOW. 

15 Q After you found out about this requirement, 

16 what happened next from your personal standpoint? What 

17 was the next event that came to your attention or 

18 required your involvement? 

19 A A couple of days, maybe a couple of weeks, 

20 maybe ten days or two weeks, went by. Maybe I'm 

21 confused. Either Vince Russo came by here to indicate 

22 some concema about this transfer and Z talked to him, 

23 maybe with my Exec, General Carmen Kavessa, with me, 

24 about it. 

25 Q We should say for the record that was then 



829 



4 



mmmm 



1 Major General Vincent Russo, who was the Assistant Deputy 

2 Chief of Staff for Logistics. 

3 A I can't recall whether he came by and talked 
with me about it personally, but I think really what 

5 happened is that Vince's concerns were shared, I have 

6 since learned, by Major Simpson, who was assisting him, 

7 and it's my understanding and I've been told that Simpson 

8 went down to our General Counsel's office. I think he 

9 talked with Tom. 

^° Q That would be Tom Taylor? 

^^ A Tom Taylor. And the matter was discussed with 

General Counsel and she sent me a memo raising some 
questions about whether we were involved in Congressional 
notification. And I sent a note back to Susan indicating 
what's the next step, what do we do? And so they came 
up here. We had a meeting in this office right where you 
are now, and Russo joined that meeting. 

And the transfer and all was discussed and my 
concerns were you have thel$?mlllion statute. 

2° Q This would be the 1986 Intelligence 

21 Authorization Act? 



22 A 



23 



True we did not know that It was going out of 



the country, but nevertheless that transfer of that 

24 significance over in this intelligence area raised 

25 questions in our mind of Congressional interest or 



mtmm 



48 



1 activity or awareness and also what Russo had interpreted 

2 as being somewhat of a restriction on making notes of it. 

3 I suggested to Vince that in this transaction 

4 and because of his obvious concerns that he had about the 

5 matter that he begin to start making memcons of meetings 

6 he had — and I think it was good that he did — and that 

7 also ensure that those with whom he was dealing were 

8 aware that there was concern in Army about the 

9 Congressional role and knowledge, and as a part of that I 

10 believe General Brown sent a memo to General Powell that 

11 raised some of these very questions. 

12 So I would say to you that the principal 

13 concern that was raised here was is there a Congressional 

14 role and need to know. If it is, who is going to respond 

15 to it. Word came back. Army, that will be handled by 

16 others than Army. 

17 Q Mr. Secretary, you've alluded to several 

18 documents or memoranda and I am going to get them on the 

19 record as Exhibits in a moment. But to make sure we 

20 understand, to the best of your recollection who was at 

21 the meeting? You indicated yourself, Mrs. Crawford, 

22 General Counsel, and General Ruaso. Who else was there? 

23 A I believe it would not have been unlikely that 

24 General Kavessa, the military executive for this office, 

25 would have been there and Tom. Were you there, Tom? 



mnmm 



831 



imssD 



49 



1 Q Was General Suiter there? 

2 A We got the JAG. We got a representative from 

3 the JAG'S office. General Suiter was there. 

4 Q Anyone else that you can recall? 

5 A No. I thinJc it was a pretty small meeting. 

6 We were keeping a very close hold. 

7 Q All right, sirV Let me show you and have this 

8 marked as Exhibit 5 a couple of documents that may be a 

9 little more familiar than Colonel North's PROF notes. 

10 (The document referred to was 

11 marked Marsh Exhibit Number 5 

12 for identification.) 

13 (Pause.) 

14 A This is the memo that I referred to that Mrs. 

15 Crawford sent me. I sent her back — Susan, next step. 

16 And then it says "completedi^. i That handwriting is my 

17 military exec. And the next step was a meeting with 

18 Suiter and Rusao and Crawford with instructions. Russo, 

19 one, start making memcons. Two, go down and establish 

20 this point, make this point. 

21 Q All right, sir. For the record, let me 

22 fomaliz* what you have just said. The cover sheet in 

23 Exhibit 5 is a handwritten note from Torn Taylor in Mrs. 

24 Crawford's office, the Office of Army General Counsel, to 

25 Major General Russo. It says: "Concerning our 



yNSdOTEO 



832 



oiOKsra 



50 



1 conversation last week, we decided to ensure that 

2 Secretary Marsh was aware of the provision you and I 

3 discussed. Hence, the attached was delivered today." 

4 And there is General Russo's handwritten note 

5 that he has seen that. Then Mr. Taylor attached to it 

6 Mrs. Crawford's memorandum of 13 February 86, as you have 

7 just said, that specifically referenced this statute that 

8 had the $1 million reporting threshold and talked about 

9 the concerns of notification to the Congress. 

10 Now I have included two copies of that memo 

11 because there are marginal notes from different people'. 

12 The first copy has a marginal note from General Russo 

13 dated 13 February 86 in which he says: "In discussion 

14 with Mrs. Crawford today she advised that where we 

15 support another agency they, not we, are responsible to 

16 make the necessary notifications." 

17 Then the copy which you recall having seen of 

18 her memorandua has, as you said, your handwritten note: 

19 "Susan, n«xt step." And then General Kavessa's note: 

20 "Completedpy And there's the name of Tom T. up there, so 

21 I assun* that would be Mr. Taylor. 

22 Anything else we need to say about this 

23 dociment? 

24 A No. I think that this would also precipitate 

25 a memorandum that General Brown sent. 



yiassmo 



833 



»i«D 



51 



1 Q We Will get to both the Brown memorandum and 

2 the Russo memorandum next. I'll ask this be marked as 

3 the next exhibit. 

4 (The document referred to was 

5 marked Marsh Exhibit Number 6 

6 for identification.) 

7 (Pause.) 

8 Mr. Secretary, you indicated a moment ago when 

9 the meeting was held in your office you either suggested 

10 or directed that General Russo begin to keep some record, 

11 some notes as to what was transpiring. 

12 A I believe he kept more than this, just this. 

13 Q And you indicated that he was asked to put 

14 down on paper memorandum for record of this requirement. 

15 Now I would ask you if this appears to be at least on6 of 

16 the memoranda he wrote. 

17 A Yes, it is. 

18 Q It's dated 25 February 86, and let me just 

19 highlight one or two things that are in it. He begins by 

20 indicating that on 18 January the Army received this 

21 tasking. In paragraph four he talks about the 

22 Congressional notification requirement in the new 

23 legislation, and he states: "With regard to 

24 Congressional notification, this was determined to be the 

25 responsibility qt the receiver, not the Secretary of the 



mwm 



834 



m\mm 



1 Army . " 

2 The final paragraph indicates that he has been 

3 assured that that responsibility does not rest with the 

4 Department of the Army but that it rests with the 

5 recipient agency, the transferring agency, and that those 

6 individuals have been made aware of that responsibility. 

7 And then there's a handwritten note at the bottom in 

8 which General Russo writes: "Coordinate with General 

9 Powell on 5 March 86." 

10 Do you recall General Russo telling you that, 

11 when he checked with General Powell, General Powell told 

12 him you are right? You guys don't have to notify the 

13 Congress; that's the CIA's responsibility and they are 

14 aware of it. 

15 A I think Vince did report back on that meeting. 

16 That's my recollection. I think that he did. I can't 

17 vividly recall his coming down here and telling me that, 

18 but I think I got the word, and I think it got it from 

19 Vinco. He may have told my military exec and my military 
2 exec would have told me. Or he may have told Susan and 

21 Susan told me. But I understood that this was the end 

22 result. 

23 Q All right, sir. You mentioned a memorandum 

24 that you asked General Brown to draft, and I think you 

2 5 said it was also for the purpose of flagging this issue 



yHcrafiED 



835 



mimm 



1 of Congressional notification; is that correct? 

2 A I'm not sure that I specifically asked Art to 

3 do it, but he learned that I had suggested this practice 

4 and whether he did that at my request or on his own 

5 initiative I don't know. I think maybe he might have 

6 done it at his own initiative because by this time this 

7 was beginning to get difficult. Please note the date of 

8 the statute. You have a significant statute intervening 

9 in a very short time after this action was initiated and 

10 our lawyers picked that up. 

11 Q Mr. Secretary, let me have marked and show ^ou 

12 what will be Marsh Deposition Exhibit 7, and that is the 

13 memorandxim that General Brown drafted, along with the 

14 cover memo that General Colin Powell put on it when he 

15 sent it forward to Admiral Poindexter. I will give you a 

16 moment to read all of that. 

l"^ (The document referred to was 

18 marked Marsh Exhibit Number 7 

19 for identification.) 

20 (Pause.) 

21 A It's a very pointed memo. 

22 Q Mr. Secretary, let me start at the back of the 
2 3 exhibit with the memorandum from General Brown and simply 
24 highlight one or two point* and see if this is consistent 
2 5 with your understanding. This is General Art Brown, at 



836 



\IWl&& 



54 



1 th« time the Director of the Army Staff, writing on 7 

2 March 86 to General Colin Powell, Secretary Weinberger's 

3 military assistant. 

4 In the first paragraph he talks about the 

5 rec[uirements under SNOWBALL. In the second paragraph he 

6 states; "This request for support circvuivent«<l the 
normal^^^^^^^^^^^^^^Kor reasons security. 

8 the support exceeded the $1 million threshold established 

9 in the FY 86 Intelligence Authorization bill for 

10 reporting to Congress as a 'significant intelligence 

11 activity." 

12 In the third paragraph he says: "DOD support 

13 to CIA special activities establishes responsibility for 

14 notification of Congress of DOD support to the Agency 

15 with the Deputy Under Secretary of Defense for Policy. 

16 It also confirais the prinary responsibility resides with 

17 the Director of Central Intelligence." And there he is 

18 specifically referencing the neaorandim fro« Secretary 

19 Weinberger of 13 June 83, which was introduced as Exhibit 

20 2, the response to your earlier nemorandun. 

21 And then he concludes with: "This memo is to 

22 assure understanding of statutory requirements should 

23 this issue be raised by one of the Congressional 

24 intelligence conunitteee in the futuriM,/ which we Jcnow has 



been done. 



liNiASHD 



837 



1 General Powell put his cover memo on this, 

2 dated 12 March 86, and sent it to Admiral Poindexter, in 

3 which he stated: "The attached memorandum reflects the 

4 unease of the Army General Counsel's office over the 

5 transfer of items with which you are familiar." And then 

6 he goes on to talk, to reference that the Army has not 

7 been told — excuse me, that the Army has been told that 

8 they had no responsibility for Congressional notification 

9 and that whatever notice does take place will be made at 

10 the appropriate time by the appropriate agency and simply 

11 that Secretary Weinberger had asked that he, General 

12 Powell, make Admiral Poindexter aware of the Army's 

13 concerns in the event that he wants to advise Director 

14 Casey or Mr. Meese. 

15 We can see from the top page that Admiral 

16 Poindexter saw fit to give this to Conmander Thompson and 

17 have it put with the Finding, which for the record was in 

18 the safe, and apparently no Congressional notification 

19 took place. 

20 But this is the Brown memorandum; correct, 

21 air? 

22 A Is the what? 

23 Q The Brown memorandum. 

24 A That's right. That's the memorandum that I 

25 referred to written by General Brown, who was the 



it'iSffiO 



838 



wmm 



56 



1 Director of the Army Staff. 

2 Q And I think it's fair to say that this 

3 activity — Mrs. Crawford's memorandum, General Russo's 

4 memorandum, and General Brown's memorandum — clearly 

5 reflect the sensitivity o#^ thjT Department of the Army to 

6 the need to notify the Congress. Is that a fair 

7 statement? 

8 A Yes. I think it shows a concern that we had 

9 here on the need to keep the Congress informed, or that 

10 someone keep the Congress informed. 

11 Q I think for a complete record we should 

12 probably establish whether anyone within the Department 

13 of the Army knew of the existence at the time these 

14 memoranda were generated of a Presidential Finding, which 

15 we know to have been signed by President Reagan on 

16 January 17, pursuant to which these transfers went 

17 forward, which expressly said that the Congress would not 

18 be notified. 

19 So my question is, to your knowledge did 

2 anyone within the Department of the Army know that that 

21 Finding had been signed and that no notice was to take 

22 place? 

2 3 A I did not know it. To my knowledge, none 

24 stationed here in the senior levels of the Department, 

25 military or civilian, knew it, and I say that because in 

top' ^?C$E1 



mmsi 



839 



wmm.fi 



57 



1 dealing with General Thurman, dealing with General 

2 Wickham, the Under Secretary, Jim Ambrose, there was no 

3 indication by them of an awareness of it, because they 

4 had the same lack of )cnowledge that I had. 

5 Q Mr. Secretary, I have no further questions on 

6 the TOW transfers. Maybe my colleagues do before we 

7 proceed to something else. 

8 MR. SABA: No. I think you've covered the 

9 TOWS . 

10 BY MR. SAXON: (Resuming) 

11 Q Let me proceed to Project CROCUS, which was' 

12 the name Major Simpson gave to the HAWK repair part 

13 transfers, since at the time that came forward the 

14 crocuses were pushing their heads up through the ground. 

15 I ask you when you became aware that the Army 

16 had been tasked with the requirement to ship HAWK repair 

17 parts to the CIA which we now know were destined for 

18 Iran. 

19 A My first knowledge of that would occur — 

20 because I've kind of gone back and looked at the dates — 

21 as I recall, probably in May, and again this was a case 

22 where John Wickham, General Wickham, the Chief of Staff 

23 of the Army — and I would add that General wickham was 

24 very solicitous in ensuring that I was informed of things 
2 5 that had transpired in the JCS — and he came down and 



mmms 



840 



liWSMO 



58 



1 told me that he had gotten a request relayed to him. I 

2 think it was relayed to him while he was down in the 

3 tank. 

