(navigation image)
Home American Libraries | Canadian Libraries | Universal Library | Community Texts | Project Gutenberg | Children's Library | Biodiversity Heritage Library | Additional Collections
Search: Advanced Search
Anonymous User (login or join us)
Upload
See other formats

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

Y l.l/2:Serial 13739 

100-1: United States Congr... 



Government 
Documents 



DH-'O&trORY 



* MAY SI 1950 



80^0^! 



uOV£R;;;i^£:;T^^ 



^f.i^tlNJ^'Atejj^Tfto, •>•■•.., 



l23ff--taq»,*S*««M,. 






I 



BOSTON 










-■?tt 




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



Senate Report 



No. 216 




IRAN-CONTRA INVESTIGATION REPORT 



United States Congressional Serial Set 
Serial Number 13739 



United States Government Printing 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 

Imn-Contra Affair 

With 
Supplemental, Minority, and Additional Views 



Daniel K. Inouye, Chairman, 
Senate Select Committee 

Lee H. Hamilton, Chairman, 
House Select Committee 




U.S. Senate Select Committee 

On Secret Military Assistance to Iran 

And the Nicaraguan Opposition 



U.S. House of Representatives 

Select Committee to Investigate 

Covert Arms Transactions with Iran 



November 17, 1987. — Ordered to be printed. 
November 13, 1987. — Committed to the Committee of the Whole House 
on the State of the Union and ordered to be printed. 



Washington : 1987 



For sale by the Superintendent of Documents. U.S. Government Printing Office. Washington, DC 20402 



DANIEL K INOUYE. HAWAII CHAIRMAN 
WARREN RUDMAN NEW HAMPSHIRE. VICE CHAIRMAN 



GEORGE J MITCHELL MAINE 
SAM NUNN GEORGIA 
PAUL S SARBANES MARVLANO 
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 I LtMAN. 
CHIEF COUNSEL 



MARK A BELNICK 
EXECUTIVE ASSISTANT 
TO THE CHIEF COUNSEL 



PAUL BARBADORO. 
DEPUTY CHIEF COUNSEL 



MARY JANE CHECCHI, 
EXECUTIVE DIRECTOR 

ASSOCIATE COUNSELS 



C H ALBRIGHT. Jn 
DANIEL FINN 
C H HOLMES 
CHARLES M KERR 
JAMES E KAPLAN 



JOEL P LISKER 
RICHARD D PARRY 
JOHN SAXON 
TERRY A SMILJANICH 
TIMOTHY C WOODCOCK 



lanited States Senate 

SELECT COMMITTEE ON SECRET MILITARY 

ASSISTANCE TO IRAN AND THE NICARAGUAN OPPOSITION 

WASHINGTON, DC 20510 



November 17, 1987 



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

Dear Mr. President: 

We have the pleasure to transmit herewith, pursuant to 

Senate Resolution 23, 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, 



Daniel K. Inouye 
Chairman 




U>Xtu»\^^ /^^^m^eU#u>\^ 



Warren B. Rudman 
Vice Chairman 



DKI:WBR:cp 



(III) 



U.S. HOUSE OF REPRESENTATIVES 



DICK CHENEV WYOMING 
WM S BROOMFieiO MICHIGAN 
HfNHY J HYDE ILLINOIS 
JIM COURTEH NEW JERSEY 
SILL MCCOLLUM. FLORIDA 
MICHAEL DiWINE. OHIO 



LEE H HAMILTON INDIANA CHAIRMAN 

DANTE B EASCELL Fl QRIDA 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 THOMAS R SMEETON MINORITY STAFF DIRECTOR 

SELECT COMMITTEE TO INVESTIGATE george van cleve. chief minority counsel 

JOHN W NIELDS JR CHIEF COUNSEL RICHARD LEON, DEPUTY CHIEF MINORITY COUNSEL 

w NEIL EGGLESTON DEPUTY CHIEF COUNSEL COVERT ARMS TRANSACTIONS WITH IRAN 

CASEY MILLER STAFF DIRECTOR 

UNITED STATES CAPITOL 



WASHINGTON, DC 20515 
(202) 225-7902 

November 13, 1987 



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

Dear Mr . Speaker : 

Pursuant to the provisions of House Resolutions 12 and 294, 
100th Congress, First Session, I transmit herewith the Report 
of the Congressional Committees Investigating the Iran-Contra 
Affair, which the Select Committee to Investigate Covert Arms 
Transactions with Iran ordered reported to the House on 
November 5, 1987. The report includes findings, conclusions 
and recommmendations, together with supplemental, minority and 
additional views. 

Within the next 30 days, the Select Committee will file for 
printing the accompanying appendices to the report. The 
complete set of appendices will include volumes containing a 
chronology of events; a testimonial chronology; miscellaneous 
documents used as sources in the committee report; depositions 
conducted by the Committees; and an index to the report and 
appendices. After filing, the appendices will, where 
appropriate, be declassified before they are printed. If 
necessary, the Committees will also file an appendix containing 
classified information. The appendices will be published as 
soon as possible after declassification. 




ly yours. 



Lee H. Hamilton 
Chairman 



(V) 



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 



Committee Members' Designated Liaison 



Senator Inouye 
Senator Rudman 

Senator Mitchell 
Senator Nunn 

Senator Sarbanes 
Senator Heflin 
Senator Boren 

Senator McClure 
Senator Hatch 

Senator Cohen 

Senator Trible 



Peter Simons 
William V. Cowan 
Thomas C. Polgar 
Richard H. Arenberg 
Eleanore Hill 
Jeffrey H. Smith 
Frederick Millhiser 
Thomas J. Young 
Sven Holmes 
Blythe Thomas 
Jack Gerard 
Dee V. Benson 
James G. Phillips 
James Dykstra 
L. Britt Snider 
Richard CuUen 



Administrative Staff 



Secretaries 



Receptionist 

Computer Center Detailee 

Part Time* 



John K Appleby 
Ruth Balin 
Robert E. Esler 
Ken Foster* 
Martin H. Garvey 
Rachel D. KaganofT* 
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 



Assistant Counsel 
Hearings Coordinator 
Staff Assistants 



Interns 



Document Analyst 

Historian 

Volunteers 



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 
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. 



(VIII) 



United States House of Representatives 
Select Committee to Investigate Covert Arms Transactions with Iran 



Majority Staff 



Special Deputy 

Chief Counsel 
Staff Counsels 



Press Liasion 
Chief Clerk 
Assistant Clerk 
Research Director 
Research Assistants 



John W. Nields, Jr. 
Chief Counsel 

W. Neil Eggleston 
Deputy Chief Counsel 

Kevin C. Miller 
Staff Director 



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. Ratchff 
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 Minority 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/ tyriter Michael J. Malbin 

Minority Executive Assistant Molly W. Tully 
Minority Staff Assistant Margaret A. Dillenburg 



Committee Staff 



Associate Staff 



Investigators 



Director of Security 
Security Officers 



Editor 

Deputy Editor 
Associate Editor 
Production Editor 
Hearings Editors 

Printing Clerk 



Robert A. Bermingham 
James J. Black 
Thomas N. Ciehanski 
William A. Davis, III 
Clark B. Hall 
Allan E. Hobron 
Roger L. Kreuzer 
Donald Remstein 
Jack W. Taylor 
Timothy E. Traylor 
Bobby E. Pope 
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 



Representative Hamilton 
Representative Fascell 

Representative Foley 

Representative Rodino 

Representative Brooks 
Representative Stokes 

Representative Aspin 

Representative Boland 
Representative Jenkins 
Representative Broomfield 

Representative Hyde 
Representative Courier 
Representative McCollum 
Representative De Wine 



Michael H. Van Dusen 
Christopher Kojm 
R. Spencer Oliver 
Bert D. Hammond 
Victor Zangla 
Heather S. Foley 
Werner W. Brandt 
M. Elaine Mieike 
James J. Schweitzer 
William M. Jones 
Michael J. O'Neil 
Richard M. Giza 
Richard E. Clark 
Warren L. Nelson 
Michael W. Sheehy 
Robert H. Brink 
Steven K. Berry 
David S. Addington 
Diane S. Dornan 
Dennis E. Teti 
Tina L. Westby 
Nicholas P. Wise 



General Counsel to the Clerk Steven R. Ross 



(IX) 



Contents 



Origins of This Report XV 

Section I: The Report 

Part I Executive Summary 

Executive Summary 3 

Part II Central America 

Chapter 1 Introduction: Background on U.S. -Nicaragua Relations 25 

Chapter 2 The NSC Staff Takes Contra Policy Underground 31 

Chapter 3 The Enterprise Assumes Control of Contra Support 59 

Chapter 4 Private Fundraising: The Channell-Miller Operation 85 

Chapter 5 NSC Staff Involvement in Criminal Investigations and Prosecutions 105 

Chapter 6 Keeping "USG Fingerprints" Off the Contra Operation: 1984-1985 117 

Chapter 7 Keeping "USG Fingerprints" Off the Contra Operation: 1986 137 

Part III The Arms Sales to Iran 

Chapter 8 U.S. -Iran Relations and the Hostages in Lebanon 157 

Chapter 9 The Iran Arms Sales: The Beginning 163 

Chapter 10 Arms to Iran: A Shipment of HAWKs Ends in Failure 175 

Chapter 11 Clearing Hurdles: The President Approves a New Plan 193 

Chapter 12 Arms Sales to Iran: The United States Takes Control 213 

Chapter 13 Deadlock in Tehran 237 

Chapter 14 "Taken to the Cleaners": The Iran Initiative Continues 245 

Chapter 15 The Diversion 269 

Chapter 16 Summary: The Iran Initiative 277 

Part IV Exposure and Concealment 

Chapter 17 Exposure and Concealment: Introduction 285 

Chapter 18 October 1986: Exposure Threatened 287 

Chapter 19 November 1986: Concealment 293 

Chapter 20 November 1986: The Attorney General's Inquiry 305 

Part V The Enterprise 

Chapter 21 Introduction to the Enterprise 327 

Chapter 22 The Enterprise 331 

Chapter 23 Other Privately Funded Covert Operations 361 

Part VI Conclusions and Recommendations 

Chapter 24 Covert Action in a Democratic Society 375 

XI 



Chapter 25 Powers of Congress and the President in the Field of Foreign Policy 387 

Chapter 26 The Boland Amendments and the NSC Staff 395 

Chapter 27 Rule of Law 41 1 

Chapter 28 Recommendations 423 

Section II The Minority Report 

The Minority Views of Mr. Cheney, Mr. Broomfield, Mr. Hyde, Mr. Courter, Mr. 

McCollum, Mr. DeWine, Sen. McClure, and Sen. Hatch 431 

Part I Introduction 

Chapter 1 Introduction 437 

Part II The Foreign Affairs Powers of the Constitution and the Iran-Contra Affair 

Chapter 2 The Foreign Affairs Powers and the Framers' Intentions 457 

Chapter 3 The President's Foreign Policy Powers in Early Constitutional History 463 

Chapter 4 Constitutional Principles in Court 471 

Part III Nicaragua 

Chapter 5 Nicaragua: The Context 483 

Chapter 6 The Boland Amendments 489 

Chapter 7 Who Did What to Help the Democratic Resistance 501 

Part IV Iran 

Chapter 8 The Iran Initiative 519 

Chapter 9 Iran: The Legal Issues 539 

Chapter 10 The Diversion 549 

Part V Disclosures and Investigations 

Chapter 11 The Disclosure and the Uncovering 561 

Chapter 12 The NSC's Role in Investigations 567 

Part VI Putting Congress' House in Order 

Chapter 13 The Need to Patch Leaks 575 

Part VII Recommendations 

Chapter 14 Recommendations 583 

Part VIII Appendixes 

Section III Supplemental and Additional Views 

The Additional Views of Sen. Inouye and Sen. Rudman 637 

The Additional Views of Mr. Rodino, Mr. Fascell, Mr. Foley, Mr. Brooks, Mr. Stokes, 

Mr. Aspin, and Mr. Boland 639 

The Additional Views of Mr. Rodino, Mr. Fascell, Mr. Brooks, and Mr. Stokes 643 

The Additional Views of Sen. Boren and Sen. Cohen 651 

The Additional and Separate Views of Sen. Heflin 655 

The Additional Views of Sen. Boren 657 

The Supplemental Views of Sen. McClure 659 

The Additional Views of Mr. Broomfield 661 

The Supplemental Views of Sen. Hatch 665 

The Supplemental Views of Mr. Hyde 667 

XII 



The Additional Views of Sen. Cohen 673 

The Supplemental Views of Mr. McCollum 675 

The Additional Views of Sen. Trible 679 

Section IV Appendix 

Organization and Conduct of the Committees' Investigation 683 



XIII 



Note on Citations in This Report 

Footnotes appear at the end of the each chapter and refer to a variety of sources 
available to the Committees. The most common are: 

1. Hearings. Refers to The Iran-Contra Investigation: Joint Hearings Before 
the House Select Committee to Investigate Coveri Artns Transactions with Iran 
and the Senate Select Committee on Secret Military Assistance to Iran and the 
Nicaraguan Opposition, 100th Cong., 1st Sess. (Washington: Government Print- 
ing Office, 1987, 13 vols.). Most page references in the footnotes are to these 
volumes. Because of publication production necessities, however, some references 
are to the original transcripts of the hearings. A table converting transcript page 
numbers to hearings page numbers is published in the Hearings. 

2. Dep. or Depo. A sworn deposition taken in the presence of one or more 
Members of the Committees and/or counsel for the Committees, and counsel for 
the deponent. Please consult other volumes of the Committees' publications for 
further information. 

3. Int. An unsworn interview conducted by one or more Committee Members 
and/or Committee counsel, with counsel for the interviewee present if the 
interviewee wished. 

4. PROF Notes. Messages generated on a computer system used by the 
National Security Council staff. The exact time and date of the message are 
recorded. 

5. Tower. Report of the PresidenVs Special Review Board, John Tower, 
Chairman (Washington: Government Printing Office, Feb. 26, 1987). 

6. Letter and Number Codes. Source and Document File Codes for materials 
that have been assigned a Senate letter code and stamped page number. These 
materials are stored in the Committees' archives in Washington, D.C. 



Preface 
Origins of this Report 



On November 3, 1986, Al-Shiraa, a Lebanese 
weekly, reported that the United States had 
secretly sold arms to Iran. Subsequent re- 
ports claimed that the purpose of the sales 
was to win the release of American hostages 
in Lebanon. These reports seemed unbeliev- 
able: Few principles of U.S. policy were 
stated more forcefully by the Reagan Ad- 
ministration than refusing to traffic with ter- 
rorists or sell arms to the Government of the 
Ayatollah Khomeini of Iran. 

Although the Administration initially 
denied the reports, by mid-November it was 
clear that the accounts were true. The 
United States had sold arms to Iran and had 
hoped thereby to gain the release of Ameri- 
can hostages in Lebanon. However, even 
though the Iranians received the arms, just 
as many Americans remained hostage as 
before. Three had been freed, but three more 
had been taken during the period of the 
sales. 

There was still another revelation to come: 
on November 25 the Attorney General an- 
nounced that proceeds from the Iran arms 
sales had been "diverted" to the Nicaraguan 
resistance at a time when U.S. military aid to 
the Contras was prohibited. 

Iran and Nicaragua — twin thorns of U.S. 
foreign policy in the 1980s — were thus linked 
in a credibility crisis that raised serious ques- 
tions about the adherence of the Administra- 
tion to the Constitutional processes of Gov- 
ernment. 

The public and Members of Congress ex- 
pressed deep concern over the propriety and 
legality of actions by the staff of the Nation- 
al Security Council (NSC) and other officers 



of the Government regarding both the arms 
sales and the secret assistance to the Contras. 

The issue of U.S. support for the Contras 
was not new. The President and Congress 
had engaged in vigorous debate over the 
proper course of U.S. policy, and Congress 
had barred U.S. support of Contra military 
operations for almost 2 years. Subsequently, 
senior Administration officials had assured 
Committees of Congress repeatedly that the 
Administration was abiding by the law. 

The Iran-Contra Affair, as it came to be 
known, carried such serious implications for 
U.S. foreign policy, and for the rule of law 
in a democracy, that the 100th Congress de- 
termined to undertake its own investigation 
of the Affair. 

The inquiry formally began on January 6, 
1987, when the Senate, by S. Res. 23, estab- 
lished the Select Committee on Secret Mili- 
tary Assistance to Iran and the Nicaraguan 
Opposition. The next day, the House, by H. 
Res. 12, established the Select Committee to 
Investigate Covert Arms Transactions with 
Iran. The two Chambers charged their re- 
spective Committees with investigating four 
major areas: arms sales to Iran, the possible 
diversion of funds to aid the Contras, viola- 
tions of Federal law, and the involvement of 
the NSC staff in the conduct of foreign 
policy. 

The two Committees took the unprece- 
dented step of merging their investigations 
and hearings and sharing all the information 
they obtained. The staffs of the two Commit- 
tees worked together in reviewing more than 
300,000 documents and interviewing or ex- 
amining more than 500 witnesses. The Com- 
mittees held 40 days of joint public hearings 



XV 



Preface 



and several executive sessions. The two 
Committees then decided to combine their 
findings in a joint Report. 

The conclusions in this Report are based 
on a record marred by inconsistent testimony 
and failure on the part of several witnesses 
to recall key matters and events. Moreover, 
a key witness — Director of Central Intelli- 
gence William J. Casey — died, and members 
of the NSC staff shredded relevant contem- 
poraneous documents in the fall of 1986. 
Consequently, objective evidence that could 
have resolved the inconsistencies and over- 
come the failures of memory was denied to 
the Committees — and to history. 

Under the American system. Government 
is accountable to the people. A public bipar- 
tisan investigation such as this one helps to 
ensure that the principle of accountability is 
enforced for all officials and policies. It 
strengthens the national commitment to the 
democratic values that have guided the 
United States for two centuries. 

The President cooperated with the investi- 
gation. He did not assert executive privilege; 
he instructed all relevant agencies to 
produce their documents and witnesses; and 



he made extracts available from his personal 
diaries, although he rejected the Committees' 
request to refer to those entries in this Report 
on the ground that he did not wish to estab- 
lish a precedent for future Presidents. 

The Committees also received unprece- 
dented cooperation from a sovereign nation, 
the State of Israel. Although not willing to 
allow its officials to be examined, the Gov- 
ernment of Israel assembled and furnished 
the Committees with extensive materials and 
information, including information affecting 
its national security. 

The Committees' investigation of the Iran- 
Contra Affair is not the first, following as it 
does the findings of the Senate Select Com- 
mittee on Intelligence and the President's 
Special Review Board (known as the Tower 
Board); nor will it be the last, for the investi- 
gation of the Independent Counsel assigned 
to this matter continues. 

But the Committees hope this Report will 
make a contribution by helping to explain 
what happened in the Iran-Contra Affair, 
and by helping to restore the public's confi- 
dence in this Nation's Constitutional system 
of Government. 



XVI 



Section 
The Report 



Part I 
Executive Summary 



The full story of the Iran-Contra Affair is 
complicated, and, for this Nation, profoundly 
sad. In the narrative portion of this Report, 
the Committees present a comprehensive ac- 
count of the facts, based on 10 months of 
investigation, including 1 1 weeks of hearings. 
But the facts alone do not explain how or 
why the events occurred. In this Executive 
Summary, the Committees focus on the key 
issues and offer their conclusions. Minority, 
supplemental, and additional views are print- 
ed in Section II and Section III. 

Summary of the Facts 

The Iran-Contra Affair had its origin in two 
unrelated revolutions in Iran and Nicaragua. 

In Nicaragua, the long-time President, 
General Anastasio Somoza Debayle, was 
overthrown in 1979 and replaced by a Gov- 
ernment controlled by Sandinista leftists. 

In Iran, the pro-Western Government of 
the Shah Mohammed Riza Pahlavi was over- 
thrown in 1979 by Islamic fundamentalists 
led by the Ayatollah Khomeini. The Kho- 
meini Government, stridently anti-American, 
became a supporter of terrorism against 
American citizens. 

Nicaragua 

United States policy following the revolu- 
tion in Nicaragua was to encourage the San- 
dinista Government to keep its pledges of 
pluralism and democracy. However, the San- 
dinista regime became increasingly anti- 
American and autocratic; began to aid a left- 
ist insurgency in El Salvador; and turned 
toward Cuba and the Soviet Union for politi- 
cal, military, and economic assistance. By 
December 1981, the United States had begun 



supporting the Nicaraguan Contras, armed 
opponents of the Sandinista regime. 

The Central Intelligence Agency (CIA) 
was the U.S. Government agency that assist- 
ed the Contras. In accordance with Presiden- 
tial decisions, known as Findings, and with 
funds appropriated by Congress, the CIA 
armed, clothed, fed, and supervised the Con- 
tras. Despite this assistance, the Contras 
failed to win widespread popular support or 
military victories within Nicaragua. 

Although the President continued to favor 
support of the Contras, opinion polls indicat- 
ed that a majority of the public was not 
supportive. Opponents of the Administra- 
tion's policy feared that U.S. involvement 
with the Contras would embroil the United 
States in another Vietnam. Supporters of the 
policy feared that, without U.S. support for 
the Contras, the Soviets would gain a dan- 
gerous toehold in Central America. 

Congress prohibited Contra aid for the 
purpose of overthrowing the Sandinista 
Government in fiscal year 1983, and limited 
all aid to the Contras in fiscal year 1984 to 
$24 million. Following disclosure in March 
and April 1984 that the CIA had a role in 
connection with the mining of the Nicara- 
guan harbors without adequate notification 
to Congress, public criticism mounted and 
the Administration's Contra policy lost much 
of its support within Congress. After further 
vigorous debate. Congress exercised its Con- 
stitutional power over appropriations and cut 
off all funds for the Contras' military and 
paramilitary operations. The statutory provi- 
sion cutting off funds, known as the Boland 
Amendment, was part of a fiscal year 1985 
omnibus appropriations bill, and was signed 



Executive Summary 



into law by the President on October 12, 
1984. 

Still, the President felt strongly about the 
Contras, and he ordered his staff, in the 
words of his National Security Adviser, to 
find a way to keep the Contras "body and 
soul together." Thus began the story of how 
the staff of a White House advisory body, 
the NSC, became an operational entity that 
secretly ran the Contra assistance effort, and 
later the Iran initiative. The action officer 
placed in charge of both operations was Lt. 
Col. Oliver L. North. 

Denied funding by Congress, the President 
turned to third countries and private sources. 
Between June 1984 and the beginning of 
1986, the President, his National Security 
Adviser, and the NSC staff secretly raised 
$34 million for the Contras from other coun- 
tries. An additional $2.7 million was provid- 
ed for the Contras during 1985 and 1986 
from private contributors, who were ad- 
dressed by North and occasionally granted 
photo opportunities with the President. In 
the middle of this period. Assistant Secretary 
of State A. Langhorne Motley — from whom 
these contributions were concealed — gave 
his assurance to Congress that the Adminis- 
tration was not "soliciting and/or encourag- 
ing third countries" to give funds to the 
Contras because, as he conceded, the Boland 
Amendment prohibited such solicitation. 

The first contributions were sent by the 
donors to bank accounts controlled and used 
by the Contras. However, in July 1985, 
North took control of the funds and — with 
the support of two National Security Advis- 
ers (Robert McFarlane and John Poindexter) 
and, according to North, Director Casey — 
used those funds to run the covert operation 
to support the Contras. 

At the suggestion of Director Casey, 
North recruited Richard V. Secord, a retired 
Air Force Major General with experience in 
special operations. Secord set up Swiss bank 
accounts, and North steered future donations 
into these accounts. Using these funds, and 
funds later generated by the Iran arms sales, 
Secord and his associate, Albert Hakim, cre- 



ated what they called "the Enterprise," a 
private organization designed to engage in 
covert activities on behalf of the United 
States. 

The Enterprise, functioning largely at 
North's direction, had its own airplanes, 
pilots, airfield, operatives, ship, secure com- 
munications devices, and secret Swiss bank 
accounts. For 16 months, it served as the 
secret arm of the NSC staff, carrying out 
with private and non-appropriated money, 
and without the accountability or restrictions 
imposed by law on the CIA, a covert Contra 
aid program that Congress thought it had 
prohibited. 

Although the CIA and other agencies in- 
volved in intelligence activities knew that 
the Boland Amendment barred their involve- 
ment in covert support for the Contras, 
North's Contra support operation received 
logistical and tactical support from various 
personnel in the CIA and other agencies. 
Certain CIA personnel in Central America 
gave their assistance. The U.S. Ambassador 
in Costa Rica, Lewis Tambs, provided his 
active assistance. North also enlisted the aid 
of Defense Department personnel in Central 
America, and obtained secure communica- 
tions equipment from the National Security 
Agency. The Assistant Secretary of State 
with responsibility for the region, Elliott 
Abrams, professed ignorance of this support. 
He later stated that he had been "careful not 
to ask North lots of questions." 

By Executive Order and National Security 
Decision Directive issued by President 
Reagan, all covert operations must be ap- 
proved by the President personally and in 
writing. By statute. Congress must be noti- 
fied about each covert action. The funds 
used for such actions, like all government 
funds, must be strictly accounted for. 

The covert action directed by North, 
however, was not approved by the President 
in writing. Congress was not notified about 
it. And the funds to support it were never 
accounted for. In short, the operation func- 
tioned without any of the accountability re- 
quired of Government activities. It was an 



Executive Summary 



evasion of the Constitution's most basic 
check on Executive action — the power of 
the Congress to grant or deny funding for 
Government programs. 

Moreover, the covert action to support the 
Contras was concealed from Congress and 
the pubHc. When the press reported in the 
summer of 1985 that the NSC staff was en- 
gaged in raising money and furnishing mili- 
tary support to the Contras, the President 
assured the public that the law was being 
followed. His National Security Adviser, 
Robert C. McFarlane, assured Committees of 
Congress, both in person and in writing, that 
the NSC staff was obeying both the spirit 
and the letter of the law, and was neither 
soliciting money nor coordinating military 
support for the Contras. 

A year later, McFarlane's successor. Vice 
Admiral John M. Poindexter, repeated these 
assurances to Congressional Committees. 
Then, with Poindexter's blessing. North told 
the House Intelligence Committee he was 
involved neither in fundraising for, nor in 
providing military advice to, the Contras. 

When one of Secord's planes was shot 
down over Nicaragua on October 5, 1986, 
the President and several administration 
spokesmen assured the public that the U.S. 
Government had no connection with the 
flight or the captured American crew 
member, Eugene Hasenfus. Several senior 
Government officials, including Elliott 
Abrams, gave similar assurances to Congress. 

Two months later, McFarlane told Con- 
gressional Committees that he had no knowl- 
edge of contributions made by a foreign 
country. Country 2, to the Contras, when in 
fact McFarlane and the President had dis- 
cussed and welcomed $32 million in contri- 
butions from that country. In addition, 
Abrams initially concealed from Congress — 
in testimony given to several Committees — 
that he had successfully solicited a contribu- 
tion of $10 million from Brunei. 

North conceded at the Committees' public 
hearings that he had participated in making 
statements to Congress that were "false," 
"misleading," "evasive and wrong." 



During the period when the Administra- 
tion was denying to Congress that it was 
involved in supporting the Contras' war 
effort, it was engaged in a campaign to alter 
public opinion and change the vote in Con- 
gress on Contra aid. Public funds were used 
to conduct public relations activities; and 
certain NSC staff members, using the pres- 
tige of the White House and the promise of 
meetings with the President, helped raise pri- 
vate donations both for media campaigns and 
for weapons to be used by the Contras. 

Pursuant to a Presidential directive in 1983 
the Administration adopted a "public diplo- 
macy" program to promote the President's 
Central American policy. The program was 
conducted by an office in the State Depart- 
ment known as the Office for Public Diplo- 
macy for Latin America and the Caribbean, 
(S/LPD). S/LPD's activities were coordi- 
nated not within the State Department, but 
by an interagency working group established 
by the NSC. The principal NSC staff officer 
was a former senior CIA official, with expe- 
rience in covert operations, who had been 
detailed to the NSC staff for a year with 
Casey's approval, and who upon retirement 
from the CIA became a Special Assistant to 
the President with responsibility for public 
diplomacy matters. 

S/LPD produced and widely disseminated 
a variety of pro-Contra publications and ar- 
ranged speeches and press conferences. It 
also disseminated what one official termed 
"white propaganda": pro-Contra newspaper 
articles by paid consultants who did not dis- 
close their connection to the Administration. 
Moreover, under a series of sole source con- 
tracts in 1985 and 1986, S/LPD paid more 
than $400,000 for pro Contra public relations 
work to International Business Communica- 
tions (IBC), a company owned by Richard 
Miller, whose organization was described by 
one White House representative as a "White 
House outside the White House." 

The Administration, like Members of Con- 
gress, may appeal directly to the people for 
support of its positions; and government 
agencies may legitimately disseminate infor- 



Executive Summary 



mation and educational materials to the 
public. However, by law appropriated funds 
may not be used to generate propaganda 
"designed to influence a Member of Con- 
gress;" and by law, as interpreted by the 
Office of the Comptroller General, appropri- 
ated funds may not be used by the State 
Department for "covert" propaganda activi- 
ties. A GAO report concluded that S/LPD's 
white propaganda activities violated the ban 
on arranging "covert propaganda." 

Private funds were also used. North and 
Miller helped Carl R. "Spitz" Channell raise 
$10 million, most of which went to Chan- 
nell's tax-exempt organization, the National 
Endowment for the Preservation of Liberty 
("NEPL"). They arranged numerous "brief- 
ings" at the White House complex on Cen- 
tral America by Administration officials for 
groups of potential contributors. Following 
these briefings, Channell reconvened the 
groups at the Hay-Adams Hotel, and made a 
pitch for tax-deductible contributions to 
NEPL's Central America "public education" 
program or, in some individual cases, for 
weapons. Channell's major contributors were 
given private briefings by North, and were 
afforded private visits and photo sessions 
with the President. On one occasion, Presi- 
dent Reagan participated in a briefing. 

Using the donated money, Channell ran a 
series of television advertisements in 1985 
and 1986, some of which were directed at 
television markets covering the home dis- 
tricts of Congressmen considered to be 
"swing" votes on Contra aid. One series of 
advertisements was used to attack Congress- 
man Mike Barnes, a principal opponent of 
Contra aid, and one of the Congressmen to 
whom Administration officials had denied 
violating the Boland Amendment in Septem- 
ber of 1985. Channell later boasted to North 
that he had "participated in a campaign to 
ensure Congressman Barnes' defeat." 

Of the $10 million raised by North, Chan- 
nell and Miller, more than $1 million was 
used for pro-Contra publicity. Approximate- 
ly $2.7 million was sent through IBC and 
off-shore accounts of another Miller-con- 



trolled company to Secord's Swiss accounts, 
or to Calero's account in Miami. Most of the 
remainder was spent on salaries and expenses 
for Channell, Miller and their business asso- 
ciates. 

NEPL's charter did not contemplate rais- 
ing funds for a covert war in Nicaragua, and 
the Internal Revenue Service never ap- 
proved such activity when NEPL was grant- 
ed exempt status. As a consequence, Chan- 
nell and Miller have each pleaded guilty to 
the crime of conspiring to defraud the 
United States Treasury of revenues "by sub- 
verting and corrupting the lawful purposes 
of NEPL." Channell named North as a co- 
conspirator. 

In private fundraising, as in the "white 
propaganda" campaign, the goal of support- 
ing the Contras was allowed to override sen- 
sitivity to law and to accepted norms of be- 
havior. 

Iran 

The NSC staff was already engaged in 
covert operations through Secord when, in 
the summer of 1985, the Government of 
Israel proposed that missiles be sold to Iran 
in return for the release of seven American 
hostages held in Lebanon and the prospect 
of improved relations with Iran. The Secre- 
taries of State and Defense repeatedly op- 
posed such sales to a government designated 
by the United States as a supporter of inter- 
national terrorism. They called it a straight 
arms-for-hostages deal that was contrary to 
U.S. public policy. They also argued that 
these sales would violate the Arms Export 
Control Act, as well as the U.S. arms embar- 
go against Iran. The embargo had been im- 
posed after the taking of hostages at the U.S. 
Embassy in Tehran on November 4, 1979, 
and was continued because of the Iran-Iraq 
war. 

Nevertheless, in the summer of 1985 the 
President authorized Israel to proceed with 
the sales. The NSC staff conducting the 
Contra covert action also took operational 
control of implementing the President's deci- 
sion on arms sales to Iran. The President did 



Executive Summary 



not sign a Finding for this covert operation, 
nor did he notify the Congress. 

Israel shipped 504 TOW anti-tank missiles 
to Iran in August and September 1985. Al- 
though the Iranians had promised to release 
most of the American hostages in return, 
only one, Reverend Benjamin Weir, was 
freed. The President persisted. In November, 
he authorized Israel to ship 80 HAWK anti- 
aircraft missiles in return for all the hostages, 
with a promise of prompt replenishment by 
the United States, and 40 more HAWKs to 
be sent directly by the United States to Iran. 
Eighteen HAWK missiles were actually 
shipped from Israel in November 1985, but 
no hostages were released. 

In early December 1985, the President 
signed a retroactive Finding purporting to 
authorize the November HAWK transaction. 
That Finding contained no reference to im- 
proved relations with Iran. It was a straight 
arms-for-hostages Finding. National Security 
Adviser Poindexter destroyed this Finding a 
year later because, he testified, its disclosure 
would have been politically embarrassing to 
the President. 

The November HAWK transaction had 
additional significance. The Enterprise re- 
ceived a $1 million advance from the Israe- 
lis. North and Secord testified this was for 
transportation expenses in connection with 
the 120 HAWK missiles. Since only 18 mis- 
siles were shipped, the Enterprise was left 
with more than $800,000 in spare cash. 
North directed the Enterprise to retain the 
money and spend it for the Contras. The 
"diversion" had begun. 

North realized that the sale of missiles to 
Iran could be used to support the Contras. 
He told Israeli Defense Ministry officials on 
December 6, 1985, one day after the Presi- 
dent signed the Finding, that he planned to 
generate profits on future arms sales for ac- 
tivities in Nicaragua. 

On December 7, 1985, the President and 
his top advisers met again to discuss the 
arms sales. Secretaries Shultz and Weinberg- 
er objected vigorously once more, and Wein- 
berger argued that the sales would be illegal. 



After a meeting in London with an Iranian 
interlocutor and the Israelis, McFarlane rec- 
ommended that the sales be halted. Admiral 
John Poindexter (the new National Security 
Adviser), and Director Casey were of the 
opposite opinion. 

The President decided to go forward with 
the arms sales to get the hostages back. He 
signed a Finding on January 6, 1986, author- 
izing more shipments of missiles for the hos- 
tages. When the CIA's General Counsel 
pointed out that authorizing Israel to sell its 
U.S. -manufactured weapons to Iran might 
violate the Arms Export Control Act, the 
President, on the legal advice of the Attor- 
ney General, decided to authorize direct 
shipments of the missiles to Iran by the 
United States and signed a new Finding on 
January 17, 1986. To carry out the sales, the 
NSC staff turned once again to the Enter- 
prise. 

Although North had become skeptical that 
the sales would lead to the release of all the 
hostages or a new relationship with Iran, he 
believed that the prospect of generating 
funds for the Contras was "an attractive in- 
centive" for continuing the arms sales. No 
matter how many promises the Iranians 
failed to keep throughout this secret initia- 
tive, the arms sales continued to generate 
funds for the Enterprise, and North and his 
superior, Poindexter, were consistent advo- 
cates for their continuation. What North and 
Poindexter asserted in their testimony that 
they did not know, however, was that most 
of these arms sales profits would remain with 
the Enterprise and never reach the Contras. 

In February 1986, the United States, 
acting through the Enterprise, sold 1,000 
TOWs to the Iranians. The U.S. also provid- 
ed the Iranians with military intelligence 
about Iraq. All of the remaining American 
hostages were supposed to be released upon 
Iran's receipt of the first 500 TOWs. None 
was. But the transaction was productive in 
one respect. The difference between what 
the Enterprise paid the United States for the 
missiles and what it received from Iran was 
more than $6 million. North directed part of 



Executive Summary 



this profit for the Contras and for other 
covert operations. Poindexter testified that 
he authorized this "diversion." 

The diversion, for the Contras and other 
covert activities, was not an isolated act by 
the NSC staff Poindexter saw it as "imple- 
menting" the President's secret policy that 
had been in effect since 1984 of using non- 
appropriated funds following passage of the 
Boland Amendment. 

According to North, CIA Director Casey 
saw the "diversion" as part of a more gran- 
diose plan to use the Enterprise as a "stand- 
alone," "off-the-shelf," covert capacity that 
would act throughout the world while evad- 
ing Congressional review. To Casey, Poin- 
dexter, and North, the diversion was an inte- 
gral part of selling arms to Iran and just one 
of the intended uses of the proceeds. 

In May 1986, the President again tried to 
sell weapons to get the hostages back. This 
time, the President agreed to ship parts for 
HAWK missiles but only on condition that 
all the American hostages in Lebanon be re- 
leased first. A mission headed by Robert 
McFarlane, the former National Security 
Adviser, traveled to Tehran with the first 
installment of the HAWK parts. When the 
mission arrived, McFarlane learned that the 
Iranians claimed they had never promised to 
do anything more than try to obtain the hos- 
tages' release. The trip ended amid misunder- 
standing and failure, although the first in- 
stallment of HAWK parts was delivered. 

The Enterprise was paid, however, for all 
of the HAWK parts, and realized more than 
an $8 million profit, part of which was ap- 
plied, at North's direction, to the Contras. 
Another portion of the profit was used by 
North for other covert operations, including 
the operation of a ship for a secret mission. 
The idea of an off-the-shelf stand-alone 
covert capacity had become operational. 

On July 26, 1986, another American hos- 
tage. Father Lawrence Jenco, was released. 
Despite all the arms sales, he was only the 
second hostage freed, and the first since Sep- 
tember 1985. Even though McFarlane had 
vowed at the Tehran meeting not to deliver 



the remainder of the HAWK parts until all 
the hostages were released, the Administra- 
tion capitulated again. The balance of the 
HAWK parts was shipped when Father 
Jenco was released. 

In September and October 1986, the NSC 
staff began negotiating with a new group of 
Iranians, the "Second Channel," that Albert 
Hakim had opened, in part, through prom- 
ises of bribes. Although these Iranians alleg- 
edly had better contacts with Iranian offi- 
cials, they, in fact, represented the same prin- 
cipals as did the First Channel and had the 
same arrangement in mind: missiles for hos- 
tages. Once again, the Administration insist- 
ed on release of all the hostages but settled 
for less. 

In October, after a meeting in London, 
North left Hakim to negotiate with the Irani- 
ans. Hakim made no secret of his desire to 
make large profits for himself and General 
Secord in the $15 billion-a-year Iranian 
market if relations with the United States 
could be restored. Thus, he had every incen- 
tive to make an agreement, whatever conces- 
sions might be required. 

As an unofficial "ambassador" selected by 
North and Secord, Hakim produced a re- 
markable nine-point plan, subsequently ap- 
proved by North and Poindexter, under 
which the United States would receive "one 
and one half hostages (later reduced to 
one). Under the plan, the United States 
agreed not only to sell the Iranians 500 more 
TOWs, but Secord and Hakim promised to 
develop a plan to induce the Kuwaiti Gov- 
ernment to release the Da'wa prisoners. 
(Seventeen Kuwaiti prisoners, connected to 
"al-Dawa," an Iranian revolutionary group, 
had been convicted and imprisoned for their 
part in the December 12, 1983, attacks in 
Kuwait on the U.S. Embassy, a U.S. civilian 
compound, the French Embassy, and several 
Kuwaiti Goverment facilities.) The plan to 
obtain the release of the Da'wa prisoners did 
not succeed, but the TOW missiles were sold 
for use by the Iranian Revolutionary Guard. 
Following the transfer of these TOWs, a 
third hostage, David Jacobsen, was released 



Executive Summary 



on November 2, 1986, and more profit was 
generated for the Enterprise. 

Poindexter testified that the President ap- 
proved the nine-point plan. But other testi- 
mony raises questions about this assertion. 
Regardless of what Poindexter may have 
told the President, Secretary Shultz testified 
that when he informed the President on De- 
cember 14, 1986, that the nine-point plan in- 
cluded a promise about the release of the 
Da'wa prisoners in Kuwait, the President re- 
acted with shock, "like he had been kicked 
in the belly." 

During the negotiations with the Second 
Channel, North and Secord told the Iranians 
that the President agreed with their position 
that Iraq's President, Saddam Hussein, had 
to be removed and further agreed that the 
United States would defend Iran against 
Soviet aggression. They did not clear this 
with the President and their representations 
were flatly contrary to U.S. policy. 

The decision to designate private parties — 
Secord and Hakim — to carry out the arms 
transactions had other ramifications. First, 
there was virtually no accounting for the 
profits from the arms deals. Even North 
claimed that he did not know how Secord 
and Hakim actually spent the money com- 
mitted to their custody. The Committees' in- 
vestigation revealed that of the $16.1 million 
profit from the sales of arms to Iran only 
about $3.8 million went to support the Con- 
tras (the amount representing "the diver- 
sion"). All told, the Enterprise received 
nearly $48 million from the sale of arms to 
the Contras and Iran, and in contributions 
directed to it by North. A total of $16.5 
million was used to support the Contras or 
to purchase the arms sold to (and paid for 
by) the Contras; $15.2 million was spent on 
Iran; Hakim, Secord, and their associate, 
Thomas Clines, took $6.6 million in commis- 
sions and other profit distributions; almost $1 
million went for other covert operations 
sponsored by North; $4.2 million was held in 
"reserves" for use in future operations; $1.2 
million remained in Swiss bank accounts of 
the Enterprise; and several thousand dollars 



were used to pay for a security system at 
North's residence. 

Second, by permitting private parties to 
conduct the arms sales, the Administration 
risked losing control of an important foreign 
policy initiative. Private citizens — whose mo- 
tivations of personal gain could conflict with 
the interests of this country — handled sensi- 
tive diplomatic negotiations, and purported 
to commit the United States to positions that 
were anathema to the President's public 
policy and wholly unknown to the Secretary 
of State. 

The Coverup 

The sale of arms to Iran was a "significant 
anticipated intelligence activity." By law, 
such an activity must be reported to Con- 
gress "in a timely fashion" pursuant to Sec- 
tion 501 of the National Security Act. If the 
proposal to sell arms to Iran had been re- 
ported, the Senate and House Intelligence 
Committees would likely have joined Secre- 
taries Shultz and Weinberger in objecting to 
this initiative. But Poindexter recommend- 
ed — and the President decided — not to 
report the Iran initiative to Congress. 

Indeed, the Administration went to consid- 
erable lengths to avoid notifying Congress. 
The CIA General Counsel wrote on January 
15, 1986, "the key issue in this entire matter 
revolves around whether or not there will be 
reports made to Congress." Shortly thereaf- 
ter, the transaction was restructured to avoid 
the pre-shipment reporting requirements of 
the Arms Export Control Act, and place it 
within the more limited reporting require- 
ments of the National Security Act. But 
even these reporting requirements were ig- 
nored. The President failed to notify the 
group of eight (the leaders of each party in 
the House and Senate, and the Chairmen and 
Ranking Minority Members of the Intelli- 
gence Committees) specified by law for un- 
usually sensitive operations. 

After the disclosure of the Iran arms sales 
on November 3, 1986, the American public 
was still not told the facts. The President 
sought to avoid any comment on the ground 



Executive Summary 



that it might jeopardize the chance of secur- 
ing the remaining hostages' release. But it 
was impossible to remain silent, and inaccu- 
rate statements followed. 

In his first public statement on the subject 
on November 6, the President said that the 
reports concerning the arms sales had "no 
foundation." A week later, on November 13, 
the President conceded that the United 
States had sold arms, but branded as "utterly 
false" allegations that the sales were in 
return for the release of the hostages. The 
President also maintained that there had been 
no violations of Federal law. 

At his news conference on November 19, 
1986, he denied that the United States was 
involved in the Israeli sales that occurred 
prior to the January 17, 1986 Finding. The 
President was asked: 

Mr. President . . . are you telling us 
tonight that the only shipments with 
which we were involved were the 
one or two that followed your Janu- 
ary 17 Finding and that . . . there 
were no other shipments which the 
U.S. condoned? 

The President replied: 

That's right. I'm saying nothing, but 
the missiles we sold. 

And, on November 25, 1986, the Attorney 
General — with the President at his side — an- 
nounced at a press conference that the Presi- 
dent did not know of the Israeli shipments 
until after they had occurred. He stated that 
the President learned of the November 1985 
HAWK shipment in February 1986. 

In fact, however, the Israeli sales, includ- 
ing the HAWK shipment, were implemented 
with the knowledge and approval of the 
President and his top advisers; and the Presi- 
dent himself told Shultz on the day of his 
press conference that he had known of the 
November 1985 shipment when it occurred. 
McFarlane, Poindexter, and North were inti- 
mately involved in the Israeli shipments; and 
the CIA had actually transported one deliv- 
ery from Israel to Iran. 



While the President was denying any ille- 
gality, his subordinates were engaging in a 
coverup. Several of his advisers had ex- 
pressed concern that the 1985 sales violated 
the Arms Export Control Act, and a "cover 
story" had been agreed on if these arms sales 
were ever exposed. After North had three 
conversations on November 18, 1986, about 
the legal problems with the 1985 Israeli ship- 
ments, he, Poindexter, Casey, and McFarlane 
all told conforming false stories about U.S. 
involvement in these shipments. 

With McFarlane's help, North rewrote 
NSC staff chronologies on November 19 and 

20, 1986, in such a way that they denied 
contemporaneous knowledge by the Admin- 
istration of Israel's shipments to Iran in 1985. 
They asserted at one point that the U.S. 
Government believed the November 1985 
shipment consisted of oil-drilling equipment, 
not arms. 

Poindexter told Congressional Committees 
on November 21, 1986, that the United 
States had disapproved of the Israeli ship- 
ments and that, until the day before his brief- 
ing, he believed that Administration officials 
did not know about any of them until after 
they had occurred. He then destroyed the 
only Finding signed by the President that 
showed the opposite. 

Casey told Congressional Committees on 
November 21, 1986, that although a CIA 
proprietary airline had actually carried mis- 
siles to Iran from Israel in 1985, the proprie- 
tary had been told the cargo was "oil-drill- 
ing equipment." 

McFarlane told the Attorney General on 
November 21, 1986, that the Israelis said 
they were shipping oil-drilling equipment in 
November 1985 and that McFarlane did not 
learn otherwise until May 1986. 

On learning that the President had author- 
ized the Attorney General to gather the rele- 
vant facts. North and Poindexter shredded 
and altered official documents on November 

21, 1986, and later that weekend. On No- 
vember 25, 1986, North's secretary con- 
cealed classified documents in her clothing 



10 



Executive Summary 



and, with North's knowledge, removed them 
from the White House. 

According to North, a "fall guy" plan was 
proposed by Casey in which North and, if 
necessary, Poindexter, would take the re- 
sponsibility for the covert Contra support 
operation and the diversion. On Saturday 
November 22, 1986, in the midst of these 
efforts to conceal what had happened, Poin- 
dexter had a two and one half hour lunch 
with Casey. Yet Poindexter could not recall 
anything that was discussed. 

North testified that he assured Poindexter 
that he had destroyed all documents relating 
to the diversion. The diversion nevertheless 
was discovered on November 22, 1986, 
when a Justice Department official, assisting 
the Attorney General's fact-finding inquiry, 
found a "diversion memorandum" that had 
escaped the shredder. 

Prior to the discovery of the diversion 
memorandum, each interview by the Attor- 
ney General's fact finding team had been 
conducted in the presence of two witnesses, 
and careful notes were taken in accordance 
with standard professional practices. After 
discovery of the diversion memorandum — 
which itself gave rise to an inference of seri- 
ous wrongdoing — the Attorney General de- 
parted from these standard practices. A 
series of important interviews — Poindexter, 
McFarlane, Casey, Regan, and Bush — was 
conducted by the Attorney General alone, 
and no notes were made. 

The Attorney General then announced at 
his November 25 press conference that the 
diversion had occurred and that the Presi- 
dent did not know of it. But he made several 
incorrect statements about his own investiga- 
tion. He stated that the President had not 
known of the Israeli pre-Finding shipments, 
and he stated that the proceeds of the arms 
sales had been sent directly from the Israelis 
to the Contras. These statements were both 
mistaken and inconsistent with information 
that had been received during the Attorney 
General's fact-finding inquiry. 

Poindexter testified to these Committees 
that the President did not know of the diver- 



sion. North testified that while he assumed 
the President had authorized each diversion, 
Poindexter told him on November 21, 1986, 
that the President had never been told of the 
diversion. 

In light of the destruction of material evi- 
dence by Poindexter and North and the 
death of Casey, all of the facts may never be 
known. The Committees cannot even be sure 
whether they heard the whole truth or 
whether Casey's "fall guy" plan was carried 
out at the public hearings. But enough is 
clear to demonstrate beyond doubt that fun- 
damental processes of governance were dis- 
regarded and the rule of law was subverted. 

Findings and Conclusions 

The common ingredients of the Iran and 
Contra policies were secrecy, deception, and 
disdain for the law. A small group of senior 
officials believed that they alone knew what 
was right. They viewed knowledge of their 
actions by others in the Government as a 
threat to their objectives. They told neither 
the Secretary of State, the Congress nor the 
American people of their actions. When ex- 
posure was threatened, they destroyed offi- 
cial documents and lied to Cabinet officials, 
to the public, and to elected representatives 
in Congress. They testified that they even 
withheld key facts from the President. 

The United States Constitution specifies 
the process by which laws and policy are to 
be made and executed. Constitutional process 
is the essence of our democracy and our 
democratic form of Government is the basis 
of our strength. Time and again we have 
learned that a flawed process leads to bad 
results, and that a lawless process leads to 
worse. 

Policy Contradictions and Failures 

The Administration's departure from 
democratic processes created the conditions 
for policy failure, and led to contradictions 
which undermined the credibility of the 
United States. 



11 



Executive Summary 



The United States simultaneously pursued 
two contradictory foreign policies — a public 
one and a secret one: 

— The public policy was not to make any 
concessions for the release of hostages lest 
such concessions encourage more hostage- 
taking. At the same time, the United States 
was secretly trading weapons to get the hos- 
tages back. 

— The public policy was to ban arms ship- 
ments to Iran and to exhort other Govern- 
ments to observe this embargo. At the same 
time, the United States was secretly selling 
sophisticated missiles to Iran and promising 
more. 

— The public policy was to improve rela- 
tions with Iraq. At the same time, the United 
States secretly shared military intelligence on 
Iraq with Iran and North told the Iranians in 
contradiction to United States policy that the 
United States would help promote the over- 
throw of the Iraqi head of government. 

— The public policy was to urge all Gov- 
ernments to punish terrorism and to support, 
indeed encourage, the refusal of Kuwait to 
free the Da'wa prisoners who were convict- 
ed of terrorist acts. At the same time, senior 
officials secretly endorsed a Secord-Hakim 
plan to permit Iran to obtain the release of 
the Da'wa prisoners. 

— The public policy was to observe the 
"letter and spirit" of the Boland Amend- 
ment's proscriptions against military or para- 
military assistance to the Contras. At the 
same time, the NSC staff was secretly assum- 
ing direction and funding of the Contras' 
military effort. 

— The pubhc policy, embodied in agree- 
ments signed by Director Casey, was for the 
Administration to consult with the Congres- 
sional oversight committees about covert ac- 
tivities in a "new spirit of frankness and co- 
operation." At the same time, the CIA and 
the White House were secretly withholding 
from those Committees all information con- 
cerning the Iran initiative and the Contra 
support network. 

— The public policy, embodied in Execu- 
tive Order 12333, was to conduct covert op- 
erations solely through the CIA or other 



organs of the intelligence community specifi- 
cally authorized by the President. At the 
same time, although the the NSC was not so 
authorized, the NSC staff secretly became 
operational and used private, non-accounta- 
ble agents to engage in covert activities. 

These contradictions in policy inevitably 
resulted in policy failure: 

— The United States armed Iran, including 
its most radical elements, but attained neither 
a new relationship with that hostile regime 
nor a reduction in the number of American 
hostages. 

— The arms sales did not lead to a modera- 
tion of Iranian policies. Moderates did not 
come forward, and Iran to this day sponsors 
actions directed against the United States in 
the Persian Gulf and elsewhere. 

— The United States opened itself to black- 
mail by adversaries who might reveal the 
secret arms sales and who, according to 
North, threatened to kill the hostages if the 
sales stopped. 

— The United States undermined its credi- 
bility with friends and allies, including mod- 
erate Arab states, by its public stance of op- 
posing arms sales to Iran while undertaking 
such arms sales in secret. 

— The United States lost a $10 million 
contribution to the Contras from the Sultan 
of Brunei by directing it to the wrong bank 
account — the result of an improper effort to 
channel that humanitarian aid contribution 
into an account used for lethal assistance. 

— The United States sought illicit funding 
for the Contras through profits from the 
secret arms sales, but a substantial portion of 
those profits ended up in the personal bank 
accounts of the private individuals executing 
the sales — while the exorbitant amounts 
charged for the weapons inflamed the Irani- 
ans with whom the United States was seek- 
ing a new relationship. 

Flawed Policy Process 

The record of the Iran-Contra Affair also 
shows a seriously flawed policymaking proc- 
ess. 



12 



Executive Summary 



Confusion 

There was confusion and disarray at the 
highest levels of Government. 

— McFarlane embarked on a dangerous 
trip to Tehran under a complete misappre- 
hension. He thought the Iranians had prom- 
ised to secure the release of all hostages 
before he delivered arms, when in fact they 
had promised only to seek the hostages' re- 
lease, and then only after one planeload of 
arms had arrived. 

— The President first told the Tower 
Board that he had approved the initial Israeli 
shipments. Then, he told the Tower Board 
that he had not. Finally, he told the Tower 
Board that he does not know whether he 
approved the initial Israeli arms shipments, 
and his top advisers disagree on the question. 

— The President claims he does not recall 
signing a Finding approving the November 
1985 HAWK shipment to Iran. But Poin- 
dexter testified that the President did sign a 
Finding on December 5, 1985, approving the 
shipment retroactively. Poindexter later de- 
stroyed the Finding to save the President 
from embarassment. 

— That Finding was prepared without ade- 
quate discussion and stuck in Poindexter's 
safe for a year; Poindexter claimed he forgot 
about it; the White House asserts the Presi- 
dent never signed it; and when events began 
to unravel, Poindexter ripped it up. 

— The President and the Attorney General 
told the public that the President did not 
know about the November 1985 Israeli 
HAWK shipment until February 1986 — an 
error the White House Chief of Staff ex- 
plained by saying that the preparation for 
the press conference "sort of confused the 
Presidential mind." 

— Poindexter says the President would 
have approved the diversion, if he had been 
asked; and the President says he would not 
have. 

— One National Security Adviser under- 
stood that the Boland Amendment applied to 
the NSC; another thought it did not. Neither 
sought a legal opinion on the question. 



— The President incorrectly assured the 
American people that the NSC staff was ad- 
hering to the law and that the Government 
was not connected to the Hasenfus airplane. 
His staff was in fact conducting a "full serv- 
ice" covert operation to support the Contras 
which they believed he had authorized. 

— North says he sent five or six completed 
memorandums to Poindexter seeking the 
President's approval for the diversion. Poin- 
dexter does not remember receiving any. 
Only one has been found. 

Dishonesty and Secrecy 

The Iran-Contra Affair was characterized 
by pervasive dishonesty and inordinate secre- 
cy. 

North admitted that he and other officials 
lied repeatedly to Congress and to the Amer- 
ican people about the Contra covert action 
and Iran arms sales, and that he altered and 
destroyed official documents. North's testi- 
mony demonstrates that he also lied to mem- 
bers of the Executive branch, including the 
Attorney General, and officials of the State 
Department, CIA and NSC. 

Secrecy became an obsession. Congress 
was never informed of the Iran or the 
Contra covert actions, notwithstanding the 
requirement in the law that Congress be no- 
tified of all covert actions in a "timely fash- 
ion." 

Poindexter said that Donald Regan, the 
President's Chief of Staff, was not told of the 
NSC staffs fundraising activities because he 
might reveal it to the press. Secretary Shultz 
objected to third-country solicitation in 1984 
shortly before the Boland Amendment was 
adopted; accordingly, he was not told that, 
in the same time period, the National Securi- 
ty Adviser had accepted an $8 million con- 
tribution from Country 2 even though the 
State Department had prime responsibility 
for dealings with that country. Nor was the 
Secretary of State told by the President in 
February 1985 that the same country had 
pledged another $24 million — even though 
the President briefed the Secretary of State 
on his meeting with the head of state at 



13 



Executive Summary 



which the pledge was made. Poindexter 
asked North to keep secrets from Casey; 
Casey, North, and Poindexter agreed to keep 
secrets from Shultz. 

Poindexter and North cited fear of leaks as 
a justification for these practices. But the 
need to prevent public disclosure cannot jus- 
tify the deception practiced upon Members 
of Congress and Executive branch officials 
by those who knew of the arms sales to Iran 
and of the Contra support network. The 
State and Defense Departments deal each 
day with the most sensitive matters affecting 
millions of lives here and abroad. The Con- 
gressional Intelligence Committees receive 
the most highly classified information, in- 
cluding information on covert activities. Yet, 
according to North and Poindexter, even the 
senior officials of these bodies could not be 
entrusted with the NSC staffs secrets be- 
cause they might leak. 

While Congress's record in maintaining 
the confidentiality of classified information is 
not unblemished, it is not nearly as poor or 
perforated as some members of the NSC 
staff maintained. If the Executive branch has 
any basis to suspect that any member of the 
Intelligence Committees breached security, it 
has the obligation to bring that breach to the 
attention of the House and Senate Leaders — 
not to make blanket accusations. Congress 
has the capability and responsibility of pro- 
tecting secrets entrusted to it. Congress 
cannot fulfill its legislative responsibilities if 
it is denied information because members of 
the Executive branch, who place their faith 
in a band of international arms merchants 
and financiers, unilaterally declare Congress 
unworthy of trust. 

In the case of the "secret" Iran arms-for- 
hostages deal, although the NSC staff did 
not inform the Secretary of State, the Chair- 
man of the Joint Chiefs of Staff, or the lead- 
ership of the United States Congress, it was 
content to let the following persons know: 

— Manucher Ghorbanifar, who flunked 
every polygraph test administered by the 
U.S. Government; 



— Iranian officials, who daily denounced 
the United States but received an inscribed 
Bible from the President; 

— Officials of Iran's Revolutionary Guard, 
who received the U.S. weapons; 

— Secord and Hakim, whose personal in- 
terests could conflict with the interests of the 
United States; 

— Israeli officials, international arms mer- 
chants, pilots and air crews, whose interests 
did not always coincide with ours; and 

— An unknown number of shadowy inter- 
mediaries and financiers who assisted with 
both the First and Second Iranian Channels. 

While sharing the secret with this dispar- 
ate group, North ordered the intelligence 
agencies not to disseminate intelligence on 
the Iran initiative to the Secretaries of State 
and Defense. Poindexter told the Secretary 
of State in May 1986 that the Iran initiative 
was over, at the very time the McFarlane 
mission to Tehran was being launched. Poin- 
dexter also concealed from Cabinet officials 
the remarkable nine-point agreement negoti- 
ated by Hakim with the Second Channel. 
North assured the FBI liaison to the NSC as 
late as November 1986 that the United States 
was not bargaining for the release of hos- 
tages but seizing terrorists to exchange for 
hostages — a complete fabrication. The lies, 
omissions, shredding, attempts to rewrite his- 
tory — all continued, even after the President 
authorized the Attorney General to find out 
the facts. 

It was not operational security that moti- 
vated such conduct — not when our own 
Government was the victim. Rather, the 
NSC staff feared, correctly, that any disclo- 
sure to Congress or the Cabinet of the arms- 
for-hostages and arms-for-profit activities 
would produce a storm of outrage. 

As with Iran, Congress was misled about 
the NSC staffs support for the Contras 
during the period of the Boland Amendment, 
although the role of the NSC staff was no 
secret to others. North testified that his oper- 
ation was well-known to the press in the 
Soviet Union, Cuba, and Nicaragua. It was 
not a secret from Nicaragua's neighbors, 



14 



Executive Summary 



with whom the NSC staff communicated 
throughout the period. It was not a secret 
from the third countries — including a totah- 
tarian state — from whom the NSC staff 
sought arms or funds. It was not a secret 
from the private resupply network which 
North recruited and supervised. According 
to North, even Ghorbanifar knew. 

The Administration never sought to hide 
its desire to assist the Contras so long as 
such aid was authorized by statute. On the 
contrary, it wanted the Sandinistas to know 
that the United States supported the Contras. 
After enactment of the Boland Amendment, 
the Administration repeatedly and publicly 
called upon Congress to resume U.S. assist- 
ance. Only the NSC staffs Contra support 
activities were kept under wraps. The Com- 
mittees believe these actions were concealed 
in order to prevent Congress from learning 
that the Boland Amendment was being cir- 
cumvented. 

It was stated on several occasions that the 
confusion, secrecy and deception surround- 
ing the aid program for the Nicaraguan free- 
dom fighters was produced in part by Con- 
gress' shifting positions on Contra aid. 

But Congress' inconsistency mirrored the 
chameleon-like nature of the rationale of- 
fered for granting assistance in the first in- 
stance. Initially, Congress was told that our 
purpose was simply to interdict the flow of 
weapons from Nicaragua into El Salvador. 
Then Congress was told that our purpose 
was to harrass the Sandinistas to prevent 
them from consolidating their power and ex- 
porting their revolution. Eventually, Con- 
gress was told that our purpose was to elimi- 
nate all foreign forces from Nicaragua, to 
reduce the size of the Sandinista armed 
forces, and to restore the democratic reforms 
pledged by the Sandinistas during the over- 
throw of the Somoza regime. 

Congress had cast a skeptical eye upon 
each rationale proffered by the Administra- 
tion. It suspected that the Administration's 
true purpose was identical to that of the 
Contras — the overthrow of the Sandinista 
regime itself Ultimately Congress yielded to 



domestic political pressure to discontinue as- 
sistance to the Contras, but Congress was 
unwilling to bear responsibility for the loss 
of Central America to communist military 
and political forces. So Congress compro- 
mised, providing in 1985 humanitarian aid to 
the Contras; and the NSC staff provided 
what Congress prohibited: lethal support for 
the Contras. 

Compromise is no excuse for violation of 
law and deceiving Congress. A law is no less 
a law because it is passed by a slender major- 
ity, or because Congress is open-minded 
about its reconsideration in the future. 

Privatization 

The NSC staff turned to private parties 
and third countries to do the Government's 
business. Funds denied by Congress were ob- 
tained by the Administration from third 
countries and private citizens. Activities nor- 
mally conducted by the professional intelli- 
gence services — which are accountable to 
Congress — were turned over to Secord and 
Hakim. 

The solicitation of foreign funds by an Ad- 
ministration to pursue foreign policy goals 
rejected by Congress is dangerous and im- 
proper. Such solicitations, when done secret- 
ly and without Congressional authorization, 
create a risk that the foreign country will 
expect and demand something in return. 
McFarlane testified that "any responsible of- 
ficial has an obligation to acknowledge that 
every country in the world will see benefit 
to itself by ingratiating itself to the United 
States." North, in fact, proposed rewarding a 
Central American country with foreign as- 
sistance funds for facilitating arms shipments 
to the Contras. And Secord, who had once 
been in charge of the U.S. Air Force's for- 
eign military sales, said "where there is a 
quid, there is a quo." 

Moreover, under the Constitution only 
Congress can provide funds for the Execu- 
tive branch. The Framers intended Con- 
gress's "power of the purse" to be one of the 
principal checks on Executive action. It was 
designed, among other things, to prevent the 



15 



Executive Summary 



Executive from involving this country unilat- 
erally in a foreign conflict. The Constitution- 
al plan does not prohibit a President from 
asking a foreign state, or anyone else, to 
contribute funds to a third party. But it does 
prohibit such solicitation where the United 
States exercises control over their receipt 
and expenditure. By circumventing Con- 
gress' power of the purse through third- 
country and private contributions to the 
Contras, the Administration undermined a 
cardinal principle of the Constitution. 

Further, by turning to private citizens, the 
NSC staff jeopardized its own objectives. 
Sensitive negotiations were conducted by 
parties with little experience in diplomacy, 
and financial interests of their own. The dip- 
lomatic aspect of the mission failed — the 
United States today has no long-term rela- 
tionship with Iran and no fewer hostages in 
captivity. But the private financial aspect 
succeeded — Secord and Hakim took $4.4 
million in commissions and used $2.2 million 
more for their personal benefit; in addition, 
they set aside reserves of over $4 million in 
Swiss bank accounts of the Enterprise. 

Covert operations of this Government 
should only be directed and conducted by 
the trained professional services that are ac- 
countable to the President and Congress. 
Such operations should never be delegated, 
as they were here, to private citizens in 
order to evade Governmental restrictions. 

Lack of Accountability 

The confusion, deception, and privatiza- 
tion which marked the Iran-Contra Affair 
were the inevitable products of an attempt to 
avoid accountability. Congress, the Cabinet, 
and the Joint Chiefs of Staff were denied 
information and excluded from the decision- 
making process. Democratic procedures 
were disregarded. 

Officials who make public policy must be 
accountable to the public. But the public 
cannot hold officials accountable for policies 
of which the public is unaware. Policies that 
are known can be subjected to the test of 
reason, and mistakes can be corrected after 



consultation with the Congress and delibera- 
tion within the Executive branch itself. Poli- 
cies that are secret become the private pre- 
serve of the few, mistakes are inevitably per- 
petuated, and the public loses control over 
Government. That is what happened in the 
Iran-Contra Affair: 

— The President's NSC staff carried out a 
covert action in furtherance of his policy to 
sustain the Contras, but the President said he 
did not know about it. 

— The President's NSC staff secretly di- 
verted millions of dollars in profits from the 
Iran arms sales to the Contras, but the Presi- 
dent said he did not know about it and Poin- 
dexter claimed he did not tell him. 

— The Chairman of the Joint Chiefs of 
Staff was not informed of the Iran arms 
sales, nor was he ever consulted regarding 
the impact of such sales on the Iran-Iraq war 
or on U.S. military readiness. 

— The Secretary of State was not in- 
formed of the millions of dollars in Contra 
contributions solicited by the NSC staff from 
foreign governments with which the State 
Department deals each day. 

— Congress was told almost nothing — and 
what it was told was false. 

Deniability replaced accountability. Thus, 
Poindexter justified his decision not to 
inform the President of the diversion on the 
ground that he wanted to give the President 
"deniability." Poindexter said he wanted to 
shield the President from political embarrass- 
ment if the diversion became public. 

This kind of thinking is inconsistent with 
democratic governance. "Plausible denial," 
an accepted concept in intelligence activities, 
means structuring an authorized covert oper- 
ation so that, if discovered by the party 
against whom it is directed. United States 
involvement may plausibly be denied. That is 
a legitimate feature of authorized covert op- 
erations. In no circumstance, however, does 
"plausible denial" mean structuring an oper- 
ation so that it may be concealed from — or 
denied to — the highest elected officials of the 
United States Government itself. 



16 



Executive Summary 



The very premise of democracy is that 
"we the people" are entitled to make our 
own choices on fundamental policies. But 
freedom of choice is illusory if policies are 
kept, not only from the public, but from its 
elected representatives. 

Intelligence Abuses 

Covert Operations 

As former National Security Adviser 
Robert McFarlane testified, "it is clearly 
unwise to rely on covert action as the core 
of our policy." The Government cannot 
keep a policy secret and still secure the 
public support necessary to sustain it. Yet it 
was precisely because the public would not 
support the Contra policy, and was unlikely 
to favor arms deals with Iran, that the NSC 
staff went underground. This was a perver- 
sion of the proper concept of covert oper- 
ations: 

— Covert operations should be conducted 
in accordance with strict rules of account- 
ability and oversight. In the mid-1970s, in 
response to disclosures of abuses within the 
intelligence community, the Government en- 
acted a series of safeguards. Each covert 
action was to be approved personally by the 
President, funded by Congressional appro- 
priations, and Congress was to be informed. 

In the Iran-Contra Affair, these rules were 
violated. The President, according to Poin- 
dexter, was never informed of the diversion. 
The President says he knew nothing of the 
covert action to support the Contras, or the 
companies funded by non-appropriated 
monies set up by North to carry out that 
support. Congress was not notified of either 
the Iran or the Contra operations. 

— Covert actions should be consistent with 
publicly defined U.S. foreign policy goals. 
Because covert operations are secret by defi- 
nition, they are of course not openly debated 
or publicly approved. So long as the policies 
which they further are known, and so long 
as they are conducted in accordance with 
law, covert operations are acceptable. Here, 
however, the Contra covert operation was 
carried out in violation of the country's 



public policy as expressed in the Boland 
Amendment; and the Iran covert operation 
was carried out in violation of the country's 
stated policy against selling arms to Iran or 
making concessions to terrorists. These were 
not covert actions, they were covert policies; 
and covert policies are incompatible with de- 
mocracy. 

— Finally, covert operations are intended 
to be kept from foreign powers, not from the 
Congress and responsible Executive agencies 
within the United States Government itself 
As Clair George, CIA Director of Oper- 
ations, testified: "to think that because we 
deal in lies, and overseas we may lie and we 
may do other such things, that therefore that 
gives you some permission, some right or 
some particular reason to operate that way 
with your fellow employees, I would not 
only disagree with that I would say it would 
be the destruction of a secret service in a 
democracy." In the Iran-Contra Affair, se- 
crecy was used to justify lies to Congress, 
the Attorney General, other Cabinet officers, 
and the CIA. It was used not as a shield 
against our adversaries, but as a weapon 
against our own democratic institutions. 

The NSC Staff 

The NSC staff was created to give the 
President policy advice on major national 
security and foreign policy issues. Here, 
however, it was used to gather intelligence 
and conduct covert operations. This depar- 
ture from its proper functions contributed to 
policy failure. 

During the Iran initiative, the NSC staff 
became the principal body both for gather- 
ing and coordinating intelligence on Iran and 
for recommending policy to the President. 
The staff relied on Iranians who were inter- 
ested only in buying arms, including Ghor- 
banifar, whom CIA officials regarded as a 
fabricator. Poindexter, in recommending to 
the President the sale of weapons to Iran, 
gave as one of his reasons that Iraq was 
winning the Gulf war. That assessment was 
contrary to the views of intelligence profes- 
sionals at the State Department, the Depart- 



77-026 - b7 



17 



Executive Summary 



ment of Defense, and the CIA, who had 
concluded as early as 1983 that Iran was 
winning the war. Casey, who collaborated 
with North and Poindexter on the Iran and 
Contra programs, also tailored intelligence 
reports to the positions he advocated. The 
record shows that the President believed and 
acted on these erroneous reports. 

Secretary Shultz pointed out that the intel- 
ligence and policy functions do not mix, be- 
cause "it is too tempting to have your analy- 
sis on the selection of information that is 
presented favor the policy that you are ad- 
vocating." The Committees agree on the 
need to separate the intelligence and policy 
functions. Otherwise, there is too great a risk 
that the interpretation of intelligence will be 
skewed to fit predetermined policy choices. 

In the Iran-Contra Affair, the NSC staff 
not only combined intelligence and policy 
functions, but it became operational and con- 
ducted covert operations. As the CIA was 
subjected to greater Congressional scrutiny 
and regulation, a few Administration offi- 
cials — including even Director Casey — came 
to believe that the CIA could no longer be 
utilized for daring covert operations. So the 
NSC staff was enlisted to provide assistance 
in covert operations that the CIA could not 
or would not furnish. 

This was a dangerous misuse of the NSC 
staff. When covert operations are conducted 
by those on whom the President relies to 
present policy options, there is no agency in 
government to objectively scrutinize, chal- 
lenge and evaluate plans and activities. 
Checks and balances are lost. The high 
policy decisions confronting a President can 
rarely be resolved by the methods and tech- 
niques used by experts in the conduct of 
covert operations. Problems of public policy 
must be dealt with through consultation, not 
Poindexter's "compartmentation"; with hon- 
esty and confidentiality, not deceit. 

The NSC was created to provide candid 
and comprehensive advice to the President. 
It is the judgment of these Committees that 
the NSC staff should never again engage in 
covert operations. 



Disdain for Law 

In the Iran-Contra Affair, officials viewed 
the law not as setting boundaries for their 
actions, but raising impediments to their 
goals. When the goals and the law collided, 
the law gave way: 

— The covert program of support for the 
Contras evaded the Constitution's most sig- 
nificant check on Executive power: the 
President can spend funds on a program only 
if he can convince Congress to appropriate 
the money. 

When Congress enacted the Boland 
Amendment, cutting off funds for the war in 
Nicaragua, Administration officials raised 
funds for the Contras from other sources — 
foreign Governments, the Iran arms sales, 
and private individuals; and the NSC staff 
controlled the expenditures of these funds 
through power over the Enterprise. Con- 
ducting the covert program in Nicaragua 
with funding from the sale of U.S. Govern- 
ment property and contributions raised by 
Government officials was a flagrant violation 
of the Appropriations Clause of the Constitu- 
tion. 

— In addition, the covert program of sup- 
port for the Contras was an evasion of the 
letter and spirit of the Boland Amendment. 
The President made it clear that while he 
opposed restrictions on military or paramili- 
tary assistance to the Contras, he recognized 
that compliance with the law was not op- 
tional. "[W]hat I might personally wish or 
what our Government might wish still 
would not justify us violating the law of the 
land," he said in 1983. 

A year later, members of the NSC staff 
were devising ways to continue support and 
direction of Contra activities during the 
period of the Boland Amendment. What was 
previously done by the CIA — and now pro- 
hibited by the Boland Amendment — would 
be done instead by the NSC staff. 

The President set the stage by welcoming 
a huge donation for the Contras from a for- 
eign Government — a contribution clearly in- 
tended to keep the Contras in the field while 
U.S. aid was barred. The NSC staff thereaf- 



18 



Executive Summary 



ter solicited other foreign Governments for 
military aid, facilitated the efforts of U.S. 
fundraisers to provide lethal assistance to the 
Contras, and ultimately developed and di- 
rected a private network that conducted, in 
North's words, a "full service covert oper- 
ation" in support of the Contras. 

This could not have been more contrary 
to the intent of the Boland legislation. 

Numerous other laws were disregarded: 

— North's full-service covert operation 
was a "significant anticipated intelligence ac- 
tivity" required to be disclosed to the Intelli- 
gence Committees of Congress under Sec- 
tion 501 of the National Security Act. No 
such disclosure was made. 

— By Executive order, a covert operation 
requires a personal determination by the 
President before it can be conducted by an 
agency other than the CIA. It requires a 
written Finding before any agency can carry 
it out. In the case of North's full-service 
covert operation in support of the Contras, 
there was no such personal determination 
and no such Finding. In fact, the President 
disclaims any knowledge of this covert 
action. 

— False statements to Congress are felonies 
if made with knowledge and intent. Several 
Administration officials gave statements de- 
nying NSC staff activities in support of the 
Contras which North later described in his 
testimony as "false," and "misleading, eva- 
sive, and wrong." 

— The application of proceeds from U.S. 
arms sales for the benefit of the Contra war 
effort violated the Boland Amendment's ban 
on U.S. military aid to the Contras, and con- 
stituted a misappropriation of Government 
funds derived from the transfer of U.S. prop- 
erty. 

— The U.S. Government's approval of the 
pre-Finding 1985 sales by Israel of arms to 
the Government of Iran was inconsistent 
with the Government's obligations under the 
Arms Export Control Act. 

— The testimony to Congress in November 
1986 that the U.S. Government had no con- 
temporaneous knowledge of the Israeli ship- 
ments, and the shredding of documents relat- 



ing to the shipments while a Congressional 
inquiry into those shipments was pending, 
obstructed Congressional investigations. 

— The Administration did not make, and 
clearly intended never to make, disclosure to 
the Intelligence Committees of the Finding — 
later destroyed — approving the November 
1985 HAWK shipment, nor did it disclose 
the covert action to which the Finding relat- 
ed. 

The Committees make no determination as 
to whether any particular individual in- 
volved in the Iran-Contra Affair acted with 
criminal intent or was guilty of any crime. 
That is a matter for the Independent Counsel 
and the courts. But the Committees reject 
any notion that worthy ends justify viola- 
tions of law by Government officials; and 
the Committees condemn without reserva- 
tion the making of false statements to Con- 
gress and the withholding, shredding, and 
alteration of documents relevant to a pend- 
ing inquiry. 

Administration officials have, if anything, 
an even greater responsibility than private 
citizens to comply with the law. There is no 
place in Government for law breakers. 

Congress and the President 

The Constitution of the United States 
gives important powers to both the President 
and the Congress in the making of foreign 
policy. The President is the principal archi- 
tect of foreign policy in consultation with 
the Congress. The policies of the United 
States cannot succeed unless the President 
and the Congress work together. 

Yet, in the Iran-Contra Affair, Administra- 
tion officials holding no elected office re- 
peatedly evidenced disrespect for Congress' 
efforts to perform its Constitutional over- 
sight role in foreign policy: 

— Poindexter testified, referring to his ef- 
forts to keep the covert action in support of 
the Contras from Congress: "I simply did 
not want any outside interference." 

— North testified: "I didn't want to tell 
Congress anything" about this covert action. 



19 



Executive Summary 



— Abrams acknowledged in his testimony 
that, unless Members of Congressional Com- 
mittees asked "exactly the right question, 
using exactly the right words, they weren't 
going to get the right answers," regarding 
solicitation of third-countries for Contra sup- 
port. 

— And numerous other officials made false 
statements to, and misled, the Congress. 

Several witnesses at the hearings stated or 
implied that foreign policy should be left 
solely to the President to do as he chooses, 
arguing that shared powers have no place in 
a dangerous world. But the theory of our 
Constitution is the opposite: policies formed 
through consultation and the democratic 
process are better and wiser than those 
formed without it. Circumvention of Con- 
gress is self-defeating, for no foreign policy 
can succeed without the bipartisan support 
of Congress. 

In a system of shared powers, decision- 
making requires mutual respect between the 
branches of government. 

The Committees were reminded by Secre- 
tary Shultz during the hearings that "trust is 
the coin of the realm." Democratic govern- 
ment is not possible without trust between 
the branches of government and between the 
government and the people. Sometimes that 
trust is misplaced and the system falters. But 
for officials to work outside the system be- 
cause it does not produce the results they 
seek is a prescription for failure. 

Who Was Responsible 

Who was responsible for the Iran-Contra 
Affair? Part of our mandate was to answer 
that question, not in a legal sense (which is 
the responsibility of the Independent Coun- 
sel), but in order to reaffirm that those who 
serve the Government are accountable for 
their actions. Based on our investigation, we 
reach the following conclusions. 

At the operational level, the central figure 
in the Iran-Contra Affair was Lt. Col. 
North, who coordinated all of the activities 
and was involved in all aspects of the secret 



operations. North, however, did not act 
alone. 

North's conduct had the express approval 
of Admiral John Poindexter, first as Deputy 
National Security Adviser, and then as Na- 
tional Security Adviser. North also had at 
least the tacit support of Robert McFarlane, 
who served as National Security Adviser 
until December 1985. 

In addition, for reasons cited earlier, we 
believe that the late Director of Central In- 
telligence, William Casey, encouraged 
North, gave him direction, and promoted the 
concept of an extra-legal covert organiza- 
tion. Casey, for the most part, insulated CIA 
career employees from knowledge of what 
he and the NSC staff were doing. Casey's 
passion for covert operations — dating back 
to his World War II intelligence days — was 
well known. His close relationship with 
North was attested to by several witnesses. 
Further, it was Casey who brought Richard 
Secord into the secret operation, and it was 
Secord who, with Albert Hakim, organized 
the Enterprise. These facts provide strong 
reasons to believe that Casey was involved 
both with the diversion and with the plans 
for an "off-the-shelf covert capacity. 

The Committees are mindful, however, of 
the fact that the evidence concerning Casey's 
role comes almost solely from North; that 
this evidence, albeit under oath, was used by 
North to exculpate himself; and that Casey 
could not respond. Although North told the 
Committees that Casey knew of the diver- 
sion from the start, he told a different story 
to the Attorney General in November 1986, 
as did Casey himself. Only one other wit- 
ness, Lt. Col. Robert Earl, testified that he 
had been told by North during Casey's life- 
time that Casey knew of the diversion. 

The Attorney General recognized on No- 
vember 21, 1986 the need for an inquiry. His 
staff was responsible for finding the diver- 
sion memorandum, which the Attorney Gen- 
eral promptly made public. But as described 
earlier, his fact-finding inquiry departed from 
standard investigative techniques. The Attor- 
ney General saw Director Casey hours after 



20 



Executive Summary 



the Attorney General learned of the diver- 
sion memorandum, yet he testified that he 
never asked Casey about the diversion. He 
waited two days to speak to Poindexter, 
North's superior, and then did not ask him 
what the President knew. He waited too 
long to seal North's offices. These lapses 
placed a cloud over the Attorney General's 
investigation. 

There is no evidence that the Vice Presi- 
dent was aware of the diversion. The Vice 
President attended several meetings on the 
Iran initiative, but none of the participants 
could recall his views. 

The Vice President said he did not know 
of the Contra resupply operation. His Na- 
tional Security Adviser, Donald Gregg, was 
told in early August 1986 by a former col- 
league that North was running the Contra 
resupply operation, and that ex-associates of 
Edwin Wilson — a well known ex-CIA offi- 
cial convicted of selling arms to Libya and 
plotting the murder of his prosecutors — were 
involved in the operation. Gregg testified 
that he did not consider these facts worthy 
of the Vice President's attention and did not 
report them to him, even after the Hasenfus 
airplane was shot down and the Administra- 
tion had denied any connection with it. 

The central remaining question is the role 
of the President in the Iran-Contra Affair. 
On this critical point, the shredding of docu- 
ments by Poindexter, North, and others, and 
the death of Casey, leave the record incom- 
plete. 

As it stands, the President has publicly 
stated that he did not know of the diversion. 
Poindexter testified that he shielded the 
President from knowledge of the diversion. 
North said that he never told the President, 
but assumed that the President knew. Poin- 
dexter told North on November 21, 1986 
that he had not informed the President of the 
diversion. Secord testified that North told 
him he had talked with the President about 
the diversion, but North testified that he had 
fabricated this story to bolster Secord's 
morale. 



Nevertheless, the ultimate responsibility 
for the events in the Iran-Contra Affair must 
rest with the President. If the President did 
not know what his National Security Advis- 
ers were doing, he should have. It is his 
responsibility to communicate unambiguous- 
ly to his subordinates that they must keep 
him advised of important actions they take 
for the Administration. The Constitution re- 
quires the President to "take care that the 
laws be faithfully executed." This charge en- 
compasses a responsibility to leave the mem- 
bers of his Administration in no doubt that 
the rule of law governs. 

Members of the NSC staff appeared to 
believe that their actions were consistent 
with the President's desires. It was the Presi- 
dent's policy — not an isolated decision by 
North or Poindexter — to sell arms secretly to 
Iran and to maintain the Contras "body and 
soul," the Boland Amendment notwithstand- 
ing. To the NSC staff, implementation of 
these policies became the overriding con- 
cern. 

Several of the President's advisers pursued 
a covert action to support the Contras in 
disregard of the Boland Amendment and of 
several statutes and Executive orders requir- 
ing Congressional notification. Several of 
these same advisers lied, shredded docu- 
ments, and covered up their actions. These 
facts have been on the public record for 
months. The actions of those individuals do 
not comport with the notion of a country 
guided by the rule of law. But the President 
has yet to condemn their conduct. 

The President himself told the public that 
the U.S. Government had no connection to 
the Hasenfus airplane. He told the public 
that early reports of arms sales for hostages 
had "no foundation." He told the public that 
the United States had not traded arms for 
hostages. He told the public that the United 
States had not condoned the arms sales by 
Israel to Iran, when in fact he had approved 
them and signed a Finding, later destroyed 
by Poindexter, recording his approval. All of 
these statements by the President were 
wrong. 



21 



Executive Summary 



Thus, the question whether the President 
knew of the diversion is not conclusive on 
the issue of his responsibihty. The President 
created or at least tolerated an environment 
where those who did know of the diversion 
believed with certainty that they were carry- 
ing out the President's policies. 

This same environment enabled a secretary 
who shredded, smuggled, and altered docu- 
ments to tell the Committees that "some- 
times you have to go above the written 
law;" and it enabled Admiral Poindexter to 
testify that "frankly, we were willing to take 
some risks with the law." It was in such an 
environment that former officials of the NSC 
staff and their private agents could lecture 
the Committees that a "rightful cause" justi- 
fies any means, that lying to Congress and 
other officials in the executive branch itself 
is acceptable when the ends are just, and that 
Congress is to blame for passing laws that 
run counter to Administration policy. What 



may aptly be called the "cabal of the zeal- 
ots" was in charge. 

In a Constitutional democracy, it is not 
true, as one official maintained, that "when 
you take the King's shilling, you do the 
King's bidding." The idea of monarchy was 
rejected here 200 years ago and since then, 
the law — not any official or ideology — has 
been paramount. For not instilling this pre- 
cept in his staff, for failing to take care that 
the law reigned supreme, the President bears 
the responsibility. 

Fifty years ago Supreme Court Justice 
Louis Brandeis observed: "Our Government 
is the potent, the omnipresent teacher. For 
good or for ill, it teaches the whole people 
by its example. Crime is contagious. If the 
Government becomes a law-breaker, it 
breeds contempt for law, it invites every 
man to become a law unto himself, it invites 
anarchy." 

The Iran-Contra Affair resulted from a 
failure to heed this message. 



22 



Part II 
Central America 



Chapter 1 

Introduction: Background on U.S.-Nicaragua 

Relations 



On July 17, 1979, President Anastasio Somoza De- 
bayle and his family fled Nicaragua. A civil war that 
had devastated the nation's economy and caused more 
than 130,000 casualties was at an end, as was the 
autocratic and corrupt 43-year rule of the Somoza 
family. But the battle for Nicaragua's future was just 
beginning. 

The United States had long played a role in Nicara- 
gua's affairs. Under the Monroe Doctrine of 1823, the 
United States had declared the Western hemisphere, 
including Central America, off-limits to European 
powers. For the rest of the 19th century, U.S. influ- 
ence was episodic. An American privateer named 
William Walker briefly seized control of Nicaragua in 
1855, opened its borders to slavery, and appointed 
himself President before he was deposed and execut- 
ed. The opening of the Panama Canal, however, in- 
creased the strategic importance of Nicaragua to the 
United States in the early 20th century. 

A treaty signed by the United States and Nicaragua 
in 1911 gave the United States an exclusive right of 
intervention in return for the reorganization of Nica- 
ragua's finances. One year later, President Taft in- 
voked this pact as a basis for dispatching 2,700 Ma- 
rines to Nicaragua. The Marines initially arrived at 
the request of a U.S. -supported Nicaraguan President, 
ostensibly to protect American property and citizens. 
They stayed, with one brief intermission, until 1933. 
During this period, Nicaragua was a virtual depend- 
ency of the United States. 

From 1927 to 1933, the Marines and the Marine- 
trained Nicaraguan National Guard, with General 
Anastasio Somoza Garcia at its head, fought a guerril- 
la war against the forces of General Augusto Cesar 
Sandino, who opposed the U.S. -backed Conservative 
Government of Adolfo Diaz. Sandino, whose aim was 
to rid Nicaragua of "U.S. imperialists," became a na- 
tional hero to many Nicaraguans during those years; 
the Sandinistas were named after him. When U.S. 
forces withdrew in 1933, Sandino accepted a truce. 
He was shot dead a year later. Many authorities be- 
lieve Sandino was killed on direct orders from 
Somoza, who seized power from the civilian govern- 
ment in 1936. 

From 1936 to 1979, Anastasio Somoza Garcia and 
then his son, Anastasio Somoza Debayle, ruled Nica- 



ragua. The rule of Anastasio Somoza Debayle was 
characterized by corruption; the Somoza family 
owned nearly one-third of all the land and controlled 
much of the country's wealth. 

In 1961, opponents of Somoza formed the National 
Liberation Front (FSLN), popularly known as the 
Sandinistas. This fledgling resistance organization 
drew much of its early support from students. Fidel 
Castro provided some of its initial financial backing. 
Through the early 1970s, the FSLN was a marginal 
group, unable to succeed in its low-level guerrilla war 
or to marshal popular support. 

The 1972 earthquake that devastated the capital 
city of Managua, however, changed the nature of the 
conflict between the rebels and the Government. Fol- 
lowing the earthquake, Somoza reaped immense prof- 
its from international relief efforts. His show of greed 
in the face of so much suffering was an important fact 
in his loss of support from the growing Nicaraguan 
business and professional classes. Another was his 
grooming of his son, known as Tachito, to inherit his 
position. 

Successive attacks by the FSLN were met by in- 
creasingly harsh reprisals by the National Guard. 
Strikes, street protests, and guerrilla raids prompted 
Somoza to order the wholesale shooting of alleged 
peasant collaborators and the clearance of large areas 
of the countryside where opposition fighters found 
sanctuary. Somoza's human rights abuses led the 
Carter Administration in April 1977 to reduce mili- 
tary and economic aid to the regime. Six months 
later, the aid was restored after Nicaragua promised 
to curb the excesses of the National Guard. 

Despite Somoza's promises, the situation deteriorat- 
ed. In January 1978, Pedro Joaquin Chamorro, the 
editor of La Prensa, Nicaragua's foremost opposition 
newspaper, was assassinated. His assassins were never 
found, but the public reacted against the Government. 
A wave of protest swept the country. The ranks of 
the FSLN swelled with new recruits. Business, trade, 
and church groups joined the rebellion. 

The FSLN was the only force trained and capable 
of opposing the National Guard. The fact that the 
movement had taken on the rhetorical trappings of a 
leftist insurgency seemed of little consequence to 
Nicaraguans eager to remove Somoza. Following the 



25 



Chapter 1 




26 



Chapter 1 



killing of Chamorro, non-Marxist resistance groups 
began to gather around the FSLN, leading ultimately 
to the creation of the Broad Opposition Front seeking 
to draw all economic classes, ages, and professions. 
By the beginning of 1979, the movement could claim 
the full backing of Cuba, the unqualified support of 
the democracies of Venezuela and Costa Rica, and 
broad sympathy throughout Latin America. 

In February 1979, the State Department announced 
that, because of Somoza's unwillingness to accept a 
negotiated settlement, the United States was recalling 
more than half of its officials in Nicaragua and sus- 
pending all new economic and military aid. The end 
of U.S. backing cut the last props of support for the 
Government, and the end of the Somoza dynasty 
came on July 17, 1979. 

The Sandinistas were enormously popular when 
they began their rule. A Provisional Government of 
National Reconstruction was formed to lead the coun- 
try. At its head was a five-person directorate com- 
posed of Violetta Chamorro (widow of the murdered 
La Prensa editor), Alfonso Robelo, Sergio Ramirez, 
Moises Hassan, and Daniel Ortega. Hassan and 
Ortega came from the militant wing of the Sandinista 
Party. Members of the 18-member cabinet and the 33- 
member council were drawn from a broad spectrum 
of Nicaraguan public life. Though Nicaraguans were 
generally satisfied that the new Government repre- 
sented the Somoza opposition, the United States was 
not, pointing to Ortega and Hassan as left-wing radi- 
cals. 

The Sandinistas Tal<e Over 

The Sandinistas set out to court public favor and 
international support. They promised free elections, a 
free press, free enterprise, an independent judiciary, 
and an end to political oppression. 

Yet, the Sandinistas took over television and radio 
stations and censored the newspaper La Prensa, 
which opposed repression whether by the Sandinistas 
or by Somoza. The Sandinistas forced the two moder- 
ate members of Nicaragua's governing council, Cha- 
morro and Robelo, to resign, pressured opposition 
parties, continued political detentions, and expropriat- 
ed land. The revolutionary party organization as- 
sumed the functions of state. On September 19, 1980, 
the Government announced that it would not hold 
national elections until 1985. 

Americans were divided on how to interpret Sandi- 
nista intentions. If the Carter Administration did not 
openly embrace the Sandinistas, neither did it close all 
doors to a possible reconciliation. Immediately fol- 
lowing the Sandinista victory, the United States do- 
nated $39 million in emergency food aid to Nicara- 



gua, and in 1980 Congress appropriated an additional 
$75 million in emergency economic assistance (Public 
Law 96-257). Similarly, Washington supported the 
provision of aid to Nicaragua from international lend- 
ing organizations. 

The Carter Administration accepted the fact that 
the United States was in "competition" with Cuba to 
win over the Nicaraguan Government, but it hoped 
that friendly relations could be maintained. Yet while 
providing overt financial assistance. President Carter 
in the fall of 1979 signed a Finding authorizing sup- 
port to the democratic elements in Nicaragua because 
of the concern about the effect of the Sandinista take- 
over on such institutions. 

In public statements, Sandinista officials expressed 
their desire for better relations with the United States, 
and insisted that they had no intention of supporting 
insurgencies aimed at subverting their neighbors. 
Their actions, however, began to raise doubts. Weap- 
ons and equipment sent by Cuba through Nicaragua 
were making their way to rebels in El Salvador. 

The new regime received aid from several sources, 
including United States, Mexico, Venezuela, and 
Western Europe. But the United States, the largest 
single contributor, became increasingly concerned 
about the new regime's growing ties with the Eastern 
bloc. Nicaragua increased its number of Cuban advis- 
ers, and in 1980 and 1981 signed agreements with the 
Soviet Union and East bloc governments, including 
Bulgaria and East Germany, for advisers and military 
and intelligence assistance. 

Candidate Ronald Reagan stated his firm opposition 
to any further U.S support for the Sandinistas. In 
January 1981, President Carter suspended aid to the 
Nicaraguan regime. In April 1981, the Reagan Ad- 
ministration continued this policy. It announced that 
it would withhold the remaining $15 million in un- 
spent U.S. assistance to Nicaragua and not request 
further economic aid until the revolution was democ- 
ratized and all assistance to the Salvadoran rebels 
ceased. 

Concerns about Nicaragua's internal repression, its 
growing military force, its ties to the Soviet bloc and 
its support for the Salvadoran insurgency led the Ad- 
ministration to consider ways to assist the regime's 
opponents, who came to be known as the Contras. 

The Contras 

As the Sandinistas consolidated their hold on Nicara- 
gua in 1979 to 1981. the concerns of the United States 
were matched within Nicaragua itself. In response, a 
new Nicaraguan rebel movement — anti-Sandinista 
"Contras" — emerged. 



27 



Chapter 1 



Figure 1-2. Map of Nicaragua 




ChlnandegaO / 

North "<r ITM-aXjTaVl.SanBenlto ..^../^ 

Pacific Ocean \^ v^-^ aipitapi-, f chontales 

Puerto Sandlno^ y C* — ^^1 ( / >, 



Caribbean 
Sea 



Nicaragua 



■^-^— International boundary 

Departamento boundary 

O National capital 

© Departamento capital 

Depanementos have the same name 
Bs their capitals except where noted 

25 50 Kilometers 

I ■— H — 



QQ Boundary representation is not necessarily authoritative. 



28 



Chapter 1 



The Contras were not a monolithic group, but a 
combination of three distinct elements of Nicaraguan 
society; former National Guardsmen and right-wing 
figures who had fought for Somoza and against the 
revolution; anti-Somocistas who had supported the 
revolution but felt betrayed by the Sandinista Govern- 
ment; and Nicaraguans who had avoided direct in- 
volvement in the revolution but opposed the Sandinis- 
tas' increasingly anti-democratic regime. 

Many future Contra leaders fled to exile. Some, like 
Jose Francisco Cardenal, head of the Superior Coun- 
cil of Private Enterprise (COSEP), moved to the 
United States, where they began a political campaign 
to win support for their cause in Congress and from 
among the Cuban and Nicaraguan exile communities. 
Other anti-Sandinistas set about organizing a resist- 
ance movement in neighboring nations. 

The largest and most active of these groups, which 
later came to be known as the Nicaraguan Democrat- 
ic Force (FDN), was led by Adolfo Calero Portocar- 
rero. Calero had been an accountant and businessman, 
and had been active in the movement to oust Somoza. 
Following the liberation, he served as the political 
coordinator of the Conservative Democratic Party 
and became an outspoken critic of the Sandinista 
Government. Calero joined the resistance movement 
after his office and home were attacked and he was 
forced into exile. 

Although Calero had opposed Somoza, the FDN 
had its roots in two insurgent groups made up of 
former National Guardsmen who fled Nicaragua after 
the fall of Somoza. In 1981, this branch of the resist- 
ance consisted of only a few hundred men. 

Other elements of the anti-Sandinista resistance 
emerged following the failure of members of the Nic- 



araguan provisional government to resolve their dif- 
ferences over the political direction of the country. 
Increasingly, those who opposed the Sandinistas 
found themselves isolated within the Government. 
The resignation in 1980 of Violetta Chamorro from 
the ruling directorate triggered an exodus of moderate 
leaders from the Government. 

Among those who left were Alfonso Robelo Calle- 
jas and Arturo J. Cruz. Robelo had entered politics 
during the two national strikes organized against 
Somoza. In March 1978, he founded the Nicaraguan 
Democratic Movement and was imprisoned by 
Somoza. After his release, he was forced into exile. 
He participated in the post-revolutionary Government 
as the head of his own political party and as an 
opponent of the Sandinista regime. Cruz, who would 
become a prominent Contra leader, was named Nica- 
raguan Ambassador to the United States in 1981. He 
resigned 2 years later in protest against Sandinista 
policies, and joined the resistance in 1983. 

In addition to the main force of FDN fighters cen- 
tered primarily in the northern portion of the country, 
other resistance forces became active in other parts of 
Nicaragua. These include several Indian groups oper- 
ating along the Atlantic coast and, after 1981, a group 
formed by the charismatic figure and former Sandi- 
nista guerrilla leader and hero, Eden Pastora. Forces 
under Pastora were based along the southern border 
with Costa Rica. 

Initial support for the Nicaraguan resistance came 
from another country, which organized and supplied 
paramilitary forces in early 1981. By the end of 1981, 
however, the Contras were looking to the United 
States for their support. They were to find a receptive 
audience — President Reagan. 



29 



Chapter 2 

The NSC Staff Takes Contra Policy 

Underground 



In December 1981, the President authorized a Central 
Intelligence Agency (CIA) covert action program to 
support the Contras. The CIA's activity, however, 
did not remain covert for long: within months, it was 
the topic of news reports and the subject of Congres- 
sional debate questioning the Administration's policy 
in support of the Contras. The Administration re- 
sponded that it did not intend to overthrow the San- 
dinista Government in Nicaragua, but sought to check 
the spread of communism to El Salvador and other 
nations in Central America. 

In 1982, in the first Boland Amendment, Congress 
sought to enforce that claim by barring the Adminis- 
tration from using Congressionally appropriated 
money for the "purpose" of overthrowing the Sandi- 
nista regime. The Administration, although not 
pleased with the amendment, nevertheless accepted it, 
because the amendment allowed the Administration to 
maintain support for the Contras so long as that sup- 
port had as its "purpose" stopping the spread of the 
Sandinista revolution outside Nicaragua's borders. 

With the first Boland Amendment, then, came a 
temporary compromise between the Administration 
and Congress. But it was an inherently uneasy com- 
promise, based more on semantics than substance: The 
Contras were not in the field to stop Sandinista arms 
flowing to El Salvador; they were in the field to 
overthrow the Sandinistas. The Intelligence Commit- 
tees of Congress, while rejecting that objective, nev- 
ertheless approved CIA use of contingency reserve 
funding to support the anti-Sandinistas. And the Ad- 
ministration embraced the contradiction inherent in 
the new law, by emphasizing that U.S. support was 
aimed only at interdicting arms destined for other 
Central American Communist insurgencies. 

During 1983, press reports of a "secret" CIA war 
in Nicaragua led to increased questioning in Congress. 
In July, the House voted to end all Contra aid. Mean- 
while, in the hopes of forestalling an aid cutoff, the 
Administration accepted an invitation by the Senate 
Select Committee on Intelligence to clarify its inten- 
tions in pursuing a covert program. Despite Adminis- 
tration efforts to meet those concerns, by the winter, 
the House and Senate had agreed to cap Contra fund- 
ing at $24 million, a sum that both the Administration 



and the Congress knew would not last through fiscal 
1984. 

Nonetheless, the Administration decided to escalate 
the operations in Nicaragua. When the Nicaraguan 
harbor mining was disclosed in April, it created a 
storm of protest in Congress and around the country 
and, chiefly as a result. Congress declined to appro- 
priate more money for the Contras. With the CIA out 
of funds for the Contras, the NSC staff took over the 
program of supporting the Contras. But this time, the 
operation was covert in a new sense — it was con- 
cealed from Congress. 

Beginning in May 1984, when the CIA-appropri- 
ated funds for the Contras ran out, the National Secu- 
rity Council (NSC) staff raised money for Contra 
military operations from third countries with the 
knowledge of the President, supervised the Contras' 
purchase of weapons, and provided guidance for the 
Contras' military operations. The operational responsi- 
bilities fell largely to Lt. Col. Oliver L. North, a 
member of the NSC staff who reported to the Nation- 
al Security Adviser, Robert C. McFarlane, and his 
deputy. Vice Admiral John M. Poindexter. 

In October 1984, the Congress passed and the 
President signed the second Boland Amendment pro- 
hibiting the expenditure of any available funds in sup- 
port of Contra military operations by any agency or 
entity involved in intelligence activities. Rather than 
halting U.S. support for the Contras, the CIA's with- 
drawal was treated as a call for the NSC staff to take 
over the entire covert operation, raising more money 
from a third country, arranging for arms purchases, 
and providing military intelligence and advice. The 
NSC staff went operational — and underground. 

The December 1981 Finding 

Within 2 months of President Reagan's inauguration, 
the CIA proposed, and the NSC considered, plans for 
covert action to deal with the growing Cuban pres- 
ence in Nicaragua.' The United States continued to 
recognize the Nicaraguan Government, but diplomat- 
ic relations became increasingly adversarial because of 
the Administration's concern that the Sandinistas 
were continuing to receive significant military support 



31 



Chapter 2 



from Cuba, support targeted, in part, for insurgent 
groups beyond Nicaraguan borders.^ 

In December 1981, President Reagan signed his 
first Finding specifically authorizing covert paramili- 
tary actions against the Sandinista Government in 
Nicaragua.^ Under the law, covert actions may be 
initiated only by a personal decision of the President. 
A Finding is an official document embodying that 
decision. By signing a Finding, a President not only 
authorizes action, but accepts responsibility for its 
consequences. 

Sponsoring the CIA's new covert program in Cen- 
tral America was the Director of Central Intelligence, 
William J. Casey. Casey was a veteran of covert 
operations, having served with the Office of Strategic 
Services (OSS), the predecessor to the CIA, during 
the Second World War. In 1945, Casey, just 32 years 
old and a Navy lieutenant, was chief of the Secret 
Intelligence Branch that directed intelligence gather- 
ing in German-controlled Europe from OSS head- 
quarters in London. 

After the war, Casey became a successful corporate 
lawyer and a wealthy investor, was appointed Chair- 
man of the Securities and Exchange Commission, and 
later became head of the President's 1980 election 
campaign. Following the 1980 election, Casey was 
named Director of Central Intelligence, the first Di- 
rector to enjoy Cabinet rank. Casey was a firm believ- 
er in the value of covert operations, and took an 
activist, aggressive approach to his craft. In the words 
of the CIA's Deputy Director of Operations, Clair 
George, "Bill Casey was the last great buccaneer 
from OSS."4 

Pastora Defects 

Casey saw the opportunity to make military head- 
way against the Sandinistas in early 1982, when rebel 
leader Eden Pastora defected from the ruling Sandi- 
nista junta. Pastora appeared to be an ideal candidate 
for Contra military leadership. Known to his follow- 
ers by the nom de guerre, "Comandante Zero," he had 
been one of the heroes of the fight against Somoza. 
From 1977 to 1978, he served in the Sandinista Na- 
tional Liberation Front and later held several high 
posts in the new Government until his abrupt resigna- 
tion in 1981. In April 1982, Pastora organized the 
Sandinista Revolutionary Front (FRS) and declared 
war on the Sandinista Government. 

Although Pastora was a popular, charismatic leader 
with the potential to challenge the Sandinistas, his 
geographic base presented a problem for the Adminis- 
tration. He insisted on operating in the southern part 
of Nicaragua. The Administration, however, claimed 
that its only purpose in aiding the Contras was to 
interdict arms Hows to El Salvador, which lies to the 
north of Nicaragua. Support for Pastora in the South 
contradicted that claim. 



Casey's deputy. Admiral Bobby R. Inman, an intel- 
ligence professional who had headed the National Se- 
curity Agency, objected to this broadening of the 
covert program. He believed that it was unsound, and 
unauthorized by the existing Presidential Finding. Yet 
Casey was determined to proceed. Inman retired at 
the end of June 1982 and the CIA supported Pastora 
without any change in the Presidential Finding.^ 

A Proposal for a New Finding 

Pastora's rebel group "develop[ed] quickly."® By 
July 12, 1982, Donald Gregg, then head of the NSC's 
Intelligence Directorate and responsible for all covert 
action projects, proposed a new draft Finding to keep 
pace with Pastora's developing operations. Gregg, 
hke Inman, believed that broad support for Pastora 
was outside the scope of the December 1981 Find- 
ing.' He wrote to William Clark, the National Securi- 
ty Adviser, that "additional actions not covered by 
previous authority are now being proposed."* Those 
"additional actions" included providing "financial and 
material support," training, and arms supply to Pas- 
tora's forces.^ The problem with providing that assist- 
ance under the December 1981 Finding, as Gregg 
saw it, was that the "rationale" of the earlier Finding 
appeared "to be to have the anti-Sandinista forces 
strike against the Cuban presence in Nicaragua rather 
than attacking the Sandinista units."'" 

Vice Admiral Poindexter, then military adviser to 
the National Security Adviser, disagreed. In a hand- 
written note, Poindexter stated: "I don't see this really 
needs to be approved since the earlier Finding covers 
it, but maybe it would be good to get a confirmation 
since we now have a better idea as to where we are 
going."" As drafted by Gregg, the proposed Finding 
provided for CIA paramilitary support to forces 
inside Nicaragua for the purpose of "effect[ing] 
changes in Nicaraguan government policies."'^ This 
draft Finding, with its broadly stated goals, was never 
approved by the President. 

Boland I 

By the fall of 1982, press reports told of a growing 
U.S. involvement in Nicaragua.'^ Administration 
spokesmen responded by stating that the U.S. Gov- 
ernment was seeking not to overthrow the Nicara- 
guan Government, but merely to prevent it from ex- 
porting revolution to El Salvador. Aid to the Contras 
was presented as an act in defense of El Salvador, not 
a hostile act against Nicaragua. 

Congress soon began to question this explanation.'* 
The Contras were in the field for the announced 
purpose of overthrowing the Sandinistas, not simply 
to interdict supplies destined for El Salvador.'* Con- 
gress debated the issue extensively, with some Mem- 
bers questioning whether their own Government was 



32 



Chapter 2 



violating the charters of both the United Nations and 
the Organization of American States by interfering in 
the internal affairs of Nicaragua.'* Members voiced 
concern that U.S. support for the Contras was provid- 
ing a "convenient pretext" for the Sandinistas to 
impose martial law, suppress freedom of the press, 
stifle religion, and undermine the rights of assembly 
and free elections." Those who supported these 
views called for a complete cutoff of aid to the Con- 
tras. 

There was equally strong support in Congress, par- 
ticularly in the Senate, for aiding the Contras. Some 
Members believed that the Sandinistas were trying to 
spread a Marxist revolution to neighboring states. 
They argued that no Communist regime had ever 
stepped down or consented to free elections and that 
support for the Contras was necessary to bring about 
democracy in Nicaragua.'* 

Out of this debate emerged an amendment to the 
Defense Appropriations bill for fiscal year 1983, later 
known as Boland I. Introduced by Representative 
Edward P. Boland, the amendment passed the House 
by a vote of 411-0, and was adopted, in December 
1982, by a Conference Committee of the House and 
Senate. This first Boland Amendment prohibited CIA 
use of funds "for the purpose of overthrowing the 
Government of Nicaragua."'^ 

The internal contradictions of the Administration's 
announced Nicaragua policy ^° were carried forward 
in the new law: Congress appropriated funds that 
would be used by the CIA for Contra assistance, but 
at the same time rejected the Contras' objective to 
remove the Sandinista Government. During the floor 
debate on his amendment, Representative Boland indi- 
cated that while the Administration did not like his 
proposed restrictions, it would accept them.^' Con- 
gress had not cut Contra funding; it merely had legis- 
lated an impermissible purpose. The Administration 
still could maintain support for the Contras and did, 
by relying upon its original justification for Contra 
support— stopping arms flows to El Salvadoran Com- 
munist insurgents. 

In December 1982, The New York Times reported 
intelligence officials as saying that Washington's 
"covert activities have . . . become the most ambitious 
paramilitary and political action operation mounted 
by the C.I. A. in nearly a decade. . . ."^'^ One month 
later, in January 1983, Senator Patrick J. Leahy, ac- 
companied by staff of the Senate Intelligence Com- 
mittee, visited Central America to review U.S. intelli- 
gence activities related to Nicaragua. His findings, 
supplemented by followup Committee briefings and 
inquiries, revealed that the covert action program was 
"preceding policy," that it was "growing beyond that 
which the Committee had initially understood to be 
its parameters," and that "there was uncertainty in the 
executive branch about U.S. objectives in Nicara- 
gua."^^ 



Questions about compliance with the Boland 
Amendment increased throughout 1983. In March, 37 
House Members sent a letter to the President warning 
that CIA activities in Central America could be vio- 
lating the law.^* In April, news reporters visiting 
Contra base camps wrote that "[t]he U.S. -backed 
secret war against Nicaragua's leftist Sandinista 
regime has spilled out of the shadows."^^ 

Challenged to defend the Administration's compli- 
ance with the law, the President asserted in April that 
there had been no violation of the Boland Amend- 
ment. There would be none, said the President, be- 
cause even a law he disagreed with had to be ob- 
served; "We are complying with the law, the Boland 
Amendment, which is the law."^* "[W]hat I might 
personally wish or what our government might wish 
still would not justify us violating the law of the 
land."^'' When asked if his Administration was doing 
anything to overthrow the Government of Nicaragua, 
he replied, "No, because that would be violating the 
law."28 

According to some in Congress, the Administration 
was facing a "crisis of confidence" about the legitima- 
cy of CIA support for the Contras. ^^ The President 
responded with a major address on Central America 
to a joint session of Congress on April 27, 1983. 
Rejecting images of a new Vietnam, the President 
stated: 

But let us be clear as to the American attitude 
toward the Government of Nicaragua. We do not 
seek its overthrow. Our interest is to ensure that 
it does not infect its neighbors through the export 
of subversion and violence. Our purpose, in con- 
formity with American and international law, is 
to prevent the flow of arms to El Salvador, Hon- 
duras, Guatemala, and Costa Rica . . . .^° 

It soon became clear, however, that the President 
had not made the case for the Administration's 
Contra support policy with either the Congress or the 
American people.^' He was not helped by the Con- 
tras' performance on the ground. The Contras had 
failed to win either popular support or military victo- 
ries in Nicaragua and could not, without both, sustain 
public support in the United States. ^^ 

The Administration Responds to 
Congressional Unrest: l\/lay- 
September 1983 

In May 1983, both the House and Senate Select Com- 
mittees on Intelligence challenged the Administra- 
tion's Nicaragua policy, but in different ways. The 
Senate Intelligence Committee "took the rather un- 
usual step of requiring" that "the Administration ar- 
ticulate, in a clear and coherent fashion its policy 



33 



Chapter 2 



objectives." Before the Committee would vote for 
more aid, it wanted a new Presidential Finding. ^^ 

The House Permanent Select Committee on Intelli- 
gence, on the other hand, favorably reported a new 
bill, the "Boland-Zablocki" bill, to the full House for 
consideration.^* The bill barred aid for the Nicaragua 
covert action program, but it also took the Adminis- 
tration at its word about the need to stop arms flows 
to El Salvador. The legislation provided $80 million 
in assistance to Central American governments to 
stop the flow of arms to rebel groups, but no funds 
for "support of military or paramilitary activities in 
Nicaragua."^* Despite strong Administration opposi- 
tion, the House passed the bill on July 28, 1983, by a 
vote of 228-195.36 

With its implicit threat of an aid cutoff, the Boland- 
Zablocki measure challenged the Administration to 
articulate a plausible rationale for covert aid. The bill 
exposed the loose fit between the Administration's 
announced policy of stopping arms flows to El Salva- 
dor and its covert support of the Contras. If the 
Administration really wanted to stop arms flows to El 
Salvador, it could do so directly, said the Congress; 
but if its purpose was to aid the Contras in over- 
throwing the Nicaraguan Government, there would 
be no funding. 3' 

The Administration responded to the threat of an 
aid cutoff in three different ways. First, the Adminis- 
tration established a public relations office in the State 
Department attempting to muster the public and Con- 
gressional support necessary for the Contras. Second, 
anticipating that a cutoff might nevertheless occur, 
the Administration developed a secret plan to stock- 
pile weapons for the Contras at the CIA. Finally, at 
the same time, to satisfy Congressional demands, the 
Administration agreed to draft a new Finding. 

White Propaganda 

In June of 1983, the Administration decided upon a 
new method of trying to win public support for the 
President's policy in Central America. On July 1, 
1983, then National Security Adviser Clark an- 
nounced that "the President had decided that the Ad- 
ministration must increase our efforts in the public 
diplomacy field to deepen the understanding of the 
support for our policies in Central America."^* 

As a result, an office of Public Diplomacy for Latin 
American and the Caribbean (S/LPD) was estab- 
lished in the State Department, headed by Otto 
Reich, ''^ who eventually was given the rank of Am- 
bassador.*" The S/LPD was an interagency office 
with personnel contributed by the Department of 
State, the Department of Defense (DOD), the 
Agency for International Development, and the U.S. 
Information Agency. Although created as part of the 
State Department, the office was established at the 
direction of the National Security Council.'" The S/ 
LPD's activities were coordinated by an interagency 



working group staffed by the NSC. The principal 
NSC staff officer was a former senior CIA official. 
With the knowledge and approval of Director Casey, 
he was detailed to the NSC staff for a year. He later 
became Special Assistant to the President with re- 
sponsibility for public diplomacy matters. 

The mission of the office — public diplomacy — was 
a "new, non-traditional activity for the United States 
government," according to the State Department. In 
fact, "public diplomacy" turned out to mean public 
relations-lobbying, all at taxpayers' expense. The 
office arranged speaking engagements, published pam- 
phlets, and sent materials to editorial writers.*^ In its 
campaign to persuade the public and Congress to 
support appropriations for the Contras, the office used 
Government employees and outside contractors — in- 
cluding Richard Miller and Francis Gomez who 
would later work with North to provide Contra as- 
sistance. ^^ 

A Deputy Director of S/LPD, Jonathan Miller, 
reported the office's success in what he labeled a 
"White Propaganda Operation," which sought to 
place op-ed pieces in major papers by secret consult- 
ants to the office.** By Reich's own description, the 
office adopted "a very aggressive posture vis-a-vis a 
sometimes hostile press." It "briefed Members of Con- 
gress, reached out to audiences previously over- 
looked, found new ways of reaching traditional audi- 
ences, and generally did not give the critics of the 
policy any quarter in the debate."*^ It claimed that 
"[a]ttacking the President was no longer cost free."*® 

Later, the Comptroller General would find that 
some of the office's efforts, in particular Jonathan 
Miller's "White Propaganda," were "prohibited, 
covert propaganda activities,""' "beyond the range 
of acceptable agency public information 
activities. . . ."" In a September 30, 1987, letter, 
the Comptroller General concluded that S/LPD had 
violated "a restriction on the State Department's 
annual appropriations prohibiting the use of federal 
funds for publicity or propaganda purposes not 
authorized by Congress.""^ 

The CIA Tries to Stoclcpiie 

In the summer of 1983, while efforts were under- 
way at the State Department to change public opin- 
ion, the CIA began secret preparations in the event 
Congress decided to cut off aid to the Contras. In that 
event, the Agency planned to obtain equipment free 
of charge from the DOD. 

On July 12, the President directed that the DOD 
provide enhanced support for the CIA in its efforts to 
assist the Contras.^" One day later, the CIA sent a 
"wish list" to the DOD, requesting that $28 million in 
equipment be transferred to it, "free-of-charge."*' 
The list covered everything from medical supplies to 
aircraft, and included a request for personnel.*^ The 



34 



Chapter 2 



Joint Chiefs of StafT proposed that each of the four 
services carry a quarter of the cost of these trans- 
fers.^' The equipment then could be stockpiled by the 
CIA and provided to the Contras if the need arose. 
The CIA would not run afoul of any aid ceiling since 
it had not paid for the equipment. The equipment 
involved had been paid for out of the normal DOD 
budget allocation. In short, money appropriated by 
Congress for one purpose would be used for another, 
bypassing any limits Congress might place on CIA 
appropriations, such as the then-pending Boland- 
Zablocki bill.^" 

By late summer, the DOD's General Counsel con- 
cluded that a nonreimbursable transfer would violate 
the Economy Act, a law requiring that the DOD be 
reimbursed for the cost of interagency transfers. ^^ 
The CIA would have to pay for all items except 
surplus equipment. From the CIA's perspective, this 
defeated the purpose of the plan: to avoid the expend- 
iture of CIA funds and shift the cost to the DOD.^^ 
The project was finally terminated on February 12, 
1985, after the CIA had obtained, without cost, 3 
surplus Cessna aircraft and, at cost, 10 night vision 
goggles, 1 night vision sight, and a Bushmaster 
cannon.^' 

The September 1983 Finding: A New 
Rationale for Covert Aid 

Trying to forestall a complete cutoff of Congres- 
sional aid, the Administration accepted the Senate 
Intelligence Committee's proposal that it draft a new 
Finding defining and delimiting the purposes of the 
covert program. By August, Director Casey had pre- 
sented the Committee with a first draft and later, in 
September, proceeded to "informally discuss the find- 
ing with Senator Goldwater and other key Senators 
of the SSCI."^* Within the Administration, the Find- 
ing was, as North put it, "thoroughly scrubbed" by 
the State Department and NSC staff as well by as the 
Justice Department and lawyers from DOD and 
CIA.59 

On September 16, 1983, at a National Security 
Planning Group (NSPG) meeting. Director Casey 
briefed the President and his advisers from the State 
and Defense Departments on the draft Finding. The 
Director explained that the earlier Finding had been 
"modified to reflect [a] change of objectives. . . ."^° 
No longer was the covert program justified solely by 
the need to curb Cuban support for the Sandinistas or 
to stop arms flows out of Nicaragua. A new, and 
broader, rationale was added: covert aid was intended 
to pressure the Sandinistas to negotiate a treaty with 
nearby countries.®' 

The new Finding also reflected a change of tactics. 
Congress would not accept a Finding broad enough 
to permit paramilitary operations conducted by U. S. 
citizens. The Administration gave its assurances that 
aid for paramilitary operations would be limited to 



third -country nationals.®^ Casey told the President 
that the "new Finding no longer lets us engage in PM 
[paramilitary operations]."®' 

Three days later, on September 19, 1983, the Find- 
ing was signed.®* The next day, the Intelligence 
Committees received briefings on it. Shortly thereaf- 
ter, the Senate Intelligence Committee voted to pro- 
vide aid for a continued covert operation in Nicara- 
gua.®^ 

The new Finding, however, was not without prob- 
lems. The Administration's stated objective in sup- 
porting the Contras was now to pressure the Sandinis- 
tas into accepting a treaty that had to include free 
elections. If, as the President believed, the Sandinistas 
could not win such an election, they would never 
agree to such a treaty.®® Only the prospect of a 
military defeat would push them toward a negotiating 
posture. Yet, the renunciation of a military victory 
was the price set by Congress for a bipartisan com- 
promise. The Finding thus contained within it a para- 
dox that would haunt the Administration's Nicaragua 
policy. 

Forcing the Issue: The December 
Funding Cap and Intensifying 
Covert Operations 

One day after the September Finding was briefed to 
the Intelligence Committees, an unnamed Administra- 
tion official was quoted in The New York Times 
explaining the rationale of the new Finding: "Yes, we 
are supporting the rebels until the Nicaraguans stop 
their subversion," an "approach," the official urged, 
that "should end the argument over whether the Ad- 
ministration was violating its pledge by doing more 
than just stopping the arms flow."®' 

But Administration hopes that the September Find- 
ing, and its new rationale for covert action, would 
end the debate on Contra aid were quickly dashed. 
Discussions were held on the House floor over the 
advisability of continuing covert aid, and the Presi- 
dent took his cause to the public in his radio address- 
es. In October, the House voted to halt all aid to 
paramilitary groups fighting the Nicaraguan Govern- 
ment.®* The Senate, however, wanted to continue 
aid. In early December, the House and Senate agreed 
to a compromise: A "cap" of $24 million would be 
placed on Contra funding, and the CIA would be 
barred from using its contingency reserves to make up 
any shortfall.®^ 

Congress and the Administration recognized that 
the $24 million appropriation would be insufficient to 
sustain a covert operation through the fiscal year.'" 
Therefore, the door was left open for a future Admin- 
istration funding request to carry the program for the 
balance of the year if negotiations for a peace treaty 
were thwarted by the Sandinistas. The President was 



35 



Chapter 2 



required to report to Congress by March 15 on the 
steps taken to achieve a negotiated settlement in Cen- 
tral America.'" 

The Decision to Bring the Situation to a 
Head 

Having survived the threat of a total cutoff of funds 
for the Contras, the Administration decided to intensi- 
fy the CIA's covert activities while funding still re- 
mained.'^ Charged by the new National Security Ad- 
viser, Robert McFarlane, to prepare an "in-depth 
review" of the Administration's Central America 
policy, ''^ a Special Interagency Working Group 
(SIG)''' concluded: "Given the distinct possibility 
that we may be unable to obtain additional funding in 
FY-84 or FY-85, our objective should be to bring the 
Nicaragua situation to a head in 1984.""^ At a Janu- 
ary 6 NSPG meeting, the President and his advisers 
concurred in the SIG recommendation: "Our covert 
action program should proceed with stepped up inten- 
sity."''^ 

Even before the decision had been officially ac- 
knowledged, plans had been implemented to step-up 
paramilitary operations in Central America. In the 
fall, speedboats carried out attacks against Sandinista 
patrol craft and fuel tanks.'® By November, a more 
heavily armed speedboat had been developed for 
follow-on operations." 

At the end of December, and thereafter, the mining 
and other operations increased. In early January, the 
CIA proposed attacks against fuel supply depots and 
transmission lines along the "entire Pacific coast of 
Nicaragua."'* On January 7, three magnetic mines 
were placed in Sandino harbor;''^ on February 3, an 
air attack destroyed a Sandinista "communications 
and naval arms depot"*"; and on February 29, more 
mines were placed at Corinto.*' By March 29, plans 
had been made to support an attack by Eden Pastora 
on San Juan del Norte; it was hoped that the attack 
would result in the installation of a provisional gov- 
ernment.*^ 

The Role of Lt. Col. Oliver North 

At the NSC, Lt. Col. Oliver North became the 
liaison with the CIA in its intensified covert effort. A 
graduate of the U. S. Naval Academy, he had distin- 
guished himself on the battlefield in Vietnam, winning 
a Silver Star, a Bronze Star, and two Purple Hearts.*^ 
He was assigned to the NSC in October 1981, where 
he quickly established a reputation with his superiors 
as a staffer who could get a job done.*** 

North was energetic, articulate, action-oriented, and 
had a reputation for bypassing red tape.*^ His superi- 
ors could depend on him not only to carry out orders, 
but to keep them informed.*® North was a prodigious 
writer, often staying in his office until late at night to 
complete lengthy papers or other work.*'' 



As described by a number of his colleagues. North's 
relationship to McFarlane was very close.** With 
McFarlane's rise to the position of National Security 
Adviser, North came to play an increasingly large 
role not only in the operational aspects of Contra 
policy, but also in forging that policy. North already 
had contacts in Central America who were pleased 
with his success. On November 7, 1983, John Hull, 
Indiana native, ranch owner in Costa Rica, and 
Contra supporter, wrote that "B.G.," or "blood and 
guts," as North was known, was to have a new boss, 
Robert McFarlane. Hull hoped this would make 
North "more powerful as we need more like him."*^ 

North became a strong advocate within the NSC 
staff of intensified covert support for the Contras. He 
was the point of contact, transferring information 
from the CIA to the National Security Adviser for 
the President's approval.®" For every significant, and 
sometimes insignificant, operation, he provided a 
memorandum to the National Security Adviser des- 
tined for the President. His reports were detailed and 
enthusiastic, his recommendations supportive of fur- 
ther operations.®' 

In his new assignment, North looked to Casey for 
guidance. In his words. Director Casey was a "teach- 
er or philosophical mentor" of sorts, to whom he 
looked for help and advice on a regular basis. ®^ "Bill 
Casey was for me a man of immense proportions," 
North testified, "a man whose advice I valued greatly 
and a man whose concern for this country and the 
future of this land were, I thought, on the right 
track." "History," North stated "will bear that 
out."®^ 

Tension Between the 1983 Finding and 
Intensified Operations 

In a series of memorandums written between Oc- 
tober 1983 and March 1984, North recorded the 
CIA's increasing covert presence in the region. Rela- 
tively minor operational details were given to the 
President, as on November 4, when North advised 
McFarlane to suggest an increase in the number of 
weapons supplied to the Contras by 3,000. The Presi- 
dent approved the recommendation.®'* North not only 
sought approval for, but also reported the results of, 
various actions proposed to him by Agency person- 
nel. On February 3, he reported a successful attack on 
a Sandinista communications and naval arms depot. 
Admiral Poindexter penned, "Well done." and 
checked North's recommendation that the President 
would be briefed.®^ 

North frequently stated in his memorandums that 
the actions recommended were within the Septem- 
ber 1983 Finding.®^ Yet, progress toward negotiations 
and success in arms interdiction were not the focus of 
his attention; instead, the destruction of Sandinista 
fuel supply lines or the mining of harbors was the 



36 



Chapter 2 



subjects of these memorandums. North kept his 
superiors advised of Contra actions that would 
weaken the Sandinista regime, explaining that the 
purpose of the mining and attacks was to enhance 
the Contras' military strength, while "reduc[ing] 
the mobility of Sandinista military units. "^' 

North could contend that such military activities 
were within the scope of the Finding because of the 
Finding's essential ambiguity. Paramilitary action, 
once authorized, may be used to promote a diplomat- 
ic end while at the same time furthering the cause of 
military victory. But by March of 1984, it had 
become clear that the diplomatic end the Finding 
described was not what North anticipated or encour- 
aged. In memoranda to McFarlane, he proposed sig- 
nificant military actions against the Sandinistas, the 
details of which cannot be disclosed for national secu- 
rity reasons, but which give substance to the testimo- 
ny of Clair George, CIA Deputy Director for Oper- 
ations, that North's ideas were often extreme, 
"crazy," or "hairbrained."** The memos reveal the 
same enthusiasm for covert paramilitary operations 
that North would later bring to his work as the 
"switching point" for Contra support during the next 
2 years. ^8 

The Money Begins to Run Out 

By February 1984, the $24 million earmarked by 
Congress for the Contras was being quickly depleted. 
On February 13, North wrote to McFarlane, empha- 
sizing the importance of obtaining "relief from the 
$24M ceiling,"""' but recognizing that "[c]ongres- 
sional resistance on this issue is formidable": 

[P]rospects for success are bleak even with a 
concerted effort. At some point, we may have to 
reassess our prospects and decide whether pru- 
dence requires that we somehow stretch our FY- 
84 effort to avoid running out of funds.'*" 

In a memorandum drafted by North for the President, 
McFarlane concluded that "[u]nless an additional 
$14M [million] is made available, the [Contra aid] 
program will have to be drastically curtailed by May 
or June of this year.""'^ 



the September 1983 Finding.'"^ Senator Barry 
Goldwater, Senate Intelligence Committee Chairman, 
charged that his Committee Members had been de- 
ceived at the very moment they were being asked to 
vote to support Contra aid. "[I]t is indefensible on the 
part of the Administration to ask us to back its for- 
eign policy when we don't even know what is going 
on," he declared.'"^ 

After initial assertions by Director Casey and the 
National Security Adviser"" that full and detailed 
disclosure had been provided to Congress, the Ad- 
ministration decided to end the escalating battle and 
offered a truce. On April 26, Director Casey 
"apologize[d] profoundly," conceding inadequate dis- 
closure.'"* But the "apology" could not heal the 
"fracture" between Congress and the Administration 
that the mining had created. '°^ The Administration's 
policy to bring the situation "to a head" had back- 
fired: the plan, rather than attracting support, lost it. 

Keeping the Contras Together: 
Spring-Summer 1984 

The Administration's proposal for $21 million in 
supplemental assistance for the Contras now lay in 
doubt as Congress debated the course of U. S. policy 
in Central America. The uproar over the mining inci- 
dent made any further appropriation unlikely. Indeed, 
House Speaker Thomas P. (Tip) O'Neill, Jr. declared 
that, in his view, the President's funding request was 
"dead."''" 

With or without appropriated funds, the Adminis- 
tration planned to continue supporting the Contras. In 
McFarlane's words, the President directed the NSC 
staff to keep the Contras together "body and 
soul."''"^ In Poindexter's words, the President 
"wanted to be sure that the contras were support- 
ed."' ^ 

McFarlane assigned this responsibility to North, 
who testified: 

I was given the job of holding them together in 
body and in soul. ' ' ^ 



The Harbor Mining Disclosures 



In early April, the country learned that the U.S. 
Government was involved in the mining of Nicara- 
guan harbors. U.S. Government presence in Nicara- 
gua had become "embarrassingly overt." '"^ As 
McFarlane testified: "The disclosure that harbors had 
been mined in Nicaragua was received very 
badly. . . ."""■ 

Some in Congress believed that the Administration 
had misrepresented the activities it conducted under 



To keep them together as a viable political oppo- 
sition, to keep them alive in the field, to bridge 
the time between the time when we would have 
no money and the time when the Congress 
would vote again, to keep the effort alive, be- 
cause the President committed publicly to go 
back, in his words, again and again and again to 
support the Nicaraguan resistance. ' ' * 



37 



Chapter 2 



Tapping Foreign Sources — The First 
Efforts 

With the appropriated funds projected to run out in 
May or June, the Contras could be kept together only 
if an alternative source of funding could be found. 
The Administration began to look beyond the U.S. 
Treasury to foreign countries for monetary support. 
As early as February, North drafted a National Secu- 
rity Decision Directive recommending "immediate ef- 
forts to obtain additional funding of $10-$ 15 million 
from foreign or domestic sources to make up for the 
fact that the current $24 million appropriation will 
sustain operations only through June 1984."*''* While 
McFarlane struck this language from an official pol- 
icymaking document,"^ he quietly pursued the same 
idea. 

Looking to Country 1 for Contra Support 

McFarlane testified that perhaps as early as Febru- 
ary 1984, he considered "the possibility of in effect 
farming out the whole contra support operation to 
another country, which would not only provide the 
funding, but give it some direction."**^ In February 
or March, McFarlane pursued the idea with an offi- 
cial from Country 1."'' He inquired whether Country 
1 would have any interest in instructing "the contras 
in basic tactics, maneuver[s], and so forth."''* Coun- 
try 1 officials eventually declined the invitation. "^ 

But McFarlane was not dissuaded from attempting 
a less ambitious plan for third-country support. On 
March 27, McFarlane met with Director Casey and 
proposed a plan to approach third countries, including 
Country 1, for Contra assistance. In a memorandum 
of that date, Casey recounted McFarlane's plan: 

In view of possible difficulties in obtaining sup- 
plemental appropriations to carry out the Nicara- 
guan covert action project through the remainder 
of this year, I am in full agreement that you 
should explore funding alternatives with [Coun- 
try 1] and perhaps others.'^" 

Others were not in "full agreement," however, 
about an approach to Country 1. Secretary of State 
George P. Shultz testified that during other discus- 
sions within the Administration about third-country 
funding, he questioned the legality and wisdom of any 
third-country approach. Shultz testified that by April 
18, McFarlane knew he (Shultz) felt it was a mistake 
to approach Country 1 for Contra support. '2' 

Nevertheless, McFarlane followed through with the 
plan recounted in Director Casey's March 27 memo. 
He directed Howard J. Teicher, the Director of Near 
East Affairs at the NSC, to speak to an official in 
Country Ts Ministry of Foreign Affairs about obtain- 
ing monetary support. Teicher made the approach, 
but Country 1 declined to be a part of the plan.'^^ 
McFarlane, in a memorandum of April 20, told 



Teicher that he was "disappointed in the outcome but 
we will not raise it further . . . [w]e will not press 
them on the question of assistance to the contras." '^^ 
In May, Secretary Shultz learned of Teicher's ap- 
proach from the U. S. Ambassador to Country 1, and 
he confronted McFarlane at the White House. '^'' Ac- 
cording to Shultz, McFarlane told him that Teicher's 
approach to Country 1 was without authorization and 
that Teicher was operating "on his own hook."'^* 
But Shultz later learned, to the contrary, from his 
Ambassador, that Teicher had made a point of telling 
the Ambassador he was in Country 1 at McFarlane's 
instructions. '2^ Later, McFarlane told the Commit- 
tees that he had directed Teicher to seek a contribu- 
tion from Country 1.'^' 

Looking to Country 6 for Contra Support 

Another third-country funding option considered 
by the CIA during the spring of 1984 was an ap- 
proach to Country 6. In his March 27 memorandum, 
Casey indicated that Country 6 officials already had 
been approached and that the initial reaction had been 
favorable. '2* Between April 10 and 13, 1984, Duane 
(Dewey) Clarridge, Chief of the Latin American Di- 
vision of the CIA Directorate of Operations traveled 
to Country 6.'-^ While there, CIA Deputy Director 
John N. McMahon, told Clarridge to "hold off on 
his discussions because of the recent harbor mining 
disclosures.'^" Upon his return to the United States, 
Clarridge wrote: 

Current furor here over the Nicaraguan project 
urges that we postpone taking [Country 6] up on 
their offer of assistance. Please express to [Coun- 
try 6 official] my deep regret that we must do 
this, at least for the time being, and I fully realize 
that he cannot crank up assistance on a moment's 
notice, should we decide to go forward in the 
future. ' ^ ' 

Clarridge testified that neither Casey's March 27 
memorandum nor the cable traffic (in some cases cap- 
tioned, "[Country 6] Assistance to the Nicaraguan 
Project" '^^), represented CIA efforts to solicit 
Contra assistance from Country 6.'^^ He conceded 
that the documents showed that, prior to his arrival. 
Country 6 had offered to aid the Contras, and that an 
offer may have been made as early as January 1984 in 
a meeting between Director Casey and a Country 6 
official.'^'' But before he arrived in Country 6, 
Clarridge testified, "a decision had been taken . . . 
that we would neither ask for any assistance nor 
would we accept any . . . ."'^s clarridge did not 
explain why, if the Country 6 offer of assistance was 
dead before his visit, he urged on his return "we 
postpone taking [Country 6] up on their offer of as- 
sistance."'^* 



38 



Chapter 2 



Country 2 Contributes Funds 

By May 1984, the Contras had exhausted the last 
portion of the $24 million Congressional appropriation 
for fiscal 1984. McFarlane testified that possibly as 
early as May,'^' he met with the Ambassador from 
Country 2 and explained that it was almost "inevita- 
ble that the Administration would fail" to win Con- 
gressional support for the Contras.*'* According to 
McFarlane, the Ambassador offered to "provide a 
contribution of $1 million per month, ostensibly from 
private funds that would be devoted to — as a humani- 
tarian gesture — to sustenance of the Contras through 
the end of the year."''^ In his testimony, McFarlane 
denied that any solicitation of Country 2 had oc- 
curred, and insisted the Country 2 contribution was 
merely a gift.'*" 

After receiving the contribution and informing his 
deputy, Admiral Poindexter, McFarlane charged 
North with the responsibility for arranging the trans- 
fer of funds: "[I] asked him to be in touch with the 
contra leaders and to find out where the bank account 
was kept. . . . Lieutenant Colonel North came back 
and provided the name of the bank, its address and 
the contras' account number for the bank in 
Miami. . . ."*'" McFarlane communicated this to 
the Ambassador by handing him an index card with 
the account number on it."^ North testified that it 
was McFarlane who asked him "to establish the 
initial resistance account offshore to which money 
was sent by a foreign government."'"'^ 

According to McFarlane, the President was in- 
formed of the Country 2 contribution shortly after it 
took place. McFarlane placed a note card into the 
President's morning briefing book. He chose this 
method of informing the President of the contribution 
to reduce any chance that others at the President's 
daily briefing might become aware of the funding 
scheme. After the meeting, McFarlane was called in 
to "pick up the note card which," he recalled, "ex- 
pressed the President's satisfaction and pleasure that 
this had occurred."''*'* 

McFarlane also testified he informed selected mem- 
bers of the executive branch of the funding. "Within a 
day or so," he told Vice President George Bush, and 
at a weekly breakfast with the Secretaries of State 
and Defense, he "drew them aside" and informed 
them that the Contras would be "provided for" until 
the end of the year. Neither Secretary, according to 
McFarlane's testimony, asked the source of the 
funds.'''* McFarlane testified that it was "likely" he 
told then-Chief of Staff, James A. Baker III "[i]n the 
spring of '84," and that it was "possible" he told then- 
Counselor to the President Edwin Meese III of the 
Country 2 contribution.'*® McFarlane claimed he did 
not inform Director Casey of the Country 2 fund- 
ing.'*' 

But McFarlane's account was disputed by other 
witnesses. Secretary of Defense Caspar W. Weinberg- 



er had no recollection of being so advised by McFar- 
lane; '•** and Secretary Shultz testified that he was 
told of the contribution for the first time in June 1986 
after Admiral Poindexter became concerned that the 
Secretary of State had not been told of the Country 2 
contribution.'*^ Baker denied any knowledge of the 
contribution. '*° 

The June National Security Planning 
Group Meeting 

On June 25, the National Security Planning Group 
met to consider options for funding the Contras. In 
attendance were the President, Vice President Bush, 
Secretary Shultz, Secretary Weinberger, Director 
Casey, Meese, and McFarlane. Director Casey urged 
the President to seek third-country aid. Secretary 
Shultz responded that Chief of Staff James Baker had 
told him that if the U.S. Government acted as a 
conduit for third-country funding to the Contras, that 
would be an "impeachable offense."'*' Casey re- 
sponded that it was permissible if the plan called for 
direct contributions from third countries to the Con- 
tras. Meese recalled that there was an opinion by 
Attorney General William French Smith that provid- 
ed authority for such a plan, but also noted that if an 
opinion were sought. Justice Department lawyers 
should be given guidance on what the opinion should 
say. The meeting ended without any firm conclusion. 
McFarlane advised that no one was to do anything 
without the necessary Justice Department opinion. 
Although McFarlane had already secured the contri- 
bution from Country 2, neither he nor anyone else 
mentioned it. '*^ 

And although McFarlane had urged those at the 
National Security Planning Group meeting not to do 
anything, that very day North arranged for the trans- 
fer of Country 2 funds to Contra leader Adolfo 
Calero. North's notes reveal that on June 25, 1984, he 
told Calero that funds would be transferred "w/in 24 
hrs.," through an offshore account. North issued a 
series of instructions to Calero: "Never let agency 
know of amt, source, or even availability" of the 
funds; "No one in our govt, can be aware"; and 
"Your organization must not be aware."'*' 

North made these plans to send the Country 2 
funds to Calero despite his apparent knowledge of the 
legal difficulties expressed earlier that day at the Na- 
tional Security Planning Group meeting. His notes 
reflect that he was advised of those discussions by 
Clarridge of the CIA. North recorded phrases such as 
"impeachable offense" (presumably referring to Sec- 
retary Shultz's remark), and "going to French Smith 
— reading on US seeking alternative funding." The 
note continues: "Seek 3d party funding."'** 

The next day, Director Casey met with Attorney 
General Smith along with members of the Justice 
Department and the CIA legal staff. In a memoran- 



39 



Chapter 2 



dum recording the meeting, the CIA's General Coun- 
sel, Stanley Sporkin, reported that in response to Di- 
rector Casey's question about the "legal limits" of 
funding options, the Attorney General stated: 

that he saw no legal concern if the United States 
Government discussed this matter with other na- 
tions so long as it was made clear that they 
would be using their own funds to support the 
Contras and no U.S. appropriated funds would be 
used for this purpose. The Attorney General also 
said that any nation agreeing to supply aid could 
not look to the United States to repay that com- 
mitment in the future. The DCI [Director of 
Central Intelligence] made it clear that if there is 
a possibility this option might be used, he would 
advise the CIA oversight committees. '^^ 

The Intelligence Committees were not advised of the 
Country 2 contribution until 1987. 

Providing Support— The Private Networl( 

With funds available from Country 2, North turned 
to creating a mechanism for providing materiel sup- 
port for the Contras. "When we ran out of money," 
North testified, "when people started to look in Nica- 
ragua and Honduras and Guatemala and El Salvador 
and Costa Rica for some sign of what the Americans 
were really going to do," a decision was made to 
create an infrastructure, what North termed a "covert 
operation" to provide the operational support denied 
by Congress. '^^ 

North testified that, at Casey's suggestion, he 
turned to Retired U.S. Air Force Maj. General Rich- 
ard V. Secord: '^'' 

[I]n 1984, we were approaching the proscriptions 
under Boland, Director Casey and I had had a 
number of discussions. I had made a number of 
trips, and obviously by then I had become much 
more engaged in the support for the resistance. 

Director Casey is the one who had suggested 
General Secord to me as a person who had a 
background in covert operations . . . and was a 
man who, by Director Casey's definition, got 
things done, and who had been poorly treated. 
Those were his words. 

I approached General Secord in 1984 and asked 
that he become engaged in these activities. . . . 

I went back to him again and at some point in 
'84, he agreed to become actively engaged. He 
agreed to establish, and did, private commercial 
entities outside the United States that could help 
carry out these activities. '•''*' It was always 
viewed by myself, by Mr. McFarlane, by Direc- 
tor Casey, that these were private commercial 
ventures, private commercial activities . . . .'^^ 



It was clearly indicated that Mr. McFarlane and 
Admiral Poindexter and in fact almost drawn up 
by Director Casey, how these would be outside 
the U.S. Government, and that I told them right 
from the very beginning that those things that he 
did deserved fair and just compensation.'^" 

[I]t was always the intention to make this a self- 
sustaining operation and that there always be 
something there which you could reach out and 
grab when you needed it. Director Casey said he 
wanted something you could pull off the shelf 
and use at a moment's notice.'®' 

The network, albeit privately run, was created for the 
purpose of pursuing "foreign policy goals." Accord- 
ing to North: "It was never envisioned in my mind 
that this would be hidden from the President." '^^ 
The President has publicly stated that he was kept 
informed of some of the efforts by private citizens to 
aid the Contras.'®^ Poindexter testified the President 
"knew the contras were being supported ... by 
third-country funds and by private support 
activity. . . ." "''' There is no evidence, however, to 
suggest that the President was ever informed about an 
"off-the-shelf covert operation. 

Secord's Initial Role 

General Secord had served in the Air Force until 
1983, when he retired and entered private business. 
During his service in the Air Force, he was involved 
in special operations with the CIA in Laos. From 
1978 to 1981, Secord headed the U.S. Air Force 
International Programs office.'®^ 

In summer 1984, Secord's first assignment from 
North was to assist the Contras in buying weapons 
with the funds sent to Calero by Country 2. In July, 
Secord, accompanied by his associate and former CIA 
operative, Rafael Quintero, met with Calero to dis- 
cuss the Contras' need for low-priced weapons. He 
left the meeting with a weapons list.'^® Although 
Secord was not an arms dealer, he agreed to act as a 
broker to procure the weapons with his business part- 
ner, Albert A. Hakim, a naturalized American of Ira- 
nian descent.'^' In his testimony. Secord referred to 
the operation that he and Hakim used for Contra 
support as "the Enterprise." '** 

Owen's Role 

North also obtained the assistance of Robert W. 
Owen to act on his behalf with Contra leaders. Owen 
was a private citizen who was a teacher before he 
joined the staff of Senator Dan Quayle in 1982. After 
leaving Senator Quayle's staff in 1983, Owen joined 
Gray & Co., a public relations firm in Washington, 
D.C.'«» 

In the spring of 1984, while Owen was at Gray & 
Co., a Contra representative approached the firm 



40 



Chapter 2 



seeking representation. Owen was asked to contact 
the Nicaraguan Democratic Forces (FDN). He turned 
to North, whom he had met the year before while 
working for Senator Quayle. Owen learned from 
North that the Contras needed money, and they dis- 
cussed a plan to set up a group of European proprie- 
tary companies to purchase weapons overseas. During 
the discussions, North asked Owen to travel to Cen- 
tral America to determine the Contras' requirements 
over the next several months. Owen agreed.''"' 

Taking a leave of absence from his firm, Owen 
traveled to Central America in late May or early June 
1984 and met with Contra leaders. He was told, and 
subsequently repeated to North, that the Contras 
"would need $1 million a month, and if they wanted 
to increase in size they would need about a million 
and a half dollars a month." "' Between October 
1984 and March 1986, Owen made more than seven 
trips to Central America collecting information and 
delivering intelligence and money to the Contras on 
North's behalf.'''^ He was given the code name 
"T.C." (The Courier), and in his own words, he 
served as North's "eyes and ears" in Central Amer- 
ica. •''^ 

Boland II 

In the summer of 1984, CIA covert assistance to the 
Contras began to wane as funds were depleted. Mean- 
while, legislation — the second Boland Amendment — 
that would bar the Agency from future support for 
the Contras had been passed by the House in early 
August. According to McFarlane, as the CIA stepped 
out of the picture, the task of supporting the Contras 
fell to the NSC: "[t]he President had made clear that 
he wanted a job done. The net result was that the job 
fell to the National Security Council staff." '''* 

In late August, North traveled to Central America 
to meet with Calero to resolve "immediate operation- 
al/logistic problems." McFarlane advised North: "Ex- 
ercise absolute 'stealth.' No visible meeting. No press 
awareness of your presence in the area." '''^ On Sep- 
tember 1, North proposed to McFarlane that he 
obtain a "private donor" for a new helicopter to re- 
place one shot down the day before. The National 
Security Adviser penned a note: "I don't think this is 
legal." "^ One month later, on October 9, North 
proposed a National Security Decision Directive call- 
ing "for the CIA to provide assistance to the Nicara- 
guan Resistance Forces in interdicting Soviet arms 
bound for the FSLN in Managua." Once again, 
McFarlane wrote on the cover sheet: "Ollie/Ken [de- 
Graffenreid]. '''■' pis check w/ CIA legal counsel 
promptly to confirm this is legal ... ." •'* 

By early October, Congress had adopted the 
Boland Amendment to an omnibus appropriations bill. 
Signed into law by the President on October 12, 1984, 



the bill would later be referred to as Boland II. It 
provided in relevant part: 

During fiscal year 1985, no funds available to the 
Central Intelligence Agency, the Department of 
Defense, or any other agency or entity involved 
in intelligence activities may be obligated or ex- 
pended for the purpose or which would have the 
effect of supporting, directly or indirectly, mili- 
tary or paramilitary operations in Nicaragua by 
any nation, group, organization, movement or 
individual. 

Similar provisions were adopted as parts of the De- 
fense and Intelligence Authorization bills. 

While Boland II cut off all funding for the Contras, 
it held out some hope for renewing Contra aid in the 
future by providing that the Administration could 
seek a $14 million appropriation on an expedited basis 
after February 28, 1985. But, even as the bill held out 
a future hope, its sponsors made clear that the law 
was intended to achieve an immediate cutoff of aid. 
As Representative Boland put it, the law "clearly 
ends U.S. support for the war in Nicaragua. Such 
support can only be renewed if the President can 
convince the Congress that this very strict prohibition 
should be overturned." '" 

Poindexter and North, who admitted assisting the 
Contras in their military activities, had a different 
view. Both testified that they did not believe that 
Boland II was applicable to the NSC staff and that 
while the CIA could no longer provide any assistance 
to the Contras, the NSC staff was free to do so.**" 
Poindexter put it succinctly: "I never believed, and 
I don't believe today, that the Boland Amendment 
ever applied to the National Security Council 
staff. . . ." '»' 

Their former superior, Robert McFarlane, was sur- 
prised by that view.'^^ McFarlane, who denied au- 
thorizing the NSC staff to provide military assistance 
to the Contras, maintained that the "Amendment gov- 
erned our actions." '*^ In "cutting off money for the 
Contras," he understood Congress to say "we don't 
want any money raised for the Contras." McFarlane 
testified that he repeatedly addressed the NSC staff 
with "a kind of litany of mine, . . . [not to] 'solicit, 
encourage, coerce, or broker' " financial contributions 
for the Contras. 1^* According to McFarlane, he spe- 
cifically told North to "stay within the law and to be 
particularly careful not to be associated with or take 
part in any fundraising activities." '*^ He dismissed 
his instruction to North to keep the Contras "together 
body and soul" as meaning nothing more than "smoke 
and mirrors." '^^ What he intended North to provide 
was only moral and political, not military, support.'*'' 

North and Poindexter both denied hearing 
McFarlane's warnings against solicitation and en- 
treaties to observe the law.'** Both claimed that they 
were acting within their legal rights in aiding the 



41 



Chapter 2 



Contras. North stated that all of his acts were author- 
ized by his superiors, '^^ and Poindexter, speaking as 
one of those superiors, confirmed that he had given 
North a "broad charter" to support the Contras and 
had "authorized in general" North's actions in carry- 
ing out that charter. **° McFarlane testified he was 
unaware of the breadth of North's activities. '* ' 

In any case, Poindexter and North were not de- 
terred by Boland II in assisting the Contras. Thus, 
after the Boland Amendment passed, Poindexter ex- 
plained to McFarlane his Nicaraguan strategy for the 
future: "continue active negotiations but agree on no 
treaty and agree to work out some way to support the 
Contras either directly or indirectly. Withhold true 
objectives from staffs." '^^ 

Indeed, Boland II was a spur to action. The CIA 
had to withdraw from supporting the Contras and, 
according to North, this meant he "was the only 
person left talking to them." '^^ As North put it: 
"The U.S. contact with the Nicaraguan resistance was 
me, and I turned to others to help carry out that 
activity." '^^ Poindexter saw it the same way: 

Very frankly, we were willing to take some risks 
in order to keep the Contras alive, as I said, until 
we could eventually win the legislative battle. 

So for all intents and purposes. Colonel North 
largely took over the — much of the activity that 
[the] CIA had been doing prior to their being 
prohibited from carrying [on] activity because of 
the Boland Amendment."^ 

As Poindexter summed up North's role, "[0]nce the 
CIA was restricted," North was the "switching point 
that made the whole system work . . . the kingpin to 
the Central American opposition . . . ." >^^ 

Boland II did not deter North — it simply reinforced 
the need to keep what he was doing secret from 
Congress, the public, and others in the Government. 
The CIA support of the Contras had not been kept 
from Congress — it was openly debated on the floor 
and was funded by appropriations. With Boland II, 
the assistance— now handled by the NSC staff— went 
underground. 

Contra Aid— Fall 1984 to Winter 
1985 

Boland II did not cause any immediate crisis for the 
Contras. Steps taken months before ensured their sur- 
vival. As McFarlane testified, "[T]here wasn't any 
need" for funds at the time.'^' The $1 million-a- 
month pledged by Country 2 in June 1984 would 
"bridge the gap" at least until December. And as 
North testified, by the time the Boland Amendment 
was passed, "General Secord had been engaged and 
money had started to flow to the Nicaraguan Resist- 
ance from outside sources." '^* 



Arms Shipments Begin and Blowpipes 
Are Sought 

While Secord undertook to procure weapons, 
North remained heavily involved. Calero testified that 
he consulted with North regarding weapons needs 
and purchases '^^ and North's notebooks confirm 
this.^oo 

In the fall, the Contras' most pressing need was 
ground-to-air missiles. The Sandinistas had just ob- 
tained Soviet-designed HIND-D helicopters, sophisti- 
cated assault helicopters. North devoted his efforts to 
finding a missile capable of shooting them down. 

North learned in December 1984 that Blowpipe 
missiles were available in a Latin American country 
and, on his advice, Calero visited the country to ne- 
gotiate for their purchase.^"' On December 17, 
Calero reported back to North that the Latin Ameri- 
can country was willing to donate Blowpipes provid- 
ed that Calero bought eight launchers for 
$200,000.^°^ Permission was required and North tried 
to get that permission, recommending to McFarlane 
that the President take it up directly with the perti- 
nent head of state. ^°^ McFarlane denied he ever 
asked "the President to intercede with any person for 
the obtaining of Blowpipes for the Contras." ^°'* In 
any event, permission was not secured and on January 
3, 1985, Calero reported to North that the "Blow 
Pipe deal is off" ^"^ North would try the following 
year to revive it. 

In the meantime, Secord had located ground-to-air 
missiles in Country 4. But in December, North 
learned that Secord was having difficulty in arranging 
their shipment to the Contras. North asked Gaston 
Sigur, an NSC consultant and expert in Far Eastern 
Affairs, to set up a meeting in Washington between a 
representative of the originating country. Country 4, 
and North. ^°^ At the meeting, North told the Coun- 
try 4 official that the missiles were going to the 
Contras, not to the Central American country identi- 
fied in the official documents.^"'' North said that 
while he was "actually seeking to facilitate the trans- 
portation" of the missiles, he hoped that he could 
persuade Country 4 to donate them.^"^ Ultimately, 
Country 4 agreed to sell the missiles to the Contras. 

North sent McFarlane and Poindexter a memoran- 
dum reporting on the meeting. Although McFarlane 
could not recall the memorandum, he testified that it 
would likely have prompted him to ask "Admiral 
Poindexter to find out what was going on . . . and 
how his [North's] actions squared with the law." 
McFarlane did not recall how his questions were re- 
solved. ^°^ North testified that McFarlane and Poin- 
dexter approved the meeting with the Country 4 rep- 
resentative described in his memo.^'° 

Meanwhile, the Contras were also running out of 
basic weapons. According to Secord, in November, 
Secord, using money provided by Calero, made a 



42 



Chapter 2 



downpayment on a shipment of arms which was to 
come by sea from the Far East. But the shipment was 
delayed and, in fact, it would not arrive until the 
spring of 1985. 2" 

To make the first arms shipment, the Enterprise 
needed an end-user certificate (EUC) — a document 
certifying that the arms were for the exclusive use of 
the country to which the arms were being sent. The 
Contras could not issue end-user certificates because 
they were not a recognized government. Thus, false 
certificates had to be procured for the Enterprise, and 
again it fell to North to arrange their procurement. 
By the end of January, he was engaged in the task. 
He wrote in his notebooks: "Mtg. w/ Adolfo 
[Calero]-. . . . [Central American Leader] re: EUC for 
M-79 Rounds. [Leader of Central American country] 
turned down." ^" "Private mtg. w/ [U.S. Ambassador 
to a Central American country], offline items — EUC- 
$5000 M-79 Rds." ^'^ By early February, there was 
urgency in the request: Second met with North and 
told him that he "need[ed] to get a bunch of EUC's 
from [Country 14] NOW for next shipment." ^"' By 
February 14, 1985, North had the end-user certificates, 
and Secord was able to ship more than 90,000 pounds 
of East European munitions by chartered aircraft from 
Defex, a European arms dealer, to a Central American 
country for the Contras. ^'^ 

Providing Intelligence and Military 
Advice 

North's role was not limited to assisting arms pur- 
chases. On direction from McFarlane, he gave politi- 
cal advice to the Contras on unifying the different 
factions and adopting a platform recognizing human 
rights and pledging a pluralistic society.^ '^ Even 
more critical for the Contras, North provided military 
intelligence and advice. 

The CIA and the DOD could not provide military 
intelligence directly to the Contras, so North provid- 
ed it himself North would obtain maps and other 
intelligence on the Sandinista positions from the CIA 
and DOD, ostensibly for his own use.^''' North 
would then pass the intelligence to the Contras using 
Owen as a courier.^'* North explained the reasons 
for this system: 

Q: Did you believe that you were complying 
with Boland when you took intelligence from the 
CIA and passed it to the Contras through Robert 
Owen? 

A: Yes. And the intelligence that I passed myself 
personally, and it wasn't all from the CIA, much 
of it came from the Department of Defense. 

Q: And did you understand at the time that the 
CIA and the Department of Defense couldn't 
pass that intelligence directly? 

A: Exactly. 



Q: And you believed that it was compliance with 
Boland, that it was fulfilling the purposes of 
Boland for you to take the intelligence from the 
CIA or the Department of Defense and pass it to 
the Contras? That is what you are saying? 

A: I am not saying that it was fulfilling the pur- 
poses of Boland. I am saying it was working 
around the problem that Boland would have cre- 
ated in trying to comply with Boland that al- 
lowed me to do that.^'^ 

Director Casey was eager to keep the CIA bu- 
reaucracy insulated from North's activities in support- 
ing the Contras. Indeed, in November, Casey com- 
plained to Poindexter that North was conducting his 
support activities "indiscreetly," '^^° and had disclosed 
to CIA officials that he was raising funds for, and 
providing intelligence to, the Contras.^ ^' 

Learning of the complaint. North wrote McFarlane 
on November 7, 1984, to defend his behavior. North 
insisted he had not implicated the Chief of the CIA's 
Central American Task Force in his Contra support 
activities. "Clarifying who said what to whom," 
North acknowledged that he had passed intelligence 
to Calero to assist him in destroying the Sandinistas' 
newly acquired HIND-D helicopters. North stated 
that he had gone to both the CIA and to the DOD 
for information on the helicopters' location and 
passed this on to Calero.^^^ 

North denied, however, that he had disclosed his 
purpose to the Chief of the Central American Task 
Force, or advised him about the "financial arrange- 
ments of the FDN." ^^^ In fact, the memo recounts a 
conversation showing that North misled the Task 
Force Chief, telling him that the intelligence request 
had been "a fall out of the CPPG [the Crisis Pre- 
planning Group]," and that he (North) had no idea 
where the Contras were obtaining their funding. In 
the memorandum. North reported that he encouraged 
the Task Force Chiefs impression that the funding 
had been obtained from "outside" sources. ^^^ 

McFarlane testified that he did not authorize North 
to pass intelligence to the Contras and if, as the memo 
indicated. North had passed that information to 
Calero, Boland II would had been violated.^^^ North 
admitted that he had provided the intelligence but 
maintained that Boland II did not "prevent the trans- 
fer of basic intelligence information to the Con- 
tras." 226 

In early February 1985, North became concerned 
about a shipment of weapons bound for the Sandinis- 
tas aboard the ship, the Monimbo. In a memorandum 
to McFarlane and Poindexter, North recommended 
the vessel be seized or sunk: 

If asked, Calero would be willing to finance the 
operation. He does not, however, have sufficient 
numbers of trained maritime special operations 



43 



Chapter 2 



personnel or a method of delivery for seizing the 
ship on the high seas. ... If time does not permit 
a special operation [on the high seas] . . . Calero 
can quickly be provided with the maritime assets 
required to sink the vessel before it can reach 
port at Corinto. He is in contact with maritime 
operations experts and purveyors of materiel nec- 
essary to conduct such an operation. ^^'' 

North asked McFarlane for authorization to provide 
Calero "with the information on Monimbo" and for 
permission to approach him "on the matter of seizing 
or sinking the ship." ^^^ 

This time, Admiral Poindexter raised a legal ques- 
tion, but only to advise McFarlane about how North's 
recommendation should be handled. On the bottom of 
the memorandum, Poindexter agreed with North that, 
"We need to take action to make sure ship does not 
arrive in Nicaragua. JP."229 But in a cover note to 
McFarlane, Admiral Poindexter wrote: 

Except for the prohibition of the intelligence 
community doing anything to assist the Freedom 
Fighters I would readily recommend I bring this 
up to CPPG [Crisis Pre-Planning Group] at 2:00 
today. Of course we could discuss it from the 
standpoint of keeping the arms away from Nica- 
ragua without any involvement of Calero and 
Freedom Fighters. What do you think?23° 

No action was taken on North's recommendation to 
seize the Monimbo. 

In addition to providing intelligence. North also 
secured the logistical assistance of a paramilitary op- 
erations expert. He described those efforts in the same 
December 4 memorandum to McFarlane in which he 
had outlined his intervention with Country 4 to 
secure surface-to-air missiles. According to the memo. 
Secretary of the Navy John Lehman had suggested to 
North that he meet with David Walker, a former 
British SAS officer, to discuss the services Walker's 
company could provide. North met with Walker, and 
proposed to McFarlane that Walker: 

establish[ ] an arrangement with the FDN for 
certain special operations expertise aimed particu- 
larly at destroying HIND helicopters. . . . Unless 
otherwise directed. Walker will be introduced to 
Calero and efforts will be made to defray the 
cost of operations from other than Calero's limit- 
ed assets.^^' 

In his testimony. North confirmed that he had ar- 
ranged for Walker to "provide operational support 
for certain activities in the region," and that Walker 
was paid either by the Contras or Secord. This step, 
according to North, was approved by Poindexter or 
McFarlane.232 McFarlane testified that he referred 
North's memo on the subject to Poindexter,^^^ and 



Poindexter said that, if asked, he would have ap- 
proved North's actions. ^3'' 

Three months later. Walker provided two techni- 
cians to help carry out a military operation in Nicara- 
gua. North testified that he was involved in the oper- 
ation. ^^^ A subsequent PROF note confirms Walker's 

role 2 36 

Singlaub Efforts with Countries 3 and 5 

Country 2 had pledged funds only through the end 
of 1984. Therefore, by the end of the year, an urgent 
need existed to find money for the Contras to contin- 
ue into 1985. 

In late November 1984, North approved the efforts 
of Retired U.S. Army Maj. Gen. John K. Singlaub to 
obtain funds from third countries to support the Con- 
tras. ^^'^ Singlaub met in Washington with officials of 
Country 3 and Country 5 to request aid. Singlaub was 
blunt about the Contras' needs: bullets, guns, and anti- 
aircraft missiles. The foreign country officials, howev- 
er, expressed concern about running afoul of "Con- 
gress by openly defying the Boland Amendment." At 
the same time they were willing to help "if this could 
be done in a way that did not attract attention." They 
agreed to send Singlaub's request to their respective 
governments.^^* 

On November 28, Singlaub reported to North the 
reaction of the officials of Countries 3 and 5, inform- 
ing him he "was prepared to go and meet with senior 
officials in those governments." According to Sing- 
laub, North concurred and gave the plan "his bless- 
ing. . . . [I]t was a good idea, he saw no objec- 
tion . . ." 239 

Whether North was authorized to "bless" Sing- 
laub's efforts is a matter of confiicting testimony. Ac- 
cording to McFarlane, to solicit or facilitate aid from 
a third country was barred by the Boland Amend- 
ment and he did not authorize North to pursue fund- 
ing from third countries.^'"' But according to North, 
he believed McFarlane had approved: "he was aware 
of each and every one of [my] actions to obtain 
money from foreign countries and approved of it.''^*' 
North defended his actions, testifying that Country 3 
had offered to make a contribution;^''^ he had never 
made any "solicitation" because that would be an 
improper act for a Government official. ^^^ 

Singlaub followed up on his request, travelling to 
Countries 3 and 5 in January. He met with highly 
placed officials and reiterated his earlier request for 
military donations to the Contras. ^'''^ Singlaub provid- 
ed the officials with an index card bearing the name 
of the bank and account number, under Calero's con- 
trol, where the funds could be deposited directly. ^""^ 
Singlaub told the officials he was a private citizen, but 
wanted to make it clear he was not an "unguided 
missile ricocheting around to that part of 
the world." ^""^ He expressed the belief that "it 
would be possible ... to have someone in the Admin- 



44 



Chapter 2 



istration send a signal to them ... to indicate that [he] 
. . . was not operating entirely on [his] . . . own, 
without the knowledge of the Administration."^'" 

On February 1, 1985, North's notes reflect that 
Singlaub called North and told him that Country 3 
needed a signal that the Administration would be 
"greatly pleased" by a donation before Country 3 
would be willing to contribute.^** On February 6, 
North wrote McFarlane and reported that: "Singlaub 
will be here to see me tomorrow. With your permis- 
sion, I will ask him to approach [the Country 3 and 5] 
Embass[ies] urging that they proceed with their offer. 
Singlaub would then put Calero in direct contact with 
each of these officers. No White House/NSC solicita- 
tion would be made."^''^ McFarlane made no re- 
sponse on the memo to North's recommendations.^^" 

Singlaub testified that he returned to Washington 
on February 7, met with North to report his results, 
and recounted his "entire presentation. "^^^ He rec- 
ommended that now was the time for a U.S. Govern- 
ment representative to send a signal to Countries 3 
and 5. According to Singlaub's testimony, North re- 
sponded that he would "brief his superiors," and 
eventually told him (Singlaub) that he had informed 
his superior, whom Singlaub assumed to be McFar- 
lane. ^^^ 

Countries 3 and 5 did not contribute any money as 
a result of Singlaub's efforts. Not until late 1985, after 
a signal was in fact given by an NSC official, did 
Country 3 make a contribution.^^* 

Country 2 Makes an Additional 
Contribution 

With the Contras running out of funds, McFarlane 
turned once more to Country 2. McFarlane made the 
initial approach to its Ambassador for more funds. He 
testified that he did not "solicit" funds because the 
Boland Amendment prohibited such solicitation. He 
merely told the Ambassador of the plight of the Con- 
tras and hoped for a contribution.^^* According to 
Secord, North asked him to follow up on McFarlane's 
initial meeting.^^^ 

Secord testified that he did in fact follow up with 
the Ambassador, with whom he "had dealt ... in the 
past with respect to possible contributions to the Con- 
tras." When Secord raised the subject, the Ambassa- 
dor responded curtly, "You can stop twisting my arm 
.... I have decided to take it up with the head of 
state. "^^® McFarlane did not recall Secord's involve- 
ment.^*'' 

In early February 1985, Country 2 agreed to con- 
tribute an additional $24 million.^** McFarlane in- 
formed the President of the contribution by placing a 
note card in the President's daily briefing book. The 
President again reacted with "gratitude and satisfac- 
tion," expressing no surprise. ^^^ Unknown to McFar- 
lane, the Country 2 head of state had already in- 
formed the President directly of the new contribution. 



But the President did not mention this when he 
briefed the Secretary of State and McFarlane on his 
meeting with the government leader.^®" 

Nor did McFarlane tell the Secretary of De- 
fense.^®' Both Secretary Weinberger and General 
John W. Vessey, Jr., the Chairman of the Joint Chiefs 
of Staff, learned of the contribution from other 
sources.^®^ Secretary Shultz, who dealt regularly 
with Country 2, was not told of the contribution until 
June 1986.2^3 This was an omission "not of conscious 
choice," according to McFarlane. ^^^ 

The new donation from Country 2, like its prede- 
cessor, was sent to Calero's accounts. Between June 
1984 and March 1985, Country 2's contributions, to- 
taling $32 million, were virtually the only funds the 
Contras had.^®^ 

Contra Aid: Winter-Spring 1985 
Tlie Administration Returns to Congress 

When the President signed the Boland Amendment, 
he made it clear he would return to Congress for 
additional Contra support: 

I sincerely regret the inability of the Congress to 
resolve the issue of continuing certain activities in 
Nicaragua .... I am signing this act with every 
expectation that shortly after the next Congress 
convenes it will provide adequate support for 
programs to assist the development of democracy 
in Central America.^® ^ 

In the winter of 1985, the Administration pinned its 
hopes on obtaining the $14 million in aid held out by 
the Boland legislation. The law provided for expedit- 
ed consideration of such a request after February 28, 
1985, if the President certified to Congress that Nica- 
ragua was supporting other Central American com- 
munist insurgencies. McFarlane conveyed to his staff, 
in particular to North and Donald R. Fortier, then 
Senior Director for Policy Development, the Presi- 
dent's "strong wish that we not break faith with the 
Contras. . . . [We need] to do everything possible to 
reverse the course of the Congress, and get the fund- 
ing renewed," he said. "[T]he mission was to win the 
vote the next time . . . ."^st 

The chances for success were dim from the start. 
The new Chairman of the Senate Intelligence Com- 
mittee, David Durenberger, had warned publicly that 
he would oppose both the release of the $14 million 
and any future Contra aid.^** But the President had 
not given up. He told a group of reporters, "We're 
going to do our best."^®^ 

Defense Secretary Weinberger called for an updat- 
ed legislative strategy and new funding alternatives to 
win the battle in Congress. ^^^ White House officials 
considered a number of legislative proposals including 
third-country assistance and/or the supply of non- 



45 



Chapter 2 



lethal aid coupled with third-country lethal assist- 
ance.^" Legislative strategy groups met to consider 
the proposals. McFarlane, accompanied by North, 
traveled to Central America to gauge the reaction of 
leaders in the region. Donald Fortier was dispatched 
to Capitol Hill to assess Congressional sentiment. ^''^ 
While North assisted in drafting various legislative 
proposals, his preferred option was to seek Congres- 
sional approval for sufficient sums to fund an in- 
creased covert action program "adequate to achieve 
victory. "^■'^ North understood that foreign contribu- 
tions would ensure Contra survival, but success could 
only be achieved with increased funding: 

[RJesources available to the resistance from sym- 
pathetic government(s) and/or individuals will 
permit current small-scale operations to continue 
for at least another 6 to 8 months. A resumption 
of USG funding or additional alternative re- 
sources would be essential in order to bring the 
scale of activity to that which existed in the 
spring of 1984 and, over time, to prevent an 
erosion of the will and determination of the FDN 
combatants.^''* 

North was optimistic that "[w]ith adequate support 
the resistance could be in Managua by the end of 

1985." 275 

Any legislative proposal for increased aid depended 
upon the Contras' survival in the field. McFarlane 
testified he told North that "unless the Contras 
become a credible military force, they would never 
gain political support in Congress and among the 
American people. "^'s North was counting on the En- 
terprise to provide the support necessary to maintain 
the Contras as a viable force. 