4 Q Did he indicate who he got the request from? 

5 A I believe he mentioned — I happen to know 

6 that it came from Taft, but I think John told me that it 

7 came from Taft, Depii tyn jt ecretary _ef Defense Taft. And 

8 John said that this request had come through for HAWKs. 

9 He didn't know where they were going, as I recall, but we 

10 were asked to provide them and that we would do it, 

11 which, as I recall, was the case. 

12 Q Was it your understanding at the time that 

13 this was in any way connected to or a fot^ov- aBc- co nnected 

14 with or » follov*on to the earl'iju: TOW project? 

15 A No. I had no knowledge. I had no idea that 

16 there was a relationship, nor, to the best of my 

17 knowledge, did he. And I think John would have told me 

18 if he did. I forget the quantities and the numbers, but 

19 he and I did not discuss it at any great length or 

2 anything. It was one of these things he'd been told to 

21 do it and do it. 

22 Do you want to go on to how it did surface? 

23 Q Why don't I simply ask you to tell us, after 

24 having found out, what the next event was that came to 

25 your attention or that involved you in any way? 



iitM«D 



841 



USCUSSiEO 



59 



1 

2 
3 
4 

5 
6 

7 

9 

10 

11 

12 

13 

14 

15 

16 

17 
18 
19 
20 
21 
22 
23 
24 
25 



A Th« matt«r then came back up later, aa I 
recall, in the summer or probably in September because 
there were some additional parts that wer e related to the 
shipment, and it came in through 

Q A subsequent request from the CIA? 

And when hit^^^^^^^^^Hthey 
couldn't relate it to anything because they didn't know 
ot the earlier shipment that had been requested in May — 

is^B^^^^^^^^others working the staff action 
in the Department of the Army — and when it came up to 
me in my office and to Wickhan's office we didn't relate 
them because we didn't know where they were going. 

So it became a difficult thing to get it 
approved because it was outside the system and^^^^^^M 
was trying to trace it and find out where it was coming 
from. And apparently it was never supposed to have been 
put, must not have been supposed to have been put in the 
system, I don't know. But eventually to resolve it, 
because here we were, sitting on a request from the 
Agency and they needed a response, we finally decided 
there's only one way to do this. 

And that's to take th« request and go to 
SecOef . And what happ«a;^|fea; to^^e Mr. Weinberger was 
gone, so my military exec — 
Q General Kavess^ 



H^ED 



842 



i^iii^ira 



60 



1 A The two of us walked. I got on Taft's 

2 calendar and walked down to see him, and laid this out. 

3 And then I could tell that will knew something about this 

4 I didn't know, because it seemed to make some sense to 

5 him. And he had, I think, his military exec in there and 

6 where it was left was let me take this. I'll get into 

7 this and he was going to raise it with the Agency. That 

8 was the last I heard of it. That was in October. And I 

9 still didn't know where it was or where it was going, but 

10 I commented to General Kavessa coming down the hall I 

11 believe that Mr. Taft knows something more about this 

12 than we do. 

13 Q Mr. Secretary, I'll come back to this follow- 

14 on on the HAWK repair parts in a moment. I want to go 

15 back, though, to the earlier request and ask you a 

16 question about readiness. The request which came from 

17 CIA was for 234 HAWK repair parts, and as the requirement 

18 was worked, with Major Simpson being the primary action 

19 officer reporting to General Russo, they ultimately 

2 determined that there would be certain parts that would 

21 have a zero balance in the inventory if they fully met 

22 the requirement. 

2 3 I can give you those numbers, but I don't know 

24 that it's relevant in one sense, in that there was no 

25 ultimate determination of readiness being adverse to all 



iW^lfD 



843 






61 



1 of tham that had any depletion. But Major Siapeon and 

2 General Russo ultimately concluded that a half dozen or 

3 so, six to eight, I think Major Simpson puts it at, items 

4 which would have been totally depleted if we had met this 
requirement were^^^^^^^^^^^^^^^Hthat they 

6 not provide them to the CIA. 

7 -There was what Major Simpson characterizes as 

8 some back and forth with his counterpart at the Agency 

9 and in essence the CIA overruled the Army and said you've 

10 got to provide then, and that's what happened. Has that 

11 ever brought to your attention? 

12 A I can't say that it wasn't. I can't recall 

13 it. You see, what happens in these kind of requests, 

14 literally hundreds of transfers and transactions, I'm 

15 sure you realize, go through this office. This request 

16 for HAWK parts or for particular armaments is not unusual 

17 to come in and it's hard to focus on them and relate back 

18 to them. That would be Vines Russo 's job to do that, and 

19 obviously he did it. ^^^^^ 

20 I could tell you by looking at^^^^^^lstaf f 

21 papers that came up with the HAVrx parts request, because 

22 that would have had a readiness finding or readiness 

23 recommendation by the Army, and I'm sure it may have been 

24 brought to my attention in a staff finding — I'm not 

25 sure — but I don't know. 






844 



1 Q On tha sam* readiness c[ue8tlon let na move 

2 forward then to the follow-on rec[ue8t and get to the 

3 readiness Impact there as determined by the system when 

dld^^^^^^^^^^^^lLet me give you the next exhibit 

5 and have this marked as Number 8. 

6 (The document referred to was 

7 marlced Marsh Exhibit Number 8 

8 for Identification.) 

9 AX haven't even read It, but I would say the 

10 system said that Impacts adversely on readiness. 

11 Q Th^'s correct, sir. This Is a memorandum for 

12 you don* by Nrav^grawford. 

13 A And this Is In tha October time frame. 

14 Q On 10 October dealing with that follow-on 

15 request. I'll give you a moment to read that. 

16 (Pause.) 

17 A Yes. 

18 Q All right, sir. If you notice, in tha last 

19 full paragraph on page one of Mrs. Crawford's memorandum 

20 she indicates with regard to this follow-on request for 

21 HAWK parts: "Tha request, if supported, will result in 

22 an inventory zero balance on three items and impact on 

23 the Army's air defense capability. Both DOD Directive 

24 5210.36 and the DASP set forth the policy of providing 

2 5 support to non-DOD agencies if it will not interfere with 



'itStHed^rs?:^ 



845 



OIL^S!) 



63 



or imped* th« perfonnanca of missions and functions 
assigned to DOD." 

At various points in the memo she discusses 

the procedure that would normally be followed with^^^^H 
ind some of the things that that review covers. Is 
[t^ fair to say that in this case, because we went through 
the^^^^^^^^^^^B«^^^^^^^^B>rith 
the HAWK repair request that it was staffed out more 
along the lines of what it should have been? 

A yes. This type of response reflects that kind 
of review. But what was making it difficult, it didn't 
fit in and that'* why eventually to resolve it I went 

down to OSD because people] 

Icould not figure Where's 
this coming from and what does it support. 

Q All right, sir. Let me ask you to look at 
another exhibit that is not directly related to SNOWBALL 
and CROCUS, and I want to make that clear so there's no 
confusion. It addresses the more general need for the 
md the need to go through it. And 
that's a neaoraidUB e]||B>fi«Hiral Vuono, then Lieutenant 
General, tha OC|/OPf;' and now Z IsgFleva the Chief of 
Staf f^ th§ A13K/ QA 1& Aj^tl ^t>^4iliid it wm^o thm r: 




Director of 



nt StsiS. ^ ^ 

■i^ (Th^^gnMnt refen-ed^to was 



f^i^^SifO 



846 



ynj^sra 



1 «nrk«d Mar«h Exhibit Number ^ 

2 ^ for IdantiC^tlQB.) 

3 (♦•us*.) _ 

4 Hav« you r«ad that, air? ^^^ "^ 

5 A Um-hum. 

6 Q I just want to aslc you if you agree with the 

7 statements that are in the first and third paragraphs. 

8 In the first paragraph General Vuono states: "TheH^^H 
^^^^^^^HH provides a single channel for requests for 

10 support from the Central Intelligence Agency to the 

11 Department of Defense." Would you agree that it la the 

12 single channel or the exclusive channel for such 

13 transfers? 

14 A Yes. That's by directive. 

15 Q And then he further states: "The system 

16 protects extremely sensitive information from both 

17 Inadvertent and deliberate disclosure, allows for covert 

18 support to Agency operations worldwide and ensures 

19 adequate service review of the request." Does that seem 

20 to be a fair statement? 

21 A That's a very good statement. 

22 Q In the final paragraph he states: "Requests 
bypass tha^^^^^^^^^^^^Hwould receive less 

24 service and no joint staff scrutiny that may Impact on 

25 the services' warflghting capabilities. The Secretary of 



mmms 



847 



lliislii^^illl' 



1 Defense should be made aware that using ad hoc channels 

2 to support the CIA may degrade security overall and 

3 impair national security." 

4 Now admittedly that's opinion. If you don't 

5 agree with that, you are welcome to say so. But I would 

6 just like to know if that in general — 

7 A I share that view, -v -^=_ 

8 a«r^ All right, sir. »» yoa happen to know, by the 

9 way, what tri^ered Genjaral Vuono's memOraSSum to the 

10 Director of the Joint istaffl. -^ 

11 ^ A Ko, I don'^toow what it la. ^'A b* 

12 interasted. But soml^ing-c^^^p lAan ha jnntad to go 

13 on r^rt, It's %^iom, and ■|t' ^^L^wo^Sf^ba^tha Chiet^i, 

14 of Staff of €he Army told him t«|. dojlfchat . Do you kiw^ 

15 Q I think I've baan told, but I don't recall and 

16 I simply wondered if you knew and wa could get it on the 

17 record in case a Member asks us what that was all about. 

18 ^^^ thought mayba you knew. I don't know, but 

19 that was Carl's concern, which I'm confidant ha shared 

20 with tha Chief of Staff, and the Chief said, Carl, I 

21 think this is the way wa want to have it. This is the 

22 new Chief of Staff. 

23 COLONEL WALLACE: Let's go off tha record. 

24 (A discussion was held off tha record.) 

25 MB. SAXON: Let's go back on tha record. 



iiiifO 



848 



OiiASSii 



1 BY MR. SABA: (Reaumlng) 

2 Q Sir, w« understand that tha TOW transfers to 

3 Iran in 1986 and, for tha most part, tha HAWK spara 
transfer bypassed^^^^^^^^^H can you offer your 

5 opinion as to, one, how that happened and, two, why? 

6 A No. I would just have to say to you that^^H 
^^^^^^^|ia one that's internal to the Army and the 

8 decision to do this was made at a much higher level where 

9 I recognize that people who are in superior positions 

10 have a right to override that and overrule it. 

11 Q Do you know,, sir, was it decided at a higher 

12 level to bypass the system? 

13 A I don't )cnow if the President felt that way. 

14 The order came down from the National Command Authority 

15 to execute the mission. I can see where there may be 

16 things of such national concern or, indeed, emergency 

17 that it would be that the National Command Authority may 

18 want thM executed in this way. This is an internal 

19 administrative procedure which worJcs, we thinJc can work, 
2 very effectively. 

21 Your other safeguard, if you bypass the 

22 system, the other safeguard is advising the Congress. 

23 Then the fact that you have bypassed it is no problem, 

24 you see. And I think the people that are senior can go 

2 5 past the system so long as you touch the other base. And 



849 



mmms 



67 



1 had you touched tha other base here it really would not 

2 have been a problem. 

3 BY MR. SAXON: (Reaunlng) 

4 Q Well, I think that question, though, is 

5 directed at — and you may not know the answer to this, 

6 but I'll give you two possibilities — is what happened 

7 here an example of a requirement coming in that's very 

8 sensitive, very close7h)pid, and people just worked it 

9 knowing it was sensitive andvclosa hold and it happened 

10 that in working it inadvertently they bypassed the^^^^H 

11 ^^^^^^^^^^^maybe not even being aware that there wa^ a 
^^^^^^^^^^^^^^t the above 

13 Or is it that somebody consciously said, well, 

14 we've got this system and there are a lot of people 

15 involved in it, there are a lot of different checks, we 

16 don't want to go that route and they consciously said 

17 we'll do it another way? 

18 A It could have been. It could have been the 

19 fact that we know, to speculate, that Kr. Weinberger had 

20 raised great concerns about it. Indeed, Z believe in the 

21 Tower report North complains about making Defense move 

22 fast on this, and so it may have been doitltgitiv* aovther 

23 opportunity to review and debate an issue that we've 

24 already decided on, which I say you could do that, so 

25 long as you tell those people sitting over there on 



mmm.fi 



850 



68 




Capitol Hill. 

But I really don't know. I can't answer it 
because I don't know. 

Q Mr. Secretary, we're ready to move to another 
of these fun topics, and that's YELLOW FRUIT. You 

alludad earlie r in tfie deposition tc 

as I 

understand it, for what has become known as YELLOW FRUIT. 
There is a lot that we have that the Department oC- the 
Army has made available with regard to YELLOW FRUIT and, 
by the way, everyone's been very helpful in helping urf 
piece together the record and see if it does directly or 
even indirectly connect up to the matters we are looking 
at. So we're not here this afternoon to get the full 
YELLOW FRUIT Story. 

But we do have a few questions for you. Let 
m« ask first if in some brief or summary form you can 
tell us what It was and what its genesis was AJl_8iaipty 
how it sort of played out. 

A YELLOW FRUIT was a sort of component 




\i .^( 



851 



12 



iiSUSSiKe 




1 

2 
3 
4 

5 Q YOU said •«rll«r that it vaa your 

6 understandM^ tluit l^.waa «r«atad vlthout^ur )cnowledg« 

7 or approval at^tha CfeiM 4^2, to jMB^^c^it , Without the 

8 knowladga, ||iNreval or at !«■% fall undaratMfl &fe Mg the 

9 Army' 8 ■ilifiry I«iii«rahip;^s th^^ fklr atataawnt? 

10 A^ Ky obaanyitlon ia that A_nuBber of the aanlor 

11 militarytlaadarr''*ef iiS^racaiva if toll^ diaclbaure aa^ 



the purpos* and int^^ .Qf ttel^^aniztt^^^ 

13 Q Now I gueaa it 'a important to note that the 

14 system worked in exposing YELLOW FRUIT and fully 

15 investigating it and ultimatal^ ahOtting ft down. I 

16 think you have told ua in pravioua aaaaiona when we have 

17 interviewed you that there ia atill aome ongoing 

18 inveatigation into theaa mattara, one, to look at the 

19 money trail and see if all the dollara can be accounted 

20 for and, two, in light of something I'll come to shortly 

21 about Swiaa bank accounta, there haa been a worldwide 

22 check or audit of the uae of bank accounta in covert 

23 activitiea, if I'm correct. % 

24 Can you update ua on what haa happened more 

25 recently with YELLOW FRUIT and the inveatigations by the 



IJIfttSSffSB 



852 



ijyiiiissMs 



70 



1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 



Army? 