The Weapons Shipments from the 
Enterprise Continue 

In the spring of 1985, two weapons shipments ar- 
ranged by Secord in consultation with North and 
Calero would finally reach the Contras: first, in Feb- 
ruary, a planeload of 90,000 pounds of munitions from 
Europe and, second, in the spring, a sealift. Both 
shipments were arranged through Transworld Arma- 
ment, and both apparently required end-user certifi- 
cates. ^^ 7 

North needed the cooperation of Central American 
countries to provide documentation and to receive the 
shipments for the Contras. On March 5, 1985, he 
proposed that one country be rewarded for its assis- 
tance. In a memorandum to McFarlane, North sug- 
gested that the Secretaries of State and Defense and 
Chairman Vessey of the Joint Chiefs of Staff be asked 
to grant the Central American country additional se- 
curity assistance.27 8 

The "real purpose" of this memo, North explained, 
was to: 



find a way by which we can compensate [Coun- 
try 14] for the extraordinary assistance they are 
providing to the Nicaraguan freedom fighters. At 
Tab II are end-user certificates which [Country 
14] provided for the purchase of nearly $8M 
worth of munitions to be delivered to the 
FDN.279 

In the attached memorandum to Weinberger, Shultz, 
and Vessey, drafted by North, the real purpose 
behind the request was not stated. The memorandum 
contained no reference to the end-user certificates, "to 
the arrangements which have been made for support- 
ing the resistance through [Country 14],"2«o or to the 
Country 14 munitions "wish list" North attached for 
McFarlane's information. ^^^ Instead, the request for 
aid was predicated on its merits. 

McFarlane testified that he recommended that the 
Cabinet approve increased assistance based solely on 
his assessment of Country 14's need, without taking 
into account its support of the Contras. ^^2 North 
testified that he had not promised a "quid pro quo." 
There was no "need" to make such a promise to a 

country threatened by the Sandinista presence, he 
said. 283 

Disbursements to Other Contra Leaders 

During the winter and spring of 1985, North decid- 
ed to use the money sent directly to Calero from 
Country 2 to support other Contra leaders. To do 
this, funds were withdrawn from Calero's account 
using traveler's checks, and hand-carried to North. 
North stored the checks in his safe. Additional cash 
was secured from Secord. ^^^ 

North testified that the idea for maintaining this 
fund came from Director Casey:^^^ 

My recollection is that the very first traveler's 
checks came either very late '84 or certainly 
early 1985 and that the sum total of traveler's 
checks was probably in excess of $100,000 or 
thereabouts. 

I also had cash which I estimated to be some- 
where in the neighborhood of 50 to 75 thousand 
dollars in cash, so we are talking about an oper- 
ational account that went from somewhere 
around 150 to 175 thousand dollars. At various 
points in time there would be considerable sums 
in it and at various points in time there would be 
none in it. 

My recollection is that I got the traveler's checks 
in packages of less than $10,000. I understand 
that others have remembered elsewise, but that is 
how I remember it. 

Those funds were used to support the operations 
that we were conducting. They were used to 



46 



Chapter 2 



support the covert operation in Nicaragua, and 
then eventually were used to support other ac- 
tivities as well. 

The fact that I had those funds available was 
known to Mr. McFarlane, to Admiral Poin- 
dexter, to Director Casey, and eventually to Ad- 
miral Art Moreau over at the Pentagon. It also 
came to be known to others, some of whom you 
have had testimony here.^*^ 



What is important that you realize is that meticu- 
lous records were kept on all of this. I kept a 
detailed account of every single penny that came 
into that account and that left that account. All 
of the transactions were recorded on a ledger 
that Director Casey gave me for that purpose. 
Every time I got a group of traveler's checks in, 
I would report them, and I would report them 
when they went out, even going so far as to 
record the traveler's check numbers themselves. 

The ledger for this operational account was 
given to me by Director Casey, and when he 
told me to do so, I destroyed it because it had 
within it the details of every single person who 
had been supported by this fund, the addresses, 
their names, and placed them at extraordinary 
risk.287 

Poindexter testified that he knew of the account 
almost from the start, in 1984: 

[I]t was associated with the first contribution of 
Country 2, I think it came to my attention, by 
Colonel North reporting to me, that Mr. Calero 
had provided some funds to him, and it was my 
understanding it was cash, at least that's my 
recollection of my understanding.^®* 

Poindexter "didn't see anything illegal about it," but, 
as he testified, "any time you handle cash there are 
perception problems that can certainly develop .... 
And so I told Colonel North he should get rid of the 
money by returning it or whatever, that I didn't think 
that was a good idea."^*' In fact, the money was 
instead funneled to various Contra leaders throughout 
1985 and 1986. 

One of the principal beneficiaries of North's fund 
was a Resistance leader. With McFarlane's approval. 
North decided to assume support for the Resistance 
leader, using funds drawn from the Calero ac- 
count.^*" North assured McFarlane that Casey had 
been told that North would maintain contact with the 
Contra leader.^" Later, though. North reported that 
"the CIA will not be told of the new source for 
[Resistance leader's] funds. "^^^ 

By February 27, 1985, "Adolfo [Calero] ha[d] 
agreed to provide [the] requisite funds in the blind 



without [the] [Resistance leader] becoming aware of 
the source. "^*^ Eventually, Calero was to "deposit 
$6,250 per month in [Resistance leader's] checking 
account without [his] knowledge [of the source]. "^^^ 
But before the direct deposit mechanism could be put 
into operation. North enlisted Robert Owen and Jona- 
than Miller, then-Deputy Coordinator for Public Di- 
plomacy at the State Department, to pass the money 
to the Resistance leader. Sometime in early March, 
North handed Owen and Miller traveler's checks 
from his office safe, and requested that the checks be 
cashed. Miller and Owen did so, and returned to 
North's office. Later that day, at his apartment, Owen 
passed $6,000 to $7,000 in cash to the Resistance 
leader.28^ 

Owen handled a number of transfers to Contra 
leaders. He testified that he paid "[s]omewhere be- 
tween six and ten" Contra leaders, and the total 
amount paid was "[s]omewhere around $30,000."^*® 
On March 22, 1985, for example, Owen traveled to 
Central America carrying several thousand dollars in 
cash or traveler's checks for delivery to a Contra 
leader.^®'' In some cases, Owen's efforts did not take 
him far from the White House itself In April, for 
example, he waited outside the Old Executive Office 
Building in the rain. A car drove up, and Owen 
passed cash to a Nicaraguan Indian leader sitting 
inside.^®* These payments had a number of purposes: 
One payment was made to an Indian leader as a "quid 
pro quo" for ceasing negotiations with the Sandinistas 
and joining instead with other Indian leaders to 
"work together in a united front."^*^ 

Keeping the Operation Secret 

North provided the logistical and funding assistance 
the Contras needed to keep going in Central America 
at the same time that he worked to keep their cause 
alive in Washington. To persuade Congress to vote 
for renewed aid, it was critical that the NSC staffs 
Contra assistance remain secret. As North warned 
Calero: "Too much is becoming known by too many 
people. We need to make sure that this new financing 
does not become known. The Congress must believe 
that there continues to be an urgent need for fund- 
ing"3oo 

North actively cultivated an image of Contra self- 
sufficiency within the Administration. For example, 
he urged the CIA's Chief of the Central American 
Task Force to reject the State Department's opinion 
that the Resistance had become largely ineffective 
since U.S. funding ran out in May 1984. "I told [the 
Chief of the Central American Task Force]," wrote 
North, "that it was important that the SNIE [Special 
National Intelligence Estimate] reflect the fact that 
there was substantial outside support which had con- 
tinued for some months and showed no signs of abat- 



47 



Chapter 2 



But even without such active encouragement, the 
secrecy shrouding North's efforts contributed to the 
appearance of Contra self-sufficiency. As funds ar- 
rived and weapons were shipped, CIA intelHgence 
reports confirmed that the Contras remained not only 
a viable force, but were surviving on their own, with- 
out apparent U.S. Government assistance. By March, 
close to a year after U.S. Government aid had ceased. 
Director Casey's subordinates provided Casey with 
briefing materials, reporting surprise at the Contras' 
survival, but noting there was little intelligence on 
how the Contras had managed to flourish: 

Since the cutoff of official funds to the anti-San- 
dinistas in May 1984 they have been able to field 
a viable guerrilla fighting force, have increased 
their numbers, and improved their tactical effi- 
ciency. It is estimated that to maintain the level 
of activity that they have it would cost an esti- 
mated one and one half to two million dollars per 
month. There is, however, no intelligence on the 
source of this income, except that it comes from 
private groups, and possibly some U.S. business 
corporations.^"^ 

The secret of North's involvement, however, was 
not to last. North's name had begun to appear periodi- 
cally in the press along with that of Singlaub. By 
March, Singlaub already had become something of a 
"lightning rod" in the press, attracting attention as a 
private fundraiser for the Contras. ^os According to 
Singlaub, North told him that his frequent visits to 
the NSC were a source of concern.^"* But North 
"understood and agreed" that Singlaub had to keep a 
"high profile" in order to raise funds, and he support- 
ed the effort. If Singlaub "had high visibility, [he] 
might be the lightning rod and take the attention 
away from [North] and others who were involved in 
the covert side of support. "^°^ 

Covert Operation and Legislative 
Strategy Intertwine 

While maintaining the secrecy of his Contra support 
activities, North worked to promote a legislative 
strategy that would change both the Congressional 
and the public perception of the Nicaraguan 
threat. ^°^ In March, he and Donald Fortier spon- 
sored an elaborate plan calling for lobbying, a media 
blitz, and culminating in almost daily Presidential 
speeches and phone calls in support of the initiative. 
At its most ambitious stage, the plan included a 10- 
page, day-by-day chronology to describe each of the 
players' appointed tasks. ^"^ 

At the same time. North proposed a "Fallback 
Plan," should Congress refuse to provide aid or lift 
the Boland Amendment restrictions.^"* In a memo- 
randum to McFarlane, North noted that the Contras 
had sufficient funding for munitions to carry them 



through October 1, 1985, but they needed money for 
the following year.^"^ The fallback plan, sent to 
McFarlane on March 16, called for Country 2, de- 
scribed as the "current donor," to contribute an addi- 
tional $25 million to $30 million to the Resistance for 
the purchase of arms and munitions; for the President 
to appeal to the public for contributions instead of 
seeking a Congressional appropriation; and for a tax- 
exempt foundation to be established to receive the 
contributions. McFarlane rejected the idea of the 
Presidential appeal, expressed doubt about seeking 
more money from Country 2, and approved the estab- 
hshment of a tax-exempt foundation.^'" 

With McFarlane ruling out a return to Country 2, a 
return to Congress was the Administration's only 
hope for renewed Contra funding. During March 
1985, North focused his attention on the elaborate 
legislative strategy plan he had been working on since 
late February. The plan was developed in conjunction 
with a peace initiative drafted by North in a Miami 
hotel room with FDN head Adolfo Calero and other 
Contra leaders, which became known as the San Jose 
Declaration. North arranged the deadline for a Sandi- 
nista response to the peace plan to coincide with the 
vote by Congress. If the Sandinistas rejected the over- 
ture, as North anticipated, then "special operations 
against highly visible military targets in Nicaragua," 
were timed to follow in the hopes that successful and 
"visible" Contra military activities might favorably 
influence Congress's decision on Contra aid.^'' 

At the last minute, however, the Administration 
considered delaying the submission of the Administra- 
tion's new aid request to Congress.^'^ North recog- 
nized that if the vote were delayed, the Contras' 
planned military operations would not serve as an 
effective tool in influencing Congress's decision on 
the aid proposal. He strongly recommended to 
McFarlane that the vote take place as originally 
scheduled. He wrote: 

The deadline for substantive negotiations . . . was 
carefully chosen to ensure that the internal oppo- 
sition would have a specific date for their own 
planning purposes. Military operations were 
planned based on the expiration of the offer on 
April 20. . . . [A]n attack is scheduled for April 
25. Based on my request Calero has agreed to 
postpone the attack for five days. The force 
which is being inserted to conduct this operation 
cannot be logistically supported in this area after 
May 5. The resupply situation will require that 
they be withdrawn after that date. 



It is my belief that urging the resistance leaders 
(particularly Calero) to accept a major delay . . . 
will result in a breakdown of the unity we have 
achieved. [Calero] has only cooperated to date in 



48 



Chapter 2 



the unity effort because he trusts the only persons 
in the U.S. Government who have supported the 
movement since October 1984 — North and 
McFarlane.^'^ 

The Administration Responds to 
Congressional Defeat 

In early April, the Administration submitted a Contra 
aid proposal to the Congress, along with its own 
peace plan modeled on the San Jose Declaration. The 
President pledged that lethal aid would only be pro- 
vided if the Sandinistas rejected the proposal. The 
plan provoked controversy, and on April 23, the 
House rejected the Administration's proposal. 

When the House rejected the bill, the President's 
first step was to reassure Central American leaders 
that he had not given up on Contra aid. As to one 
country, the President had special cause for concern: 
A military leader had seized ammunition intended for 
the Contras. The President telephoned the head of 
state and received an assurance that the ammunition 
would be delivered to the Contras.^''* 

Publicly, the President expressed his determination 
"to return to the Congress again and again." ^'^ Soon 
after the House defeat, the Administration was back 
on Capitol Hill hoping to mold a compromise in sup- 
port of nonlethal aid. 

Meanwhile, Nicaraguan President Daniel Ortega 
traveled to the Soviet Union and throughout Europe, 
seeking renewed assistance for the Sandinista forces. 
President Ortega's visit to Moscow prompted the 
President to issue a warning to Congress: 

And whatever way they may want to frame it, 
the opponents in the Congress of ours, who have 
opposed our trying to continue helping those 
people, they really are voting to have a totalitar- 
ian Marxist-Leninist government here in the 
Americas, and there's no way for them to dis- 
guise it. So, we're not going to give up.'*® 

President Ortega's Moscow trip also prompted a 
renewed sense in Congress that something had to be 
done to support the Contras. With strong support 
from Congressional leaders, President Reagan an- 
nounced the imposition of economic sanctions against 
Nicaragua on May 1, 1985. '''' 

Maintaining the Covert Operation 

Before the Congress rejected the Administration's aid 
proposal. North was optimistic about the Contras' 
prospects. In an early April 1985 memo to McFar- 
lane. North explained what the operation had 
achieved up to that point, and the plans he had for its 
future.' '* Based on information provided by Calero, 
North outlined what the Contras had spent "since 
USG funding expired in May 1984."3>9 Of the "grand 
total" of $24.5 million received by Calero, 
"$17,145,594 has been expended for arms,'^° muni- 



tions, combat operations, and support activities."'^' 
Extolling the FDN's nearly twofold increase in size, 
and its newly acquired expertise in guerrilla warfare. 
North emphasized that the money had been spent 
wisely: "In short, the FDN has well used the funds 
provided and has become an effective guerrilla army 
in less than a year."'^^ 

The image of Contra military capability cultivated 
by North was arguably at odds with reality. U.S. 
Army General Paul F. Gorman, Commander of the 
Southern Command from May 1983 through Febru- 
ary 1985, told the Committees that "the prospects of 
the Nicaraguan resistance succeeding [were] dim at 
best." Specifically referring to Congressional testimo- 
ny he gave in June and December 1985, Gorman 
testified: 

what I was saying in those days was that I did 
not see in the Nicaraguan resistance a combina- 
tion of forces that could lead to the overthrow of 
the government or the unseating of the Sandinis- 
tas. . . . The training of the Contras was, when I 
last saw them in 1985, abysmal. ... I didn't 
regard them as a very effective military organiza- 
tion, based on what I could see in refiections of 
battles, in communications on both sides. The 
Sandinistas could wipe them out. 

Regarding North's reaction to his views, Gorman 
added: 

Oliver was terribly concerned about my attitude, 
and he knew that I was travelling up here on the 
Hill and in other circles where I was being asked 
to comment on the prospects of these people. 

Q: I take it Colonel North, who had been your 
friend . . . was not pleased with the position you 
were taking? 

A: No. ... I made a speech over at the National 
Defense University which was reported in the 
Washington Post . . . and Oliver . . . got very 
exercised because in it I said ... I can't see any 
amount of money or any amount of time, given 
the present set of conditions, that would be effi- 
cacious. . . . Oliver got very exercised about that 
and called me and said would you try to put to- 
gether an op ed piece . . . which he allegedly was 
going to get placed in the Washington Post. It 
never was, and I gather it's because what I wrote 
displeased him. 

Gorman concluded by telling the Committees, "it was 
also very clear to me, he [North] saw me as a prob- 
lem in terms of what I was saying, and I think he was 
just doing his damndest to get me to shut up — old 
General, put a cork in it."'^' 

In the spring. North had made ambitious plans for 
the Contras' future, according to his April 11 memo. 
The force would be increased in size. Two special 

49 



77-026 - o7 - 3 



Chapter 2 



operations were planned: an "attack against Sandino 
airport with the purpose of destroying" Sandinista 
HIND-D hehcopters; and a "ground operation against 
the mines complex" in Nicaragua securing the princi- 
pal lines of communication in and out of Puerto Cabe- 
zas. Finally, North told McFarlane the Contras 
would open a Southern front. ^^^ 

These plans were soon stalled, though, when in late 
April, Congress rejected the Administration's funding 
request. The defeat precipitated a crisis atmosphere 
among Contra leaders, who had planned on renewed 
Congressional funding. There were daily contacts be- 
tween Contra leaders and North, and between North 
and the CIA Chief of the Central American Task 
Force. The problems of the Resistance were further 
complicated when one Central American country, re- 
sponding to Sandinista encroachment, ordered the 
Contras to move to less exposed locations.^^^ 

Meanwhile, in Congress, a consensus was building 
in favor of humanitarian aid. By May 15, 1985, Con- 
gressional leaders were seeking counsel from the NSC 
on the Administration's position about a Contra sup- 
port bill that was limited to nonlethal aid. North, 
along with other NSC staff members, drafted talking 
points for a meeting between McFarlane and Minority 
Leader Robert H. Michel, emphasizing that the "pri- 
mary goal" was to lift the Boland Amendment restric- 
tions, "which severely limit our ability to support/ 
advise the now unified Nicaraguan resistance. "^^^ 

By the end of May, North was optimistic that the 
Boland Amendment restrictions would be lifted, at 
least with respect to the CIA's provision of intelli- 
gence and political support. But even if they were 
lifted, and Congress appropriated humanitarian aid, 
North did not contemplate that his covert operation 
would end. He told McFarlane in a May 31 memo: 

Plans are underway to transition from current 
arrangements to a consultative capacity by the 
CIA for all political matters and intelligence, 
once Congressional approval is granted on lifting 
Section 8066 [Boland Amendment] restrictions. 
The only portion of current activity which will 
be sustained as it has since last June, will be the 
delivery of lethal supplies. ^^'' 

The Secord Group and Its 
Competition 

As humanitarian aid measures were debated in Con- 
gress, Secord's Enterprise was continuing to procure 
weapons for the Contras. By May, Secord was using 
Thomas G. Clines, rather than the original broker. 
Clines' source was a European arms dealer. ^^* 
Secord was also using Rafael Quintero to handle the 
logistics of the arms deliveries in Central America. As 
North put it, Quintero was the "Secord man on [the] 
scene."^28 j^e coordinated the arms reception in Cen- 
tral America, and "all of the liaison with the Contras 
and with the local authorities."^^" From Quintero, 
Secord would obtain the information necessary to 



provide North with what North termed "views from 
on [the] scene" in Central America. ^^' Clines, Quin- 
tero, and Secord were to play an increasingly large 
role in the Contra support structure as the summer 
progressed. 

During May, Secord arranged through Clines for 
the third in a series of arms transfers to the Contras. 
This time, the shipment was to arrive by sea.^^^ Peri- 
odically, Secord would call North with the latest 
update, as on May 8: "Came out of mtg/ in . . . now 
in Paris; -Tested every item; -ship arrived 4-5 hours 
ago; -40,000 M-79 . . . ."^^'^ Later, on May 24, North 
recorded: "Call from Dick; -Vessel needs shipping 
agent for receiving; -Need to do long lead plan for 
Aug-Sep delivery; -need to make deposit for M-79 
buy."'^* As Secord testified. North "was in the infor- 
mation collection business" and "[h]e wanted to know 
if I would provide him with details of any deliveries 
or deals that were made, and I did so gladly. "^^* 

General Secord was not the only weapons dealer 
seeking the Contra account during the summer of 
1985. For example, Ronald Martin, a Miami arms 
dealer, was by May "setting up [a] munitions 'super- 
market' " in Central America. ^^^ As North testified: 
"You had a very competitive environment down 
there. Once the U.S. Government withdrew in '84 
from directly supporting the resistance, you ended up 
with a lot of folks out there running a very cutthroat 
business."^ ^' 

North discouraged Calero from dealing with some 
of Secord's competitors. He testified that CIA Direc- 
tor Casey had suspicions that the arms warehouse 
operation run by Martin was supported by U.S. fund- 
ing that had been diverted to Martin by a Central 
American country. According to North, Casey told 
him "that there shouldn't be any further transactions 
with that broker until such time as he resolved or 
they were able to resolve where" the money to stock- 
pile "several millions of dollars worth of ordnance" 
had come from.^^^ 

Secord's other competitor for procuring arms for 
the Contras during the spring of 1985 was General 
Singlaub. As early as April, Singlaub had begun to 
arrange for a major weapons purchase, after meeting 
at FDN base camps in March with the FDN military 
commander, Enrique Bermudez.^^^ The list of weap- 
ons Singlaub drew up with Bermudez included AK-47 
rifles, RPG-7 rocket launchers, light machine guns, 
and SA-7 surface-to-air missiles. Singlaub took the 
weapons list to North, who made "some additions and 
subtractions." North and Singlaub "reach[ed] a clear- 
cut statement of what we were going to buy."^'"' 

Sometime later that month, Singlaub introduced 
Calero to a European arms dealer.^'" Calero was 
astonished at the low prices he had been quoted; "at 
least in the case of the AK-47s that price was about 
half of what we had previously had to pay."^*^ (In 
part, this can be attributed to the fact that Singlaub 
did not take a commission.) 



50 



Chapter 2 



According to Singlaub, North later confirmed that 
the prices quoted by the European arms dealer were 
lower than anything he had ever seen before. Con- 
fronted with the price list, North "expressed some 
surprise, doubt, that they could be purchased for that 
price." But, he "made it quite clear that that was a 
very, very good price and a bargain. We were getting 
twice as many weapons for the same amount of 
money. "^■'^ In his testimony. North maintained that 
he checked Secord's prices against the prices of other 
dealers: "[s]ome were higher, some were lower. "^'''' 

Part of the explanation for the difference between 
Secord's prices and those of Singlaub's dealer was 
Secord's profit margin — a margin of which Calero 
was unaware. Secord testified that his markup on all 
Contra shipments "averaged out almost exactly 20 
percent."^** In fact, the actual commission charged 
on the cost of arms averaged 38 percent.^*® 

In Secord's own words: 

By the way, this was a strict commercial kind of 
transaction. There was nothing spooky about it. 
It was just a normal brokering deal. The prices 
were marked up in the process, different markups 
for different line items depending upon the size, 
but between 20 and 30 percent was the markup 
which is quite low in the arms business.^*'' 

Secord candidly admitted that he was to make a 
profit:^*^ 

Q: I take it from what you are saying that you 
were to make a profit on these arms transactions? 

A: Yes .... It was intended that the profits 
generated would be shared by Hakim, myself, 
and, of course, the arms dealer. ^*^ 

Calero testified he was unaware that Secord was 
earning money off the arms sales. He believed that 
Secord was supplying the weapons at cost.^*° "My 
understanding, right from the beginning, was that he 
was not making a profit," Calero recalled.^^' North, 
on the other hand, testified that it was his understand- 
ing from his conversations with Casey in 1984 that 
those running the off-the-shelf covert entities were 
entitled to fair compensation:'*^ "The arrangement 
that I made with General Secord starting in 1984 
recognized that those who were supporting our effort 
were certainly deserving of just and fair and reasona- 
ble compensation."'*' 



Calero Tries Singlaub 

In early May, Calero and Singlaub met with Secord 
in North's office to discuss procuring SA-7 mis- 



siles.'** Although Singlaub's price was lower than 
Secord's, North and Calero decided that Secord 
should supply the missiles because Secord was pre- 
pared to provide training and Singlaub was not.'** 

Sometime in mid-May, Calero placed an order for 
weapons — other than SA-7s — through Singlaub's 
dealer. Calero "preferred" dealing with Singlaub, 
rather than Secord, because not only was Singlaub a 
closer personal friend, but also his prices were lower. 
Singlaub told Calero that he believed Secord was 
making a profit. Secord, on the other hand, told 
Calero that Singlaub would be unable to deliver: 
"The price was so, you know, so low that he thought 
he [Singlaub] couldn't make, he couldn't do it. Yes, he 
[Secord] told me that, yes."'*® 

North's notes reflect an unsuccessful attempt to per- 
suade Calero not to deal with Singlaub via the Euro- 
pean arms dealer.'*' On May 17, Secord met with 
North and discussed pending weapons transactions, 
including Martin's munitions supermarket and the 
"Singlaub deal w/ A.C; -[European arms 
dealer] ....;- lOK AK47s; -procuring items from 
USSR . . ." '*' An hour and 20 minutes later. North 
spoke to Calero and noted, "will stop move w/ [Europe- 
an arms dealer]." ^^^ But despite Calero's apparent 
decision to stop the Singlaub deal, Secord informed 
North on May 20 that it "[s]ounded like Calero was 
going to have to go through with [the European arms 
dealer] purchase." ^^° 

North appears to attribute to Director Casey his 
reluctance to procure arms through the European 
dealer. According to North, Casey warned him of "a 
transaction of some five to six million dollars from a 
broker who he was concerned had also been involved 
in reverse technology transfer to the Eastern Bloc, 
and he told me to do everything possible to discour- 
age further purchases."'®' Although North did not 
name the dealer, his reference to a "transaction of 
some five to six million dollars" points to the Europe- 
an arms dealer. The arms dealer denied to the Com- 
mittees any involvement in reverse technology trans- 
fers.'®^ 

The purchase that Singlaub arranged did in fact go 
forward after Owen, at North's request, confirmed 
the list with Calero. The arms arrived in Central 
America on July 8, 1985.'®' 

This was the last shipment Calero was to order 
from Singlaub or any arms dealer other than Secord. 
The Singlaub shipment had nearly exhausted the 
funds in Calero's own accounts. Calero told North in 
May, "[I] have enough to cover this [shipment] but 
[it] will leave nothing."'®*' Thereafter, money raised 
by North and Secord was given directly to Secord, 
who then provided the Contras with arms. Calero 
testified he was "never given a reason" why his "au- 
thority to have cash directly sent to [him] to make 
those purchases in the future was taken away."'®* 



51 



Chapter 2 



Chapter 2 



1. See R. McFarlane Memo, 2/27/81, to Secretary Haig, 
N33323-47 (forwarding Director Casey's proposal). 

2. See "Review of Foreign Policy," House Foreign Af- 
fairs Committee, 97th Cong., 1st Sess., 16-17 (Nov. 12, 
1981) (stale-ment of the Hon. Alexander M. Haig, Jr., Sec'y 
of State). 

3. Earlier, in March 1981, the President had authorized a 
CIA covert program for Central America in general. 

4. George Test., Hearings. 100-11, 8/6/87, at 269. 

5. Inman Int., 3/16/87. 

6. Gregg Memo, 7/12/82, to Clark, "Proposed Covert 
Action Finding on Nicaragua," N44654. 

7. Gregg Memo, 7/12/82, to Clark, "Proposed Covert 
Action Finding on Nicaragua," N44654. 

i.Id. 

9. Id. 

10. Id 

11. Poindexter handwritten note, attached to Gregg 
Memo to Clark, 7/12/82, "Proposed Covert Action Finding 
on Nicaragua," N44652. 

12. Gregg Memo, 7/12/82, to Clark, "Proposed Covert 
Action Finding on Nicaragua," N44656. 

13. See e.g., Newsweek, Nov. 8, 1982, at 43. 

14. See, e.g., Cong. Rec. H9148-49 (Dec. 8, 1982) (state- 
ment of Rep. Harkin). 

15. See The Washington Post, April 3, 1983 at A13 (quot- 
ing Contra leaders rejecting the Administration's explana- 
tion for Contra aid: "The people who are fighting, they are 
not fighting to stop the weapons. . . . We are fighting to 
liberate Nicaragua. As Suicide [a Contra leader] put it . . . 
We're not going to stop the transport of arms and supplies 
to the Salvadoran guerrillas until we cut the head off the 
Sandinistas.) 

16. See Cong. Rec. H9149 (Dec. 8, 1982) (statement of 
Rep. Leach); id. at H9151 (statement of Rep. Mikulski); id. 
at H9153 (statement of Rep. Studds). 

17. See Cong. Rec. H9149 (Dec. 8, 1982) (statement of 
Rep. Leach); id. at H9158 (statement of Rep. Matsui). 

18. See Cong. Rec. SI 5363-64 (Dec. 18, 1982) (statement 
of Sen. Helms). 

19. Pub. L. 97-377, Defense Appropriations Act for FY 
1983, Sec. 793. In enacting the Boland Amendment, the 
Congress re-jected a bill that would have barred all covert 
action funding, as well as an amendment that would have 
barred Administration support of any insurgent group 
having the purpose to overthrow the Nicaraguan Govern- 
ment. See "The Boland Amendment," Chapter 26. 

20. Since 1982, the Administration has taken the position 
that, under the Boland Amendment, it was the agency's 
purpose that was controlling, not the Contras' purpose. See 
Opinion of the Intelligence Oversight Board, Apr. 6, 1983, 
J4825; "The Boland Amendment," Chapter 26. 

21. Cong. Rec. H9156 (Dec. 8, 1982) (statement of Rep. 
Boland); "The Boland Amendment," Chapter 26. 

22. The New York Times, Dec. 9, 1982, at A9. 

23. Select Committee on Intelligence, S. Rep. No. 665, 
98th Cong., 2d Sess., at 5 (1984) (hereinafter "S. Rep. 98- 
665"). 



24. Letter, from 37 Congressmen, 3/24/83, to the Presi- 
dent, HF1367; see Turner Memo, 4/6/83, to the President's 
Intelligence Oversight Board, at 17, J4824. 

25. Newsweek. April 11, 1983, at 46. 

26. 1983 Public Papers of the President of the United 
States, Ronald Reagan, Vol. 1, at 539 (April 14, 1983) 
[hereinafter "Presidential Papers"]. 

27. Id at 541. 

28. Id 

29. See The Washington Post, April 3, 1983 at A3 (state- 
ment of Sen. Daniel Moynihan). 

30. 1983 Presidential Papers, Vol. 1, at 603-04 (April 27, 
1983). 

31. In June 1983 a CBS/New York Times poll showed 
that the public opposed helping the Contras try to over- 
throw the Nicaraguan Government by 53 percent to 23 
percent. New York Times, July 1, 1983, at A2. In Septem- 
ber, a Harris survey showed 60 percent opposed, and 24 
percent favored, U.S. Government support for the Contras. 
The Harris Survey, 9/29/83, at 3. 

32. See Gorman Dep., 7/22/87, at 25-32; McFarlane 
Test., Hearings. 100-2, 5/11/87, 9-10, 21. 

33. S. Rep. 98-665 at 5-6. 

34. H.R. 2760 was sponsored by Representative Edward 
P. Boland, then Chairman of the House Intelligence Com- 
mittee and Representative Zablocki, then chairman of the 
Committee on Foreign Affairs. See H. Rep. 122, 98th 
Cong., 1st Sess., Part 1 at 1; Part 2 at 2 (May 13, 1983). 

35. See H. Rep. No. 122, 98th Cong., 1st Sess., at 4. 

36. Cong. Rec. H5880-81 (July 28, 1983). 

37. See Cong. Rec. H5721-62 (July 27, 1983); id at 
H58 19-82 (debate on Boland-Zablocki). Ultimately, the 
Boland-Zablocki legislation was never considered by the 
Senate, and did not be come law. See "The Boland Amend- 
ment," Chapter 26. 

38. Clark Memo, 7/1/83, to SPG Principals, S9243. 

39. Id 

40. Report to the Senate Committee on Foreign Rela- 
tions: Subj: "Conferral of Personal Rank of Ambassador," 
S9516. 

41. S9468. 

42. In its first year, S/LPD claimed credit for 1,5CX) 
speaking engagements and for sending material to 239 edito- 
rial writers in 150 cities. Comptroller General's Report, 2/ 
8/85, S9391. It published pamphlets, such as "Broken Prom- 
ises: Sandinista Repression of Human Rights in Nicaragua, 
"The Sandinista Military Build-up, "Misconceptions About 
U.S. Policy Toward Nicaragua." all for the purpose of 
"Spreading the President's Message to the Public, the 
Media and the Congress." Gardner Memo, 6/25/85, to 
Twohie: Subj: "Current Program of S/LPD," S9441. 

43. See Chapter 4. 

44. J. Miller Memo. 3/13/85, to P. Buchanan: Subj: 
" "White Propaganda' Operation," S9418. 

45. Reich Memo, 3/1/86, to W. Raymond, S9460. 

46. Id 



52 



Chapter 2 



47. Comptroller General Letter, 9/30/87, to Hon. Jack 
Brooks, Hon. Dante Fascell, at S11655. 

48. Id. at S11652. 

49. Id. at S 11 656. The State Department's Inspector Gen- 
eral concluded in Audit Report No. 7PP-008 (July 1987) 
that "there is no evidence that S/LPD staff participated 
directly or indirectly in any unlawful lobbying or that IBC 
spent S/LPD contract funds for lobbying activities." 

50. Vessey Memo, 9/6/83, to Chief of Staff, U.S. Army et 
ai. Subj: "DoD Support for the DCL" at D 15331. 

51. See DOD "Background Paper." D 15321 (July 13, 
1983 "wish list"); see Information Paper, 4/14/87, D137I8 
(referring to the CIA's original request as a "Christmas 
List"). 

52. Memo, Subj: "Supplies Needed to Support Nicara- 
guan Resistance Effort," D 15249; Memo for the Record, 7/ 
15/83. Subj: "CIA Request for DoD Support," D15356-364. 

53. See DoD Memo, 7/28/83, to Chief of Staff, U.S. 
Army, Chief of Naval Operations, Chief of Staff, U.S. Air 
Force, Commandant of the Marine Corps: Subj: "DOD 
Support for the DCI," D 15344. 

54. This effort has been addressed generally in the press. 
See, e.g., U.S. News and World Report. Dec. 15, 1986, at 27- 
28. 

55. DOD Memorandum for the Director, J-3, The Joint 
Staff, 8/19/83, Subj: "DoD support for the DCI," D15338- 
40; DOD Memo. 12/9/83, "Background Paper for the Di- 
rector." D 13760 (chronology of project developments). 

56. W. Taft IV Memo, 9/2/83, to Weinberger: Subj: 
"CIA Request for DoD Support of Covert Activities in 
Nicaragua," D25051 ("The CIA has been disappointed with 
our pointing out this difficulty; it has suggested that it has 
insufficient funds to support such activities on its own"). 

57. CIA paid the preparation and transfer cost of $28,000, 
but not the equipment cost of the aircraft. See DOD 
Memo, 12/9/86, "Background Paper for the Director," at 
D13762-63. 

58. Clark Memo, "Meeting with National Security Plan- 
ning Group," N49258; see also S. Rep. 98-665 at 6. 

59. North/deGraffenreid Memo, 9/15/83, to Clark: Subj: 
"NSPG Meeting on Covert Action in Nicaragua," N49255. 

60. NSC Handwritten Notes, 9/16/83, N54822. 

61. Presidential Finding Scope Paper, 9/19/83, N6783. 

62. Presidential Finding Scope Paper. 9/19/84, N6783. 

63. NSC Handwritten Notes, 9/16/83, N54823 (emphasis 
in original). 

64. Presidential Finding. 9/19/83. N6780-82. 

65. S. Rep. 98-665 at 6. 

66. See Minutes of 5/16/86 NSPG Meeting, 6/4/86, 
N10288. 

67. S. Rep. 98-665 at 6 (quoting The New York Times); 
see Casey Memo, 9/27/83, to Clark. N6787-89. 

68. See Cong. Rec. H8389-432 (Oct. 20, 1983). 

69. See H.R. Rep. 98-569. 

70. See Cong. Rec. H 10543-45 (Nov. 18, 1983); id at 
SI 6859-60. 

71. Intelligence Authorization Act. FY 1984, sec. 109. 

72. SIG Paper, 12/20/83: Subj: "Where Next in Central 
America," at N32314. 

73. C. Hill Memo. 12/20/83, to McFarlane: Subj: "Next 
Steps in Central America," N32308. 

74. The Special Interagency Working Group consisted of 
representatives from the State Department, CIA, DOD, 
NSC, Joint Chiefs of Staff and the White House. See 



Memo, 9/23/83, Subj: "Legislation on Nicaragua," N6883. 
Later, an interagency policymaking group on Central 
America would be called a Restricted Interagency Group 
or 'RIG." 

74a. SIG Paper, 12/20/83: Subj: "Where Next in Central 
America," at N32314; see McFarlane Memo, 1/6/85, Subj: 
"Meeting with the National Security Planning Group," at 
N46540 (summarizing SIG strategy paper). 

75. McFarlane Memo, 1/6/85: Subj: "Meeting with the 
National Security Planning Group," N46450; NSDD 124 
(approving measures outlined in the SIG paper. "Where 
Next in Central America," N32308-359). 

76. North/Menges Memo, 10/19/83, to McFarlane: Subj: 
"Special Operations: Nicaragua." N44721. 

77. North/Menges Memo, 10/19/83. to McFarlane: Subj: 
"Special Operations: Nicaragua," N44721. 

78. Attachment to North/Menges Memo, 12/22/83, to 
McFarlane: Subj: "Anti-Sandinista Actions." at N30844. 

79. McFarlane Memo. 2/17/84, Subj: "Meeting with the 
National Security Planning Group." at N40040. 

80. North Memo to McFariane. 2/3/84, Subj: "Attack on 
Guerrilla Command and Control Centers in Nicaragua," at 
N44831. 

81. North/Menges Memo, 3/2/84, to McFarlane: Subj: 
"Special Activities in Nicaragua," at N44842. 

82. North Memo, 3/30/84, to McFarlane: Subj: "Nicara- 
gua Special Activities Program," at N34514. 

83. See North Personnel File, D6087, D6089. 

84. Poindexter Test., Hearings. 100-8. 7/15/87. at 41-42; 
McFarlane Test., Hearings. 100-2, 5/11/87, at 31. 

85. Poindexter Test., Hearings, 100-8, 7/15/87 at 41-42 
McFarlane Test.. Hearings. 100-2. 5/11/87, at 31-32; Gregg 
Int., 4/2/87, at 4, 6; P.X. Kelley Int., 9/30/87, at 7. 

86. McFarlane Test., Hearings. 100-7, 7/14/87, at 203, 
221. 

87. Hall Test., Hearings. 100-5, 6/8/87, at 466; see North 
Test., Hearings. 100-7, Part II, 7/13/87. at 55-56. 

88. Gregg Int., 4/2/87, at 4; Ledeen Dep., 6/19/87, at 33; 
Eari Dep., 5/22/87, at 29. 

89. Letter, 11/7/83, J. Hull to R. Owen, N7460. 

90. North's notes reveal frequent Contra-related contacts 
during this period between North and Dewey Clarridge, 
then Chief of the Latin American Division of the CIA's 
Directorate of Operations. See North Notebooks, 1/84- 
3/29/84, QOOl 1-0165. 

91. See, e.g.. North memo, 3/30/84, to McFarlane: Subj: 
"Nicaragua Special Activities Program," N34514; North/ 
Menges Memo, 3/2/84, to McFarlane: Subj: "Special Ac- 
tivities in Nicaragua," N44842. 

92. North Test., Hearings. 100-7. Part II, 7/13/87, at 40; 
North Test, Hearings. 100-7, Part I, 7/9/87, at 244-45. 

93. North Test., Hearings. 100-7, Part I, 7/9/87, at 245. 

94. North/Menges Memo. 1 1/4/83, to McFarlane: Subj: 
"Support for Nicaraguan Democratic Opposition," N40079, 
N40081. 

95. North Memo, 2/3/84. to R. McFarlane: Subj: "Attack 
on Guerilla Command and Control Centers in Nicaragua," 
N44831-32; see North/Menges Memo, 1/23/84, to McFar- 
lane: Subj: "Targeting Guerilla Command and Control Cen- 
ters in Nicaragua." N44837. 

96. See, e.g., North/Menges Memo, 10/19/83, to McFar- 
lane: Subj: "Special Operations: Nicaragua," at N44721; 
North/Menges Memo, 12/22/83, to R. McFarlane: Subj: 
"Anti Sandinista Actions," at N30842; North Memo. 3/30/ 



53 



Chapter 2 



84, to McFarlane: Subj: "Nicaragua Special Activities Pro- 
gram," at N34515. 

97. North/Menges Memo, 12/22/83, to McFarlane: Subj: 
"Anti Sandinista Actions," N30841; see North Memo, 3/30/ 
84, to McFarlane: Subj: "Nicaragua Special Activities Pro- 
gram," N34514. 

98. George Test., Hearings. 100-11, 8/6/87, at 269. 

99. Poindexter Dep., 5/2/87, at 63. 

100. North Forwarding Note to McFarlane, 2/13/84, 
N 16901. 

101. North/Keel Memo, 2/7/84, to McFarlane: Subj: 
"Additional Resources for Our Anti-Sandinista Program," 
N16908 (attached to North Forwarding Note, 2/13/84, 
N16901). 

102. McFarlane Memo, 2/21/84, to the President: Subj: 
"Central America Legislative Strategy — Additional Funding 
for the Anti-Sandinista Forces," N 16894. 

103. Los Angeles Times, Apr. 13, 1984, at 1. 

104. McFarlane Test., Hearings. 100-2, 5/11/87, at 13. 

105. The National Security Adviser later expressed his 
regret about "lapses," such as the "failure to brief the Com- 
mittees on the San Juan del Norte operation." McFar- 
lane, PROF Note. 5/4/84 at 17:57:43, to Poindexter, N7091; 
see also deGraffenreid Memo, 6/13/84, to McFarlane: Subj: 
"Prospectus on New Covert Action Procedures," N7094 
("with the exception of the special measures on Nicaragua 
(mining . . . etc.) our Hill briefings have been timely and 
thorough"). 

106. S. Rep. 98-665 at 8 (quoting Goldwater statement). 

107. See, e.g.. Weekly Presidential Documents, Vol. 20, 
No. 15, at 517-18 (Apr. 10, 1984 statement); McFarlane 
letter, 4/5/84, to Sen. H. Baker, N43406-07 ("Please be 
assured that we have not deviated from the strictest inter- 
pretation of this Finding.") 

108. S. Rep. 98-665 at 8-9. 

109. S. Rep. 98-665 at 10. 

110. Los Angeles Times, April 13, 1984, at 9. 

1 10a. McFarlane Test., Hearings. 100-2, 5/11/87, at 5, 20- 
21. McFarlane testified these were his words, expressing the 
President's "sentiment." McFarlane Test., Hearings. 5/11/ 
87, at 21. North testified that, "[a]s they were relayed to 
me," the words 'body and soul' "were the words of the 
President." North Test., Hearings. 100-7, Part I. 7/9/87, at 
265. 

111. Poindexter Test., Hearings. 100-8, 7/15/87. at 54. 

112. North Test., Hearings. 100-7, Part \. 1/1/il, at 74. 

113. North Test., Hearings. 100-7, Part I, 1/9/&1, at 265. 
North testified that he received this assignment around the 
time of the Kissinger Commission Report, which was re- 
leased Jan. 10, 1984. Report of the National Bipartisan 
Commission on Central America (H. Kissinger, Chairman); 
North Test.. Hearings. 100-7, Part I. 7/13/87. at 79. McFar- 
lane dated the instruction "in the days leading to Boland 
H," which was enacted in October 1984. McFarlane Test.. 
Hearings. 100-7, Part H, 7/14/87, at 221. 

114. North/Menges Memo. 1/13/84, to McFarlane: Subj: 
"Central America— Draft NSDD to Implement NSPG De- 
cisions of January 6, 1984," N43397 (emphasis added). 

115. Memo. North/Menges, Memo, 1/13/84, to R. 
McFarlane: Subj: "Central America — Draft NSDD to Im- 
plement NSPG Decisions of January 6, 1984," handwritten 
changes, N43397. 

116. McFarlane Test., Hearings. 100-2, 5/11/87, at 14. 
54 



117. The Committees agreed at the request of the White 
House that, in the interest of U.S. foreign relations, certain 
foreign nations which were approached or enlisted for 
Contra aid would not be referred to by name. Accordingly, 
those countries were given numerical designations. 

118. McFarlane Test., Hearings. 100-2. 5/11/87, at 15. 

119. The idea that Country 1 might fund U. S. ventures in 
Central America was not a new one for McFarlane. In the 
spring of 1983, he learned that Country 1 might be willing 
to provide security assistance and agricultural training to 
other countries. In a note to Oliver North recounting this 
offer, McFarlane mused that since the U. S. appropriation 
to Country 1 increased every year, perhaps it would be 
willing to sign over the increase for use in Central America. 

120. Casey Memo, 3/27/84, to McFarlane, RCM Ex. 29 
at 456, C7490. Casey already had devised his own plan for 
raising additional funds. In the March 27 memorandum, he 
indicated that two initiatives already were underway at the 
CIA to provide the Contras with weapons and other materi- 
als: one involved an arrangement with Country 1. and the 
other involved an approach to Country 6. Neither effort 
produced any significant Contra assistance. Id., C7490. 

121. Shultz Test., Hearings. 100-9, 7/23/87, at 13. 

122. McFarlane Test., Hearings. 100-2, 5/11/87, at 15-16; 
Teicher Dep., 4/23/87. at 15. 

123. McFarlane Memo, 4/20/84, to Teicher, RCM Ex. 30 
at 459, N 10576. Secretary Shultz was unaware of the sub- 
stance of this memo. Shultz Test., Hearings. 100-9, 7/23/87, 
at 14-15. 

124. Shultz Test., Hearings. 100-9, 7/23/87, at 13-14. 

125. Shultz Test., Hearings. 100-9, 7/23/87, at 13-14. 

126. Shultz Test., Hearings. 100-9, 7/23/87, at 13-14. 

127. McFarlane Test., Hearings. 100-2, 5/11/87, at 15-16. 

128. Casey Memo. 3/27/84, to McFarlane. C7490. See 
also CIA Cable. 3/8/84, DRC Ex. 19, CIA Cable. 3/10/84, 
DRC Ex. 19-1. 

129. CIA Cable from D. Clarridge, 4/5/84, DRC Ex. 19- 
11; id. 4/12/84. DRC Ex. 19-15. 

130. CIA Cable. 4/10/84. DRC Ex. 19-14. 

131. Clarridge Test.. Hearings. 100-11. 8/4/87. at 31; CIA 
Cable, from D. Clarridge, 5/11/84, DRC Ex. 19-18. 

132. See, e.g., CIA Cables, 3/23/84. DRC Ex. 19-2; id. 3/ 
24/84, DRC Ex. 19-3; id. 4/2/84, DRC Ex. 19-5: id. 4/3/ 
84. DRC Ex. 19-6; id, 4/4/84. DRC Ex. 19-7. 

133. Clarridge Test., Hearings. 100-11, 8/4/87 at 29-32. 

134. Clarridge Test., Hearings. 100-11, 8/4/87, at 29-30, 
32-33. 

135. Clarridge Test., Hearings. 100-11, 8/4/87, at 34. 
Clarridge also defended the Agency's conduct by emphasiz- 
ing that Country 6's early offer was rejected because it 
turned out Country 6 wanted reimbursement and that Coun- 
try 6 sought a bilateral arrangement with a Central Ameri- 
can country, not the Contras specifically. Clarridge Test., 
Hearings. 100-11, 8/4/87, at 28-32. 

136. CIA Cable from D. Clarridge. 5/11/84, DRC Ex. 
19-18. 

137. McFarlane Test.. Hearings. 100-2, 5/12/87. at 84. 

138. McFarlane Test., Hearings, 100-2, 5/11/87, at 17. 

139. McFarlane Test., Hearings. 100-2, 5/11/87, at 17. 

140. McFarlane Test., Hearings. 100-2, 5/11/87, at 17: 
I should stress. I described it as it happened, and 
while there is no solicitation, cry for solicitation, in 
fact it was unmistakable in his own mind that my 
concern and my view of this impending loss would 
represent a significant setback for the President, 



Chapter 2 



and if anyone with any gumption could manage 
without being led or asked, then a contribu- 
tion would have been welcome. 

141. McFarlane Test., Hearings. 100-2, 5/11/87, at 17-18. 
North's notes show that the arrangements were made by 
June 25. On June 24, he noted "call to RCM re arrange- 
ments" and on June 25 he noted that he had told Calero the 
funds were on their way. North Notebook, 6/24/84, 
Q0338; id., 6/25/84, Q0340. Bank records show the pay- 
ment was actually received in Calero's account on July 6, 
1984. Bank Records, 0318. 

142. McFarlane Test., Hearings. 100-2, 5/11/87, at 18. 

143. North Test., Hearings. 100-7, Part II, 7/13/87, at 80. 

144. McFarlane Test., Hearings. 100-2, 5/11/87, at 18-19. 

145. McFarlane Test., Hearings. 100-2, 5/11/87, at 18. 

146. McFarlane Test., Hearings. 100-2, 5/11/87, at 53. 

147. McFarlane Test., Hearings. 100-2, 5/11/87, at 24. 

148. Weinberger Dep., 6/17/87, at 74 (denying any 
knowledge of a Country 2 contribution). 

149. Shultz Test., Hearings. 100-9, 7/23/87, at 4; Poindex- 
ter Test., Hearings, 100-8, 7/15/87, at 78-79. 

150. Baker Dep., 6/22/87, at 12. Attorney General Meese 
did not testify on this issue. 

151. Baker did not recall "using that language or having a 
specific opinion such as that, although I do, as I have 
stated, recall feeling that we should take a very close look 
at the question of legality and feeling that we could not do 
indirectly what we couldn't do directly." Baker Dep., 6/22/ 
87, at 8-9. 

152. See Shultz Test., Hearings. 100-9, 7/23/87, at 14-17. 

153. North Notebook, 6/25/84, Q0340 (emphasis in origi- 
nal). 

154. North Notebook, 6/25/84, Q0343. 

155. Sporkin Memo for Record, 6/26/84, Subj: "Nicara- 
gua," C8322. Secretary Shultz testified that, as far as he 
knew, no Justice Department opinion was ever obtained. 
Shultz Test., Hearings. 100-9, 7/23/87, at 17-18. 

156. North Test., Hearings, 100-7, Part I, 7/7/87, at 74. 

157. North Test., Hearings. 100-7, Part I, 7/8/87 at 116. 
There is some evidence that Secord may have been in- 
volved in another covert operation prior to the Contra 
project. In an Apr. 27, 1984, notebook entry. North relates 
what appears to be an arms deal with Country 1 ("Team to 
[Country 1] $54 million worth of arms"). Later the note 
states: "McFarlane talked to [Country 1 official] Can't 
produce $; similar to Secord arrangement: 65 lift vans; 
$750K." North Notebook, 4/27/84, Q0228 (emphasis 
added). 

158. North Test., Hearings. 100-7, Part I, 7/8/87, at 116. 

159. North Test., Hearings. 100-7, Part I, 7/8/87, at 117. 

160. North Test., Hearings, 100-7, Part I, 7/8/87, at 117. 

161. North Test., Hearings, 100-7, Part I, 7/8/87, at 122. 
As recounted by North, Casey's plan mirrored the sugges- 
tions of others. It was about this time that Robert Owen, 
who would become North's courier, provided him with a 
plan for "setting up proprietary companies ... to purchase 
goods overseas and provide assistance to the contras." 
Owen Test., Hearings. 100-2, 5/14/87, at 325-26. 

162. North Test., Hearings. 100-7, Part II, 7/13/87, at 46. 

163. See The New York Times, May 16, 1987, at Al ("As 
a matter of fact, I was very definitely involved in the 
decisions about support to the freedom fighters. It was my 
idea to begin with.") 

164. Poindexter Test., Hearings. 100-8, 7/20/87, at 228. 



165. See Secord Test., Hearings. 100-1, 5/5/87, at 46. 

166. Secord Test., Hearings. 100-1, 5/5/87, at 48-49. On 
July 26, North had a conversation with Gen. Secord, and 
his notes report the involvement of "Chi Chi" Quintero: 

L-lOO Shipping prices 

Shipping Agent — Raphael Chi Chi Quintero 

Cuban/Miami 

knows maritime ops 

knows logistic support 

would make a logistics advisor 

travels in region frequently 

Canadian Arms dealer — Century Arms Ltd. 
North Notebook, 7/26/84, Q0448. 

167. Secord Test., Hearings. 100-1, 5/5/87, at 50-51; 
Hakim Test., Hearings, 100-5, 6/3/87, at 200. 

168. Secord Test., Hearings. 100-1, 5/7/87, at 172. 

169. Owen Test., Hearings. 100-2, 5/14/87, at 325-26. 

170. Owen Test., Hearings, 100-2, 5/14/87, at 325-26. 

171. Owen Test., Hearings, 100-2, 5/14/87, at 327; see 
Owen Letter, 7/2/84, to North, RWO Ex. 1 at 777 ("fire- 
cracker costs"). 

172. Owen Test., Hearings. 100-2, 5/14/87, at 326-42. 

173. Owen Test., Hearings. 100-2, 5/14/87, at 334-35; 
id, 5/19/87, at 385. 

174. McFarlane Test., Hearings. 100-2, 5/11/87, at 5. 

175. North Memo, 8/28/84, to McFarlane: Subj: "Official 
Travel to Honduras on August 31, 1984," at N46204. 

176. North Memo, 9/2/84, to McFarlane: Subj: "FDN 
Air Attack of 1 September," RCM Ex. 30-B at 426, N44850. 

177. Ken deGraffenreid was, at the time, the head of the 
NSC Staffs Intelligence Directorate, the group responsible 
for coordinating policy on covert action projects. deGraf- 
fenreid Dep., 6/19/87, at 5; id. 1/11/il, at 58. 

178. North Memo, 10/9/84, to McFarlane: Subj: "Draft 
National Security Decision Directive (NSDD) on Arms 
Interdiction in Central America," at N6446-51. 

179. Cong. Rec. HI 1974 (Oct. 10, 1984). Representative 
Hyde, an opponent of the Boland Amendment, gave it a 
similar interpretation in urging members to reject it. He 
stated: "[S]ection 107 . . . forbids any assistance to the 
freedom fighters in Nicaragua .... Arm them and abandon 
them on a party line vote. No food, no medicine, no ammu- 
nition, not even moral support. We barely leave them a 
prayer." Cong. Rec. H8269 (Aug. 2, 1984). See Chapter 26 
for a fuller discussion of the legislative history of the 
Boland Amendment. 

180. North Test., Hearings. 100-7, Part I, 7/8/87, at 162- 
63; see id., at 270-71; McFarlane Test., Hearings. 100-7, Part 
II, 7/14/87, at 223-24; Poindexter Test., Hearings. 100-8, 7/ 
20/87, at 52-53. See Chapter 26 for a fuller discussion of 
their views. 

181. Poindexter Test., Hearings. 100-8, 7/15/87, at 52-53. 

182. See McFarlane Test., Hearings, 100-7, Part II, 7/14/ 
87, at 203-04. 

183. McFarlane Test., Hearings, 100-7, Part II, 7/14/87, at 
203; see also McFarlane Test., Hearings, 100-2, 5/12/87, at 
129. 

184. McFarlane Test., Hearings, 100-2, 5/11/87, at 44-48; 
McFarlane Test., Hearings. 100-2, 5/11/87, at 20. 

185. McFarlane Test., Hearings. 100-2, 5/11/87, at 21. 

186. McFarlane Test., Hearings. 100-2, 5/11/87, at 21. 

187. McFarlane Test., Hearings. 100-7, Part II, 7/14/87, at 
204, 221-22. 



55 



Chapter 2 



188. Poindexter Test,, Hearings, 100-8, 7/21/87, at 340-41; 
North Test., Hearings. 100-7, Part I, 7/9/87, at 177. 

189. North Test., Hearings. 100-7, Part I, 7/8/87, at 177; 
id., 1/9/&7, at 186; id, 100-7, Part II, 7/13/87, at 78-79. 

190. Poindexter Test., Hearings. 100-8, 7/20/87, at 228- 
29; id. 7/15/87, at 74. 

191. McFarlane Test., Hearings. 100-7, Part II, 7/14/87, at 
204; see also id. 7/14/87, at 21 1-22. 

192. Poindexter PROF to McFarlane, 11/23/84 at 
21:27:14, JMP Ex. 4. 

193. North Test., Hearings. 100-7, Part I, 7/7/87, at 74. 

194. North Test., Hearings. 100-7, Part I, 7/7/87, at 74. 

195. Poindexter Dep., 5/2/87, at 51-52. 

196. Poindexter Dep., 5/2/87, at 63. 

197. McFarlane Test., Hearings. 100-7, Part II, 7/14/87, at 
225. 

198. North Test., Hearings. 100-7, Part II, 7/10/87, at 2-3. 

199. Calero Test., Hearings, 100-3, 5/20/87, at 11-12. 

200. See, e.g.. North Notebook, 1/10/85, Q0957; id, 1/3/ 
85, Q0934; id, 12/12/84, Q0893. 

201. North Notebook, 12/7/84, Q0882; id. 12/17/84, 
Q0910; see North Memo, 12/20/84, to McFarlane: Subj: 
"Follow-up with [ ] re: Terrorism and Central America," 
N720O-02. 

202. North Notebook, 12/17/84, Q0910; cf. North Memo, 
12/20/84, to McFarlane: Subj: "Follow-up with [ ] Re: 
Terrorism and Central America," N7200 (indicating $15K 
price per launcher). 

203. North Memo, 12/20/84, to McFarlane: Subj: 
"Follow-up with [ ] re: Terrorism and Central America," 
N7200-02. 

204. McFarlane Test., Hearings. 100-7, Part II, 7/14/87, at 
222. 

205. North Notebook, 1/3/85, Q0934. 

206. North Memo, 12/4/84, to McFarlane: Subj: "Assist- 
ance for the Nicaraguan Resistance," RCM Ex. 32 at 468, 
N16887. 

207. North Memo, 12/4/84, to McFarlane: Subj: "Assist- 
ance for the Nicaraguan Resistance," RCM Ex. 32 at 468, 
N16887. 

208. North Test., Hearings, 100-7, Part I, 7/7/87, at 83-84. 

209. McFarlane Test., Hearings. 100-2, 5/11/87, at 29-30. 

210. North Test., Hearings. 100-7, Part I, 7/7/87, at 83-84. 

211. Secord Test., Hearings, 100-1, 5/5/87, at 51-52. Bank 
records indicate that the downpayment for the first sealift 
was not made until February. H9409. 

212. North Notebook, 1/29/85, Q1553-54. 

213. North Notebook, 1/30/85, Q1555. 

214. North Notebook, 2/5/85, Q1580 (emphasis in origi- 
nal). 

215. See North Memo, 3/5/85, to McFarlane: Subj: "Aid 
to the Nicaraguan Resistance," RCM Ex. 35 at N7 189-97 
(attaching end user certificates dated Feb. 14, 1985). 

216. See McFarlane Test., Hearings, 100-7, Part II, 7/14/ 
87, at 221; North Notebook, 1/2/85, Q0932. 

217. C/CATF Test., Hearings, 100-11, 8/4/87, at 237-38. 

218. See Owen Test., Hearings, 100-2, 5/14/87, at 332-33. 

219. North Test., Hearings. 100-7, Part I, 7/9/87, at 266- 
67. 

220. See Poindexter Test., Hearings. 100-8, 7/15/87, at 
193. 

221. See North Memo, 11/7/84, to McFarlane: Subj: 
"Clarifying Who Said What to Whom," RCM Ex. 31 at 
463, N6914. 



222. Id. RCM Ex. 31, at 463-64, N6914-15. 

223. Id. RCM Ex. 31, at 465, N6916. 

224. Id. RCM Ex. 31, at 464, N6915. 

225. McFarlane Test., Hearings. 100-7, Part II, 7/14/87, at 
222; McFarlane Test., Hearings. 100-2, 5/11/87, at 166. 

226. North Test., Hearings, 100-7, Part I, 7/9/87, at 204- 
05. 

227. North Memo, 2/6/85, to McFarlane: Subj: "Nicara- 
guan Arms Shipments," RCM Ex. 33 at 472, N6918. 

228. Id. RCM Ex. 33, at 472, N6918. 

229. Id. RCM Ex. 33, at 472, N6918. 

230. Id. RCM Ex. 33, at 475, N6921. 

231. North Memo, 12/4/84, to McFarlane: Subj: "Assist- 
ance for the Nicaraguan Resistance," RCM Ex. 32, at 470, 
N16889. 

232. North Test., Hearings, 100-7, Part II, 7/14/87, at 157. 

233. McFarlane Test., Hearings, 100-2, 5/11/87, at 29-30. 

234. Poindexter Test., Hearings. 100-8, 7/20/87, at 230. 

235. North Test., Exec. Session, 7/9/87, at 58. 

236. North, PROF Note, 8/23/86 at 15:52:52, to Poin- 
dexter, N12151. [North Classified Ex. 336.] 

237. Singlaub Test., 5/20/87, at 192; see North Test., 7/7/ 
87, at 199-202. 

238. Singlaub Test., 5/20/87, at 190-93; see also North 
Test., 7/7/87, at 199-202. 

239. Singlaub Test., 5/20/87, at 192. 

240. McFarlane Test., 5/11/87, at 14-15; id. 5/14/87, at 
203. 

241. North Test., 7/7/87, at 198-99. 

242. North Test., 7/7/87, at 202-04. 

243. North Test., 7/7/87, at 234 ("[SJomeone had told me 
that a U.S. Government official should not, cannot, will 
not, whatever solicit.") 

244. Singlaub Test., 5/20/87, at 193-94. 

245. Singlaub Test., 5/20/87, at 201. 

246. Singlaub Test., 5/21/87, at 164. 

247. Singlaub Test., 5/20/87, at 198-99. 

248. North Notebook, 2/1/85, Q1567; see Singlaub Test., 
5/20/87, at 198-201. 

249. North Memo, 2/6/85, to McFarlane, RCM Ex. 34 at 
479, N7015. In a handwritten addition. North wrote: "Nor 
should Singlaub indicate any U.S. Government endorsement 
whatsoever." Id. 

250. North Memo, 2/6/85, to McFarlane, RCM Ex. 34, at 
479, N7015. 

251. Singlaub Test., 5/20/87, at 200. Singlaub informed 
North that he presented three options for Country 3 to 
contribute to the Contras: (1) a deposit to a foreign bank 
account where no subsequent accounting would be provid- 
ed; (2) a contribution directly to, and with an accounting 
by, Singlaub; and (3) a diversion from the proceeds of an 
upcoming arms sale to Country 3 (so that no disbursement 
would then be reflected on Country 3"s books). Singlaub 
also proposed that Countries 3 and 5 make direct contribu- 
tions to the Contras of military supplies. Singlaub Test., 5/ 
20/87, at 195-97. 

252. Singlaub Test., 5/21/87, at 204. 

253. See North Test., 7/7/87, at 199-207. 

254. McFarlane Test., 5/13/87, at 103-05. 

255. Secord Test., 5/5/87, at 154-56. 

256. Secord Test., 5/5/87, at 154-56. 

257. McFarlane Test., 7/14/87, at 218. 

258. McFarlane Test., 5/11/87, at 49-52. 

259. McFarlane Test., 5/11/87, at 51-52. 



56 



Chapter 2 



260. McFarlane Test., 5/11/87, at 50-51; see Shultz Test., 
7/23/87, at 8-9; McFarlane Int., 4/5/87, MF1955. 

261. Weinberger Test., 7/31/87, at 133, 135. 

262. Vessey Dep., 4/17/87, at 6; Weinberger Test., 7/31/ 
87, at 134; cf. CWW Ex. 39, CIA Memo for the Record by 
J. McMahon, "Breakfast with Secretary and Deputy Secre- 
tary of Defense," 3/15/85, ("In closing the Secretary stated 
that he had heard that [Country 2] had earmarked $25 
million for the Contras in $5 million increments"). While 
Weinberger did not recall making the statement recorded in 
the memo, Weinberger Dep., 6/17/87, at 74-75, McMahon 
confirmed, in his deposition, the accuracy of the informa- 
tion. McMahon Dep., 7/1/87, at 57 (Q: "Do you remember 
that meeting where Secretary Weinberger mentioned that 
he had heard that [an official of Country 2] had earmarked 
$25 million for the contras?" A: "Yes." Q: "What did he say 
in that meeting?" A: "Exactly what you sa/rf. It was like an 
offhand remark.") 

263. Shultz Test., 7/23/87, at 8-9. 

264. McFarlane Test., 5/11/87, at 54. 

265. See 04882-83. 

266. Weekly Presidential Documents, Vol. 20, No. 45, 11/ 
9/84, at 1817. 

267. McFarlane Test., 5/11/87, at 43. 

268. The Washington Post, 11/30/84, at Al (statement of 
Sen. David Durenberger). 

269. Weekly Presidential Documents, Vol. 20, No. 51, 12/ 
21/84, at 1909. 

270. See Weinberger Memo, 1/3/85, to McFarlane: Subj: 
"U.S. Policy Toward Nicaragua," at N6495. 

271. See North Memo, 1/15/85, to McFarlane: Subj: 
"Nicaragua Options," Tab F, "Options and Legislative 
Strategy for Renewing Aid to the Nicaraguan Resistance," 
at N45086-93. 

272. See North Memo, 1/15/85, to McFarlane: Subj: 
"Nicaragua Options," at N45025, N45029; see also McFar- 
lane Test., 5/11/87, at 44. 

273. North Memo, 1/15/85, to McFarlane: Subj: "Nicara- 
gua Options," Tab I, "Policy Options for Nicaragua," at 
N45029. 

274. North Memo, 1/15/85, to McFarlane: Subj: "Nicara- 
gua Options," Tab E, "The Future of the Nicaraguan Re- 
sistance," at N45083. 

275. North Memo, 1/28/85, to Poindexter: Subj; "Nicara- 
guan SNIE," (referring to "The Future of the Nicaraguan 
Resistance," Tab E to "Nicaragua Options" Memo, at 
N45029), at N32824. 

276. McFarlane Test., Hearings. 100-2, 5/11/87, at 21. 

277. Secord Test., Hearings, 100-1, 5/5/87, at 49-52. 

278. North Memo, 3/5/85, to McFarlane: Subj: "Aid to 
the Nicaraguan Resistance," RCM Ex. 35 at 494, N7184. 

279. North Memo, 3/5/85, to McFarlane: Subj: "Aid to 
the Nicaraguan Resistance," RCM Ex. 35 at 494, N7184. 

280. Id. RCM Ex. 35 at 495, N7185. 

281. Id. RCM Ex. 35 at 494, N7184. 

282. McFarlane Test., Hearings. 100-2, 5/11/87, at 32-33; 
McFarlane Int., 4/5/87, MF1957. 

283. North Test., Hearings. 100-7, Part I, 7/8/87, at 147- 
48. 

284. North Test., Hearings. 100-7, Part I, 7/8/87, at 132, 
135. 

285. North Test., Hearings. 100-7, Part I, 7/8/87, at 132 

286. North Test.. Hearings. 100-7, Part I, 7/8/87, at 132. 



287. North Test., Hearings. 100-7, Part I, 7/8/87, at 133. 
North made no mention in his testimony about what he 
believed to be the "extraordinary risk" involved. In con- 
trast, in the case of his notebooks, which also contained the 
names and addresses of private donors and recipients. North 
felt free to remove them from the protection of his locked 
and guarded office. North Test., Hearings, 100-7, Part I, 7/ 
8/87, at 134. He destroyed the ledgers as the Contra diver- 
sion was coming to light in November 1986. North Test., 
Hearings. 100-7, Part I, 7/8/87, Part I, at 134. 

288. Poindexter Test., Hearings. 100-8, 7/15/87, at 74. 

289. Poindexter Test., Hearings. 100-8, 7/15/87, at 74. 

290. North Memo, 3/15/85, to McFarlane, N7127-28. 

291. North Memo, 2/27/85, to McFarlane, N6418-19. 

292. North Memo, 3/15/85, to McFarlane, at N7128. 

293. North Memo, 2/27/85, to McFarlane, N6419. 

294. North Memo, 3/15/85, to McFarlane, N7128. 

295. Owen Test., Hearings. 100-2, 5/14/87, at 237-39. 

296. Owen Test., Hearings. 100-2, 5/19 at 347-48. 

297. Owen Test., Hearings. 100-2, 5/14/87, at 340-41. 

298. Owen Test., Hearings. 100-2, 5/14/87, at 341-42. 

299. Owen Test., Hearings. 100-2, 5/14/87, at 339-40. 

300. "Steelhammer" Letter to "My Friend," RWO Ex. 3 
at 782 (emphasis in original). 

301. North Memo, 11/7/84, to McFarlane: Subj: "Clarify- 
ing Who Said What to Whom," RCM Ex. 31, at 464, 
N6915. 

302. CIA Memo, 3/5/85, "Outside Support to the FDN," 
C2470. 

303. See, e.g.. Guardian, 3/13/85, at 3; see also Boston 
Globe, 12/30/84, at A21, A24. 

304. Singlaub Test., Hearings. 100-3, 5/20/87, at 83-84. 

305. Singlaub Test., Hearings. 100-3, 5/20/87, at 83-84. 

306. As Owen wrote to North in February, "[a] major 
lobbying, educational and public relations effort is needed to 
help sway a Congress which appears inclined not to vote 
for passage of covert funding." Owen Memo, 2/19/85, to 
North: Subj: "Public Relations Campaign for the Freedom 
Fighters," RWO Ex. 4 at 783. 

307. North/Fortier Memo, 3/22/85, to McFarlane; Subj: 
"Timing and the Nicaraguan Resistance Vote," Tab, 
"Chronological Event Checklist," N40320-331. The plan ap- 
parently evolved from meetings of an ad hoc working 
group chaired by Patrick Buchanan. See id. at N40317. 

308. North Memo, 3/16/85, to McFarlane: Subj: "Fall- 
back Plan for the Nicaraguan Resistance," RCM Ex. 36 at 
511, N10618. 

309. Id. RCM Ex. 36 at 512, N10619. 

310. Id RCM Ex. 36 at 512, N10619. 

311. North/Fortier Memo, 3/22/85, to McFarlane: Subj: 
"Timing and the Nicaraguan Resistance Vote," at N40317. 

312. See Fortier Memo, 4/1/85, to McFarlane; Subj: 
"Contra Vote —Delay to May," N 18785-86. 

313. North Memo, 4/1/85, to McFarlane: Subj: "Using 
the March 1 San Jose Declaration to Support the Vote on 
the Funding for the Nicaraguan Resistance," N40317 (em- 
phasis added). 

314. McFarlane Test., Hearings. 100-2, 5/11/87, at 28. 

315. Weekly Presidential Documents, Vol. 21, No. 18, at 
537 (Apr. 24, 1985). 

316. Weekly Presidential Documents, Vol. 21, No. 18, at 
557 (Apr. 29, 1985). 

317. Weekly Presidential Documents, Vol. 21, No. 18, at 
566 68 (May 1, 1985). 



57 



Chapter 2 



318. North Memo, 4/11/85, to McFarlane: Subj: "FDN 
Military Operations," RCM Ex. 37 at 520, N10592. 

319. Calero Test., 5/20/87, at 29; North Memo, 4/11/85, 
to McFarlane: Subj: "FDN Military Operations," RCM Ex. 
37 at 520, N 10592. 

320. In all but one case, these arms had been purchased 
by Calero from General Secord. Calero Test., 5/20/87, at 
30. 

321. North Memo, 4/11/85, to McFarlane: Subj: "FDN 
Military Operations," RCM Ex. 37 at 520, N 10592. As of 
March 25, 1985, Calero had received $32 million. 04881-83. 

322. Id., RCM Ex. 37 at 521, N 10593. 

323. Gorman Dep., 7/22/87, at 25-32. 

324. RCM Ex. 37 at 521, N10593. North's notes suggest 
that these plans were at least to some extent pursued. On 
June 17, North first met with Secord and "Tom" (perhaps 
Clines); that same morning he met with the Chief of the 
Central American Task Force, and noted "-need more Intel; 
-MAPS - 1:80,000 Northern Area; -Maps of Managua Air- 
port Area." The note continues: "-Log/Mil Pining - Miami 
-3 small Maule, 1 C-47, 1 Helo, Medevac -Log Support for 
3 mines Area -Log Support for Managua Ops -Phaler Boat 
Ops -Refinery -Ammo Purchase Program -Training Pro- 
gram." North Notebook, 6/17/85, QI953-54. 

325. On May 6, North learned from the Chief, Central 
American Task Force, the details of a Sandinista attack. 
North Notebook, 5/6/85, Q1796. By the next day, the Con- 
tras had been ordered to move out, and Calero called North 
to tell him that he was "waiting for word on where they 
want[ed the] FDN to move to." North Notebook, 5/7/85, 
Q1800. North received the same news from the Chief, 
CATF: They had to "immed. vacate [location], will have to 
vacate." North Notebook, 5/8/85, Q1808. On May 13, 
North learned from the U.S. Ambassador that the "disper- 
sal" was "complete." North Notebook, 5/13/85, QI818. 
North told a Central American Ambassador that it was 
"essential that [the] movement not feel abandoned . . ." 
"There must be some visible link/continuity in [the] pro- 
gram." North Notebook, 5/9/85, Q1810. 

326. North/Fortier/Lehman/Burghardt Memo, 5/15/85, 
to McFarlane: Subj: "Congressional Strategy for Nicara- 
guan Resistance Funding," N40244. 

327. North Memo, 5/31/85, to McFarlane: Subj: "The 
Nicaraguan Resistance: Near Term Outlook," RCM Ex. 38 
at 532, N 10584. 

328. Secord Test., Hearings, 100-1, 5/5/87, at 52-53. 

329. North Notebook. 5/1/85, Q1790. 

330. Secord, Hearings, 100-1, 5/5/87, at 53. 

331. See, e.g.. North Notebook, 5/17/85, Q1832: "Mario 
[Calero] more & more in picture;-ponchos, Howard, tires 
for C-47;-LORAN C w/ Bad cable, boots w/bad soles; - 
serious logistics problems; - possible Martin interference w/ 
[Central American] delivery; -ship arrives 1 June 85 - 
Danish vessel; -$148/copy for . . . in lots of 5K or more." 



332. See RCM Ex. 37 at 525, "FDN Expenditures and 
Outlays." 

333. North Notebook, 5/8/85, Q1806. 

334. North Notebook, 5/24/85, Q1861. 

335. Secord Test, Hearings, 100-1, 5/5/87, at 57. 

336. North Notebook, 5/1/85, Q1790. 

337. North Test., 7/8/87, at 83. 

338. North Test., 7/8/87, at 84. 

339. Singlaub Test., 5/20/87, at 202-03. 

340. Singlaub Test., 5/20/87, at 204. 

341. Singlaub Test., 5/20/87, at 206-08. 

342. Singlaub Test., 5/20/87, at 210-11. 

343. Singlaub Test., 5/20/87, at 218. 

344. North Test., 7/8/87, at 83. 

345. Secord Test., Hearings, lOO-I, 5/5/87, at 53. 

346. See Chapter 22. 

347. Secord, Hearings. 100-1, 5/5/87, at 51. 

348. But see Secord Test., 5/5/87, at 152 ("[L]ater in 
1985, I foreswore my share of the profits that had accrued 
to that time, none of which I had drawn, and discussed this 
extensively with Mr. Hakim"). 

349. Secord Test., 5/5/87, at 142. For details of the finan- 
cial workings of the Enterprise, see Chapter 22. 

350. Calero Test., 5/20/87, at 32. 

351. Calero Test., 5/20/87, at 279-80. 

352. North Test., 7/10/87, at 155-56. 

353. North Test., 7/8/87, at 62. 

354. Singlaub Test., 5/20/87, at 211-13. 

355. Singlaub Test., 5/20/87, at 213-14. 

356. Calero Test., 5/20/87, at 90. 

357. North called Clarridge immediately after he dis- 
cussed the purchase with Secord, and asked Clarridge to do 
a check on the European arms dealer. North Notebook, 5/ 
18/85, Q1834. Clarridge, who was by then Chief of the 
CIA's European division, reported back on May 23, 1985. 
Id., 5/23/85, Q1858. 

358. North Notebook, 5/17/85, Q1831. 

359. North Notebook, 5/17/85, Q1833. 

360. North Notebook, 5/20/85, Q1837. 

361. North Test., 7/8/87, at 84. 

362. Committee Interview, 6/10/87. 

363. Singlaub Test., 5/20/87, at 222-25. The vessel was 
met by an associate of Ron Martin, Mario DelAmico, who 
held himself out as a representative of a Central American 
country, charged with FDN matters. In September, Sing- 
laub met with DelAmico, who warned him that he should 
never send another ship but, instead, purchase weapons 
through Martin. Id. at 227. Singlaub told North of this 
"threat," and North responded that "he would take what- 
ever action was necessary of this." Id. 

364. North Notebook, 5/15/86, Q1825. In fact, Calero's 
funds were not completely depleted until October 1985. See 
bank records, 04737. 

365. Calero Test., 5/20/87, at 152. 



58 



Chapter 3 

The Enterprise Assumes Control of Contra 

Support 



In the summer of 1985, Congress voted to appropriate 
$27 million for the Contras' humanitarian needs, in- 
cluding food, medicine and clothing. At the same 
time, the covert program, run by the National Securi- 
ty Council (NSC) staff, entered a new and bolder 
phase. With the Contras' daily living needs taken care 
of by Congress, and their requirements for arms 
having been met through Country 2's prior donations, 
the NSC staff was able to focus on attempting to 
improve the Contras' military effectiveness. This in- 
volved establishing an air resupply program for the 
main Contra fighting force operating in the North of 
Nicaragua, the Nicaraguan Democratic Force (FDN), 
and promoting the opening of a second Contra front 
in the South of Nicaragua by supporting other Contra 
fighters, independent of the FDN, who were operat- 
ing there. This support for the southern forces includ- 
ed the procurement of arms as well as the establish- 
ment of an air resupply program. 

Disappointed at the failure of Adolfo Calero to 
develop a logistics infrastructure, Lt. Col. Oliver 
North asked Gen. Richard Secord and his associates 
to assume new responsibilities that under the Boland 
Amendment the U.S. Government could not under- 
take. Secord agreed to continue to handle all future 
weapons procurement for the Contras and to acquire 
and operate a small fleet of planes to make air drops 
of weapons, ammunition, and other supplies to the 
Contras in both northern and southern Nicaragua. 
North arranged the funding for Secord to carry out 
these activities, directing third-country and private 
contributions to Secord that previously went to 
Calero. These funds were later augmented by the 
diversion from the Iranian arms sales that North, with 
Admiral John Poindexter's approval, initiated. 

Financed by contributions and the diversion, the 
Secord group purchased and operated five airplanes, 
built an emergency airstrip in Costa Rica, maintained 
an air maintenance facility and a warehouse in an- 
other Central American country, and hired pilots and 
crew to fly the air drop missions. They also pur- 
chased weapons and ammunition in Europe and deliv- 
ered them to Central America for use by the Contras 
in the south and north. North called the organization 
"Project Democracy." Secord and his partner, Albert 
Hakim, referred to it as the Enterprise. 



The Enterprise, though nominally private, func- 
tioned as a secret arm of the NSC staff in conducting 
the covert program in Nicaragua. While Secord con- 
trolled the operational decisions of the Enterprise, 
North remained in overall charge of the Contra sup- 
port program. He set the priorities and enlisted the 
support of an Ambassador, Central Intelligence 
Agency (CIA) officials, and military personnel to 
carry out the air resupply operation. He dealt with 
crises as they arose, sometimes on a daily basis. In 
carrying on these tasks. North had the unqualified 
support of Admiral Poindexter, who had replaced 
Robert McFarlane as National Security Adviser in 
December 1985. 

The efforts of the NSC staff and the Enterprise to 
carry out a government function with a makeshift 
covert organization were, however, dogged by prob- 
lems from the beginning. The Enterprise's aircraft 
were in poor condition and the group had to over- 
come numerous tactical problems in carrying out its 
mission. While the Enterprise conducted routine air 
drops in northern Nicaragua, it was not able to begin 
a regular air drop operation in the south until late 
summer of 1986 — at a time when both Houses of 
Congress had voted to authorize the CIA to resume 
its support for the Contras with appropriated funds 
and when the Enterprise was trying to sell its assets 
to the CIA. The operation ended abruptly in October 
1986 when the plane that Eugene Hasenfus was on 
was shot down while on a mission to drop supplies to 
the Contras in Nicaragua. 

Before that and for more than 2 years, the NSC 
staff had secretly achieved what Congress had openly 
disapproved in the Boland Amendment — an extensive 
program of military support for the Contras. The 
Boland Amendment operated as a restraint on disclo- 
sure, not on action, as the NSC staff placed policy 
ends above the law. 

The Enterprise's Mission is 
Expanded 

On June 12, 1985, the House passed a bill approving 
$27 million in humanitarian assistance to the Contras, 
paving the way for final approval and signature by 
the President in August 1985. While that vote virtual- 



59 



Chapter 3 



ly ensured that the Contras would have adequate 
food, medical supplies, and other provisions, it also 
strictly limited the money to nonmilitary uses. 

The provision of covert military assistance re- 
mained the secret business of the NSC staff. In the 
summer of 1985, articles appeared in the press specu- 
lating about the role of the NSC staff in assisting the 
Contras and Congress began inquiring of the National 
Security Adviser whether this was true. Yet, at this 
very time, the NSC staff decided to extend its covert 
program to include a system for resupplying Contras 
in the field. Some of the Contras fighting within Nica- 
ragua were as many as 30 days away by land from 
border areas. To keep them supplied and to encour- 
age other fighters to move from border sanctuaries to 
Nicaragua, a capacity to make aerial drops of ammu- 
nition and other supplies was essential.' 

As early as February 1985, North had urged Calero 
to set aside $10 million from the funds raised from 
Country 2 to hire a logistics expert and create a 
resupply operation. But the available money was used 
to purchase and stockpile weapons. As a result, by 
summer 1986, the Contras had a surplus of arms. 
Their problem was how to deliver these weapons to 
the fighters. For North, the answer lay with Secord 
and his group. ^ 

In early July, North held a meeting in Miami of 
Contra leaders and members of Secord's group to 
arrange for what Congress had refused to fund — the 
air resupply of lethal material for the Contra forces 
inside Nicaragua. Present were North, FDN leader 
Adolfo Calero, Enrique Bermudez, the FDN military 
commander, Secord, and his associates, Thomas 
Clines and Rafael Quintero.^ 

North began the meeting with an expression of a 
loss of confidence in the way the FDN was handling 
the donated funds he had directed to the FDN. 
Secord described North's remarks: 

The meeting commenced on a pretty hard note, 
with Colonel North being worried about and 
critical of the Contras, because he had been re- 
ceiving reports that the limited funds they had 
might be getting wasted, squandered or even 
worse, some people might be lining their pockets. 

His concern, as he articulated it, was a very 
serious one. He was afraid that if anything like 
this was going on that since they were dependent 
on contributions that the image of the Resistance 
could be badly damaged; it could ruin us, in fact, 
and he was very, very hard on this point.'* 

North's solution, though not unveiled at the meet- 
ing, was to have Secord and his group take over the 
procurement function for the Contras. As Robert 
Owen, North's courier, testified, "I think he and Gen- 
eral Secord felt they probably could do a better job" 
of handling the funds than the Contras.* 



North had decided to furnish the FDN directly 
with arms, air support, and other supplies. He would 
no longer leave to the Contras the task of spending 
their own money on these goods and services. Almost 
immediately after the Miami meeting, Secord's part- 
ner, Albert Hakim, established the Lake Resources 
account in Geneva, Switzerland, and thereafter virtu- 
ally all donated funds were directed by North to the 
Lake Resources account in Switzerland, not Calero's 
accounts. The Secord group — the Enterprise — would 
no longer function simply as an arms broker from 
which Calero would purchase the arms. With the 
contributions, it would make all the decisions on arms 
purchases and supply the Contras with the weapons 
and the other support they needed, without receiving 
from the Contras payment for the arms.® 

The Contras' management of money was only one 
of the problems raised at the all-night meeting in 
Miami. More important was the need to create an 
airlift system to drop supplies to FDN troops inside 
Nicaragua and to open a Southern front. 

The first priority, all agreed, was the delivery of 
the arms already purchased to the soldiers fighting 
near and inside Nicaragua. Before the Boland Amend- 
ment was passed, the CIA helped to arrange the airlift 
of arms and other supplies to the troops. When the 
CIA withdrew, the Contras had difficulty maintaining 
this important logistical function. The FDN's aircraft 
were few and could not effectively and consistently 
penetrate Nicaraguan airspace past Sandinista de- 
fenses. Moreover, the FDN lacked properly trained 
personnel. The continuing resupply of troops and its 
attendant logistics, maintenance, and communications 
comprised the "sinews of war," the infrastructure nec- 
essary for any sustained and effective fighting force. 
North turned to Secord to establish and run the air 
resupply operation.' 

The participants in the Miami meeting also agreed 
on the need to open a Southern front. With the FDN, 
the principal Contra force, operating in the North, the 
Sandinistas could concentrate their military forces on 
the Northern front. Forcing the Nicaraguans to fight 
a two-front war by building up a Contra force in the 
South was elemental military strategy. Calero, howev- 
er, continued to concentrate his resources on his own 
organization in the North, the FDN.* 

The air resupply and Southern front projects went 
hand-in-hand. Because neighboring countries were re- 
luctant to permit land resupply from inside their bor- 
ders, a southern force could not live without air re- 
supply. And the FDN could not, or would not, un- 
dertake this mission on its own.^ 

Thus, the air resupply operation that North asked 
Secord to undertake was also the key to the Southern 
front. In giving this assignment to Secord, North testi- 
fied that he acted with McFarlane's authority.'" 
McFarlane denied this." Poindexter, however, stated 
that he was "aware that Colonel North was con- 



60 



Chapter 3 



cerned about the logistics operation, the way it was 
going, and I was aware that he was going to talk to 
General Secord about setting up a more professional 
logistics support operation as a private operation." '- 

The New Humanitarian Aid 

As the Enterprise began implementing the plans laid 
in Miami, the Contras received a boost from Wash- 
ington. On August 8, 1985, President Reagan signed 
legislation authorizing $27 million in humanitarian aid 
to the Contras." For the first time since May 1984, 
the Contras would receive U.S. Government funding 
as well as intelligence support from the CIA. Al- 
though the Boland Amendment remained in effect, 
new legislation specified that the Amendment did not 
prohibit exchanging information with the Contras.''* 

The legislation prohibited the CIA or the Depart- 
ment of Defense (DOD) from administering the new 
humanitarian funds and required that the President 
ensure that any assistance "is used only for the intend- 
ed purpose and is not diverted" for the acquisition of 
military hardware. The State Department was chosen 
to administer the aid. By executive order signed on 
August 29, 1985, the President created the Nicara- 
guan Humanitarian Assistance Office (NHAO) in the 
State Department.'^ 

The State Department was reluctant to accept this 
responsibility. The Department had no experience and 
lacked the organization to feed and provide for the 
daily needs of troops. To run NHAO, Secretary 
George P. Shultz tapped Ambassador Robert Duem- 
ling, a seasoned diplomat, but with no prior experi- 
ence in administering an aid program. Secretary 
Shultz cautioned Duemling to administer the aid not 
only with "enthusiasm" but also with "care." Ambas- 
sador Duemling found the program difficult to admin- 
ister from the start. '^ Nicaragua's neighbors did not 
officially recognize the Contra movement, even 
though Contras operated unofficially out of their ter- 
ritory. The cargo of the initial NHAO flight on July 
10 was impounded when local Central American au- 
thorities learned that an NBC film crew was on board 
at the invitation of Calero's brother. Thereafter, that 
Central American country barred, for a period of 
time, the entry of NHAO employees, which prevent- 
ed them from conducting any on-site accounting of 
supplies or of the Contras' needs.''' Deumling's diffi- 
culties were definitional as well as operational. 
NHAO had continually to assess whether various 
items were "humanitarian" within the meaning of the 
statute.'^ 

Preparations for the Resupply Operation 

In the beginning of August, Secord met with North 
and others to discuss the steps necessary to establish 
the resupply program. First, a logistics organization 
consisting of aircraft, spare parts, maintenance, com- 



munications, and trained personnel had to be set up. 
For that, Secord turned to former Air Force Lt. Col. 
Richard Gadd, who since his retirement from the 
military in 1982 had been providing, through a private 
business, air support to the Pentagon.'^ 

The second task was to obtain a secure operating 
base from which the aircraft could launch their mis- 
sions. For this, Quintero, on Secord's instructions, 
consulted with the Contra leaders and chose a mili- 
tary airbase in a Central American country ("The 
Airbase".) Secord and North concurred in this 
choice.^" 

Finally, Secord concluded that to establish a sus- 
tained air resupply operation on the Southern front, 
an emergency airstrip was necessary in the South. 
North suggested to Secord Santa Elena in the north- 
west corner of Costa Rica, which North believed 
could also be used as a covert secondary operating 
base for resupply to the Southern front. ^' 

U.S. Support for the Covert 
Operation 

The plans made in Miami for a resupply operation 
and a Southern front could not have been implement- 
ed without the active support of U.S. Government 
officials. 

In July 1985, almost immediately after the Miami 
meeting, North asked Lewis Tambs, the newly ap- 
pointed Ambassador to Costa Rica, to help open a 
Southern front for the Contras, a request that Poin- 
dexter approved. ^^ Tambs agreed without consulting 
Secretary Shultz. Later that summer. North specifical- 
ly asked for Tambs' help, as well as that of CIA Chief 
Tomas Castillo, to facilitate the construction and use 
of the airfield. ^^ 

North testified that he had received authorization 
from Director of Central Intelligence William J. 
Casey to bring Castillo into the resupply operation. 
Moreover, according to North, the airstrip was dis- 
cussed in the Restricted Interagency Group on Cen- 
tral American Affairs, which consisted of, among 
others. North, the Chief of the Central American 
Task Force (CATF) at the CIA and the group's 
chairman, Elliott Abrams, Assistant Secretary of State 
for Inter-American Affairs.^* Abrams acknowledged 
the discussions, but testified that he believed "private 
benefactors, as we used to call them, were building 
the airstrip." ^^ 

The Airfield Is Planned 

On August 10, 1985, North flew to Costa Rica 
where he met with Castillo and Tambs. North and 
Castillo discussed the establishment of a secret airbase 
that would permit moving all Contra military oper- 
ations inside Nicaragua for resupply by air. Castillo 
and Tambs then worked to achieve the establishment 



61 



Chapter 3 



of the airfield and air resupply depot for the Contra 
forces. Castillo reported these developments to the 
Chief of the CATF at CIA headquarters. The Chief 
replied that he was pleased with these developments 
but he "emphasize[d]" to Castillo that neither the 
CIA nor DOD could "become involved directly or 
indirectly" in the project. ^^ 

Less than a week later, North sent Robert Owen to 
Costa Rica to scout the Santa Elena site. Owen met 
with Tambs, who introduced him to Castillo as a 
North emissary. The next day, Owen and Castillo 
surveyed Santa Elena. Owen took photographs and 
returned to Washington with a map, photos, and a 
description of various logistical problems presented 
by the air strip. North later told Castillo that he 
thought Santa Elena was an ideal place for a refueling 
and resupply base.^' 

Meanwhile, North recruited a former Marine col- 
league, William Haskell, to negotiate the purchase of 
the land at Santa Elena for the airfield. By the begin- 
ning of September, Haskell, under the alias of Olm- 
stead, arrived in Costa Rica to meet with Joseph 
Hamilton, an American who headed the group that 
owned the land at Santa Elena. While Tambs assisted 
in bringing the parties together, Castillo alerted North 
that local groups had to be involved in the construc- 
tion. Eventually, Secord paid more than $190,000 for 
local contractors and guards at the airstrip.^* On Oc- 
tober 3, Haskell called North with news of Hamilton's 
tentative approval for the sale of the land. Shortly 
thereafter. North, Haskell, Secord, Gadd, and Hakim 
met. At North's request, Gadd agreed to assemble a 
team and assume responsibility for constructing the 
airstrip. ^^ 

The Airbase Is Secured 

Once the Airbase in the other Central American 
country was selected as the most desirable main base 
for the air resupply operation. North also took the 
necessary steps to obtain host-government approval, 
which required the assistance of other U.S. Govern- 
ment officials. North's notebooks reflect that on Sep- 
tember 10, 1985, he met with Col. James Steele, a 
U.S. Military Group Commander stationed in Central 
America, and Donald Gregg, Vice President Bush's 
National Security Adviser. Among the discussion 
topics North listed was a "Calero/Bermudez visit to 
[the Airbase] to estab[lish] log[istical] support/ 
maint[enance]," as well as other possible locations for 
the resupply base.^° Gregg, however, testified that he 
did not know of the resupply operation prior to the 
summer of 1986.^' 

On September 16, North's notebooks reflect a call 
from Steele, "what about Felix — help for a/c [air- 
craft] maint[enance]." ^^ An ex-CIA operative, Felix 
Rodriguez had volunteered as a private American cit- 
izen to aid a Central American Air Force in counter- 
insurgency maneuvers. Rodriguez had a close rela- 



tionship with a local Commander stationed at the 
Airbase ("The Commander"). In a letter dated Sep- 
tember 20, North asked Rodriguez to obtain service 
space at the Airbase for one C-7 Caribou aircraft and 
for occasional Maule maintenance. The Maule would 
be operated by the FDN and the Caribou by a private 
contractor for aerial resupply of both the FDN in the 
North and eventually in support of a Southern front. 
North wrote. North also said Rodriguez could use 
North's name with the Commander. Rodriguez 
agreed to help and obtained the Commander's ap- 
provals^ Poindexter had sanctioned North's efforts to 
obtain the Central American country's help in the 
logistics of air resupply. S'* 

Securing suitable aircraft that the Enterprise could 
afford proved difficult. In the summer of 1985, North 
met with both Secord and Calero on the most imme- 
diate aircraft needs of the FDN and the resupply 
operation. They decided that their first need was a C- 
7 Caribou, a twin-engine propeller aircraft capable of 
carrying a 5,000-pound cargo over a 900-mile 
range. 2^ By November 1985, Gadd, whose task it was 
to locate and purchase the airplanes, had found three 
surplus C-123 airplanes belonging to a Latin Ameri- 
can Air Force. Gadd had earlier formed Amalgamat- 
ed Commercial Enterprises (ACE), a shelf company 
registered in Panama, to hold title to the aircraft. 
ACE was owned equally by Gadd and Southern Air 
Transport of Miami, which was to provide mainte- 
nance and other logistical support. ^^ 

The logistics director of the Latin American Air 
Force was unwilling to sell the airplanes — whose use 
was for military transport — to Gadd without a sign of 
official U.S. Government approval. So, Gadd turned 
to North for assistance, who decided to intercede in 
an effort to obtain the airplanes. North told Gadd and 
Secord that he requested both Robert McFarlane and 
the State Department's assistance. On November 15, 
North indicated in his notebook that he called "El- 
liott" "re call to [the Latin American country]" for 
the purpose of telling [that country] that "ACE is 
OK." Abrams, however, denied any knowledge of the 
planes belonging to the Latin American country's Air 
Force. In addition. North asked Vince Cannistraro, a 
colleague at the NSC, to intercede with the Latin 
American country. In the PROF note on November 
20, North referred to Cannistraro's upcoming call and 
provided the following talking points: 

A reputable business organization called A.C.E. 
Inc. is negotiating with your air force to buy 
three excess C-123 aircraft, a number of engines 
(48) and some spare parts. 

A.C.E. is a legitimate company which will use 
the aircraft for a good purpose that is in the 
interest of your country and ours — humanitarian 
aid deliveries to anti-communist resistance forces 
(. . . Nicaragua). 



62 



Chapter 3 



Apparently the logistics director for the air force 
. . . was concerned that A.C.E. (Amalgamated 
Commercial Enterprises) may not be legitimate 
or that the A/C could be used for drug running 
or the like. This is not the case. 

It would be very helpful if you could contact 
someone who can clarify the good reputation of 
A.C.E. and encourage [the logistics director] to 
consummate the offer which has been made by 
A.C.E. The need is great for these planes. They 
will help the cause of democracy where it is most 
needed. 

Nonetheless, the Government of the Latin American 
country did not approve, and the Enterprise had to 
look elsewhere.^' 

From the inception of the air resupply operation in 
July 1985, North impressed upon Secord the fact that 
they were operating with donated funds that were 
strictly limited. Consequently, more preferable air- 
planes that were examined by Gadd and discussed by 
North and Secord, such as the Casa 212 and the L- 
100 turbo jet propeller-driven aircraft, were rejected 
because of their high cost, in favor of the less expen- 
sive C-7 and C-123.38 

Country 3 Comes Through 

More third-country money was needed to support 
the Contras. McFarlane had barred a return to Coun- 
try 2,^^ and John K. Singlaub had since the end of 
1984 been trying unsuccessfully to obtain money from 
Country 3. 

In the summer of 1985, North turned to Gaston 
Sigur, a Senior Director for Far Eastern and Asian 
Affairs on the NSC staff, to seek his assistance with 
Country S.""* According to Sigur, North told him that 
it was an "emergency situation," and that he and 
McFarlane were aware that Country 3 "might have 
an interest in giving some assistance, financial assist- 
ance in the humanitarian area to the Contras."*' 
North, too, testified that he had gone to Sigur with 
the knowledge, and approval, of McFarlane. ''^ 
McFarlane testified to the contrary, claiming that he 
was "firm" with North "in saying to him absolutely 
no participation by you or any other staff member in 
any kind of approach to this country." *^ 

Sigur recalled that when North asked him to set up 
the meeting, he inquired, "[N]ow everything here is 
quite legal?" to which North replied, "[0]h yes, we 
have checked all that out and there is no question 
about that." •*■* 

Sigur met with a Country 3 official and, without 
mentioning any specific amount of money, learned 
that the representative needed "to go back to his 
home government on it." The same day, Sigur went 
to McFarlane and told him that any contribution from 
Country 3 would have to be made directly through 
U.S. Government channels. According to Sigur, "Mr. 



McFarlane's response to that was that this is not pos- 
sible, that cannot be done, and so I saw that as the 
end of that, and I told Colonel North about it." ■** 
North was not deterred. He asked Sigur to arrange 
a face-to-face meeting with the Country 3 representa- 
tive.*^ At the ensuing meeting at the Hay-Adams 
Hotel in the fall of 1985, North told the Country 3 
representative that "this country [U.S.] would be very 
grateful if they were to make the contribution."*'' 
North's plea was successful. Sometime later, the 
Country 3 official responded with a $1 million contri- 
bution in "humanitarian" assistance.** North then sent 
Owen to give the official an envelope containing the 
Swiss bank number of the Enterprise's Lake Re- 
sources account. The $1 million was transferred to 
Lake Resources and another $1 million followed in 
the early months of 1986.*^ 

The Link With NHAO 

Without the knowledge of its supervisors, the Nica- 
raguan Humanitarian Assistance Office (NHAO) pro- 
gram was used to further the Enterprise's activities. 
Robert Owen became the first link between NHAO 
and the covert operation. In mid-September 1985, 
Owen applied to Ambassador Duemling for a position 
in the humanitarian aid office. North recommended 
Owen as a "can do" person "who knows the scene," 
but Duemling declined to hire him.^° 

Duemling still refused to hire Owen even after the 
three directors of the United Nicaraguan Opposition 
(UNO) — Calero, Arturo Cruz, and Alfonso Robelo — 
wrote Duemling requesting Owen's help. North, how- 
ever, continued to press for Owen's employment. At a 
Restricted Interagency Group meeting on October 11, 
North complained about the October 10 NHAO re- 
supply flight impounded by Central American au- 
thorities, claiming that it would never have happened 
if Owen had been working for NHAO. Only then did 
Duemling relent and agree to fund a UNO contract 
with Owen's company, the Institute for Democracy, 
Education and Assistance, Inc. (IDEA), to assist in 
disbursing the humanitarian aid.^' 

North exploited Owen's new position by using his 
trips, funded by humanitarian aid dollars, to transfer 
and receive information about the Contra war and the 
fledgling resupply operation. Following his trips to 
Central America, Owen would submit two reports — 
one to NHAO describing humanitarian services per- 
formed and another to North describing his activities 
in coordinating lethal aid. The grant agreement with 
the State Department barred Owen from performing 
"any service" related to lethal supply "during the 
term of this grant." ^^ 

North also told Owen that he should introduce 
Gadd to Mario Calero, who was in charge of pur- 
chases for the FDN in the United States, so that 
Gadd might get a contract to fly humanitarian aid 
supply missions. ^^ Later, North personally accompa- 



63 



Chapter 3 



nied Gadd to meet with Ambassador Duemling and 
urged Duemling to award Gadd an air delivery con- 
tract, to which Duemling, unaware of Gadd's role in 
the lethal resupply operation, agreed.^'' 

New Legislation— Congressional 
Support Increases 

On November 21, 1985, the Senate agreed to a con- 
ference report on the Intelligence Authorization Bill 
providing two significant Contra support measures: 
the CIA was granted additional money to provide 
communications equipment to the Contras and the bill 
specifically provided that the State Department was 
not precluded from soliciting third countries for hu- 
manitarian assistance. The U.S. Government was still 
barred from expending funds to provide lethal assist- 
ance to the Contras but, according to North, "the 
instructions were to bite off a little at a time and start 
moving back toward full support." *^ 

Polndexter Visits Central America 

On December 12, 1985, the newly appointed Na- 
tional Security Adviser, Admiral Poindexter, took a 
trip with North to Central America.^® 

In a PROF note to Poindexter, North recommend- 
ed the trip, suggesting that it be "billed as a quick 
tour through the region to confer w/ top ranking 
U.S. officials to reinforce the continuity of U.S. 
policy in the region." That explanation would be a 
"plausible cover" for the real purpose of the trip, 
which included delivering to Central American offi- 
cials "the messages we need sent." ^'' 

One of the messages was that "we [the United 
States] intend to pursue a victory and that [a Central 
American country] will not be forced to seek a politi- 
cal accommodation with the Sandinistas." ** North 
noted that this Central American country was at- 
tempting to use support of the Contras as leverage to 
force U.S. aid.^^ 

The Santa Elena airstrip in Costa Rica was also an 
issue raised in discussions during the trip. North 
brought Poindexter up to date on the progress of the 
Santa Elena airstrip, and they discussed what meas- 
ures "could be taken to encourage" Costa Rica to be 
more cooperative with the Contras. When Poindexter 
returned from his one-day trip to Central America, he 
briefed the President on the morning of December 13, 
including informing the President of the efforts to 
secure the land necessary for the airstrip. Poindexter 
testified, and his notes reflect, that Poindexter "did 
talk to him [the President] about the private air- 
strip." «« 

Continued Funding Problems 

By the end of 1985, North had put into motion the 
airlift operation and the beginnings of the Southern 



front. A critical problem remained how to fund these 
efforts. Throughout 1985, North, Casey, and Singlaub 
discussed a variety of methods to fund support for the 
Contras. In early 1985, in connection with his solicita- 
tion of Country 3, Singlaub suggested to Country 3 
officials and to North that a portion of his proposed 
arms sales to Country 3 be diverted and applied to the 
benefit of the Contras. During the summer of 1985, 
Singlaub worked without success through Geomili- 
tech Consultants, owned by Barbara Studley, on di- 
verting part of a $75 million proposed sale of torpe- 
dos to Country 3. In the fall of 1985, Singlaub ar- 
ranged for both North and Casey to meet with Stud- 
ley to present yet another plan to aid the Contras and 
democratic resistance forces worldwide. Geomilitech 
would be a vehicle for a three-way trade to "enable 
the U.S. Government, the Administration, to acquire 
some Soviet-bloc weapons without having to go 
through the painful process of appropriations," in 
order to furnish weapons to anti-Communist insurgen- 
cies in Nicaragua and around the world. The pro- 
posed trade entailed the U.S.'s giving credit for high 
technology purchases to another country, that coun- 
try using the credit to deliver military equipment to a 
totalitarian country, which would then transfer 
Soviet-compatible weapons to a trading company. Ac- 
cording to the plan, the company, at the direction of 
the NSC and CIA, would distribute the weapons to 
the Contras and other resistance movements, "man- 
dating neither the consent or awareness of the De- 
partment of State or Congress." These fundraising 
ideas were never approved. The diversion from the 
Iranian arms sales would provide the needed funds. ^' 

Legislative Plans and a New Finding 

At a January 10, 1986, NSC meeting, the first in 15 
months on Nicaragua, the President heard the views 
of his advisers. CIA Director Casey described a build- 
up of Soviet weaponry and increasing Sandinista re- 
pression in Nicaragua; Admiral William J. Crowe. Jr., 
discussed the inability of the Department of Defense 
to provide logistical assistance that the Contras badly 
needed; and Secretary Shultz voiced his approval for 
resumption of Congressional funding for a covert pro- 
gram. The President ended the meeting by instructing 
his advisers to prepare to go back to Congress with a 
request for full funding ($100 million) of a covert 
action program. ^^ 

A week after the meeting, the President signed a 
new Finding on Nicaragua, consolidating what had 
been separate Findings governing various aspects of 
the program. The Finding authorized the CIA to im- 
plement the newly granted aid and to establish the 
communications network for which Congress had just 
provided funding. 



64 



Chapter 3 



The Resupply Operation Begins 

In January 1986, the plans set in motion by North 
in the fall of 1985 were beginning to give shape to the 
resupply operation. Gadd recruited flight crews, 
agreed with Southern Air Transport that it would 
handle all aircraft maintenance, and purchased the 
first aircraft, a C-7 Caribou. A team was also sent to 
Santa Elena and construction of the airstrip began in 
earnest. ^^ Moreover, the problem of secure communi- 
cations was solved with the help of the National Se- 
curity Agency. 

According to North, both Casey and Poindexter 
had told him to seek some type of secure communica- 
tions support. North turned to the National Security 
Agency for secure communications equipment. ^'^ 

The National Security Agency provided KL-43 en- 
cryption devices to North. On January 15, North 
gave KL-43s to the principal members of the covert 
operation: Secord, Gadd, Steele, Castillo, Quintero, 
and William Langton, president of Southern Air 
Transport. North also put a device in his office at the 
Old Executive Office Building. Each month newly 
keyed material was distributed to the group to enable 
them to communicate with each other in a secure 
manner. ^^ 

Throughout January 1986, North also pursued dis- 
cussions with Steele and CIA representatives about 
arrangements for using the Airbase and for establish- 
ing the airstrip at Santa Elena. North's notebooks 
indicate a series of telephone conversations with 
Steele relating to obtaining the permission of Central 
American officials for the resupply aircraft to operate 
from the Airbase.®^ 

During that same period. North wrote to Poin- 
dexter that General John Galvin, Commander of U.S. 
Southern Command, was "cognizant of the activities 
under way in both Costa Rica and at [the Airbase] in 
support of the DRF [Democratic Resistance Force]." 
North added, "Gen. Galvin is enthusiastic about both 
endeavors." According to North's notebooks. North, 
Poindexter, and others met with Galvin on January 
16 to discuss, among other items, "covert strategy/ 
training/planning/support" for the Nicaraguan Resist- 
ance. General Galvin testified that he knew of the air 
resupply operation, but believed that it was being 
financed and run by private individuals, not the NSC 
staff" 

Meanwhile, North continued his discussions on the 
details of construction of the airstrip at Santa Elena. 
His discussions covered arrangements for fuel storage 
on site, the construction of guard quarters and even 
instructions to the bulldozer operation.®* 

In February, after consultation with Enrique Ber- 
mudez and various commanders connected with the 
Southern front. North and Secord decided to deliver 
approximately 90,000 pounds of small arms and am- 
munition geared for airdrop to the FDN, which also 
could be delivered to the Southern front. This was 



the first delivery of arms that North and Secord pro- 
vided to the Contras without payment from them and 
out of funds that had been contributed directly to the 
Enterprise."^ 

Yet by February, supply problems still plagued the 
operation. There was only one plane at the Airbase, 
and it was damaged. On its arrival flight, the C-7 
plane had developed mechanical problems. The crew 
jettisoned spare parts, and even training manuals, but 
the plane crash-landed nonetheless.'"' 

Faced with the Contras' requests for resupply and 
lacking aircraft to perform the job. North sought to 
deliver arms to the Contra soldiers using aircraft that 
had been chartered by NHAO to take humanitarian 
supplies from the United States to Central America.'" 

In February 1986, North called Gadd at home and 
told him to charter an NHAO flight from New Orle- 
ans to the Airbase in Central America. Once the plane 
arrived at the Airbase, it was directed to an FDN 
base where ammunition and lethal supplies were 
loaded and airdropped to the FDN. NHAO later re- 
fused to pay for the portion of the charter that cov- 
ered the delivery of lethal supplies.''^ 

In the South, however, the Contra forces remained 
without necessary supplies. In part, the problem was 
logistical: the Costa Rican airfield was not yet open 
and the only planes available at the Airbase could not 
make the flight to southern Nicaragua. The problem 
was also political: the FDN did not want to share its 
scarce resources with the southern forces. In early 
February, Owen warned North that "our credibility 
will once again be zero in the south" if deliveries did 
not soon start: 

[T]hey have been promised they will get what 
they need. Who is to be the contact for these 
goods and who is to see that they are delivered? 
A critical stage is being entered in the Southern 
Front and we have to deliver.'^ 

In early March, North asked Owen to travel with 
another NHAO humanitarian aid flight that, upon un- 
loading, would be reloaded at the Enterprise's ex- 
pense with lethal supplies for airdrop to the Southern 
front. However, the FDN never produced the muni- 
tions promised, even though CIA officials tried to 
persuade the FDN to release the munitions. The mis- 
sion thus resulted in failure. As Owen later wrote 
North, "the main thing to be learned from this latest 
exercise is . . . the FDN cannot be relied upon to 
provide material in a timely manner."''* 

The President Meets a Costa Rican 
Official 

In March 1986, a meeting North arranged for a Costa 
Rican Official with President Reagan at the White 
House occurred. The meeting was simply a photo 



65 



Chapter 3 



opportunity, attended as well by North and Cas- 
tillo.'s 

After the Oval Office visit, North asked the Official 
to meet with Secord that afternoon to work out some 
issues concerning the airstrip. At the meeting, the 
Official asked Secord for a letter, which the Official 
dictated, to the effect that the Costa Rican Civil 
Guard maintain control of the airstrip, have access to 
it for training purposes, and that ecological and envi- 
ronmental considerations apply. '^ 

Lethal Deliveries Begin 

By the end of March 1986, the C-7 Caribou aircraft 
was operating and flights finally began to ferry lethal 
and nonlethal supplies for the FDN in the North. But 
the problem of resupplying the Southern front re- 
mained.'^ 

On March 28, Owen wrote to North that he, 
Steele, Rodriguez, and Quintero reached a consensus 
on what steps had to be taken to successfully resupply 
the South: lethal and nonlethal supplies should be 
stockpiled at the Airbase; the Caribou or better yet a 
C-123 should load at the Airbase, deliver to the 
South, and refuel at Santa Elena on the return to the 
Airbase; and the Southern Air Transport L-lOO 
should be used until Santa Elena was prepared to 
refuel the C-7 and C-123.'8 

While Gadd completed the purchase of a second C- 
7 Caribou and the first C-123 in early April, North 
responded to the growing needs of the southern 
forces. Between early April and April 11, North co- 
ordinated virtually every aspect of the first drop of 
lethal supplies into Nicaragua by way of the Southern 
front. He was in regular communication with Secord 
and others to ensure that the drop was successful. 
KL-43 messages among the planners involved in this 
drop show both the level of detail in which North 
was concerned and the coordination among various 
U.S. Government agencies to ensure that the drop 
succeeded. The first message, from North to Secord, 
established the essential elements of the drop: 

The unit to which we wanted to drop in the 
southern quadrant of Nicaragua is in desperate 
need of ordnance resupply. . . . Have therefore 
developed an alternative plan which [Chief of the 
CIA's CATF] has been briefed on and in which 
he concurs. The L-lOO which flies from MSY to 
[an FDN base] on Wednesday should terminate 
it's NHAO mission on arrival at [the FDN base]. 
At that point it should load the supplies at [the 
Airbase] which— theoretically [the CIA's Chief 
of Station in the Central American country] is 
assembling today at [the FDN base]— and take 
them to [the Airbase]. These items should then be 
transloaded to the C-123. . . . On any night be- 
tween Wednesday, Apr 9, and Friday, Apr 11 
these supplies should be dropped by the C-123 in 
the vicinity of [drop zone inside Nicaragua]. The 



A/C shd penetrate Nicaragua across the Atlantic 
Coast. ... If we are ever going to take the 
pressure off the northern front we have got to 
get this drop in — quickly. Please make sure that 
this is retransmitted via this channel to [Castillo], 
Ralph, Sat and Steele. Owen already briefed and 
prepared to go w/ the L-lOO out of MSY if this 
will help. Please advise soonest.'^ 

Secord and Gadd arranged to lease the L-lOO plane 
from Southern Air Transport. Secord transmitted the 
following instructions to Quintero on April 8: 

CIA and Goode [North's code name] report 
Blackys [a Southern front military commandante] 
troops in south in desperate fix. Therefore, 
[CIA's Chief of Station in a Central American 
country] is supposed to arrange for a load to 
come from [the FDN base] to [the Airbase] via 
LlOO tomorrow afternoon. . . . Notify Steele we 
intend to drop tomorrow nite or more like Thurs 
nite. . . . Meanwhile, contact [Castillo] via this 
machine and get latest on DZ [drop zone] co- 
ordinates and the other data I gave you the 
format for. . . . CIA wants the aircraft to enter 
the DZ area from the Atlantic. . . .*" 

On April 9, Secord relayed to North that "all co- 
ordination now complete at [the Airbase] for drop — 
[Castillo] has provided the necessary inputs."*' After 
the Southern military commanders relayed the drop 
zone information to Castillo's communications center, 
Castillo sent a cable to the Chief of the CATF at CIA 
headquarters, requesting flight path information, vec- 
tors based on the coordinates of the drop zone, and 
hostile risk evaluation to be passed to the crew. CIA 
headquarters provided the information, as it did on 
three other occasions that spring.*^ 

After Secord's April 9 message, the L-lOO arrived 
and was loaded with a considerable store of munitions 
for airdrop to the South on April 10. Castillo had 
provided the location of the drop zone to Quintero, 
and Steele told the Southern Air Transport crew how 
to avoid Sandinista radar. Despite North's intricate 
planning, the L-lOO was unable to locate the Contra 
forces. The maiden flight to the Southern front had 
failed.®^ 

On April 11, the L-lOO tried again, airdropping 
more than 20,000 pounds of lethal supplies inside 
Nicaragua. This was the first successful drop to the 
southern forces. Before the plane left, Steele checked 
the loading of the cargo, including whether the as- 
sault rifles were properly padded. Castillo reported 
the drop to North in glowing terms: 

Per UNO South Force, drop successfully com- 
pleted in 15 minutes. . . . Our plans during next 2- 
3 weeks include air drop at sea for UNO/KISAN 
indigenous force . . . maritime deliveries NHAO 



66 



Chapter 3 



supplies to same, NHAO air drop to UNO South, 
but with certified air worthy air craft, lethal drop 
to UNO South. . . . My objective is creation of 
2,500 man force which can strike northwest and 
Unk-up with quiche to form sohd southern force. 
Likewise, envisage formidable opposition on At- 
lantic Coast resupplied at or by sea. Realize this 
may be overly ambitious planning but with your 
help, believe we can pull it off*'* 

The Resupply Operation Steps Up 
Its Activities 

While the April 1 1 mission to the South was the only 
successful airdrop in that region, the air resupply op- 
eration was, by April, operating regular, almost daily, 
supply missions for the FDN in the North. Most 
missions delivered supplies from the main FDN base 
to the FDN's forward-operating positions. Other 
flights dropped lethal cargo to units operating inside 
Nicaragua. Many of these flights were helped infor- 
mally by CIA field officers on the ground, who pre- 
pared flight plans for aerial resupply missions, briefed 
the air crews on Nicaraguan antiaircraft installations, 
and provided minor shop supplies to the mechanics. 
On one occasion, the CIA operations officer at an 
FDN base flew Ian Crawford, a loadmaster for the 
resupply operation, in a CIA helicopter with lethal 
supplies on board over the border area so Crawford 
could see where he and his crew were airdropping 
cargo three to four times daily. However, the resup- 
ply operation was not without problems. Poor mainte- 
nance hampered the performance of the aircraft and a 
lack of a closely knit organization contributed to the 
Enterprise's troubles.*^ 

Because of these problems, North and Secord flew 
to the Airbase in Central America on April 20 for a 
one-day meeting with the Commander, Steele, Rodri- 
guez, and the military leadership of the FDN. During 
the meeting. North and Secord emphasized the impor- 
tance of the Southern front and complained about the 
difficulty of getting stocks out of the FDN, thus pre- 
paring the FDN for the future storage of Southern 
front supplies directly at the Airbase. There was some 
misunderstanding as to whether the FDN were the 
legal owners of the aircraft, but North and Secord 
stated that the aircraft belonged to a private company 
dedicated to support all the Contras, both the FDN 
and the Southern front. In turn, the FDN leaders 
expressed their dissatisfaction with the C-7 aircraft. 
They were simply "too old" to operate effectively, 
Bermudez told them. He wanted bigger and faster 
aircraft. North responded that if he had the money to 
buy better aircraft, he would, but they were financing 
the operation with donated funds. *^ 

The possible purchase for the FDN of Blowpipe 
surface-to-air missiles to use against the Sandinista 
HIND-D helicopters was also raised. In December 



1985, Secord and Calero had tried to purchase Blow- 
pipes from a Latin American country. The transaction 
proceeded to the point where the Enterprise placed a 
deposit on the missiles. But necessary approvals for 
the sale could not be secured, even though North 
enlisted the help of Poindexter and of McFarlane, 
who remained in contact with North by PROF ma- 
chine even after he left the Government.*' 

After the April 20, 1986, meeting, the first shipment 
of lethal supphes by the Enterprise for the Southern 
front arrived at the Airbase to be stored by the resup- 
ply operation. At North's request, the Enterprise paid 
David Walker $110,000 for two foreign pilots and a 
loadmaster to fly missions inside Nicaragua so that 
U.S. citizens would not be exposed to possible shoot- 
down or capture.** 

Secord took another step to overcome the resupply 
problems. He recruited Col. Robert Dutton to 
manage the resupply operation on a daily basis. 
Secord knew Dutton from their active duty together 
in the U.S. Air Force, where Dutton had considerable 
experience in managing covert air resupply oper- 
ations. Gadd's role was phased out and on May 1, 
Dutton, retiring from the Air Force, was placed in 
operational command of the resupply operation, re- 
porting to Secord, and increasingly over time, direct- 
ly to North on all operational decisions of conse- 
quence.*® 

At the outset, Secord emphasized to Dutton that 
the air program would receive very little in the way 
of additional funding. Dutton was instructed to 
manage the operation with existing equipment and 
conserve resources carefully as the money provided 
was all "donated." ^° 

When Dutton took over, he traveled to Central 
America to assess the operation. There were approxi- 
mately 19 pilots, loadmasters and maintenance opera- 
tors at the Airbase. In addition, Felix Rodriguez and 
his associate Ramon Medina coordinated with the 
Commander and oversaw the local fuel account. 
Dutton also examined the aircraft — two C-7s, one C- 
123, and the Maule — and found that, indeed, they 
were in "very poor operating condition." ®' 

The resupply operation at the Airbase maintained a 
warehouse stocked with an assortment of munitions — 
light machine guns, assault rifles, ammunition, mor- 
tars, grenades, C-4 explosive, parachute rigging, uni- 
forms, and other military paraphernalia. The crews 
lived in three safe houses and used a separate office 
with maps and communications equipment. By May, 
the Santa Elena airstrip, along with emergency fuel 
storage space and temporary housing, was finished.®^ 

Because Secord (and later North) had impressed on 
Dutton the need for strict accountability given the 
limited nature of the donated funds, Dutton enforced 
a stringent set of accounting requirements: Expendi- 
tures had to be carefully documented and all missions 
fully reported. Moreover, Dutton devised an organi- 



67 



Chapter 3 



zation, based on a military hierarchy, that delineated 
each person's role and responsibility. Dutton also de- 
fined the legal constraints on the organization as he 
had understood from Secord: no Contra combatants 
could be airdropped into battle. These new require- 
ments of accountability, reporting, and organization 
were followed for the remaining life of the oper- 
ation.^^ 

Despite these impending changes, North wrote to 
Poindexter expressing his weariness and warning that 
without Congressional authorization for CIA involve- 
ment, "we will run increasing risks of trying to 
manage this program from here with the attendant 
physical and political liabilities. I am not complaining, 
and you know that I love the work, but we have to 
lift some of this onto the CIA so that I can get more 
than 2-3 hrs. of sleep at night." ^* 

Dutton's Reorganization Plan 

Following his first trip to Central America in May, 
Dutton began drafting a reorganization plan for the 
Enterprise "to outline in one document exactly what 
the basic operating locations were, and who the key 
people were and what their responsibilities were."®^ 
The plan was reviewed, edited, and approved by both 
Secord and North.^^ The plan stated that "B.C. 
Washington has operational control of all assets in 
support of Project Democracy."^' While Secord 
maintained that B.C. Washington meant "primarily 
myself and Robert Dutton," ^^ Dutton testified that 
"B.C. Washington" described North and Secord. ^^ 

According to Dutton, the purpose of the reorgani- 
zation plan was to disguise the role of Secord and 
North. The lawsuit brought by freelance journalisits 
Tony Avirgan and Martha Honey had named Secord 
and was generating publicity. North and Secord, ac- 
cording to Dutton, were concerned that Rodriguez, 
who had become disaffected, was providing informa- 
tion about the operation to Avirgan and Honey. 
North and Secord, therefore, wanted to create the 
pretense that they "had withdrawn from the oper- 
ation, they were no longer part of it, and this new 
company called B.C. Washington, which represented 
the donators [sic], therefore the benefactors — that 
they had come in to take over the operation." '°° 
But, according to Dutton, "the fact was that Colonel 
North and General Secord's relationship with the or- 
ganization had not changed one bit.""" As Dutton 
acknowledged, "B.C. Washington" was a facade that 

North and Secord developed in order to cloak their 
role. '"2 

The Southern Front Resupply 

On May 24, 1986, the day after Dutton left Central 
America, another planeload of munitions, paid for by 
the Enterprise arrived at the Airbase for the Southern 
front. Because the FDN was reluctant to make arms 
available to the independent southern Contra forces, 



North and Secord decided in April 1986 that arms 
and other supplies would now be stored under the 
control of the Enterprise at the Airbase. This second 
direct shipment of arms to the Airbase to be delivered 
to the Southern front was part of the new plan. To- 
gether with the late April shipment, there were now 
more than $1 million in arms at the Airbase available 
for airdrop to the Southern front forces. '°^ 

The warehouse, however, was not large enough to 
accommodate the new munitions. Dutton had to ask 
the Commander for permission to expand the ware- 
house, while seeking North's approval for the addi- 
tional cost of construction. After the Commander au- 
thorized the expansion. North relayed to Secord his 
approval for construction to proceed.'"* 

With new arms and an expanded warehouse, 
Dutton had the material to deliver to the Southern 
front. However, while regular deliveries with the C-7 
continued to the FDN in the North, no flights were 
being made to the South. North told Dutton that the 
Southern forces were adding 150 new recruits a day, 
but that they had neither enough weapons for the 
fighters nor enough medicine to treat the growing 
problem of mountain leprosy.'"^ 

On June 2, Castillo called North and told him that 
drops to the southern units were needed as soon as 
possible. Castillo advised North that Quintero had all 
the necessary vector information to make the drops. 
Following Castillo's request, two deliveries were pre- 
pared for the South totalling about 39,000 pounds, 
and on June 9, after coordinating with Castillo the 
location and needs of the Southern troops, the C-123 
airplane tried to make an air drop. However, the 
plane could not locate the troops inside Nicaragua, 
and when it landed at the Santa Elena airstrip, it got 
stuck in the mud.'°^ 

The stuck plane caused consternation at the U.S. 
Embassy in Costa Rica. The month before, Oscar 
Arias had been inaugurated as the new President of 
Costa Rica. The new Costa Rican Government had 
told Ambassador Tambs that it had instructed that the 
airstrip not be utilized. Tambs, in turn, told Castillo to 
notify North and Udall Corporation that the airstrip 
had to be closed. Now Tambs was faced with explain- 
ing to President Arias why a munitions-laden airplane 
was stuck in the mud at Santa Elena. A plan was 
devised by Tambs, Castillo, and others at the U.S. 
Embassy to borrow trucks from a nearby facility to 
free the aircraft, but the plane was able to take off 
before the plan could be carried out.'"'' 

The needs of the FDN still had to be met. On June 
10, North met with Calero who requested that the 
Caribou planes fly more missions inside Nicaragua. 
The Enterprise was just about to purchase additional 
arms for the FDN.'"^ However, the most pressing 
need. North wrote to Poindexter, was neither money 
nor arms, but rather: "to get the CIA re-engaged in 
this effort so that it can be better managed than it 



68 



Chapter 3 



now is by one slightly confused Marine Lt. Col." 
North further reported to Poindexter that "several 
million rounds of ammo are now on hand . . . Criti- 
cally needed items are being flown in from Europe to 
the expanded warehouse facility at [the Airbase]. At 
this point, the only liability we still have is one of 
Democracy, Inc.'s airplanes is mired in the mud (it is 
the rainy season down there) on the secret field in 
Costa Rica." ^°^ 

The decision to purchase additional millions of dol- 
lars in arms for the FDN was taken after the Enter- 
prise learned from Bermudez and the FDN leaders 
that FDN stocks were getting low. Hundreds of tons 
of East European weapons were paid for in three 
installments between June 27 to July 16. The ship- 
ment, the last arms purchased for the Contras by 
North and Secord, never reached them.''" 

Despite the difficulties, North wanted to continue 
to airdrop supplies, especially to the South. As soon 
as the C-123 was freed from the mud, it embarked on 
another mission with a full lethal load for the south- 
ern troops. But this time, fog covered a mountain, and 
William Cooper, the chief pilot for the resupply oper- 
ation, hit the top of a tree, knocking out an engine. 
After the plane reached the drop zone, Cooper could 
not locate the troops, m 

Communicating by KL-43, North told Castillo that 
to facilitate further airdrops to the southern forces, he 
had "asked Ralph [Quintero] to proceed immediately 
to your location. I do not think we ought to contem- 
plate these operations without him being on scene. 
Too many things go wrong that then directly involve 
you and me in what should be deniable for both of 
us.""^ 

Meanwhile, North made further plans to ensure re- 
supply to the Southern front. With the C-123 dam- 
aged in flight, the remaining C-7 aircraft could only 
make the trip to the South if it were able to refuel 
before the return trip, and the Santa Elena strip was 
not operational. North asked Dutton to look for an- 
other C-123, and with Tambs' assistance, arranged for 
a new flight pattern in which the empty C-7 aircraft, 
after making its drops, refueled at the San Jose Inter- 
national Airport in Costa Rica. The new refueling 
plan permitted two small drops of supplies to the 
Southern front. But, by the third week in July, 
$870,000 worth of munitions were still sitting at the 
Airbase waiting for the Southern forces. Despite all 
the efforts, the vision of a year before for the South- 
ern front had yet to become a reality. ''^ 

Alternative Funding Sources: 
North's Response to 
Congressional Action 

The Administration continued to seek an appropria- 
tion for the CIA to resume its program of covert 
assistance to the Contras. In early May, according to 



Poindexter, the President told him, "If we can't move 
the Contra package before June 9, I want to figure 
out a way to take action unilaterally to provide assist- 
ance." Poindexter wrote his deputy, Donald Fortier, 
"The President is ready to confront the Congress on 
the Constitutional question of who controls foreign 
policy. . . . George [Shultz] agrees with the President 
that we have to find some way and we will not pull 
out." ''* 

North, who received a copy of Poindexter's PROF 
note, responded immediately with a suggestion: The 
Contras should capture some territory inside Nicara- 
gua and set up a provisional government. The Presi- 
dent would respond by recognizing the Contras as the 
true government and provide support. Asked by Poin- 
dexter whether he had talked to Casey about his plan, 
North replied, "Yes, in general terms. He is support- 
ive, as is Elliott [Abrams]. It is, to say the least, a 
high risk option — but it may be the only way we can 
ever get this thing to work."''^ 

The Money: Third Country Assistance 

By the end of April 1986, the Contras' funding 
needs were critical. North told Fortier: "We need to 
explore this problem urgently or there won't be a 
force to help when the Congress finally acts."''® The 
same day, North wrote to McFarlane that "the resist- 
ance support acct. is darned near broke," and asked 
for assistance in filling the gap: 

Any thoughts where we can put our hands on a 
quick $3-5M? Gaston [Sigur] is going back to his 
friends who have given $2M so far in hopes that 
we can bridge things again, but time is running 
out along w/ the money. So far we have seven 
a/c working, have delivered over $37M in sup- 
plies and ordnance but the pot is almost empty. 
Have told Dick [Secord] to prepare to sell the 
ship first and then the a/c as a means of sustain- 
ing the effort. Where we go after that is a very 
big question."' 

An Aborted Solicitation 

Despite North's reference to "Gaston," it was not 
Gaston Sigur, but Singlaub who went to the Far East 
in May 1986 in search of Contra aid. This time, Sing- 
laub wanted to be sure that he would receive the 
official U.S. "signal" these countries had previously 
told him was a condition to their aid. Before he trav- 
eled to Countries 3 and 5, Singlaub spoke to Elliott 
Abrams at the State Department and, according to 
Singlaub, explained that he wanted to know "how the 
U.S. would send a signal." Singlaub testified that 
Abrams told him that he (Abrams) would send the 
signal."* 

Singlaub arrived in Country 3, but before he could 
meet with his contact, Abrams told him to stop the 
plan. When Singlaub and Abrams later met, Singlaub 



69 



Chapter 3 



testified that Abrams told him that the soHcitation 
was "going to be handled by someone at the highest 
level." Singlaub assumed that it would be someone 
from the White House, although Abrams never gave 
him a specific name. "^ However, Abrams disputed 
Singlaub's testimony. While acknowledging that he 
spoke to Singlaub about Singlaub's proposed solicita- 
tion, Abrams testified that he never agreed to provide 
to Singlaub a U.S. Government signal for the solicita- 
tion.'^" Abrams' account is supported by the testimo- 
ny of Richard Melton, at the time Director of the 
Office of Central American Affairs at the State De- 
partment, who was present during Abrams' conversa- 
tions with Singlaub.'^' 

The May 16, 1986, NSPG Meeting 

On May 16, 1986, the President and his advisers 
discussed the issue of obtaining funds from third 
countries. In a memorandum to the President for the 
National Security Planning Group (NSPG) meeting, 
North suggested three ways to "bridge the gap" in 
funding: (1) a reprogramming of funds from DOD to 
the CIA ($15 million in humanitarian aid); (2) a Presi- 
dential appeal for private donations by U.S. citizens; 
and (3) a "direct and very private Presidential over- 
ture to certain Heads of State." The last source of 
funds would, as North put it, eliminate the need "to 
endure further domestic partisan political debate." '^^ 

Director Casey opened the meeting and explained 
the Contras' needs. The good news, he told the Presi- 
dent, was that the Contras had infiltrated more troops 
into Nicaragua than ever before, and the troops were 
now being resupplied by air. '^^ The "bad news" was 
that the Resistance was operating under the assump- 
tion that it would receive new funding at the end of 
May. Only $2 million remained from the humanitarian 
assistance appropriation.'^* 

Later in the discussion. Secretary Shultz returned 
to the Contras' need for funds. Noting the unlikeli- 
hood of an immediate Congressional appropriation 
and the improbability that the intelligence committees 
could be persuaded to reprogram funds. Secretary 
Shultz suggested that third countries be approached 
for humanitarian aid. North added that the Intelli- 
gence Authorization Act of 1986 permitted the State 
Department to approach other governments for non- 
military aid.'^^ 

No one at the meeting discussed the fact that Coun- 
try 2 had already given $32 million to the Contras, 
including a $24 million donation committed to the 
President personally. Nor was it mentioned that sev- 
eral Far Eastern countries had been approached for 
donations or that Country 3 had given $2 million only 
6 months earlier. Instead, Shultz was instructed to 
prepare for review by the President a list of countries 
that could be solicited. 

Later that day, North told Poindexter that the ur- 
gency of the need had lessened: The Enterprise had 



that day received the last $5 million of the $15 million 
arms sales to Iran. North wrote Poindexter: "You 
should be aware that the resistance support organiza- 
tion now has more than $6 million available for imme- 
diate disbursement. This reduces the need to go to 
third countries for help." '^^ North later testified that 
he wrote the message because "it was important he 
[Poindexter] understand that Secretary Shultz didn't 
need to go out that afternoon and go ask for addition- 
al help." Poindexter testified that he understood the 
$6 million to which North referred was coming from 
the Iranian arms sales, but he did not tell the Presi- 
dent the $6 million was available. North testified that 
as he was leaving the NSPG meeting, he mentioned 
to Poindexter that Iran was supplying $6 million for 
the Contras, but that he did not know whether he 
was overheard. '^^ 

North wrote Poindexter that he did not know 
whether all those present at the NSPG meeting, such 
as Chief of Staff Donald Regan, knew of "my private 
U.S. operation." On the other hand. North noted to 
Poindexter, "the President obviously knows why he 
has been meeting with several select people to thank 
them for their 'support for Democracy' in 
CentAm."'28 

North also realized that disclosure of a significant 
sum of money earmarked for Contra support, but only 
made possible by arms sales to Iran, could prove 
politically embarrassing. 

The more money there is (and we will have a 
considerable amount in a few more days) the 
more visible the program becomes (airplanes, 
pilots, weapons, deliveries, etc.) and the more 
inquisitive will become people like Kerry, 
Barnes, Harkins, et al. While I care not a whit 
what they may say about me, it could well 
become a political embarrassment for the Presi- 
dent and you. 

He suggested that the problem could be "avoided 
simply by covering it with an authorized CIA pro- 
gram undertaken with the $15M" reprogrammed 
funding from the DOD budget.'^* 

Poindexter approved North's recommendation to 
seek the $15 million reprogramming and responded to 
his concerns: "Go ahead and work up the paper 
needed for the $15M reprogramming. ... I under- 
stand your concerns and agree. I just didn't want you 
to bring it up at NSPG. I guessed at what you were 
going to say. Don Regan knows very little of your 
operation and that is just as well." By May 28, how- 
ever, it was clear that "the votes were not there," and 
the reprogramming effort was dropped in favor of a 
campaign to obtain Congressional support for the 
$100 million aid package.'^" 

Meanwhile, the concerns that prompted North's si- 
lence at the May 16 NSPG meeting persisted: Who 
knew about the secret aid third countries had given 



70 



Chapter 3 



earlier? In the prior 2 years, members of the NSC 
staff had approached several countries for fmancial 
assistance to the Contras. Of these, two had provided 
funds or other forms of assistance. Those solicitations 
were made without the knowledge of the Secretary of 
State and other senior diplomatic officials. 

The December amendment expressly provided that 
soliticitations for humanitarian aid were not preclud- 
ed. Now, Secretary Shultz and others were discussing 
making approaches to countries that had already con- 
tributed. Poindexter and North became concerned 
that their prior actions would be uncovered. 

On June 10, North wrote Poindexter, "[A]t this 
point, I'm not sure who on our side knows what. 
Elliott has talked to Shultz and had prepared a paper 
re going to [Country 2 and Country 3] for contribu- 
tions. Elliott called me and asked 'where to send the 
money.'" North asked Abrams to "keep quiet" until 
he talked to Poindexter. North added: 

At this point I need your help. As you know, I 
have the accounts and the means by which this 
thing needs to be accomplished. I have no idea 
what Shultz knows or doesn't know, but he 
could prove to be very unhappy if he learns of 
the [Country 2 and 3] aid that has been given in 
the past from someone other than you. Did RCM 
[McFarlane] ever tell Shultz. ^^' 

North recommended that Poindexter and McFar- 
lane meet to discuss "how much Sec Shultz does or 
does not know abt [Country 2 and 3] so that we don't 
make any mistakes." '^^ Poindexter declined to 
follow North's advice: "To my knowledge Shultz 
knows nothing about the prior financing. I think it 
should stay that way." "'^ 

Nonetheless, McFarlane informed Secretary Shultz. 
As the Secretary described the event, on June 16, 
1986, he received a telephone call on a secure phone 
from McFarlane, who had by then been out of the 
Government for approximately 6 months. In a con- 
versation that occurred completely out of context and 
long after the donation had been made, McFarlane 
told Secretary Shultz about the Country 2 donation to 
the Contras. '3* 

Soon thereafter, Abrams recommended Brunei as a 
likely country from which to seek humanitarian assist- 
ance for the Contras. As Poindexter put it, "[t]hey 
have lots of money." '^^ Brunei also qualified for 
another reason. The Secretary of State did not want 
to be beholden to any country that was a recipient of 
U.S. aid.'^® Brunei was not. Originally, the Secretary 
of State was to make the approach during a meeting 
with the Sultan of Brunei in June. Before Secretary 
Shultz left, Abrams asked North for a Contra account 
to which the money could be sent. North directed his 
secretary to prepare an index card with the account 
number on it. North told Abrams that the account 
was controlled by the Contras and Abrams so in- 



formed Secretary Shultz. •^'^ Following Poindexter's 
instructions. North did not reveal that the NSC staff 
"had access to the accounts." '^^ North gave the 
index card to Abrams, who gave it to the Secretary 
of State. The Secretary decided, however, that he 
would discuss the general issue of Central America 
with the Sultan but that he would not make an actual 
solicitation. The card was not used on that trip. '^® 

On August 8, 1986, Abrams met in London with a 
representative of the Government of Brunei. In an 
unusual occurrence for Abrams, he traveled under an 
alias. The two men first met at a London hotel, then 
walked in a nearby park where Abrams requested $10 
million in bridge financing for the Contras. Asked by 
the official what Brunei would receive in return, 
Abrams responded, "Well, . . . the President will 
know of this, and you will have the gratitude of the 
Secretary and of the President for helping us out in 
this jam."i*° The official persisted, asking, "What 
concrete do we get out of this?" Abrams responded, 
"You don't get anything concrete out of it." Abrams 
then gave the account number that he had received 
from North to the Brunei official.'*' 

Although the Sultan of Brunei eventually trans- 
ferred the $10 million, the funds never reached the 
account for which they were intended. North testified 
that he had intended to give Abrams the number of 
the Lake Resources account controlled by Secord and 
Hakim, but the account numbers had been inadvert- 
ently transposed by North or by his secretary, Fawn 
Hall.'*2 

Felix Rodriguez Becomes Disaffected 

Shortly after North traveled to Central America in 
late April 1986, Rodriguez decided to leave Central 
America. Rodriguez testified: "I don't know if I got a 
sixth feeling or something, but after I saw the people 
in there, I didn't feel comfortable with it and I 
thought we had better leave." Rodriguez informed 
Steele, citing fatigue as the reason for his depar- 
ture. '*» 

Rodriguez met with Vice President Bush in Wash- 
ington on May 1. He had arranged the meeting 
through the Vice President's National Security Advis- 
er, Donald Gregg. The appointment scheduling memo 
for the meeting states: "To brief the Vice President 
on the status of the war in [a Central American coun- 
try] and resupply of the Contras." Members of the 
Vice President's staff gave conflicting testimony over 
how this description was printed on his schedule. Sam 
Watson, the Vice President's Deputy National Securi- 
ty Adviser, testified that the memo was inaccurate, 
and that he did not provide the description. Phyllis 
Byrne, the secretary who typed the memo, testified 
that Watson had given her the description.'** 

In the Old Executive Office Building on his way to 
the Vice President's office, Rodriguez stopped by to 
tell North he was leaving the operation. Rodriguez 



71 



Chapter 3 



said North asked him to remain in Central America, 
but he ignored the request. Escorted by Gregg and 
Watson, Rodriguez then met with the Vice Presi- 
dent.'** 

Before Rodriguez could tell the Vice President that 
he was leaving Central America, North arrived and 
told the Vice President about the good job Rodriguez 
was doing. Embarrassed to tell the Vice President he 
was going to leave, Rodriguez left the meeting with- 
out discussing his resignation, and eventually returned 
to Central America. Rodriguez testified that "at no 
point in any of this conversation did I ever mention 
doing anything that was remotely connected to Nica- 
ragua and the contras." Moreover, former Senator 
Nicholas Brady, who was also present at the meeting, 
testified that the resupply operation was not dis- 
cussed.'''® 

Rodriguez stayed in Central America, but his rela- 
tionship with Dutton became increasingly strained. 
According to Dutton, they disagreed on how the 
operation should be run. At the same time. North had 
his own reservations that Rodriguez was "something 
of a loose cannon" who might reveal the oper- 
ation.'"''' 

On June 8, Dutton complained about Rodriguez in 
a KL-43 message to North: "He now wants a $10K 
emergency fund that he will control. He also wants 
partial control of our fuel fund ($50K)." Cash funds 
translated into unaccountable slush funds so far as 
Dutton was concerned. Furthermore, with the estab- 
lishment of cash accounts, the resupply operation 
would be "losing control of one of the most critical 
portions of the operation, that is the money." '''^ 

Rodriguez was summoned to meet with North and 
Dutton in Washington on June 25. North began by 
showing Rodriguez the organizational plan drawn up 
by Dutton, in which Rodriguez was designated "liai- 
son officer." After North stated that he had intelli- 
gence that Rodriguez was compromising the oper- 
ation by talking over open, unsecured telephone lines, 
Rodriguez complained that the poor condition of the 
aircraft, the communications equipment, and the lack 
of adequate radar had endangered the pilots and crew 
on the flight which hit the mountain, even though on 
that flight, despite the fog, the pilot was able to locate 
the drop zone by using the aircraft's radar. North, in 
turn, offered Rodriguez $3,000 a month to stay in the 
operation, which Rodriguez later accepted. '■'^ 

Rodriguez testified that at the end of the meeting, 
he asked to see North alone. Rodriguez told North 
that he had learned "that people are stealing here," in 
particular Thomas Clines, a former associate of 
Edwin Wilson. Rodriguez expressed his concerns that 
arms were being sold at inflated prices. North disput- 
ed Rodriguez's conclusions and told Rodriguez that 
Clines was a patriot, and that he was not buying 
equipment, only helping to transport the goods. In 
fact, none of the arms furnished to the FDN and the 
Southern front since Rodriguez became involved in 



the operation were sold to the Contras. Instead, the 
Enterprise purchased arms with money obtained from 
the arms sales to Iran and private U.S. donors.'*" 
At the close of the meeting, according to Rodri- 
guez, North made one last comment. Congress was 
voting that day on the $100-million Contra aid legisla- 
tion, and the television in North's office carried the 
floor debate. According to Rodriguez, North looked 
at the television and said: "Those people want me but 
they cannot touch me because the old man loves my 
ass." North did not recall that part of his conversation 
with Rodriguez. That meeting was the last between 
the two.'*' 

New Legislation 

On June 25, 1986 the House approved the Adminis- 
tration's request for $100 million in Contra aid. Al- 
though the bill would not become law for another 3 
months, the vote ensured passage of the Contra aid 
legislation. The President announced at 11:30 a.m. 
that day that the vote "signalled] a new era of bipar- 
tisan consensus in American foreign policy. . . . We 
can be proud that we as a people have embraced the 
struggle of the freedom fighters in Nicaragua. Today, 
their cause is our cause." '*^ 

The $100 million aid package marked the first time 
in more than 2 years that the House had voted to 
provide lethal assistance to the Contras. By June 
1986, North had established air resupply to both the 
Northern and Southern fronts. The Enterprise had 
succeeded in flying lethal material to the Contra fight- 
ers inside Nicaragua; even Americans in the employ 
of North's organization were flying into that country, 
all financed by donated funds and proceeds from the 
Iranian arms sales overseen by North. None of 
North's activities were disclosed to Congress in ad- 
vance of the House vote. Only 1 month later, before 
the aid bill had been signed, Poindexter would write 
to Congress that the NSC was complying with the 
letter and spirit of the Boland Amendment.'*^ 

Selling the Assets to the CIA 

With the House vote in June, North's hopes to 
reengage the CIA in Nicaragua were on the verge of 
being realized. North was increasingly occupied with 
the Iran arms initiative, and he was anxious to give 
the Contra resupply operation back to the CIA. But 
North wanted the Enterprise to recoup its investment, 
and urged the CIA to buy the assets of the resupply 
operation in Central America.'** 

Secord had Dutton prepare a plan to present to the 
CIA. North wrote to Poindexter: 

We are rapidly approaching the point where the 
PROJECT DEMOCRACY [PRODEM] assets in 
CentAm need to be turned over to CIA for use 
in the new program. The total value of the assets 
(six aircraft, warehouses, supplies, maintenance 



72 



Chapter 3 



facilities, ships, boats, leased houses, vehicles, 
ordnance, munitions, communications equipment, 
and a 6520' runway on property owned by a 
PRODEM proprietary) is over $4.5M. 

All of the assets — and the personnel — are owned/ 
paid by overseas companies with no U.S. connec- 
tion. All of the equipment is in first rate condi- 
tion and is already in place. It wd be ludicrous 
for this to simply disappear just because CIA 
does not want to be "tainted" with picking up 
the assets and then have them spend $8-10M of 
the SIOOM to replace it — weeks or months later. 
Yet, that seems to be the direction they are head- 
ing, apparently based on NSC guidance. 

If you have already given Casey instructions to 
this effect, I wd vy much like to talk to you 
about it in hopes that we can reclaim the issue. 
All seriously believe that immediately after the 
Senate vote the DRF [Nicaraguan Democratic 
Resistance] will be subjected to a major Sandi- 
nista effort to break them before the U.S. aid can 
become effective. PRODEM currently has the 
only assets available to support the DRF and the 
CIA's most ambitious estimate is 30 days after a 
bill is signed before their own assets will be avail- 
able. This will be a disaster for the DRF if they 
have to wait that long. North predicted "disas- 
ter" if his plan was not followed. '^^ 

The plan drafted by Dutton at Second's request 
offered two options. The first was to sell the assets of 
the organization to the CIA at cost; the second would 
continue the operation on behalf of the CIA for a 
monthly fee. Although Dutton, Secord, and North 
differed in their public testimony over whose idea it 
was to include these two options (and Secord denied 
that he ever authorized a sale of the assets), Dutton's 
plan contemplated that the Enterprise would continue 
in operation. The plan indicated a preference for a 
sale because the funds generated would permit the 
Enterprise to engage in other covert action projects: 
"[W]e prefer option I with the proceeds from the sale 
going back into a fund for continued similar require- 
ments." '^* 

North testified that the idea to sell the Enterprise's 
assets to the CIA was Director Casey's. In a PROF 
note to Poindexter at the time. North said that the 
sale to the CIA would be the only way to finance 
purchases for the Contras prior to the time the Con- 
gressional appropriation became effective: 

Given our lack of movement on other funding 
options, and Elliot/[C/CATF's] plea for 
PRODEM [Project Democracy] to get food to 
the resistance ASAP, PRODEM will have to 
borrow at least $2M to pay for the food. That's 
O.K., and Dick is willing to do so tomorrow — 
but only if there is reasonable assurance that the 



lenders can be repaid. The only way that the 
$2M in food money can be repaid is if CIA 
purchases the $4.5M worth of PRODEM equip- 
ment for about $2.25M when the law passes. 

Concluding his efforts to "sell" the project. North 
offered to send Poindexter a copy of Dutton's "pro- 
spectus," or, as he wrote, "the PROJECT DEMOC- 
RACY status report. It is useful, nonattributable read- 
ing." '^' 

Poindexter responded that he had not given Casey 
any "guidance" against the sale and, indeed, that he 
approved of North's plan. Poindexter explained that 
he had told CIA Deputy Director Robert Gates "the 
private effort should be phased out," but he agreed 
with North and asked him to talk to Casey about the 
plan to sell Project Democracy to the CIA.'^* 

Clair George, the CIA Deputy Director for Oper- 
ations, testified that North asked him to buy the air- 
craft, but that he declined because their use in private 
resupply could result in criticism of the CIA. "I 
wouldn't buy those planes if they were the last three 
planes in Central America," he said.'^^ 

The Resupply Operation is Interrupted 

Relations between Felix Rodriguez and the resup- 
ply operation continued to deteriorate. Tensions in- 
creased when early in August a dispute erupted be- 
tween Secord's deputy, Rafael Quintero, and Rodri- 
guez. Ignoring Quintero's instructions not to use the 
aircraft, Rodriguez took an Enterprise-owned plane in 
Miami and fiew into the Airbase with a load of spare 
parts and medicine. By the time Rodriguez arrived in 
Central America, Quintero was claiming that the 
plane had been stolen. Quintero gave instructions to 
refuel and send the plane back to Miami, full of the 
supplies. Rodriguez ignored the order and told the 
crew to unload.'®" 

Rodriguez maintained that all the aircraft belonged 
to the FDN, and expressed his concern to the Com- 
mander that the Enterprise would pull out, taking the 
planes away from their rightful owners — the 
FDN.i^i On August 6, Dutton called North to tell 
him that Rodriguez "took C-123K from Miami." "^^ 
North later complained to Gregg, the Vice Presi- 
dent's National Security Adviser, that Rodriguez had 
"made off with an airplane," and asked him, "Will 
you call him and find out what the hell is going on?" 
Rodriguez told Gregg he had decided to tell Gregg 
"about what had been going on." '^^ 

Steele then called North to tell him that the "situa- 
tion was not good." Steele warned North there was 
no one on the "scene who can take charge," and that 
the Commander was becoming a "potential problem" 
because he believed that the aircraft "belong[ed] to 
the DRF [Democratic Resistance Forces]." Steele 
added that Rodriguez was "enroute to see Don 
[Gregg]." '«* 



73 



Chapter 3 



North sent his colleague and aide, Lt. Col. Robert 
Earl, to sit in on the Rodriguez-Gregg meeting. Brief- 
ing Earl before the meeting, North portrayed Rodri- 
guez as someone who had "insinuated himself into the 
organization and was giving rudder orders and it was 
not his place to do so." '^^ 

In the dispute with Rodriguez, Quintero had also 
accused Rodriguez of air piracy. Now, after confer- 
ring with Rodriguez, the Commander understood that 
he too was accused of air piracy, and feared the 
aircraft themselves would be taken. 

On August 8, Rodriguez met with Gregg and set 
out his allegations about the Secord group. Gregg 
noted the points Rodriguez made: "using Ed Wilson 
group for supplies"; "Felix used by Ollie to get 
Contra plane repaired . . ."; "a swap of weapons for $ 
was arranged to get aid for Contras, Clines and Gen- 
eral Secord tied in"; "Hand grenades bought for $3 - 
sold for $9." Gregg, according to Earl, expressed 
shock about the involvement of Clines. '^^ 

On August 12, Gregg convened a meeting to dis- 
cuss Rodriguez's allegations with a group of Adminis- 
tration officials involved in Central American policy- 
making: Steele; Ambassador Edwin Corr; Deputy As- 
sistant Secretary of State Walker; the Chief of the 
Central American Task Force; and from the NSC, 
Earl and Ray Burghardt. Gregg testified that he 
"went over the notes with the people who were 
there." Without mentioning North's involvement, 
Gregg emphasized that he considered Clines not reli- 
able but that he had faith in Rodriguez.'^' 

Gregg knew by this time that North was involved 
in the operation. Rodriguez had made that clear at his 
initial August 8 meeting, and Gregg's notes reflect 
that knowledge.'^* Gregg testified that at no time did 
he pass that information on to the Vice President. 
Gregg did not report the meeting, because he be- 
lieved it "was a very murky business. . . . We had 
never discussed the Contras. We had no responsibility 
for it. We had no expertise in it. I wasn't at all certain 
what this amounted to. ... I felt I had passed along 
that material to the organizations who could do some- 
thing about it, and I frankly did not think it was Vice 
Presidential level." '®^ 

The Resupply Operation Resumes 

Shortly after Gregg's August 12 meeting, Steele 
was scheduled to meet with Dutton in Washington to 
resolve the dispute with the Commander. Dutton had 
told Steele by KL-43 that "It is everyone's intent to 
continue to support the effort," but that the aircraft 
were owned by an independent company, not the 
FDN, in part so they could be used to support the 
Southern front forces as well as the FDN. Secord, 
too, insisted that the aircraft belonged to a private 
company. Earl, North's deputy, told Secord by KL- 
43 on August 13 that the crew should simply pull out 
because the threat of a lawsuit against the Command- 



er had "poisoned the atmosphere." Secord responded 
that there was more than "1 million dollars worth 
equipment" in Central America owned by the Enter- 
prise, which had no intention of abandoning them. 
Secord explained that the "threat of air piracy lawsuit 
has nothing to do with [the Commander]. This was 
comment made to VP by Ollie ref Max [Felix Rodri- 
guez] vice [the Commander]." "° 

Dutton later met with Steele in Washington and by 
the end of the meeting, Steele had agreed to help to 
solve the brewing "confrontation" between the Com- 
mander and the resupply operation.''" 

The warring parties reached an uneasy resolution 
after Steele returned to Central America. Steele took 
a more active role in overseeing the flights and was 
told to inform the Commander that, while the assets 
were made available to the Contra cause, they be- 
longed to a private company whose desire was to 
turn them over to the CIA once the Agency resumed 
Contra support. Steele felt that he would have trouble 
persuading the Commander to accept this position 
until he was assured that the CIA would continue to 
provide support. '^^ 

On August 22, Dutton was able to reassure Steele: 

Received new guidance through Goode [North] 
from his boss. We are to stay in full operation 
supporting the drops until 1 Oct. At that time 
NSC says that CIA will have been in operation 
approx. 1 month. The CIA will go to [The Cen- 
tral American government] and explain that they, 
the CIA, are now in control. ' ' ^ 

During the fall of 1986, problems continued in the 
resupply operation, but some success on both the 
Northern and Southern fronts was finally achieved. 
The resupply operation delivered more than 180,000 
pounds of lethal supplies to the Southern front in 
September alone."* 

In late August, North attended a Restricted Inter- 
agency Group meeting at which the Chief of the 
CATF and others were asked what steps the airlift— 
i.e., according to North, the "covert operation being 
conducted by this government to support the Nicara- 
guan Resistance" — should take now that the CIA was 
due to assume control. According to North, he de- 
scribed at that meeting the activities in which the 
Enterprise was engaged and sought approval from the 
Restricted Interagency Group to continue until the 
CIA could take over.'" While the Chief of CATF 
acknowledged that North discussed airdrops to the 
Contras, he testified that he did not recall North dis- 
cussing "his full service covert action program."'''* 

On August 22, Dutton met with Quintero and de- 
vised a new plan for Southern front resupply that he 
presented to North: The initial arrival over the drop 
zone should be at dusk; once the zone has been identi- 
fied by the pilots, repeated sequential drops would be 
made in the evening without communication to the 



74 



Chapter 3 



troops. Castillo agreed with the plan, as did Steele. 
North also approved it.'^^ 

On September 4, North met with Poindexter. North 
asked Poindexter for the "go/no go" on sequential air 
deliveries to the Southern forces. Shortly afterwards, 
North told Secord to implement the new drop plan 
and conduct a "force feed" operation to the South 
where all supplies would be delivered sequentially in 
accordance with Dutton's plan.'^* 

On September 9, Dutton flew with the crew in the 
second C-123 (now operational) inside southern Nica- 
ragua to attempt a lethal drop to the troops Castillo 
had identified. But this mission was unable to locate 
the troops, prompting Dutton to propose to North 
using two aircraft on each mission to increase deliv- 
ery potential once troops were located and to protect 
against increased Sandinista antiaircraft fire. Dutton 
also asked North for help on weather information and 
troop location. North approved the use of two air- 
craft and told Dutton to obtain weather information 
from Steele, and that he would speak to Castillo 
about troop locations. North cautioned Dutton not to 
personally fly inside Nicaragua again: The operation 
could not afford the exposure if the plane were shot 
down inside Nicaragua with Col. Robert Dutton at 
the controls.'''^ 

The pace of delivery stepped up. The resupply op- 
eration was finally becoming effective only weeks 
before the CIA would be back in the business. On 
September II, a lethal drop was successfully made to 
the South using the C-123 while the C-7 delivered 
more arms for the FDN in the northern regions. 
Dutton reported the success of the southern delivery 
to North. On the 12th, three aircraft made more de- 
liveries: a C-123 delivered 10,000 pounds to the South 
and a C-7 and a Maule delivered to the FDN. Sep- 
tember 13 was "a red letter day," Dutton wrote to 
North. All five aircraft fiew at the same time, with 
lethal loads dropped in both the North and South. 
"The surge is now in full force," Dutton relayed to 
North. The plan at last was working. '*° 

Things were going so well that Dutton advised 
North that an additional $20,000 in cash was needed 
for the fuel fund and that the "C-123 is now armed 
with HK-2 1/7.62 machine gun on the aft ramp, bring 
on the MI-24." In fact, before Dutton returned to 
Washington, he could report to North that "all troops 
should now have equipment. Will stand by for direc- 
tion from [Castillo]. He already told us not to send 
any more to [a Southern commandante] for a while. 
Never thought we would hear that." ^*' 

The "hand-to-mouth" operation that had limped 
along on limited resources for so long had, with the 
support of certain individuals, finally delivered the 
goods. Under North's direction, Dutton's operational 
control, Castillo's critical assistance in locating, dis- 
patching, and scheduling the needs of the Southern 
troops, and Steele's coordination with the Command- 
er, the South received arms, while deliveries contin- 



ued apace to the FDN in the North. Indeed, for the 
rest of September, lethal drops were successfully 
made to both the FDN and the Southern forces. 
North duly reported the operation's success to Poin- 
dexter.'*^ 

When Dutton returned from Central America later 
that month, he met with North. North asked him to 
arrange a 1-day trip to the region so that he could 
personally thank the pilots and crew. North told him, 
"Bob, you will never get a medal for this, but some 
day the President will shake your hand and thank you 
for it." '83 

Dutton had also prepared a photograph album de- 
picting the operation: the operational bases, drop 
zones, aircraft, munitions, and the crew replete with 
assault machine guns and other assorted weapons. 
Dutton showed the album to North, who liked it and 
said he wanted to show it to "the top boss."'*'* North 
testified that he sent the album to Poindexter to show 
to the President, but never heard further about the 
album. Poindexter testified that he did not show the 
album to the President.'*^ 

North Expands His Special Operations 

Even with the $100 million in appropriated funds 
becoming available in the near future. North tried to 
get other aid for the Contras. In May, Israeli Defense 
Minister Yitzhak Rabin had offered to provide Israeli 
military advisers for the Southern front. Although 
nothing came of this offer, North and Rabin met 
again in September and discussed an Israeli transfer of 
Soviet bloc weapons to the Contras. Rabin wanted 
"to know if we had any need for So v Bloc weaps and 
ammo he could make avail." Rabin asked whether 
North's ship, the Erria, had left the Mediterranean. 
When North responded that it was in Lisbon, Rabin 
suggested that it dock at Haifa and "have it filled w/ 
whatever they cd assemble" of a "recently seized 
PLO shipment captured at sea."'*® 

Poindexter sanctioned the Israeli arms offer: "I 
think you should go ahead and make it happen. It can 
be a private deal between Dick [Secord] and Rabin 
that we bless. . . . Keep the pressure on Bill [Casey] 
to make things right for Secord." Later, Poindexter 
cautioned "[ajbsolutely nobody else should know 
about this. Rabin should not say anything to anybody 
else except you or me." On September 15, North told 
Poindexter that "orders were passed to the ship this 
morning to proceed to Haifa to pick up the arms. 
Loading will be accomplished by Israeli military per- 
sonnel." '*^ 

Despite Poindexter's caution. North later recounted 
the offer in a memorandum briefing the President for 
a visit from Israeli Prime Minister Shimon Peres. 
North wrote that Prime Minister Peres was likely to 
raise certain sensitive issues, such as the transfer of 
Soviet bloc arms by the Israelis "for use by the Nica- 
raguan democratic resistance." North recommended: 



75 



Chapter 3 



"If Peres raises this issue, it would be helpful if the 
President thanked him since the Israelis hold consid- 
erable stores of bloc ordinance compatible with what 
the Nicaraguan resistance now uses." Next to this 
sentence, Poindexter penciled: "Rabin. Very tightly 
held." '88 

As another expansion of his special operations, 
North received an offer from a third party to engage 
in sabatoge and other activities inside Nicaragua, to 
be financed with Enterprise funds. Poindexter ap- 
proved the sabatoge plan, but instructed North not to 
become involved in conspiracy or assassinations.'*^ 
According to North, the plan was never implemented 
because North was dismissed. '®° 

The Operation Begins to Unravel: 
Disclosure of the Airstrip 

Along with others in the Administration, North had 
helped to prevent the disclosure of his operation to 
Congress. The extent of his involvement in Central 
America, however, made him open to exposure. Al- 
though the U.S. Congress was not told of North's 
role in supporting the Contras, Central American 
governments — including that in Managua — were 
aware of it. Eventually, one of those governments 
chose not to remain silent. 

Early in the morning on September 6, North 
learned that a Costa Rican official was threatening to 
hold a press conference announcing the existence of 
the Santa Elena airfield and alleging violations of 
Costa Rican law by North, Secord, and Udall Re- 
sources. North immediately called Assistant Secretary 
Abrams and told him that the press conference had to 
be stopped. Half an hour later. North had reached 
Ambassador Tambs and placed a conference call to 
Abrams.'^' 

President Arias was scheduled to visit the United 
States, and Abrams "instructed Tambs to advert to 
the visit in a way which made it clear to President 
Arias that his visit was at risk." Abrams testified, "It 
was supposed to be diplomatic, but the message was 
supposed to be clear." North's notes reflect the idea 
of a greater threat than the cancellation of a White 
House visit: "Conf call to Elliott Abrams and Amb. 
Lew Tambs; -Tell Arias; -Never set foot in W.H.; - 
Never get 5 [cents] of $80M promised by McPher- 
son." An hour or two later, Tambs had made the call 
(but did not threaten the cutoff of aid), and the press 
conference was cancelled. '^^ 

In his report to Poindexter, North exaggerated his 
own role in the crisis. In a PROF note. North told 
Poindexter he had personally forestalled the crisis by 
calling the President of Costa Rica and threatening to 
cut off aid. North conceded to Poindexter that he 
may have overstepped the bounds of his authority: "I 
recognize that I was well beyond my charter in deal- 
ing with a head of state this way and in making 



threats/offers that may be impossible to deliver." 
Poindexter responded: "Thanks, Ollie, you did the 
right thing, but let's try to keep it quiet." North 
admitted in his testimony that he had not called Presi- 
dent Arias. He claimed, instead, that the PROF mes- 
sage "was specifically cast the way it was to protect 
the other two parties engaged." '*^ 

The Costa Rican officials were delayed but not 
deterred by the call. On September 25, Costa Rican 
authorities held a press conference announcing the 
discovery of a "secret airstrip in Costa Rica that was 
over a mile long and which had been built and used 
by a Co. called Udall Services for supporting the 
Contras." Olmstead was named as the man who set 
up the airfield as a "training base for U.S. military 
advisors."'^'* 

North offered a "damage assessment" to Poin- 
dexter, assuring him that "all appropriate damage con- 
trol measures" had been undertaken to "keep USG 
[U.S. Government] fingerprints off this." He wrote to 
Poindexter: 

Udall Resources, Inc., S.A. is a proprietary of 
Project Democracy. It will cease to exist by 
noon today. There are no USG fingerprints on 
any of the operation and Olmstead is not the 
name of the agent — Olmstead does not exist. We 
have removed all Udall Resources ... to another 
account in Panama, where Udall maintained an 
answering service and cover office. The office is 
now gone as are all files and paperwork. '^^ 

The New York Times picked up the story. North, 
with assistance from Abrams and others, drafted press 
guidance for the Administration's response. The 
"guidance," approved by Poindexter, stated that the 
airstrip had been offered to the Costa Rican Govern- 
ment "by the owners of the property who had appar- 
ently decided to abandon plans for a tourism project." 
It concluded: "No U.S. Government funds were allo- 
cated or used in connection with this site nor were 
any U.S. Government personnel involved in its con- 
struction. Any further inquiries should be referred to 
the Government of Costa Rica." The U.S. Govern- 
ment's role in facilitating the construction of the air- 
field was concealed.'®® 

At the same time North was promoting this cover 
story, he suggested to Poindexter that steps be taken 
to "punish" the Costa Rican Government for the dis- 
closure. '^'^ 

On September 30, North again argued that any 
attempt to benefit President Arias should be quashed: 
"Those who counsel such a course of action are un- 
aware of the strategic importance of the air facility at 
Santa Elena and the damage caused by the Arias' 
government revelations." '^* 



76 



Chapter 3 



The Covert Operation Ends 

The triumph of the airlift was short-lived. When Bill 
Cooper wrote to Dutton in late September after an- 
other successful drop, "Ho-Hum, just another day at 
the office," Dutton warned him to be careful.'*® 

On October 5, a C-123 left the Airbase at 9:50 a.m. 
local time with 10,000 pounds of ammunition for a 
drop to the FDN inside Nicaragua. Cooper was in 
command. Buzz Sawyer the co-pilot, and Eugene Ha- 
senfus the loadmaster who would actually dro"" the 
supplies. An FDN fighter was also on board for radio 
communications to the troops on the ground. Al- 
though the mission was to support the northern FDN 
forces, the plane flew a southern route to avoid San- 
dinista guns.^"" 

First reports had the plane missing. Castillo sent 
Southern front troops to look for the plane and 
Dutton notified North's office in an attempt to mount 
a search operation. Earl attempted to arrange for a 
U.S. military search and rescue mission, while friend- 
ly governments in the region also organized a discreet 
search effort. Felix Rodriguez called the Vice Presi- 
dent's Deputy National Security Adviser at his home, 
telling him the plane could not be found. It was all to 
no avail: the plane had been hit by a Sandinista SAM- 
7 over Nicaraguan territory. Three crew members 
were killed. Only Hasenfus survived, captured by the 
Sandinistas.^"' 

Abrams called North and asked him to arrange to 
retrieve the bodies. The State Department issued 
press statements claiming no U.S. involvement in the 
mission. ^"^ 

But the Enterprise had begun to unravel. The 
bodies of the crew were found bearing Southern Air 
Transport identification cards. The Federal Aviation 
Administration and the U.S. Customs Service began 
to investigate. With secrecy no longer possible, the 
resupply operation was shut down.^"^ 

Presidential Authorization and 
Knowledge 

The President told the Tower Review Board that he 
did not know that the NSC staff was assisting the 
Contras.^"* After the Tower Report was issued, the 
President stated that private support for the Contras 
was "my idea." ^°^ In fact, the President knew of the 
contributions from Country 2.^°® According to Poin- 
dexter, the President's policy was "to get what sup- 
port we could from third countries." '"'' 

In general, Poindexter understood that the Presi- 
dent wanted the NSC staff to support the Contras, 
including encouraging private contributions. The 
President also knew, according to Poindexter, that 
North was the chief staff officer on Central America 
who was responsible for carrying out the President's 
general charter to keep the Contras alive. Poindexter 



regularly reported to the President on the status of 
the Contras, the fact that they were surviving, and 
"in general terms" North's role in facilitating their 
survival. As a result of these briefings, Poindexter 
thought that the President understood that both he 
and North were coordinating the effort to support the 
Contras. Poindexter also believed the President under- 
stood that "Col. North was instrumental in keeping 
the Contras supported without maybe understanding 
the details of exactly was he was doing." ^"^ 

As to the level of detail provided to the President 
on the Contra support operation, Poindexter testified 
that he: 

would not get into details with the President as 
to who was doing what. The President knew that 
there was a Boland Amendment, he knew there 
were restrictions on the government. As he has 
said. I think, since November of 1986, that he did 
not feel that the Boland Amendment applied to 
his personal staff and that that was his feeling all 
along. I knew that. 

He knew the Contras were being supported, and 
we simply didn't get into the details of exactly 
who was doing what.^°* 

Poindexter testified that on one occasion, he briefed 
the President with some specificity about the Contra 
support program, but understood that the President 
did not recall the briefing: 

Now, you know, the President doesn't recall ap- 
parently a specific briefing in which I laid out in 
great detail all of the ways that we were going 
about implementing the President's policy, and I 
frankly don't find that surprising. It would not, 
frankly, at the time have been a matter of great 
interest as to exactly how we were implementing 
the President's policy.^*" 

Without getting to the "extraneous detaiUs]" of 
how the President's policy was being implemented, 
however, Poindexter briefed the President on the 
Santa Elena airstrip in Costa Rica. Poindexter testified 
that in December 1985, after he returned from Central 
America, he specifically briefed the President about 
the local assistance provided in establishing the air- 
strip. In addition, Poindexter informed the President 
that the "private individuals" were also involved in 
establishing the airstrip. At the same time, Poindexter 
excluded the "extraneous detail" that North, through 
Tambs and Castillo, had facilitated the construction of 
the airstrip.^" Similarly, while Poindexter thought 
that the President was aware of North's role in sup- 
porting the Contras, "it did not include something as 
specific as directing Col. North to conduct air supply 
operations." 2'2 North testified that he believed that 
the President approved his efforts to resupply the 
war. In fact, his actions support that belief While 



77 



Chapter 3 



Poindexter testified that he did not show the photo- 
graph album detailing the operation to the President, 
North testified that he sent the album to the President 
through Poindexter and told Dutton that the Presi- 
dent would thank Dutton for his efforts. 