A I'm going to have to refer to it more in^^| 
because there are elements that were 
very troublesome that went well beyond YELLOW FRUIT and 
went into SEJ^ SPRAY. 

Q SEA SPRAY was the! 

A It was the 




There is ongoing what we call a 15-6 
Invest igation that covers the entire universe ol 

jperations, which is really in its final 
stages. As you know, there were criminal prosecutions. 
There was one in the United States Federal Court that 
resulted in a conviction of an officer. Th-sre were 
prosecutions- tlurougtv court aartial procedures held at Ft. 
Myer of others that were involved, which resulted in 
convictions, and both, in the Federal and in the courts 
martial, are on appeal. You ]cnow that. 






853 






1 The question of the Swiss accounts, it 

2 appears, based on investigation — I think some of your 

3 people took part in an investigation that we made -- 

4 involving principally an individual named Golden, that 

5 there was not 1 S«^ss account. 

6 Q Is that a final determination or is that what 

7 it looks like right now? 

8 A I'm not willing to say that that's a final 

9 determination. I aB no%-e^®f ortable saying that. There 

10 is an area in that . .^ which I'm not fully satisfied 

11 yet. I don't think it relates to this, the precic- item 

12 you are thinking of on the Iran matter, but I would be 

13 glad to discuss it with you in other questioning, but not 

14 as a part of this record, if you would agree. 

15 Q All right, sir. Let me introduce as an 

16 exhibit in this deposition the sworn statement that Mr. 

17 Golden, and that's William T. Golden, provided to the 

18 Department of the Army on 2 April 87. 

19 (The document referred to was 

20 marked Marsh Exhibit Number 10 

21 for identification.) 

22 There are a couple of questions I want to ask 

23 you after you have had a chance to look at it. 

24 (Pause.) ^ ■iff_ j^ _i=~_ 

25 A . Okay. '^~ 



»l#MB 



854 



'ifeyiSSIF4L 



72 



1 Q Mr. Secretary, I don't want to go through all 

2 of this. I simply was going to asJc you if there had been 

3 any evidence to corroborate two points that Mr. Golden 

4 makes. One of them you have already addressed, and that 

5 was the Swiss bank account question, and I won't repeat 

6 what's in here. The document speaks for itself in terms 

7 of what Mr. Golden recalls might have happened in that 

8 regard, and I think you've addressed that adequately. 

9 'T>i« second point he makes does more directly 
10 relate to S'^yy.: g the contras in possible violation of 
H the Boland Amendment, and that is — and I won't read 'it 

12 verbatim — Mr. Golden says he recalls that in the time 

13 frame of late August or early S^t<8ft>r J »"l& m»M a 

14 concept paper that talked about FMS salesi 

15 w hich there would be an inflated list of items tha^ 

16 ^^^^^^^^Bgovemment wanted under foreicp military 

17 sales with the express intent that they would not need 

18 all of them and some of them would go to the contras, 

19 And he says further in here that that was done more or 

20 leas in contemplation of the Boland Amendment. 

21 Let ^ simply ask you if either the earlier or 
more investigation ^^*!^^^^^^^^^^^^^^^^^^B 

23 and, in particular, YELLOW FRUIT shows any evidence of 

24 attampta to violate the Boland Amendment through these 

25 particular covert~^fcr^^^^», , .^. 1^ 





855 







1 A No. The matters that you raised then 

^^^^^^^^^^Hall are new assune you 

3 have gone through and asked for production of any files 

4 or materials on FMS records. 

5 Q Yes, sir. In fact, there were no FMS sales, 
^^^^^^^^^^^^^^^^n.n those 

7 correct. But DSAA has provided us that, yes, sir. 

8 A The only thing that comes t o mind that f alls 

9 Into that same period of time would be] 

10 as to whether or not that was caught in the Boland 

11 Amendment application. 

12 Q And that's going to be the last matter I'll 

13 get to. Let me say that that's all I want to ask about 

14 YELLOW FRUIT. Now If anybody else has a question on 

15 that, they can ask It. If not, we'll move on. 

16 MR. SABA: No, John. 

17 BY MR. SAXON: (Resuming) 

18 Q Mr. Secretary, you Bantione 

19 Lat ma ask you first of all, like I did with YELLOW 

20 FRUIT, if you can give ua simpl y a capaula of what you 
understood|^^^^^^^^^^^^9and ultimately 

22 understood to have happened with that request. 

23 A Wall, to go back, you recall in one of your 

24 earlier interviews when you concluded your last question 

25 it was, was there soma other operation that I might be 






856 



1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 



'mMm'i 



74 



aware of that in my own mind I did not )cnow whether or 
not it would have come without the application of the 
Boland Amendment, and I re sponded I c ould only think of 
one, which might have been! 




That was one that became a source of 
considerabl e concern as to how to handle i t. By this 

now^^^^^^^^^^^^^^^^^^l^^^^Hwa s 
to work. And again there were questions raised about who 
tells Congress. We took a view that there was an 
obligation to do that. That view was not shared by 
others, but I think that perhaps the review and the study 
of that that occurred, coupled with other legislative 
actions that involved the Boland or Boland-type 
amendment, would mean that it was n ot fully implemented. 

I think some portions of 
^^^Hsome parts of it were. There were some items of 
Army materiel which were furnished, and we have made an 



mmms 



857 



iimwiB 



75 



1 •ffort to identify those and will identify them for the 

2 record, those that we think were transferred. 
Q Mr. Secretary, correct me if this is not a 

fair characterization. Is it accurate to suggest 

Iwas an effort by the CIA to stockpile 
materials in anticipation of an cutoff which resulted 
from the Boland Amendment? It's been characterized that 
way. If that's not a correct characterization, correct 
ma. 

A I would tell you frankly I had not thought of 
it in those terns myself. I just assumed it was an 
effort to move equipment on down there, and if you look 
at that period of time, in the fall of '83, if you look 
at that time frame, there was considerable uncertainty as 
to what is the application of the Boland Amendment and 
does it apply. I think that, very validly, lawyers over 
here at this time — Tom and I have talked about it since 
— did not feel that the Boland Amendment would have been 
a limiting factor. 

20 I think there are others who would disagree 

21 with t hat. But the other ar gument that has been made on 
that ia^^^B^^^^^^^^Hwas being in 

23 anticipation of a more relaxed, lenient Boland Amendment, 

24 so that when it was to be shipped it would be in 

25 conformance with the statute. Some of the items went on 



ll^^^f<kdk0.^^^^^ 



858 



yiiiffilElED 



y 



76 



1 down anyway, which is the reason I had not thought too 

2 much about it being a stockpile against the Boland 
Amendment . 

Q Mr. Sec retary, Mr. Albright, who is the 

|on the Senate staff, may have some 

questions. 

BY MR. ALBRIGHT: 

Q I thinJcIjusthave one. Is it fair to 
characterize^^^^^^^^^Has an example of whenj 
/orked and shut down a project? 

A I think it is one of the things that 
contributed to it. I think it played a major role in 
getting that reviewed at very senior policy levels. 

Q The main problem or the main area that shut 
that down was the funding problem, is that correct — 
whether or not it was going to be paid for out of Army 
funds or CIA funds? 

A The Army kept drawing the issue. The Army 
kept approving the thing approved subject to notification 

20 of Congress, and I think that beceuae a rather formidable 

21 challenge to the project. And even though we were 

22 ultimately overruled, that we were wrong, nevertheless 

23 raising that Congressiona l issue I think contributed to 

24 it, because, you ^^^^^^^^^^^^^^^^ 
^^^^^^^^^^^^^^^^^^^^^■raised the questic 







859 



m^pf 



mmmm 



77 



prop«r notification of Congress, and that was a great big 
piece of that action. 

I think you are right. 
BY MR. SAXOM: (Resuming) 
Q Mr. Secretary, I've only got one or two more 
questions. They are of a general and broad nature. 

MR. TAYLOR: Could we go off the record for a 
second? 

(A discussion was held off the record.) 
BY MR. SAXON: (Resuming) 
Q Mr. Secretary, a few minutes ago, in response 
to Mr. Albright's question you were talking about that 
the system worked because! 

Mr. Taylor has correctly pointed out thati 
las an office wasn't created until the fall of 
1984, so I think that it's correct to say the forces that 
were in place within the building and within the 
Departaent of the Any that led to the creation ot 
the staffing, the legal checks, the review of covert 
op erati ons — it 'a those forces that led to the shutdown 
lis that a correct statement? 
A That's correct, because there was being 
developed at that period of time the staffing and other 
review proced ures that would ul timately find their final 
expression ir 









860 



1 Q I only have two final areas of inquiry. One 

2 is to look at what you described to us in an earlier 

3 session were some of the broad problems with YELLOW 

4 FRUIT, and that is you had some things taking place that 

5 were outside of the normal review system, that certain 

6 people who should have known about those operations 

7 didn't in terms of approval and understanding and 

8 monitoring, that there ware some aircraft perhaps 

9 purchased outside of the system, there was some money 

10 that wasn't as accountable as it should have been. 

11 I don't want to connect up something that 

12 shouldn't be connected, but you may have heard in recent 

13 testimony from Colonel North that he and Director Casey 

14 had discussions about creating an off-the-shelf, outside- 

15 of-the-system covert capability that would be outside of 

16 the CIA that would have rapid response capability, that 

17 would have a pool of funds that would obviate the need to 

18 go to Congress, et cetera. 

19 If I have described those two things 

20 accurately, do you see any connection between the two? 

21 Do you think, given what we knew about the CIA role 

22 involving Colonel Longhofer and Mr. Enders and so forth 

23 with YELLOW FRUIT, is there any connection at all between 

24 what Director Casey and Colonel North wanted to create 

25 and what happened with YELLOW FRUIT? 



861 



1 A I can't prove that ther« is, but there are 

2 certain off-line dimensions that are associated with some 

3 of these activities that never fully got under way in the 

4 Army that are disturbing and troublesome because it is 

5 contradictory. It subverts the system and the 

6 institution, and those activities are well known and 

7 identified. 

8 Acquisition of major items of ecjuipment 

9 without using the normal Congressional processes is an 

10 example of what I'm talking about, and I think there are 

11 some other examples that are associated with those thihgs 

12 that can be cited that are causes for concern. But I 

13 cannot prove that they are connected. 

14 Q My final area of c[uestioning is to ask you to 

15 wax philosophical for a couple of minutes. Given that 

16 you have served in the Congress and have served in the 

17 White House in various senior positions, as you indicated 

18 with Cabinet rank, and you have now been Secretary of the 

19 Aray for six-plus years, and you've been in other sub- 

20 Cabinet positions in the Department of Defense, let me 

21 ask you two things. 

22 One, what lessons you draw from the Iran- 

23 contra affair that would be valuable to our Committees, 

24 and, second, what recommendations you would have for us 

25 beyond what we talked about earlier about possibly a 



asir*%»i a /^^J'^ i!*"« T^ 



862 



u-r^i<#^lli4y 



80 



1 joint intelligence committee. First, what lessons should 

2 we learn from all of this? 

3 A Well, I think the first lesson, it seems to 

4 me, that we see from the Iran thing is really one that 

5 gets into the very basic checks and balances and the role 

6 of the Congress. As members of the Committee have said 

7 themselves, you are not going to be able to carry out a 

8 successful policy without Congressional support because 

9 Congressional support represents your public support, and 

10 you must have it. 

11 The other point is that in the world in whith 

12 we live intelligence operations are vitally important. 

13 They are vitally important. And they are more difficult 

14 to structure at times in a free and open society, but 

15 they can be done. But if you short-circuit that system 

16 because it's difficult to establish those operations you 

17 are courting disaster to do it, and we see that. 

18 On the other hand, if you structure them 

19 within our system of government where they are properly 

20 run, they can be effectively conducted, notwithstanding 

21 what people say. They can be. We are quite capable — 

22 "we" being the country — are quite capable of doing 

23 this, and there are many examples of it. 

24 If you were to bottom-line it, there must be, 

25 one, a system to review for approval at the outset. In 



m^m 



863 






t i. ^ iif' '3 1 3 •^•» - 4 c '^^ r 'J /. c '* ^ 



1 addition to a review procedure there must be a system for 

2 financial controls. There must be. Even if you approve 

3 a good system, if you do not have a financial control 

4 system I guarantee you it will get in trouble. It will 

5 get in trouble. And then, third, there must be a system 

6 of continuing oversight to ensure that you are complying 

7 with the original ground rules for approval. 

8 And, finally, there must be a system to 

9 terminate and disband and stand down when, one, it's 

10 mission is accomplished, the purpose for which it was 

11 organized is no longer appliczible, meaning they have been 

12 successful, or it has to be terminated for reasons of 

13 operational impossibility or some other problem of 

14 disclosure. 

15 You've got to have those four things. Now if 

16 you go at it with that attitude and then decide that you 

17 are going to make the Congress your partner, I think you 

18 can structure some very successful programs to do it. I 

19 see — you know, I hear some of these witnesses talking 

20 about well, nobody knows how to run these black 

21 operations. I have seen some of the black operations 

22 that these witnesses have been running, and they haven't 

23 been running them very well and they have caused us some 

24 enormous problems and a great deal of national 

25 embarrassment which could have been avoided. 



mmm 



864 



82 

1 Let me say something to you that I learned in 

2 '75 when I started working with the intelligence 

3 community in response to disclosure of information. 