Conclusion 

Although the North-Secord resupply operation ended 
on a disastrous note, with the shooting down of the 
Hasenfus plane, North had successfully managed, 
with the approval of his superiors, the covert pro- 
gram to assist the Contras for almost 2 years. The 
covert program that North had developed inevitably 
created conflicts of loyalties and shadings of duties 
among the persons whom he coopted to assist him. 
Felix Rodriguez was a close associate of Donald 
Gregg, the National Security Adviser to the Vice 
President. Yet North instructed Rodriguez not to tell 
Gregg that he was secretly working for North, and 
Rodriguez testified that he complied until the summer 
of 1986.^'^ According to North, Director Casey 
wanted to insulate the CIA's career employees from 
North's operation so that the CIA could not be 
charged with a violation of the Boland Amend- 
ment.^'* CIA officials admitted that, far from their 
traditional role, they "actively shunned information. 
We did not want to know how the Contras were 
being funded . . . we actively discouraged people 
from telling us things." ^'^ 



The CIA's attempt to remain uninformed failed as 
North sought out the assistance of CIA personnel in 
Central America. Particularly after Congress amended 
the law to allow the CIA to exchange intelligence 
with the Contras, many flights undertaken by the 
Enterprise were reported by CIA field offices to CIA 
headquarters; and at least one CIA Chief of Station 
provided information necessary for the Enterprise to 
make accurate airdrops and avoid Sandinista fire. 

A CIA Chief of Station, the U.S. Ambassador to 
Costa Rica, and other operatives — both Government 
employees and private citizens — that North recruited 
with the approval of his superiors provided necessary 
support to his covert program of military support for 
the Contras. Yet throughout this time, the NSC staff 
repeatedly assured Congress that it was complying 
with the letter and spirit of the Boland Amendment. 

The NSC staffs resupply operation provided essen- 
tial support to the Contras' during 1986. Not only did 
North coordinate that effort, but he decided with 
Secord, after consulting the Contras' military com- 
manders, what supplies were needed in order to con- 
duct the entire Contra operation, both on the ground 
and in the air. 

North directed the Enterprise's efforts on behalf of 
the Contras with Poindexter's approval and in the 
belief that the President likewise concurred. The 
result was that, with the help of other U.S. Govern- 
ment officials, North managed to provide to the Con- 
tras what Congress had not: a full-scale program of 
military assistance. 



78 



Chapter 3 



Table 3-1. — Resupply Flights Made by the North/Secord Resupply Operation During 1986 



DATE 



AIRCRAFT 



FDN/SOUTHERN 



NOTES 



23 March 86 

24 March 86 

25 March 86 

26 March 86 
28 March 86 
28 March 86 
28 March 86 
31 March 86 
31 March 86 
31 March 86 
1 April 86 

1 April 86 
4 April 86 

6 April 86 

7 April 86 

8 April 86 

9 April 86 

10 April 86 
10 April 86 



1 1 April 86 
1 1 April 86 



1 May 86 
1 May 86 
5 May 86 
5 May 86 

7 May 86 

8 May 86 

8 May 86 

9 May 86 
12 May 86 
12 May 86 
12 May 86 
12 May 86 

12 May 86 

13 May 86 
13 May 86 
13 May 86 
13 May 86 

13 May 86 

14 May 86 
14 May 86 

14 May 86 

15 May 86 

19 May 86 

20 May 86 
20 May 86 
20 May 86 

20 May 86 

21 May 86 

21 May 86 

22 May 86 
6 June 86 

9 June 86 



10 June 86 



C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
L-lOO 



C-7 Caribou 
L-lOO 



C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 

C-7 Caribou 
C-7 Caribou 
C-123 



C-123 



C-7 Caribou 



N/A 

N/A 
N/A 
N/A 
N/A 
N/A 
N/A 
N/A 
N/A 
N/A 
FDN 
N/A 
FDN 
N/A 
FDN 
FDN 
FDN 
FDN 
Southern 



FDN 

Southern 



FDN 
FDN 
FDN 
FDN 
FDN 
FDN 
FDN 
FDN 
FDN 
FDN 
FDN 
FDN 
FDN 
FDN 
FDN 
FDN 
FDN 
FDN 
FDN 
FDN 
FDN 
FDN 
FDN 
FDN 
FDN 
FDN 
FDN 
N/A 

FDN 
FDN 

N/A 

Southern 



FDN 



Local Flight-No Cargo 

Local Flight-No Cargo 

Local Flights-No Cargo 

3 Local Flights-No Cargo 

2 Local Flights 

2 Local Flights 

2 Local Flights-No Cargo 

Local Flight-No Cargo 

Local Flight-No Cargo 

Training-No Cargo 

Lethal Cargo 3,440 lbs. 

Local Flight-No Cargo 

Lethal Cargo (2 nights) 9,200 lbs. 

Training 

Lethal Cargo (2 flights) 8,600 lbs. 

Lethal Cargo (2 flights) 11,500 lbs. 

Lethal Cargo (3 flights) 18,000 lbs. 

Lethal Cargo (2 flights) 7,900 lbs. 

Arrived DZ on time but never saw 
inverted or strobe light. Aborted 
after staying in area 25 minutes. 
Lethal Cargo: 18 bundles 

Lethal Cargo (3 nights) 16,250 lbs. 

Lethal drop UNO/ South received 
20,000 lbs. ammo, grenades, rock- 
ets, launchers, rifles, magazines, 
etc. 

Lethal Cargo: Hard - 800 Soft - 700 
Lethal Cargo 

Lethal Cargo: 1000 lbs. 
Lethal Cargo 
Cargo: Soft 6300 
Cargo: Soft 3700 

Cargo: Soft 4150 

Lethal Cargo: 5140 lbs. 

Cargo: Soft - 6000 

Lethal Cargo: 3000 lbs. 

Lethal Drop 

Cargo: Hard - 3000 Soft - 2000 

Cargo: Hard - 3700 Soft - 1000 

Cargo: Hard - 500 Soft - 1500 

Cargo: Hard -4150 

Cargo: Hard - 1000 Soft - 3850 

Cargo: Hard - 450 Soft - 4058 

Cargo: Hard - 2175 Soft - 3850 

Cargo: Soft - 5178 

Cargo: Soft - 600 

Cargo: Soft - 3756 

Cargo: Soft - 3778 

Cargo: Soft - 3714 

Cargo: Soft - 3778 

Airbase to Santa Elena airstrip and 
return 

Cargo: Soft - 3358 

Cargo: Soft - 358 

Airbase to Santa Elena airstrip and 
return 

Stuck in mud at Santa Elena 10,000 
lbs of munitions, uniforms & medi- 
cines. 

Lethal Drop 



79 



Chapter 3 



Table 3-1.— Resupply Flights Made by the North/Secord Resupply Operation During 1986— Continued 



DATE 



AIRCRAFT 



FDN/SOUTHERN 



NOTES 



1 1 June 86 


C-123 


12 June 86 


C-7 Caribou 


13 June 86 


C-123 


14 June 86 


C-123 


15 June 86 


C-123 



N/A 
FDN 



Southern 
Southern 



21 June 86 



8 July 86 

9 July 86 

9 July 86 

10 July 86 



12 July 86 



13 July 86 

28 July 86 

29 July 86 



31 July 86 



13 Aug 86 

14 Aug 86 

15 Aug 86 

15 Aug 86 

17 Aug 86 

18 Aug 86 

18 Aug 86 

19 Aug 86 

20 Aug 86 

20 Aug 86 

21 Aug 86 

22 Aug 86 

23 Aug 86 

25 Aug 86 

26 Aug 86 

27 Aug 86 

28 Aug 86 
5 Sept 86 



C-7 Caribou 



C-7 Caribou 

C-7 Caribou 

C-123 

C-7 Caribou 



C-7 Caribou 



C-7 Caribou 



C-7 Caribou 
C-7 Caribou 



C-7 Caribou 



C-7 Caribou 
C-7 Caribou 

C-7 Caribou 

C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-7 Caribou 

C-7 Caribou 

C-123 

C-123 

C-123 

C-7 Caribou 

C-7 Caribou 
C-7 Caribou 
C-7 Caribou 



Southern 



FDN 

FDN 

Southern 
FDN 



Southern 



FDN 



FDN 
FDN 



FDN 



FDN 
FDN 

FDN 

FDN 
FDN 

Southern 

FDN 

FDN 

FDN 

Southern 

FDN 

Southern 
Southern 
Southern 
Southern 

Southern 
Southern 
Southern 



Return with 5000 pounds to Airbase 

5000 pounds lethal 

Loaded 7 pallets and Hold. Gross 
weight 7038 lbs. lethal Bad weath- 
er put flight on hold until 1600 

Lethal No drop zone contact 

Lethal, no drops made. While over 
Costa Rica, A/C bounced over the 
trees & damaged engine. By 
Checking radar with LORAN (a 
Navigational aid), A/C then flew 
over drop zone twice, avoiding 
enemy anti-aircraft fire. No DZ 
contact with troops. Plane down 7- 
10 days. 

Refueled at San Jose AP Cargo: HK- 
21 machine guns, cartridges, gre- 
nades Successful drop inside Nica- 
ragua 

Successful drop of lethal supplies to 
the FDN inside Nicaragua 

Lethal 8000 lbs. 

Airbase to Parrots Beak 

Drop 3 pallets of boots. 81 mm mor- 
tars & ammo plus small ammo, 6 
pallets medical clothing & small 
ammo. DZ receipt confirmed. 

Lethal Cargo: Cartridges, grenades 
and non-lethal. Landed in San 
Jose, then returned to Airbase. 

Lethal drop made 1-1/2 mile from 
original DZ. 

Lethal drop. 

Lethal Cargo including ammunition 
is successfully dropped inside Nica- 
ragua. Inbound-received sporadic 
37 mm AAA when crossing a 
road Receipt of cargo confirmed 
by radio 

Lethal cargo dropped inside Nicara- 
gua. Receipt of cargo confirmed 
by radio 

Landed with 1500 lbs. 

Air drop 4580 lbs. lethal inside Nica- 
ragua. 30 mins in DZ 

Air Drop 4580 lbs. lethal Dropped 7 
FDN parachute school graduates. 

4030 lbs. 

Local Training 

4000 lbs. Lethal Load 

2,400 hand grenades 

Maintenance 

Still problems w/right engine 

C-7 Caribou returned w/4500 lbs. to 
be added to 7000 lbs. 

Still problems w/right engine 

Abort 

Aborted 10,000 lbs. lethal 

Lethal Cargo Dropped 

Lethal 4800 pounds Returned w/load 
no radio contact no lights visible 

Lethal 4560 lbs. Bad weather. 

Lethal 4600 lbs. 

Lethal— 10,000 lbs. No drop— 20mm 
over DZ — no lights no r.idio con- 
tact— DZ UNO 



80 



Chapter 3 



Table 3-1.— Resupply Flights Made by the North/Secord Resupply Operation During 1986— Continued 



DATE 



AIRCRAFT 



FDN/SOUTHERN 



NOTES 



7 Sept 86 
9 Sept 86 



10 Sept 86 

1 1 Sept 86 
1 1 Sept 86 



12 Sept 86 



C-123 



C-123 



C-7 Caribou 
C-7 Caribou 
C-123 



C-123 



12 Sept 86 


C-7 Caribou 


13 Sept 86 


C-123 


13 Sept 86 
13 Sept 86 

13 Sept 86 

14 Sept 86 


C-123 

C-7 Caribou 
C-7 Caribou 
C-123 


14 Sept 86 
17 Sept 86 


C-7 Caribou 
C-123 


19 Sept 86 

20 Sept 86 


C-123 
C-123 


23 Sept 86 


C-123 


29 Sept 86 


C-123 


29 Sept 86 

30 Sept 86 
30 Sept 86 
5 Oct 86 


C-7 Caribou 
C-7 Caribou 
C-7 Caribou 
C-123 



Southern 



Southern 



FDN 

FDN 

Southern 



Southern 



FDN 

Southern 

FDN 

FDN 
FDN 

Southern 

FDN 

Southern 

Southern 

FDN in the Southern Provinces 



Southern 

Southern 

FDN 
FDN 
FDN 

FDN in the Southern Provinces 



Lethal HK-21 machine guns, car- 
tridges, C-4 explosive, hand gre- 
nades, shells 
Lethal No drop No contact in DZ 
Troops on ground unable to identi- 
fy coordinates of DZ. Bad weath- 
er. Arrived at coordinates early 

Weapons & supplies. 

Lethal 384 81mm shells 

Lethal load 10,000 lbs. No drop 
made Bad weather. Called North's 
office to get assistance w/ weather 
reports. 

Drop 10,000 lbs. Rifles, grenades 
mortar shells, cartridges and non- 
lethal 

3800 lbs. of ammo grenades and non- 
lethal 

10,000 lbs. dropped cartridges, hand 
grenades and non-lethal 

5.000 lbs food 4,630 grenades 

1500 lbs of chutes & straps 

Additional delivery 

10,000 lbs cartridges, shells, machine 
guns, and grenades 

mortar shells 

9850 lbs. cartridges, C-4 explosive, 
fuses, detonators, and grenades. 

10,500 lbs. lethal 

10,500 lbs. lethal 3 machine guns, 
ammo, grenades, all received in 
good shape. 

10,100 lbs 15 pallets Lethal: grenades, 
AK's 702 ammo 

Lethal Drop Cartridges, shells, and 
grenades 

2,400 hand grenades 

Lethal Drop 

Lethal 

Lethal; Plane shot down. Carrying 
guns & other ammo. Left Airbase 
at 0950. Full fuel and 10,000 lbs. 
route same as usual. Planned to 
return to Airbase 1530. Never 
reached DZ. 



Source: Flight logs and mission reports compiled by air resupply operation pilots and flight crew. 



77-02b 



81 



Chapter 3 



Chapter 3 

I. Secord Test., Hearings, 100-1 at pp. 57-65; (hereinafter 
"Secord"), North Test., Hearings, 100-7 I at 162; (herein- 
after "North"), Signed Memorandum of Interview of Rich- 
ard V. Secord, Aug. 18, 1987 (hereinafter "Secord Inter- 
view"). 

l.Id. 

3. Secord, Id. 

4. Secord, Hearings, 100-1 at 58. 

5. Id.; Owen, Hearings, 100-2, at p. 36. See also Section 
on Enterprise of the Narrative. 

6. See Note 1 supra. 
l.Id 

S.Id 

9. Id. Although the participants did not decide to author- 
ize specific action, they agreed on the need to conduct 
resistance activities inside Nicaragua's urban areas. This too 
was a subject that North and Calero had previously dis- 
cussed. Indeed, North had in December introduced Calero 
to David Walker, a British insurgency expert, to conduct 
such operations. 

10. North Test., Hearings, 100-7, at 94. 

II. McFarlane Test., Hearings, 100-2, at 96-97. 

12. Poindexter Test., Hearings, 100-8, at 8 (hereinafter 
"Poindexter"). See also North, 100-7, at 150 and Secord at 
60 61, 138. 

13. International Security and Develop. Act of 1985, Pub. 
L. 99-88, 99 Stat. 149. 

14. Supplemental Appropriations Act for 1985, Pub. L. 
99-88. 

15. Calero Test., Hearings, 100-3, at 12. 

16. Duemling Deposition, 8/20/87, at 9-11. 

17. Duemling Deposition, 8/20/87, at 46-48. 

18. Duemling Deposition, 8/20/87, at 28-29; Abrams 
Test., 100-3 at 35-36. 

19. Secord Test. Id., Secord Interview and Deposition of 
Richard Gadd, May 1, 1987 at 6-7. 

20. Id 

21. Id.; Castillo Test., Hearings, 100-4, at 40 et seq. (here- 
inafter "Castillo"). 

22. Poindexter, Test., Hearings, 100-8, at 75. 

23. Tambs Test., Hearings, 100-3, at 367-68, 375, 427; 
North, 100-7, 7/8/87, at 150. 

24. North Test., Hearings, 100-7, Part 1 at 173-174. North 
did not identify which members of the Restricted Inter- 
Agency Group were present during these discussions. (Id.) 

25. Abrams Test., Hearings, 100-5 at 20. 

26. North Notebooks, 8/10, 8/18/85; Castillo at 11-15, 
Exhibits TC-1 and TC-2 at 87 et seq. 

27. Memo from TC (Owen) to BG (North), 8/25/85, 
RWO Exhibit 9; Castillo at 14 and 60 et seq. 

28. Owen at 351; Castillo at 16; North Notebooks 9/3/86 
and 9/17/86; Interview of Joseph Hamilton; H6345 (summa- 
ry of CSF Ledger). 

29. North Notebooks 10/3/85; Gadd Dep., 5/1/87, at 19- 
22. 

30. North Notebooks, 9/10/85. 

31. Gregg Dep., 5/18/87 at 27. 

32. North Notebooks, 9/16/85. 

33. Rodriguez Test., Hearings, 100-3, at 289-90; Ex. FIR-1 
(hereinafter Rodriguez). 

34. Poindexter Test., Hearings, 100-8, at 75. 



35. North Notebooks 7/23-24/85, 8/3/85, 8/15/85; 
Dutton Test., Hearings. 100-3, at 212 and 283 (hereinafter 
Dutton); Coors Test., Hearings, 100-3, at 44. 

36. Gadd Dep., 5/1/87, at 13-16; Dutton at 212. 

37. Gadd Dep., 5/1/87, at 16-19; Secord Interview Para. 
3; North Notebooks 11/15/86; Abrams Test.. Hearings, 100- 
5, at 145-46; N12087 PROF Note 11/20/85, Exhibit OLN- 
87. 

38. Secord Interview, Para. 4; Gadd Dep., 5/1/87, at 12- 
13. While the search for aircraft continued, in October 1985, 
North directed troop salary payments to the FDN and in 
December 1985, another 85,000 pounds of ammunition and 
other arms arrived for the FDN from the Enterprise.(M , 
CSF Adjusted Ledger) 

39. McFarlane, Test., Hearings, 100-2, at 28-29. 

40. North Test., Hearings, 100-7, at 78-79. 

41. Sigur Test., Hearings, 100-2, at 286-287. 

42. North Test., Hearings, 100-7, at 78-79. 

43. Ex. RCM-26. 

44. Sigur Test., Hearings, 100-2, at 288-89. 

45. Sigur Test., Hearings, 100-2, at 289. 

46. Sigur Test., Hearings, 100-2, at 290. 

47. North Test., Hearings, 100-7, at 79. 

48. Sigur Test., Hearings, 100-2, at 291, id at 286-292. 

49. Owen Test., Hearings, 100-2, at 11-14; North Test., 
Hearings, 100-7, Part I, at 208. Congressman Jenkins gave 
this political context for the contribution from Country 
Three: "In October 1985 when the NSC staff was schedul- 
ing an appointment for Colonel North to meet with one of 
these countries that later contributed $2 million, I was in- 
volved in a tough legislative battle in this House. On Octo- 
ber 12, I believe, of 1985, this House passed a textile bill, 
very controversial. At that very time. Colonel North appar- 
ently was soliciting, from a nation that was impacted by this 
bill, funds secretly and that country later delivered $2 mil- 
lion, according to the testimony. The President vetoed that 
bill in December 1985 and between December 1985 and 
August 1986, when the Congress decided to sustain the 
President by an eight-vote margin, there were entreaties 
apparently made to many other nations that were impacted 
by this legislation." McFarlane 100-2, at 279. 

50. S4344, Handwritten Notes, 9/24/85. 

51. Owen Test., Hearings, 100-2, at 355; Duemling Dep., 
8/20/87 at 65-68 and 60-63. 

52. Owen Exhibit RWO-14, 100-2 at 825-26; RWO-17, 
100-2 at 831. The contract between Institute for Democra- 
cy, Education and Assistance, Inc. and NHAO provided 
that as a condition of the receipt of this grant, the grantee 
[IDEA] agrees . . . "that Mr. Robert Owen shall not during 
the term of this Grant perform any service which is related 
to the acquisition, transportation, repair, storage or use of 
weapons, weapons systems, ammunition or other . . . [lethal 
aid]." RWO-17, Duemling Dep. at 69. 

53. Owen Test., Hearings, 100-2, at 380. 

54. Gadd Dep., 5/1/87, at 24-26. 

55. North Test., Hearings, 100-7, at 268. 

56. Poindexter Depo., 5/2/87 at 64; Memo from North to 
Poindexter, 12/2/85. 

57. PROF Note, North to Poindexter, 12/5/85, 22:12:05. 

58. N49179, Memo, North to Poindexter, 12/10/85. 

59. Id 

60. Poindexter at 222-27, 310; Tambs at 380-81; Deposi- 
tion of Poindexter, 5/2/87 at 64-68. 



82 



Chapter 3 



61. Singlaub Test., Hearings. 100-3, at 89-90; Exhibit JKS- 
6 at 462-65. 

62. N 10720-28, Memo from Burghardt to Poinde.xter, 
1/14/86. 

63. Gadd Dep., 5/1/87, at 15, 21 and 26. 

64. North Test., Hearings, 100-7, at 140-41; 151. 

65. Gadd Dep., 5/1/87, at 42; North at 7/7/87 at 84, 150, 
Secord at 65, 252; Dulton at 208-09; Poindexter at 75; 
North Notebooks 1/15/86. 

66. At the end of December 1985, Steele called North to 
report that all was "OK" on fmal flight arrangements at the 
Airbase and that fuel for the aircraft had to be handled on a 
"pay as you go" basis. On January 6, North talked to Steele 
about problems with Felix Rodriguez, including security 
concerns and Rodroguez' ties to an arms dealer connected 
to the military of a Central American country. Despite 
various organizational problems, Steele called North a week 
later to report significant progress. The Commander was 
now "fully aboard." The building construction for a ware- 
house was underway, and all that was needed was money to 
pay for the fuel. On January 16, North discussed with 
Steele the 3 Butler buildings Gadd was constructing and 
operational security at the Airbase. North talked to Steele 
again on January 20 concerning additional operational prob- 
lems and determined (apparently after a call from the Chief 
of the CATF) that flight planning data for resupply aircraft 
should be passed to Steele for local coordination. North 
Notebooks 12/19/85, 12/23/85, 1/6/86, 1/20/86, 1/31/86; 
Depo. of Col. James Steele 4/21/87 at 27, 68. 

67. Id., North Notebooks 1/16/86; Dep. of Gen. John 
Galvin, 6/13/87 at 32-33; Castillo, Test.. Hearings, 100-4, at 
15-16. 

68. Id. By this time. North had also coordinated with 
Castillo, Quintero's arrival and help in overseeing the air- 
strip construction, particularly in obtaining local supplies. 
(Id.) 

69. Secord Int. Para. 8; North Notebooks Feb. 27, 1986. 

70. Rodriguez Test., Hearings, 100-3, at 292. 

71. On Feb. 18, North wrote in his notebook; "Call [Chief 
of the CATF at the CIA] ASAP. Find A/C: L-lOO C-7 
standby. See Duemling - Americit crews." The C-7 at that 
time was still on standby while the L-lOO were the aircraft 
Gadd had chartered from Southern Air Transport to deliver 
humanitarian supplies under NHAO contract from the 
United States to Central America. North Notebooks 2/18/86 
and 2/29/86; Gadd at 34 et. seq.; C/CATF Dep. I 5/1/87 
at 91, 103-05, 114. 

72. Id 

73. Owen, RWO-11, 100-3 at 816-17. 

74. Owen, at 358, and RWO-14 at 825. 

75. Poindexter at 222-27; Castillo Test., Hearings, 100-4, at 
33. 

76. Id 

11. See Table of Resupply Flights made by the North/ 
Secord Resupply Operation During 1986, infra. 

78. RWO-14a, 100-3 at 825. 

79. Gadd Dep., 5/1/87, at 39; KL-43 Message April 1986; 
OLN-88, Hearings. 100-7, Part 3. 

80. Gadd Dep., 5/1/87, at 34-35; KL-43 Message 4/8/86, 
Secord to Quintero (82330Z Apr 86). 

81. KL-43 Message, 4/9/86 [Copp: 4/9/86 0945]. 

82. Castillo at 21-23; C/CATF Dep. I 5/1/87 at 114. 

83. Castillo at 24; Dep. of Ian Crawford, 3/13/87 at 60- 
61; Secord Ex. 3, 100-1 at 418-20. 



84. Castillo at 22; Exhibit TC-6, 100-4. (KL-43, 4/12/86); 
Dep. of Ian Crawford, 3/13/87, pp. 58-63. 

85. See Note 77 supra; Crawford Dep., 3/13/87 at 58-63; 
Dep. of CIA Field Operations Officer, at 45 et. seq. 

86. Rodriguez Test., Hearings, 100-3, at 299; Gadd at 37- 
38; Secord Int. at Para. 6. 

87. North to McFarlane Memorandum dated Dec. 4, 
1984; Secord at 66-67; Exhibits OLN-83, 84, 281, 282. See 
also Chapter 2. 

88. Secord at 68; Secord Int. Para. 8; H893 Wire Trans- 
fer; Dutton at 214. 

89. Secord at 64; Dutton at 204-08. 

90. Dutton at 208. See also Dutton Chronology of Events 
for May. 

91. Dutton at 208, 212-13; Dutton Chronology of Events, 
entry for 5/19/86. 

92. Id 

93. Dutton at 208, 223; Secord at 68. 

94. PROF Note, OLN to JMP, 5/16, 19:29:43. 

95. Dutton, Test.. Hearings. 100-3, at 54. 

96. Dutton, Test.. Hearing.',. 100-3. at 118. 

97. Dutton Ex. RCD-14. 

98. Secord 5/7 at 111. 

99. Dutton at 119-20. 

100. Id. at 119-20. 

101. Id. 

102. Id. 

103. Dutton at 213-14; Secord Int. Para. 8; Exhibits RCD- 
14 and RCD-15, 100-3. 

104. Dutton at 214-15; Secord at 251. 

105. Dutton at 215 and 218. 

106. Dutton at 216-17; KL-43 Message dated 6/9/86; 
Pilot Mission Reports; Secord at 74. 

107. KL-43 #R00022; Tambs at 381-83 and 407; Castillo 
at 32-33; Interview of John C. Taylor, Commander of the 
Office of Defense Cooperation, U.S. Embassy, Costa Rica. 

108. North Notebooks, 6/10/86; Secord Int. Para. 7; 
H495 Wire Transfer. 

109. PROF Note, North to Poindexter, 6/10/86, Ex. 
OLN-70, 100-7, Part III. 

110. See Note 108 supra. 

111. Dutton at 217; Pilot Mission Report of Bill Cooper 
and John Piowatty; Dutton Chronology for June. See also 
Note 74. 

112. KL-43 Message North to Castillo 6/16/86, Ex. 
OLN-89, 100-7, Part III. 

1 13. Dutton at 217-219; Ex. RCD-14 at 8. 

114. PROF Note, 5/2/86, Ex. JMP-45, 100-8. 

115. PROF Note, Ex. OLN-287, 100-7, Part III. 

116. PROF Note, Ex. OLN-27, 100-7, Part 3. 

117. PROF Note, Ex. OLN-4; 100-7, Part III. 

118. Singlaub Test., Hearings, 100-3, at 90. 

119. Id. at 91. 

120. Abrams Test. Hearings. 100-5, at 56-58, 124. 

121. Depo. of Richard Melton, May 27, 1987, at 14-15, 
20-21, 25 and 32. 

122. Memo, Ex. JMP-50, N3873-34; N3738 Drop by CSIS 
Briefing (Robinson) 6/10/86. 

123. N 10290, Memo from Burghardt to McDaniel, 6/4/86. 

124. N3738, Drop by CSIS Briefing (Robinson) 6/10/86. 

125. N 10296, Memo from Burghardt to McDaniel, 6/4/86. 
See also Shultz Test., at 17-19. 



83 



Chapter 3 



126. PROF Note, North to Poindexter, Ex. OLN-10, 100- 
7. Part III. 

127. North Test., Hearings, 100-7, Part 1, at 311-13. 

128. Id. at 310; Ex. OLN-10, 100-7, Part III. 

129. Id. 

130. Ex. OLN-11, 100-7, Part III; PROF Note, Ray 
Burghardt to RBM, 5/28/86, 18:36, N 18096. 

131. PROF Note, North to Poindexter, Ex. OLN-70, 100- 
7, Part III. 

132. Id. 

133. Id. and Ex. JMP-52, 100-8. 

134. Shultz Test., Hearings, 100-9, at 4, 18-19, Ex. GPS-8. 

135. PROF Note, 6/10/86 Poindexter to North, Ex. 
OLN-81. 

136. Abrams Test., Hearings, 100-5, at 34; Shultz at 19. 

137. Shultz Test., Hearings, 100-9, at 20. 

138. PROF Note, 6/10/86, Poindexter to North, Ex. 
OLN-81. 

139. Shultz Test., Hearings at 19-20. 

140. Abrams, 100-5 at 126-31. 

141. Abrams, 100-5 at 34. 

142. Abrams, 100-5 at 42; North, 100-7, Part 1 at 33; Hall, 
100-5 at 88. 

143. Rodriguez Test., Hearings, 100-3, at 252-55. 

144. N46325; Memo from Don Gregg to Debbie Hutton, 
4/16/87; Deposition of Phyllis M. Byrne, 6/16/87 at 13; 
Samuel Watson Dep., 6/16/87 at 26-27. 

145. Rodriguez at 257-60. 

146. Id., Depo. of Nicholas Brady, Oct. 1, 1987. 

147. Dutton at 255-56; Dep. of Robert Earl 5/22/87 at 
163. 

148. KL-43 Message Dutton to North, 6/8/86 Ex. RCD- 
1; Dutton at 220-21. 

149. Dutton at 221-22; Rodriguez at 305 et seq. 

150. Rodriguez at 306. See Note 65. 

151. Id; North, 100-7, Part 1 at 48. 

152. N37096, Memo dated 6/25/86, Presidential State- 
ment: Victory of Contra Aid Legislation. 

153. Poindexter, 100-8 at 104. 

154. North, 100-7 at 312; Dutton at 222-25. 

155. Ex. OLN-198, 100-7, Part III. 

156. Secord Ex. 4, 100-1 at 439. 

157. Ex. OLN-158, 100-7, Part III; North, 7/14/87 at 146. 

158. PROF Note, 7/86, 15:31, Poindexter to North. 
North continued to hope, up through September, that the 
assets could be sold. On Sept. 3 or 4, North met with 
Ambassador Tambs and told him that he wanted to sell the 
assets because the Freedom Fighters were out of money. 
North hoped to raise about $5 million. Tambs was skeptical. 
He knew that the Costa Rican Government closed down 
the airstrip. Tambs asked North: "How could you sell 
something which you couldn't use?" North did not reply. 
Tambs, 5/28 at 170-72, 234. 

159. George Test., Hearings, 100-11, at 35-36. 

160. Dutton at 225-226; Rodriguez at 307-309; KL-43 
Messages in July and August. 

161. Id 

162. North Notebooks, 8/6/86. 

163. Dep. of Donald Gregg at 11-12. 

164. North Notebooks, 8/7/86. 

165. Dep. of Robert Earl, 5/2/87 at 101-04. 

166. Rodriguez at 309-10; Earl at 166-69. Sam Watson, 
Gregg's deputy, was also at the meeting. His notes state: 



"Felix— Tom Clines, Secord— Ripping Off Contras— Fraud, 
a crime to profit." N46663. 

167. Gregg Dep. 5/18/87 at 28-29. 

168. Gregg Dep., 5/18/87 at 14, 34. 

169. Gregg Dep. at 30-31; Earl Dep. at 175. 

170. KL-Messages # 340, 342, 347, 351, and 345. See also 
Secord Ex. 3, 100-1 at 430 et seq; Dutton at 225-27. 

171. Dutton at 225-27; Steele Dep. at 72. 

172. See Note 170 supra. 

173. KL-43 8/22/86 Secord Exhibit 3 at 431. 

174. Dutton at 234. 

175. North, 100-7 I at 86-89 and 158. 

176. Hearings, Testimony of C/CATF 8/5/87 at 66-67. 

177. Dutton at 229-30; KL-43 8/22/86 RCD-5. 

178. Id North Notebooks 9/4/86; KL-43, Secord Ex. 3 at 
434. 

179. Dutton at 230-35 and accompanying exhibits, RCD- 
6, 7, 8 and 9. 

180. Id 

181. KL-43 Messages Ex. RCD-9, 10 and KL-43 Message 
Dutton to North, 9/17/86, #423. 

182. Dutton at 232-34; Ex. OLN-162, 100-7; PROF Note 
North to Poindexter Sept. 15, 1986. 

183. Dutton at 236. 

184. Dutton at 236-37. 

185. North at 133; Poindexter at 227. 

186. PROF Note, 9/12/86, 21:50, North to Poindexter 
(N12163). 

187. Ex. OLN-60, OLN-160, OLN-161, 100-7, Part III; 
Ex. JMP 60, 100-8. 

188. Ex. OLN-303, 100-7, Part III. 

189. North Test., Executive Session. 

190. Id 

191. North Notebooks 9/6/86; Tambs at 210. 

192. W., Abrams at 124-25. 

193. Ex. OLN-203, 100-7, PROF Note, 9/7/86, 11:18:45, 
Poindexter to North; Ex. OLN-301, 100-7, Part III; North 
Test., 100-7 I at pp. 86-87. 

194. PROF Note, 9/25/86, 11:23, Poindexter to North. 

195. N18064-65, Prof Note, 9/25/86, 17:39:51 North to 
Poindexter 

196. N30783, Memo North to Poindexter, 9/30/86 

197. N18063, Prof Note, 9/25/86, 11:23:45, Poindexter to 
North 

198. N30782, Memo, North to Poindexter, 9/30/86 

199. Dutton at 237-38. 

200. Dutton at 238-39; KL-43 Message, Ex. RCD-12. 

201. Id 

202. Abrams Test., Hearings, 100-5, at 62. 

203. Dutton at 239-40. 

204. Report of the President's Special Review Board, 
February 26, 1987 at III-24. 

205. The New York Times, May 16, 1987 at A 1. 

206. McFarlane Test., Hearings, 100-2, at 17. 

207. Poindexter Test., Hearings, 100-8. at 54-55. 

208. Poindexter, 100-8, at 54-55, 73-76, 89, 222-29. 

209. Poindexter, 100-8 at 101. 

210. Id 

211. Poindexter, 100-8 at 225-226. 

212. Id at 229. 

213. Rodriguez, 100-3 at 67. 

214. North at 223-225. 

215. Gates Test., Senate Select Committee on Intelligence 
Dec. 4, 1986, at 38. 



84 



Chapter 4 

Private Fundraising: The Channell-Miller 

Operation 



While donations from other countries and profits from 
the Iran arms sales provided most of the money for 
lethal assistance to the Contras after the Boland 
Amendment, the network of private foundations and 
organizations formed by Carl R. "Spitz" Channell and 
Richard R. Miller also played a role. Channell's prin- 
cipal organization, the tax-exempt National Endow- 
ment for the Preservation of Liberty (NEPL), used 
White House briefings and private meetings with the 
President to raise more than $10 million from private 
contributors, almost all for the Contra cause. Over 
half of this total came from two elderly widows — 
Barbara Newington and Ellen Garwood — who made 
the bulk of their contributions after receiving private 
and emotional presentations by Lt. Col. Oliver North 
on the Contras' cause and military needs. One dozen 
contributors accounted for 90 percent of NEPL's 
funds in 1985 and 1986. 

Of the $10 million that was raised, only approxi- 
mately $4.5 million was funnelled to, or spent on 
behalf of, the Contras, including more than $1 million 
for political advertising and lobbying. The rest was 
retained by Miller and Channell for salaries, fees, and 
expenses incurred by their organizations, including 
compensation to their associates, David Fischer and 
Martin Artiano. 

The NEPL money spent for direct and indirect 
assistance to the Contras was disbursed primarily by 
Miller at the direction of North. Approximately $1.7 
million was "washed" by Channell through Miller's 
domestic and Cayman Island entities — International 
Business Communications (IBC) and I.C., Inc. — to the 
Enterprise, where it was commingled with funds from 
third-country contributions and the Iranian arms sale. 
Another $1 million was passed at the direction of 
North through Miller's entities to accounts controlled 
by Adolfo Calero, and approximately $500,000 was 
distributed at North's request to other persons and 
entities engaged in activities relating to the Contras. 

Channell and Miller made elaborate efforts to con- 
ceal the nature of their fundraising activities and 
North's role. Certain funds received by NEPL for 
Contra assistance were allocated on Channell's books 
to a project denominated "Toys," a euphemism for 
weapons. The NEPL and IBC employees were in- 
structed to refer to North by a code name, "Green." 



Funds were transferred to the Contras, not directly — 
which would be traceable — but through Miller's 
anonymous offshore entity, I.C., Inc. North misrepre- 
sented to several White House officials the nature of 
the network's fundraising activities. For instance, the 
President apparently was led to believe that the funds 
were being raised for political advertising; the Presi- 
dent's Chief of Staff, Donald Regan, was deliberately 
kept in the dark by North and Admiral John Poin- 
dexter; and North misrepresented to Congress and 
White House personnel the nature of his involvement 
in the activities of NEPL and IBC. As a result, the 
network was able to operate successfully until the 
latter part of 1986, when increased Government aid to 
the Contras and public disclosure of both the Iranian 
arms sales and the Contra resupply network made 
further assistance efforts unnecessary and unwise. 

By using a tax-exempt organization to funnel 
money to the Contras — for arms and other purposes — 
Channell and Miller provided tax deductions to 
donors. As a result, the U.S. Government effectively 
subsidized a portion of contributions intended for 
lethal aid to the Contras. In the spring of 1986, Chan- 
nell and Miller pled guilty to criminal tax charges of 
conspiring to defraud "the United States Treasury of 
revenues to which it was entitled by subverting and 
corrupting the lawful purposes ... of NEPL by using 
NEPL ... to solicit contributions to purchase mili- 
tary and other non-humanitarian aid for the Contras." 
At his plea hearing, Channell identified Miller and 
North as his co-conspirators. 



The Background 



Carl R. "Spitz" Channell 

Channell, 42, was raised in Elkton, West Virginia. 
He attended American University from 1963 to 1968 
and then, for a brief period, the Union Theological 
Seminary in Virginia. He left to join the Army and, 
after service for 3 years, received an honorable dis- 
charge.^ 

In 1976, Channell began to work for Terry Dolan, 
the founder of the National Conservative Political 
Action Committee (NCPAC). His initial responsibility 
was assisting in Congressional campaigns. After the 



85 



Chapter 4 



1978 elections, Dolan asked Channell to shift to fund- 
raising. To Channell's own surprise, he was an instant 
success, and was named by Dolan as NCPAC's first 
national finance chairman. In that position, Channell 
concentrated on NCPAC's "high dollar donor pro- 
gram" and set up a number of briefings in Washington 
for potentially large contributors.^ This fundraising 
method was to become the standard operating proce- 
dure for the Channell-Miller network. 

In 1982, Channell left NCPAC to form his own 
political consulting organization, the Channell Corpo- 
ration, to offer fundraising advice to campaigns and 
candidates. By 1984, he began to establish a network 
of other politically-oriented foundations. First, he 
founded the American Conservative Trust (ACT) as a 
Political Action Committee (PAC). At approximately 
the same time, he incorporated NEPL and sought 
Internal Revenue Service (IRS) recognition of NEPL 
as a tax-exempt foundation under Section 501(c)(3) of 
the Internal Revenue Code.^ 

In its application for tax-exempt status, NEPL as- 
serted that it was formed "to educate members of the 
general public on American political systems and soci- 
etal institutions." The application further stated that 
this education was to be accomplished through the 
study of the development of American political sys- 
tems and the influence of such systems on societal 
institutions in the United States. NEPL indicated to 
the IRS that it would collect information on these 
topics, make that information available to the general 
public, and eventually conduct seminars.* 

On December 12, 1984, the IRS issued a determina- 
tion letter stating that, based on the information con- 
tained in NEPL's application and assuming that its 
operations would be consistent with the program out- 
lined in the application, NEPL qualified as an exempt 
organization under Section 501 (c)(3). s* 

According to Channell, when he formed NEPL in 
late 1984, most "Washington insiders" doubted that 
anyone could raise money to advance foreign policy. 
Channell, however, believed that he could succeed 
because his major donors were committed to Presi- 



•Channell formed additional entities between 1983 and 1986. The 
American Conservative Trust State Election Fund (ACT-SEF) was 
formed as a state PAC to take advantage of state laws allowing 
corporate contributions to such entities. "Sentinel" was formed in 
1983 as a lobbying organization under Section 501(c)(4) of the tax 
code. The "American Conservative Foundation," a 501(c)(3) corpo- 
ration also established in 1983, was intended to focus on issues that 
were "more worldwide in scope and interest" than NEPL. The 
"Anti-Terrorism American Committee" (ATAC) was formed in 
1986 as a PAC focusing on "congressional attitudes toward terror- 
ism and policies associated with terrorism." "Grow Washington" 
and "Hill Potomac" were corporations established to pursue specif- 
ic initiatives that, according to Channell, never materialized. Those 
entities have therefore remained inactive and unfunded. In 1986, 
Channell assumed control of another conservative organization. 
Western Goals, which had been established by the late Representa- 
tive Larry McDonald. Channell Dep., 9/1/87, at 62-66. 



dent Reagan and his philosophy toward foreign af- 
fairs.® 

At first, NEPL concentrated on raising funds to 
publicize "European issues," e.g., SALT, summits, 
and nuclear freeze proposals. In January 1985, after 
NEPL ran a large newspaper advertisement congratu- 
lating President Reagan on his inauguration, Channell 
received a call from Edie Eraser of the public rela- 
tions firm. Miner & Eraser. According to Channell, 
Eraser indicated that she admired the ad and asked 
for NEPL's assistance in organizing and promoting a 
fundraising dinner for the Nicaraguan Refugee Fund 
(NRF). This was Channell's introduction to the Con- 
tras' cause.' 

To assist him, Channell recruited Daniel Conrad, a 
fundraising consultant from San Francisco, with 
whom Channell had dealt on earlier occasions. 
Conrad came to Washington, and together he and 
Channell initiated NEPL's involvement in the Nicara- 
guan issue.* 

Daniel L. Conrad 

Conrad, 44, received a bachelors degree in English 
and Political Science from Northwestern University 
in 1965. He also did graduate work in philosophy and 
business at Northwestern and the University of Michi- 
gan.^ In the late 1960s, after short stints as a manage- 
ment trainee at Ford Motor Company and a fundrais- 
er for Northwestern, Conrad joined Harvey Fundrais- 
ing Management of Milwaukee, Wisconsin, as a field 
director for campaigns. '° 

In the early 1970s, after a brief career as a stock- 
broker, Conrad started his own firm, the Institute for 
Fundraising, in San Francisco. It was a sole propri- 
etorship that presented seminars, produced manuals, 
and offered consulting services in the field of fund- 
raising. ' ' 

In the late 1970s, Conrad incorporated his business 
as Public Management Institute (PMI), which evolved 
from a training and consulting services firm to one 
primarily engaged in the publishing of periodicals and 
reference materials on financial grants and capital 
campaigns. Conrad himself continued, however, to 
consult on fundraising matters. '^ 

Conrad first met Channell in 1978 or 1979 at a 
seminar on fundraising being taught by Conrad in 
Alexandria, Virginia. After their initial meeting, 
Channell called Conrad periodically for informal 
advice on fundraising. In 1983 or 1984, Channell hired 
Conrad as a consultant to advise him on how to build 
a political consulting business, an assignment that 
lasted approximately 1 week.'^ 

Given Channell's history of looking to Conrad for 
advice, it was natural for Channell to ask Conrad to 
assist him in fundraising for the Contras — even 
though Conrad had never been involved in political 
fundraising and had no particular interest in the Nica- 
raguan issue.'* Their financial arrangement was never 



86 



Chapter 4 



formalized. According to Conrad, Channel! just gave 
him money periodically. For his efforts on the NRF 
dinner, for example, Conrad recalls receiving $10,000 
or $15,000 from Channell, $10,000 from the NRF, and 
$1,500 from Miner & Fraser. After that time, Con- 
rad's compensation "kept changing," with Channell 
deciding at various intervals how much to pay him. 
According to Conrad, he signed on with Channell's 
organizations more as a matter of friendship than as a 
matter of business. ' ^ 

Although Conrad had no formal position or title, 
he served initially as the number two person in each 
of Channell's organizations. Channell eventually gave 
him the title, "Executive Director."'® 

When Conrad joined Channell, the common offices 
for Channell's various entities were in a small town- 
house at 305 4th Street, NE, in Washington, D.C. 
Later, in August 1986, as money from Contra donors 
rolled in, they moved to luxurious and spacious new 
quarters in National Place, 1331 Pennsylvania 
Avenue, NW, Washington, D.C, and hired additional 
staff and fundraisers. 

Lines of authority in Channell's organization were 
informal. Fundraisers reported either to Conrad or 
Channell, who shared responsibility for training them. 
Channell, however, was generally in charge of pre- 
paring the script to be used for soliciting prospective 
donors. ' ' 

Richard R. Miller and IBC 

Miller, 35, received a bachelors degree in 1976 from 
the University of Maryland. During parts of 1979 and 
1980, he served as director of broadcast services for 
the Reagan campaign. William Casey, Director of the 
1980 Presidential campaign, furloughed him when 
funds ran short but then rehired him. During the 
furlough, Miller formed Ram Communications, a 
short-lived public relations firm.'* 

After the 1980 election. Miller served on the transi- 
tion team and then briefly as special assistant to the 
director of public affairs in the Department of Trans- 
portation. From February 1981 to February 1983, he 
was chief of news and public affairs for the Agency 
for International Development (AID). He was then 
promoted to public affairs director at AID, where he 
remained until 1984.'^ 

Upon leaving AID, Miller established IBC as a sole 
proprietorship to engage in media relations, strategic 
planning for public affairs, political analysis, and exec- 
utive branch liaison. In 1984, he began to work with 
Francis Gomez who recently had left his position as 
Deputy Assistant Secretary for Public Affairs in the 
State Department. Miller had first met Gomez in Feb- 
ruary 1982.20 

Immediately upon leaving the State Department in 
February 1984, Gomez received a contract from the 
State Department to assist its newly formed Office of 
Public Diplomacy for Latin America and the Caribbe- 



an (S/LPD) with public relations advice and support. 
The original purchase order for the contract specified 
that Gomez was to write talking point papers on 
Central America, prepare speaker kits, identify and 
refute distortions and false allegations regarding U.S. 
policy, draft sample speeches, prepare op-ed pieces 
and feature articles, assist Central American refugees 
and exiles visiting Washington, arrange media events 
for them, and make them available for Congressional 
interviews.^' 

This contract was renewed with Gomez in May 
1984 and then assumed by IBC in August or Septem- 
ber 1984. Before it terminated in September 1986 after 
several renewals, Gomez and IBC received a total of 
$441,084 from the State Department. 22* 

By mid- 1984, with the assumption of the State De- 
partment contract, IBC was functioning as an infor- 
mal partnership between Miller and Gomez, even 
though Gomez was technically a subcontractor to 
IBC. At a later time. Miller and Gomez would each 
establish personal corporations — Miller Communica- 
tions, Inc. and Gomez International, Inc. — and, effec- 
tive January 1, 1986, would restructure IBC into a 
partnership of those two entities. There is not, howev- 
er, any written partnership agreement. ^3** 

In September 1984, IBC also began to represent one 
of Adolfo Calero's organizations, the Nicaraguan De- 
velopment Council (NDC). Initially, IBC charged 
NDC $3,000 a month for public relations services, a 
fee that was later raised to $5,000 a month when IBC 
hired a full-time employee to do work for NDC. This 
relationship gave Miller and Gomez significant oppor- 
tunities to work closely with Calero, Alfonso Robelo, 
and Arturo Cruz. 2* 

In the course of assisting the Contras with their 
public relations. Miller was introduced to North, ap- 
parently by either Otto Reich or Jonathan Miller (no 
relation) — Director and Deputy Director of S/LPD — 
who were IBC's principal contacts at the State De- 
partment. ^^ In early 1985, Richard Miller became in- 
volved with the NRF dinner, with which Channell 
and Conrad were also engaged. This was the begin- 
ning of their relationship, although the dinner de- 
manded little of their respective energies and was 
organized and run principally by others. 



•In Audit Report No. 7PP-008, July 1987, the State Depart- 
ment's Office of Inspector General filed its conclusions reached 
after a special inquiry into the awarding and supervision of these 
contracts with Gomez and IBC. That report concluded, in summa- 
ry, that, while the original contract was justifiable, its utility 
became questionable during its later stages. The Inspector General 
also criticized the sole-source, noncompetitive process for awarding 
and administering the contracts, especially the classification of one 
version of the contracts as "SECRET," indicating that the classifi- 
cation was unjustified and improper. Audit Report at 32-33. 

••In July 1986, IBC entered into a joint venture with David C. 
Fischer & Associates, a consulting firm founded by a former aide to 
President Reagan. R. Miller Dep., 8/20/87, at 93-95. 



87 



Chapter 4 



The NRF Dinner 

According to Channell, the NRF dinner had to be 
postponed several times and was an organizational 
disaster. When it finally took place on April 15, 1985, 
President Reagan attended and delivered the keynote 
address. The NRF dinner proved to Channell that 
large and expensive functions were not an efficient 
method of raising money for the Contras, but the 
President's commitment to the Contra cause con- 
vinced Channell that the Nicaraguan issue was fertile 
ground for fundraising and public education.^^ 

Thereafter, Channell and Conrad, with the assist- 
ance of Miller, concentrated on private meetings with 
potential large donors, who would be given an audi- 
ence with North and, in some cases, a photo opportu- 
nity with the President. 

The idea of focusing on potential big givers to the 
Contras was not new. Edie Fraser, one of the princi- 
pal organizers of the NRF dinner, testified that at the 
suggestion of the State Department she met with 
North on December 11, 1984, to seek White House 
"participation" in the dinner. At that meeting, Fraser 
mentioned the Sultan of Brunei to North as a possible 
contributor to the NRF. Fraser explained that the 
Sultan had come to her attention because he had 
made a contribution to UNICEF in honor of Mrs. 
Reagan. On December 28, 1984, Fraser sent further 
biographical information on the Sultan to North, but 
does not know if North ever followed this lead.^'' 

On March 4, 1985, Fraser sent additional informa- 
tion to North on the planned dinner. At the bottom of 
the cover letter she added a handwritten note: "OUie, 
Very Imp., Two people want to give major contribs 
i.e. 300,000 and up if they might have one 'quiet' 
minute with the President." ^® 

According to Fraser, she added this note to the 
letter because of her conversations with Channell and 
Conrad, who suggested that some of their contribu- 
tors might make large donations to the NRF dinner if 
they could meet alone with President Reagan. As far 
as Fraser can recall, she added the number of donors 
("two") and the possible amount of money 
("300,000") to her note to give the offer some defini- 
tion. She cannot be sure that either Channell or 
Conrad were that specific in their conversations with 
her. 2^ Neither Channell nor Conrad recall discussing 
such an offer with Fraser.^" 

Fraser received no response from North regarding 
the offer. In fact, Fraser says she never heard from or 
spoke to North again after their initial meeting on 
December 11, 1984. Her letters were not answered by 
North; someone else at the White House ultimately 
assumed responsibility for liaison with the group plan- 
ning the dinner.^' 

NEPL and IBC Meet 

In late March 1985, prior to the NRF dinner, Chan- 
nell called the office of Edward Rollins, then White 



House Political Affairs Director, to ask how NEPL 
could help support "the President's agenda in Central 
America." Rollins's office referred the call to John 
Roberts, then a White House aide, who agreed to 
have lunch with Channell and Conrad. ^^ 

At that lunch, according to Channell, Roberts re- 
sponded to their interest in the Nicaraguan issue by 
stating that they should talk to Miller and Gomez, the 
principals of IBC. Roberts told Channell and Conrad 
that IBC was "the White House outside the White 
House" on this issue. Shortly thereafter, Channell and 
Conrad set up a meeting with Miller.^''* 

Roberts had called Miller prior to that meeting and 
alerted him to the referral, suggesting that Channell 
and Conrad wanted to "help the President" on Nica- 
ragua. In particular, Roberts told Miller that Channell 
and Conrad wanted to do a media campaign. Roberts 
did not mention any possibility of direct financial as- 
sistance to the Contras.^* 

Channell-Miller Network— The 
Beginnings 

In late March or early April 1985, Channell, Conrad, 
Miller, and to a significantly lesser degree, Gomez, 
embarked on an effort to assist the cause of the Con- 
tras. Their joint efforts would extend into the latter 
portion of 1986. According to Miller, Channell initial- 
ly offered to IBC a retainer of $15,000 per month, 
which IBC accepted. ^^ 

In exchange for this retainer, IBC was to handle 
media relations, political analysis, research, advertis- 
ing copy, film production, and other public relations 
functions. There was never any written agreement, 
however, reflecting the arrangement between NEPL 
and IBC.36 

At first, IBC lent support to the American Con- 
servative Trust and NEPL in their efforts to educate 
the public on the Nicaraguan issue. Very quickly, 
however, Channell expressed to Miller an interest in 
raising money for the Contras. Because of their prior 
contact with the Contras' organization and leaders. 
Miller and Gomez believed that they could be of 
assistance. One of Channell's first steps, with IBC 
help, was to secure a letter from Adolfo Calero au- 
thorizing NEPL to solicit contributions on behalf of 
his organizations.^' This letter, dated April 10, 1985, 
opened "Dear Spitz," and read in part: 

Please help us to achieve our dream, a free and 
democratic Nicaragua, not tied to a hostile Soviet 
threat but to a peaceful democratic American 
tradition. 



♦With respect to this conversation, Roberts told the Committees 
in an interview that he possibly described Miller as "fronting for 
the State Department" or as "in the family." Roberts Int., 7/17/87. 



88 



Chapter 4 



All resources you can raise will be appreciated. 
We can put all of them to good purposes. 

Richard Miller and Frank Gomez can keep you 
informed of our progress and serve as our con- 
tact point in the United States.^* 

The Initial Solicitations 

In early April 1985, Channell spoke with one of his 
prior contributors, John Ramsey of Wichita Falls, 
Texas, who Channell felt might be interested in con- 
tributing to support the Contras. Ramsey seemed re- 
ceptive to the idea, but wanted to meet Calero in 
person to ensure that any money he contributed 
would, in fact, be used to support the Contras.^* 

Channell scheduled a dinner for himself, Conrad, 
Miller, Gomez, Ramsey, and Calero in Washington, 
D.C., on April 10, 1985. At the last minute, however, 
Calero was unable to attend and the dinner went 
forward without him. Going into the dinner, Channell 
had told Miller and Gomez that Ramsey was a 
"tough cookie" who probably would be most interest- 
ed in the Contras' need for arms and other lethal 
supplies. *° 

At the dinner, in a private room at the Hay-Adams 
Hotel, Miller and Gomez spoke at length about the 
Contras' need for supplies, both lethal and non-lethal. 
Gomez showed Ramsey a book of photographs taken 
during a recent trip Gomez had made to various 
Contra bases in Central America. This collection in- 
cluded pictures of Contra fighters, mortars, and ma- 
chine guns.*' 

Conrad openly tape-recorded the conversation 
during dinner, supposedly because he was learning 
new information about the Contras and wanted to 
preserve it.*^ The transcript of the tape, as further 
interpreted by Channell, Conrad, and Miller during 
depositions, confirms that Channell, Miller, and 
Gomez discussed the Contras' military and non-mili- 
tary needs at length, often in response to questions 
from Ramsey. At one point, Miller deflected a sugges- 
tion by Ramsey that people be solicited to send used 
shotguns to the Contras: 

RAMSEY: "The best I can tell, a shotgun is the 
best thing to use in jungle warfare." 

GOMEZ(?): "Or a very rapid fire machine gun. 
That's why the AK-47s and the M16s are the 
best weapons." 

MILLER: "The M16 fires a 22.5 caliber bullet." 

RAMSEY: "I bet I could get 10,000 people to 
give their old shotguns to this." 

MILLER: "Only one problem. You can't export 
guns without a license."*^ 



Shortly after this exchange, the subject turned to 
methods of counteracting Soviet-supplied HIND heli- 
copters: 

GOMEZ or MILLER: "Calero has said publicly, 
so that the Sandinistas could hear on secret radio 
communications in the field saying we have red 
eyes [missiles]. It's a big lie." 

UNKNOWN: "They're playing a psychological 
war against the Sandinistas." 

MILLER(?): "The more sophisticated of the 
shoulder-held missiles, the red eyes. There's 2 
different kinds. One that's a little less expensive 
and there's one that's $8,000. It can take it 
out." ** 

Later, Channell itemized some of Calero's needs: 

CHANNELL: "Calero wants those red eye mis- 
siles. He wants boots. He wants back packs. He 
wants AK-47 rounds which you can get on the 
international market. He wants communications 
equipment." *^ 

Ramsey, however, returned again to his suggestion 
to provide the Contras with donated arms, which is 
not what Channell and Miller had in mind: 

RAMSEY: "We're going to call it the Shotgun 
Drive. And we're going to get Remington to put 
up the amo [sic]. Dupont owns Remington. 

"We're going to start on CBs. We're not even 
going to invoke the electronic media until we get 
support or we have about three semis going 
north on Tobacco Road out of North Carolina 
full. 

"And they keep calling on another semi. 

"We got an empty semi out there? Somebody got 
an 18-wheeler empty can come down and help 
liberate Central America?" *^ 

Near the end of the transcript, the Channell-Miller 
group succeeded in turning the discussion back to 
missiles and money: 

UNKNOWN: "Between now and May 1 the red 
eye missiles could be the entire key. 

"Because if they succeed at this point in launch- 
ing an offensive including tanks and MI24 heli- 
copters into that region and go for the 



"There's two different kinds of red eye missiles. 
There's one that's very unsophisticated which is 
just a direct shot missile. And then there's one 
that's able to take on the Hind [sic] because the 
Hind has major decoy devices, has heavy arma- 



89 



Chapter 4 



ment, and it has these flares on the back of the 
exhaust from the jets — the expulsion from the 
engine — that mask the heat. 

"So you have to have the $8,000 red eye to make 
it work.'"" 

The transcript concludes with an observation, at- 
tributed to Miller, summing up well the philosophy 
with which Channell, Conrad, and Miller approached 
their solicitations: 

MILLER: "If you provide money for ammuni- 
tion, the money they've set aside for ammunition 
can go to boots. 

"On the other hand, if you provide money for 
boots, what they've set aside for boots can go to 
ammunition."** 

The solicitation was a success. The next morning 
Ramsey had breakfast with Calero and, at that time or 
shortly thereafter, donated $20,000 directly to the 
Nicaraguan Development Council. As noted earlier, 
the NDC had previously retained IBC as a public 
relations consultant.* 

Later, in early June 1985, Miller received a tele- 
phone call from North, who asked him to try to raise 
$30,000 for an undisclosed purpose related to the 
Contras. North also gave Miller the name and number 
of a Robelo-controlled account in the United States — 
although Miller did not know that — into which any 
contribution could be deposited.*^ 

At Channell's suggestion. Miller contacted Ramsey, 
who sent $10,000 directly to the Robelo-controlled 
account. *° North later confirmed to Miller that the 
contribution had been received.^' 

Channell then asked Miller to have North send 
telegrams of appreciation to both Ramsey and Chan- 
nell. Miller got North's approval for these telegrams 
and sent them over North's name.^^ In those June 6, 
1985 telegrams. North thanked Ramsey and Channell 
for their support. ^^ 

The Ramsey solicitation was not, however, to 
become the model. It did not produce enough money 
for the effort and the donation was sent directly to 
Robelo so that the Channell-Miller group was not 
compensated. A new approach was undertaken. 

North's Maiden Presentation 

After the Ramsey solicitation, Channell drew on his 
experience with NCPAC briefings, and worked with 



Miller to sponsor a White House "event" for prior 
and potential NEPL contributors. This event was in- 
tended to educate contributors about the situation in 
Nicaragua and to solicit funds for the Contras. 
Through North, Miller and other IBC associates were 
successful in arranging a White House briefing for a 
group invited by NEPL.^* 

The briefing was held on June 27, 1985, in the Old 
Executive Office Building next to the White House 
with North as the principal speaker. According to 
Channell, North delivered what became his standard 
speech about Nicaragua and the Contras. North 
showed slides during his presentation, some of which 
had been provided by IBC.^^ 

North's speech was an impassioned plea. He dis- 
cussed the Communist threat posed to Nicaragua's 
neighbors by the Soviet and Libyan military buildup 
in Nicaragua, the political and religious repression in 
Nicaragua, the humanitarian and military needs of the 
Contras, and the importance of United States support 
for the Contras. North also emphasized that the 
United States would be flooded with millions of refu- 
gees if Nicaragua continued under its existing regime 
and policies.* This briefing was the initial substantive 
encounter between Channell and North. **^^ 

After the briefing, the potential donor group was 
taken across the street for a reception and dinner at 
the Hay-Adams Hotel. As was to become customary, 
NEPL arranged and paid for food and lodging at the 
Hay-Adams for persons attending this special White 
House briefing. At the dinner, Channell presented 
Calero with a check for $50,000, which represented 
all Contra-related contributions received to date by 
NEPL. At Miller's instruction, the check was made 
payable to a Calero account.^' 

Channell testified that his understanding was that 
the contributed funds would be used for humanitarian 
supplies. This understanding was based on Calero's 
specific appeal that night for medicine and food.^* 

The Establishment of I.C., Inc. 

Meanwhile, in March or April 1985, North was 
contacted by Kevin Kattke — whom North described 
to Miller as an "intelligence community gadfly" — 
about an alleged Saudi Prince who proposed donating 
to the Contras $14 million of profits derived from the 
sale of Saudi oil.*** North referred the Prince — who 



•When Ramsey was shown a copy of the dinner transcript, he 
indicated that, while portions of the dialogue seemed familiar, 
"[tjhere is very much on there I have never heard of before." 
Ramsey Dep. at 70. Ramsey suggested that Channell, Conrad, 
Miller, and Gomez "might not have ask[ed] for the money [for 
lethal supplies] directly." Instead, "[t]hey were just saying that if 
the [Contras] had the money they could buy them " Ramsey Dep. 
at 87. 



•North presented a version of his slide presentation during the 
public hearings. North Test, Hearings. 100-7, Part II. at 142-46. 

"Some donors who contributed money to Calero through 
NEPL had received expressions of appreciation from North prior 
to the June 27 briefing. E.g., RM .^577. These communications 
were apparently arranged by Miller at Channell's request. R. Miller 
Dep., 6/23/87, at 27. 

••'The Prince eventually was determined to be a fraud, and now 
is imprisoned for a separate swindle involving a Philadelphia bank. 



90 



Chapter 4 



used a variety of pseudonyms, the most common of 
which was Ebrahim al-Masoudi — to Miller, who was 
engaged to market the Prince's oil. Miller and the 
Prince met several times over the course of the next 
several months. Miller's interest was twofold; he and 
North wanted to raise money for the Contras, and he 
was to receive $1 million of the profit that would be 
derived from the sale of the oil.^^ 

Miller kept North fully apprised of his dealings 
with the Prince, which eventually also included a 
prospective gold transaction and assistance in freeing 
the hostages held in Lebanon.^" Indeed, Miller be- 
lieved that he "was an agent working on [North's] 
behalf in connection with these and other activities 
undertaken at North's request.^' * 

On April 26, 1985, Miller and Gomez incorporated 
a Cayman Islands corporation known as I.C., Inc.^^ 
This entity originally was intended to receive the 
profits from the transactions conducted with the 
Prince. Gomez was included because Miller needed a 
second corporate director under Cayman Islands law 
and Gomez was a close business associate on whom 
Miller could rely.*^ 

The Cayman Islands were chosen by Miller on the 
recommendation of a "political friend." Miller wished 
to keep "offshore" any money that he derived from 
his transactions with the Prince, because: (1) he did 
not want to incur federal income tax on these pro- 
ceeds; and (2) he and North "took precautions all the 
time . . . not to have organizations be readily available 
for public view." Miller was told that it was cheaper 
to maintain bank accounts in the Cayman Islands than 
in Switzerland. He also received advice from an attor- 
ney that such an offshore "collection point" was a 
lawful arrangement.^'' 

Although no proceeds were derived from the ven- 
ture with the Prince,** I.C., Inc. became an integral 
part of the Channell-Miller fundraising network for 
the Contras. It served as a conduit, protected by 
Cayman Islands bank secrecy laws, through which 
the funds contributed to the tax-exempt NEPL could 
be transferred to the Contras or to the Enterprise. 

Miller advised North in late April or early May 
1985 of the actual formation of I.C., Inc.®^ Indeed, 
North testified that he directed Miller to establish this 
Cayman Islands corporation to be used for Contra 
funding efforts. ^^ In May 1986, Miller changed the 
name of I.C., Inc. to "Intel Co-Operation, Inc.," and 
amended the corporate charter to specify that the 
company was engaged, among other things, in provid- 



•For a more detailed account of the Prince's activities in connec- 
tion with operations and persons under investigation by the Com- 
mittees, see Chapter 5. 

"According to Miller, he spent approximately $370,000 on ac- 
tivities involving the Prince. North was aware of and approved 
these expenditures. Miller did not incur monetary loss, however, 
because North authorized Miller to reimburse himself for these 
expenditures from Contra assistance funds transferred to IBC from 
NEPL. R. Miller Dep., 8/21/87, at 404-07. 



ing grants to "political and benevolent" organiza- 
tions.^' At that time. Miller told North about this 
name change and charter amendment, which Miller 
asserts was not aimed at providing increased cover 
for the operation. 8* 

The Creation of the Network 

Soon after the June 1985 briefing, Channell asked 
Miller to arrange a meeting with North. Certain con- 
tributors to NEPL were concerned about press re- 
ports suggesting that contributions for the Contras 
were being skimmed or spent on unnecessary or obso- 
lete items. ^^ In addition, Channell wished to express 
his appreciation to North for the June 27 briefing.'" 

Miller ultimately arranged a meeting on July 9 for 
himself, North, Channell, and Conrad at the Grill 
Room in the Hay-Adams Hotel. At the meeting, 
Channell asked North how best to ensure that funds 
contributed to NEPL for the benefit of the Contras 
actually were used for that purpose. North told Chan- 
nell that henceforth "continued" contributions to 
NEPL for the Contras should be passed to IBC for 
proper dispersal. From shortly after this meeting 
through the fall of 1986, NEPL made all Contra as- 
sistance payments to IBC or to I.C., Inc.'' 

North had shown a flow chart to his deputy, 
Robert Earl, and Miller sometime in 1985, which 
showed NEPL, IBC, and I.C., Inc. as vital parts of an 
elaborate Contra funding network. While this chart 
turned out not to be a fully accurate depiction of the 
actual workings of the network. North used it with 
Miller to explain "how a covert operation is set up." 
Miller recalls that the chart was similar to (although 
not as complete as) a chart found in North's safe and 
reproduced in the Tower Review Board Report at C- 
17.'2 

Channell-Miller Network— The 
Operation 

White House Briefings and Hay-Adams 
Gatherings 

The North briefing in June 1985 served as the blue- 
print for other similar briefings during the next year 
for NEPL contributors or potential contributors. 
These group briefings occurred on October 17, 1985, 
November 21, 1985, January 30, 1986, and March 27, 
1986. 

The White House briefings were meticulously 
planned by NEPL, IBC, North, and White House 
personnel. Internal White House memorandums ob- 
tained by the Committees show that North was the 
switching point for arranging and coordinating the 
briefings with White House liaison. White House 
Counsel, and White House security. 



91 



Chapter 4 



NEPL prepared and sent invitations to persons se- 
lected by Channel! and his associates. A typical invi- 
tation to a briefing stated in pertinent part: 

You are one of a small group of dedicated Amer- 
icans who has stood by President Reagan ... in 
support of his agenda. ... It will be a pleasure 
to meet you in Washington on [date] when you 
attend our special security briefing followed by a 
working dinner. . . . Please be reminded that 
your accommodations at the Hay-Adams Hotel 
are taken care of and there is no expense to 
you.''^ 

For those who attended, NEPL met them at the 
airport with a limousine and escorted them to the 
Hay-Adams Hotel, where all expenses were paid by 
NEPL. 

The group typically was taken from the Hay- 
Adams to a reception room in the Old Executive 
Office Building, where they were introduced to 
North and other White House personnel. Other than 
North, among those who participated in these brief- 
ings were Patrick Buchanan, White House Communi- 
cations Director; Mitch Daniels, Political Assistant to 
the President; Linas Kojelis, Special Assistant to the 
President for Public Liaison; Linda Chavez, Deputy 
Assistant to the President and Director of the Office 
of Public Liaison; and Elliott Abrams, Assistant Sec- 
retary of State for Inter-American Affairs. For the 
January 30 briefing, David Fischer — a former Special 
Assistant to the President who became a highly paid 
consultant to NEPL and IBC — even arranged for a 
Presidential "drop-by." 

North always delivered the principal speech and 
slide presentation along the lines of the June 1985 
briefing. While he was an effective speaker. North 
generally was careful not to ask for money, often 
telling the audience that he could not solicit funds 
because he was a Federal employee. He did, however, 
suggest that persons interested in contributing funds 
for the Contras should speak with Channell. At least 
one attendee at these briefings recalled North's stating 
that there were certain matters he could not discuss 
with them "on this side of Pennsylvania Avenue" but 
that Channell would raise later "on the other side of 
the street," a reference to the Hay- Adams Hotel.'* 

An account of North's presentation was provided at 
the public hearings by an eventual contributor in at- 
tendance at the March 1986 briefing, William 
O'Boyle: 

[North] described the military and political situa- 
tion in Nicaragua. He had photographs of an 
airport in Nicaragua that had been recently built; 
the purpose of the airport was ostensibly com- 
mercial, but it was in fact a disguised military 
airport. One of the uses for which the airport was 
intended was to recover the Russian Backfire 



bombers after they made a nuclear attack on the 
United States. 

Another possible use of this airport was to fiy a 
certain kind of mission that was currently being 
flown out of Cuba, up and down the east coast of 
the United States. Apparently every day a Rus- 
sian plane leaves Cuba, as I recall, and goes right 
up the 12-mile limit, has some kind of large 
device on the outside of the plane. . . . This 
Nicaraguan air base would allow the Russians to 
fly the same kind of mission up the west coast to 
the United States. . . . 

He described the refugee problem . . . and we 
could look forward in the next few years to mil- 
lions of refugees flooding across our borders as 
this happened. . . . 

He showed photographs which indicated that the 
Nicaraguan government officials were indicated 
in smuggling dope. . . . He also told an anecdote 
about some Nicaraguan agents that were recently 
caught with dope and money and so forth and 
disguised as American agents.'^ 

O'Boyle indicated also that North furnished him with 
classified information designed to show that the Sovi- 
ets were managing the diplomacy of the Nicaraguans 
before the United Nations.''^ 

After the briefings, Channell, Miller, and their asso- 
ciates hosted a cocktail party and dinner at the Hay- 
Adams, often attended by Contra leaders and some 
U.S. Government officials. During the reception and 
dinner, NEPL and IBC employees attempted to deter- 
mine which attendees were the most likely contribu- 
tors. The enticement of purchasing lethal supplies for 
the Contras was often used with potential contribu- 
tors. Those persons who expressed a serious interest 
in contributing money for the Contras were offered 
the opportunity to meet one-on-one with North, and, 
if they gave enough, a meeting with the President. '' 
Large contributors to NEPL uniformly received 
thank you letters from North (and often from the 
President) for their support of the President's policies 
in Central America, although without specific refer- 
ence to any contribution.''* 

North's Involvement in Solicitations 
Intended for the Purchase of Lethal 
Supplies 

In his public testimony. North testified that "I do 
not recall ever asking a single, solitary American citi- 
zen for money. "''^ He readily admitted, however, that 
"I showed a lot of munitions lists" to Contra contrib- 
utors or potential contributors "in response to ques- 
tions about the cost of lethal items."*" The Commit- 
tees received evidence on North's activities thai shed 
light on these statements. 



92 



Chapter 4 



1. "Big Ticket Items" and "Ollie's New Purchase" 
Lists. In the late fall or early winter of 1985, Channell 
asked Miller to have North prepare and provide a list 
of "big ticket items" to be used in soliciting contribu- 
tions for the Contras. At Miller's request, North recit- 
ed a list that included heavy lifting of cargo by air- 
craft (approximately $675,000 worth); training and 
outfitting of an "urban tactics unit"; the resupply of a 
Contra fighting unit known as the "Larry McDonald 
Brigade" (a Contra unit); and probably missiles of 
some kind.®' 

Miller typed the list onto his computer, printed a 
single copy, gave that copy to Channell, and deleted 
the computer entry. Channell used this list, which 
totalled approximately $1.2 million, to solicit contribu- 
tions.*^ An apparently different "big ticket items" list 
was prepared by North and used by him and Channell 
in a solicitation of Nelson Bunker Hunt. Handwritten 
notes produced by Miller indicate other conversations 
with North about fundraising for lethal supplies. A 
note dated September 18, 1985, contains entries read- 
ing "$41 5,000- Weapons, C4, M79" and "520,000 
MAUL."®^ "C4" refers to an explosive, "M79" likely 
refers to a grenade launcher, and "$520,000 MAUL" 
refers to the cost of eight Maule airplanes. Miller 
testified that North provided this information to him 
with the understanding that it would be used for 
fundraising.®* 

Another handwritten note of Miller's contains the 
entry "Ollie's new purchase list." The note is dated 
February 5, 1986.** Miller does not recall the deriva- 
tion of this entry. ®^ 

2. North 's Special Appeals. As North testified public- 
ly, he met with scores of potential contributors to 
convey the plight and needs of the Contras. Insofar as 
North's actual role, the more revealing of these meet- 
ings are those that were conducted in private. As the 
descriptions below indicate. North prepared potential 
large contributors for what Conrad termed "the call 
to the altar." *' 

a. Nelson Bunker Hunt — In September 1985, Chan- 
nell arranged a meeting in Dallas between North and 
Nelson Bunker Hunt, a wealthy Texas businessman 
who had contributed $10,000 to NEPL the previous 
July. Channell rented a private airplane for $8,000 to 
$9,000 to transport North to and from Dallas.®® * The 
trip was worth the cost. 

In Dallas, there was a private dinner at the Petrole- 
um Club attended by Hunt, Conrad, Channell, and 
North. North gave his standard briefing, without 
slides, and showed Hunt a list of various Contra 
needs. The list was divided about evenly between 
lethal and non-lethal items, and included Maule air- 
craft and a grenade launcher possibly described as an 



* This was the first time North used an airplane supplied by 
NEPL; on one other occasion, NEPL chartered a plane to fiy 
North and his family for a weekend visit to Barbara Newington's 
house in Connecticut. Channell Dep., 9/1/87, at 148. 



"M-79." The total price was about $5 million. Ac- 
cording to Channell, after discussing the items on the 
list and their prices, North "made the statement that 
he could not ask for funds himself, but contributions 
could be made to NEPL, or words ... to that 
effect." North then left the room, a maneuver that 
had been "pre-arranged."®^ 

Channell explained that the list was his idea because 
he wanted a "fundraising objective" to take to Hunt. 
He therefore had asked North to prepare a list total- 
ling about $5 million for use in the solicitation of 
Hunt.90 

Despite this evidence, Hunt has told the Commit- 
tees that Channell never spoke to him about the Con- 
tras' need for weapons. According to Hunt, Channell 
told him that the Contras had "unpaid bills" for 
"[f]ood and shelter, medicine, [and] general 
expenses. . . ." ^ ' Hunt testified that he does not 
recall any conversation he had with North at the 
dinner. ^2 

Nonetheless, as a result of this dinner. Hunt made 
two payments to NEPL of $237,500 each.^^ One of 
them was a contribution and one was a loan. The loan 
was evidenced by an unsigned promissory note be- 
cause Channell would not agree to the loan (especial- 
ly after he was unable to find a contributor to guaran- 
tee the loan on NEPL's behalO. Nevertheless, he held 
the $237,500 principal for 4 months, repaying it to 
Hunt in January 1986 without interest.^* Hunt subse- 
quently paid $237,000 to NEPL in March 1986 as a 
contribution, making his total contributions to NEPL 
$484,500.9 5 

In the case of Hunt's initial $10,000 contribution in 
1985, he sent NEPL a personal check drawn pursuant 
to a "check request" and marked "contribution." He 
also itemized the $10,000 contribution as a charitable 
deduction on his 1985 tax returns. By contrast, each 
step in the later transactions was conducted with 
Hunt's law firm — Shank, Irwin & Conant (SI&C) of 
Dallas, Texas — acting as an intermediary, and issuing 
its own checks, backed by Hunt's funds.®^ 

Hunt testified that he handled these transactions in 
this manner in an effort to avoid publicity in the 
"liberal media" over the contributions. He acknowl- 
edged that the NEPL gifts were the only ones he had 
ever made indirectly. Moreover, none of the check 
requests or check stubs for the three large checks has 
any entry in the section designated for "purpose." 
Documentation for other checks produced by Hunt 
consistently included this entry. Hunt indicated that 
he must have overlooked this omission on the three 
checks in question. 9' 

Finally, Hunt did not itemize the $237,500 contribu- 
tion on his 1985 tax return or the $237,000 contribu- 
tion on his 1986 return. He explained that, because of 
large losses each year, he did not need the deductions. 
Nonetheless, numerous other contributions apparently 
were itemized by Hunt on those tax returns. 9® 



93 



Chapter 4 



In short, it seems that Hunt took great pains to 
keep his large contributions to NEPL "off the books." 
As indicated above, a note made by Miller 1 day after 
Hunt issued the checks for the contribution and loan 
to NEPL contains the entries "$415,000 — Weapons 
C4, M79" and "$520,000 MAUL," referring to muni- 
tions and airplanes. ^^ This same note refers expressly 
to Hunt in a different context. '°° 

b. Barbara Newington — Barbara Newington, a 
wealthy widow from Greenwich, Connecticut, had 
been a large contributor to Channell organizations 
(and at least one predecessor organization) for a few 
years. In 1985 and 1986, Newington contributed a 
total of $2,866,025 to NEPL. On June 25 or 26, 1985, 
she met privately with North because she was unable 
to attend the Channell group meeting arranged for 
the next day. She also met privately with President 
Reagan on two occasions. ' ° ' 

In early November 1985, North, Miller, and Chan- 
nell participated in a solicitation of significant contri- 
butions from Newington. Miller's handwritten notes 
leading up to the meeting indicate that Channell pre- 
pared a proposed "pitch" for "Green" — the code 
name for North used by NEPL and IBC — to use with 
Newington. This "pitch" included statements such as 
"[you are] the most secure person we know in the 
U.S." and "[w]e are asking you to take on a project 
that requires your kind of person. "'"^ Although 
Miller does not specifically recall, he might have re- 
layed a somewhat softened version of this solicitation 
to North. » 3 

In further preparation for the solicitation, Miller 
created a file folder that contained an unclassified 
photograph of a Soviet HIND helicopter on one side 
of the folder and a picture of a shoulder-held surface- 
to-air missile on the other side. He also included an 
article from The New York Times on the capabilities 
of the HIND helicopter. ^"^ 

The critical meeting took place in Newington's 
suite at the Hay-Adams Hotel where Channell, Miller, 
and Newington were joined by North. At the meet- 
ing, North referred to the file folder prepared by 
Miller, placed The New York Times article in front 
of Newington, and described the capability of the 
pictured surface-to-air missile to counteract HIND 
helicopters. In response to a question from Newing- 
ton, North indicated that he knew where to obtain 
such missiles, although Miller cannot recall whether 
North quoted any prices. North left the room shortly 
thereafter. According to Miller, North's absence was 
not specifically prearranged, "but it was his practice 
not to be in the presence of the donor when they 
were asked for money." '"^ 

Channell then solicited Newington for a substantial 
amount of money. Over the course of the next 4 to 6 
weeks, Newington made stock contributions to NEPL 
worth approximately Sl.l million.'"^ Like Hunt, 



Newington has denied that she ever made a contribu- 
tion intended for the purchase of lethal supplies.'"''* 

At some point in the spring of 1986, Channell and 
Newington decided to invite North and his family to 
Newington's house for a weekend of recreation and 
relaxation. Miller, North, and North's family travelled 
to Connecticut in a private plane chartered by Chan- 
nell. It is unclear whether there was any discussion of 
Contra assistance that weekend. '"^ 

c. William O'5ov/e— William O'Boyle testified that 
he received several fundraising calls from NEPL in 
early 1986. O'Boyle, an independently wealthy busi- 
nessman from New York City, had been referred to 
NEPL by a friend from Texas.'"* 

In late March, he was invited by mailgram to a 
private White House briefing on Nicaragua. He flew 
to Washington on March 27, was met at the airport 
by a limousine arranged by NEPL, and was delivered 
to the Hay-Adams Hotel, where he met Channell, 
Miller, and others. Channell escorted the group to a 
meeting room in the Old Executive Office Building, 
where North presented the briefing described 
above."" 

After the briefing, the participants returned to the 
Hay-Adams for a cocktail reception and dinner at- 
tended by Channell, Miller, and other NEPL and IBC 
personnel. During the reception, O'Boyle indicated to 
a NEPL employee, either Cliff Smith or Krishna Litt- 
ledale, that he was interested in making a contribution 
to purchase weapons for the Contras. He wanted to 
know what weapons were needed and how much 
they cost. The NEPL employee with whom O'Boyle 
spoke told him later that a Blowpipe antiaircraft mis- 
sile could be purchased for $20,000. ' ' » 

After dinner, Channell told O'Boyle that there was 
a small, select group of persons in the United States 
who contributed money for lethal supplies to carry 
out the President's policy in support of the Contras. 
Channell asked O'Boyle if he would meet with North 
at breakfast the next morning. O'Boyle agreed."^ 

Breakfast took place in the main dining room of the 
hotel. Before North arrived, the conversation between 
O'Boyle and Channell continued in the same vein as 
the evening before. Channell told O'Boyle that they 
had him "checked out" overnight to ensure that he 
(O'Boyle) was reputable enough to join the select 
group of Americans Channell had mentioned. "^ 

When North arrived, Channell told him that 
O'Boyle was willing to contribute funds for the pur- 
chase of weapons. North immediately began to de- 
scribe from a notebook the Contras' needs, including 
several million rounds of "NATO" ammunition. East- 
ern bloc ammunition. Blowpipe and Stinger antiair- 



•Miller later heard from Calero Ihat no missiles had been re- 
ceived by the Contras. North told Miller that the Newington 
money had been used to purchase "secure radios." R. Miller Dep.. 
8/20/87, at 237. 



94 



Chapter 4 



craft missiles, and Maule aircraft. North explained 
that Blowpipe missiles cost $20,000 each, but that 
they had to be purchased in packs of 10. He also 
mentioned that the cost of Maule airplanes was 
$65,000 each. According to O'Boyle, North stated 
that "he could not ask for money himself as a govern- 
ment employee.""* 

Either at this breakfast or the evening before, 
Channell informed O'Boyle that if he contributed 
$300,000 or more, a 15-minute "off-the-record" meet- 
ing would be arranged between O'Boyle and Presi- 
dent Reagan. Channell indicated that other people 
who had contributed that amount of money had met 
with the President. O'Boyle understood that these 
meetings with the President were "off-the-record" be- 
cause the subject matter was so secret and sensi- 
tive. "^ 

O'Boyle told Channell that he wanted time to con- 
sider whether to make a contribution. After returning 
to his home in New York for a few days, O'Boyle 
decided to contribute $130,000 to NEPL for the pur- 
chase of two Maule airplanes.* He flew to Washing- 
ton to deliver his check to NEPL headquarters and 
was taken to the Hay-Adams Hotel by a NEPL em- 
ployee. Channell met O'Boyle at the hotel. O'Boyle 
then gave his check to Channell, who telephoned 
North to join them at the hotel. "^ 

When North arrived, Channell showed him 
O'Boyle's check, which North acknowledged. North 
spoke to O'Boyle again of the Contras' military needs 
and corresponding costs, but indicated that Blowpipe 
missiles no longer were available. In North's presence, 
Channell again told O'Boyle that a larger contribution 
would warrant a meeting with the President and 
asked for more money. ' ' ' 

Despite a visit in New York from Channell and 
Conrad and another meeting with North in Washing- 
ton in which North disclosed a purported "secret" 
plan as to how the Contras would prevail in Nicara- 
gua, O'Boyle informed Channell that he did not wish 
to make further contributions to NEPL.** In any 
event, in response to a subsequent mailing from 
NEPL, O'Boyle made one more contribution for 
$30,000. "« 

d. Ellen Clayton Garwood — Ellen Garwood also tes- 
tified at the Committees' public hearings. She had 
been a NEPL contributor on several occasions. She is 
a wealthy octogenarian widow from a well-known 
family in Austin, Texas. Garwood first met North in 



*The Committees have concluded from Enterprise records that 
O'Boyle's contribution was used for general Contra support, not for 
the purchase of two Maule aircraft. 

••At the meeting in New York, O'Boyle expressed to Channell 
some concerns about the legality of using tax deductible contribu- 
tions for weapons. According to O'Boyle, Channell told him that a 
lawyer had advised favorably on the question of legality, but that 
in any event the money could not be traced because contributions 
were being passed through a for-profit corporation and overseas. 
O'Boyle Dep. at 91. 



1984 at a Council for National Policy meeting. She 
had been briefed privately by him on the Contras' 
needs at least a handful of times, including once at a 
small airport in Dallas when North flew there to 
solicit Hunt in September 1985."^ 

Garwood travelled to Washington in April 1986 to 
attend meetings of NEPL contributors. Prior to the 
trip, Channell told Garwood that she would be pre- 
sented with an appeal for much more money than had 
been requested of her before.'^" 

During the last day of the NEPL meetings, Chan- 
nell asked Garwood to meet with him and North that 
evening in the hotel lounge. At the evening meeting. 
North told Garwood that the situation of the Contras 
was desperate. With tears in his eyes. North explained 
to her that the Contras were hungry, poorly clothed, 
and in need of lethal supplies. He emphasized that the 
Contra forces might not exist by the time the Con- 
gress renewed Contra aid.'^' 

Either North or Channell then produced a small 
piece of paper with a handwritten list on it. They 
discussed the list in hushed tones outside of Gar- 
wood's hearing. After North left the lounge, Channell 
showed the paper to Garwood. The paper contained 
a list of weapons and ammunition, with a price oppo- 
site each category of items. She recalls that the list 
included hand grenades, antiaircraft missiles, bullets, 
cartridge belts, and other items. '^^ 

Channell told Garwood that the items were what 
the Contras needed to sustain their efforts and re- 
quested her to provide the amount necessary to pur- 
chase the listed lethal supplies. Channell transcribed a 
copy of the list for Garwood to take with her.^^^ 

To supply the items on the list, Garwood immedi- 
ately contributed more than $1.6 million to NEPL; 
she wired $470,000 in cash and transferred stock 
valued at $1,163,506. For this same purpose, she con- 
tributed an additional $350,000 the next month. All 
told, she contributed $2,518,135 in 1986. Garwood 
stated unequivocally that the principal purpose of 
these April and May 1986 contributions was to pur- 
chase for the Contras the weapons and ammunition 
on the list provided by North and Channell.'^* 
***** 

These descriptions of the Hunt, Newington, 
O'Boyle, and Garwood solicitations are not exhaus- 
tive. The Committees interviewed or deposed 13 of 
NEPL's significant contributors during the relevant 
time period, nearly all of whom reported personal 
contact with North. The Committees have received 
evidence that several of these contributors — including 
John Ramsey of Wichita Falls, Texas, and C. Thomas 
Claggett, Jr., of Washington, D.C. — made donations 
intended for the purchase of lethal supplies. Chan- 
nell's records reveal that 12 contributors, including 
Newington and Garwood, accounted for slightly 
more than 90 percent of NEPL's contributions in 

1985 and 1986. 



95 



Chapter 4 



By giving to the tax-exempt NEPL, the contribu- 
tors were able to claim tax deductions even though 
their contributions were intended for the purchase of 
lethal supplies. The Committees have received evi- 
dence that several of these contributors claimed tax 
deductions for their NEPL contributions. For taxpay- 
ers in the 50 percent tax bracket, this meant that the 
public in effect paid for half their gifts. 

The Role of the President 

In a May 19, 1986, PROF note to Poindexter, 
North wrote "the President obviously knows why he 
has been meeting with several select people to thank 
them for their 'support for Democracy' in Cent[ral] 
Am[erica]."'2^ In fact, what the President knew is a 
matter of some doubt. 

The President, in his March 19, 1987, press confer- 
ence said that he believed that contributors he met 
had donated money for political advertising for the 
Contras.*26 The minutes of the May 16, 1986, Nation- 
al Security Planning Group (NSPG) meeting reveal 
the same understanding on the part of the President. 
He stated, "What about the private groups who pay 
for ads for the Contras? Have they been contacted? 
Could they do more than ads?" ^^'' Similarly, in prep- 
aration for the January 30 briefing, Linda Chavez 
wrote a memorandum to the President, stating that 
"ACT and NEPL spent in excess of $3 million sup- 
porting the President's programs through public 
awareness using television and newspaper mes- 
sages." '^^ In fact, much of the $3 million was direct- 
ed toward Contra support activities, including arms. 

Poindexter, however, testified at his deposition that 
"[tjhere wasn't any question in my mind" that the 
President was aware that the contributors he was 
thanking were giving to the Contras ^^^ He added 
that "in the White House during this period of time 
that we were encouraging private support, we really 
didn't distinguish between how the money was going 
to be spent." '^° North testified that in writing his 
May 19 PROF note, he assumed that the President 
was aware that the contributions were for munitions, 
as well as other things, although he denied ever dis- 
cussing this with the President.'*' 

The President met with and thanked several large 
contributors for their support of his policies. David 
Fischer, former Special Assistant to the President, 
arranged Presidential photo opportunities or meetings 
with at least seven major Channell-Miller contributors 
in 1986. Fischer and Martin Artiano, a Washington 
lawyer, were paid steep fees by IBC (which charged 
these fees to NEPL) for arranging these meetings 
(among other services). Channell's statement to 
O'Boyle that these meetings carried a $300,000 price 
tag is substantiated by Edie Eraser's cryptic note to 
North (mentioned above); at least five of the six con- 
tributors who donated more than $300,000 to NEPL 
were invited to meet with the President. 



The Role of David Fischer and Martin 
Artiano 

In late November or early December 1985, Miller 
asked Martin Artiano, an acquaintance from the 1980 
Reagan Presidential campaign, to help him find some- 
one "who had some Washington experience at a rela- 
tively senior level" to provide "consulting" assistance 
to IBC on behalf of NEPL.'^a When Artiano learned 
of IBC's needs, he contacted David Fischer, who had 
been a friend since they worked together as advance 
men in the 1976 Reagan campaign. '^^ 

After the unsuccessful 1976 Reagan Presidential 
effort, Fischer worked as an employee of Deaver and 
Hannaford, a public relations firm that did extensive 
work for Mr. Reagan. Fischer was in charge of Mr. 
Reagan's advance operations and served on occasion 
as his personal aide during the years of preparation 
for another Presidential run in 1980.'*'* During the 
1980 campaign, Fischer became the full-time personal 
aide to Mr. Reagan, travelling on the campaign plane 
with the candidate. After the inauguration in January 
1981, Fischer was appointed Special Assistant to the 
President with an office adjacent to the Oval 
Office.'*^ For the next 4 years— until April 1985— 
Fischer was in almost constant contact with the Presi- 
dent. 

As President Reagan's second term began in early 
1985, Fischer and his wife decided for personal rea- 
sons to move to Utah. By the fall of 1985, however, 
Fischer wanted to return to Washington and asked 
Artiano to let him know about employment or con- 
sulting opportunities'^^ When contacted by Artiano 
about the IBC opportunity, Fischer authorized Ar- 
tiano to pursue discussions with Miller on his 
behalf.'" 

When Miller decided to retain Fischer and Artiano, 
he sought Channell's concurrence because NEPL ulti- 
mately was to be the recipient of, and billed by IBC 
for, the "consulting" services performed by Fischer 
and Artiano. While all the participants recall that 
Fischer and Artiano agreed to act as subcontractors 
for IBC and provide services to Channell's organiza- 
tions, there is sharp dispute over the terms of that 
agreement. This dispute is only sharpened by the ab- 
sence of a written understanding. 

Channell and Conrad insist that they agreed to pay 
Fischer and Artiano $50,000 for each meeting Fischer 
scheduled with the President for a NEPL contributor. 
Conrad claims to recall a meeting in December 1985 
in Miller's office attended by Miller, Artiano, Fischer, 
Channell, and himself at which Artiano broached, and 
Channell accepted, this proposal.'** Channell recalls 
Fischer and Artiano making this proposal but claims 
that he rejected it as too expensive. Instead, according 
to Channell, he opted for a straight retainer of 
$20,000 per month. '*^ Gomez recalls that Fischer and 
Artiano were to be compensated at least in part based 



96 



Chapter 4 



on the number of Presidential meetings they could 
arrange for NEPL contributors.''"' 

Fischer and Artiano vehemently deny that any such 
proposal was made or accepted. Artiano, who negoti- 
ated with Miller on behalf of Fischer, testified that 
they initially agreed to a 2-year consulting contract 
for a monthly retainer of $20,000 a month. When he 
and Fischer realized the amount of work Channell 
demanded, however, Artiano testified that he request- 
ed a $50,000 "acceleration" of their retainer. This 
payment was made to them on January 31, 1986, and 
was split evenly by Artiano and Fischer. Later, Fisch- 
er demanded and received another $50,000 "accelera- 
tion," which he did not split with Artiano. In July 

1986, Fischer and Artiano recast their arrangement 
with IBC entirely, replacing the 2-year consulting 
contract with a formal joint venture between "David 
C. Fischer & Associates" and ISC'" 

According to both Fischer and Artiano, they 
learned in early 1986 that Channell and Conrad were 
operating under the assumption that there was a 
straight fee-for-Presidential meeting arrangement. Ar- 
tiano thereupon convened a meeting of all the princi- 
pals and disabused Channell and Conrad of that 
notion.'*^ 

Miller's recollection lends some credence to every- 
one's account. He testified that the initial agreement, 
struck in December 1985, was a $20,000-a-month con- 
sulting arrangement. He testified, however, that this 
initial agreement did not contemplate Fischer setting 
up meetings at the White House. Shortly after striking 
the original deal, according to Miller, Channell began 
to make increased demands upon Fischer, one aspect 
of which was setting up meetings between the Presi- 
dent and major NEPL contributors. In exchange for 
servicing those increased demands, Fischer and Ar- 
tiano demanded, through Miller, an acceleration of 
their retainer to $70,000 per month (that is, $50,000 
per month more than the monthly fee of the original 
arrangement). When Miller relayed this demand to 
Channell, Channell suggested that, for such a sum, 
NEPL should get at least one meeting with the Presi- 
dent each month. According to Miller, Channell ulti- 
mately did agree to this acceleration.'*^ 

All told, between December 1985 and February 

1987, IBC paid Fischer $397,400 and Artiano 
$265,000. Artiano transferred $60,000 of his payments 
to Fischer. All of the payments were reimbursed to 
IBC by NEPL. 

When asked about allegations that Fischer was paid 
$50,000 for each meeting arranged with the President, 
Donald Regan, the President's Chief of Staff, testified 
that he had no independent knowledge of such an 
arrangement, but, if true, the allegations would be a 
"real embarrassment." According to Regan, "we 
thought he was doing it out of his concerns for the 
contras and the goodness of his heart, a public pro 
bono type of thing." He continued: "To find out he 
was being paid for it was a real shock .... [A]nyone 



getting paid to get a group into the White House, we 
tried to block that." ■■''' 

Fischer, however, contends that Regan knew by 
the first meeting between the President and Channell 
supporters — in January 1986 — that Fischer was acting 
as a paid consultant to the Channell organization. 
When he raised the subject with Regan, according to 
Fischer, Regan responded, "I hope you're being com- 
pensated for this."'*^ 

North's Other Fundraising Efforts 

Separate from his Channell-related efforts, in the 
fall of 1985, North enlisted Roy Godson — a consult- 
ant to the National Security Council — to assist in rais- 
ing funds for a humanitarian organization involved 
with Nicaragua. Godson's efforts led to a deposit to 
the I.e., Inc. account through first the Heritage 
Foundation and then the Institute for North-South 
Issues (INSI), a non-profit organization controlled by 
Miller and Gomez. This deposit originally took the 
form of a $100,000 grant from the Heritage Founda- 
tion to INSI. The Heritage Foundation received the 
money for the "grant" from a private contributor 
arranged by Godson and Clyde Slease, a Pittsburgh 
attorney and friend of Godson's. Godson had ar- 
ranged for Slease to meet privately with North and 
McFarlane on the need to raise funds for the humani- 
tarian organization.'*^ 

The true objective of this "grant" was disguised in 
correspondence between Miller (as Treasurer of 
INSI) and Edwin J. Feulner (as President of the Her- 
itage Foundation) with whom Godson had met pre- 
viusly. Miller sent an INSI "grant proposal" to the 
Heritage Foundation in September 1985 proposing the 
preparation and dissemination of public information 
materials in Central America. This proposal requested 
$100,000. On October 15, the Heritage Foundation 
sent INSI a check for $100,000, with Feulner stating 
by letter that "[m]y colleagues and I have discussed 
your proposal in some detail, and are pleased to re- 
spond in a positive way." '''^ 

INSI passed to I.C, Inc. only $80,000 of the 
$100,000 Heritage Foundation "grant," and retained 
the $20,000 balance as an administrative fee. The ulti- 
mate distribution of the $80,000 forwarded to I.C, 
Inc. was made to an entity which, according to 
Miller, North represented was an account controlled 
by the humanitarian organization. INSI misrepresent- 
ed on its 1985 IRS Form 990 the nature of the activi- 
ties supported by this money.'** 

Godson also arranged for John Hirtle, a stockbro- 
ker in Philadelphia, to meet with North in Washing- 
ton. Following this meeting, Hirtle and North met 
again in Philadelphia with two prospective contribu- 
tors.'*^ One subsequently donated $60,000 by check 
dated December 13, 1985, directly to INSI. Shortly 
thereafter, this amount was then transferred by INSI 
directly to a Lake Resources account in Switzerland. 



97 



Chapter 4 



What Happened to the Money 

Just as only a small fraction of the Iranian arms 
profits was used for the Contras, so only a small part 
of the money Channell raised for the Contras reached 
them. Fischer and Artiano received more than 
$650,000 or more than five percent of the total money 
raised, and Miller, Gomez, and their companies re- 
tained a large percentage of the $5 million that IBC 
received from NEPL. A total of $2,740,000 was trans- 
ferred by IBC to I.e., Inc., and $430,000 directly to 
Lake Resources. After deducting the payments to 
Fischer and Artiano — which eventually were reim- 
bursed by NEPL — the balance, approximately $1.2 
million, was retained by IBC for fees-for-services and 
expenses on NEFL's behalf.* This amount, however, 
is not all that Miller and Gomez received from the 
venture. Miller testified that North agreed in late 1985 
that he and Gomez could begin to collect a 10 per- 
cent commission on the payments funnelled to the 
Contras through IBC and I.C, Inc. Miller stated that 
North said that the 10 percent was reasonable since 
"most of the other people in the business of providing 
assistance to the Contras were taking 20% to 
30%." '^° North, in his testimony, denied that he had 
agreed to any specific percentage, but rather stated 
that he had approved "fair, just, and reasonable" com- 
pensation to Miller and Gomez. '^' Nonetheless, 
North's notebooks contain an entry for November 19, 
1985, which states "IBC - 10%." 

Miller and Gomez formed another Cayman Islands 
corporation in early May 1986, World Affairs Coun- 
selors, Inc. (WACI) to receive the compensation ap- 
proved by North. Miller instructed his Cayman Is- 
lands agent to deduct automatically for WACI 10 
percent of all funds transferred to I.C, Inc.^^^ A 
total of $442,000 was taken by Miller and Gomez 
pursuant to this commission arrangement. Miller 
never told Channell that he and Gomez were receiv- 
ing a 10 percent commission approved by North. 
Both Miller and Gomez believed that once the Contra 
assistance money left NEPL, it was subject to North's 
total discretion and control. '^^ 

Including these commissions, IBC, Miller, and 
Gomez received more than $1.7 million from the 
money raised by NEPL for the Contras. Channell's 
take was also substantial, though apparently not of the 
magnitude of Miller's and Gomez's total compensa- 
tion. He furnished his offices extravagantly and was 
lavish in his expenditures. He drew compensation for 
1985 and 1986 totalling $345,000, while Conrad and 
his organization received more than $270,000, extraor- 
dinary earnings for nonprofit fundraisers. 



•During the relevant time periods IBC received $356,472 under 
its contract with the State Department, $.19,000 from Calero for 
services, $180,000 from affihated entities, and $407,304 from other 
individuals or organizations. In other words, the amount retained 
by IBC from NEPL accounted for nearly 60% of IBC's income in 
1985 and 1986. 



Out of the money raised by NEPL, the Contras and 
their affiliated entities received only $2.7 million, with 
approximately $500,000 going to other persons and 
entities engaged in activities relating to the Contras. 
The money was routed through IBC and I.C, Inc. 
and disbursed at the direction of North to Lake Re- 
sources, Calero, and the other persons and entities. In 
virtually every case, Miller would tell North when 
money was available and North would then instruct 
him on what to do with it. Figure 4-1 depicts the 
flow of money. In addition, as described in the next 
section, more than $1.2 million was spent on political 
advertising and lobbying for the Contras. 

Political Advertising for the Contras 

Apart from financial assistance to the Contras, the 
major project of the Channell and Miller organiza- 
tions in 1985 and 1986 was a "public education" and 
lobbying program in support of U.S. Government aid 
for the Contras. 

The major vehicle in the "public education" cam- 
paign was a series of television advertisements pre- 
pared by the Robert Goodman Agency in Baltimore 
that cost NEPL $1 million. Adam Goodman of that 
agency, following the Senate's approval of the Contra 
funding bill in 1986, wrote a letter to Channell de- 
scribing their achievement: 

By design, we launched the four-week national 
television ad campaign in Washington, DC, in 
late February. This reflected the economy of 
reaching all 435 Members of the House (and 100 
United States Senators) in one sitting. Beginning 
with Week 2, and running through the first deci- 
sive House vote in late March, we also aired spot 
commercials in 23 additional television markets 
across the country. These targeted markets, cov- 
ering the home Districts of nearly thirty Con- 
gressmen experts considered to be at the core of 
the key 'swing vote' on Contra funding, added 
scope and credibility to the ad campaign. In fact, 
N.E.P.L.'s national television spot series was ulti- 
mately seen by more than 33 million people, or 
one out of every seven Americans. '^■' 

Supplementing the television programs were press 
conferences and speaking tours by persons supporting 
the Contras. These were arranged by IBC and an- 
other public relations firm, Edelman, Inc., retained by 
Channell, which was paid $92,000 by NEPL. 

NEPL paid $115,000 for extensive polling by the 
Finkelstein Company as an aid to selecting areas 
where television advertisements and speaking tours 
would most likely have a favorable effect on a Con- 
gressional vote. He also retained two companies, 
Miner & Eraser and the Lichtenstein Company, to 
generate letters to Congressmen supporting Contra 
aid, and he paid two lobbyists for their services in 



98 



Chapter 4 



support of this effort: Dan Kuykendall, who concen- 
trated on undecided Repubhcans and conservative 
Democrats, and Bruce Cameron, who focused on lib- 
eral Democrats. 

Another organization, Prodemca, which had con- 
centrated on Central American issues, also received 
payments from Channell. Its representatives apparent- 
ly participated in strategy sessions about enlisting 
Congressional support. 

Finally, it appears that Channell engaged in adver- 
tising targeted to defeat Representative Michael 
Barnes's bid for a Senate seat in Maryland. Represent- 
ative Barnes had been a vocal opponent of military 
assistance to the Contras. Channell's Anti-Terrorism 
American Committee ran a series of television adver- 
tisements opposing Representative Barnes during the 
primary campaign. When Representative Barnes was 
defeated in the primary, Channell and his associates 
(Cliff Smith and Krishna Littledale) sent a telegram to 
North exulting in this result: 

We have the honor to inform you that Congress- 
man Michael Barnes, foe of the freedom fighter 
movement, adversary of President Reagan's for- 
eign policy goals and opponent of the President's 
vision for American security in the future has 
been soundly defeated in his bid to become the 
Democratic candidate for the U.S. Senate from 
Maryland. 

His defeat signals an end to much of the disinfor- 
mation and unwise effort directed at crippling 
your foreign policy goals. 

We, at the Anti-Terrorism American Committee 
(ATAC), feel proud to have participated in a 
campaign to ensure Congressman Barnes' 
defeat. '^^ 

Channell-Miller Network: The End 
The Beginning of the End 

On October 18, 1986, the President signed legisla- 
tion appropriating $100 million for the Contras ($30 
million for humanitarian assistance and $70 million in 
unrestricted aid). The anticipation of this legislation 
led to a downturn in the activities of the Channell- 
Miller fundraising and Contra assistance network (see 
Figure 4-1) after the summer of 1986. 

With the disclosure in early November of the sale 
of arms to Iran, however, persons involved in the 
network became concerned that the story of the net- 
work would unravel and become public. This pre- 
scient concern led to meetings between Miller and 
North on November 20 and 21. 

The initial meeting was requested by Miller. They 
met in the hallway outside of North's office in the 
Old Executive Office Building. Miller told North that 
he was worried about the possible legal ramifications 



and the costs associated with a legal defense. North 
told Miller that he should use the money left in the 
Intel Co-Operation (or I.C., Inc.) account (approxi- 
mately $200,000) for any legal fees that might 
arise. '^8 

North called Miller the next day, November 21, to 
arrange a meeting later that afternoon. Miller met 
North in the Old Executive Office Building, and 
North asked him for a ride to Dupont Circle. Miller 
told North that money was needed from a foreign 
source to fund public relations and congressional ac- 
tivities on behalf of the United Nicaraguan Opposition 
(UNO). Miller suggested contacting the Sultan of 
Brunei or an Arab country. North's response was "I 
gave one to Shultz already and he [screwed it up]." 
North also stated that "if Shultz knew that the Aya- 
tollah was bankrolling this whole thing he'd have a 
heart attack." Miller did not understand either refer- 
ence.'^' 

Either that day or the day before. North told Miller 
that the Attorney General had advised North to 
obtain legal counsel.* Miller dropped North at the 
office building at 1800 Massachusetts Avenue, N.W., 
where Tom Green's law offices, among others, are 
located.'*® 

The Lowell Sun Allegations 

On December 14, 1986, the Lowell (Mass.) Sun ran 
a story under the headline "Money from Iranian 
Arms Sales Was Used to Back Conservatives During 
1986 Election." The story stated that "[a]bout $5 mil- 
lion from the almost $30 million in excess raised from 
arms sales to Iran was filtered to conservative politi- 
cal action groups" to "support candidates who backed 
President Reagan's pro-Contra and Star Wars poli- 
cies." The only such group named in the article was 
NEPL. 

The Committees have uncovered no evidence to 
substantiate the allegation that NEPL or any other of 
Channell's political action groups received any pro- 
ceeds derived from the sale of arms to Iran. In this 
regard, the Committees have accounted for virtually 
all of the funds received by Channell's organizations 
during the relevant period, none of which are trace- 
able to the Iranian arms sales. Similarly, the Commit- 
tees have accounted for virtually all expenditures 
from the Enterprise, and none of these were paid to 
Channell's organizations. 

NEPL Activities in December 1986 

In December 1986, NEPL's staff received an un- 
usually lengthy holiday vacation from December 15 
to January 5, 1987. The reason given for this lengthy 
break was that the media were making it too difficult 



*The Attorney General denied that he offered such advice to 
North. Meese Dep., 7/8/87, at 103. See Chapter 20 for a more 
complete description of the events in November 1986. 



99 



Chapter 4 



for the organizations to conduct their work and that 
the most sensible response was to close operations for 
a couple of weeks. '*^ 

Immediately prior to the extended holiday, two 
NEPL accounting employees were instructed by their 
supervisors to delete from the accounting records any 
and all references to the "Toys" project. As men- 
tioned above, contributions intended for the purchase 
of lethal supplies generally were designated on 
NEPL's books for the "Toys" project. Alterations in 
the accounting records and related floppy discs were 
made to modify prior references to "Toys" to a neu- 
tral project named "CAFF TV" (presumably Central 
American Freedom Project — Television Advertis- 
ing), i^o 

In addition, NEPL's principal accountant took all 
NEPL accounting materials home with him during 
the vacation, including financial records, bank state- 
ments, check books, deposit slips, and the like. '^' 
The evidence obtained by the Committees suggests 
that all such records were taken to perform year-end 
accounting tasks and were returned by the accountant 
without further alteration. 

February 1987 Report from IBC to NEPL 

On February 16, 1987, IBC issued a report to 
NEPL that reconstructed the disposition of the 
Contra assistance payments made by NEPL to IBC 
and I.e., Inc. during the period from July 1985 
through the end of 1986. The report contained sup- 
porting documentation for many of the relevant trans- 
actions.'^^ 

In a summary at the beginning of the report, IBC 
acknowledged that most of the disbursements of these 



funds were made "at the request of Lt. Col. Oliver L. 
North." Moreover, the summary states that "we were 
assured by [North] at the time that the funds were to 
be applied solely for humanitarian assistance." '^^ 
Miller has told the Committees that he would write 
these statements differently if he were writing them 
today."^'** 

Guilty Pleas of Channel! and Miller 

On April 29, 1987, Channell pled guilty to a one- 
count criminal information filed the same day by the 
Independet Counsel. As noted above, the information 
charged that Channell, Miller, "and others known and 
unknown to the Independent Counsel" conspired "to 
defraud the IRS and deprive the Treasury of the 
United States of revenue to which it was entitled by 
subverting and corrupting the lawful purposes ... of 
NEPL by using NEPL ... to solicit contributions to 
purchase military and other types of non-humanitarian 
aid for the Contras," in violation of 18 U.S.C. Section 
371. The acts identified by the information as part of 
the conspiracy include the Ramsey, Hunt, Newington, 
O'Boyle, Garwood, and Claggett solicitations. At the 
hearing in which Channell's guilty plea was accepted 
by the Federal district court, Channell named Miller 
and North as his co-conspirators. 

Miller pled guilty to a substantively identical crimi- 
nal information on May 6, 1987. Both Channell and 
Miller are awaiting sentencing. 



•According to Miller, he told North in late 1986 that he "hoped 
to hell the account had been used for humanitarian assistance." 
North responded "Oh hell, yes." R. Miller Dep., 8/21/87, at 331. 



100 



Chapter 4 



Figure 4-1. The Channell-Miller Contra Assistance Network 



Naiionai 

Endovvmeni fo' 

Ihe P'esc'vaiion 

0' Liberty (NEPL) 




This chart represents the money flow of the Channell-Miller Contra Assistance Network. 

Source: Senate Select Committee on Secret Military Assistance to Iran and the Nicaraguan Opposition 
and House Select Committee to Investigation Covert Arms Transactions with Iran. 



101 



Chapter 4 



Chapter 4 



1. Channell Dep., 9/1/87, at 2-4. 

2. Id., at 6-10, 14-16, 21; 9/2/87, at 163. 

3. Id.. 9/1/87, at 30-34. 

4. CH 4477-80. 

5. CH 4437. 

6. Channell Dep., 9/2/87, at 163-64. 

7. Id.. 9/1/87, at 40-41; 9/2/87, at 165. 

8. Id.. 9/1/87, at 49-50. 

9. Conrad Dep. at 4-6. 

10. Id at 6-8. 

11. Id. at 8-10. 

12. Id. at 12-16. 

13. Id at 20-22, 25-27. 

14. Id at 24, 557, 559-60. 

15. Id at 28-38. 

16. Id at 38-39. 

17. Id at 41. 

18. R. Miller Dep., 8/20/87, at 92-93. 

19. Id. 6/23/87, at 19-20. 

20. Id.. 6/23/87, at 19-21; 8/20/87 at 93-95. 

21. Audit Report No. 7PP-008, Office of Inspector 
General.Department of State (July 1987). 

22. Id 

23. R. Miller Dep., 8/21/87, at 93. 

24. Id, at 285-86, 306. 

25. Id, 8/20/87, at 125-26. 

26. Channell Dep., 9/2/87, at 165-67. 

27. Fraser Dep. at 28, 31-39; N 6298. 

28. Fraser Dep. Ex. 3. 

29. Fraser Dep. at 41-60. 

30. Channell Dep., 9/2/87, at 75-77; Conrad Dep. at 580- 
81. 

31. Fraser Dep. at 28-30, 48-49. 

32. Channell Dep., 9/1/87, at 52-53. 

33. Id. at 52-54. 

34. R. Miller Dep., 8/20/87, at 135-37. 

35. Id, at 137. 

36. Id., at 137-39. 

37. Id, at 14849. 

38. CH 32022. 

39. Channell Dep., 9/1/87, at 80-82; R. Miller Dep., 8/ 
20/87, at 141-42. 

40. Channell Dep., 9/1/87, at 80-83; R. Miller Dep., 8/ 
20/87, at 142. 

41. CH 36920-35; R. Miller Dep. Ex. 10. 

42. Conrad Dep., 6/10/87, at 75-76; Gomez Dep. at 32- 
33. 

43. R. Miller Dep. Ex. 10. 

44. Id 

45. Id 

46. Id. 

47. Id 

48. Id 

49. R. Miller Dep., 6/23/87, at 24-25. 

50. Ramsey Dep. at 55; R. Miller Dep., 6/23/87, at 27. 

51. R. Miller Dep., 6/23/87, at 27. 

52. Id 

53. RM 3577; RM 3578. 

54. Channell Dep., 9/1/87, at 76-78. 

55. Id. 9/2/87, at 171. 

56. Id. 9/1/87, at 87-88; 9/2/87, at 168-71. See also 
O'Boyle Test., Hearings, 100-3, 5/21/87, at 117-19. 



59. 



57. Channell Dep., 9/1/87, at 78-80. 

58. Id 

59. R. Miller Dep., 8/21/87, at 382-89. 

60. Id. at 389-90. 

61. Id. 8/20/87, at 98-99. 

62. RM 1136-44. 

63. R. Miller Dep., 8/20/87, at 96-100. 

64. Id. at 102-04, 113-14. 

65. Id. 6/23/87, at 29. 

66. North Test., Hearings. 100-7, Part II, 7/13/87, at 58- 
9. 

67. RM 1541-42. 

68. Miller Dep., 8/20/87, at 124. 

69. Id. 6/23/87, at 28. 

70. Channell Dep., 9/1/87, at 91. 

71. R. Miller Dep., 6/23/87, at 28-30. 

72. Id. 8/20/87, at 110-13. 

73. CH 35141. 

74. McLaughlin Dep. at 50-52. 

75. O'Boyle Test., Hearings. 100-3, 5/21/87, at 117-19. 

76. Id 

II. Id at 120. 

78. R. Miller Dep., 9/15/87, at 511-15. 

79. North Test.. Hearings. 100-7, Part I, 7/7/87, at 89-90. 

80. Id. at 91. 

81. R. Miller Dep., 6/23/87. at 32-33. 

82. Id. at 32-34. 

83. RM 971. 

84. R. Miller Dep., 7/3/87. at 75-76; 8/20/87, at 252-56. 

85. RM 859. 

86. R. Miller Dep., 8/20/87, at 266-67. 

87. Conrad Dep., 6/10/87, at 147-48. 

88. Channell Dep., 9/1/87, at 123. 

89. Id. at 113-20; 9/2/87, at 171-72. 

90. Id. 9/1/87, at 110-11. 

91. Hunt Dep., at 32-33. 

92. Id. at 21. 

93. Id. at 32, 48. 

94. Channell Dep. 9/1/87, at 124-25. 

95. Hunt Dep. at 52. 

96. Id. at 46-55, 79-80, 82-83. 

97. Id. at 34, 56, 80-85. 

98. Id. at 67, 82-83. 

99. RM 971. 

100. R. Miller Dep., 6/23/87, at 75-76; 8/20/87, at 254- 

101. Newington Dep., at 16-17, 36, 56-58. 

102. RM 1042. 

103. R. Miller Dep., 8/20/87, at 248-50. 

104. Id., 6/23/87, at 34-35. 

105. Id, at 34-36. 

106. Id, at 36-37. 

107. Newington Dep., at 33, 45, 86-87, 90-93. 

108. Channell Dep., 9/1/87, at 148. 

109. O'Boyle Test., Hearings, 100-3, 5/21/87, at 116-17. 

110. Id at 117-18. 

III. Id at 118-19. 

112. Id at 119. 

113. Id at 120. 

114. Id at 120-21; O'Boyle Dep. at 42-44. 



55. 



102 



Chapter 4 



Hearings. 100-3, 5/21/87, at 120; 



100-3, 5/21/87, at 121-22; 



114; 



115. O'Boyle Test., 
O'Boyle Dep. at 46-47. 

116. O'Boyle Test., Hearings. 
O'Boyle Dep. at 54-55. 

117. O'Boyle Test., Hearings. 100-3, 5/21/87, at 122. 

118. Id. at 123-24. 

119. Garwood Test., Hearings, 100-3. 5/21/87, at 112-14; 
Garwood Dep. at 12-15, 16-18, 20, 28-30, 32-36. 

120. Garwood Test., Hearings. 100-3, 5/21/87, at 113. 

121. Id. at 112-13; Garwood Dep. at 33-34. 

122. Garwood Test., Hearings. 100-3, 5/21/87, at 113-14; 
Garwood Dep. at 34. 

123. Garwood Test., Hearings. 100-3, 5/21/87, 
Garwood Dep. at 35-38. 

124. Garwood Test., Hearings. 100-3, 5/21/87, at 115-16; 
Garwood Dep. at 58-61. 

125. N 12528. 
New York Times, 3/20/87, at A- 10, col. 4. 
N 10298. 
N 22715. 

Poindexter Dep., 5/2/87, at 203. 
Id at 202. 

North Test., Hearings. 100-7, Part I, 1/1/%1, at 92. 
Artiano Dep. at 58-59. 
Id at 44-45. 

Id. at 45; Fischer Dep. at 6. 
Fischer Dep. at 9; Artiano Dep. at 46-50. 
Fischer Dep. at 159. 
Artiano Dep. at 59. 

138. Conrad Dep., 6/10/87, at 179-80. 

139. Channell Dep., 9/1/87, at 155-59. 

140. Gomez Dep. at 61-64. 



126. 
127. 
128. 
129. 
130. 
131. 
132. 
133. 
134. 
135. 
136. 
137. 



141. Artiano Dep., at 64-72, 78-90; Fischer Dep., at 35- 
38; 97-104, 111-119. 

142. Fischer Dep., at 104-05. 

143. R. Miller Dep., 8/21/87, at 358-62. 

144. Regan Test., Hearings., 100-10, 7/30/87, at 58; 7/31/ 
87, at 116. 

145. Fischer Dep. at 48. 

146. Godson Dep. at 53-70; R. Miller Dep., 8/20/87, at 
276-81; Slease Dep. at 20-36, 56-57. 

147. RM 17211. 

148. Godson Dep. at 9, 40, 47-85; R. Miller Dep., 8/20/ 
87, at 276-81; Slease Dep. at 20-36, 56-57. 

149. Godson Dep., at 89-96; Hirtle Dep., at 27-48. 

150. R. Miller Dep., 6/23/87, at 38. 

151. North Test., Hearings. 100-7, Part II, 7/13/87, at 
58-59. 

152. R. Miller Dep., 8/20/87, at 226-28. 

153. Id., at 228; Gomez Dep., at 88-89. 

154. Letter from Adam Goodman to Spitz Channell, 3/ 
31/86, reproduced as part of Channell Dep. Ex. 1. 

155. Channell Dep. Ex. 1, No. A36004. 

156. R. Miller Dep., 6/23/87, at 5-8. 

157. Id, at 9-14. 

158. W.,at 14-15. 

159. McLaughlin Dep. at 122-30. 

160. S. McMahon Dep. at 50-54. 

161. Id at 23-24. 

162. RM 1-88. 

163. RM 3. 

164. R. Miller Dep., 8/20/87, at 236-37. 



103 



Chapter 5 

NSC Staff Involvement In Criminal 
Investigations And Prosecutions 



During the period covered by the Boland Amend- 
ment, federal law enforcement agencies conducted in- 
vestigations that touched upon various aspects of the 
secret Contra support operation. Concerned that these 
investigations, if pursued, would expose the NSC 
staffs covert operations, North and Poindexter react- 
ed by contacting the agencies involved. They sought 
to monitor investigations and, in some cases, to delay 
or impede their progress by suggesting that national 
security was at stake. Confronted with such assertions 
from White House officials involved with the nation's 
security, law enforcement agencies understandably 
cooperated with the NSC staff by delaying some in- 
vestigations, arranging to move a convicted former 
foreign official whom North was afraid would dis- 
close facts about the Contras to a minimum security 
prison, and giving Poindexter and North information 
about other investigations. 

The Committees are aware of seven such episodes, 
three involving the United States Customs Service 
and four involving the Department of Justice. They 
represent an integral part of the NSC staffs efforts to 
keep its operations even from those with legitimate 
law enforcement interests. 

North and the Customs Service 

Maule Aircraft Corporation 

In the summer of 1986, the United States Customs 
Service, following up on a CBS news report, began 
an investigation into allegations that Maule Aircraft 
Corporation of Macon, Georgia, had shipped four 
aircraft into Central America to support the Contras 
in possible violation of U.S. export control laws.^ 

In August 1986, the Commissioner of the U.S. Cus- 
toms Service, William von Raab, was approached by 
North, who told him that Customs agents in Georgia 
were giving Maule Aircraft Corporation a hard time.^ 
North said the Maule Corporation shipped aircraft 
such as "Piper Cubs" down south. North also said 
that Maule was "a close friend of the President." 
Commissioner von Raab told North he would look 
into the Customs Service investigation and assigned 
the matter to William Rosenblatt, Assistant Commis- 
sioner for Enforcement.^ 



Rosenblatt contacted North, who told Rosenblatt 
that the people involved in the sale and export of the 
four Maule aircraft were "good guys" and had done 
nothing illegal.* North insisted that the aircraft were 
simply "super Piper Cubs" and were exported only to 
a Central American country, where they were used to 
supply the Contras with medical and humanitarian 
supplies.^ Rosenblatt explained that in order to verify 
the legality of the transactions. Customs needed cer- 
tain documents and photographs of the aircraft, 
which North promised to produce. In exchange, Ro- 
senblatt agreed to postpone issuance of subpoenas. 

Over the course of the next several weeks, Rosenb- 
latt continued to contact North periodically to request 
the promised documentation,^ which North led him 
to believe would be forthcoming "momentarily." Be- 
cause of North's promises, Rosenblatt told the agent 
in charge to suspend issuing a grand jury subpoena 
for Maule, although the agent asserted that the Maule 
officials were "stone-walling" him.' In the interim, 
Rosenblatt found himself dealing with North on two 
other matters, one involving a Customs informant 
named Joseph Kelso and another involving Southern 
Air Transport's role in the Hasenfus aircraft, where 
North asked Customs to narrow a subpoena so as not 
to expose other sensitive operations (see Chapter 18). 

On November 10, Rosenblatt met with Commis- 
sioner von Raab to discuss North's assertions that the 
Customs investigation could compromise national se- 
curity, including an effort to obtain the release of the 
hostages.* At that meeting, von Raab advised Ro- 
senblatt to speak with Robert Kimmitt, General 
Counsel to the Treasury Department, about his inabil- 
ity to obtain the Maule and SAT records. Rosenblatt 
scheduled that meeting for the afternoon of Novem- 
ber 17.9 

On the morning of November 17, Rosenblatt called 
North to attempt again to get the promised docu- 
ments on Maule Aircraft. To Rosenblatt's surprise. 
North indicated that he had the documents and would 
send them right over. When they arrived, however, 
Rosenblatt was quite disappointed. They did not in- 
clude purchase orders, photographs, or other docu- 
ments sufficient to dispose of the Customs inquiry. 
That afternoon, Rosenblatt met with Kimmitt and re- 
lated the entire episode involving Maule and SAT. '" 



105 



Chapter 5 



At that point, the investigation resumed, 6 weeks after 
it had been halted at North's request. 

While Rosenblatt testified he never mentioned the 
Kimmitt or von Raab meetings to North and he had 
no contact with North after November 17,'' North's 
notes suggest that Rosenblatt did brief him on these 
matters after November 17. A note dated "19 Nov. 
86" reads: 

—Bill Rosenblatt 

— Joe Ladow - P/M Maule 

— Letter from Justice 

— Talk to Commissioner next week 

— Talked to Kimmitt re relationship 

— Profs w/C-123 military configuration required so- 
journ 

— Names in document - La dodge needed advice on 
how to handle 

—Call Von Raab 12 

Kelso 

Another matter on which Customs had dealings 
with North involved Joseph Kelso. Kelso was on 
probation after a conviction for illegally exporting 
arms to Iraq. In 1986, he approached Customs under 
an alias and offered to work as an informant.'^ 

In the spring of 1986, Kelso, accompanied by a 
Customs informant, traveled to Costa Rica to gather 
information on an alleged counterfeiting and drug 
ring that supposedly included corrupt DEA agents.''* 
Kelso and the informant had not notified the U.S. 
Embassy or Costa Rican authorities of their investiga- 
tion, and Kelso was detained and questioned by the 
Costa Rican authorities and DEA agents as to what 
he was doing in the country. '^ Kelso was then taken 
to John Hull's farm. '8 Hull reported the incident to 
North and Owen in a letter.''' At the same time, 
Tambs complained to Customs about their sending 
informants into Costa Rica without notifying the Em- 
bassy. 

After returning to the United States, Kelso, who 
faced charges of violating his probation, turned over 
tape recordings of his activities to Customs, and 
claimed that, apart from his trip for Customs, he was 
working for the inteUigence community.'* In or 
about September 1986, Rosenblatt called North to 
find out if Kelso was working for the intelligence 
community.'^ North, who was already aware of 
Kelso's visit to Costa Rica, suggested that Rosenblatt 
allow Owen, whom Rosenblatt did not know, to 
listen to Kelso's tapes to verify his claims. Rosenblatt 
agreed on the assumption that Owen was part of the 
NSC staff, or otherwise assisting North. ^° 

After receiving the Kelso tapes from Rosenblatt in 
October, Owen made two trips to Central America 
where he met with DEA agents. Although Owen was 
purporting to investigate Kelso's status, he never 
communicated further with Rosenblatt, and Rosenb- 



latt concluded from this silence that Kelso had not 
been working for the intelligence community.^' 

Miami Neutrality Investigation 

In connection with another investigation, this one 
conducted by the Office of the United States Attor- 
ney for the Southern District of Florida, North and 
Poindexter were able to obtain information concern- 
ing the vulnerability of the Enterprise. 

The Roots of the Investigation 

On July 21, 1985, the Miami Herald published an 
article by reporters Martha Honey and Tony Avir- 
gan. In that article, a mercenary for Civilian Military 
Assistance (CMA) named Steven Carr, who was then 
imprisoned in Costa Rica, spoke of an arms shipment 
from Fort Lauderdale to a Central American location. 
The article caught the attention of the FBI in the 
Southern District of Florida, which opened an investi- 
gation into Carr's allegations and alerted FBI head- 
quarters in Washington, D.C., as required in any 
matter involving the Neutrality Act.^^ 

Garcia Allegations 

In December 1985, an individual named Jesus 
Garcia was convicted in the Southern District of 
Florida on charges of possessing an unlicensed ma- 
chine gun.^^ 

While Garcia was awaiting sentence, he offered 
through his attorney to provide federal authorities 
with information relating to paramilitary plots in Cen- 
tral America. As a result of that offer, he was inter- 
viewed on January 7, 1986 by two FBI agents. He 
claimed that he had been set up on the machine gun 
charge by a person who supposedly worked for Tom 
Posey and the CMA, a pro-Contra paramilitary 
group. According to Garcia, Posey was attempting to 
neutralize him because of his knowledge of a CMA 
plot to assassinate Ambassador Lewis Tambs to col- 
lect a reward offered by a notorious drug kingpin in 
Central America. The assassination, Garcia told the 
FBI, would, as an added benefit, be blamed on the 
Sandinistas, thereby assisting the Contras' cause. 
Garcia also gave the FBI further details on the gun 
shipment reported earlier in the Miami Herald.^* 

The FBI agents and Jeffrey Feldman, the Assistant 
United States Attorney conducting the investigation, 
were all skeptical. ^^ Nevertheless, given the gravity 
of Garcia's allegations, the investigation continued. At 
the request of the FBI, embassy officials in Costa 
Rica interviewed Carr and other American mercenar- 
ies imprisoned in that country. Hotel records at the 
alleged site of a critical meeting seemed to confirm its 
occurrence. Flight plans and records suggested that 
the alleged arms shipment also could have oc- 
curred. ^^ 



106 



Chapter 5 



During this phase of the investigation, the FBI re- 
ceived allegations that North, Owen, and John Hull 
were involved in, or at least aware of, the gun run- 
ning plots.^'' This information was not supplied by 
Garcia, but came through other sources.^* 

On March 14, 1986, an FBI agent and Feldman met 
with Anna Barnett, the Executive Assistant United 
States Attorney. While the FBI agent and Feldman 
were in Barnett's office discussing the investigation. 
United States Attorney Leon Kellner came in to in- 
quire whether anyone was aware of an alleged plot to 
assassinate Ambassador Tambs. According to Kellner, 
he had just received a call from someone at the De- 
partment of Justice in Washington who wanted infor- 
mation about the investigation.^^ At or shortly after 
that meeting, it was decided that the FBI agents and 
Feldman would travel to New Orleans to interview 
Jack Terrell, a/k/a "Colonel Flaco," a former CMA 
mercenary who, they had been told, knew more de- 
tails of the conspiracy.^" 

Activity in Washington 

The FBI agents had been advising headquarters by 
telex throughout the early stages of the investigation 
and in early March had received a request from 
Oliver Revell, Executive Assistant Director of the 
FBI, for a detailed summary of their findings. Their 
report was forwarded to headquarters on March 20, 
1986.31 

Revell's inquiry was itself sparked by a request 
from Deputy Attorney General D. Lowell Jensen for 
an update on the investigation. ^^ Revell sent a sum- 
mary of the agents' report five pages in length, to 
Jensen. ^3 

Upon receiving the memorandum, Jensen met with 
Attorney General Meese to discuss the case. Jensen 
recalls that he and Meese decided that Admiral Poin- 
dexter, the National Security Adviser, should be 
briefed on the matter because of its international im- 
plications and the possibility of danger to an Ameri- 
can diplomat. Jensen was uncertain, however, wheth- 
er he or Meese initiated the proposal to brief Poin- 
dexter.^"* Meese testified at his deposition that he did 
not recall discussing this matter with Jensen. ^^ 

Jensen also forwarded a copy of Revell's memoran- 
dum to Associate Attorney General Steven Trott, 
who forwarded it in turn to Deputy Assistant Attor- 
ney General Mark Richard. On the "buck slip" ac- 
companying the memorandum, Trott wrote: 

Please get on top of this. [Jensen] is giving a 
heads up to the N.S.C. He would like us to 
watch over it. 

Call Kellner, find out what is up, and advise him 
that decisions should be run by you.^® 

On another buck slip attached to the memorandum 
for his own record, Richard wrote, "3/26/86, spoke 



to Kellner — AUSA not back yet from [New Orle- 
ans]. "3'' 

Richard recalls speaking with Kellner about the 
case on several occasions over the next several 
months. Trott and Jensen also believe they spoke to 
Kellner about the case on a few occasions. Each of 
them specifies that he never attempted to impede or 
otherwise interfere m »he investigation itself, and the 
Committees have no tvidence that contradicts this.'* 

On March 26, 1986, Jensen went to the NSC and 
showed Poindexter a copy of Revell's memorandum. 
Jensen does not recall any discussion that may have 
taken place. Poindexter testified that he does not 
recall the briefing at all.^^ 

Terrell and Costa Rica 

In New Orleans, Terrell provided the FBI agents 
and Feldman with additional information on the al- 
leged assassination plot and arms shipment. When 
pressed, however, Terrell admitted that most, and 
perhaps all, of his information was based on hearsay 
rather than on his direct participation or observa- 
tion. *« 

Feldman and the FBI agents traveled to Costa Rica 
on March 31, 1986, and reported to the U.S. Embas- 
sy. There they met with Tambs, who wanted to know 
the purpose of their visit. Feldman briefed Tambs 
thoroughly on their investigation and intentions. 
During that briefing, Feldman showed Tambs a chart 
he had drawn to illustrate the supposed conspiracy 
that had been described to him. The chart showed a 
pyramid of participants, with lines of involvement 
running up through John Hull and Robert Owen to 
Ohver North at the top.*' 

When he saw the chart, Tambs summoned 
"Thomas Castillo," who introduced himself to the 
investigators as a CIA station chief Castillo provided 
them background information on Hull. According to 
Feldman, Castillo also spoke of North warmly as "the 
person who introduced me to the President of the 
United States last week."*^ 

Over the course of the next two days, Feldman, the 
FBI agents, and various embassy personnel inter- 
viewed Steven Carr and several other imprisoned 
mercenaries. They attempted to set up an interview 
with Hull, who initially agreed and then declined to 
speak to them.''^ Feldman was also told by an em- 
ployee at the U.S. Embassy that Hull had been con- 
tacted by the NSC about the investigation.** 

North received a briefing from Owen on Feldman's 
visit. In a letter dated April 7, 1986, Owen identified 
each of the investigators who had appeared in Costa 
Rica, then wrote: 

According to [Castillo], Feldman looks to be 
wanting to build a career on this case. He even 
showed [Castillo] and the Ambassac'or a diagram 
with your name at the top, mine underneath, and 



107 



Chapter 5 



John's underneath mine, then a Hne connecting 
the various resistance groups in [a Central Ameri- 
can country.] 

Feldman stated they were looking at the "big 
picture" and not only looking at a possible viola- 
tion of the neutrality act, but at possible unau- 
thorized use of government funds. They went 
several times to the prison to question the five in 
jail. They tried to talk with John, but he was 
advised not to talk with them unless he had a 
lawyer present.*^ 

April 4 Meeting 

Feldman met late on the afternoon of April 4, 1986, 
with Kellner and Barnett to discuss the results of his 
trip to Costa Rica. Also present were Larry Scharf 
(Special Counsel to the United States Attorney) and 
Richard Gregorie (Chief Assistant United States At- 
torney). 

Feldman explained to them that, while the assassi- 
nation plot seemed to be fading as a cause for concern 
or a vehicle for prosecution, the gun-running charges 
seemed to have some basis in fact. Others at the 
meeting believed, however, that Feldman was having 
a difficult time fitting a complex combination of facts, 
witnesses, and actors into a coherent theory of pros- 
ecution.*^ 

At one point, the topic of the Boland Amendment 
was raised. Because no one in the room was familiar 
with the details of that legislation Barnett asked As- 
sistant United States Attorney David Liewant to 
locate it with the research computer.*' 

According to Liewant, when he arrived at 
Kellner's office with the printout, only Kellner, Bar- 
nett, and Feldman were present and Kellner was on 
the telephone talking to someone at the Department 
of Justice.*^ According to Liewant, when Kellner 
hung up, he turned to Barnett, Feldman, and Liewant 
and said that the Department wanted them to "go 
slow" on the investigation. Liewant could tell from 
Kellner's expression and tone of voice that Kellner 
was disdainful of that suggestion and had no intention 
of actually slowing the investigation.*® 

If Liewant's account of this meeting is correct, the 
Department of Justice would appear to have been 
exerting improper influence to delay an investigation, 
albeit influence brushed aside by Kellner. But each of 
the other participants in the April 4 meeting deny that 
any such telephone conversation took place. ^° Rich- 
ard, Trott, Jensen, and Meese also deny that any 
telephone call like that described by Liewant oc- 
curred or that anyone, to their knowledge, attempted 
to slow the investigation at any time.^' 

At the end of the meeting on April 4, Kellner asked 
Feldman to draft a memorandum pulling together the 
results of the investigation to date as well as Feld- 
man's approach to any possible prosecution.^^ 



The Meese Aside 

On April 12, Meese, along with Jensen and Revell, 
arrived in Miami to visit a number of FBI agents 
wounded in a shoot-out the day before. Kellner ac- 
companied Meese on his visits. ^^ 

During the day, Meese pulled him aside and asked 
him about the Garcia investigation. Kellner believes 
that he told Meese that there did not appear to be 
much substance to the assassination allegations, but 
that the gun-running investigation was continuing. 
Kellner testified that Meese neither stated nor implied 
that the investigation should be slowed or conducted 
in any other particular manner.^* 

Meese recalls asking Kellner about the matter, al- 
though he does not recall pulling Kellner aside to do 
so. Meese testified that he mentioned that case in 
particular because it had received attention by the 
press.** Meese also denies that he attempted to affect 
the course of the investigation.*^ 

The Feldman Memoranda 

On April 28, Feldman provided the first in what 
was to become a series of memorandums to Kellner. 
Both Feldman and Kellner felt that it was unsatisfac- 
tory.*' On May 14, Feldman therefore produced a 
more detailed memorandum, 20 pages in length. It 
reviewed the facts gathered to that time and conclud- 
ed that it was appropriate to issue grand jury subpoe- 
nas for various documents and witnesses. Feldman 
wrote: 

The Bureau believes that a grand jury is neces- 
sary for several reasons. First, it would dispel 
claims that the Department of Justice has not ag- 
gressively pursued this matter. Second, a grand 
jury would eliminate some of the deception they 
believe they have encountered during their inter- 
views with Jesus Garcia, Daniel Vasquez Sr., 
Ronald Boy, and Max Vargas. Finally, the grand 
jury would give the Department of Justice access 
to Costa Gun Shop's business records and 
CANAC's bank records. 

Within a few days, Kellner returned the memoran- 
dum to Feldman with the notation "I concur, we 
have sufficient evidence to institute a grand jury in- 
vestigation into the activities described herein."*^ 

Kellner then convened a meeting in his office on 
May 20 to discuss the case. Present, once again, were 
Kellner, Barnett, Scharf, Gregorie, and Feldman. As 
the discussion progressed, Scharf and Gregorie set 
forth a number of reasons why they believed it pre- 
mature to issue grand jury subpoenas. Gregorie, at his 
deposition, summarized those reasons: 

Before you go into the grand jury, as I told Jeff, 
you have to have some idea where you're going 
and what you're looking for. 



108 



Chapter 5 



Up until that time, he had some wild stories that 
were concocted by freelance newspaper reporters 
about mercenaries who were unreliable, individ- 
uals who had failed a polygraph, people who 
were unreliable, and we did not have a stage set 
of facts [sic], and I did not think it was appropri- 
ate to go into the grand jury with a bunch of 
people who we were later going to find out were 
totally lying and totally misled in a grand jury, 
going to confuse them. 

What I saw was a confused mess of facts that 
were leading in no particular direction, and had 
no form or substance to them.^* 

By the end of the meeting, a consensus developed 
that further interviews should be conducted before 
resorting to the grand jury. Feldman, who had re- 
quested authorization to go to the grand jury initially, 
acquiesced in the decision and agreed to have the FBI 
conduct the additional interviews.®" 

After Kellner changed his mind and concluded that 
grand jury subpoenas would be premature, he asked 
Feldman to redraft the May 14 memorandum to re- 
flect that conclusion. Feldman did so, and submitted a 
revised version to Kellner on May 22. Feldman did 
not change the original date on the revised memoran- 
dum.^* 

Kellner asked Scharf to review this new version, 
and Scharf made a number of changes. Most impor- 
tant, he included a reference to the Christie Institute 
litigation filed in the Southern District of Florida on 
May 30 and added to the conclusion a number of 
reasons why resort to a grand jury would be prema- 
ture. Scharf had these changes made on a word proc- 
essor, but did not change the original date or author. 
As a result, when Kellner submitted the memorandum 
to the Department on June 3, it still bore the date of 
May 14 even though it referred to an event that 
occurred on May 30. Feldman did not see this final 
version of his memorandum before Kellner sent it on 
to Washington. ®2 

Further Investigation 

The FBI agents undertook the additional investiga- 
tion requested by Feldman. On July 31, 1986, they 
presented Feldman with a lengthy "prosecution 
memorandum" that included their most recent find- 
ings. Feldman, in turn, forwarded that report to 
Kellner on or about August 14.®^ 

On August 29, 1986, Kellner told Feldman to sus- 
pend any further investigation on the matter until he 
(Kellner) returned from an impending trip to Wash- 
ington. According to Feldman, Kellner told him that 
"politics" were involved. Feldman found this state- 
ment surprising and disturbing, because it was the 
first, and only, time Kellner had indicated to him that 
such considerations were relevant. When Kellner re- 



turned from Washington shortly thereafter, he told 
Feldman to proceed.®* 

Kellner confirmed Feldman's version of this inci- 
dent. According to Kellner, shortly before he was to 
leave for Washington he received a letter from John 
Hull making serious allegations of impropriety by 
members of Senator Kerry's staff, who were also in- 
vestigating Garcia's allegations. Hull also had includ- 
ed affidavits from some of the imprisoned mercenaries 
retracting some of their prior statements regarding 
gun-running and Contra support. Kellner stated that 
he feared that he was being put into the middle of a 
political dispute, and wanted to talk to Mark Richard 
about the allegations before proceeding further. After 
that discussion, Kellner immediately authorized Feld- 
man to proceed. Both Feldman and Richard con- 
firmed this explanation.®^ 

Meanwhile, Kellner had reviewed the prosecution 
report cursorily and forwarded it, in mid-August, to 
Richard Gregorie for his input. On October 6, the 
day after the Hasenfus crash, Gregorie responded to 
Kellner that he felt the case was ready to go to the 
grand jury.®® The prosecution memorandum then 
rested again with Kellner, who forwarded his own 
approval to Feldman in the first week in November — 
six months after Feldman had first suggested the need 
for a grand jury. The relative inactivity from mid- 
August to the first week in November was again 
frustrating to Feldman and the FBI agents, and was 
explained by Gregorie and Kellner as due to the gen- 
eral press of other matters.®' 

Upon receiving approval from Kellner, Feldman 
proceeded with the investigation. The Independent 
Counsel subsequently declined to take over the case 
and Feldman was continuing to investigate the matter 
at the time he was deposed by the Committees.®* 

Reward for a Friend 

In one episode, the NSC staff undertook to persuade 
the Department of Justice to "reward" someone char- 
acterized by North as a "friend" who had been con- 
victed of plotting to assassinate a Central American 
leader. In that episode, the NSC staffs motive appears 
to have been a desire to prevent disclosure of certain 
questionable activities. 

According to a North PROF to Poindexter, the 
"friend" was an official in a Central American coun- 
try with whom North, the U.S. Ambassador, General 
Gorman, and Dewey Clarridge arranged for bases for 
the Contras as well as overall logistics, training and 
support.®^ 

This official and other plotters were indicted prior 
to 1986 for conspiracy to assassinate a Central Ameri- 
can leader. ■'° Pursuant to a plea agreement, the offi- 
cial pleaded guilty to two felony counts which car- 
ried a significant maximum sentence; and he was later 



109 



Chapter 5 



sentenced to two shorter, though still significant, 
prison terms to run concurrently.'" 

At the sentencing hearing, U.S. military officials 
assigned to the State Department testified on behalf of 
the official. The court provided that the official could 
be immediately eligible for parole if so determined by 
the Parole Commission and recommended he serve 
his sentence at a minimum security institution. Mean- 
while, Assistant Secretary of State Elliott Abrams 
promised the official's government that he would look 
into the case.''^ 

In a September 17, 1986 PROF message to Poin- 
dexter. North noted that the official was under the 
impression he would serve only a matter of days or 
weeks at the minimum security institution and then be 
released.''^ North was concerned that once the offi- 
cial realized he was really going to serve a long 
sentence, "he will break his longstanding silence 
about the Nic[araguan] Resistance and other sensitive 
operations."''' North noted the next morning he 
would meet with Oliver Revell, Steven Trott, and 
Elliott Abrams to explore the possibility of a pardon, 
clemency, deportation, or sentence reduction. The ob- 
jective of this exercise, as North put it, was "to keep 
[the official] from feeling like he was lied to in legal 
process and start spilling the beans."''* Admiral Poin- 
dexter responded: "You may advise all concerned that 
the President will want to be as helpful as possible to 
settle this matter."''^ 

Representatives of different agencies of the Admin- 
istration met to discuss the request for leniency. 
Deputy Assistant Attorney General Mark Richard at- 
tended a meeting where Defense Department repre- 
sentatives argued on the official's behalf Richard con- 
cluded their reasons were not sufficiently specific. ''' 
No one ever gave a detailed account of what the 
official had actually done for the United States to 
deserve leniency. He was always simply described as 
a "friend of the United States.''''^ The State Depart- 
ment agreed with the Department of Justice that the 
official was a terrorist and should be punished. The 
CIA did not express an opinion. ''^ 

At a subsequent meeting in North's office on Sep- 
tember 24, 1986, North tried to convince Trott, 
Revell, C/CATF (CIA) and James Michel, Deputy 
Assistant Secretary of State, that the official was only 
tangentially involved in the assassination plot and de- 
served leniency.*" Revell disagreed. North asked 
them to consider recommending a minimum security 
correctional institution rather than the federal prison 
to which the official had been assigned, despite the 
court's recommendation, by the Bureau of Prisons.*' 

In early October, North tried again with the De- 
partment of Justice, this time with help from General 
Gorman and Dewey Clarridge. Also at this meeting 
were Mark Richard (filling in for Trott), Revell, and 
Elliott Abrams.*^ North, Gorman and Clarridge all 
argued for leniency for the official, explaining only 
that the official was a "friend of the government" 



who was "always ready to assist us" and "was helpful 
in accommodating our military."*^ Abrams agreed 
that the U.S. should do what it could for the official, 
thereby reversing the State Department's earlier posi- 
tion. *■* According to Richard, he offered to meet 
with others in the Department and determine whether 
the Department would oppose the transfer of the offi- 
cial to the minimum security institution. 

North's contemporaneous account of that meeting 
portrayed the Justice Department as more committed 
to assisting the official. In a PROF note to Poin- 
dexter. North indicated that, after the last co-con- 
spirator was convicted and sentenced, the Department 
of Justice would have the defense attorney file a 
motion to reduce the sentence to time served and 
arrange to have General Gorman brief the court in 
camera on the equities. North said Trott and Revell 
believed this should result in the release and deporta- 
tion of the official. North suggested that the official's 
attorney should be discreetly briefed to mollify the 
concerns of those involved that the official "will start 
singing songs nobody wants to hear."** 

Richard soon determined that neither Trott nor 
Kellner had any objection to redesignating the official 
to the minimum security institution, as contemplated 
in the original court's recommendation and made the 
appropriate arrangements with the Bureau of Pris- 



The Fake Prince 

As explained briefly in Chapter 4. an individual 
named Kevin Kattke contacted North in March or 
April 1985 about a Saudi "prince" who proposed do- 
nating to the Contras approximately $14 million in 
proceeds derived from the sale of the "prince's" oil. 
North referred the "prince" to Richard Miller. Miller 
and the "prince" met regularly over the course of the 
next several months. The "prince" sought Miller's 
help in marketing the oil, agreeing to pay Miller $1 
million of the profits earned. Miller kept North regu- 
larly apprised of his dealings with the "prince", which 
eventually also included both a proposed gold trans- 
action and assistance in freeing the hostages held in 
Lebanon.*'' Indeed, Miller saw himself as "an agent 
working on [North's] behalf " in connection with 
these activities.** Yet while North was attempting to 
develop the "prince" as an asset in both his Iran and 
Contra initiatives, the FBI was investigating the 
"prince" for bank fraud. 

From the start. Miller had misgivings about the 
bona fides of the "prince." He did library research 
without much success in an effort to establish the 
"prince's" authenticity. According to Miller, North 
told him that the CIA had confirmed both the 
"prince's" identity and the veracity of the "prince's" 
information about the hostages.*® 



110 



Chapter 5 



Early in their relationship, the "prince" told Miller 
that he had information about the hostages in Leba- 
non that would be useful to U.S. efforts to locate and 
extricate the hostages. At North's suggestion, Miller 
related this information to the Hostage Location Task 
Force, representatives of which met with and inter- 
viewed the "prince" in Houston. Miller continued to 
inform North of the hostage-related information con- 
veyed by the "prince."^" 

In July 1985, North asked a DEA agent (Agent 
1) — who was detailed to North in connection with 
hostage release efforts — to accompany Miller and the 
"prince" to England to assist the "prince's" entry into 
the country, if necessary. Agent 1 agreed, and North 
arranged for payment of his travel expenses.®' 

The three men stayed in London for five or six 
days. Based on discussions with the "prince" about 
the situation in the Middle East, Agent 1 concluded 
that it would be worthwhile to develop the "prince" 
as a source in the hostage location effort.®^ 

In August 1985, the DEA agents embarked on fur- 
ther activities with the "prince." At North's request, 
they traveled to Geneva from Cyprus to help the 
"prince" obtain travel papers after his passport had 
allegedly been stolen. Even with the cooperation of 
Ambassador Faith Whittlesey, Agent 1 was unsuc- 
cessful in obtaining a U.S. passport for the "prince." 
A week later, however. Agent 1 obtained travel 
papers for the "prince" issued by another country. 
Agent 1 remained with the "prince" in Europe for 
some time thereafter, and paid the "prince's" ex- 
penses.®^ 

At North's request, Secord met Agent 1 and the 
"prince" in Geneva in September 1985. After meeting 
the "prince," Secord expressed to Agent 1 concerns 
about the "prince's" bona fides.®* 

Meanwhile, during the spring and summer of 1985, 
the "prince" developed legal problems in the United 
States. In late spring, the "prince" cashed a $250,000 
check at William Penn Bank in Philadelphia, which 
was returned for insufficient funds. This event result- 
ed in a referral to the FBI's Philadelphia field office 
for bank fraud charges against the "prince." In con- 
nection with the fraud investigation, the FBI's Wash- 
ington field office was asked to interview both North 
and Miller.®^ 

An FBI agent interviewed North on July 18, 1985. 
According to the agent. North said that he had re- 
ferred the "prince" to Miller because it was inadvis- 
able (and potentially unlawful) for an NSC staff 
person to meet with an individual who planned to 
contribute funds to the Contras. North further in- 
formed the agent that the "prince's" interest in donat- 
ing to the Contras was discussed by North personally 
with the President and with Robert McFarlane.®^ 
North "confidentially" advised the agent that the 
NSC staff had maintained indirect contact with the 
"prince" because of the Contras' desperate need for 
funds.®'' 



North specifically requested that attempts by the 
FBI to interview the "prince" be held in abeyance 
until after the week of July 22, 1985, because the 
Congress was expected to approve funding for the 
Contras that week. After being pressed by the FBI 
agent. North "backed down" on this request, al- 
though he expressed his view that FBI contact with 
the "prince" prior to the NSC's determination of the 
"prince's" true intentions likely would eliminate any 
possibility that the "prince" would aid the Contras. 
On his departure from North's office, the agent was 
introduced by North to Adolfo Calero, whom North 
called the "George Washington of Nicaragua".®* 

After the North interview, the FBI agent attempted 
to contact Miller, who did not return several of the 
agent's telephone calls. North called the agent on July 
30, 1985, in apparent response to the agent's attempt 
to reach Miller. North told the agent that Miller and 
the "prince" were in Europe arranging a transfer of 
funds from the "prince" to the Contras.®® 

On August 27, the FBI agent finally interviewed 
Miller, who outlined the history of his contacts with 
the "prince." Miller mentioned that he knew North, 
but did not disclose anything to the agent about Nica- 
ragua. In October, Miller was interviewed again by 
the FBI. During this session, he pledged complete 
cooperation with the fraud investigation. ""' 

During the course of the grand jury investigation of 
the "prince," North called the FBI's Oliver Revell 
once again to express concern that Miller might be 
questioned about confidential governmental matters. 
North told Revell that Miller was a consultant to the 
NSC and the State Department on the hostage situa- 
tion, but did not mention Miller's efforts on behalf of 
the Contras. At North's request, Revell called the 
Assistant United States Attorney who was handling 
the "prince's" prosecution in Philadelphia. Revell re- 
lated the concern expressed by North, and was as- 
sured by the prosecutor that, if Miller testified, he 
would not be questioned about any hostage-related 
activities.'"' 

According to Miller, he spent approximately 
$370,000 on the activities involving the "prince." 
North was aware of and approved these expenditures. 
On at least three occasions — two of which occurred 
after Miller agreed to cooperate fully in the investiga- 
tion of the "prince" — Miller sent travelers checks to 
the "prince" in Europe.'"^ Although the "prince" 
requested these payments — which totalled $32,500 — at 
least $15,000 was used to finance the DEA hostage 
rescue operations. North approved all such pay- 
ments. '"^ 

These expenditures, however, did not result in 
monetary loss for Miller. He complained to North of 
the money that the "prince" had cost him, and North 
told Miller to take reimbursement for these costs from 
Contra assistance funds that he had transferred to 



111 



Chapter 5 



Miller's company by Carl "Spitz" Channell's tax- 
exempt organization. '°'' 

In the end, it was determined that the "prince" was 
neither a "prince," nor even a Saudi. He was an 
Iranian con man, who pleaded guilty to bank fraud 
charges on the eve of his trial. He now is incarcerated 
in a federal penitentiary in Texas.'"* 

Instigation of Investigations 

North attempted to exploit his contacts with the FBI 
to attempt to instigate or intensify investigations of 
people and organizations perceived as threats to the 
Enterprise. He was ultimately assisted in this effort by 
Richard Secord and Glenn Robinette. 

In early 1986, Secord had been the target of allega- 
tions that he was running guns and drugs between 
Central America and the United States. In May 1986, 
these allegations blossomed into a lawsuit filed in 
United States District Court for the Southern District 
of Florida. The lead plaintiffs in the action were re- 
porters Martha Honey and Tony Avirgan, who were 
represented by the Christie Institute. The defendants 
included Secord, Thomas Clines, Theodore Shackley, 
and John Hull. '"« 

At some point after the lawsuit was filed, North 
again contacted Oliver Revell, this time to suggest 
that the federal government ought to investigate the 
plaintiffs because he thought they were probably 
being funded or supported by the Sandinistas. Revell 
told him that the FBI did not engage in that type of 
investigation."" 

On May 9, the FBI interviewed North about al- 
leged measures taken against him. North claimed that 
his car had been vandalized, he had been followed, 
and his dog had been poisoned. North also claimed a 
fake bomb device had been left in his mailbox. He had 
not kept the device, however, for the FBI to analyze. 
North told the FBI that he had written down the 
license number of the car that was used to follow 
him, but, after several requests from the FBI, he 
failed to provide it, claiming he lost the number.'"* 

The FBI checked with the local police regarding 
the fake bomb device placed in North's mailbox. 
North had told them he discarded it before it could 
be examined. The FBI concluded it was probably a 
prank rather than a threat. 

On June 3, 1986, North met with FBI agents to 
discuss an investigation they had been conducting into 
allegations by North that he was the target of politi- 
cally motivated vandalism and harassment, perhaps by 
foreign intelligence sources. At this meeting, North 
expressed his displeasure about the FBI's alleged lack 
of effort in the investigation. In particular, he com- 
plained that the FBI had never contacted an NSC 
staffer who supposedly was the source of allegations 
linking North to drug traffic, had not investigated 
Daniel Sheehan of the Christie Institute, had not 
interviewed a reporter who claimed North had threat- 



ened him, had not examined allegations made by Sen- 
ator Kerry against North, and had not attempted to 
interview Senator Durenberger and Representative 
Hamilton to determine the sources for allegations 
made against North about which they had raised 
questions.'"® Despite these complaints, the FBI ulti- 
mately closed its investigation after concluding that 
none of North's complaints could be traced to foreign 
intelligence sources."" 

North ultimately hit on a better formula, however, 
with Secord's assistance. In March 1986, Secord had 
retained Glenn Robinette, a security consultant and 
former CIA officer, to conduct a private investigation 
of some of the individuals ultimately involved in the 
Honey and Avirgan lawsuit. ' ' ' One of the people 
Secord singled out for such treatment was Jack Ter- 
rell, also known as "Colonel Flaco." Terrell had at 
one time been a pro-Contra mercenary associated 
with Tom Posey and CMA. He ultimately became 
disillusioned with the Contras, however, and began to 
cooperate with the plaintiffs in the lawsuit. He threat- 
ened to testify that North had helped provide secret 
funding to the Contras and that he, Terrell, had used 
CMA as a cover from which to carry out CIA-spon- 
sored assassinations. ' ' ^ 

In mid-1986, the FBI received information from a 
classified source that pro-Sandinista individuals might 
have been contemplating an assassination of President 
Reagan. The FBI suspected that Terrell might be 
involved and disseminated this information to the 
CIA, Secret Service, State Department, Department 
of Justice, and NSC'^* 

Shortly thereafter, on July 15, 1986, Revell re- 
ceived a call from North, who indicated that he knew 
a person familiar with Terrell's activities and would 
make his contact available for debriefing."* The FBI 
met that evening with Robinette, North's contact, 
who told them he had met Terrell on July 1 1 while 
posing as an attorney exploring the possibility of col- 
laborating with Terrell on a book, movie, and televi- 
sion program. Robinette, who was in daily contact 
with Terrell, offered to assist the FBI in gaining infor- 
mation about him."* 

On July 22, 1986, FBI agents interviewed North. 
He told them he had heard of Terrell eighteen 
months earlier when a Contra intelligence officer 
complained of Terrell's brutality."* North claimed 
he suggested at the time of that incident that local 
officials should expel Terrell. North stated that he had 
heard that Terrell had tried to import guns into a 
Central American country and had claimed to be for- 
merly with U.S. Army Special Forces and the CIA. 

The FBI agents asked North about Secord and 
Robinette. North said Secord ran an import-export 
business and was a consultant to the Defense Depart- 
ment and emphasized Secord did not work for him. 
He said Robinette was a security consultant hired by 
Secord to investigate Terrell. North acknowledged he 



112 



Chapter 5 



met with Robinette prior to sending him to the FBI 
and that Robinette gave him copies of the Terrell 
manuscript and the other materials Robinette shared 
with the FBI. North stated that neither he nor his 
staff was responsible for arming, funding, or adminis- 
tering Contra programs and denied he was involved 
with covert operations being run from the U.S."'' 
The FBI decided to watch Terrell with Robinette's 
help. Although Robinette refused to wear a recording 
device, he reported back to the FBI after he met with 
Terrell. Shortly thereafter, Terrell went to Miami at 
the same time President Reagan visited Miami. 
Agents observed him there and concluded he was not 
a threat to the President. The FBI then terminated 
this investigation. "* 



Summary 



These seven episodes collectively show how the NSC 
staff, and North in particular, tried to prevent expo- 
sure of the Enterprise by law enforcement agencies. 
We do not mean to impugn the integrity of the law 
enforcement officials involved. Suggestions that na- 
tional security could be compromised, coming from 
NSC aides, inevitably were given weight by law en- 
forcement officials and led them on occasion to pro- 
vide information to the NSC staff and to delay inves- 
tigations. The fault lies with the members of the NSC 
staff who tried to compromise the independence of 
law enforcement agencies by misusing claims of na- 
tional security. 



77-026 



113 



Chapter 5 



Chapter 5 

1. Rosenblatt Dep., 9/25/87, at 7. 

2. von Raab believes that his first contact with North 
occurred a few months before this conversation. According 
to von Raab, he received a telephone call from General 
Singlaub who inquired about a helicopter, the "Lady 
Ellen," that Customs was detaining enroute to a Central 
American country. When von Raab informed Singlaub that 
the helicopter needed a license before it could be released, 
Singlaub indicated that he would obtain one. Singlaub then 
suggested that von Raab call North about the matter. When 
von Raab did so. North told him that the individuals in- 
volved with the helicopter were "good guys." Ultimately, 
Customs issued the appropriate license and released the 
helicopter. William von Raab, Int., Tower, 2/11/87, 
N36038-36041. 

3. Id. 

4. Rosenblatt Dep., 9/25/87, at 16. Rosenblatt testified 
that, "to the best of [his] recollection," North did not men- 
tion any involvement of Richard Secord with the aircraft in 
question. Rosenblatt Dep., 9/25/87, at 13. A North note 
dated "27 Aug," raises questions because of the following 
entry: "Bill Rosenblatt - Customs - DOJ observed CBS film - 
Secord involved - DOJ asked Customs to look into [this?] - 
Agent preparing to subpoena Maule records - If this is for a 
"right organization" - 2 to 4 have already gone - Joe Tost/ 
Justice - U.S. Attorney on this - Need docs on who air 
planes went to and what was on them - Foreign Assets 
Control." North Notebook, 8/27/86, Q2369. 

5. Rosenblatt Dep., 9/25/87, at 12. 

6. Id., at 17-21. 

7. Id., at 16-17. 

8. Id., at 90-93. 

9. Id., at 96-99. 

10. Id., at 32, 99. 

11. M, at 35. 

12. North Notebook, 11/19/86, Q2634. The entry relating 
to the "C-123" may refer to a requirement that the Hasenfus 
air plane have a "sojourn permit" before it left the United 
States. "Ladodge" may be a reference to Larry LaDodge, 
the Customs agent in charge of the Kelso matter. 

13. Rosenblatt Dep., 9/25/87, at 51. 

14. Id., at 48-49. 

15. Id 

16. Id 

17. Id. at 60-62. 

18. Id. at 54-57. 

19. Id. at 55-56. 

20. Id., at 57-58, 62-63. North was not questioned on this 
matter. 

21. Id., at 62-69. 

22. Currier Dep., 5/5/87, at 6-7. 

23. Id. at 8-9, 11; Feldman Dep., 4/30/87, at 5, 8-9. 

24. Currier Dep., 5/5/87, at 12-14; Feldman Dep., 4/30/ 
87, at 12-15. "CM A" originally stood for "Civilian Military 
Assistance." In April 1986, it was changed to "Civilian 
Materiel Assistance." Posey Dep., 4/23/87, at 7. 

25. Kiszynski Dep., 5/5/87, at 11-12; Currier Dep., 5/5/ 
87, at 12-14; Feldman Dep., 4/30/87, at 16. A polygraph 
examination conducted on January 14 did nothing to bolster 
Garcia's credibility. The test was "inconclusive" on wheth- 
er Garcia was telling the truth about a key meeting where 
the assassination plot was supposedly discussed, and labelled 
him "deceptive" on his allegations about Posey's involve- 



ment. Currier Dep., 5/5/87, at 14; Kiszynski Dep., 5/5/87, 
at 14; Feldman Dep., 4/30/87, at 17-18. In his sworn testi- 
mony to the Committees, Posey vigorously denied Garcia's 
allegations. Posey Dep., 4/23/87, at 72, 77, 84-85, 89. 

26. Currier Dep., 5/5/87, at 16; Feldman Dep., 4/30/87, 
at 21-22. 

27. Allegations about North's own involvement in Contra 
resupply efforts had been reported in the press as early as 
the summer of 1985. See, e.g. "Private Sources Are Used to 
Skirt Ban on Contra Aid," Miami Herald, June 24, 1985, at 
lA; "Nicaraguan Rebels Getting Advice from White House 
on Operations," New York Times, August 8, 1985, at AI. 

28. Currier Dep., 5/5/87, at 16-18; Kiszynski Dep., 5/5/ 
87, at 13-14. 

29. Feldman Dep., 4/30/87, at 26; Kellner Dep., 4/30/87, 
at 7. The Committees have not been able to establish with 
any certainty the trigger for this inquiry from Washington. 
Kellner believes the call came from Mark Richard, Deputy 
Assistant Attorney General for the Criminal Division, and 
had been sparked by a letter from Garcia's wife that had 
found its way to Richard's desk. Richard, on the other 
hand, does not recall being aware of the investigation until 
some time later in March, when he received a "buck slip" 
on the matter from Steven Trott, then Assistant Attorney 
General for he Criminal Division. Kellner Dep., 4/30/87, at 
7-8; Richard Dep., 8/19/87, at 53-54. 

30. Feldman Dep., 4/30/87, at 26-27, 37. Garcia's sen- 
tencing proceeding had been scheduled for March 19, 1986. 
On March 18, Feldman filed a motion to continue this 
proceeding for 30 days, alleging that the day before, "at 
approximately 4:30 p.m., the United States Attorneys Office 
for the Southern District of Florida was requested by the 
Department of Justice to seek a continuance of the sentenc- 
ing hearing." J 19348. No one is quite certain, however, who 
made or even who received this request. Kellner Dep., 4/ 
30/87, at 9-11; Feldman Dep., 4/30/87, at 31-32; Richard 
Dep., 8/19/87, at 71-73. 

31. Currier Dep., 5/5/87, at 38-40; Kiszynski Dep., 5/5/ 
87, at 21-22. 

32. Jensen Dep., 7/6/87, at 48-49. 

33. Id., at 48; Ex. EM73. Because the investigation re- 
mains an open matter, the memorandum's contents are clas- 
sified in their entirety. 

34. Jensen Dep., 7/6/87, at 54. Jensen, Trott, and Richard 
all contend that the sensitive nature of the investigation, its 
international overtones, and the possible danger to Ambas- 
sador Tambs made an NSC briefing advisable. They also 
concur that the level of supervision exercised by the De- 
partment of Justice was consistent with the nature of the 
investigation. Jensen Dep., 7/6/87, at 48, 53, 55; Trott Dep., 
7/2/87, at 87; Richard Dep., 8/19/87, at 87. Jensen ex- 
plained that he briefed only the NSC on this matter because 
Revell's memorandum, which remains classified, indicated 
that the CIA and the State Department were already being 
briefed. Jensen Dep., 7/6/87, at 55-57. At his deposition, 
Meese could not think of anything about the case that 
merited a special briefing of the NSC. Meese Dep., 7/8/87, 
at 227. 

35. Meese Dep., 7/8/87, at 221. 

36. Ex. EM73. 

37. Ex. EM73. 

38. Richard Dep.. 8/19/87, at 68-70, 87, 92-93; Trott 
Dep., 7/2/87, at 9; Jensen Dep., 7/6/87, at 57-59. 



114 



Chapter 5 



39. Jensen Dep., 7/6/87, at 60-61; Poindexter Test., 7/21/ 
87, at 180-81. 

40. Feldman Dep., 4/30/87, at 37-38. 

41. Id., at 47-50. 

42. Id., at 56-59. 

43. Id., at 56-59. Although Hull told Feldman he had not 
spoken to anyone at the embassy before he cancelled the 
interview, Kirt Kotula, an embassy official, told Feldman 
that he had, in fact, spoken to Hull and advised him of his 
right to counsel. Feldman Dep. 4/30/87, at 58-61. 

44. Feldman Dep., 4/30/87, at 60-61. 

45. Exhibit TCI 5. Castillo has testified that he never 
discussed the investigation with Owen. Castillo Test., 5/29/ 
87, at 158, 192, 197 (Executive Session). He was uncertain 
whether he had ever discussed the investigation with North. 
Castillo Test., 5/29/87, 154-58 (Executive Session). North's 
notes suggest that he was advised of the investigation by 
Castillo. In an entry dated "31 Mar 86," North wrote: 
"1700— call from [Thomas [Castillo?]] * » • - Asst. U.S. 
Attorney/2 FBI + Resident Agent - Rene Corbo - Terrell 
(Flaco) - CMA - Guns to [a Central American location]. 
North Notebook, 3/31/86, Q 2078. 

46. Feldman Dep., 4/30/87, at 68-71; Barnett Dep., 7/17/ 
87, at 27-31; Scharf Dep., 7/17/87, at 31; Gregorie Dep., 7/ 
17/87, at 12-15. 

47. Barnett Dep., 7/17/87, at 33-34. 

48. Testimony by all the other participants in the meeting 
indicates that Scharf and Gregorie were also in Kellner's of- 
fice when Liewant arrived. Scharf Dep., 7/17/87, at 15-17; 
Gregorie Dep., 7/17/87, at 15-20; Kellner Dep., 4/30/87, at 
17-20; Feldman Dep., 4/30/87, at 68-70; Barnett Dep., 7/ 
17/87, at 38-41. 

49. Liewant Dep., 6/2/87, at 9-14. 

50. Barnett Dep., 7/17/87, at 38-41; Scharf Dep., 7/17/ 
87, at 15-17; Gregorie Dep., 7/17/87, at 15-20; Kellner 
Dep., 4/30/87, at 17-20; Feldman Dep., 4/30/87, at 68-70. 

51. Richard Dep., 8/19/87, at 92-93; Trott Dep., 7/2/87, 
at 9; Jensen Dep., 7/6/87, at 58-59; Meese Dep., 7/8/87, at 
222. Nor do the incomplete telephone records available to 
the Committees reflect any calls from the Department of 
Justice to Kellner on the afternoon of April 4. Because the 
federal government uses a separate network, "FTS," for 
intra-governmental telephone calls, commercial toll records 
are not useful. The General Services Administration, which 
maintains and monitors the FTS network, routinely records 
information for only 20% of the calls made on the network. 
A review of these records for April 1986 reveals a call on 
April ,4 from the Office of the Deputy Attorney General to 
the Office of the United States Attorney for the Southern 
District of Florida. The call took place at 11:33 a.m. and 
lasted only 1 minute. It was, therefore, too early and too 
brief to be the call described by Liewant, J20977-J21016. 
This evidence is not, of course, conclusive, since the call 
described by Liewant could have originated in Miami or 
could have been among the 80 percent originating at the 
Department of Justice but not recorded. 

52. Feldman Dep., 4/30/87, at 69. 

53. Kellner Dep., 4/30/87, at 25-27. There are conflicting 
accounts as to who rode in what cars with whom. Compare 
Kellner Dep., 4/30/87, at 26-27; Jensen Dep., 7/6/87, at 63- 
64; Meese Dep., 7/8/87, at 225. 

54. Kellner Dep., 4/30/87, at 28-33. 

55. The Miami News had run a story the day before 
describing certain aspects of the investigation. See "U.S. 



Probes Reports of Smuggling for Nicaraguan Rebels," The 
Miami News, 4/11/86, at 1; Feldman Dep., 4/30/87, at 70. 