4 There is in the Federal system a natural institutional 

5 resistance to disclosure, in any bureaucracy, whether 

6 it's Defense or over at Health and Human Services or 

7 Agriculture. My experience was you are going into an 

8 area of operation and you want to pull out information 

9 and there is resistance to that, and that's 

10 understandable. 

11 This normal resistance, this human resistance 

12 that you get when you move into the national security 

13 field becomes extraordinarily difficult because you are 

14 dealing with careerists who, for five, ten, fifteen, 

15 twenty years, whatever their career life has been, have 

16 been trained not to disclose. Let me give you a little 

17 example I could give you off the record. 

18 (A discussion was held off the record.) 

19 THE WITNESS: When you are dealing with the 

20 national security field you are dealing with people who - 

21 by the very nature of their occupation and by their 

22 training do not want to make disclosures of information, 

23 and Congress must recognize that. And that failure at 

24 what they think sometimes to be forthcoming is based on 

25 institutional training of DeQDle_who do not think that 



mnvfi 



11 training or J«QD..L*«> 

mmm 



865 



iirmiisiiii 



83 



1 those things should be made public, not to a Member of 

2 Congress, not to somebody who Is even in the same agency 

3 but that is not compartmented for it. 

4 They have the same resistance. So this 

5 application of security is a status thing. It's a big 

6 status thing, a lot of it. And we have a great tendency 

7 to overclassify too many items, and we make the 

8 classification too broad and apply it to too many people, 

9 and we ought to do less of both, in my view. 

10 MR. SAXON: Mr. Secretary, that's all I've 

11 got. Let me see if anybody else has anything. 

12 MR. SABA: I have nothing, sir. 

13 MR. ALBRIGHT: Just to thank you. 

14 THE WITNESS: I don't know if I've helped you 

15 or not. 

16 MR. SAXON: You have. Let me say for the 

17 record before we shut down you have been very helpful, 

18 not just this afternoon but on previous occasions. For 

19 that matter, Mr. Winchester, Colonel Wallace, Ms. 

20 Crawford, everybody with whom we've dealt in the 

21 Department of the Army has been professional and as 

22 helpful as they can be, and it's made it much easier for 

23 our two Committees and we thank you. 

24 THE WITNESS: Thank you. 

25 (Whereupon, at 4:38 p.m., the taking of the 



iJELISSSlfS!!! 



866 



iiyms 



1 instant deposition ceased.) 
2 



3 Signature of the Witness 

4 Subscribed and sworn to before ne this day of 

5 , 1987. 

6 



7 Notary Public 

8 My Commission Expires: 



yiLASSIBEB 



867 



..-2 



«(lCUi$SJE?0) 



9 Mjy 1 98 2 



?/^^^^f3 



yKmFT 



ML->;OR.-«'.'DUM FOR THE SECRETARY OF DEFENSE 

SUBJECT: Sensitive DOD Support to CIA Special Activities 



(S) As you are d„ 
provides sensitive oper 



Central In te 1 1 igence" Ag 
support are often in to 
(covert action), as rev 
Group (NSPG) and approv 
frequency, due largely 
to Central America, the 
which should be conside 
cult policy and legal q 
cant and sensitive DOD 
the CIA in connection w 
are set forth in Tab A. 



<3te, the Depart.T.ent of Defense 'DOD) 
ational and logistic suoport to -^e 
ency (CIA). CIA requests for OOd" 
rtnerance of CIA special activities 
lewed by the National Security Plannir 
ed by the President. With increasing 
to the Presidential Findings relating 
CIA has been requesting DOD support 
red significant and raises some diffi- 
uestions. Three examples of signvfi- 
support which have been requested oy 
ith Its activities in Central Arr-tica 




policy or to call "into qoestlon th;'proce%s b w ich Prl^i 
dential Findings are reviewed and approved. 




CLASSIFIED 3Y DASP 
DECLASSIFY ON OADR 



Partially DeciassifieO/Released on lO^JS 86 
undef piovisions of E 12356 
by K Johnson, National Secunty Council 



COPY 



UimftSSIFIED 






uHetus^iFi^o 



D 2 



authority by wnicr. OOD provides z^opott to CIA zr^ocial jcti- 
ties. .^cre is, of course, no explicit statutory jut.^ority 
:o: t.^e ::a — conduct or the DGD to ^upoort spociol j-fvi- 
-;c3. Rather, the National Security Act, the mhcren- ocw-r 
of tne President, a Presidential Executive Order, and rhe 
Conqrcss-.onal authorization and :por cpr : a t i on process are 
j^ed to authorize special activities m general. T-» "-one- 



:s 
soer ;a : 



acz 



cited as 
les , 



■or 1 



Cy 



-hicr 



003 



-or 



(S) RareiV has authorization or recoanition of the 
need for DOD support been acknowledged in the Presidential 
.c-mdmg supporting th e, special activ ity. Re cently , however 

context the ABB^^^HliiHHHHBH charter, 
the Attorney General requested that DOD supoort to "a special 
activities be authorized by the President. "The CIA, DOD, 
and the Department of Justice have agreed that foreseeable 
and significant DOD support (to be deterr.ined pursuan- to a 
reasonableness test), will be noticed explicitly wit.-in the 
r-resiaentiai .-^inding and that all other support will be sec 
forth in the scope paper which accompanies the Finding. y 
While not as definitive as explicit statutory authority, > 
such an arrangement will substantially solidify the authcritv 
by which DOD provides support to the CIA on a case by case 
basis. 



(TS) 
President 
which IS 
Finding, 
are broad 
F ind ings 
requests 
within t^ 
seeks to 
support t 
in Tab A) 
Find in 




T^.e second major issue relates to tne oreatn of 
lal Findings and the question of whether DOD support 
requested is consistent with and authorized by the 
Presidential Findings, by necessity and nature, 
in scope, though by no means 1 i.-n 1 1 less . Also, 
are often operative for a number of years. Support 
must be reviewed to determine whether they are 
le legal parameters of the Finding which the request 
implement. For example, i w as concerned that the 
equested pursuant to pro]ectBm|^|H| (descr ibed 
was beyond the .scoge and inter^^ ^^^e under ly i nq 
to H^HHB^^^^^^^g^^^^^H^^H 
_ Thus, while I executed the approval memorandum, 
one^rny approval upon an a pr lor i notification to 
of the exact nature of the operation given conflicting 
tatements in the transmittal memoranda between the 
ting agencies. For this, and various other reasons, 
raised objections to the support reauest and it was 
y withdrawn by the CIA. 



UttOI^SIFBED 



869 



w 






^CyQ 






T ; 



'^•^ Wor Po^ '^"^''^s (5C ■ ' 



^ ^° Cong....' ''^co 

J.S.r 









' "^^ and ^nr^ ' ^ies. 

t:es. ';f°J'^-..o.3 

°'^e the rio^^^ 
^^ regard to'""9 

• ■''oreover ''^^ard 

e the War pA ^''''" ^f 
S 4J3 and E°r"^= 

^' '-ssional 




870 



metflssiFiED 



D 2891 



( 



believe it is importjnt that all siamficant reauo<.r. r 
scns.tive DOD support be reviewed m a cons;s en' !'d 
systematic manner, to include an appropr i . te oU foj the 
aacncies- legal adviser, within and among all a "ec^ed 
agencies. Also, such a system guarantees that ^e hIaHs of 
o^c^ agency are aware of the scope of tne aa^ncys 7n-olJ 
n-ent in spcc:al activities. .- ^/ ^ in-.ol-e- 

(5) witnn rne Army, I 3m ?lea:-d with th^ r..,,^^ 
•staol ished 

:he^ 

i-ems of mTTT^^^f^"^" "^ ^^* request is for major e-.d 




:ant 



i r mv%ho ?!J^ g^^'^j"" I receTTTTT^^^^^S 
Army should provide the requested support. 

fS) Based upon the foregoing, r believe it 13 i-cz' 
that you encourage the establishment of formal ln^ra and 

cep-^:2-^^f^-j-c:-;e;at;--2 J?: ----r; i -to 

c^nrfecu^it: f°^ ITI''' ^""^ P-P-ety a 1 /a r iably' s l.ntf 1 
nJted :?ove '°' ""''''''' ^^PP°^^ -pncatmg the issues 



(U) If r can be of any further assistance 
t ree to contact me. 



Attachment 



'lease feel 




UNCLASSIFIED 



871 



(»(e£ASSIF:E3 



:,\ Pcqjccts for Sl 




UNCLASSfflEO 



872 



UNCbASSIFIED 



^^^^ THE SECRETARY Of DEFENSE D 2 8 84 

WASHINGTON TMC District Of COLU-^^l* 



13 JUN 



MEMORANDUM FOR THE SECRETARY OF THE ARMY 

SUBJECT: DoD Support to CIA Sp«ci.l Activities (S) 

• i„„/fi^-L'n''n* '^■'^ *'^* procedure -hereby foreseeable and 

•cope paper, provide. . .olid .uthority for our J!p^rt. ^ 

co-il?i.«][°U S^il\Sk2»*"i!!' «o*i"<:«'lon to th« Con9r...lon.l f 

t^lllill /t,n,;,f^*"* ^*'* 0«P«ty On<S«r Secretary of 0«f«n.« - 

I"? . '; """^ ">••• t«q«lr«Miit«, 1 .Ian to b« •■ dlllo.nt 

innE^ll'IH ££?—"' -:;:„jir?- j;--iL .: 

.ee ir. i2^*Ir*i«^^*K":^?'' *'' ^^* reque.t. for OoD support I ^ 
!nH f!i\ i •' '°' '^* '^^*- DUSD(P) recently discussed this 
and related concern, with .enlor personnel of that Agency and -as ^ 
oroolr Jn:L'''\r"'^"^'*'' It. internal coordination L ensure 
Side to SS!^""**'' °' ^•^•^ ^""" '^•^°" '^^^^ requests are 



Paitially Declassilicil/neleased onjOre_eo 
undei piovisions ol E 12366 
by K Johnson, National Secu.cy Council 

Downsrade to SECRET 
Classified by: SecDef "P°" Renoval of Tab A 

Declas.ify on: OADR . L _ 

^./fh<^^J^^^^^'<:<{i^ -7;ff. su,/- 9/^5- 

cow rs^ ^r _J!v- COPIES. ' :y^'^-^^3^?^og/ 



873 




D 2o'35 



(S) Our current DoD process for sta^^i^O^^ques^f or 
operational support through the special IH^HH^Hi^^^^^^— 
proper. All such requests should be handled through the^^^^ 
■^■■■■B pursuant to DepSecOeC letter, sub]ect: Provision of 
oS^^e^Tperational and Logistic Support (U) , 20 December 1979. 

(S) In this connection, OSD and Joint Staff records indicate 
that the three examples you cited were properly handled by those 
offices; further details are at Tab A. 

(S) Legal counsel is readily available to all participants 
in this process. All proposals and requests for action in these 
areas referred to OSD are handled by the DUSD{P). The latter s 
staff is especially experienced In and attuned to policy, procedural 
constraints, and general legal issues pertinent to these activities. 
In addition, in order to ensure that a complete legal review is 
carried out, all such requests will b« referred to the Office of 
the DoD General Counsel for evaluation. In view of the 
institutionalized legal review, the establishment of additional 
intra-agency or interagency review procedures to evaluate ana 
advise outside the current interagency coordination process is 
not necessary. An additional review process, independent o^ ^ne 
department heads' regular policy and operations process, would be 
f^efficient, and undermine agency heads' normal management and 
^ntrol. 

(S) DUSD(P), with the Joint Staff, is worUn^r^ proposed 
DoD-CIA Memorandum of Understanding (MOU) on^g^g^g^^o Other 
Support to CIA. This MOU will be coordinated with DIA and ^ne 
Military Departments. The DUSD(P) will ensure that DoD ^"^P^*"^^"^^" 
instructions accompanying the MOU emphasize the need for appropriat 
legal counsel at each level of decision. 

(S) Your memorandum raises a question about the nature and 
extent of CIA direct exploratory discussions with elements ot tne 
Military Services concerning possible suppo^^efo^t^^^^^ 
referred to the Joint Staff and OSD^^^^^^^B^H^^^^^ 
m^m^m I have instructed the DUSD(P) to evaluate this process 
t^determine if he should undertake an increased role in the 
early stages of the process. 



1/ 



Mmh 



e 



874 



.= ? =■ 



-•-?'.A 
-?' A 



•« ««ply-c-o not* of 0«/3:/85 D :6 



JNCLASSIflE 





noon on Frid«y 22 Nov 
r:«r«tf Tlrcraft. ovnad by « propri«t«ry 
0.- T«briz. Th* «ircrtfs 
•nrout* to Ttbr U (r o 
th the proper 



•ir control 

con- 



NOTE FROM: OLIVtR NOI 

Subject: PRIVATE lUNK CHECK 

Wr«p tp «s of 2030 EOT. 

Th« Iira«li.» will d«liv«r 80 «od HAWKS 

Th«$« 80 will b« lo4d«d »bo«rd :nr«« ci 

which will tak» off «t cwo hour inctrv li 

fll* for ovtrflifht through :h 

Appropriat* «rr«n(«a«nts h«v« bt«n a«d« 

p«r»oim«l . Onc« th » tircrtft hav^bjt" Uunch^d, th«i 
who w i^^^n^^K^^iwho will 

■^iract^^lUHHIHUPin Bairut to collect th« fiv. 
A«cit« fro« Hizb«ll«h and d«Iiv«r th«a to th« U.S. Eabaity. 
Th«r« U also th« poiiibility that thay wUl hand ovar tha Franch hoitaca 
who is vary ill. 
Thara ii a raquiraaant for 40 additional waapa of tha *aM neMnclatura 

for a total raquiraaiant of 120. S18M in payvant for tha flrat 80 hat 
baan dapositad in tha appropriate account No acft will lard in Tabrta until 
tha AMCITS hava baan dalivartd to tha aabasiy Tha Iranians hava alto aikad 
to ordar additional itaas in tha future and have been told that they will 
be considered after this activity has succeeded. All tranafer arranjeMats 
have been nade by Dick Secord, who deserves a aedal for his ejctraordlaary 
short notice efforts. 




1^ 



Replenishaent arrangeoents are being aada through the .MOD purchasing office 
in S"\C. There is. to say the least, considerable armiety that wa will 
$o«ehow delay on their plan to purchase 120 of these weapons in the next 
few days. lAW your instructions I have told their agent that wa will sell 
them 120 items at a price that they can naet I have further told then that 
we will nalte no effort to oove on their purchase LOA request until we have 
all five A.'ICITS safely delivered. In short, the pressure is on then. 



debrief teaa to Wiesbaden. 



Tomorrow we will dispatch a covert hosta 

unde r cover of an exerci s e. 

__ _^ lUCOM will be told to prepare^ 

Tour"-fibur~aTart to^^TcVup any hostages who aay be released 
over the weekend. All of the parties above will be told that we have 
info (froB the saae sourc« which advised us of Wier' s release) that 
soae. if not all, AnCIT hostages will be turned overBH^^H 
between now and Sunday. ^^^^^^^" 

At soon at v« hava tha release confirmed, we need to aova quickly with 
Defense to prevlds th« 120 aissiles the Israelis want to buy They are ve 
concerned that thay are degrading their defense capability, and in view of 
Syrian shoot-down yesterday the PM has placed-cons iderable pressure on bot 
Rablx and KiBche for very proapt replaceaent. Both called several tiaes 
todsy. 

There is the distinct possibility that at the end of the week we will 
have five Americans hoae and the promise of no future hostage takings in 
exchange for selling the Israelis 120 lod HAWKs . Despite the difficulty 
of asking all this fit inside a 96-hour window, it isn't that bad a deal 



the 




■ecoaaend past to RC!1 after review Noi 



war« regards. 



t/NCLASSiFiEd 



875 



^^^^,.M 



■-^^^ -"--IJP ■ -. 



i-i-' 



m& 



(TQA. 



Motricffl rot XNNioun siznavr or x-iamk m4 z-tqh ^^^ 

I '■AW 

iat«nd«d for OM tad 14 for lorM. TIm aissilaa hav!^**^' 

b««A ^ot aeeaptaaca taatad, b«t tbara la a vary 1«« Ii??^ Y«t 

fallara. Tba alaallaa will ba at Ra4 liv«r aatll aba.? \*' 

19M for taatiaf . ^*'* *Prli 

• Th«ra woald ba ae iapact oa tha OAI if wa ahip tbai* t%. 
■laailaa. Tba pro^raa hat tllppad la etb«r «aya, «a4 mj\ 
acco—odatad witbia tha aoraal preductloa la«d ti«a «.,*' ^ 
Mat aiaailaa. •' ^•pUca- 

• Keraa woald bava to ba eonaaltad to aacartaia tb« ite..» 
tbolr pro^raa. if It ia nocaaaary to abip aay •ItaliM if* ?? 
tioa to tbo 7S aaatloaod abova. rreearaaoat laa4 tiaa »? •Mi-. 
leraa't •iaailaa would ba aboat 33 Motba. *^ r«pUea 




- Ac«y baa abo«t^^H|Taifa (iaelodlof I CJf \*9tm s ^ . ^ 
aiaat a dlatribJfToTroqairwaat of •bootHBHr^L^*^'^' 
fOt I'tm aiaalloa ara availabla ia ctjau/^opok~toeka 



* To tbo boat of o«r kaowladga. all of O.t. Arsy |-bam> . 
witb uaita and aboald oot bo eoaaidorod froa divoraioo. 

- Ooit roplacaaont priea of IMfl aiaailaa ia aboat $4)7 7. 
total paeka^a priea for SO woald approaiaoto 122. SNi far'ifkil 
aboat MSN. Faeka^a prieaa iacloda tw sttrehargaa. "" 

a: 

- iMod oa tbo aoafeora, 
X-TOift iaaodiatoly woold 
aiaailaa «aaU bavo to b 
aorioaaaoaa otf tba raqai 
vo«14 roeoiva TOV-IX roplae 
Aray aeald rolaetoatly aeqaiaaeo to 
ootiro qoaatlty. 

- Oait priea of tba roplaeoaaat fOV-XZ alaalla ia aboat ti2 200t 
total paekafo priea aeaid approaiaata MSN. vitb VMt aarcbarioa! 

- Oallvary frea prodaetioa of TO»-XX pay baek aiaailaa to iim 
Axay aeald oeear aboat tbo bo^iaaiaf of CT 19M. If aoeaaalrr— 
tboaab tbia ia aat roeoaaoadod—approxlaataly 2.000 aaaUoeltad 
to»-XX aiaailaa eaold bo dolivorad f rea SAT to Army i, ^ZZlT 




876 



UNCLASSIFIED 



/ 



' Declassified/Released on I 1^6^ fe S 
under (jrovisions 01 f 12356 
Johnson Nalional Security Council 






'^'^c lb 
D 2915 



tXrAKTMCHT OF THE ARMY 

orricc or rue ctniti couisii 



lifef> 



Zf^O 






CM 






UHCUSSffltO 



877 




UNCLASSIFIED 



DEPARTMENT OF THE ARMY 

rMC CCNCMAL COUNSO. 

•WASHiNaroN. oc ioji* 



13 FEB 



D 2916 



.MEMORANDUM_POR THB SECRETARY^Or THB ARMT^ 

SUBJECT: Support to Intelligence Operations 



During a recent review of an issue in our office, 
we noted a significant provision in the Intelligence 
Authorization Act for Fiscal Year 1986 that we wanted 
to call to your attention. 

During Fiscal Year 1986, the transfer of defense 
articles or services exceeding one million dollars by 
an intelligence agency to a recipient outside that 
agency is considered a significant anticipated intelli- 
gence activity for the purpose of reporting to Congres- 
sional intelligence oversight conunittees. In addition, 
an intelligence agency may not transfer any defense ar- 
ticles or services outside the agency in conjunction 
with any intelligence or intelligence-related activity 
for which funds were denied by the Congress. 

These provisions appear to reinforce our view of 
the importance of Congressional notifications in con- 
nection with support to intelligence operations. 



■■":eci3';sitied'Reie!ised nn ll^ ^^ 8& 
jioer orovisions o( E 12356 
. Jo-i isoii National Security Council 



^(^^\ v/ ^tcM^^C 



Susan J. Crawford 
General Counsel 






a^ 



^^*<f^-^^ 



^>.^*Ax*-*^ 




UNCLASSIFIED 



878 




UNCLASSIFIED 



DEPARTMENT OF THE ARMY — ij/*^ 

/ 



• AtMINOrOM. OC Mil* 



1 3 rC8 >986 



NEMORANDUN POR THE SECRETARY Of THE ARrtY 
SUBJECT: Support co Inttlli9tnc« Op«ration« 




During a recent review of an issue in our oCeiee, 
we noted « significant provision in the Intelligence 
Authorization Act for Fiscal Year 19l« that we wanted 
to call to your attention. 

During Fiscal Tear 198<, the transfer of defense 
articles or services esceediog one ■illiea dollars by 
an intelligence agency to a recipient outside that 
agency is considered a significant anticipated Intelli- 
gence activity for the purpose of reporting to Congres- 
sional intelligence oversight eoaaittees. In addition, 
an intelligence agency aay not transfer any defense ar- 
ticles or services outside the agency in conjunction 
with any intelligence or intelligence-related activity 
for which funds were denied by the Congress. 

These provisions appear to reinforce our view of 
the iaportance of Congressional notifications in con- 
nection with support to intelligence operations. 



r Deciassilied/Releasea on 1 1 ft6> 6 & 
unoef utovi'iior.; ol E 12356 
Joririsoi Nsiioiiji Iz-:-:. •\, .cuncil 

i'. K.- ■ 



SfCi 



Susan J. Crawford (/' 
General Counsel 



c-c^''4^h^ 



UNCLASSIFIED 



879 




DEPARTMENT OF THE ARMV 

OFFICE OF THE DEPUTY CHIEF OF STAFF FOfl LOGISTICS 
WASHINGTON. 20310 05 




'"i(iti i-rovisionr, o( E Viyi 
"v K ion-ison, (touKdl -i... , , ,;jncil 

MEMORANDUM FOR RECORD 

SUBJECT: Support for Intelligence Activities (U) 



25 Feb 86 



1. (S) On 18 January 1986, The Army was tasked to provide support 
in terms of 3504 (later Increased to 4509) inissiles. The task was 
to turn these items over to the receiver at Redstone Airfield. Use 
and destination was unknown. The task would be executed upon 
receipt of certification of funds by the receiving agency. 

2. (S) The first phase of the task, delivering 1000 inissiles, was 
not executed until 13-14 Feb 86, due to initial delay in cer- 
tification of funds by the receiving agency. 

3. (C) During the course of coordination with OSD (MG Powell) and 
OSAGC, questions were asked as to the responsibility for end item 
usage. This was identified as a responsibility of the receiver. 

4. (C) On 7 Feb 86, the new law (The Intelligence Authorization 
Act for Fiscal Year 1986) which required Congressional notification. 
In certain circumstances, became known. Coordination was accom- 
plished with the Office of the Army General Counsel (OSAGC) as to 
the Secretary of the Array's responsibility. This was determined to 
be a responsibility of the receiver, not the Secretary of the Army. 
This position was later confirmed by the Array General Counsel. 

5. (S) The notification requirement, while clearly to be satisfied 
by the receiver, places the Army in a difficult position. We 
believe the notification must occur, and as the provider, believe 
the receiver must b« advised that notification is the respon- 
sibility of the receiver, and must be accomplished. I have 
discussed this with the Office of the Secretary of Defense; they 
have assured me — and asked that the Secretary of the Army be assured- 
that the receiver Is fully aware of its reporting responsibility. 






^/tavws 



/^a»^//M^^a^>^ 



VINCENT M. RUSSO 
Major General, GS 
Assistant Deputy Chief of 
Staff for Logistics 



l^t^^e 



880 



UNCLASSIFIE, 




1 1 1' I?" "^ 



H 



^897 



^:U--^ 



V/v.^c 



J^Xl^ 



^--^ ^ 



r 



RECEIVED 

NOV 29 .:-^6 



•lil«»Deci3SSitied/Peieased nn ' 1^658 5 
under pfoviiions oi E 12356 
tly K Johnson. National Secuiity Council 



^ 



\ 



^- 



,^ 



UNCLASSIFIED 



881 



mcmms 



^ 9898 



THIS DOCUMENT CONTAINS SPECIAL ACCESS MATERIAL 



SPECIAL ACCESS REQUIRED 

Access to this document will be restricted to those 
persons specifically indoctrinated to the individual 
Special Access Program indicated l)elow: 

DO NOT PLACE IN DISTRIBUTION: 
CALL 



WARNING 



This document contains Information affecting the 
National Security of the United States within the 
meaning of the espionage laws US Code 18, Sections 
793 and 794. The law prohibits its transmission or 
the revelation of its content in any manner to an 
unauthorized person. 



lA CHQ) Label 602 
1 Feb 83 



ONttlVlSEKI 



882 



J 



UNCkASSIFPED 

OrnCE OF THE SECRET ARv OF DEFENSE 
A/ASMINGTON O C 20301 



9899 



12 March 1986 



MEMORANDUM FOR VICE 



E^DMt 



RAL POINDEXTER 



The attached memorandum Irom the Director of the Army Staff 
13 self-explanatorv. It reflects the unease of the Army General 
Counsel's office over the transfer of items with which you are 
familiar. As you know, we have been handling this program on a 
very close hold basis, and the Army has been told nothing with 
respect to destination. Per guidance received from NSC, the Army 
has been told that they have no responsibility for Congressional 
notification. The Army has also been told that whatever notifi- 
cations are to be made will be taken care of at the appropriate 
time by the appropriate agency and that the Attorney General has 
provided an ooinion that supports this position. 

The Secretary asked that I make you aware of the Army's 
concerns in the event vou wish to advise the DCI or the Attornev 
General, ^ ^ 

Colin L. Powetl 
Major General , USA 
Senior Military Assistant 
to the Secretary of Defense 




Bllf Oeclassified/Reieasea oniLti^cC 

unde' provisions ol £ 123^G 
I K Johnson National Secunty Council 



ut^tKSSimD 



883 



\J 



OEPA«TMENT OF THE ARMY 
o»» ce o» '-f c- c« o» i'«»» 



^ 9900 



7 MAA 



MEMORANDOM POR THE MI L ITXRY^>«flSTANT TO THE SECRETARY OF DEPENSE 

SUBJECT: Congressional ^k^t i f icat Ion of Significant Intelligence 
Activities (U) 



1. (TS/NOPORN) On 19 January 1986, the Amy responded to a verbal 
tasking froa your office to provide 1,000 TOW missiles to the 
Central Intelligence Agency with a contingency for 3,509 «ore at i 
later date. The first 1,000 missiles were delivered on 
14 February 1986 to the CIA. 

This request for support circumvented the normal 
' ' ■ "' t 



■ system for reasons of security, yet the supper 
exceeaea the SI million threshold established In the FT86 
Intelligence Authorization Bill for reporting to Congress as a 
"significant intelligence activity." Funds in excess of S3. 5 
million were provided by the CIA to reimburse the Army for the 
first 1,000 missiles. Billing and payment will occur within 60 
days, or when all missiles are delivered, whichever Is shorter. 
The Agency expects to complete the project within 60 days. 

3. (TS/ NOPORN) SBCDEF memorandum of 13 June 1983, subject: DoO 

s u p po r t ^mmmi^^^^i^^Hin s ) , 

for notification ofCon^aT^o^DoD support to the Agency with the 
Deputy Onder Secretary of Defense for Policy. It also confirms 
that primary responsibility resides with the Director, Central 
Intelligence. In the case of the TOW missiles, the Army 
understanding on responsibilities for notification conforms with 
your June 1983 aeBorandua. 