56. Meese Dep., 7/8/87, at 219-22. 

57. Feldman Dep., 4/30/87, at 76-77. 

58. Id., at 78-80, J 19450. 

59. Gregorie Dep., 7/17/87, at 31-33. 

60. Feldman Dep., 4/30/87, at 81-83; Kellner Dep., 4/30/ 
87, at 46. 

61. Feldman Dep., 4/30/87; Kellner Dep., 4/30/87, at 47. 

62. Feldman Dep., 4/30/87, at 92-95; Scharf Dep., 7/17/ 
87, at 53-58; Kellner Dep., 4/30/87, at 47-49. This last 
version, including Scharfs changes, was ultimately leaked 
to the news media. Feldman Dep., 4/30/87, at 96-98. 

63. Feldman Dep., 4/30/87, at 102-03; Currier Dep., 5/5/ 
87, at 47-48; Kiszynski Dep., 5/5/87, at 31-33. 

64. Feldman Dep., 4/30/87, at 104-09. 

65. Feldman Dep., 4/30/87, at 104-09; Kellner Dep., 4/ 
30/87, at 57-70; Richard Dep., 8/19/87, at 87-90. 

66. Gregorie Dep., 7/17/87, at 39; Feldman Dep., 4/30/ 
87, at 115. The Hasenfus crash took place on October 5, 
1986. 

67. Feldman Dep., 4/30/87, at 108-10; Currier Dep., 5/5/ 
87, at 49; Kellner Dep., 4/30/87, at 116-17; Gregorie Dep., 
7/17/87, at 44. 

68. Feldman Dep., 4/30/87, at 1 10. 

69. North PROF Note to Poindexter, 9/17/86, N 12602. 

70. Memorandum from John L. Martin to William Weld, 
9/30/86, J4627-28. 

71. Id 

11. Draft State Dept. cable from Deputy Assistant Secre- 
tary James Michel to Legal Attache in a Central American 
country, 9/24/86, J46 18-21. 

73. North PROF Note to Poindexter, 9/17/86, N 12602. 

74. Id 

75. Id 

76. Poindexter PROF Note to North, 9/17/86, N12604. 

77. Richard Dep., 8/19/87, at 122, 126, 132. 

78. Id. at 132. 

79. Id, at 121-23. 

80. Trott Dep., 7/2/87, at 78. 

81. Richard Dep., 8/19/87, at 126-28. 

82. Id. at 124. 

83. Id., at 126-27. Gorman, however, testified that there 
was discussion that the official may start to talk and reveal 
sensitive matters the U.S. would prefer remain secret. 
Gorman maintained he "was prepared to believe that the 
official might engage in all kinds of outrageous representa- 
tions." In Gorman's view, however, these sensitive matters 
did not pertain to questionable Contra-support activities. 
Memorandum (5/19/87) of Interview (4/16/87) with 
Gorman, at 12-14. 

84. Richard Dep., 8/19/87, at 127. 

85. North PROF Note to Poindexter, 9/18/86, N12603. 

86. Richard Dep., 8/19/87, at 129-30. 

87. R. Miller Dep., 8/21/87, at 381-90. 

88. North 's notes demonstrate the regularity with which 
Miller spoke with North about the "prince." These notes 
refer to the "prince" by his code name, "Jewell." (See e.g.. 
North Notebook, Q1798, Q1858, Q1930.) R. Miller Dep., 8/ 
20/87, at 98-99. 

89. R. Miller Dep., 8/21/87, at 390-93. 

90. Id., at 377-78. 

91. Id, at 393-94; Agent 1 Dep., 8/12/87, at 102-03, 112. 

92. Agent 1 Dep., 8/12/87, at 105-06. 



115 



Chapter 5 



93. Id., at 106-10. 

94. Id., at 114-16. 

95. James Kramarsic Int. 

96. McFarlane flatly denied that North had discussed the 
"prince" with him. McFarlane Test., 5/11/87, at 95-96. 

97. Kramarsic Int., Exhibit OLN264. 

98. Kramarsic Int., Exhibit OLN264. 

99. Kramarsic Int., Ex. OLN265. According to Miller, he 
unsuccessfully had attempted to contact the FBI agent 
when he learned of the investigation from North. R. Miller 
Dep., 8/21/87, at 396-97. 

100. Kramarsic Int.; FB27 15-20. 

101. Revell Dep., 7/15/87, at 83-89; Nicholas Harbist Int., 
6/4/87. 

102. A portion of these payments was used by DEA 
agents with whom the "prince" was traveling. R. Miller 
Dep., 8/21/87, at 378-79. 

103. R. Miller Dep., 8/21/87, at 405-06. 

104. Id., at 406-07; see Chapter 4. 

105. Nicholas Harbist Int., 6/4/87. 

106. Amended Complaint, Avirgan, et al. v. Hull, et al.. 
No. 86-1146 (S.D., Fla., filed Oct. 3, 1986), 

107. Revell Dep., 7/15/87, at 36. 

108. FBI Teletype, 5/16/86, from Washington Field 
Office to Intelligence Division, FBI Headquarters, at 1-2, 
FB2983-86. 



109. FBI Teletype. June 11, 1986, from Washington Field 
Office to Intelligence Division, FBI Headquarters, at 3-5, 
FB 2977-82. 

110. FBI teletype, June 11, 1986, from Washington Field 
Office to Intelligence Division, FBI Headquarters, FB 2977- 
82. 

111. Robinette Dep., 1/17/87, at 5-7. 

112. Terrell had been interviewed by Assistant United 
States Attorney Jeffrey Feldman in connection with the 
investigation being conducted into alleged violations of the 
Neutrality Act and an alleged plot to assassinate Ambassa- 
dor Lewis Tambs. FBI Form 302, Subj: interview of Ter- 
rell, dated 7/16/86. Of Terrell's allegations about Posey and 
the plot to assassinate Tambs, Posey said Terrell "is full of 
bull." Posey Dep., 4/23/87, at 89. 

113. Revell Dep., 7/15/87, at 25-28. 

114. Revell Dep., 7/15/87, at 26. 

115. Robinette Int., 6/15/87, at 13-14. FBI 302 Report, 7/ 
16/86. See also WFO 2 488-1 and 199C-4773. 

116. FBI form 302, Subj: Interview of Oliver North, 
dated 7/22/86, FB3256-58. 

117. FBI form 302. Subj: Interview of Oliver North, 
dated 7/22/86, FB3256-58. 

118. Revell Dep., 7/15/86, at 27, 32. 



116 



Chapter 6 

Keeping "USG Fingerprints"* Off The Contra 

Operation: 1984-1985 



In October 1984, the President signed into law a ver- 
sion of the Boland Amendment barring the Central 
Intelligence Agency, the Department of Defense, and 
"any other agency or entity of the United States in- 
volved in intelligence activities" from providing sup- 
port to Contra military activities. Explaining the stat- 
ute on the floor of the House of Representatives im- 
mediately before its passage, Representative Edward 
P. Boland, then Chairman of the House Permanent 
Select Committee on Intelligence, was clear about the 
legislation's intent: the provision "ends U.S. support 
for the war in Nicaragua."' National Security Advis- 
er Robert C. McFarlane acknowledged that intent: 
"the Boland Amendment governed our actions," he 
told these Committees.^ Although Congress eventual- 
ly approved humanitarian aid for the Contras and 
authorized intelligence sharing, the full prohibition on 
lethal support remained in effect until October 1986. 

Despite the Boland Amendment's prohibition, U.S. 
support for the Nicaraguan Resistance continued. As 
set forth fully in Chapters 2 and 3, members of the 
National Security Council staff— with help from offi- 
cials of other Government agencies — supervised a 
covert operation supporting the Contras. They pro- 
vided weapons and military intelligence to the Resist- 
ance and resupplied troops inside Nicaragua, using 
funds raised from foreign countries, private citizens, 
and ultimately the Iranian arms sales. They did so 
despite the unambiguous intent of Congress that the 
U.S. Government, including the NSC staff, could not 
aid the Contras' military effort. 

Secrecy, therefore, was vital to the success of the 
Contra operation. Disclosure of U.S. support, Oliver 
North wrote to John Poindexter in May 1986, "could 
well become a political embarrassment for the Presi- 
dent and you." ^ Moreover, disclosure would surely 
doom the project. Poindexter told these Committees: 
"It was very likely if it became obvious what we 
were doing that Members of Congress would have 
maybe tightened it [the law] up. I didn't want that to 
happen." * 



* North's term used in two PROF notes to Poinde.xter dealing 
with the possible disclosure of the US. Government link to the 
Contra operation. [Exhibits OLN-131 and OLN-307, Hearings, 
100-7, Part III.] 



But just as secrecy was vital to the operation's 
success, even limited success jeopardized that secrecy. 
As the Contras continued to purchase supplies and 
equipment despite the cut-off of aid. Congress and the 
media inquired, inevitably, about the sources of Re- 
sistance support and funding. 

Officials involved in the Contra support operation 
took every precaution to ensure that the project re- 
mained secret. They withheld the facts from some 
Administration officials who spoke out frequently on 
U.S. policy in Central America, forcing them to mis- 
lead Congress and the American people. They dis- 
couraged reporters from pursuing the link between 
the NSC staff and the Contras. And they responded 
to direct inquiries with half truths and false state- 
ments. 

1983-1984: Suspicions, and the 
"Casey Accords" 

Even before the full-prohibition Boland Amendment 
was enacted in October 1984, Members of Congress 
were concerned that the Administration was not pro- 
viding sufficient information about the covert pro- 
gram in support of the Nicaraguan Resistance. 

In April 1983, Senator Daniel Moynihan, Vice- 
Chairman of the Senate Select Committee on Intelli- 
gence, spoke of a "crisis of confidence" between Con- 
gress and the intelligence agencies running the oper- 
ation.^ A year later, Committee Chairman Barry 
Goldwater rebuked the CIA in the wake of the rev- 
elations related to Nicaragua harbor mining. He wrote 
to CIA Director William Casey: "[W]e were not 
given the information we were entitled to receive." ® 
Expressing the sense of many in Congress, Goldwater 
said at an Intelligence Committee hearing: "We 
cannot play guessing games with the intelligence com- 
munity if the relationship between legislative and ex- 
ecutive branches is to work." ' 

After the mining incident became public in April 
1984, Director Casey was called before an extraordi- 
nary secret session of the Senate — 60 Members were 
present — to explain the failure to consult adequately 
ahead of time. The Director apologized at the session, 
and promised a new spirit of cooperation.® The prom- 
ise would soon be formalized in what became known 



117 



Chapter 6 



as the "Casey Accords," an agreement between the 
CIA and the Senate Intelligence Committee on con- 
sultation guidelines for covert operations. Under the 
agreement, the CIA would share explanatory material 
outlining the exact nature, goals, and risks of the 
covert operation. The CIA would also give prior 
notice of any "significant, anticipated intelligence ac- 
tivity," even if the planned activity was part of an 
ongoing covert operation.^ 

The accords reflected the recognition that coopera- 
tion and forthrightness on covert activities were es- 
sential in the relationship between the Executive and 
Congress. But the subsequent actions of Casey and 
members of the NSC staff did not reflect that recogni- 
tion. 

1984: Testimony Before Congress 
on Third-Country Assistance 

In December 1983, the President signed into law leg- 
islation limiting funding for the Contras in fiscal year 
1984 to $24 million. ^° The limit was the result of a 
compromise between the House, which hoped to cur- 
tail support for the Contras, and the Senate, which 
favored continuing the aid. Explaining the compro- 
mise on the floor of the House, Representative Boland 
said the $24 million, which would likely run out by 
June 1984, represented a "cap on funding from what- 
ever source."*^ Representative J. Kenneth Robinson, 
the ranking Republican on the House Intelligence 
Committee, said that the $24 million compromise 
meant "no additional funding could be made avail- 
able" for the Nicaraguan Resistance "unless additional 
authorization and/or appropriations are approved by 
both Houses."'^ 

The Administration, however, sought funding for 
the Contras beyond the $24 million appropriation. On 
several occasions in 1984, officials tried to obtain aid 
for the Contras from third-country sources. Those 
attempts occurred as early as February, when the 
Administration began to suspect that Congress was 
not likely to approve supplemental funding for the 
Contras when the $24 million ran out.'^ Shortly 
thereafter, McFarlane sought to obtain equipment, 
materiel and training for the Contras from Coun- 
try l.!* 

In a March 27, 1984, memo, CIA Director Casey 
urged McFarlane to proceed with his plans to obtain 
aid from Country 1, and told him that the CIA was 
working along a second track to obtain assistance 
from that Country. Casey added in the memo that the 
CIA also was exploring "the procurement of assist- 
ance from [Country 6]." That country had "indicat- 
ed" that it might make "some equipment and training 
available" to the Contras.'^ Country 1 rejected 
McFarlane's approach, and the advance to Country 6 
was called off, in part because of the revelations in 
April relating to the Nicaraguan harbor mining.'® 



As McFarlane testified, those revelations left a 
"zero probability" that Congress would provide sup- 
plemental funding for the Contras, "and no amount of 
wringing our hands was going to change that."'^ In 
May or June, the National Security Adviser obtained 
a $1 million-a-month donation from Country 2, and 
informed the President, who expressed "satisfaction 
and pleasure" with the gift. McFarlane testified that 
he also shared the news with the Vice President.'* 

McFarlane informed the President of the donation 
using a notecard. He rejected the option of telling the 
President about the gift at a morning briefing because 
"there could be ... as many as ten people in the 
room [and] I simply didn't know for sure who would 
be there." '^ 

In order to further ensure that the new Contra 
funding remained secret, McFarlane did not share de- 
tails of the gift with the Secretaries of State or De- 
fense. McFarlane, who acknowledged that he regard- 
ed the Country 2 contribution as a secret to be closely 
held, testified he told them in vague terms that the 
Contras "had been provided for through the end of 
the year. "20 Neither Secretary of State Shultz nor 
Secretary of Defense Weinberger recall receiving any 
information on third-country funding until later. ^^ 

McFarlane also instructed North not to share news 
of the new funding with anyone; indeed, according to 
North, McFarlane never told him which country had 
contributed. 2 2 North, in turn, instructed Contra 
leader Adolfo Calero: "never let agency [CIA] know 
of amt, source, or even availability [of the funds]. . . . 
No one in our govt, can be aware. . . . Your organiza- 
tion must not be fully aware."^^ 

Stories about the third-country contacts soon began 
appearing in the media. In mid- April 1984, The Wash- 
ington Post quoted anonymous sources speculating 
that third countries might be persuaded to provide 
money for the Contras. ^^ Administration officials 
were quoted in the story as flatly denying that the 
United States would approach foreign countries for 
assistance. 2^ In an article 4 days later discussing up- 
coming U.S. -Israeli talks on Israeli assistance to Cen- 
tral American countries. The Washington Post quoted 
State Department spokesman John Hughes as saying, 
"The United States has no intention of using third 
countries to finance covert action in Central Amer- 
ica."2® Although Hughes was not aware, his denial 
came at a lime when the CIA and NSC staff were 
continuing their attempts to obtain third-country sup- 
port. 

Prompted by the reports, the House Permanent 
Select Committee on Intelligence requested an ap- 
pearance on May 2 by CIA Director Casey and Ken- 
neth W. Dam, then Deputy Secretary of State. The 
testimony occurred about 5 weeks after Casey had 
sent the memorandum to McFarlane outlining the 
CIA's efforts to obtain lethal assistance for the Con- 
tras from Country 1 and Country 6 and indicating 



118 



Chapter 6 



Casey's awareness of McFarlane's attempt to obtain 
assistance from Country 1. Coming only days after he 
had pledged to be fully candid with Congress, Casey's 
testimony was inconsistent with his memorandums: 

STOKES: . . . There has been some talk in the 
media with reference to [Country 1] or [Country 
2] being alternative funding sources. What can 
you tell us about that? 

CASEY: Well, there has been a lot of discussion. 
We have not been involved in that at all. 

FOWLER: Who has? 

CASEY: I do not know." 



FOWLER: ... Is any element of our Govern- 
ment approaching any element of another Gov- 
ernment to obtain aid for the Contras? 

CASEY: No, not to my knowledge.^* 

Kenneth Dam acknowledged to the Committees 
that "there have been conversations with [Country 
1]" about aid to the Contras and explained that those 
talks had led nowhere.^* He also said that there had 
been no "high level" approach to Country 2.^° Asked 
about Administration activities. Dam denied that the 
U.S. Government was approaching other countries 
for assistance: 

FOWLER: ... Is the Administration actively 
looking for help, either in funding or in tactical 
aid to our [Contra] operation? 

DAM: . . . We are not making approaches to 
other Governments. So it is clear — you know, 
when you say 'actively' I do not know what is 
going on in terms of people's minds or conversa- 
tions among people within the executive branch. 
We do not have a program of approaching other 
governments for support, and we are not doing 
so. 

FOWLER: . . . We want to know whether or 
not in light of serious questions about the Con- 
gress' willingness to continue this funding, 
whether or not our Government in all of its 
ramifications is looking for help, both in funding 
and the possibility of some tactical or strategic or 
geopolitical — whatever you want to call it — help 
to our operations and policy in Nicaragua. 

DAM: All I can do is answer precisely, and that 
is what I am trying to do. We have no program 
of approaching other Governments. We are not 
currently approaching other Governments on this 
subject. I am not going to tell you we will not 
sometime in the future. We do not see this as a 



realistic approach. We do not see this as a solu- 
tion, and I think that is a very precise answer.^' 

Dam's denials accurately reflected State Department 
policy but not Administration activities. There is no 
evidence that Dam was aware of the Casey and 
McFarlane third-country efforts or that he did not 
make his statements in good faith. However, Casey, 
who knew at least about the approaches to Countries 
1 and 6, did not correct Dam's statements. 

With the help of the Country 2 donation, the Con- 
tras survived beyond the summer of 1984, when their 
Congressionally approved $24 million allotment had 
been exhausted. The donated funds began to flow in 
July, and by September 4 the Contras had received $3 
million. ^^ By then, Oliver North also had called on 
Richard Secord to purchase weapons for the Con- 
tras. ^^ 

On September 9, two major newspapers. The New 
York Times and the Miami Herald, published reports 
suggesting that third countries and private U.S. citi- 
zens had replaced the CIA in providing aid to the 
Contras.^* The reports prompted another Congres- 
sional inquiry. Three days after the stories appeared, 
the House Intelligence Committee called officials 
from the CIA and the State Department to appear 
before it. Members assumed that these officials — 
Dewey Clarridge, the CIA's Latin American Division 
Chief, and Ambassador Anthony Langhorne Motley, 
Assistant Secretary of State for Inter-American Af- 
fairs — would know whether the reports were true or 
false. ^^ 

Clarridge told the Members that the CIA believed 
the Contras had been receiving about $1 million per 
month^* — precisely what Country 2 had provided. 
He added, however, "We know of no place or no 
country that has supplied any funds in any real 
amount."^' Motley, who had not been informed of 
the contribution from Country 2, testified: 

FOWLER: Are we, is the United States of 
America, soliciting help for the Contras? 

MOTLEY: No. No. 

FOWLER: In other countries? 

MOTLEY: No. 

FOWLER; Are we encouraging other countries 
to participate? 

MOTLEY: No, no, and that's a very good point. 

FOWLER: Are we under any negotiations or 
discussions with any other countries to aid these 
efforts? 

MOTLEY: No.^s 

Motley explained the "decision" made on this issue 
by senior Administration officials. As the $24 million 



119 



Chapter 6 



was running out, he said, the Administration decided 
that even though third-country soUcitation was still 
"technically" permitted, a "feeling of mistrust" exist- 
ed, and "in that context it was decided that we would 
not encourage and that we would not facilitate either 
other governments or in private groups within the 
United States. And to my knowledge, that has been 
honored. "^^ 

Committee member Wyche Fowler, Jr., responded 
that he had "a hard time believing . . . that our 
government does not know" how the Contras were 
surviving.*" Indeed, the President, the Vice Presi- 
dent, and the National Security Adviser knew that 
Country 2 had made a substantial donation to the 
Contras. 

Early 1985: The Second Country 2 
Contribution 

In February 1985, the Administration obtained an ad- 
ditional donation from Country 2. A $5 million depos- 
it was made on February 27, 1985; by the end of 
March 1985, the amount totaled $24 million, bringing 
the total donation from that country to about $32 
million.*' Again, officials took steps to ensure that 
the funding remained secret. 

McFarlane withheld information about the new do- 
nation from two likely recipients of Congressional 
inquiries on the subject of U.S. support for the Con- 
tras: Secretary of State Shultz and CIA Director 
Casey. ■'^ The President did not tell Shultz either, 
even though he briefed the Secretary on his meeting 
with the donor country's head of state shortly after 
that meeting.* 3 Shultz testified: "I don't think he [the 
President] is out to deceive me."** (Secretary of De- 
fense Weinberger, along with the Chairman of the 
Joint Chiefs of Staff, found out about the donation 
independently.*^) 

About Shultz, McFarlane testified that he "shared 
virtually everything — I think indeed everything — with 
the Secretary of State that I would learn of rel- 
evance."*^ Asked whether the reason he did not tell 
Secretary Shultz was "for his benefit, not for yours," 
McFarlane said yes.*'' McFarlane further explained: 
"I am guessing that it [not telling Shultz] was prob- 
ably out of concern for further dissemination and 
compromise of that relationship, and damage and em- 
barrassment."** State Department and CIA officials 
had been frequently questioned about the sources of 
Contra funding in 1984. And McFarlane's decision 
not to tell Secretary Shultz about the donation came 
shortly after The Washington Post publicized corre- 
spondence between Representative Joseph P. Addab- 
bo, the former Chairman of the Defense Subcommit- 
tee of the House Appropriations Committee, and the 
State Department. In a December 11, 1984, letter, 
Addabbo had asked Shultz whether some countries 
receiving U.S. foreign assistance had diverted some of 



those funds to the Contras. The State Department 
replied negatively one month later, and the corre- 
spondence was the subject of an article on Janu- 
ary 23.*9 

Like McFarlane, North took action in February 
1985 to prevent disclosure of U.S. Government activi- 
ties in support of the Contras. In a letter addressed to 
Calero about the new large donation. North revealed 
his intention to conceal facts from Congress: 

Please do not in any way make anyone aware of 
the deposit. Too much is becoming known by too 
many people. We need to make sure that this 
new financing does not become known. The 
Congress must believe that there continues to be 
an urgent need for funding.^" 

Within weeks of the new donation. Assistant Secre- 
tary Motley was called to testify before the Senate 
Committee on Foreign Relations. On March 26, 1985, 
Senator Christopher Dodd asked about "a number of 
rumors or news reports around this town about how 
the Administration might go about its funding of the 
Contras in Nicaragua. There have been suggestions 
that it would be done through private groups or 
through funneling funds through friendly third na- 
tions, or possibly through a new category of assist- 
ance and asking the Congress to fund the program 
openly." Motley replied that the Boland Amendment 
prohibited "any U.S. assistance whether direct or in- 
direct, which to us would infer also soliciting and/or 
encouraging third countries; and we have refrained 
from doing that because of the prohibition."^' 

Senator Dodd pursued the matter further: 

DODD: Well, that aside, looking at these resolu- 
tions, there are always clever ways of discover- 
ing something that may have been omitted. All I 
am asking from you is, and from the Administra- 
tion more directly, is whether or not we can 
have an assurance that there will be no indirect 
efforts made to finance the Contra operation 
through third party nations or through other ve- 
hicles within the foreign aid authorization to fi- 
nance this operation, that you will proceed pursu- 
ant to the resolution as adopted on the continuing 
resolution. 

MOTLEY: I think that was one thing that was 
loud and clear with us when I started. I told you 
that we understand what it means, direct and 
indirect, including third party. We take it to the 
letter of the law at its most liberal interpretation. 
And I can assure you that we have done it in the 
past. You want my assurances that we will con- 
tinue to do it in the future, and if you feel that is 
necessary, I will so give it to you. 

DODD: We have that assurance, then. 



120 



Chapter 6 



MOTLEY: That is right. ^ 2 

After Senator Dodd referred to the availability of 
possible loopholes, Ambassador Motley responded: 

We are going to continue to comply with the 
law. I am not looking for any loopholes. . . . 
Nobody is trying to play games with you or any 
other Member of Congress. That resolution [the 
Boland Amendment] stands, and it will continue 
to stand; and it says no direct or indirect. And 
that is pretty plain English; it does not have to be 
written by any bright, young lawyers. And we 
are going to continue to comply with that.^^ 

Again, Motley was not informed that the Adminis- 
tration had obtained the donation from Country 2, 
that the National Security Adviser and the CIA had 
sought assistance from other countries, or that the 
NSC staff had begun to supervise the covert Contra 
operation out of its offices. 

Casey Briefing of Senate 
Intelligence Committee 

In late 1984 and early 1985, North sent CIA intelli- 
gence information to the Contras through Robert 
Owen. 54 The CIA Chief of the Central American 
Task Force (C/CATF), who ordinarily passed that 
information to North, denied to these Committees 
that he knew intelligence was being transmitted by 
North via Owen to the Contras. ^^ On April 17, 1985, 
CIA Director Casey, accompanied by Deputy Secre- 
tary of State Dam, briefed the Senate Intelligence 
Committee on intelligence operations in Nicaragua. 
Casey told Committee members that, apart from intel- 
ligence which might jeopardize the lives of Ameri- 
cans, "we've kept out of any intelligence exchange 
.... We haven't been providing intelligence. "^^ 

Prior to the date of the briefing, North had ob- 
tained Richard Secord's assistance to purchase weap- 
ons for the Contras with the funds donated from 
Country 2. North testified that Casey suggested 
Secord for this purpose. ^'^ However, Casey assured 
the Members that "over the past year, we strictly 
honored in practice and in spirit the Congressionally 
mandated restrictions on military aid to the Con- 
tras."^* He testified: 

CASEY: [W]e have carefully kept away from 
anything which would suggest involvement in 
their activities which have been carried on quite 
effectively and with considerable success in get- 
ting support and getting weapons and getting am- 
munition on their own. They've gone into the 
international arms markets. We know that from 
lots of sources that they were buying things from 
other countries and bringing in ammunition and 
been raising money. But we don't have any idea 



as to the quantity, what they got in the pipeline 
or — 

CHAIRMAN: That's all I wanted to establish.^s 

Deflecting Media Inquiries 

By June 1985, reporters were close to establishing a 
link between the NSC staff and Contra support. A 
June 3 memo from North to Poindexter illustrates 
North's efforts to discourage reporters from pursuing 
the story. North boasted in the memo that at his 
request, Adolfo Calero told Alfonso Chardy of the 
Miami Herald "that if he (Chardi) [sic] printed any 
derogatory comments about the FDN or its funding 
sources that Chardi [sic] would never again be al- 
lowed to visit FDN bases or travel with their units." 
North added: "At no time did my name or an NSC 
connection arise during their discussion."^" 

North and retired Major General John K. Singlaub 
had already devised a plan to divert press attention 
away from the NSC staffs Contra operation, which 
by then was being coordinated under North by Rich- 
ard Secord, Richard Gadd, and their employees. 
North encouraged Singlaub to court the media, realiz- 
ing that, as Singlaub put it, "If I [Singlaub] had high 
visibility, I might be the lightening rod and take the 
attention away from himself [North] and others who 
were involved in the covert side of support."^* 

The plan seems to have had some success. Shortly 
after his discussion with North, Singlaub was the sub- 
ject of a long article in The Washington Post con- 
necting him to support for the Contras,*^ and in the 
coming months, he would be featured in virtually all 
the major newspapers. Although North himself soon 
would be the subject of press reports, Secord was not 
mentioned in the media until mid- 1986, and details of 
North's resupply operation were not revealed until 
the plane carrying Eugene Hasenfus was shot down 
in October 1986. 

June-August 1985: Press Reports on 
NSC Staff and Contra Support 

By April, third-country funding had not only sus- 
tained the Contras but had "allowed the growth of 
the Resistance from 9,500 personnel in June 1984 to 
over 16,000 today — all with arms," according to an 
April 11, 1985, memo from North to McFarlane.*^ 
During May, according to a May 31 memo, "the 
Nicaraguan Resistance recorded significant advances 
in their struggle against the Sandinistas."^* 

In June, reporters first linked the Contras' success 
with North. By mid-August, most major news organi- 
zations had published or broadcast reports on this 
"influential and occasionally controversial character 
in the implementation of the Reagan Administration's 
foreign policy."*^ 



121 



Chapter 6 



News stories in June 1985 explored the sources of 
Contra funding. On June 10, the Associated Press 
distributed an article by Robert Parry suggesting that 
the White House had lent support to private fundrais- 
ing efforts. The article named North as the White 
House contact for such efforts, which according to 
the report, revolved around John Singlaub.^^ 

Two weeks later, the Miami Herald reported that 
the Administration "helped organize" and continued 
to support "supposedly spontaneous" private fundrais- 
ing efforts. The article quoted extensively from ousted 
Nicaraguan Democratic Force (FDN) leader Edgar 
Chamorro, who described a trip by North and a CIA 
officer to a Contra base in the spring of 1984. North 
and the CIA officer assured the rebels, according to 
the article, that the White House would "find a way" 
to keep the movement alive. Neither North nor the 
CIA officer specifically promised private aid, al- 
though "it was clear that was their intent," Chamorro 
was quoted as saying.^' 

In August, reports in The New York Times, The 
Washington Post, and other major newspapers assert- 
ed that White House support for the Contras involved 
more than fundraising. Oliver North had given the 
Contras "direct military advice" on rebel attacks, ex- 
ercising "tactical influence" on military operations. 
The New York Times reported. The newspaper re- 
ported that North had also "facilitated the supplying 
of logistical help" to the Contras, filling in where the 
CIA could no longer help. The information was at- 
tributed to anonymous "administration officials. "^^ 

Denials 

The day after this story appeared. President Reagan 
responded to the allegations. "[W]e're not violating 
any laws," the President said as he signed legislation 
providing $27 million in humanitarian aid for the 
Contras and authorizing the exchange of inteUi- 
gence.^8 In a statement released later that day, the 
President added that he would "continue to work 
with Congress to carry out the program as effectively 
as possible and take care that the law be faithfully 
executed."'" 

The National Security Adviser made his first com- 
ments on the allegations about North in an interview 
with The Washington Post. In an August 11 article, 
McFarlane said he had told his staff to comply with 
the Boland Amendment. "We could not provide any 
support," he said, but he also stated that the NSC 
staff could and did maintain contact with the Con- 
tras.'' 

Summer and Fall August 1985: 
Congressional Inquiries 

In the third week of August, Representative Michael 
Barnes, Chairman of the Subcommittee on Western 
Hemisphere Affairs of the House Committee on For- 



eign Affairs, and Representative Lee H. Hamilton, 
Chairman of the House Permanent Select Committee 
on Intelligence, separately wrote the President's Na- 
tional Security Adviser, inquiring into NSC support 
for the Contras.'^ Representative Barnes' letter, dated 
August 16, cited press accounts as the cause of con- 
cern about NSC staff support for the Contras. The 
reports, Barnes wrote, "raise serious questions regard- 
ing the violation of the letter and spirit of U.S. law." 
The letter summarized the focus of his inquiry: 
Whether the NSC staff provided "tactical influence 
on rebel military operations;" whether the NSC staff 
was engaged in "facilitating contacts for prospective 
financial donors;" and whether the NSC staff was 
involved in "otherwise organizing and coordinating 
rebel efforts." 

Barnes made clear his view that such activities 
would violate the intent, if not the letter, of Congres- 
sional restrictions on aid to the Contras: "Congres- 
sional intent in passing the Boland Amendment was to 
distance the United States from the Nicaraguan rebel 
movement, while the Congress and the nation debated 
the appropriateness of our involvement in Nicaragua." 
The letter continued, "The press reports suggest that, 
despite congressional intent, during this period the 
U.S. provided direct support to the Nicaraguan 
rebels." Barnes' letter concluded with a request for all 
information and documents "pertaining to any contact 
between Lt. Col. North and Nicaraguan rebel leaders 
as of enactment of the Boland Amendment in Octo- 
ber, 1984." 

Representative Hamilton's letter also cited press ac- 
counts and expressed a concern about "actions that 
supported the military activity of the contras." He 
requested "a full report on the kinds of activities 
regarding the contras that the NSC carried out and 
what the legal justification is for such actions given 
the legislative prohibitions that existed last year and 
earlier this year." 

In addition to the requests from Representatives 
Hamilton and Barnes, two other inquiries were sent to 
McFarlane. On October 1, Senators David Duren- 
berger and Patrick J. Leahy, Chairman and Vice 
Chairman of the Senate Select Committee on Intelli- 
gence, sent a letter with specific questions, following 
up on a meeting with McFarlane.'^ And on Octo- 
ber 21, Representative Richard J. Durbin wrote 
McFarlane asking him to respond to charges made in 
the media. '^ 

Responses to Congress: The 
McFarlane Letters 

As described fully in Chapter 3, the covert Contra 
support operation expanded substantially in the 
summer and fall of 1985. Until that point. North had 
arranged for funding, coordinated the purchase of 
arms, and passed military intelligence to the Contras. 



122 



Chapter 6 



Beginning with the July meeting at the Miami Airport 
hotel, North sought to broaden the project, attempt- 
ing to replicate the earlier CIA covert operation. The 
Enterprise took control of third-country funds and 
other money obtained with the help of the NSC staff, 
and began to set up its own air resupply operation to 
provide weapons and material to Resistance troops 
inside Nicaragua. 

On September 5, McFarlane sent the first of his 
responses to Congress. He wrote to Representative 
Hamilton: "I can state with deep personal conviction 
that at no time did I or any member of the National 
Security Council staff violate the letter or spirit" of 
Congressional restrictions on aid to the Contras. In 
denying allegations about NSC staff activities, the 
letter echoed the language of the Boland Amendment: 

I am most concerned . . . there be no misgivings 
as to the existence of any parallel efforts to pro- 
vide, directly or indirectly, support for military 
or paramilitary activities in Nicaragua. There has 
not been, nor will there be, any such activities by 
the NSC staff." 

This letter, drafted by McFarlane himself, served as 
the model for five additional letters prepared by 
North, signed by McFarlane, and sent in September 
and October in response to Congressional inquiries.'^ 
In testimony before these Committees, McFarlane 
called these responses "too categorical."'" He said: "I 
did not give as full an answer as I should have."''^ 
North went further, acknowledging that statements in 
the letters were "false," and summarizing the re- 
sponses as "erroneous, misleading, evasive, and 
wrong. "''^ 

McFarlane wrote to Hamilton that he made his 
categorical denials only after he "thoroughly exam- 
ined the facts and all matters which in any remote 
fashion could bear upon these charges."^" A review 
by the NSC staff did take place, but the actions taken 
in conjunction with that review leave it open to ques- 
tion. 

First Reaction: Conceal the Facts 

When the Barnes letter arrived, Poindexter, who 
was then the Deputy National Security Adviser, as- 
signed North to draft the response, noting on a memo 
he had received from a subordinate: "Barnes is really 
a trouble maker. We have good answers to all of 
this."*' The "good answers," Poindexter acknowl- 
edged in testimony, involved concealing NSC staff 
activities supporting the Contras: 

Q: And when you suggested that he prepare the 
first draft of the response, was it your intention 
that Colonel North be able to answer that letter 
with finessing a description of his activities? 

A: That is exactly right. 



Q: That is why you designated him as the action 
officer? 

A: That is right, because my objective here again 
would have been to withhold information.*^ 

McFarlane, meanwhile, had decided to draft the 
initial response himself In preparation, he instructed 
Poindexter to assemble "records, files of all memoran- 
dums, papers, travel vouchers, and so forth" relating 
to the Congressional inquiries.*^ The Committees un- 
covered no evidence to suggest that the officers who 
conducted the document search were aware of or 
attempted to conceal the full extent of NSC staff 
activities. The search, however, was conducted nar- 
rowly. The information policy officer assigned by 
Poindexter to conduct the search wrote the following 
in a memo presenting plans for the document search: 

[T]he search should be as narrowly focused as 
was the request. In this case. Congressman 
Barnes has focused on '. . . documents, pertaining 
to any contact between Lt. Col. North and Nica- 
raguan rebel leaders as of . . . October, 1984.' . . . 
Fishing expeditions in all files relating to Central 
America and/or Nicaragua are NOT necesssary 
to respond to the request.** 

The officer ruled out a search of the files in North's 
office, explaining, "they are 'convenience files' gener- 
ally made up of drafts, and/or copies of documenta- 
tion in the institutional and Presidential Advisory 
files. "*^ North's files, in fact, included nonlog memos, 
many PROF notes, his notebooks, and letters to 
Calero, Owen, and others. 

Finally, the officer noted that appointment and tele- 
phone logs had become "favorite targets" of such 
Congressional inquiries, and suggested "[i]t may be in 
our interest to be terribly forthcoming and bury Mr. 
Barnes in logs of dates and/or names re meetings and 
telecons or perhaps to offer to do so putting him on 
notice that the logs give times and dates but no sub- 
stance." She recommended, however, "that for now 
we limit the search of appointment and telephone logs 
to OUie," thus leaving the search to the main target of 
the inquiry. Under the recommendation, North would 
be asked to sample the logs and "give us a sense of 
what they consist of and of the potential relevance to 
the request."*® 

Poindexter approved that recommendation, along 
with the other recommendation to begin a search of 
all Presidential and official NSC files. He also did not 
indicate any disagreement with the officer's statement 
that North's office files ought not be searched.*' 
Within a few days, some 50 relevant documents were 
identified, and 10 to 20 were deemed worthy of 
review. They were given to Commander Paul 
Thompson, the NSC's General Counsel. On or about 
August 26, Thompson gave the documents to McFar- 



123 



Chapter 6 



lane, warning him that some warranted concern and 
raising the possibihty of asserting executive privilege 
in response to the Barnes inquiry.*^ 

The Six "Troubling" l\1emos 

McFarlane reviewed the documents and selected 
six memorandums which, despite the narrow focus of 
the search, "seemed to me to raise legitimate ques- 
tions about compliance with the law." He added: 
"[A]n objective reading would have taken passages in 
each of these memorandums to be either reflective of 
a past act that was not within the law or a recommen- 
dation that a future act be carried out that wouldn't 
be."«=' 

A summary of the six documents, all memos from 
North to McFarlane, follows: 

Memo of December 4, 1984: "Assistance for the 
Nicaraguan Resistance." 

The memo ^° described a meeting between North 
and an official of Country 4, a totalitarian country, a 
meeting undertaken "in accord with prior understand- 
ing." ^' 

At the meeting, according to the memo. North at- 
tempted to convince the official to permit a sale of 
antiaircraft missiles and launchers to the Contras. The 
official had mistakenly believed that the weapons 
were intended for the Central American country 
listed on the end-user certificate. The memo shows 
North's efforts, only months after the most restrictive 
Boland Amendment went into effect, to obtain sophis- 
ticated weapons for the Contras. 

The memo also recounted a meeting with Singlaub, 
who described his efforts to solicit aid for the Contras 
from two other countries located in the Far East. 
North wrote, "If it is necessary for a USG official to 
verify Calero's bona fides, this can be arranged. "^^ 
Such an arrangement would constitute facilitation of a 
contribution to the Contras. Finally, the memo dis- 
cussed David Walker, a former British Special Air 
Services officer who, in a meeting with North, of- 
fered to conduct sabotage operations for the Resist- 
ance. "Unless otherwise directed," North wrote, 
"Walker will be introduced to Calero and efforts will 
be made to defray the cost of Walker's operations 
from other than Calero's limited assets."*^ 

McFarlane testified that upon receiving this memo 
he believed that he asked Poindexter to investigate 
and "find out from Colonel North what had happened 
and how his actions squared with the law."** The 
memo contains the notation: "Noted JF" in Poin- 
dexter's handwriting.®^ 

Memo of February 6, 1985: "Nicaraguan Arms 
Shipment." 

The memo ®* noted that the Nicaraguan merchant 
ship, Monimbo. was about to pick up a load of arms 
for delivery to Nicaragua, a delivery that North 



urged should be stopped. North noted, "if asked, 
Calero would be willing to finance the operation" to 
seize or sink the ship but does not have the personnel 
to do so. North suggested that foreign countries 
might be able to help.®'' 

North added that if time did not permit a "special 
operation" to seize the ship, "Calero can quickly be 
provided with the maritime assets required to sink the 
vessel before it can reach port of Corinto." ®* North 
recommended "that you authorize Calero to be pro- 
vided with the information on Monimbo and ap- 
proached on the matter of seizing or sinking the 
ship." National Security Council records indicate that 
McFarlane saw this memo and did not approve or 
disapprove. McFarlane testified that he did not ap- 
prove.®® Admiral Poindexter wrote on the memo, 
"We need to take action to make sure ship does not 
arrive in Nicaragua." He attached a note saying, 
"Except for the prohibition of the intelligence com- 
munity doing anything to assist the Freedom Fighters 
I would readily recommend I bring this up at CPPG 
[Crisis Pre-Planning Group meeting] at 2:00 today. Of 
course we could discuss it from the standpoint of 
keeping the arms away from Nicaragua without any 
involvement of Calero and Freedom Fighters." ""' 

Memo of March 5, 1985: "[A Central American 
Country's] Aid to the Nicaraguan Resistance." 

The memo "" requested McFarlane's signature on 
memorandums to senior Cabinet officers asking their 
views on increased U.S. aid to a Central American 
country. "The real purpose of your memo," North 
wrote, "is to find a way by which we can compensate 
[the country] for the extraordinary assistance they are 
providing to the Nicaraguan freedom fighters."'°^ 
The attached memo did not include a reference to 
such a purpose. North attached to the memo for 
McFarlane false end-user certificates provided by the 
Central American country to cover nearly $8 million 
of munitions that were soon to be delivered to the 
FDN. The certificates. North wrote, "are a direct 
consequence of the informal liaison we have estab- 
lished with [an official of the Central American coun- 
try] and your meeting with him and [the country's] 
President." '°^ The certificates were made out to 
Energy Resources International, a company owned 
by Albert Hakim and Secord. 

North added in the memo, "Once we have approv- 
al for at least some of what they have asked for, we 
can ensure that the right people in [the Central Amer- 
ican country] understand that we are able to provide 
results from their cooperation on the resistance 
issue." ^°* 

North recommended that McFarlane sign and 
transmit the attached memo to the other Cabinet offi- 
cers. NSC records reflect that McFarlane approved 
the recommendation. However, McFarlane testified 
that aid was sought on its merits, and not to reward 



124 



Chapter 6 



the Central American country for helping the Con- 
tras.i°5 

Memo of March 16, 1985: "Fallback Plan for the 
NIcaraguan Resistance." 

The memo '°^ set out a plan to aid the Contras in 
the event that Congress did not do so. It included 
several recommendations. Among them: 

- The President publicly urge Americans to con- 
tribute funds for humanitarian aid to the Contras. 
McFarlane wrote in the margin, "Not yet."'°' 

- Creation of a tax-exempt corporation for dona- 
tions. McFarlane wrote "Yes."'"* 

- "The current donors ... be apprised of the plan 
and agree to provide additional $25-30M to the 
resistance for the purchase of arms and muni- 
tions." McFarlane wrote "doubtful." '"^ 

According to McFarlane, the term "current 
donors" referred to Country 2.'*° 

Memo of April 11, 1985: "FDN Military 
Operations." 

In the memo,"' North described how the Contras 
spent the $24.5 million "made available since USG 
funding expired," making clear that the funds ob- 
tained by McFarlane went mostly for "arms, ammuni- 
tion, and other ordnance items." "^ 

North also wrote: 

Despite the lack of any internal staff organization 
. . . when the USG withdrew, the FDN has 
responded well to guidance on how to build a 
staff Although there was a basic lack of familiar- 
ity with how to conduct guerrilla-type oper- 
ations, since July, all FDN commanders have 
been schooled in these techniques and all new 
recruits are now initiated in guerrilla warfare tac- 
tics before being committed to combat. In short, 
the FDN has well used the funds provided and 
has become an effective guerrilla army in less 
than a year. ' ' ^ 

North described Contra plans for "future oper- 
ations," including a further increase in troops, a spe- 
cial operations attack against the Sandinista Air 
Force, a ground military operation against a mine 
complex and, "the opening of a southern front . . . 
which will distract EPS units currently committed to 
the northern front.""'' He continued: 

It is apparent that the $7M remaining will be 
insufficient to allow the resistance to advance 
beyond these limited objectives, unless there is a 
commitment for additional funds. The $14M 
which the USG may be able to provide will help 
to defray base camp, training, and support ex- 



penses but will not significantly affect combat 
operations until early Autumn due to lead-time 
requirements. Efforts should, therefore, be made 
to seek additional funds from the current donors 
($15-20M) which will allow the force to grow to 
30-35,000."^ 

North recommended "that the current donors be 
approached to provide $15-20M additional between 
now and June 1, 1985." "^ NSC records showed that 
McFarlane indicated no decision and returned the 
memo to the System IV files. McFarlane testified that 
he rejected North's recommendation and sought no 
further aid from Country 2. 

Memo of May 31, 1985: "The NIcaraguan 
Resistance's Near-Term Outlook." 

In the memo,'" North provided an update of 
Contra political and military activities. Among other 
things, he listed several important FDN military suc- 
cesses and concluded: "These operations were con- 
ducted in response to guidance that the resistance 
must cut Sandinista supply lines and reduce the effec- 
tiveness of the Sandinista forces on the northern fron- 
tier.""* North concluded by noting, "[P]lans are un- 
derway to transition from current arrangements to a 
consultative capacity by the CIA for all political mat- 
ters and intelligence, once Congressional approval is 
granted on lifting Section 8066 restrictions [the 
Boland Amendment].""^ He added: "The only por- 
tion of current activity which will be sustained as it 
has since last June, will be the delivery of lethal 
supplies."'^'' 

North recommended that McFarlane brief the 
President on these matters.'^' NSC records do not 
indicate whether McFarlane approved this recommen- 
dation. 

Undiscovered Documents 

The memos Thompson presented to McFarlane in 
late August 1985 did not represent all the memos 
written by North to McFarlane demonstrating 
North's involvement in supporting the Contras. Be- 
cause it was limited by the information policy officer 
to official NSC and Presidential Advisory files, the 
search would not uncover "nonlog" memorandums. 
In one such memo, dated November 7, 1984, North 
made clear that he was attempting to pass intelligence 

information about Sandinista HIND helicopters to 
Calero.'22 

Nor did the search turn up relevant logged memo- 
randums in which North indicated that he and Contra 
leaders had planned the timing of rebel military oper- 
ations. For example, a March 20, 1985, memo stated: 

In addition to the events depicted on the internal 
chronology at Tab A, other activities in the 
region continue as planned — including military 



125 



Chapter 6 



operations and political action. Like the chronol- 
ogy, these events are also timed to influence the 
vote: 

- planned travel by Calero, Cruz and Robelo; 

- various military resupply efforts timed to sup- 
port significantly increased military operations 
immediately after the vote (we expect major San- 
dinista crossborder attacks in this time frame — 
today's resupply . . . went well); and 

- special operations attacks against highly visible 
military targets in Nicaragua. '^^ 

McFarlane-North Alteration 
Discussions 

On August 28, McFarlane and North began a series 
of lengthy meetings to fashion a response to the Con- 
gressional inquiries. According to a chronology pre- 
pared by McFarlane, they met six times and spoke by 
phone four times between August 28 and September 
12, the date of the response to Representative 
Barnes. '2* Although both McFarlane and North ac- 
knowledged to the Committees that they discussed 
altering the documents, the two dispute the purpose 
of the meetings. 

McFarlane maintained that the meetings, together 
with the document review, constituted his investiga- 
tion into North's activities, an investigation, he said, 
that turned up no proof of illegal activities. '^^ For 
example, he asked North about allegations relating to 
fundraising. According to McFarlane, North respond- 
ed that he had not solicited or encouraged donations, 
that he merely told potential donors, "if you want to 
be helpful to the Contras, go to Miami, they're in the 
phone book they have an office, and do it your- 
selves."'^® 

The two reviewed the documents and, according to 
McFarlane, North explained that his memos were 
being misinterpreted. For example, in one memo 
North wrote that the FDN "has responded well to 
guidance on how to build a staff," and that "all FDN 
commanders have been schooled" in guerrilla warfare 
tactics. '2' McFarlane said North told him, contrary 
to any implication in the document, that the guidance 
came not from him but from retired military officers 
hired by the Contras. '^s as McFarlane related the 
events. North offered to alter the documents and 
McFarlane gave him a tentative go-ahead. McFarlane 
testified: 

Well, as we went through them, he pointed out 
where my own interpretation was just not accu- 
rate . . . and he just said, you are misreading my 
intent, and I can make it reflect what I have said 



if this is ambiguous to you, and I said all right, 
do that. '29 

North shortly returned with a sample alteration. 
McFarlane's testimony indicates that the document 
North had altered was "FDN Military Operations," 
dated April 11, 1985. The recommendation in the 
document, "that the current donors be approached to 
provide $15-20M additional between now and June 1, 
1985" was replaced with a recommendation that "an 
effort must be made to persuade the Congress to 
support the Contras."'^" North had asserted, accord- 
ing to McFarlane, that the problem with the docu- 
ments was one of interpretation and that the changes 
would be slight. McFarlane acknowledged that this 
alteration left the document "grossly at variance with 
the original text."'^' 

McFarlane testified that he did not replace any 
original NSC documents with altered documents and 
did not instruct North to do so. He said he took with 
him when he resigned the pages North had altered 
and eventually destroyed them. '^^ 

North's version of events is substantially different. 
McFarlane, North testified, brought the selected doc- 
uments to his attention, "indicated that there were 
problems with them, and told me to fix them." This 
meant, he testified, that he was to "remove references 
to certain activities, certain undertakings on my behalf 
or his, and basically clean up the record." '^^ The 
documents. North acknowledged, "clearly indicated 
that there was a covert operation being conducted in 
support of the Nicaraguan Resistance."'^'' That is 
why. North testified, McFarlane instructed him to 
alter them: 

The documents, after all, demonstrated his 
[McFarlane's] knowledge and cognizance over 
what I was doing, and he didn't want that. He 
was cleaning up the historical record. He was 
trying to preserve the President from political 
damage. I don't blame him for that. '^^ 

North testified that he did not abide by McFarlane's 
instruction until shortly before his dismissal: "I saw 
towards the end of my tenure that this list still had 
not been cleaned up, and so I went and got the 
documents out of the system and started revising the 
documents."'^® 

Although the record is inconclusive on what exact- 
ly McFarlane and North discussed at their meetings, 
it is undisputed that both the National Security Advis- 
er and one of his principal staff members considered 
altering NSC documents. They discussed this course 
after receiving requests from several Members of 
Congress for access to precisely those types of docu- 
ments. 



126 



Chapter 6 



Responses to Congress: The 
Denials 

Within days of his document review and discussions 
with North, McFarlane sent the first of his responses 
to Congress. In addition to the broad assurance that 
the NSC staff was complying with the "letter and the 
spirit" of the Boland Amendment, the responses con- 
tain specific denials of allegations that the NSC staff 
had provided fundraising or military support to the 
Nicaraguan resistance. 

Fundraising 

McFarlane's September 12 response to Representa- 
tive Barnes stated: "None of us has solicited funds, 
[or] facilitated contacts for prospective potential do- 
nors. . . ."13'' 

In his October 7 letter, McFarlane replied as fol- 
lows to a written question from Representative Ham- 
ilton: 

Mr. Hamilton: The Nicaraguan freedom fighters, 
in the last two months, are reported by the U.S. 
Embassy, Tegucigalpa, to have received a large 
influx of funds and equipment with some esti- 
mates of their value reaching as high as $10 mil- 
lion or more. Do you know where they have 
obtained this assistance? 

Mr. McFarlane: No.'^* 

In fact, according to his own testimony, McFarlane 
not only knew how the Contras obtained financial 
assistance, he personally facilitated the main donation 
to the Contras: 

Q: . . . I was referring to Country Two and the 
fact that the actual donors had, as I understand it, 
Country Two was the actual donors — 

A: Yes. 

Q: And that you had not only facilitated con- 
tacts, but you had facilitated the actual contribu- 
tion. 

A: I will accept that, yes. '^^ 

Furthermore, according to Assistant Secretary of 
State Gaston Sigur and North, McFarlane was aware 
of Sigur's efforts to obtain a donation from a Far 
Eastern country — efforts that took place while the 
responses to Congress were being prepared. North, of 
course, was aware of that approach. Indeed, on 
August 28, the day he and McFarlane had their first 
lengthy meeting to discuss the Congressional inquir- 
ies. North reassured an official from that country that 
the United States would be grateful if his country 
made a contribution to the Contras.'*" The country 
responded with a $1 million gift.''" 



Also, in his letter of September 12, Representative 
Hamilton asked: 

Has Colonel North been the focal point within 
the NSC staff for handling contacts with private 
fundraising groups, such as the World Anti-Com- 
munist League and the Council for World Free- 
dom headed by retired Major General John K. 
Singlaub? 

McFarlane replied, "No."'*^ In fact, however. 
North had been dealing with Singlaub on fundraising, 
as the December 4, 1984, North-to-McFarlane memo 
showed. As North told the Committees, he "certainly 
saw General Singlaub a lot related to support for the 
Nicaraguan Resistance. "'''^ 

l\/lilitary Assistance 

In his September 5 letter, McFarlane stated: 

At no time did we encourage mihtary activities. 
Our emphasis on a political rather than a military 
solution to the situation was as close as we ever 
came to influencing the military aspect of their 
struggle.'''* 

North was heavily involved in the military aspect 
of the Contra struggle. He testified that this statement 
was false. '''^ In addition to helping arm the Contras, 
and to providing intelligence and cash to Contra lead- 
ers, North also, beginning in the summer of 1985, 
coordinated the efforts to set up a resupply operation 
to provide lethal and nonlethal supplies to troops 
inside Nicaragua. Several weeks before the letters 
were drafted, North asked Secord to set up the oper- 
ation, and he called on Ambassador Lewis Tambs to 
facilitate the construction of an airfield for refueling 
resupply aircraft.''*^ Yet, McFarlane wrote to Repre- 
sentative Hamilton on October 7: 

Lieutenant Colonel North did not use his influ- 
ence to facilitate the movement of supplies to the 
resistance.'*' 

North acknowledged that this statement was false.'** 
It is unclear whether McFarlane was fully aware of 
North's activities. McFarlane testified he was not.'*^ 
But the documents McFarlane reviewed and about 
which he was concerned shortly before drafting the 
first response to Congress showed that North repeat- 
edly attempted to influence the military aspect of the 
Contras' struggle. 

Furthermore, McFarlane specifically denied in his 
October 7 letter to Representative Hamilton that 
North had provided the Contras "tactical advice": 

The allegation that Lieutenant Colonel North of- 
fered the resistance tactical advice and direction 
is, as I indicated in my briefing, patently 
untrue. '^° 



127 



Chapter 6 



North acknowledged to the Committees that ahhough 
he never "sat down in the battlefield and offered 
direct tactical advice ... I certainly did have a 
number of discussions with the Resistance about mili- 
tary activities, yes, to include the broader strategy for 
the Southern front and an Atlantic front and an inter- 
nal front."' ^' And McFarlane testified: "I felt it was 
likely that an officer of the qualifications and excel- 
lence of Col. North, when he was down visiting in 
Central America, probably did extend advice." '^^ 
Indeed, McFarlane admitted in his testimony that he 
felt in 1985 that "it was likely" that North had gone 
"beyond the law" on giving military advice to the 
Contras. '^^ He testified: "But without certain evi- 
dence of it, not being able to disapprove it, I accepted 
that [the denials McFarlane said North gave him] as 
sufficient grounds for saying it as truth, and I believe 
that I was wrong to do so. But that is why I sent 

it."154 

McFarlane maintained that he believed at the time 
that such advice was not the "central concern" of 
Congress. "It seemed to me that that was inconse- 
quential to the outcome of the conflict, and probably 
not in the eyes of Congress a serious matter," he 
said.'** Representative Barnes' letter, however, 
shows that one of his main concerns was about re- 
ports that North had provided " 'tactical influence' on 
rebel military operations."'*® In addition, Representa- 
tive Hamilton, in his first letter, expressed an interest 
"in actions that supported the military activity of the 
contras."'*'' Each of the other letters from Congress 
asks McFarlane to respond to specific allegations 
about NSC military support for the Contras. In any 
case, McFarlane in his letters offered no such explana- 
tion, merely a flat denial. 

Finally, despite his assertion in his letters to Con- 
gress, McFarlane himself influenced the Contras' mili- 
tary struggle. The $32 million obtained with his help 
from Country 2 enabled the Resistance to purchase 
weapons to continue fighting. The April 11, 1985, 
memo from North describing how the funds were 
expended stated clearly that the donation was being 
used to purchase lethal supplies.'** 

McFarlane's Meetings with l\1embers 

The denials McFarlane made in his letters were 
repeated in face-to-face meetings with Members of 
Congress. On September 5, Senate Select Committee 
on Intelligence Chairman Durenberger and Vice 
Chairman Leahy questioned McFarlane in an hour- 
long private briefing. At the start of their meeting, 
McFarlane showed the two Senators a copy of the 
letter he would send to Representative Hamilton that 
day. McFarlane assured Senators Durenberger and 
Leahy that "no law had been broken," and that 
"there was no intent to circumvent restrictions Con- 



gress placed on aid to the Nicaraguan Resistance." 
Asserting that he had grilled North on his involve- 
ment with supporters of the Resistance, McFarlane 
said he was confident that "[N]o NSC staff member 
either personally assisted the Resistance or solicited 
outside assistance on their behalf" Senator Leahy de- 
scribed the meeting in a letter written shortly thereaf- 
ter: 

Mr. McFarlane said that the officer [North] had 
frequently received calls from persons wishing to 
donate funds, and that he referred them to the 
Contra leaders themselves. He insisted that the 
officer never solicited funds, encouraged dona- 
tions or initiated contacts with potential donors. 
He further denied that the officer, in several per- 
sonal meetings with Contra leaders, both in 
Washington and in Central America, ever offered 
military advice. The officer's authorized role, Mr. 
McFarlane said, was to assure the Contras during 
the time of the Congressional aid cutoff of the 
President's continued moral support. . . .'*^ 

McFarlane concluded by telling the Senators, "I can't 
believe everything everyone says, but I do believe 
Ollie." '60 

After the session. Senator Durenberger told a re- 
porter that he felt McFarlane was candid about his 
knowledge, but that questions about U.S. Government 
support for the Contras remained: 

So we came away from the meeting feeling that 
from Bud McFarlane we're getting what he be- 
lieves to be the situation with regard to his staff 
Are we satisfied that this sort of concludes the 
matter and that no one in any way involved was 
directing the effort? No, you can't be satisfied. ' * ' 

On September 10, McFarlane met with Representa- 
tive Hamilton and other Members of the House Intel- 
ligence Committee. As Representative Hamilton later 
summarized the meeting in a letter to a colleague, 
McFarlane told the Committee Members that Presi- 
dent Reagan had made clear that the entire executive 
branch had to comply with the Boland Amendment. 
McFarlane said he had conducted a thorough investi- 
gation into allegations made about the NSC staff and 
concluded that North had not "given military advice 
of any kind to the Contras," nor had he "solicited, 
accepted, transmitted or in any other way been in- 
volved with funds for the Contras." '^^ 

The House Intelligence Committee Chairman ac- 
cepted the denials of the National Security Adviser. 
At the close of the session, Mr. Hamilton told McFar- 
lane, "I for one am willing to take you at your 
word."'®^ 



128 



Chapter 6 



McFarlane-Barnes Document 
Dispute 

In his first response to Representative Barnes on Sep- 
tember 12, McFarlane ignored the Congressman's re- 
quest for documents. A PROF note to Paul Thomp- 
son on September 20 indicated that McFarlane be- 
lieved he had successfully sidestepped the document 
issue: "Now that we have the Barnes letter behind us 
you can return the Contra papers to Ollie please."'^'' 
Ten days later, however, Representative Barnes re- 
newed his document request. In a letter to McFarlane 
dated September 30, 1985, the Congressman wrote: 

I am sure you understand that the pertinent docu- 
ments must be provided if the Committee is to be 
able to fulfill its obligation to adopt legislation 
governing the conduct of United States foreign 
policy and to oversee the implementation of that 
policy under the law."®* 

Congressman Barnes went on to explain why he felt 
strongly about his Committee's need to review the 
documents: 

It may be helpful if I spell out more clearly the 
interest of the Committee. The Committee retains 
its concern about possible violations of federal 
law by members of the NSC staff. However, that 
is not the Committee's only — or even primary — 
concern, given that the enforcement of the law is 
an Executive Branch function. It is the Commit- 
tee's responsibility, however, to conduct over- 
sight of laws that limit the activities of the Exec- 
utive Branch under the Committee's jursidiction, 
and to reach judgments as to whether changes in 
the law are indicated by those activities. Even if 
the Committee determined that the activities of 
the NSC staff on this matter were entirely legal, 
the Committee might still determine that changes 
in the law were necessary. I am sure it is obvious 
to you that the Committee cannot make those 
judgments unless it has in its possession all infor- 
mation, including memorandums and other docu- 
ments, pertaining to any contact between the 
NSC staff and Nicaraguan rebel leaders. I would 
hereby renew my request for such information, 
both oral and documentary. '^^ 

Thus, the Barnes letter of September 30 emphasized 
that Congress was entitled to know about the NSC's 
efforts to support the Contras, even if those efforts 
were legal. Once apprised of the facts, Congress 
would determine whether additional legislation was 
required, including closing any loophole in the 
Boland Amendment that the NSC staff might have 
claimed. 

Representative Barnes and McFarlane met at the 
White House on October 17. The day before the 
meeting, NSC General Counsel Paul Thompson pre- 



pared a memo for McFarlane suggesting that Repre- 
sentative Barnes should be told that the National Se- 
curity Adviser had no legal authority to turn over the 
documents. North's actions, Thompson wrote, were at 
the National Security Adviser's direction "in further- 
ance of the President's initiatives." Documents per- 
taining to North's actions in carrying out the Presi- 
dent's instructions "are internal and deliberative in 
nature and are furthermore not NSC agency docu- 
ments. As Presidential advisory papers, they fall 
under the dominion of the President and are no 
longer subject to your disposition."'®' 

At the meeting with Congressman Barnes, McFar- 
lane, referring to a stack of documents on his desk, 
explained that a document search had been made and 
that McFarlane had selected documents relevant to 
Congressional inquiries. He told Congressman Barnes 
he would not permit the documents to leave his office 
but would allow the Congressman to read them there. 
McFarlane acknowledged that he made the offer 
knowing Representative Barnes would likely refuse it: 

Q: And I take it — it was part of your thinking 
that if a busy Congressman came down to your 
office and saw a substantial stack of documents, 
and you were having a short meeting [McFarlane 
had budgeted one hour for the session], it was 
very unlikely that he would ask to read through 
the documents from one end to the other? 

A: I think that is true, yes.'®* 

Indeed, Representative Barnes deemed the offer not 
to be serious. He understood McFarlane to imply that 
the documents on the desk were not all the docu- 
ments but only the ones McFarlane had concluded 
were "relevant." This, Barnes felt, "was not an ade- 
quate way to ascertain the truth of the allegations." 
Furthermore, Representative Barnes believed that 
prohibiting staff from reviewing the documents would 
result in an incomplete investigation: "[I]n my experi- 
ence the only way you can do a good investigation is 
to compare documents — one to another — and to ana- 
lyze these with staff who have the time and back- 
ground to work at putting them in context." McFar- 
lane's offer, therefore, "didn't seem like a serious pro- 
posal."'®^ 

On October 29, Representative Barnes wrote 
McFarlane again expressing his view that the proce- 
dures mandated by McFarlane were "inadequate."''"' 
He requested that McFarlane turn the documents 
over to the House Intelligence Committee, thereby 
assuring that the classified materials would be appro- 
priately handled. Representative Barnes wrote: "I be- 
lieve that this proposal would surely resolve any con- 
cerns that the Administration might have about the 
security of the information, while at the same time 
fulfilling the responsibilities of the House.""' This 



129 



Chapter 6 



was the last correspondence between McFarlane and 
Representative Barnes on this issue. 

North, however, tried unsuccessfully to convince 
McFarlane to send one more letter — a response North 
maintained he would have preferred to send at the 
start. ''^ In the draft letter, McFarlane refused out- 
right to turn over documents claiming that they were 
"internal Presidential documents regarding sensitive 
relations with other governments."^''^ The executive 
branch, the letter said, "must abide by its commit- 
ments to other governments not to compromise sensi- 
tive information." ''■» The letter stated that disclosure 
of the documents sought by Barnes would "adversely 
effect the national security of the United States and 
endanger our citizens." "''^ 

McFarlane's 1986 Testimony 

In the wake of the November 1986 relevations and a 
full year after he left office, McFarlane testified 
before several panels investigating the Iran-Contra 
Affair; the Senate and House Intelligence Committees, 
the Senate and House Foreign Affairs Committees, 
and the President's Special Review Board (The 
Tower Board). Again, Members of Congress — and 
this time officials on the Tower Board staff as well — 
were unable to learn the crucial facts about the Gov- 
ernment's actions in support of the Nicaraguan Resist- 
ance. 

The former National Security Adviser acknowl- 
edged to the panels that North had told him in May 
1986 about the diversion of Iranian arms sales funds 
to the Contras. That aspect of Administration support 
for the Resistance, by the time of McFarlane's De- 
cember 1986 testimony, had been revealed by the 
Attorney General. Beyond that, McFarlane withheld 
virtually all other relevant information in his posses- 
sion about U.S. support for the Contras during the 
period of Congressional restrictions. He concealed 
new information he learned of North's activities in 

1986, and he repeated many of the inaccurate state- 
ments that he had made orally and in writing to 
Members of Congress while he was National Security 
Adviser. 

In his testimony before the Select Committees, 
McFarlane acknowledged that his remarks to investi- 
gating panels between December 1986 and February 

1987, like his statements about U.S. support of the 
Resistance in 1984 and 1985, had been "clearly too 
categorical."'''^ 

McFarlane's Testimony on North's 
Activities in 1986 

On December 1, 1986, while he was testifying 
before the Senate Select Committee on Intelligence, 
McFarlane was asked whether, after his resignation, 
there were "any indications" about "North's involve- 



ment in the funding [of the Contras] either directly or 
indirectly." McFarlane responded: 

Well, since leaving Government my only basis 
for knowing anything more about the issue is 
what I read in the press and the events that I 
described this morning about what I was told 
about the diversion of Iranian money in May of 
this year. So I have no personal basis for cor- 
roborating the press stories that I've seen that 
have alleged that Col. North has done various 
things to channel money and to advise and done 
business with arms merchants. I have no inde- 
pendent knowledge of that and I guess the only 
thing that I do know first hand from Col. North 
was what he told me about diversion of Iranian 
monies. I've described that this morning.''" 

In fact, despite his assertion that he had "no person- 
al basis for corroborating" allegations about North, 
and that "the only thing" he knew "first hand from 
Col. North" was the diversion, McFarlane had 
learned directly from North in 1986 about efforts to 
provide funds and weapons to the Resistance. Indeed, 
McFarlane had offered to assist. After his resignation, 
McFarlane communicated regularly with the NSC 
staff via a PROF machine he was permitted to keep 
in his home. PROF messages in 1986 show that North 
freely shared with McFarlane details of the NSC- 
coordinated Contra operation, despite North's strong 
desire to hold close information about the project. 
The following exchange between North and McFar- 
lane about efforts to obtain sophisticated Blowpipe 
missiles for the Resistance is illustrative. In late 
March, North wrote to McFarlane about efforts to 
obtain sophisticated surface-to-air missiles for the 
Contras: 

After the House vote on aid to the resistance, I 
plan to take a few days just to get re-acquainted 
w/ the family. Meanwhile, we are trying to find 
a way to get 10 BLOWPIPE launchers and 20 
missiles from . . . thru the Short Bros. Rep. The 
V.P. from Short Bros, sought me out several 
mos. ago and I met w/ him ... a few weeks ago 
.... Short Bros., the mfgr. of the BLOWPIPE, 
is willing to arrange the deal, conduct the train- 
ing and even send U.K. "tech reps" fwd if we 
can close the arrangement. Dick Secord has al- 
ready paid 10% down on the delivery and we 
have a [Central American country] EUC [end 
user certificate] which is acceptable to. . . .'''* 

McFarlane replied about one week later: 

I've been thinking about the blowpipe problem 
and the Contras. Could you ask the CIA to iden- 
tify which countries the . . . have sold them to. I 
ought to have a contact in at least one of them. 
How are you coming on the loose ends for the 



130 



Chapter 6 



material transfer? Anything I can do? If for any 
reason, you need some mortars or other artil- 
lery — which I doubt — please let me know.'''^ 

In another message to McFarlane, dated April 21, 
1986, North provided details on the resupply oper- 
ation. "So far," he wrote, "we have seven A/C [air- 
craft] working, having delivered over $37M in sup- 
plies and ordnance . . . ." In the message. North also 
discussed the need to obtain new funding for the 
Contras. "The resistance support acct is darned near 
broke," he wrote. "Any thoughts where we can put 
our hands on a quick $3-5M? Gaston [Sigur] is going 
back to his friends who have given $2M so far in 
hopes that we can bridge things again, but time is 
running out along w/ the money." Sigur recalled 
making no such approach in 1986.'*° Demonstrating 
to McFarlane his operational control of the resupply 
program. North added that he had told Secord to sell 
"the ship first and then the a/c [aircraft] as a means of 
sustaining the effort." He then proposed to McFarlane 
that U.S. businessman Ross Perot be approached for 
funds. "As you know, we've never asked him for help 
in this regard, believing that he wd be inclined to talk 
about it," North wrote, an indication that he and 
McFarlane had discussed funding alternatives. "It 
may now be time to take that risk. Any thoughts?"'*' 

The reference in the PROF to Richard Secord's 
involvement in the Contra operation is not the only 
such reference. In February 1986, North sent a PROF 
message to McFarlane in which he said that he had 
"asked JMP [Poindexter] for a session w/ you and 
Dick Secord as soon as possible after Dick returns 
tomorrow night from Eur[ope] where he is setting up 
an arms delivery for the Nic[araguan] resistance. A 
man of many talents ol' Secord is."'*^ In his testimo- 
ny before the Select Committees, McFarlane specifi- 
cally acknowledged that he was aware in 1986 that 
"Secord was involved in helping the Contras."'*^ 
But on December 10, 1986, testifying before the 
House Intelligence Committee, McFarlane denied any 
such knowledge. Representative Brown asked: "Let 
me ask about Gen. Secord .... Were you aware of 
the fact that he had a role in the Contra supply 
operation?" McFarlane replied, "No sir."'** 

Testimony on Fundraising Activities 

As described above, McFarlane arranged for two 
large donations totalling about $32 million from 
Country 2, telling a high official of that country about 
U.S. concerns and the Contras' needs, and then pro- 
viding the bank account number when the country 
decided to donate funds. The first gift came in 1984 
and the second in February and March 1985. 

In his testimony before Congress following the No- 
vember 1986 disclosures, McFarlane denied personal 
knowledge of the donations by Country 2. During 
McFarlane's testimony on December 8, 1986, before 
the House Foreign Affairs Committee, Representative 



Mel Levine asked: "There have been also press re- 
ports that" Country 2 has been "indirectly involved in 
financing the Contras. Are you aware of any such 
activities?" McFarlane replied: "I have seen the re- 
ports and I have heard that" Country 2 has contribut- 
ed. However, he said, "The concrete character of that 
is beyond my ken."'*^ 

Similarly, McFarlane testified at that session in re- 
sponse to a question from Representative Edward F. 
Feighan that he had "seen the reports that various 
countries have" donated funds to the Contras, includ- 
ing Country 2. He testified: "I have no idea of the 
extent of that or anything else."'*" 

Acknowledging before the Select Committees that 
his testimony was "not as full an account as I could 
have given," McFarlane maintained nevertheless that 
his earlier testimony was "technically accurate."'*'' 
He told the Committees that even though he had 
facilitated the donations, he did not precisely know 
the extent of the contribution or the exact total of the 
deposits. However, such precision was scarcely the 
focus of the questions from the Members of Congress. 
Moreover, the April 11, 1985, North memo which 
McFarlane reviewed in connection with the summer 
1985 Congressional inquiries, described in great detail 
the extent of the donation.'** 

Members of both the House and Senate Intelligence 
Committees specifically asked McFarlane if he still 
stood by his 1985 statement that there was no "official 
or unofficial" relationship involving any member of 
the NSC staff and fund-raising for the Nicaraguan 
Resistance.'*^ Despite his role in the two contribu- 
tions from Country 2, and despite the knowledge that 
North and Sigur said he had of Sigur's discussions 
with Country 3 about a possible donation — all of 
which occurred during his tenure as National Securi- 
ty Adviser — McFarlane stood by his statement: "I 
believe as I did then that that was true throughout my 
time and association with the NSC."'^° 

On December 18, in his second appearance before 
the Senate Intelligence Committee following the No- 
vember disclosures, McFarlane acknowledged for the 
first time that he "believe[d]" Country 2 had donated 
funds. He knew of the donation, he testified, only 
because Secretary Weinberger told him: "I think that 
is the only one I ever heard about but I was told by 
the Secretary of Defense that there had been a contri- 
bution by [Country 2], and I don't know that I could 
put a date on it."'^' 

Six weeks after this testimony, McFarlane wrote 
the Chairman and Vice Chairman of the Senate Intel- 
ligence Committee to correct his statements. In his 
letter, he described the 1984 donation, maintaining, as 
he did before the Select Committees, that he had not 
solicited the gift. McFarlane did not mention the 
second contribution from Country 2. He wrote: "At 
no time from that moment [spring 1984] to this date, 



131 



Chapter 6 



have I ever sought, brokered or otherwise managed 
donations from anyone." '^^ 

Testimony on 1985 Activities 

As McFarlane acknowledged before these Commit- 
tees, the documents he gathered in response to the 
summer 1985 Congressional inquiries, "raise[d] legiti- 
mate questions about compliance with the law."'*^ In 
his testimony following the diversion disclosure, 
McFarlane not only withheld his concerns about the 
documents, but asserted that they proved that North 
had fully complied with the Boland Amendment. 

For example, on December 10, 1986, before the 
House Intelligence Committee, responding to ques- 
tions from Representative Dick Cheney, McFarlane 
testified that in the summer of 1985 he "went to 
considerable length to determine whether" North had 
violated the Boland Amendment. A document search, 
he said, "turned up two or three inches of paper, that 
reported on contacts that did occur between Colonel 
North and myself, indeed the President and Contra 
leaders." He continued: 

[F]rom the sum total of these documents, it was 
clear that the activities were to meet with Contra 
officials, civilian officials, tell them in so many 
words where we were, that we did not have 
Congressional support for military help, that we 
would try to get it, continue working with the 
Congress, that we couldn't provide it in the short 
term but we hoped that they would use the time 
until we could get it, to strengthen their political 
organization, bring in people like Cruz and others 
to develop a political program . . . but we 
couldn't do anything to help them'®"* 

McFarlane also told the Tower Board that "neither 
the documentary record nor interviews with Colonel 
North showed any evidence" that North had provid- 
ed military or fundraising support to the Contras. '^^ 
As noted above, the documents about which McFar- 
lane was concerned in August 1985 were not so in- 
nocuous. 

Summer 1985: Inquiry of the 
Intelligence Oversight Board 

The flood of press allegations about possible NSC 
violations of the Boland Amendment prompted no 
investigations by executive branch law enforcement 
agencies. Only one small executive oversight organi- 
zation, the Intelligence Oversight Board, responded to 
the widespread charges. In late August 1985, the 
Board conducted an inquiry into NSC staff activities. 
After a brief investigation by its counsel, Bretton G. 
Sciaroni, the Board concluded that Oliver North had 
not provided military or fundraising assistance to the 
Nicaraguan Resistance.'®® 



Sciaroni began his inquiry with a 30 to 40 minute 
interview of Paul Thompson. Shortly before that 
interview, Thompson turned over to McFarlane the 
NSC file documents on North's activities. Those doc- 
uments included the six "troubling" memorandums 
that indicated, as Thompson later put it, that "if he 
[North] was in effect doing what was reflected in the 
documents, he was perhaps not aware of the con- 
straints of the . . . Boland Amendment."'®' In his 
interview with Sciaroni, Thompson made no mention 
of North's activities as depicted in the memorandums. 
Indeed, he denied that North had provided "military 
support" to the Contras and asserted that North had 
limited himself to providing political encouragement 
and "moral support" while funds were unavailable.'®* 
Although the Committees cannot be certain what 
Thompson knew directly of North's activities, it is 
clear that his denials cannot be squared with the 
memorandums he had given McFarlane. 

Furthermore, Thompson withheld from Sciaroni 
the six "troubling" memorandums included in the 
batch he gave McFarlane. During their meeting, 
Thompson provided Sciaroni an inch-thick pile of 
documents and told him he was producing "the rele- 
vant documents for my review," according to Sciar- 
oni. The only documents to which Sciaroni would not 
be permitted access, Thompson told him, were 
North's personal working files. Thompson also told 
Sciaroni that the pile of documents he was turning 
over were the same as those that had been "shown to 
the Hill."'®® Missing from the pile were many of the 
documents Thompson himself acknowledged raised 
questions about North's activities. 2°° 

Sciaroni's next investigative step was to talk with 
North. During a 5-minute discussion. North gave 
Sciaroni a "blanket denial" of charges that he was 
actively involved in aiding the Contras.^"' Although 
North did not recall the conversation with Sciaroni, 
he was clear in his testimony that he had no intention 
of being candid with the Intelligence Oversight Board 
Counsel: "I am sure if he asked me" about supporting 
the Contras, "I denied it, because after all we viewed 
this to be a covert operation and he had absolutely no 
need to know the details of what I was doing."^°^ 

Still, Sciaroni stressed in his testimony that he was 
justified in expecting cooperation from NSC staff offi- 
cers. Both Thompson and North, he said, "understood 
who I represented, the mandate of the Board to look 
into matters of legality, and the seriousness of the 
allegations that had been raised. "^"^ His investigation 
was "an anomaly" in that he had no legal authority 
over the NSC staff, and therefore, Sciaroni said, he 
"was relying upon the good will of other officers at 
the White House. "^°'' Once again, however, North 
chose to conceal. This time, the object of his decep- 
tion was a board established by and operating within 
the executive branch, an entity privy to intelligence 
information and programs of the highest sensitivity. 



132 



Chapter 6 



Summary 



While exercising its responsibility to oversee the im- 
plementation of the law cutting off aid to the Nicara- 
guan Resistance, Congress tried repeatedly through 
1984 and 1985 to learn how the Resistance was stay- 
ing alive and whether the U.S. Government was in- 
volved with the Contras' survival. The President, the 
Vice President, the National Security Adviser, and 
officials on the NSC staff were aware that a multimil- 
lion dollar donation from Country 2, facilitated by 
McFarlane, was largely responsible for the Contras' 
survival. North, Poindexter, and perhaps other high 
Administration officials, were aware that the NSC 
staff was directly providing lethal support to the Nic- 
araguan Resistance. McFarlane denied knowledge of 
North's activities, but documents he reviewed follow- 
ing Congressional inquiries show that North actively 
assisted the Contras' military effort. 

Yet Congressional inquiries on U.S. support for the 
Contras were invariably met with categorical denials. 
So too were inquiries made by the media. In both 
cases, the information sought related not to sensitive 
operational details, but to a controversial foreign 
policy issue. The question repeatedly asked was 
whether it was the policy and practice of the U.S. 
Government during this period to provide lethal sup- 
port to the rebels fighting in Nicaragua. It was to that 



question that Administration officials repeatedly re- 
sponded with denials. 

The record leaves no doubt that some of the offi- 
cials making these denials did so as part of a deliber- 
ate attempt to deceive Congress and the public. 
North, who testified, "I didn't want to show Congress 
a single word on this whole thing," admitted that the 
letters sent to Congress over McFarlane's signature 
were "false." In meetings with Members of Congress, 
McFarlane repeated the statements in the letters. He 
acknowledged in testimony before these Committees 
that he had been "too categorical." Poindexter testi- 
fied that his intent during this period was to "with- 
hold information." And it is difficult to reconcile CIA 
Director Casey's testimony in this period with his 
knowledge of the facts as demonstrated by the docu- 
mentary evidence, and with his pledge to the Senate 
Intelligence Committee that he would abide by a new 
spirit of cooperation. 

Other officials who denied the existence of U.S. 
support, including the State Department officials who 
testified before Congress in 1984 and 1985, and the 
press liaison of the NSC staff, were unaware of the 
truth, themselves victims of concealed information. 

As 1986 began, a new National Security Adviser 
was supervising the NSC staff, promoted from within. 
But the covert Contra operation continued, as did the 
overriding concern to keep the fact that the United 
States was providing lethal aid to the Contras secret 
from Congress and the American people. 



133 



Chapter 6 



Chapter 6 



1. Congressional Record, 10/10/84 at HI 1974. 

2. McFarlane Test., Hearings, 100-7 Part II, at 203; see 
also 100-2 at 6, 20-22. 

3. Ex. OLN-10, Hearings, 100-7, Part III. 

4. Poindexter Test., Hearings, 100-8, at 61. 

5. Congressional Record, 4/5/83 at S4109-S4110. 

6. Letter of April 9, 1984, from Chairman Goldwater to 
Director Casey. 

7. Transcript of 4/26/84 hearing, at 3. 

8. U.S. Senate Report, 98-665, at 9-10. 

9. C0619-C0621. 

10. Public Law 212, 98th Cong., and Public Law 215, 
98th Cong. Fiscal year 1984 runs from October 1, 1983 
through September 30, 1984. 

11. Congressional Record, 11/18/83, at H10544. 

12. Id. 

13. Oliver North and Alton Keel wrote McFarlane in a 
February 7 memo that "Congressional resistance on this 
issue is formidable, to the degree that prospects for success 
are bleak even with a concerted effort." ("Additional Re- 
sources for Our Anti-Sandinista Program".) 

14. See Ch. 1. 

15. Ex. 29, Hearings, 100-2, at 456-57. 
16 See Chapter 2. 

17. McFarlane Test., Hearings, 100-2, at 14. 

18. McFarlane Test., Hearings, 100-2, at 18. See also 
Chapter 2. 

19. McFarlane Test., Hearings, 100-2, at 18. 

20. McFarlane Test., Hearings, 100-2, at 18, 24. 

21. Shultz Test., Hearings, 100-9, at 4; Weinberger, Test., 
Hearings, 100-10, at 148-49. A second possible reason for the 
decison not to tell Shultz could be related to the opposition 
to third-country approach Shultz expressed at a June 24 
NSPG meeting and on other occasions. See Shultz Test., Id. 
at 13-17. 

22. North Test., Hearings, 100-7, Part I, at 75-76. 

23. North Notebook, June 25, 1984, Q 0340. According to 
the notebook entry, North gave Calero at this time the code 
name "Barnaby." 

24. Congress Due for Latin Pointers at Home, 4/17/84, The 
Washington Post, p. A 16. 

25. Id. 

26. Israeli Technical Aid to El Salvador Part of Meetings 
Here. 4/21/84, The Washington Post p. A8. 

27. HPSCI Hearings. 5/2/84, at 69-70. 

28. Id at 98. 

29. Id at 70. 

30. Id at 70. 

31. W. at 70-72. 

32. Ex. APC-2, Hearings, 100-3. 

33. See Chapter 3. 

Nicaragua Rebels Reported to Raise Millions in Gifts. 9/9/ 
84, New York Times, Al; Private Aid Fuels Contras in 
Nicaragua, Miami Herald, 9/9/84, p lA. 

35. HPSCI Hearings. 9/12/84, at 17-18. Rep. Fowler 
asked Clarridge: "I assume that you would know" whether 
foreign governments had provided substantial financial as- 
sistance. Clarridge responded: "That's true." Motley said 
that if other countries had donated, "they would come to us 
and say, hey, you know, we might be able to help, but what 
do you think?" 

36. Id at 13. 



37. Id at 14. 

38. Id at 18-19. 

39. Id at 20. 

40. Id at 23. 

41. Ex. APC-2, Hearings, 100-3. 

42. McFarlane Test., Hearings, 100-2, at 24. 

43. Shultz Test., Hearings, 100-10, at 147-48. 

44. Id 

45. McFarlane Test., Hearings. 100-2, at 23-24. 

46. Id. at 24. 

47. Id., at 37. Adm. Poindexter displayed similar prior- 
ities. He tried to ensure that CIA Director Casey would not 
learn about North's Contra-support activities because, he 
testified, Casey was vulnerable to direct questions at Con- 
gressional hearings. 

48. McFarlane Test., Hearings, 100-2, at 150. 

49. Addabbo Letter to Shultz, December 11, 1984. Reply 
from W. Tapley Bennett, Assistant Secretary of State for 
Legislative and Inter Governmental Affairs, January 15, 
1985. Contra Aid Disavowal Questioned: Addabbo Unsatisfied 
with Shultz Reply. The Washington Post, 1/23/85, p. A19. 