4. (TS/NOfORN) This aemo is to assure understanding of statutory 
requirements should this issue be raised by one of the 
Congressional Intelligence coaaittees in the future. 



Partially Declassified/Released on ' Jl^ 'S'ciQ 
undei pjoviiior.s oi E i23-)6 
by K Johnson. National Secunlv Council 



CLASSIFIED BY: 
DECLASSIFY ON: 



DASP 
OADR 



.a.^ 



ARTHUR E. BROWN, JR. 
Lieutenant General, GS 
Director of the Army Staff 



■r*ikAJL -H^ 



wsmmm 



884 



UNCLASSIFIED 



Ar.i:NT'>- ivvKsnr.^TinN nrmRT 



0012-87-CIDOOl 



BASIS FOR INVESTIGATION: About O815, 6 Apr 87. this office received a request for 
assistance from Mr. George PLIRCE, Office of the Army General Counsel, Pentagon, 
Washington, DC 20310. The request was to re-lntervlew Mr. William T. GOLDEN and 
ask him questions which were generated by a review of his statement to CID on 
2 Apr 87. The concern is whether GOLDEN, while working for Business Security 
International (BSD, knew and had dealings with LTC Oliver NORTH or any other 
Individuals at the National Security Council (NSC). 

NARRATIVE: 

1. Interview of Witness 

1.1 Between 1520 and 153«, 6 Apr 87, GOLDEN was telephonlcally Interviewed by 
SA CANTRELL via secure communications. GOLDEN related the following. He did not 
recall being Introduced to NORTH and doesn't think they ever formally met. He went 
on to say that during the November/December 1983 period he participated in a 
meeting with a number of other individuals that NORTH also attended. He was not 
aware at the time who NORTH was or for whom he worked. He said this meeting 
occurred after he left BSI and the meeting had nothing to do with the "Contra 
supply issue". He also said that while at YELLOW FRUir (D) he bad no contact with 
NSC personnel. However, subsequent to nis assignment at BSI he had dealings with 
two N'SC staffers. He identified them as John GRIMES and Tim DECRAFFENRED. His 
contact with tnem was not related to the "Contra supply issue". He did not have 
first hand kncwxeoge of any contact by BSI or YELLOW FRUIT (U) with the HSC or 
NORTH LAST ENTRY -- 



under provisions m f l^ai °° 




HQUSACIDC. Task Force Catalyst Maker 

7 Apr 87 



^^^ 



885 



m 



lit 



CO 



cussiFi^fr^^-^^'" 



1 OCT 1989 



M«OMilOy« POR THE SeCMTAJir Of THE AMX 

SOSJCCT: Additional Support of Project Cr 




ocu« (U) 



>Q<|< c»i •^'^°" ■•■«'«n<l« to you of S.ptt.b.r 8 

i!!^;^^?' "?«•'"■ -dditional .upport for thi, pro^t'; 
^n ^'^« •!'••<*/ provid.d m H.y 19M. Th« Ch Uf 
TMO provided .• with th« action ...oc.ndu. and .up! ' 
porting docu««nt«tion b«caas« th« orioinal r«qu«tt w.. 
not proctotd through th« prtscr ib«d ■■^■■■■■■H 
and did not recaiv. th« Itqai rtvi«wfftiuTr?W^h^' 
OASP(O) Tha action ...or.ndu. on additional .JjJJ; 
alao oaita TMO. OTJAG, and ay offic. 'vippoct 

IS) I havt not b««n provided with aufficiant 
inforaation on thia project to pcrait a coapltta le^al 
ravia* or concurrence, but the available Inforaation 
(or lack thereof) does raise seriou. legal and polUy 
concern, that should b« resolved prior to your action 
on thia request. Specifically, -ction 



«. (S) Since the ultiaate purpcae ot thia 




tial risk of eabarrassaent to the Onited States or 000. 
or. if in your Judgaent. it involves questions of pol- 
icy or propriety. *^ 



b. (S) The request, if supported, will 
result in an inventory sero balance on three itcas and 
iapact on th« Aray's air defense capability. Both 000 
Directive 5210.34 and the OASP set forth a policy of 
providing support to non-poo agencies if it will not 
Interfere with, or iapede, the perforaance of the ais- 
sions and functions assigned to OOO. Thus, the iapact 
of this requested support on the Aray should b« care- 
fully, evaluated. 



Specijl handling of this docuivnt tj 
required. H^ndcirry during rooting; 
norma) adniini$tr«tive distribution 
Channels shall not bt used. Access 
<^it be liaited to those -ho i«jst 
know th« Informtion. 



ciAMjnco sy.- 



OASP(U) 



OCCLUJjry ON: O^PW 



l^LASSIFSED 



r 



82 



e. (S) It is not el««r froa th« supportlnq 
■••or and* whether Rom Stock •till cont«aplat«« trans- 
ftrcln^ radar tystaaa that wart pravloualy Idantieiad 
a« Iranian asaats pandlnq sattlaaant o( elalaa by tha 
U.S. - Iranian Claiaa Tribunal. Any such propoaad 
tranafar should b« raviawad by OSO. This would ba 
traatad aa a saparata raquaat for and itaas, rathar 
than rapair parts. 

(U) I aa concarnad that It waa daaaad nacaasary 
to handla both tha original and addltlona^raauasta 
through othac than tha aatablishadlHi^^HHHNy*^** 
and to aseluda both OTJAQ and ay oCeiea Croa tha ravlaw 
procasa. Oua to his attandanca at tha JAG Confaranea, 
NQ Ovarholt has not yat had an opportunity to raviaw 
this aattar, but I aa confidant that ha would concur in 
ay vlaw that sansltlva proqraas should b« givan propar 
lagal ravlaw bafora tha Aray laadarsbip Is coaaittad to 
tbair aupport. 



^ijsan J. Craweortr ' 
Ganaral CounsaL^ 



vsm 



887 




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OEPAT 
Qrric* or TMi OCPUTV cmicf or rrArr fo« or€WATiOM« *no ri>N« 

' WASHINOTON. OC 10ll« 



irm 



18 APR 



MEMORANDUM FOR DIRECTOR, JOINT STAFF 
SUBJECT: ^^^^^^^^|sy s tern (U) 



1. (S) TMe ^^m^^^^System provides a single channel for 
requests for support from the Central Intelligence Agency to the 
Department of Defense. The system protects extremely sensitive 
information from both inadvertent and deliberate disclosure, 
allows for covert support to Agency operations worldwide, and 
insures adequate Service review of the request*. 

2. (S) Recently, a number of requests involving transfer of high 
technology weapons, large quantities of limited, sophisticated 

and/or spares for low density weapons have bypassed the 
"^System. These requests have been made by members of 
Off icgof the Secretary of Defense d irectly to Service offi- 

^''''- Pl^ ~ 

ticipated or has done so after the fact. 

3. (S) Requests which bypass the ^^^^^^^^«Sys tern receive less 
Service and no Joint Staff scrut^^^y^^m^/ impact on the 
Service's warfighting capabilities. The Secretary of Defense 
should be made aware that usin^ ad hoc channel^ to support the C3 
may degrade security overall and impair national security. 




Ihas either not par- 



mcu 



Partially Oecia<;sit(ed/Rei»ased onJj£tB_^g 
under Qrovijpons of E 12355 
Dv K Johnson. National Sscj;:,"/ Ccuncil 



CARL E. VUC 
Lieutenant General, f3S 
Deputy Chief of .Staf.if for 
Operations artd plans 



I 1 



UNCLASSIFIED 



Sf^cXALHAJTOLINO 07 THIS DOC'JUDIT IS 
RXQUIRET. HXWDCAfiSY DURING ROUTIRC. 
.lORiaiADMINISTRjlTIVEDrSTRimiTTnM 






888 



UNCUSSJFSED 



2 f-f-i-'r^'^ 




»MT TO MAKt TMC rO\.i.OVIMO »T»TtJHWT UMOCH 0»TN 

Q. We understand thac vou've been contacted bv C8S news regarding Swiss bank accounts 
that vou are a signatory to. Is this true and can vou explain their inqulrv to vou? 
A. I was contacted about a week ago bv a Mr. ROSENBERG of CBS news who wanted to 
l<.now if there were any connections between Business Security International (BSD and 
the .National Security Counsel. I refused co coaraent on that and referred him to t^e 

Array Public Affairs Office. ROSENBERG contacted me again during the morning of / I - ^- 

April and during that conversation advised me that he had confirmed through a source 
ir, Euiaoe tnat [ wac a signat;rv to a Swiss bar.< account. He aljo claimed chat Oliver 

.»fORTH. Richard SECCRD. Robert OWEN and Joel PATTERSON were signatories co cr.e same 

acccunc. I again refused to commenc and referred him co the Armv Public Affairs 

Office. 

Q. Are vou a signatorv co a 

A. I don't knew. 



iiss dar 



:count ' 



3W1SS 3dr 



:counts tfscaoi 



at iSbl 





was to oe pre-arranged chac 
whac they really wanced. wi 
excess sup 



: --^c ■-■as a ^)ij:: co supo^. chc Nicir 
^cTi; various aspi.-i.cs of :ne pl-T, o 

> Jicn supplying cne Concras chrcug" 
m CO the LS Covernmeiit through the~ 
Lstance programs wich reyuescs 



loed in 
^-.irjo It Cheir runcini^ .as 
y recall cwo. 'ho 
he plan was ;j have 
Hicarv Sales ana/or f^.e 
re. maceriai, ecc. Ic 




. - 'iHmALtDit ■*^J^i°'"I'^*b "■^ '^*'' *«^ ™* wi-HAu oFThM ftmcti HAJurto 



mu^icssmrnrr. 



WUSSIREO 




INITIALS OF PERSON MAKING STATEMENT PACE ^ OF 3 PACES 



«WJtAMtf!ED 



890 




m 



w 



? Given all the attention regarding this subject in the media. Why wasn't this subjeci 
surfaced before now? 

A. Because I didn't really connect it all until CBS inquired about the Swiss bank 
accounts and further because the focus m all of the actions related to BSI has or 
was always on DUNCAN. 
Q. Is there anything that you wish to add to or delete from this statement? 



mill in, T rnroFN 



MCMT SMICH •CC'lil ON >*CC I *M0 IMOI OM *>CC_ 

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or FUMIIMIitMT. *IIO SITHOUT COCHCIOD. UML*«ruL IMfkUCMCC. On UHk.*wrui. INOUCIHCMT. , 



5a-Craig C. MALMFELPT ' '-' 



(Sltm*nM9 •< -^•Mfln ltmMlm4 i 



HQ. USACI DC. Task Force Catalyst Maker 



•• Arl inifrnn Hall Cjrarinn. VA 



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891 



HAnE= HIR033002 



KPTS BOyUN 



DCHM DONOCK 



*i/Wf/ffl 



DEPOSITION or ROBERT H. HASOH 



^ 1 « — ntm tt 



Monday, Fabruary 2, 1987 

House oi Rapxas«ntativ*s , 
Selact Committaa to Invastigata 
Covert Arms Transactions with 
Iran, 
Hashington, D.C. 

Tha salact connittaa aat, pursuant to call, at 11=05 a. 
at Haadquartars , Southern Air Transport, Vanadades Building, 
6th Floor, Hiani International Airport, Miami, Florida, 
Charles Tiefer, Special Deputy Chief Counsel to the Select 



Committee, presiding. 




Ll'iO/^ 



UNCLASSIHEO 



'^// 



oi ta i»5* 

-^ D. SMo. Nabonal Security 1 



892 



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. yNCLHSSIFIED 



PulUly DMhHiflM /Rriwed 



HIR033002 -w^.. . ^^ pj^gj J 

HR. TIZrZR: rty naa* Is Charltts Tl«iar, I am Spaclal 
Daputy Chlaf Counsal to tha Housa Salaot Conmlttaa to 
Invaatigata Covazt Azas Tzansactlons with Iran, pursuant to 
Housa Rasolution 12. 100th Cojftgtass, First Sasslon. 

With aa is Gaorga Van Clava. ii you would intzoduca 
yoursalf . 

MR. VAN CLEVE= I an Daputy Rapublloan Counsal oi 
tha Salact Comnittaa to Invastlgata Covazt Azas Tzansactlons 
with Izan. 

HR. TIEFER: As an obsazvatlon izoM tha pazallal 
Sanata Co»«lttaa, y$» hava Tazzy Smlljanlch. 

HR. SIflLJANICH: Right, Assooiata Counsal with tha 
Sanata Salaot Coaaittaa invastlgating thasa aattazs. 

HR. TIKFER' Hz. Sailjanioh is haza with tha eonsant 
of Southazn Air Transport, which is saaking to hava as nuch 
as possibla coozdinatad and siaultanaous Housa and Sanata 
Inquizias . 

Hz. Hason. will you taKa tha oath now? 

t Hitnass sworn. ] 

BY HR. TIEfER- 
ft Hill you stata your naaa and addrass ior tha zaoozd? 
I Hy naaa is Robazt H. Hason. Hy addzass ^*^^^^^^M 
Hiaai. Florida, 33157. 

HR. TIZFER: Ha will go oH tha raoozd now. 

(Discussion off tha zaeozd.l 



^j»«on.o»LO. 12356 

r D. SUM, Nabonal Security Council 



JiSlASSIFlEP 



UNCLASSIFIED 



IE: HIR033002 UliyLriUVlJ I I- U P»GE 3 
414 MR. TIEFER: Aftar a tout through Southatn Air 

MS Transport facilitias, wa ara rasualng tha daposition of Hr . 

i«6 Mason, and if tha witness' counsal could also Idantiiy 

147 himsali ior tha racord? 

Its MR. KIRSTEIK: David Kirstaln, iron tha law fira of 

•49 Backitan C Kirstain. raprasanting Southarn Air Transport. 
50 MR. TIEFER: You hava racalvad for tha Mitnass a 

5 1 copy of tha Rules of tha Committaa? 

52 MR. KIRSTEIK: Yes. 

53 BY MR. TIEFER: 

5>4 . 2 Hr . Mason, if you would start just by tailing us 

55 your background, what you did In a vary general way before 

56 coming to the company? 

57 A Okay. I joined the company in August of 1985. I 

58 came — I joined this as Controller, and was promoted to Senior 

59 Vice President in March of 1986. I came to the con(^p^y from 

60 Evergreen International Airlines in Oregon. I had been with 

6 1 them for approximately seven and a half years. 

62 I had joined them in Arizona when I lived in 

63 Arizona, and whan the headquarters were moved to Oregon, I 
6(4 moved up there. At the time I left Evergreen, I was Vice 

65 President of finance for that organization. 

66 . ~ I had worked with Bill Langton up there, and it was 

67 through that connection that I was offered the job at 

68 Southern. Prior to that time, I had my own accounting 



mmm 



894 



ONCUSSiFlEO 



NAME: HIR033002 11 1 ^ U Vrl • V W • ■ * ■» W PAGE M 

69 practice in Tucson for a period of about eight years. 

70 I don't Know whether you want ne to go back further 
than that. 

72 C State your college education. 

73 A Okay. I received an undergraduate degree from 
Cornell University in 1957, major was agricultural 

75 economics. I received a BHA degree from the University of 

76 Arizona in, I think it was 197 1, with no particular major. 

77 It was kind of a general degree that was granted down there. 

78 C And after graduating from Cornell, what was your-- 

79 A After graduating from Cornell, I spent a little bit 
of time in the Kavy . I ran a dairy farm for a number of 
years. I worked in a family business which was a kind of a 
general variety store, in upstate New York. 

83 I worked for a very short period of time selling-- 

8U HR. TIEFER: Off the record. 

85 (Discussion off the record. ] 

86 BY HR. TIEFER: 

87 . 2 If you could pick up from the dairy farm and take it 

88 up to the eight years in accounting in Tucson. 

89 A Okay. 

90 I worked for a couple of years in a family business 
9 1 which was a variety store, I sold Insurance for a short 

92 period of time, and went to work for a farm co-op as a 

93 retail store manager. 



ICLHSSIFIEO 



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HIR033002 



mmm 



PAGE 



»t that point in tim«, I sp*nt two years doing that; 
at that point in tin*, I mov*d to Arizona and want to 
school, startad my businass, workad ior probably six months 
for the City oi Tucson, documenting their accounting system 
and writing procedures ior then. 

2 How did you cone to go to work for Evergreen? 
Answered an ad in the 







896 



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fi Hot specifically in connection with that question, 
but just in connection with all questions, I do this at the 
beginning of a deposition, you tecall you ware suoxn at the 
beginning of this deposition before we adjourned? 

A Correct. 

Q Do you understand the significance of the oath that 
you have taken? 

A I do. 

Q I show you now a docunent numbered SAT-001798. Fron 
now on, when I refer to documents, I will simply refer to 
the digits rather than the SAT numl)ers at the beginning, but 
all documents referred to by number will be prefaced with 
SAT. 

A Okay. 

fi I ask you if you recognize it? 

A Yes, I do. 

S What is it? 

A This is the organizational designation of the 



mmim 



897 



IMS 
1M6 

m? 

1148 
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~ llflOUSSiFIEB "" ' 

Exacutive Department at Evezgrean, showing or going through 
tha-- 

nR. KXXSTEIN: You maan Southern Air. 

THE UITHESS: Sorry, Southern Air. You got me back 
on the Evergreen track here--showing the senior management of 
the company, from Mr. Bastian, the Chairman, through Hr . 
Langton, the President, down to the three senior VP 
positions . 

I might say that this is outmoded at the present 
time . 

BY HR. TIEFER: 

C What would have to be changed with respect to it? 

A There is a iourth Senior Vice President who has come 
on board within the last month, who is Senior Vice President 
for Sales and Service^ 

S What is his name? 

A Eric Korth. K-o-r-t-h. 

2 Let's work our way down irom the top and actually, 
the Board of Directors is not shown on this chart, but let's 
start with the Board of Directors. Who is on the Board of 
Directors for Southern Air Transport? 

A On the Board of Directors for Southern Air Transport 
are James Bastian, William Langton, Vernon Eason, Hugh 
Grundy, and Stan Williams. 

2 Do you know how long Hr . Williams has been on the 



mmssm 



82-720 O-88-30 



898 



Board of Directors? 



HAHE: HIR033002 
169 
170 
171 
172 



"fHUSSIflB 



A I really don't. My assumption would be, if I can 
use assumptions on this, that he has been on the Board of 
Directors since 1979, because that is the point in time at 

173 which Mr. Bastian bought the company from Mr. Williams. 

17U C How long has Mr. Eason been on the Board? 

175 A I really have no good feeling for that one. Mr. 

176 Eason was a former insurance broker for the company. I am 

177 not sure when he retired from business. I think when ha--my 

178 assumption would be when he stopped being active in the 

179 insurance field as the active broker for the company, he was 

180 appointed to the Board, but I don't know when that was. 

181 MR. KIRSTEIH: Bob has only been here since August 

182 of 1985 himself. 

183 THE WITHESS: Yes, a year or year and a half. But 

184 he was on the Board at the time I came, as was Mr. Grundy, 

185 and I cannot tell you how long he was on the Board. 

186 BY MR. TIEFER: 

187 Q You have no idea how long Mr. Grundy was on the 

188 Board? 

189 A Ko. 

190 . fi Do you talk with the members of the Board who are 
not in-house, the three members of the Board who are not 

192 corporate officers? 

193 . A I talk very often with Hr . Eason, who still 



wussife 



.. UNCLASSIFIED 



H\nz- HIR033002 V I 1 V Ltn^t' W i I BImIJ^ PAGE 9 

1914 maintains soma relationships with th« insurance conpany, 

195 Alaxandei and Alaxandei, who is our prina carriar. and I do 

196 run things by him, or I do run pioblans that I am having by 

197 him, so I do hav* an ongoing dialogue with hin. 

198 Kr . Williams, I may talk to a coupla oi timas a 

199 year. 

200 2 And Mr. Grundy? 

20 1 A Mr. Grundy, I hav« had no contact with other than 

202 having met him at last year's Board meeting. 

203 2 Besides talking to these people, do you have written 
20U communications with them? By these people, I mean the three 

205 outside directors on the Board. 

206 A The only person that I have had written 

207 communication with in the last year would be Mr. Williams, 

208 and that had to do with some payments that we are still 

209 making to him out of the purchase of the company, and I 

210 think that was on one occasion. 

211 2 Are you familiar with the arrangements that were 
2 12 made for the purchase of the company? 

213 A I am really not. I don't really feel qualified to 

2114 talk about that. It is a question that probably would be 

2 15 best directed to Hr . Bastian. 

216 ' e This will arise several times, while there may be 

217 somebody else in the company who is better qualified, if I 

2 18 ask you if you know anything about something, you can answer 



UNClASSIflEO 



900 



INCLASSIflEfl 



H»HI: HIR033002 w..-»«-.^^«. .mm. pjgj 



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I don't know, or you can say what you Know. 

A W« pay X numbat of dollars aach nonth to Hr . 
UilliaBS out of that putohasa contract. 

2 By chack? 

A By chack. 

fi I may fraquantly rafaz — I slaply naad a labal that Ma 
will undarstand--if I wara to zafar to a aattaz of 
transporting Iriin arms and to a mattar of assisting a group 
in Cantral Amarica that was rasupplylng tha contras, and if 
I used tha shorthand, tha Iran-contra^ mattar, would that 
hava any maaning to you, so if I ask a quastlon such as. 
hav* you discussad tha Iran-contra^ mattar with so and so, 
would you undarstand what I was asking? 

A I would undarstand what you wara asking. 

Q So, for tha racord, and I am not asking you to 
dafina tha problam, which Is a difficult problam to daiina, 
whan I ask that quastlon, what doas it signify to you? 

A Hhat It signiflas to ma is that thara was or 
apparantly was a movamant of arms from tha U.S. to Iran via 
Israal. Thara was a movamant of arms f zom^^^^^^^jto 
Cantral Amarloa. 

And thara was a group th at was rasu pplylng tha 
coRtras in Amarica^^^^^^^^^^H if you 
guass tha quastlon, or tha statamant I naad to maka with 
you, and this may ba--ought to ba mada off tha racord, than 



UNGLASSinED 



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2M7 

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HIRO 



..... OilLASSiflEO 



PAGE 



you can decidtt after I have made it uhethai you uant it on 
the record or not. 

MR. TIEFER: off the record. 
(Discussion oii the record.] 
MR. TIEFER: Back on the record. 
BY HR. TIEFER: 

C If at any time one of my questions is difficult for 
you to understand, Mr. Mason, by all means ask me, if 
possible tell me what is difficult to understand about it or 
just say generally, I don't understand. 

With the explanation that you have just given of 
what the Iran-contra matter means to you, have you discussed 
the Iran-contra matter with any of the three outside 
directors on the Board of Directors? 

A Yes. I have. 

8 Which ones? 

A With Hr . Eason. 

Q When? 

A On several occasions, the most recent one was last 
Friday of last week. 

S And can you recite the substance of the various 
conversations you have had with Hr . Eason about this matter? 
. - A The substance basically has been that Southern was 
involved in these--yes, it was recognized that we were 
involved in these. I don't think we have from day one, have 



yNCUSSIREO 



902 



UNCLASSIFIED 



NAME: HIR033002 UivULflUM'" li-LI PAGE 12 

269 said we were not Involved. 

270 The discussions have probably been more around the 
27 1 treatnent that we have received irom the press and iron 

272 various Hembers of Congress in doing a job that we felt we 

273 were asked to do by the government, and the fact that we 
27>4 felt we were getting short shrift in the press and really 

275 being tarred and feathered for stepping forward when 

276 somebody needed to step forward and do a job. 

277 fi What did Hr . Eason say to you? 

278 A Basically, it was a back-and-f orth dialogue. I 

279 think we both have the sane feeling on it. He relayed a 

280 converse call that he received fron a reporter by virtue of 

281 being on the Board of Directors, and I don't recall the 

282 paper he was fron, I think he was fron out of Detroit within 

283 the last week, and in which he relayed much the sane type of 
28M conversation to the report, you know, here is a conpany, it 

285 is a fine conpany, this is a small portion of business they 

286 have engaged in in the last year, and I am not going to say 

287 or do anything that you can construe in any manner to use 

288 against them. 

289 S Can you tell from your conversations with Hr . Eason 

290 or from any other source whether he previously knew, prior 

291 to 'the press inquiries, of whatever Southern Air Transport 

292 had done in connection with the Iran-contra^ matter? 

293 A He knew, again, because I have an ongoing dialogue 



UNCUSSinEB 



UNCLASSIFIED 



Hkn%- HI]t033002 lllllll Hllllll II II PAGE 



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MitK hla, that w* M*r« having flight* Into Cantral Aaarlca, 
baoausa I naadad to hava an ongoing dlalogua with my 
insuzanca carzlat about thosa . 

Cantral Aaatlca was Includad Mlthln tha last yaaz as 
an azaa that was aKcludad izoa normal Insuranca covaraga, 
okay? I hava to buy Mar risk if I go down thara . 
Tharaioza, I naad to go to tha insuranoa company baiora I 
maka a trip, and ba sura thay aza willing to oovaz my 
aizczait . 

I am not going to fly down thara without insuranca. 
Ua had soma problams in gattlng tlmaly rasponsas out of 
Lloyd, that I had discussad with Hr . Eason ovar tha last 
yaar . So ha was awaza wa waza doing down thaza. 

As faz as tha Izan connaction goas, I was not awaza 
of that. I can tall you. you know, I knaw that wa had tha 
tzips on tha 707 fzom Kally to Tal Aviv, and I knaw that 
thaza was activity bayond that point. 

I oan tall you what I thought wa waza doing, but I 
navaz askad tha quastion of anybody, baoausa I didn't figura 
it was propar. I thought wa waza flying trips into 
■to halp thosa paopla. 
- It wasn't until this whola thing broka that I 
unAttstood what was happanlng, and I think you will find 
that with tha paopla within tha company. I think Bill and 
Jim — by Bill and Jim I maan Hz. Bastian and Hz. Langton and 



«Ncussife 



904 



UNCLASSIFIED 



KAHE: HIR033002 PAGE IM 

319 perhaps Paul Gilchrist had the whole picture, but beyond 

320 that, I think the rest oi us did not know, nor should Me 
32 1 have known. 

322 e Could you tell when you had your conversations with 

323 Mr. Eason whether other people, Jin or the chairman of the 
3214 board or anyone else had been briefing him on the Central 

325 American flights or Iran flights or anything like that? 

326 A I really can't answer that question. If I took the 

327 time and thought back over it, maybe I could give it a good 

328 answer, but nothing that is-- 

329 2 Hhen you talked to Hr . Eason or other outside 

330 directors, do you make any notes of your conversations or 

331 other record? 

332 A Generally not. 

333 C Did you, in these specific instances when you talked 
33M with Hr. Eason? 

335 A If I did, it would be just a quick note on how to 

336 perhaps handle a particular insurance problem, and once 

337 done, I would have no reason to retain the notes if this is 

338 the question you are leading up to, you know, there might be 

339 one or two of those around, but it would--you know, there is 
3M0 no volume of things in this particular area. 

3U1 . - fi Have you talked with either of the other two outside 

342 directors besides Hr . Eason about the Iran-contra^ matter? 
3>43 A As I have said, I have not talked with Hr . Grundy at 



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3>4U all. I did have occasion to talk with Hr . Hllllaas just 

SMS bafoxa tha and of tha yaax, and In passing, ua aantionad it, 

sue but again, it was along tha saaa Unas as wa talkad with, 

SM? with nr . Williams. 

3148 Again, not baing happy with tha way Southern is 

3U9 baing treated. 

350 C Did you have any sense iron this conversation 

35 1 whether he had previously known of this matter or had been 

352 brieied on it? 

353 A I had no sense out of that conversation that he had 
35>4 known or been briefed on it. 

355 Q By the way, for the three outside directors, 

356 physically where are they, just what cities? 

357 A One is in Hiami, who is Hr . Eason; Hr . Hillians 

358 lives in Daytona Beach; and I an not sura where Hr . Grundy 

359 lives. It is not in Miami. At least I don't believe it is 

360 in Miami. 

36 1 . C Is it in the United States? 

362 A It is in the United States. You know, it could be 

363 the Keys, it could be northern Florida. 

36M S Do you think it is somewhere in Florida? 

365 A I don't even know that — I — 

366 . ' C Fine. 

367 Continuing down the chart, or actually first coming 

368 on to the chart that you previously recognized, you have a 



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listing for the Chairman of the Board and the Chief 
Executive Officer. Hho is that? 

A That is James Bastian. 

Q Do you know how long Mr. Bastian has been Chairman 
of the Board? 

A Hr . Bastian bought the company in 1979. Hy 
assumption is that he has been Chairman of the Board from 
the day he bought the company. It is a wholly owned 
company. He owns 100 percent of the stock. 

e Have you talked with Mr. Bastian about the Iran- 
contra^ matter? 

A Me have talked about it, yes. 

2 How many times? 

A It has been an ongoing subject of discussion--you 
know, when you say the Iran-contra matter — 

5 Yes? 

A — let m« say that in my mind, that dates from early 
October, when the C-123 was shot down in Nicaragua. 

6 Hell, prior to then, had you talked with Mr. Bastian 
about, say, the operations in Central America? 

A We had had some conversations on what was happening, 
but more with--more involving our participation as a 
mm^ntenanoe base . 

e Hhat else? 

A Hhat the nature of the payments were, were we 



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MAKE: HIR033002 IMiUL.MWvI> I^^ ^'^^^ ^"^ 

39(4 getting paid on a tinely basis, and this typa of thing. Up 

395 to that--up to early October, it was really nothing in our 

396 mind, in my mind it was nothing more than the typa oi job we 

397 would do for a third party. 

398 He were performing a third party maintenance 

399 service. There was ''no problem, ' ' as you say. 

1400 S Well, with respect to the Central American side of 

M01 it, how often would you say before October of 1986 you spoke 

U02 to Mr. Bastian? 

1403 A I am sure that one way or another, we probably 

1404 touched on it at least weekly. 

405 C How, I am not going to go in full length at this 

•406 point into your own knowledge, but it may help in this 

•407 particular line of questioning. 

■408 Some aspects of flights to Central America preceded 

409 your coming into the company, no? 

1410 A Yes. I understand. 

•4 11 S There were flights in January — 

412 . A I understand there were flights in January and 

413 February of 1985. 

414 e How soon after you came into the company did you 

415 beoome aware of any such activity in terms of supplying arms 

416 or'shipping arms in Central America? 

4 17 . A I would have to say it would be early 1986, and I am 

4 18 not--you know, even at that point in time. I am not sure that 



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I could hav« told you it was arms that wa wara shipping. I 
knaw it was hazardous natatial. 

You aca tailing ma it is arns . I an not — you knoH, I 
wasn't on board the airplana and didn't saa tha maniiast. 
You didn' t--iiayba you hava saan tha maniiast; I am not sura 
what it said. Vm ara making tha assumption that both of us 
probably think is corract, but naithar oi us is taally sura. 

e Wa will raiar to it as hazardous material. 

A Okay. 

C How soon aitar your first bacoming awara of tha 
matter of shipping hazardous material would you hava been 
discussing it with Hr . Bastian? ^^^^^^ ' 

A If you are referring to the flights fron^^^^^Bto 
Central America. I am not sure that Jim and I ever discussed 
those . 

2 Then what was the first subject concerning flights 
to Central America that you discussed with Rr . Bastian? 

A Probably was something out of having the C-123, and 
one of the Caribous, were on our ramp for maintenance prior 
to the time they went to Central America, and It could have 
bean something out of that particular activity. 

~ ft By that, you mean performing maintenance activities 
on. the C-123S and the Caribous? 

A Right. 

ft Do you have any recollection of what the 



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conversation would have been between you and Hr . Bastian on 
that date? 

A Specifically, no. 

2 What other-- 

A You know, if the question you are really asking ne 
is did we talk about the fact that the Caribou was going to 
go down there, or the C-123 was going to go down there and 
run arns to the contras--no, we never had that type of 
conversation. 

We did in that same tine frane run soma flights for 
NHAO. 

fi By which you mean the Nicaragua Humanitarian 
Assistance Office? 

A Yes. 

fi Okay. 

A Did we talk about what may have been carried on 
those flights? No. 

e Do you know who you talk about? 

A It would have been specifics about what we were 
doing in the way of third-party maintenance, and what Kind 
of costs we were getting involved in in doing that type of 
thing . 

. ~ You know, it would have been related to insurance 
coverage for our Here aircraft that was flying the HHAO 
flights down there. 



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£ Would you have reiarred in thesfi conversations--or 
have we referr«d to who youi customer was on these natters? 

A I don't think we ever did. I don't Know if it was 
ever specifically stated who the customer was, other than 
the implication was that it was at the direction or at the 
request oi the government that we were undertaking these 
activities . 

C Including the maintenance of the C-123s and the 
Caribous ? 

A Yes. You know, this is our area oi expertise. He 
maintain aircraft, we operate aircraft, we are in Hiami. 
which as a proximity to the area that they were--wanted to 
operated in; we are very efficient at it, so why not come to 
Southern and ask them to do that? 

2 What is there in the nature of your conversations 
with Mr. Bastian that would have carried the implication 
that it was for the government you were going this, rather 
than, say, for some private people? 

A I think that — I am jumping off from Hr . Bastian--! 
think the implication that it was for the government 
probably came more from Mr. Langton than from Hr . Bastian, 
at least back in the early stages. 

. ~ The other thing I could draw conclusions from was 
that in the early stages, EAST, Inc. and Dick Gadd were 
involved, and my predecessor when I came in, told me a few 



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HIR033002 |ll;^::?» r^» H3IB 3I_U PAGE 2 
things that h* suspactad about EAST, Inc. and thcli 
gov«tnm«ntal connactions . 

fi Lat's taka all that up fot a coaplata axplanation. 
Who was your ptadacassor? 

A Tom Kaainay. 

S How long was ha with tha company, to your knowladga' 

A Ha was with tha company, I think about two or two 
and a hali yaars . 

S Do you know whara ha is now? 

A Yas. Ha is in Brooksvilla, Florida. 

e Do you know what ha doas now? 

A Ha is ratirad. 

e What do you racall him tailing you about EAST, Inc. 
and Gadd? 

A Nothing particularly about Gadd othar than Gadd is 
EAST, Inc. 




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NAME: HIR033002 11 1 * U LfllJ JJ J 3 iLli ^'^^^ ^^ 

519 2 Did he tell you anything more about EAST, Inc. and 

520 Gadd than that? 

52 1 A No. othet than we had sone contracts uith then, that 

522 we did do work for them, and-- 

523 2 And to go back to where we were, in your 

524 conversations with Mr. Bastian, which there was the 

525 iiiplication that maintenance on the C-123s and Caribous was 

526 being done in some sense for the government — 

527 A Let's not say that. 

528 2 Correct me. 

529 A Let's not say that that came from Hr . Bastian. Let 

530 me say that that was in my own mind, more in conversations 

531 from Mr. Langton. 

532 2 In your own mind. I will come back to Mr. Bastian, 

533 not especially to come back to him, but to complete things 
53U in a fashion. 

535 HR. KIRSTEIN: Can we go off the record? 

536 MR. TIEFER: Off the record — I am willing to go off 

537 the record, but I will tell the reporter to go off the 

538 record . 

539 [Discussion off the record.] 
5H0 BY HR. TIEFER: 

5m . - C Let's proceed to Hr . Langton. Have you had 

5142 conversations with Hr . Langton about the Iran and contra^ 

5143 matters? 



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HAHE= HIR033002 U 19 1 ,1 U W U I rti PAGI 23 

SMS fi Can you lereember when they bagan? Would it have 

SM6 been soon after you cane into the company or not for a 

5U7 while? 

51*8 A I need to go back to the time I first got involved 

SU9 in this, in order to answer that, okay? I need to go back 

550 because this all ties into it. I need to go back to 

551 November of 1985, at which time Hr . Langton asked me to go 

552 to Panama and set up a corporation. 

553 We may be getting way ahead of our story at this 
55M particular point in time. It may not be where you want to 

555 go. 

556 At that particular point in time, I knew nothing 

557 about contras, I knew nothing about Iran, I knew nothing 

558 about ''the problem.'' But that was my first conversation 

559 with nr . Langton that had a bearing on this. 

560 MR. TIEFER: This is a fortuitous break, lunch is 

561 here. 

562 [Discussion off the record. ] 

563 [Whereupon, at IMO p.m., the select committee 
56U recessed, to reconvene at 1 : UO p.m., the same day.] 



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AFTEKNOOK SESSION 

BY MR. TIEFER: 

2 Resuming th« deposition, Mr. Hason, perhaps I Hill 
sinply ask the shorter question with respect to the Iran- 
contrajl matters, did you have a number of conversations with 
Mr . Langton? 

A Yes . 

2 Let's continue down the chart. You have a listing 
for a VP of Government Affairs, who is that? 

A That is Mr. Bastian's wife. 

2 And do you have an idea how long she has been with 
the company? 

A I don't know. 

2 Hhat does she do in that post? 

A She is responsible for legal matters having to do 
with the government. 

2 She is an attorney? 

A She is an attorney. She is a former labor attorney. 
MR. SHILJANICH: I am sorry? 
THE HITHESS: Former labor attorney. 
BY MR. TIEFER: 

2 Have you had discussions with her about the Iran- 



contrai matter? 



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NAME: HIR033002 
S90 

59 1 . B Thera is a box that is labaled vacant attotnay, can 

592 you dascriba that position? 

593 MR. SniLJANICH: He is here. 

594 THE HITMESS: I will attempt it. He have in out 

595 organizational structure made provisions ior an in-housa 

596 attorney. He have not as yet hired anybody ior that, nor 

597 has anybody iillad that position. 

598 BY MR. TIEFER: 

599 2 You have a position of Exacutiva Secretary. Who is 

600 that? 

60 1 A That is Daphne Bentley. 

602 C Do you have an idea Hs . Bentley has been with the 

A 

603 company? 

60M A She has been around about 20 years. 

605 e And do you Know what she does in that position? 

606 A She is the secretary to llr . Langton and Hr . Bastian. 

607 She would do the duties normally of a secretary, typing, 

608 filing, answering the phone. 

609 S Mould she arrange appointments ior them? 

610 A She doesn't work directly for me. 

611 fi If you wanted to make an appointment with one of 

612 th»m, might you get in touch with her? 

6 13 A If I wanted to make an appointment with one of them, 

6 114 I would probably just walk in and go into their office. The 



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HAHE: HIR033002 ^ «» w -■-•'—'-' - p»GE 26 

615 company is not that big. If they wer« busy. I might say to 

616 Daphna, when they are free, let me know. 

617 2 Have you ever discussed with Ms. Bentley any Iran- 

618 contra^ matters? 
6 19 A No. 

620 Q Proceeding to the level oi the Senior Vice 

621 Presidents, you have a Senior Vice President for Operations, 

622 who is he? 

623 A David Mulligan. 

6214 fi Do you have an idea how long he has been with the 

625 company? 

626 A David has been with the company three and a half 

627 years . 

628 fi Do you know where he worked before then? 

629 A Air Florida. 

630 Q Generally, what does he do? 

631 A He has responsibility for the operations and 

632 maintenance departments, which would include flight 

633 operations, flight control, crews, and all the various 

63<4 maintenance functions, as well as the recordkeeping in the 

635 maintenance area. 

636 fi Have you spoken with him about the Iran-contra;^ 

637 matters? 

638 A Yes. 

639 Q You have a Senior Vice President for Marketing and 



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A Charlas Caison. 

Q And do you knou how long ha has been with the 
company? 

A He has been with the company about two and a half 
years . 

S Do you Know where he was previously? 

A He was with Enory Air Freight. 

Q What are his responsibilities? 

A He has recentj !».' • c. that position. Before 
that, he had charge oi ; ..tKeting and sales. As I told you 
previously, that sales slot was broken out, and another 
Senior Vice President was added. 

At ^.he present time, he is responsible for 
administration, which is contract administration, building 
administration, leases, that type of thing, data processing, 
personnel, and also marketing, which has to do with costing 
and strategic planning, that type of thing. 

fi Have you had discussions with him about the Iran- 
contra matter? 
- A Yes. 

2 Have you had aany such conversations? 

A It has particularly--particularly since October, it 



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665 has l>aen an ongoing topic of convarsation on a daily basis 

666 within thft company. 

667 Q Priot to October, did you hava convaxsations with 

668 him? 

669 A Yes. But thay ware very limited. In the overall 

670 scheme of things, Charlie was probably the one person that 

671 really had no idea of what was going on, othar than a very 

672 general way. 

673 Q Now, this chart does not show It, but you have said 
6714 there is a--besides yourself and two previous ones wa have 

675 discussed, a f-'>i<rth Senior Vice President. 

676 A Yes. 

677 C Who is he? 

678 A Eric Korth, Senior Vice President of Sales and 

679 Services. 

680 fi And how long has he been with the company? 

681 A He has been with the company less than a month. 

682 8 And what is his responsibility? 

683 A He is responsible--his responsibilities include the 
68>t sales function, selling of contract, and ad hoc charters, 

685 and service, which in Southern Air Transport includes the 

686 ground saxvlcas that we do for some of our customers, i.e., 

687 locding aircraft, unloading aircraft, that type of thing, as 

688 wall as the load masters that