50. Ex. RWO-3, Hearings, 100-2, at 780-82. A copy of this 
letter was found in North's safe; it appears to be a draft. 
Calero did not recall receiving it. North's request of Calero 
seems to have worked. Calero remained tight-lipped about 
the Contras' funding. On August 11, 1985, for example. The 
Washington Post reported that Calero "declined to reveal 
the sources of his funding since CIA financing dried up a 
year ago." Calero also denied that North had been involved 
in Contra weapon purchases. Rebel Leader Tells of Talks 
with U.S. 8/11/85 p. Al. 

51. Senate Committee on Foreign Relations Hearing at 
908. 

52. Id at 909-910. 

53. Id. at 910. The following month. Ambassador Motley 
repeated his assurances to the Defense Subcommittee of the 
House Committee on Appropriations. {Hearings at 1092) 

54. See Chapter 2. 

55. C/CATF Test., Hearings, 100-11, at 86-90. 

56. SSCI Full Committee Hearing on the President's 
Report on Nicaragua, 4/17/85 at 18. 

57. North Test., Hearings. 100-7, Part I, at 116. 

58. Hearing Transcript at 1 1. 

59. Hearing Transcript at 18. 

60. Memorandum from North to Poindexter, Press Revela- 
tions regarding North's Rule with Nicaraguan Resistance, (t/li/ 
85. Chardy published his story in June, 2 weeks after the 
first report on Oliver North. In the memo North also ex- 
pressed his fear that NSC staffers were talking to reporters 
about the matter and recommended that Poindexter require 
NSC staff to take periodic polygraph examinations. [Ex. 
OLN-186, Hearings, 100-7, Vol. 3. 

61. Singlaub Test., Hearings, 100-3, at 84. 

62. Private Groups Step Up Aid to Contras. Washington 
Post, 5/3/85, p. A22. 

63. Ex. 37, Hearings, 100-2. at 519. 

64. Ex. 38, Hearings, 100-2. at 529. 

65. Marine Plays Key Role on Foreign Policy, Washington 
Post. 8/11/85, p. 1. North had appeared once before in the 
press in connection with the Contras. On January 18, the 
Miami Herald reported that North had indirectly helped the 



134 



Chapter 6 



rebels obtain SAM-7 missiles, one of which shot down a 
Sandinista helicopter the month before. North, according to 
the article, "suggested to private contra fund-raisers," in- 
cluding Jack Singlaub, "the possibility of steering the guer- 
rillas toward an arms market source" where they could 
purchase missiles and arrange for training. (U.S. Helped 
Contras Get Missiles, 1/18/85, Miami Herald, p. 1 A.) 

66. White House Reportedly Gave Advice to Contra Fund 
Raisers. AP Wire, 6/10/85. 

67. U.S. Found to Skirt Ban on Aid to Contras. Miami 
Herald, 6/24/85, p. lA. 

68. Nicaraguan Rebels Getting Advice from White House on 
Operations. New York Times, 8/8/85, p. Al. 

69. Weekly Compilation of Presidential Documents, 8/ 
12/85, Vol. 21, No. 32 at 972. 

70. Rebels Move Back Into Nicaragua. 8/9/85, The Wash- 
ington Post, p. Al. 

71. McFarlane Aide Facilitates Policy. The Washington 
Post, 8/11/85, p. Al. 

72. Ex. 40A, Hearings, 100-2, at 546 (Barnes letter); Ex. 
41, Hearings, 100-2, at 559 (Hamilton letter). 

73. Ex. 41D, Hearings, 100-2, at 581 (letter from Duren- 
berger and Leahy). 

74. N3371. See also Ex. 41B, Hearings, 100-2, (2nd letter 
from Hamilton with specific questions). 

75. Ex. 41A, Hearings, 100-2, at 560. 

76. In a PROF message to North and Poindexter on 
September 3, McFarlane wrote: "I have sent you both sepa- 
rately a draft letter I have composed to answer Lee Hamil- 
ton's letter on Ollie's activities." [N3265] With minor 
changes, that draft became the letter sent to Hamilton 2 
days later. McFarlane's PROF note also appears to indicate 
that he wanted to keep discussion of the responses to Con- 
gress limited. McFarlane wrote to North: "Please do not 
share either this note or the separate draft with anyone. . . . 
Please bring me any edits you have. Ollie, don't send me 
any PROF notes about H." PROF notes from North to 
McFarlane were routed through other NSC staff officers. 
Under Poindexter, North would be able to send PROF 
messages directly. 

77. McFarlane Test., Hearings, 100-2, at 127. 

78. McFarlane Test., Hearings, 100-2, at 215. 

79. North Test., Hearings, 100-7, Part \, at 176-77. 

80. Ex. 41A, Hearings, 100-2, at 560. 

81. Ex. JMP-7a, Hearings, 100-8. 

82. Poindexter Test., Hearings, 100-8, at 82-83. 

83. McFarlane Test., Hearings. 100-2, at 73. 

84. Memo to Poindexter, 8/20/85, subj: "Barnes Re- 
quest." N29803-4. 

85. Id 

86. Id 

87. Id 

88. McFarlane Test.. Hearings, 100-2, at 73. Thompson 
Deposition 3/9/87 at 36, 4/28/87 at 3, 10. 

89. McFarlane Test., Hearings, 100-2, at 73. 

90. Ex. 32, Hearings. 100-2, at 466. 

91. Id., at 468. 

92. Id., at 469. 

93. Id., at 470. 

94. McFarlane Test., Hearings, 100-2, at 30. 

95. See version of memo numbered N44994-N44999. 

96. Ex. 33, Hearings, 100-2, at 471. 

97. Id., at 472. 

98. Id 



99. McFarlane Test., Hearings. 100-2, at 31. 

100. Ex. 33, Hearings, 100-2, at 475. 

101. Ex. 35, Hearings, 100-2, at 492. 

102. Id., at 494. 

103. Id 

104. Id. at 495. 

105. McFarlane Test., Hearings, 100-2, at 109-11. 

106. Ex. 36, Hearings, 100-2, at 510, 

107. Id. at 512. 

108. Id 

109. Id., at 513. 

110. McFarlane Test., Hearings, 100-2, at 35. 

111. Ex. 37, Hearings, 100-2, at 519. 

112. Id. at 520. 

113. Id. at 521. 

1 14. Id 

115. Id 

\\6. Id, at 522. 

117. Ex. 38, Hearings, 100-2, at 529. 

118. Id. at 530. 

119. W.. at 532. 

120. Id 

121. Id 

122. Ex. 31, Hearings, 100-2, at 463. 

123. North Memo to McFarlane, "Timing and the Nicara- 
guan Resistance Vote," N40301. 

124. Ex. 71, Hearings, 100-2, at 753. 

125. McFarlane Test., Hearings, 100-2, at 73-76, 117-18. 

126. Id., at 74. 

127. Ex. 37, Hearings, 100-2, at 521. 

128. McFarlane Test., Hearings, 100-2, at 74. 

129. Id., at 75. 

130. Id 

131. McFarlane Test., Hearings, 100-7, Part U, at 204. 

132. McFarlane Test., Hearings, 100-2, at 75-76. Evidence 
indicates that another document was altered in 1985. An 
altered version of the document, "The Nicaraguan Resist- 
ance: Near-Term Outlook," dated May 31, 1985 (Ex. 38, 
Hearings, 100-2 at 529), was found by investigators. The 
altered version was also typed on stationery available only 
in 1985, indicating that it had been altered in 1985. In the 
major change, the following paragraph is deleted: 

In short, the political and military situation for the resist- 
ance now appears better than at any point in the last 12 
months. Plans are underway to transition from current ar- 
rangements to a consultative capacity by the CIA for all 
political matters and intelligence, once Congressional ap- 
proval is granted on lifting Section 8066 restrictions. The 
only portion of current activity which will be sustained as it 
has since last June, will be the delivery of lethal supplies. 

It was replaced with: 

In short, the political and military situation for the resist- 
ance now appears better than at any point in the last 12 
months. Plans are underway to transition from ad hoc ar- 
rangements to a consultative capacity by the CIA for all 
political matters and intelligence, once Congressional ap- 
proval is granted on lifting Section 8066 restrictions. (Ex. 
FH-6A, Hearings, 100-5). 

133. North Test., Hearings, 100-7, Part I at 172. 

134. Id, at 173. 

135. Id., at 174. 

136. Id 

137. Ex. 40B, Hearings, 100-2, at 549. 



135 



Chapter 6 



138. Ex. 41C, Hearings, 100-2, at 579. 

139. McFarlane Test., Hearings, 100-2, at 115-16. 

140. North Test., Hearings, 100-7, Part I, at 79; Ex. 71, 
Hearings, 100-2, at 753; North's calendar. 

141. For more detail, see Chapter 2. 

142. Ex. 41C, Hearings, 100-2, at 576. 

143. North Test., Hearings, 100-7, Part I, at 167. 

144. Ex. 41 A, Hearings, 100-2, at 561. 

145. North Test., Hearings, 100-7, Part I, at 166. North 
also acknowledged that the following statement, in the Sep- 
tember 5 letter to Hamilton, was false: "We did not solicit 
funds or other support for military or paramilitary activities, 
either from Americans or other parties." 

146. See Chapter 3. 

147. Ex. 41C, Hearings, 100-2, at 572. 

148. North Test., Hearings, 100-7, Part I, at 167. 

149. McFarlane Test., Hearings, 100-7, Part II, at 203-05; 
100-2 at 157-58. 

150. Ex. 41C, Hearings, 100-2, at 572. 

151. North Test., Hearings, 100-7, vol. 1 at 167. 

152. McFarlane Test., Hearings, 100-2, at 75. 

153. Id., at 165. 

154. Id. 

155. Id., at 75. 

156. Ex. 40A, Hearings, 100-2, at 546. 

157. Ex. 41, Hearings, 100-2, at 559. 

158. Ex. 37, Hearings, 100-2, at 519. 

159. Leahy, letter, "Dear Fellow Vermonter" (September 
9, 1985), S0O1286. 

160. Recollection of meeting in notes Durenberger shared 
with Independent Counsel investigators during interview, 
see: file with Senate Office (Doug Telly). Senate Intelli- 
gence Committee News Release, 9/5/85. 

161. McFarlane Denies Illegal Ties to Contras, New York 
Times, 9/6/85. 

162. Hamilton letter to Representative Leon Panetta, 
9/18/85. 

163. Memorandum of Interview with Steve Berry, then 
Associate Counsel, HPSCI, dated 10/15/87. 

164. PROF, 9/20/85, "Subject: Contra Papers". 

165. Ex. 40C. Hearings, 100-2, at 551. 

166. W., at 551-52. 

167. Ex. 70, Hearings, 100-2, at 752. Around this time, 
McFarlane discussed the Barnes request with White House 
Counsel Fred Fielding. In addition to discussing executive 
privilege issues, McFarlane testified that he took the docu- 
ments gathered by the NSC staff to Fielding and told him 
that the documents were "extremely troubling in terms of 
interpretation of law." Fielding does not recall such a state- 
ment by McFarlane. [Fielding Interview] 

168. McFarlane Test., Hearings, 100-2, at 119. 

169. Memorandum of Interview of Barnes, dated 5/16/87. 

170. Ex. 40D, Hearings, 100-2, Part I, at 553. 

171. Id. 

172. North Test., Hearings, 100-7, Part I, at 170-71. 

173. Ex. 40E, Hearings, 100-2, at 558. 

174. Id. 



175. Id 

176. McFarlane Test., Hearings, 100-2, at 127. 

177. SSCI Hearings. 12/1/86, at 148-49. 

178. Ex. 45H, Hearings, 100-2, at 617-18. 

179. Ex. 451, Hearings, 100-2, at 619. 

180. Sigur Test., Hearings. 100-2, at 293. 

181. Ex. 46, Hearings, 100-2, at 620. 

182. Ex. 45F, Hearings. 100-2, at 614. 

183. McFarlane Test.. Hearings, 100-2, at 122. 

184. HPSCI Hearing. 12/10/86, at 139. 

185. Ex. 63, Hearings, 100-2, at 686-87. 

186. Id. at 689. 

187. McFarlane Test., Hearings, 100-2, at 86. 

188. Ex. 37, Hearings, 100-2, at 519-25. 

189. McFarlane made the statements in his 1985 letters to 
the Intelligence Committees. He wrote Hamilton on Octo- 
ber 7, 1985: "There is no official or unofficial relationship 
with any member of the NSC staff regarding fundraising for 
the Nicaraguan democratic opposition." (Ex. 41C, 100-2 at 
576) "No one has been designated by the NSC or any other 
White House entity as official or unofficial contact for pri- 
vate or public or any other kind of fundraising for the 
Nicaraguan democratic resistance." (Ex. 41E, 100-2 at 584) 

190. HPSCI, 12/10/86, at 111-112. At SSCI, 12/1/86 at 
143 McFarlane testified that his earlier statement "remains 
the case." See also SSI 12/1 at 195. 

191. SSCI 12/18/86, at 122-23. See also 139-40. The day 
before. Secretary Weinberger testified before the Senate 
Intelligence Committee that he had no recollection of dis- 
cussing with anyone third-country funding of the Con- 
tras. [SSCI, 12/17/86 at 67-71.] 

192. Ex. 60, Hearings. 100-2, at 678. 

193. McFarlane Test., Hearings, 100-2, at 73. 

194. Ex. 75, Hearings, 100-2, at 762-63. See also SSI 12/1, 
at 146-47. 

195. Tower 2/21/87, at 62-63. See also House Foreign 
Affairs Committee, December 8, 1986, at 10-11. 

196. Ex. BGS 9, Hearings. 100-5. 

197. Thompson Dep.. 7/24/87 at 3. 

198. Sciaroni Test., Hearings, 100-5, at 8-9. Sciaroni's 
notes of the interview are at Ex. 3, Hearings, 100-5. 

199. Sciaroni Test., Hearings, 100-5, at 17. 

200. Sciaroni Test., Hearings. 100-5, at 9-11. Thompson 
told the Committee that he did not recall precisely which 
document he gave Sciaroni. He maintained that it would 
have been inappropriate to turn over the documents he 
gave to McFarlane without a written request from the Intel- 
ligence Oversight Board. Although he acknowledged that 
the documents raised questions about North's activities, 
Thompson maintained that those questions were answered 
when North personally assured him that he was not in- 
volved in supporting Contra military activities or in solicit- 
ing funds. Thompson Dep., 7/24/87. at 38-41. 

201. Sciaroni Test., Hearings. 100-5. at 11. 

202. North Test., Hearings. 100-7, Part I, at 158. 

203. Sciaroni Test., Hearings. 100-5. at 11. 

204. Id. at 41. 



136 



Chapter 7 

Keeping ''USG Fingerprints"* Off the Contra 

Operation: 1986 



In 1986, the Contra support project finally achieved a 
degree of operational success. By mid-year, weapons 
and other material were being dropped to Resistance 
troops inside northern Nicaragua; by fall, similar air- 
drops were being made in the South. Congress had 
appropriated funds for the humanitarian needs of the 
Contras, it had authorized third-country solicitation 
for humanitarian aid, and it had allowed the CIA to 
provide intelligence to the Resistance. But Congress 
had maintained the prohibition on lethal support. Fol- 
lowing the pattern of 1984-1985, allegations in the 
media and independently obtained information 
prompted Congressional inquiries, which in turn were 
met with categorical denials by Administration offi- 
cials, some of whom knew the statements to be mis- 
leading and false. 

The expansion of the covert operation's activities in 
1986 also created new problems for officials still seek- 
ing to maintain secrecy. In September, a new Costa 
Rican Government threatened to reveal the existence 
of the Santa Elena airfield, exposing the involvement 
of U.S. citizens and Government officials in providing 
support to the Contras. Administration officials mobi- 
lized quickly to squelch the threatened press confer- 
ence. Successful at first, the officials were unable to 
prevent disclosure by the Costa Rican Government 
three weeks later. Concerned that reporters might 
discover the link between the airfield and U.S. offi- 
cials, North immediately took steps to ensure that no 
"USG fingerprints" would be found on Santa Elena.' 

In October, the Sandinistas shot down an Enter- 
prise plane on a resupply mission (the Hasenfus 
night). Administration officials, not all of whom knew 
the true facts, denied before Congress and to the 
media that the U.S. Government was involved in the 
Hasenfus flight. Even the President spoke out. With 
no protest from his National Security Adviser or 
others aware of the facts, the President told the 
American people: "[T]here is no government connec- 
tion with that at all."^ 

For most of 1986, efforts to determine whether the 
U.S. Government was providing lethal support to the 



•North's term, used in two PROF Notes to Poindexter dealing 
with the possible disclosure of the U.S. Government link to the 
Contra Operation. (Exhibits OLN-131 and OLN-307. Hearings. 100- 
7, vol, -V) 



Contras despite the legal restrictions were thwarted 
by the same techniques used in 1985. 

January to June 1986: Press 
Reports 

Through the first quarter of 1986, Congressional and 
media attention on the NSC staffs involvement with 
the Contras abated. In Washington, Congressional 
Committees had accepted the categorical denials the 
previous fall by the National Security Adviser. In 
Central America, the resupply project was not fully 
operational and Resistance activities slowed. A New 
York Times reporter in the region in January found 
the "Nicaraguan guerrillas . . . back in their camps;" 
in early March, the correspondent described the Re- 
sistance as being "in its worst military condition since 
its formation in 1982."^ 

By the end of March, the Contras' fortunes began 
to shift, and articles again appeared discussing the 
sources of Resistance funds and supplies.* Some fo- 
cused on charges that the Contras had received lethal 
support from American mercenaries and funds from 
drug trafficking; others explored how the Contras 
were spending the $27 million appropriated by Con- 
gress in August, 1985, for humanitarian aid.^ By the 
end of April, North had reemerged as the focus of 
attention. The allegations in the new series of articles 
were almost always attributed to anonymous officials, 
and some of the details were incorrect. But the main 
charge — that U.S. Government officials had contin- 
ued to provide lethal aid to the Contras despite the 
Boland Amendment — was accurate. The renewed re- 
porting provided the context for a new round of 
Congressional inquiries that would begin at the end of 
June. 

Focus on North 

In an April 30, 1986, article headlined, "Colonel's 
Actions May Have Broken Contra Aid Ban," the 
Miami Herald provided what it called "the first 
glimpses at the inner workings of the well-oiled pri- 
vate contra support machine that — with White House 
encouragement — developed after Congress suspended 
contra aid." The article asserted that Oliver North 



137 



Chapter 7 



had arranged a meeting between a potential donor 
and a Contra fundraiser. It quoted "administration 
officials" as saying that "North acted repeatedly on 
behalf of the contras, especially in channelling poten- 
tial donors to the rebels." John Singlaub and Robert 
Owen were cited in the article as two "conservatives 
closely associated with the contras" who had frequent 
meetings with North. In the article, "[a]n administra- 
tion official authorized to reply to queries" was 
quoted as saying that "Oliver North has not been 
involved in illegal activities."^ 

On June 8, the Miami Herald ran on page one the 
headline, "Despite Ban, U.S. Helping Contras." Quot- 
ing anonymous Administration and Resistance offi- 
cials, the article reported that the Reagan Administra- 
tion "continued secretly to assist anti-Sandinista rebels 
in finding weapons and plotting military strategy 
through a network of private operatives overseen by 
the National Security Council (NSC) and the CIA." 
According to the article, the system was supervised 
by North with "advice from" officers in the CIA 
Central American division. After enactment of the 
Boland Amendment, "private individuals were used as 
bridges between the administration and the rebels." 
The Administration "feels it has honored" Congres- 
sional restrictions "by channeling its involvement 
through private citizens." This belief was attributed to 
"two administration officials and a knowledgeable 
rebel leader."'' 

On June 22, the Miami Herald reported that the 
"controversial program to coordinate private aid to 
anti-Sandinista rebels through the National Security 
Council was approved by officials in the White 
House." This was attributed to "several current and 
former administration officials." The article went on 
to quote "one source," unidentified, as saying that 
McFarlane briefed Reagan on the proposal to aid the 
Contras and that the President verbally approved the 
plan. The Herald reported that McFarlane denied 
knowledge of any such plan to aid the Contras." 

Concern for Secrecy 

As the Contra support operation expanded during 
1986, the task of maintaining secrecy became more 
challenging. National Security Adviser John Poin- 
dexter, who admitted to the Committees, "I wanted 
to withhold information on the NSC operational ac- 
tivities in support of the Contras from most every- 
body,"" did what he could to conceal the NSC con- 
nection. 

North oversaw two of the most important NSC 
"accounts," but Poindexter kept North's title artifi- 
cially low because "we wanted to provide a signifi- 
cant amount of cover for Colonel North and his ac- 
tivities."'" According to Poindexter, North's respon- 
sibilities warranted the title Special Assistant to the 
President, the Ihird-level rank in the White House. 
Instead, he kept North as Deputy Director of Politi- 



cal Military Affairs." "We didn't want to call public 
attention to Colonel North," Poindexter testified.'^ 

In July, shortly after the renewal of Congressional 
inquiries, Poindexter tried further to downplay 
North's responsibilities. He apparently leaked to the 
Washington Times the story that North's position at 
the NSC staff was "precarious" and that "NSC soft 
liners" were maneuvering "to edge him out."'^ In a 
PROF Note sent the day the article appeared, Poin- 
dexter reassured North about his intentions: "I do not 
want you to leave and to be honest cannot afford to 
let you go."'"* He told North to call two reporters at 
the Washington Times and "tell them to call off the 
dogs." Poindexter wrote: "Tell them on deep back- 
ground, off the record, not be published, that I just 
wanted to lower your visibility so you wouldn't be 
such a good target for the Libs [Liberals]."'^ 

Poindexter directed North not to put "things in 
writing about his operational activities, especially 
with regard to the support for the Contras."'* North 
had stopped writing "logged" memorandums — docu- 
ments stored in the official NSC files — after Repre- 
sentative Barnes had sought access to such documents 
in the summer of 1985. North testified: "[W]e had . . . 
decided to take those kinds of documents out of the 
system altogether ... so that outside knowledge 
would not necessarily be derived from having seen 
them."''' Subsequent to the 1985 Congressional in- 
quiries, written communications about the Contra op- 
eration between North and his superiors were done 
exclusively using "non-logged" memorandums and 
the PROF system. North had assumed that PROF 
notes, after their use, were erased from computer 
memory and irretrievable.'* 

Poindexter arranged for North to communicate 
with him directly, thereby preventing other NSC stafT 
members from learning details of the Contra oper- 
ation. Ordinarily, PROF messages to the National Se- 
curity Adviser were channeled through other staff 
members. On August 31, 1985, two weeks after he 
had assigned North to draft the response to Repre- 
sentative Barnes, Poindexter sent North a message 
with the subject heading "Private Blank Check." '^ 
When North wanted to communicate with Poindexter 
directly, he sent a message in reply to the "Private 
Blank Check" note. Poindexter testified: "Otherwise 
. . . those messages were intercepted by the [NSC 
staff] Executive Secretary."^" 

Poindexter also stressed to North the need to avoid 
speaking of his secret operational activities with 
anyone, including other Administration officials. In 
May 1986, Poindexter learned that North had dis- 
cussed his plan to offer the Erria to the CIA for use 
in a covert activity with Ken deGraffenreid, Senior 
Director of Intelligence Programs at the NSC, the 
officer who maintained NSC documents of the high- 
est sensitivity. The Erria was a ship under North's 
control, purchased by the Enterprise for use in vari- 



138 



Chapter 7 



ous covert operations. In a PROF he titled "Be Cau- 
tious," Poindexter directed North to maintain absolute 
silence about his activities: 

I am afraid you are letting your operational role 
become too public. From now on I don't want 
you to talk to anybody else, including [CIA Di- 
rector] Casey, except me about any of your oper- 
ational roles. In fact you need to quietly generate 
a cover story that I have insisted that you stop.^' 

Poindexter testified that he was particularly con- 
cerned about keeping Casey ignorant of the operation 
because the CIA Director could be called to testify 
before Congressional Committees. ^^ 

Poindexter also kept the existence of the covert 
operation hidden from officials who did not ordinarily 
testify before Congress, such as former Chief of Staff 
Donald Regan. Poindexter explained: "Based on my 
feeling that if we were going to keep this up and 
avoid more restrictive legislation, that we simply had 
to limit the knowledge of the details to those that had 
absolutely the need to know. I simply didn't think 
that he [Regan] had an absolute need to know."^^ In 
addition, Poindexter testified that he felt Regan 
"talked to the press too much. I was afraid he'd make 
a slip."^"' Despite Poindexter's directive. North kept 
the CIA Director apprised of everything, according 
to his testimony. But North shared Poindexter's desire 
to conceal U.S. Government coordination of Contra 
support activities from Congress and the American 
public. He told these Committees: "I didn't want to 
show Congress a single word on this whole thing. "2'' 
In May, as Robert Dutton was brought in and the 
project became operational, North became concerned 
that the likelihood of disclosure was increasing. He 
described in a PROF to Poindexter "the urgent need 
to get the CIA back into the management of this 
program." He explained: 

The more money there is (and we will have a 
considerable amount in a few more days) the 
more visible the program becomes (airplanes, 
pilots, weapons, deliveries, etc.) and the more 
inquisitive will become people like Kerry, 
Barnes, Harkins, [sic] et al. While I care not a 
whit what they say about me, it could well 
become a political embarrassment for the Presi- 
dent and you. Some of this can be avoided 
simply by covering it with an authorized CIA 
program undertaken with the $15M.^^ 

The next month, as airdrops became more frequent, 
North tried to ensure that resupply activities in Cen- 
tral America could not be traced back to him or other 
U.S. officials. On June 16, he informed Tomas Cas- 
tillo, a CIA Station Chief in Central America, that he 
had sent Rafael Quintero to Central America to facili- 
tate a supply drop to the FDN. "I do not think we 
ought to contemplate these operations without him 



being on the scene," North wrote via KL-43. "Too 
many things go wrong that then directly involve you 
and me in what should be deniable for both of us."^' 

Shortly after this message to Castillo, Kama Small, 
the press liaison for the NSC staff, asked North to 
comment on allegations that would be broadcast in a 
CBS News program, "West 57th Street." Small sent a 
note to North saying she had declined the show's 
request to speak with North, but that since it would 
include interviews with people making charges about 
North, she should call back with a comment. She 
remarked, "I can't just give them the 'bullshit' re- 
sponse."^* 

The segment aired on June 25. It charged that "the 
White House secretly directed a private aid network 
to arm the Contras when it was illegal for the White 
House to do that." The show focused on John Hull, 
suggesting that he played an important role in helping 
the Contras from his ranch in Costa Rica. It also 
alleged that Robert Owen acted as "the NSC repre- 
sentative" to the Contras and their supporters in 
Costa Rica. Describing Owen as "the bag man for 
Ollie North," the report charged that he carried 
$10,000 a month from the NSC to John Hull for use 
in purchasing lethal and nonlethal supplies for the 
Nicaraguan Resistance. The segment also reported: 
"The White House today quoted Colonel Oliver 
North as calling the private aid network 'nonsense.' 
The White House also said, quote, 'The President 
never approved any such plan' [to aid the Con- 
tras]".^* 

Two days after the show aired. North sent a PROF 
to Kama Small: 

I have just had a chance to watch the W57th 
piece. As far as I am concerned, it is the single 
most distorted piece of 'reporting' I have ever 
seen. . . . The only charges made about the NSC 
are made by people who are in jail, on their way 
to jail or just out of jail. If this is supposed to be 
credible, then I'll eat my shirt. ^° 

North acknowledged in the PROF that he knew 
Robert Owen, but denied the inaccurate charge that 
Owen was "paid off' $50,000. North did not com- 
ment on the charge, the substance of which was accu- 
rate, that Owen delivered to Central America money 
provided by North. Nor did he comment on the gen- 
eral allegation that he was aiding the Contras. 

June 1986: New Congressional 
Inquiry 

On June 4, Representative Ron Coleman of Texas 
introduced a Resolution of Inquiry (H. Res. 485), 
directing the President to provide documents and in- 
formation about support for the Contras. In a public 
statement, the Resolution's author explained the need 



139 



Chapter 7 



"to get at the truth" behind the widely pubhcized 
allegations: "[D]isturbing new reports that our own 
government officials may have deliberately violated 
the law that prohibited any open or hidden U.S. as- 
sistance for military operations inside Nicaragua [sug- 
gest that there] may have been an intentional disre- 
gard for our own democratic process."^' 

In a statement inserted into the Congressional 
Record, the author of the Resolution explained the 
information sought from the Administration: 

My resolution of inquiry seeks answers and infor- 
mation on two central questions. Did Lieutenant 
Colonel North develop and implement a plan for 
Contra funding in the event that Congress did 
adopt the Boland Amendment? . . . Second, what 
was the degree of Lieutenant Colonel North's 
involvement with the Contra high command 
before, during, and after the Boland Amendment 
became the law of this land. Did he assure the 
Contra generals that the administration would 
find a way to ensure continued funding and as- 
sistance even in the event of a congressional ban? 
Did he, as alleged, provide regular tactical and 
logistical assistance to the Contra high command 
on a regular basis? Did Lieutenant Colonel North 
then implement a sham network of intermediaries 
to filter his continued advice to the Contra gener- 
als in direct violation of at least the spirit of the 
Boland language?^ ^ 

Representative Coleman said he introduced his Reso- 
lution "very reluctantly," adding: "No one can be 
allowed to operate above the law of this great coun- 
try — least of all those officials obligated to defend our 
Constitution." He concluded by stating that the Reso- 
lution "touches upon areas of concern that go far 
beyond the question of one's position relative to 
Contra aid. Rather, this course of action goes to ac- 
countability and ensuring that one branch of our Gov- 
ernment [does not] disregard . . . the other two."^'' 
The Resolution of Inquiry directed the President to 
provide to the House information and documents in 
three areas: 

1. Funds and Supplies: Information and documents 
on contacts between any NSC staff member and pri- 
vate individuals or representatives of foreign govern- 
ments relating to the provision of funds and supplies 
to the Contras.^'' 

2. Military Activities: Information and documents 
on contacts between any NSC staff member and any 
member of the Nicaraguan Resistance relating to 
Contra military activities. ^^ 

3. Singlaub, Owen & Hull: Information and docu- 
ments on contacts between any NSC staff member 
and Robert W. Owen, Maj. Gen. John K. Singlaub, 
and John Hunt's 

The Resolution was referred to the House Commit- 
tees on Intelligence, Foreign Affairs and Armed Serv- 



ices. On June 25 and July 1, the Chairmen of the 
Foreign Affairs Committee and the Intelligence Com- 
mittee requested comments from the President on the 
Resolution. 

The Executive's Response 

On July 21, Poindexter wrote the Chairmen of the 
three Committees "in reply to your letter to the Presi- 
dent.""' Poindexter testified that he "probably" did 
not show the letter to the President, but discussed the 
issue with him "in general terms .... I probably told 
him about the Resolution of inquiry and told him that 
we were opposed to it. He agreed.""* 

In the one-page letter, Poindexter first stated the 
Administration's opposition to the resolution of in- 
quiry. He continued: 

Last fall, in an effort to cooperate with Chairman 
Barnes, my predecessor, Robert C. McFarlane, 
met with members of your committee and the 
House Foreign Affairs Committee. While I did 
not participate in these discussions, I understand 
that information on the specific issues raised in H. 
Res. 485, was provided to your Committee and 
that this information made it clear that the ac- 
tions of the National Security Council staff were 
in compliance with both the spirit and letter of 
the law regarding support of the Nicaraguan re- 
sistance. 

Thank you for the opportunity to comment on H. 
Res. 485. I have forwarded similar letters to 
Chairman Fascell and Chairman Aspin and sin- 
cerely hope that this matter can finally be put to 
rest. 3 9 

Insisting that the letter was technically accurate, 
Poindexter acknowledged to the Select Committees 
that the letter "clearly withholds information.'""' 

By any standard the response was misleading. First, 
the National Security Adviser implied in the letter 
that he accepted the view that the Boland Amend- 
ment applied to the NSC staff, and that the NSC staff 
under his tenure was not providing covert lethal sup- 
port to the Contras. Poindexter referred explicitly to 
the information McFarlane had provided Congress 
that "made it clear that the actions of the National 
Security Council staff were in compliance with both 
the spirit and the letter" of the Boland Amendment. 
He did not disclose that he had authorized North to 
provide to the Contras precisely the kind of covert 
aid the Boland Amendment was intended to prohibit 
or that, as he put it, "We had been running this 
[Contra] operation on our own for a long period of 
time.'"" 

Asked how he could reconcile the statement that 
the NSC staff was complying with the "letter and 
spirit" of the Boland Amendment with the actions 



140 



Chapter 7 



North had taken and that he had approved, Poin- 
dexter testified: 

I felt that the Boland Amendment did not apply 
to the NSC staff and I feh that indeed we were 
complying with the letter and spirit of the 
Boland Amendment. Now, it doesn't say that we 
are not helping the Contras. We were.*^ 

In addition, Poindexter's letter implied that he had 
no dispute in 1985 with the categorical denials 
McFarlane gave Congress on allegations about 
North's activities. In fact, however, Poindexter was 
aware that North had taken over coordination of 
Contra-support activities after enactment of the 
Boland Amendment. ''^ Moreoever, when the Barnes 
letter arrived at the NSC on August 17, 1985, it was 
Deputy National Security Adviser Poindexter who 
assigned North to draft the response, intending that 
North would conceal his true activities from Con- 
gress.** As Poindexter himself put it before these 
Committees, he intended with his letter to say "that 
the questions had been addressed by Mr. McFarlane 
in the previous year." ''^ But McFarlane's denials had 
misled Congress the previous year, as Poindexter's 
letter misled Congress in 1986. 

August 1986: North's Meeting with 
Members of Congress 

In response to the Resolution of Inquiry, the House 
Intelligence Committee sought to meet with North. ''^ 
On August 6, North met with 1 1 members of the 
House Intelligence Committee in the White House 
Situation Room.*'' North began the session with a 
presentation about his activities. The description 
echoed closely McFarlane's letters the year before to 
Representatives Hamilton and Barnes: North's princi- 
pal mission was to coordinate contacts with the Con- 
tras; a main purpose of his job was to assess the 
viability of the Nicaraguan Resistance as a democratic 
organization; and he explained to Contra leaders the 
limitations on U.S. support as imposed by the Boland 
Amendment. According to a memorandum based on 
notes taken at the meeting. North said "that he did 
not in any way, nor at any time violate the spirit, 
principles or legal requirements of the Boland 
Amendment."*® 

In response to specific questions, North denied that 
he had raised funds for the Contras or offered them 
military advice. North told the Members that his rela- 
tionship with Robert Owen was "casual," that Owen 
never took guidance from him. He stated that he had 
not been in contact with John Singlaub at all in 1985 
or 1986.*s 

By his own testimony. North lied to the Members 
of the Intelligence Committee at this meeting: 



A: ... I will tell you right now, counsel, and all 
the Members here gathered, that I misled the 
Congress. I misled — 

Q: At that meeting? 

A: At that meeting. 

Q: Face to face? 

A: Face to face. 

Q: You made false statements to them about your 
activities in support of the Contras? 

A: I did.50 

At the conclusion of the meeting, according to an 
observer, Representative Hamilton "expressed his ap- 
preciation for the good-faith effort that Admiral Poin- 
dexter had shown in arranging a meeting and indicat- 
ed his satisfaction in the responses received."^' On 
August 12, Hamilton wrote Representative Coleman 
that the House Intelligence Committee would not 
move forward with the Resolution: "Based on our 
discussions and review of the evidence provided, it is 
my belief that the published press allegations cannot 
be proven.""^ 

Authority to Lie 

North conceded in his testimony that Poindexter 
did not give him specific prior authority to make false 
statements. ^^ Before meeting with the Members of 
the House Intelligence Committee, North expressed to 
his aide Robert Earl "concern . . . [about] what he 
was authorized to say" at the session.^* According to 
Earl, North tried to obtain guidance from Poindexter 
but could not reach him.^^ Poindexter "was on leave, 
yes, out of the office" during this period, according to 
Earl, who testified: "My impression was that the 
leave was not accidental. The timing of the leave was 
just not a coincidence."^^ In his testimony. Earl char- 
acterized his observation as follows: 

Q: So that your impression of it, your observa- 
tion of it, was that Colonel North had some in- 
formation to protect and that he was being left to 
figure out how to protect it on his own? 

A: I think that's a fair statement.^' 

North and Poindexter differ on whether North had 
general authority from the National Security Adviser 
to lie at the session. North testified that he was acting 
under such authority: "I went down to that oral meet- 
ing with the same kind of understanding that I had 
prepared those memos in 1985 and other communica- 
tions."^* North added: "[Poindexter] did not specifi- 
cally go down and say, 'OUie, lie to the Committee.' I 
told him what I had said afterwards, and he sent me a 
note saying, "Well done." ^^ 



141 



Chapter 7 



While Poindexter did send such a note, he claimed 
it did not indicate approval of North's lies. Poindexter 
acknowledged that North and he had a "general un- 
derstanding that he [North] was to withhold informa- 
tion about our involvement." But Poindexter told 
these Committees that he did not know North had 
lied at his meeting with the Intelligence Committee, 
and that he had not expected North would do so.^° 

The evidence is clear, however, that Poindexter 
knew North had misled the Members of Congress. 
Poindexter attached his "well done" message to a 
PROF Note summarizing the meeting. The summary 
was written by Bob Pearson, one of two NSC staffers 
besides North who had attended the August 8 meet- 
ing in the Situation Room, and sent to Poindexter 
who forwarded the PROF note to North. The mes- 
sage began by declaring, "Session was success," and 
went on to describe North's presentation as "thor- 
ough and convincing." Pearson wrote: 

In response to specific questions, Ollie covered 
the following points: 

— contact with FDN and UNO aimed to foster 
viable, democratic political strategy for Nicara- 
guan opposition, gave no military advice, knew 
of no specific military operations. 

— Singlaub — gave no advice, has had no contact 
in 20 months: Owen — never worked from OLN 
office, OLN had casual contact, never provided 
Owen guidance.*' 

Poindexter testified that "by reading the summary 
in this note, I didn't attach any great significance to it 
because I knew that the questions and answers would 
be very carefully crafted."®^ Yet Pearson's PROF is 
clear that North told the Members he "gave no mili- 
tary advice" to the Resistance, that he had only 
"casual" contact with Owen and never "provided . . . 
guidance," and that he had "no contact" with Sing- 
laub for 20 months. 

Thus, even if Poindexter did not expressly author- 
ize North to lie, he was aware of North's misleading 
statements and made no effort to correct them. Nor 
did he reprimand North. On the contrary, Poindexter 
congratulated North on his performance and on his 
success at deflecting the inquiry. 

In his testimony, Poindexter acknowledged that he 
did not expect North to disclose the truth: 

I did think that he would withhold information 
and be evasive, frankly, in answering questions. 
My objective all along was to withhold from the 
Congress exactly what the NSC staff was doing 
in carrying out the President's policy .... I 
thought that Colonel North would withhold in- 
formation. There was no doubt about that in my 
mind.*^ 



September 1986: The Santa Elena 
Airfield 

Soon after North had turned aside the Congressional 
inquiry, he learned of a new threat of exposure, this 
one involving the Santa Elena airfield in Costa Rica. 
It came just as Congress was taking steps to fund the 
Contras again. 

The airfield at Santa Elena had been built with the 
covert assistance of several U.S. Government offi- 
cials, including North, Tambs, and Castillo. Complet- 
ed in early 1986, the airfield was originally intended 
to serve as an abort base and refueling site for resup- 
ply aircraft, but never became a crucial element in the 
operation. The new Costa Rican Government that 
took office in May 1986, requested that the field not 
be used to aid the Contras. Ambassador Tambs 
agreed, and the operation relied on alternative means 
to drop supplies to Resistance troops inside Nicara- 
gua.®* 

North learned late Friday, September 5, that the 
Costa Rican Government planned a press conference 
about the airfield the next morning. Officials at the 
press conference. North was told, would reveal that 
Santa Elena had been used as part of an operation to 
resupply the Contras and that U.S. Government offi- 
cials were involved with the airfield. In response. 
North mobilized several government officials to pres- 
sure high Costa Rican officials to call off the press 
conference. 

North told a good deal of the story in a PROF sent 
the next day to Poindexter: "Last night at 2330 our 
Project Democracy rep. in Costa Rica called to 
advise" that the Arias Government would hold a 
press conference the next morning "announcing that 
an illegal support operation for the Contras had been 
taking place from an airfield in Costa Rica for over a 
year."®^ North wrote that Secord and CIA Station 
Chief Tomas Castillo would be "predominantly men- 
tioned." From North's notebook it appears that he too 
was in danger of being mentioned at the press confer- 
ence. The first entry relating to the incident reads: 
"0005 — call from [Castillo] — Security Minister plans 
to make public Udall role w/ Base West [Santa Elena 
airfield] and allege violation of C[osta] R[ican] law by 
Udall, Bacon, North, Secord, et al."®* 

North immediately arranged a conference call with 
Elliott Abrams and Louis Tambs. North claimed in 
his PROF note to Poindexter that the three officials 
agreed that North would call President Arias and 
make two threats: if the press conference proceeded 
as scheduled Arias would not be permitted to meet 
with President Reagan and he "w[ould] never see a 
nickel of the $80M that [Agency for International 
Development Director M. Peter] McPherson had 
promised him" the day before.®'' North's notebook 
also reflected his intention to threaten a foreign gov- 



142 



Chapter 7 



ernment if necessary to maintain secrecy. The entry 
reads: 



0008 - Conf. 
Lew Tambs 



Call to Elliott Abrams and Amb 



- Tell Arias: 

- Never set foot in W.H. 

- Never get 5 [cents] of $80M promised by 
McPherson.^* 

According to North's PROF Note to Poindexter, 
Abrams and another Government official passed "the 
same word" to President Arias.®® However, accord- 
ing to their testimony, neither North, Abrams, nor the 
other official called Arias.'"' North testified that he 
falsified the facts in his PROF note to "protect" the 
other officials involved.'" He did not offer any expla- 
nation why he felt it necesary to hide the facts from 
Poindexter, who knew details of the resupply oper- 
ation, including the existence of the airfield. 

Ambassador Tambs did call President Arias. The 
purpose, he testified, was to "dissuade him from this 
press conference."''^ Abrams recalled instructing 
Tambs before the call to President Arias that revela- 
tion of the airfield would put at risk Arias' upcoming 
meeting with President Reagan. ''^ Tambs testified that 
he merely told President Arias that it would not be 
prudent to hold the planned press conference in light 
of the pending case before the International Court of 
Justice.''* 

In his PROF note. North assured Poindexter that 
steps had been taken to ensure that the NSC-coordi- 
nated Contra operation would not be linked to the 
airfield: "As a precaution the Project a/c [aircraft] 
were flown to [another base] last night and no project 
personnel remain on site at the field."''* The next day, 
Poindexter indicated his approval of North's actions. 
He wrote in a PROF: "Thanks, Ollie. You did the 
right thing, but let's try to keep it quiet."''® 

Airfield Revealed: Damage Control 

Although the initial news conference was cancelled, 
the Costa Rican Government announced the existence 
of the airfield three weeks later. On September 26, the 
Costa Rican Interior Minister told reporters that his 
government had discovered and shut down an airfield 
that had been used for resupplying the Contras, for 
trafficking drugs, or both. Secord and North were not 
mentioned, although the name of the Enterprise Pana- 
manian company that built the airfield, Udall Re- 
sources, Inc., was revealed, as was the pseudonym 
(Robert Olmstead) of William Haskell, the man who 
purchased the land." 

The airfield had not been used in the resupply oper- 
ation for several months, and the press conference 
had compromised its location and purpose. Nonethe- 
less, action was taken to ensure that the roles of U.S. 



officials and the Enterprise remained concealed. In a 
PROF note. North told Poindexter: "There are no 
USG fingerprints on any of the operation." Udall 
Resources, which North described as "a proprietary 
of Project Democracy," will "cease to exist by noon 
today." The company's resources — $48,000 — were 
moved to another Panamanian account. And Udall's 
office in Panama "is now gone as are all files and 
paperwork." Olmstead, North added, "is not the name 
of the agent — Olmstead does not exist."'* 

In a second PROF note to Poindexter written that 
day. North blamed the failure to head off the press 
conference in part on the absence of Ambassador 
Tambs, who was on leave. North wrote that Tambs 
"put this thing back in its box two weeks ago when I 
called you in the middle of the night to threaten that 
Arias would not get in the door of the oval office if 
this came out."'® North's PROF continued with a 
lengthy slur directed against Costa Rican officials 
who exposed activities in their own country. 

North concluded the message: 

Believe we have taken all appropriate damage 
control measures to keep any USG fingerprints 
off this and with Elliott and [CIA Chief Castillo], 
have worked up appropriate "if asked" press 
guidance.*" 

The press guidance went to Poindexter for approv- 
al on September 30.*^ The guidance, which according 
to the cover memo had been coordinated with Elliott 
Abrams, the CIA Chief of the Central American Task 
Force (C/CATF) and Richard Armitage, Assistant 
Secretary of Defense for International Security Af- 
fairs, consisted of answers to two likely questions. 

The first potential question and suggested answer 
were: 

[Question:] Did U.S. personnel supervise con- 
struction of the airstrip in Northern Costa Rica? 

[Answer:] The U.S. Embassy in San Jose, Costa 
Rica, has reported that during the Administration 
of Former President Monge the Ministry of 
Public Security was offered the use of a site on 
the Santa Elena Peninsula which could be used as 
an extension of the civil guard training center at 
Murcielago. The site included a serviceable air- 
strip which could have supplemented the small 
one which is located near the training center. 
The offer was reportedly made by the owners of 
the property who had apparently decided to 
abandon plans for a tourism project. The Embas- 
sy has no information on the Ministry's decision 
concerning the offer. *^ 

The answer concluded: "No U.S. Government funds 
were allocated or used in connection with this site 
nor were any U.S. Government personnel involved in 
its construction."*^ The press guidance thus con- 



143 



Chapter 7 



cealed the involvement in the airfield's construction 
of North, Tambs, and Castillo. 

The suggested answer in the press guidance to the 
second possible question was also misleading: 

[Question:] Was the airstrip intended for use by 
the Contras? 

[Answer:] The Government of Costa Rica has 
made clear its position that it will not permit the 
use of its territory for military action against 
neighboring states. The U.S. Government re- 
spects that position. 

In fact, the airfield had been used to help the Con- 
tras. The Costa Rican Government had already re- 
vealed that the airfield's purpose had been to help the 
Contras, to traffic drugs, or both. Among the officials 
who had helped prepare the guidance, Abrams and 
CIA Central American Task Force Chief acknowl- 
edged knowing that the airfield was intended to help 
the Contras and that U.S. citizens — if not Govern- 
ment officials — were involved.®* North and Poin- 
dexter, to whom the press guidance was sent for 
approval, knew the airfield was part of the covert 
operation to help the Resistance.®^ 

The steps taken to keep reporters from finding 
"USG fingerprints" on the airfield were successful for 
the time being. Not until October 24 did evidence 
emerge suggesting ties between the airfield and the 
U.S. Government. That revelation would come from 
Eugene Hasenfus after he was shot down and cap- 
tured by the Sandinistas.®^ 

The Hasenfus Downing 

On the morning of October 5, 1986, one of the air- 
craft belonging to the Enterprise left its operational 
base with 10,000 pounds of ammunition and gear for 
FDN forces inside northern Nicaragua. William 
Cooper was in command, Wallace "Buzz" Sawyer 
was the co-pilot, and a 17-year-old FDN fighter was 
handling radio communication with the troops on the 
ground. Also on board, as the "kicker" who would 
actually drop the supplies to forces waiting below, 
was Eugene Hasenfus. 

Within a few hours, the aircraft was reported miss- 
ing. Officials later learned that the plane had been hit 
by a Sandinista SAM-7 missile over Nicaraguan terri- 
tory. Three crew members were killed. Hasenfus sur- 
vived and was captured by the Sandinistas. 

The Sandinistas found in the wreckage, and showed 
reporters, an identification card issued to Hasenfus by 
the air force in the operational base's host country 
identifying him as an "adviser" in the "Grupo 
U.S.A." group at the base, and a business card be- 
longing to an official at the NHAO office in Washing- 
ton. They also found and displayed an ID card issued 
to Cooper by Southern Air Transport.®'' 



The U.S. Government Connection 

The Hasenfus flight was part of the resupply oper- 
ation coordinated by North with the support and ap- 
proval of the President's National Security Adviser. 
North acknowledged in testimony about the flight: "I 
was the U.S. Government connection."®® James 
Steele, a U.S. Military Group Commander in Central 
America; Lewis Tambs, the U.S. Ambassador to 
Costa Rica; and Tomas Castillo, a CIA Station Chief 
in Central America, all provided assistance to the 
secret operation to support the Contras. Yet, virtually 
every newspaper article on the incident in the days 
after the downing would quote senior Government 
officials, including the President himself denying any 
U.S. Government connection with the flight. And 
within a week, high Government officials would offer 
the same categorical denials before Congressional 
Committees. 

The Initial Response 

When the Sandinistas shot down the Hasenfus 
plane. North was in West Germany negotiating with 
the Second Channel. He returned to Washington 
within 48 hours of the downing to help deflect inquir- 
ies about the flight, leaving Albert Hakim behind to 
complete his negotiations. 

Castillo, however, recognized immediately that the 
Hasenfus crash could lead to disclosure of the oper- 
ation. Before the downing was even confirmed, he 
wrote to Robert Dutton via KL-43: 

Situation requires we do necessary damage con- 
trol. Did this A/C [aircraft] have tail number? If 
so, is it the same one which refueled several 
times at . . . Please advise ASAP. If so, we will 
have to try to cover quickly as record of tail 
number could lead to very serious implication.®* 

Two days later, plans were made at a Restricted 
Interagency Group (RIG) meeting in which Abrams 
and CIA Central American Task Force Chief (C/ 
CATF) participated to ensure that the U.S. Govern- 
ment would not be implicated by the flight.'" A 
PROF from NSC staff member Vincent Cannistraro 
to Adm. Poindexter described decisions made at the 
meeting. Among them, Cannistraro wrote, "UNO to 
be asked to assume responsibility for flights and to 
assist families of Americans involved." Also, the 
group decided that press guidance would be prepared 
"which states no U.S.G. involvement or connection, 
but that we are generally aware of such support con- 
tracted by the Contras."" 

A few days later The New York Times reported: 
"Nicaraguan rebels took full responsibility today for 
the flight of a military cargo plane that was downed 
over Nicaragua last week." A "senior Administration 
official" was quoted in the story as saying that the 
U.S. Government had asked the rebels to take respon- 



144 



Chapter 7 



sibility. While denying that any such request was 
made, Bosco Matamoros, UNO's Washington-based 
spokesman, told the reporter, "There was no United 
States government connection. "^^ Similar denials by 
Administration officials would soon follow. North 
was not at the RIG meeting, but he testified that the 
guidance stating no U.S. Government connection was 
"not inconsistent with what we had prepared as the 
press line if such, if such an eventuality occurred."®^ 

The Denials 

The President: There is no evidence the President 
knew of U.S. involvement in the Hasenfus flight. But 
the National Security Adviser and officials on the 
NSC staff did know. Also, the day of the downing, 
Felix Rodriguez called Col. Sam Watson in Vice 
President Bush's office, suggesting to him that North 
was involved with the flight.'* Donald Gregg, Assist- 
ant to Vice President Bush, earlier had been alerted to 
the possibility that North was linked to the resupply 
operation. 

Nevertheless, the President was permitted to deny 
any U.S. Government connection with the flight. In 
an exchange with reporters on October 8, the Presi- 
dent praised the efforts to keep the Contras armed, 
comparing resupply efforts to those of the "Abraham 
Lincoln Brigade in the Spanish Civil War." But when 
asked whether the Hasenfus plane had any connection 
with the American Government, the President re- 
plied, "Absolutely none." He told reporters: 

There is no government connection with that at 
all . . . We've been aware that there are private 
groups and private citizens that have been trying 
to help the Contras — to that extent — but we did 
not know the exact particulars of what they're 
doing. '^ 

The Secretary of State: On October 7, Secretary 
Shultz told reporters that the Hasenfus aircraft was 
"hired by private people" who "had no connection 
with the U.S. Government at all."'® He was quoted 
on two national network news programs that evening 
as saying, "The people involved were not from our 
military, not from any U.S. Government agency, CIA 
included."''' On October 10, Shultz reiterated this 
denial while at the Reykjavik Summit with the Presi- 
dent. Asked during a Today Show interview about 
Hasenfus' statements that he worked with CIA em- 
ployees on the resupply operation, Shultz said: 

[D]on't forget that this man is under arrest and is 
saying things under those conditions. I have said, 
on the basis of checking with both the Defense 
Department and the CIA, that I am informed by 
both those agencies that he is not an employee of 
theirs and they are not connected with this oper- 
ation.'* 



Secretary Shultz testified that the U.S. Government 
involvement with the Hasenfus flight was a "surprise" 
to him," and the record shows that two National 
Security Advisers frequently failed to confide in him 
or give him accurate information. Shultz said he 
based his denials on a "general understanding" that 
"there was no problem" with North's activities, be- 
cause Congressional inquiries into North's activities 
came up empty. Moreover, Abrams testified that he 
gave categorical assurances to Shultz that there was 
no U.S. Government involvement in the Hasenfus 
flight, and that neither North nor anybody else on the 
NSC staff was involved in the provision of lethal 
assistance to the Contras. ^"^ 

North claimed in testimony that Shultz "knew what 
I was doing" to support the Contras, citing a single 
instance where the Secretary at a reception "put his 
arm around my shoulder, and told me what a remark- 
able job I had done keeping the Nicaraguan Resist- 
ance alive."*°' Shultz testified, however, that he 
merely told North that he appreciated North's work 
"to keep up the morale of these [the Contra] leaders. 
. . . But that was the sum and substance of it. To 
build on that remark this superstructure of implication 
is entirely unwarranted." '°^ 

Assistant Secretary of State for Inter-American Af- 
fairs: Elliott Abrams was the primary spokesman for 
the Administration about the Hasenfus flight. His cat- 
egorical denials of U.S. involvement were not limited 
to the State Department; he did not hesitate to tell 
reporters that no Government agency was tied to the 
Hasenfus flight, including the NSC staff Typical of 
his statements during this period were the following, 
made on the CNN Evans & Novak show which aired 
October 11: 

EVANS: "Mr. Secretary, can you give me cate- 
gorical assurance that Hasenfus was not under 
the control, the guidance, the direction, or what 
have you, of anybody connected with the Ameri- 
can government?" 

ABRAMS: "Absolutely. That would be illegal. 
We are barred from doing that, and we are not 
doing it. This was not in any sense a U.S. gov- 
ernment operation. None."'°^ 

NOVAK: "Now, when you say gave categorical 
assurance, we're not playing word games that are 
so common in Washington. You're not talking 
about the NCS [sic], or something else?" 

ABRAMS: "I am not playing games." 

NOVAK: "National Security Council?" 

ABRAMS: "No government agencies, none."^°* 

Abrams was no less categorical in denials to Con- 
gressional Committees. He testified three times during 
this period. On October 15, Abrams testified alone 



145 



77-026 - 87 - 



Chapter 7 



before the House Foreign Affairs Subcommittee on 
Western Hemisphere Affairs. On October 10, he testi- 
fied before the Senate Foreign Relations Committee, 
and on October 14, before the House Intelligence 
Committee. On these two occasions, he was accompa- 
nied by Clair George, the CIA's Deputy Director for 
Operations; and the Chief of the CIA's Central Amer- 
ican Task Force. 

During the House Intelligence Committee appear- 
ance, the following exchange occurred: 

HAMILTON: ". . . Just to be clear, the United 
States Government has not done anything to fa- 
cilitate the activities of these private groups, is 
that a fair statement? We have not furnished 
money. We have not furnished arms. We have 
not furnished advice. We have not furnished lo- 
gistics." 

GEORGE: "Mr. Chairman, I cannot speak for 
the entire United States Government." 

HAMILTON: "Can you, Mr. Abrams?" 

ABRAMS: "Yes, to the extent of my knowledge 
that I feel to be complete, other than the general 
public encouragement that we like this kind of 
activity."'"^ 

As Abrams later acknowledged to these Commit- 
tees, this statement was "completely wrong." '°*^ 
Abrams testified that he was unaware that North was 
involved with the Hasenfus flight, insisting that he 
was just another person deceived by North. 1°'' 

North, on the other hand, included Abrams with 
other officials who, he said, had tried to keep the 
Contra operation secret. He testified: "I am sure that 
others like Mr. McFarlane and Admiral Poindexter 
and Director Casey and Elliott Abrams and the Chief 
of the Central American Task Force and others were 
trying to weigh in their souls what would happen to 
those [involved in or assisting the operation] ... if the 
American Government stood up and announced 
i( "108 Noting that Abrams had asked North to help 
raise money to retrieve the bodies of the dead crew- 
members. North said, "Why would he turn to me if 
he didn't know I was doing it?""'^ 

Abrams testified that he did not specifically call 
North to ask for such assistance, but that those issues 
merely "came up in the conversation.""" Moreover, 
Abrams maintained he had sufficient reason to believe 
North was not involved in the Hasenfus flight. He 
noted first that McFarlane had categorically denied to 
Congress that North was providing military support 
to the Contras. Abrams conceded that those denials 
were made a full year before the Hasenfus shoot- 
down, but said that based on his work with North in 
the Restricted Interagency Group (RIG) throughout 
1986, he "had no reason whatsoever to believe that he 
was violating the law."' ' ' 



North claimed, however, that his Contra-related ac- 
tivities were discussed at some RIG meetings."^ In 
his testimony. North specifically mentioned only one 
RIG meeting, initially asserting that Abrams attend- 
ed.''^ North's notebook entry of that meeting, how- 
ever, indicates Abrams was not present. Nonetheless, 
North maintained that Abrams knew details of his 
Contra-support activities. An entry in North's note- 
book for April 25, 1986, suggests that North and 
Abrams discussed "support for S. front," the fact that 
the "air base [was] open in C[osta] R[ica]," and "100 
BP's [Blowpipe missiles].""* North testified that he 
did not specifically recall that conversation, "but do 
not deny that I discussed those [items listed in North's 
notebook] at various points in time with Mr. Abrams 
and others.""^ (Abrams was not asked about this 
notebook entry.) 

Moreover, the third key member of the RIG, the 
CIA Chief of the Central American Task Force (C/ 
CATF), testified that he was "taken aback" by 
Abrams' categorical denials of North's involve- 
ment."^ While he insisted that he did not want "to 
impeach" Abrams' testimony, C/CATF told these 
Committees: "I thought he [Abrams] would have a 
broad brush understanding, as did a lot of other 
people, Ollie was in and around those things."'" 

Abrams argued in defense of his statements that he 
or someone on his staff had checked with other key 
agencies — the Central Intelligence Agency (CIA) and 
the Department of Defense (DOD) — and verified that 
no U.S. officials were involved with the Hasenfus 
flight."* In their testimonies, two key CIA offi- 
cials — the C/CATF and the Deputy Director for Op- 
erations — mentioned no call from Abrams' office, and 
testified they were surprised by Abrams' categorical 
denials.' '® 

Similarly, Abrams noted that soon after the crash, 
while North was out of the country, he called an 
NSC staff officer and received assurances that the 
NSC staff was not involved in the Hasenfus flight. '^° 
Abrams said the official "may have been Mr. 
Earl."'^' Earl, however, was aware that the fiight 
was part of "Democracy, Inc." and that North played 
an important role in that organization.'^^ (Earl was 
not asked about a call from Abrams.) 

During the period he was making his denials, 
Abrams spoke with North. But Abrams did not ask 
whether North was involved with the Hasenfus flight, 
despite the fact that Abrams, in his words, "knew that 
he [North] was monitoring" the private Contra sup- 
port network.'^''' Abrams said he did not ask North 
because "it was very clear that [confirming his in- 
volvement in the fiight] would have been completely 
contradictory to what he had previously told me."'^* 
North had a different explanation: "He didn't have to 
ask me. . . He knew."'-^ 

Finally, while testifying before the House Foreign 
Affairs Subcommittee on Western Hemisphere Affairs 



146 



Chapter 7 



on October 15, 1986, Abrams said that he did not 
believe anyone in the Government would know de- 
tails about the flight: 

KOSTMAYER: "You have not been told by our 
Government, if indeed our Government knows, 
who organized and who paid for this particular 
flight?" 

ABRAMS: "I wouldn't separate myself from the 
Government. We don't know." 

KOSTMAYER: "Do you think there is anyone 
in the Government who does know?" 

ABRAMS: "No, because we don't track this kind 
of activity."'^® 

Asked to reconcile this response with the fact that 
he knew North monitored the Contra aid network, 
Abrams told these Committees: "To say that Col. 
North was the person who knew the most about the 
private benefactors — which I thought, and think to be 
the case — is not to say that he could tell you the 
name of every one of them and could tell you every- 
thing that every one of them was doing each day."*^'' 

CIA Deputy Director For Operations: Clair 
George, appearing with Abrams at two sessions 
before Congressional Committees, limited his denials 
to the Central Intelligence Agency. Typical of his 
remarks was the following from his opening statement 
before the House Intelligence Committee on October 
14: 

First I would like to state categorically that the 
Central Intelligence Agency was not involved 
directly or indirectly in arranging, directing or 
facilitating resupply missions conducted by pri- 
vate individuals in support of the Nicarguan 
democratic resistance. ' ^ * 

In fact, at least one CIA official was directly involved 
in providing lethal supplies to the Contras in 1986. 
George testified before these Committees that he was 
unaware of this fact when he testified at the Hasenfus 
hearing. Nonetheless, in his testimony before these 
Committees, George admitted that his earlier state- 
ment was "wrong", and he offered an apology. ^^^ 
George acknowledged that he knew in October 
1986, that the NSC staff was "participating in some 
way in supplying the Contras" '^° but he allowed 
Abrams' categorical denials about the involvement of 
any U.S. officials to pass without comment. He ex- 
plained: 

I was surprised Abrams made that statement. It 
was so categorical. The question is, should I leap 
up and say, 'hold it, Elliott, what about — excuse 
me, all you members of HPSCI, but Elliott and I 
are now going to discuss what we know about' — 
and I didn't have the guts to do it."' 



Saying he was "overly taken with trying to protect 
the Central Intelligence Agency," George expressed 
regret that he had not responded in some way to 
Abrams' categorical denials. '^^ 

CIA Central American Task Force Chief: The 
C/CATF told these Committees he was aware that 
the categorical denials about any U.S. involvement in 
the Hasenfus flight were wrong. Asked whether he 
had "any doubt" who ran the Hasenfus flight, he said, 
"No."'^'' However, testifying before the House Intel- 
ligence Committee on October 14, the C/CATF said: 
"We know what the airplanes are by type. We knew, 
for example there were two C-123s and C-7 cargos . . 
. . We knew in some cases much less frequently that 
they were flying down . . . into southern Nicaragua 
for the purposes of resupply, but as to who was flying 
the flights and who was behind them, we do not 
know."i='* 

The C/CATF maintained before these Committees 
that his statement was not false because he did not 
know exactly who was behind the flights: 

A: "I want to make one thing very, very clear. I 
don't lie and I don't provide false answers, and if 
I'm put in a situation that is undeniable, I will 
find some way to avoid lying .... I didn't know 
who was flying those flights." 

Q: "Or who was behind them, is what you said?" 

A: "You could have put me on a rack and I 
couldn't have told you who the pilots were, who 
was managing them. I at that time suspected, but 
didn't know that General Secord was involved 
with them. I had no idea where the money was 
coming from. ... It is not a lie."'^^ 

Generally, the C/CATF remained "uniquely 
silent," as he put it, during the hearings on the Hasen- 
fus flight where he was a supporting witness: "I spoke 
when spoken to."*^* He told these Committees that 
he had decided that, as the junior official on a panel 
with Abrams and George, he would not speak up 
first: 

I could have been more forthcoming, but I frank- 
ly was not going to be the first person to step up 
and do that .... So long as others who knew the 
details, as much as I, who knew more than I, 
were keeping their silence on this, I was going to 
keep my silence. ... I was a member of the 
administration team. I wasn't going to break 
ranks with the team. . . . My frame of mind was 
to protect, was to be a member of the team.'^'' 

The C/CATF told the Committees that he was "trou- 
bled" by his failure to speak out, but added, "There is 
not a lot I can do about it."'^* 



147 



Chapter 7 



Abrams' Brunei Testimony 

In addition to denying any U.S. role in the Hasenfus 
flight, Elliott Abrams denied on several occasions that 
the U.S. Government actions had sought third-coun- 
try funding for the Contras. His statements were 
made despite his previous involvement in soliciting 
funds from the Government of Brunei. In testimony 
before Congressional Committees in late 1986, 
Abrams repeatedly deflected questions about the Con- 
tras' funding, giving responses which were, in his 
word, "misleading." '^^ 

In an October 10 open hearing of the Senate For- 
eign Relations Committee, Senator Kerry asked 
Abrams whether Country 2 had provided assistance 
to the Resistance. Abrams replied: "I think I can say 
that while I have been Assistant Secretary, which is 
about 15 months, we have not received a dime from a 
foreign government, not a dime, from any foreign 
government." Asked whether the Contras had re- 
ceived funds, Abrams said: "I don't know. But not 
that I am aware of and not through us." He added at 
the hearing that if the Contras had approached a 
foreign government, "I think I would know about 

it"140 

Appearing before the House Intelligence Commit- 
tee on October 14, 1986, together with Clair George, 
Abrams again denied that third countries had aided 
the Contras: 

ABRAMS: "I can only speak on that question for 
the last fifteen months when I have been in this 
job, and that story about [Country 2], to my 
knowledge is false. I personally cannot tell you 
about pre-1985, but in 1985-1986, when I have 
been around, no." 

CHAIRMAN; "Is it also false with respect to 
other governments as well?" 

ABRAMS: "Yes, it is also false." i*' 

Before these Committees, Abrams testified that he 
did not know about the Country 2 or Country 3 
contributions. Although he had personally solicited 
Brunei, that country's donation had not been received 
at the time of his testimony, and therefore he ex- 
plained it was technically true that the Contras had 
not received assistance from Brunei. Furthermore, 
Abrams testified that Brunei had been promised confi- 
dentiality, and "I did not believe I was authorized to . 
. . reveal that solicitation." '■'^ 

On November 25, 1986, Abrams testified together 
with the CIA's C/CATF before the Senate Select 
Committee on Intelligence shortly after Attorney 
General Meese's press conference disclosing the di- 
version of funds from the Iran arms sales to the Con- 
tras. He was again asked about reports of third-coun- 
try funding: 



BRADLEY: ". . . Did either one of you have 
any knowledge or indication that the contras 
were receiving funds from . . . Mid-Eastern 



sources.' 

ABRAMS: "No." 

C/CATF: "No." 

BRADLEY: "Did either one of you ever discuss 
the problems of fundraising — " 

ABRAMS: "Let me add to that, Senator. I spoke 
to Dick Murphy, Assistant Secretary of State for 
Near Eastern Affairs, probably in the course of 
the summer, to ask him if he thought I could 
raise any money from Middle Eastern sources. 
He was rather discouraging as to whether we 
would be able to do it, and so we never 
tried. . . ." 

BRADLEY: "Now, you did not discuss with 
anyone else in the Executive Branch the possibili- 
ty of receiving funds from . . . any . . . Middle 
Eastern source?" 

ABRAMS: "That's correct. I never — once I had 
that conversation with him, that was the end of 

it..'143 

Again, Abrams maintained that this testimony was 
literally correct because Brunei was not a Mid-East- 
ern country.'** In his Senate Intelligence Committee 
appearance, Abrams was also asked whether he dis- 
cussed third-country funding with members of the 
NSC staff: 

BRADLEY: "Did either one of you ever discuss 
the problems of fund raising by the Contras with 
members of the NSC staff?" 

ABRAMS: "Well, yes. I mean, I think— I can't 
remember a specific day, but certainly the ques- 
tion — the fact, which now appears to be slightly 
mysterious, that they never had any money, we 
discussed — you know, it came up all the time, 
because they were always running out of every- 
thing. So the question came up, sure." 

BRADLEY: ". . , So let me ask it again. Did 
either one of you ever discuss the problems of 
fund raising by the Contras with members of the 
NSC staff?" 

ABRAMS: "No, I can't remember." 

BRADLEY: "Well, you would say gee, they got 
a lot of problems, they don't have any money. 
Then you would just sit there and say, what are 
we going to do? They don't have any money. 
You never said, you know, maybe we could get 
the money this way?" 



148 



Chapter 7 



ABRAMS: "No. Other than the conversation I 
have — other than the Middle Eastern thing 
which I recounted to you. We're not — you know, 
we're not in the fundraising business. . . ." 

BRADLEY: "Were you completely ignorant of 
all fundraising activities by the Contras?" 

ABRAMS: "No. Certainly not in the — I knew 
for — I mean — I don't think I knew anything that 
wasn't — I am trying to think if I knew anything 
that wasn't in the newspaper, that is, I knew 
certainly that Singlaub was raising money for the 
Contras. I knew that others were raising money 
for the Contras. I mean, using the Contras in a 
very general sense. For example, Friends of the 
Americas raises money for medical relief and 
things like that. I knew that was happening. I 
didn't know what Singlaub was raising or how or 
what he did with it when he got it. I was, until 
today, fairly confident that there was no foreign 
government contributing to this. But I knew 
nothing, still don't know anything about the 
mechanisms by which money was transferred 
from private groups that have been raising it, to 
the Contras." i* 5 

Abrams maintained before the Select Committees 
that these statements were "technically correct" be- 
cause he was asked about "fundraising by the Con- 
tras" and the Brunei solicitation was fundraising by 
the United States for the Contras.**® However, in his 
exchange with Senator Bradley, when asked whether 
he was ignorant of all fundraising "by the Contras," 
Abrams did not limit his responses to his knowledge 
of fundraising by the Contras. He specifically men- 
tioned fundraising for the Contras by John Singlaub 
and by the group. Friends of the Americas. 

Finally, in his Senate Select Committee testimony, 
Abrams distanced the State Department from Contra- 
related fundraising. He stated: "We don't engage — I 
mean the State Department's function in this has not 
been to raise money, other than to try to raise it from 
Congress."'*'' 

In his testimony before these Committees, Abrams 
acknowledged that he intended to prevent the Mem- 
bers of Congress from learning about the solicitation 
of Brunei: 

Q: In fact, your approach on November 25 . . . 
was that unless the Senators asked you exactly 
the right question, using exactly the right words, 
they weren't going to get the right answers. 
Wasn't that the approach? 

A: That is exactly the correct description of what 
I did on that date . . . 

Q: And, as you have said ... it would have been 
a very easy thing to have stopped the whole 
shooting match by simply saying Senators you 



are now getting into an area that I am not au- 
thorized to discuss? 

A: It would have been relatively easy. It would 
have been the right thing to do. . . . 

Q: And so unless the Senators knew the facts in 
advance so they could frame their question in 
exactly the right words, they wouldn't find out 
and they didn't find out. Isn't that what hap- 
pened? 

A: Correct. That is exactly what happened.'** 

Abrams testified that after his November 25 testi- 
mony, he realized that he had "failed to disclose the 
solicitation of Brunei," and asked for permission to 
"go back and tell the Committee there had indeed 
been another solicitation." Abrams attempted to reach 
Senator Bradley, who had posed the question, to ex- 
plain that there had, in fact, been a solicitation which 
he had failed to mention in this testimony. Failing to 
reach Bradley, he conveyed the message to a member 
of the Senator's staff. When Abrams appeared again 
before the Senate Intelligence Committee on Decem- 
ber 8, he was asked to explain his answers to the 
Committee as a whole. Shown a transcript of his 
earlier statements, Abrams admitted they were mis- 
leading but attempted to defend them as technically 
accurate. After a recess, Abrams apologized to the 
Members, having been advised by Senator Boren to 
do so.'*^ 

He made no similar effort to correct his testimony 
in October before the Senate Foreign Relations Com- 
mittee or the House Intelligence Committee. 

Conclusion 

Throughout the period of Congressional restrictions 
on lethal aid to the Contras, Administration officials 
were asked repeatedly whether the U.S. Government 
was in any way providing such support. In every 
instance, officials responded to the inquiries with eva- 
sive answers or categorical denials. Some of these 
officials made their statements as part of a deliberate 
attempt to conceal what they knew about U.S. Gov- 
ernment support for the Nicaraguan Resistance. 

These Committees found no direct evidence sug- 
gesting that the President was a knowing participant 
in the effort to deceive Congress and the American 
public. But the President's actions and statements con- 
tributed to the deception. 

Congressional Committees overseeing the imple- 
mentation of the Boland Amendment repeatedly 
sought to determine how the Contras were being 
funded. The President knew that Country 2 had pro- 
vided substantial sums of money to the Resistance; he 
had personally discussed such a contribution with the 
leader of that country. But knowledge of this contri- 



149 



Chapter 7 



bution was not widely shared within the Administra- 
tion. Indeed, high-ranking State Department officials 
were permitted on several occasions to testify to Con- 
gress that it was not the policy of the United States to 
facilitate or encourage third-country donations, and 
that the Administration had not in fact done so. In 
one instance, following the enactment of the full pro- 
hibition Boland Amendment in October 1984, Ambas- 
sador Motley testified that "soliciting" or "encourag- 
ing" third country donations would violate the law. 
In October 1986, the President denied that the U.S. 
Government had any connection with the Hasenfus 
flight, depicting it as part of a "private" operation. 
According to Poindexter the President "understood 
that the Contras were being supported and that we 
were involved in — generally involved in coordinating 
the effort." '^° These Committees found no evidence 
suggesting that the President knew his statements 
about the flight were false. He merely echoed the 
denials made the day before by State Department 
officials.'''' The National Security Adviser and others 
who knew the President's remarks were false appear 
to have made no effort to ensure that the President's 
statements were accurate and his knowledge com- 
plete. Poindexter testified he was too busy with the 
Reykjavik summit to correct the public record. '^^ 

Reasons for the Deception 

North endeavored to explain the need for the decep- 
tion by arguing that he was forced to weigh "the 
differences between lives and lies." He told the Com- 
mittees: 

[t]he revelations of the actual details of this activ- 
ity .. . would have cost the lives of those with 
whom I was working, would have jeopardized 
the governments which had assisted us, would 
have jeopardized the lives of the Americans who 
in some cases were flying flights over Nicaragua, 
would have put at great risk those inside Nicara- 
gua and in Eastern Europe and other places 
where people were working hard to keep them 
alive. . . .'^^ 

North's justification for his decision to deceive does 
not withstand analysis. Congress is routinely briefed 
on covert operations where lives are at risk. Beyond 
that, Congress publicly debated and then approved 



the support of the Contras prior to enactment of the 
Boland prohibition. Operational details that would 
have put at risk the personnel conducting those oper- 
ations were not publicly revealed. The same is true 
for the Congressionally approved operation in support 
of the Contras currently underway. 

Even in 1985 and 1986, Congress was not asking 
about operational details such as drop-zone coordi- 
nates or flight paths. Members of Congress simply 
wanted to know whether it was true that the U.S. 
Government was providing lethal support to the Nic- 
araguan Resistance. 

Indeed, North testified that his efforts were known 
widely outside the United States, even by this Coun- 
try's enemies: "Izvestia knew it ... . My name had 
been in the newspapers in Moscow, all over Daniel 
Ortega's newscasts. Radio Havana was broadcasting 
it "154 Moreover, it was important to the success of 
the resupply operation that friendly countries in Cen- 
tral America knew that the U.S. Government support 
for the Contras was continuing so that they would 
not drive the Contras out of their countries. 

Only the American people and the Congress were 
kept in the dark. Had they known, it would not have 
been lives at risk but the NSC staffs secret operation 
itself. Poindexter told these Committees he believed 
during his tenure in the White House that disclosure 
of the NSC staff operation would have almost surely 
triggered tighter restrictions on aid to the Contras.'** 
McFarlane testified that disclosure of the "troubling" 
documents on North's activities which he had gath- 
ered in response to a Congressional inquiry "would be 
an extremely torturous, conflicting, disagreeable out- 
come and that I hoped we didn't come to that."'*® 

North's contemporaneous actions and words pro- 
vide clear evidence that the reasons for the deception 
had more to do with the political risk to the operation 
than to the physical risk to operation personnel. The 
record is clear that North's actions after the revela- 
tion of the Santa Elena airfield were motivated by a 
desire to prevent the discovery of "USG finger- 
prints," in his words, on the airfield. 

In addition, in a May 1986, PROF note to Poin- 
dexter, North warned that Members of Congress were 
bound to become "more inquisitive" as the Contra 
operation's level of activity increased. He wrote: 
"While I care not a whit what they say about me, it 
could well become a political embarassment for the 
President and you."'*' 



150 



Chapter 7 



Chapter 7 



1. Exhibits OLN-131 and OLN-307, Hearings, 100-7, Part 
III. 

2. Weekly Compilation of Presidential Documents, No. 41 
at 1349. 

3. Most Contras Reported to Pull Out of Nicaragua. 
1/30/86, New York Times, Nicaragua Rebels. In Retreat. 
Viewed as a Reduced Threat. 3/6/86, New York Times Al. 

4. On March 20, for example, the Washington Post re- 
ported that the Contras had "mounted a series of raids 
against mostly economic targets in the northern Nicaraguan 
mountains in the past 10 days as debate quickened in Wash- 
ington over military aid for their sagging guerilla war." 
[Washington Post, 3/20/86, Contras Step Up Raids As U.S. 
Debate Waxes, p. 6]. 

5. See Group's Aid to Contras Probed. The Boston Globe, 
4/11/86, p 1; Cocaine, Gun Charges Probed, by the Associat- 
ed Press in Washington Post, 4/11/86, p. A6; Inquiry Re- 
ported Into Contra Arms. AP story, the New York Times, 
p A3; Top 'Contras' Under Scrutiny For Corruption. Chris- 
tian Science Monitor, 4/11/86; Reagan Asked About Allega- 
tions, The Washington Post, 4/13/86 p. A38; 11 Miami 
Banks Ordered to Open Files in Probe of Contra Spending. 5/ 
9/86, Miami Herald, p. 1; Similar articles on May 9 in The 
New York Times, The Baltimore Sun and other papers. 

6. Colonel's Actions May Have Broken Contra Aid Ban. 
Miami Herald, 4/30/86, p. 8. 

7. Despite Ban. U.S. Helping Contras. 6/8/86, Miami 
Herald, p. lA; the charges were echoed in an Associated 
Press story which ran on June 1 1 in The Washington Post 
under the headline, U.S. Abetted Contra Aid During Ban. 

8. White House OKd Contra Aid Plan, Sources Say, Miami 
Herald, 6/22/86 p. 26A. 

9. Poindexter Test., Hearings, 100-8, at 95. 

10. Poindexter Test., Hearings. 100-8, at 42. 

11. Poindexter Test., Hearings, 100-8, at 42. 

12. Poindexter Test., Hearings, 100-8, at 42. 

13. Going After North, Washington Times, 7/15/86. A 
PROF Note sent that day to North strongly suggests that 
Poindexter leaked the story. Poindexter wrote in the PROF: 
"I just wanted to lower your visibility." And he gave North 
the name of two Washington Times reporters, suggesting 
that North call them to straighten the matter out. N 1 2568. 
See also Ex. OLN- 295 and N12569. 

14. PROF Note, 7/15/86 [N12568]. On July 19, 1986, the 
Miami Herald quoted a "senior administration official" 
saying that North would be reassigned and would no longer 
handle Contra matters. 

15. PROF Note 7/15/86 [N12568]. 

16. Poindexter Test., Hearings, 100-8, at 48. 

17. North Test., Hearings, 100-7, Part I, at 174. McFar- 
lane denied that he gave such instructions to North. McFar- 
lane Test., Hearings, 100-7, Part I, at 204. 

18. North Test., Hearings, 100-7, Part I, at 27. 

19. Ex. JMP-7, Hearings, 100-8. 

20. Poindexter, Hearings, 100-8, at 196. McFarlane had 
not arranged for North to communicate with him directly 
using the PROF system. 

21. Ex. OLN- 191, Hearings, 100-7, Part III. 

22. Poindexter Test., Hearings, 100-8, at 43, 48, 60. 

23. Poindexter Dep., 5/2/87, at 208. 

24. Id 

25. North Test., Hearings, 100-7, Part I, at 87. 



26. Ex. OLN-10. Hearings, 100-7, Part III. "Kerry, 
Barnes, Harkins" referred to Senator John Kerry, Repre- 
sentative Barnes and Representative (now Senator), Tom 
Harkin. 

27. Ex. OLN-89, Hearings. 100-7, Part III. 

28. PROF Note from Small to North, date unknown 
[N17526]. 

29. Transcript of Broadcast. 

30. PROF Note, 6/27/86 [N4951]. 

31. Text of statement. On June 21, Coleman gave the 
weekly Democratic radio address. 

32. Congressional Record, June 25, 1986, p. E2264. 

33. Id 

34. The resolution reads: "A complete list and description 
of any contact or other communication between Lieutenant 
Colonel Oliver L. North or any other member of the staff 
of the National Security Council and any private individual 
or any representative of a foreign government concerning 
the provision to the Nicaraguan resistance of any funding or 
other assistance from any source other than the United 
States Government (including assistance by any private 
group or individual or by any foreign government); and any 
document prepared by or in the possession of any member 
of the staff of the National Security Council concerning the 
provision of any such assistance, specifically including any 
document concerning any discussion of or involvement in 
private fund-raising activities on behalf of the Nicaraguan 
resistance by any member of the staff of the National Secu- 
rity Council." 

35. The resolution reads: "A complete list and discription 
[sic] of and any document concerning any contact or other 
communication, directly or through intermediaries, since 
July 28, 1983, between Lieutenant Colonel Oliver L. North 
or any other member of the staff of the National Security 
Council and any member or representative of the Nicara- 
guan resistance, including any communications concerning 
the military strategy or tactics, coordination of the activi- 
ties, or the military equipment or training needs of the 
Nicaraguan resistance." 

36. The resolution reads: "A complete list and discription 
[sic] of and any document concerning any contacts or other 
communication since July 28, 1983, between Lieutenant 
Colonel Oliver L. North or any other member of the staff 
of the National Security Council and Robert W. Owen 
(who has served as a consultant to the Nicaraguan Humani- 
tarian Assistance Office), Major General John K. Singlaub 
(United States Army, retired), John Hull (a United States 
citizen operating a ranch in northern Costa Rica)." 

37. Ex. JMP-14, Hearings, 100-8. 

38. Poindexter Test., Hearings, 100-8 at 102. 

39. Ex. JMP-14, Hearings, 100-8 . 

40. Poindexter Test., Hearings, 100-8 at 96. 

41. Poindexter Test., Hearings, 100-8 at 53. 

42. Poindexter Test., Hearings, 100-8 at 88. 

43. Poindexter Test., Hearings, 100-8 at 73-70. See also 
Chapters 2 and 3. 

44. Poindexter Test., Hearings, 100-8 at 83. 

45. Poindexter Test., Hearings, 100-8 at 94. 

46. On July 30, the House Armed Services Committee 
reported H. Res. 485 unfavorably. "Unlike the usual prac- 
tice of the House in a resolution of inquiry," the report 



151 



Chapter 7 



explained "rather than requesting him [the President] to 
produce the specified materials, this resolution directs the 
production of information." This, the report said, "could 
place the President in an untenable position concerning 
compliance if the resolution were agreed to in its present 
form " (Rept. 99-724) As a result, the other two Committees 
to which it had been referred — Foreign Affairs and Intelli- 
gence — were no longer compelled to report the measure 
within 14 days. Nevertheless, the resolution was still pend- 
ing under the rules of ordinary legislation, and Committee 
members wanted to give it full consideration. They deemed 
it necessary to meet with Oliver North. 

47. In attendance at the 8:30 a.m. meeting with North 
were Chairman Hamilton, Representatives McCurdy, Kas- 
tenmeier, Daniel, Roe, Stump, Ireland, Hyde, Cheney, Liv- 
ingston, and McEwen; Bob Pearson and Ron Sable of the 
NSC staff; and Tom Latimer and Steve Berry of Committee 
staff 

48. Ex. OLN-127, Hearings, 100-7. 

49. Ex. OLN-126 and OLN-127, Hearings, 100-7. The 
Committee members came to the meeting believing that 
official Administration policy held that the NSC staff was 
covered by the Boland Amendment. The former National 
Security Adviser had told the House Intelligence Commit- 
tee as much the year before, and the current National Secu- 
rity Adviser had indicated by his letter that the interpreta- 
tion stood. North, in his statements to the Members, said 
nothing to the contrary. He stated that he had always acted 
in compliance with the letter and the spirit of the Boland 
Amendment. During the session, he admitted undertaking 
only those actions clearly permitted by all officials of the 
Executive Branch. He denied activities that Members who 
believed the Boland Amendment applied to the NSC would 
have interpreted as illegal. 

50. North Test., Hearings, 100-7, at 176. 

51. Ex. OLN-127, Hearings, 100-7. 

52. Letter from Hamilton to Coleman, 8/12/86. 

53. North Test., Hearings. 100-7, at 177-178. 

54. Earl Dep., 5/22/87 at 102. 

55. Earl Dep., 5/22/87, at 105-08. 

56. Earl Dep., 5/22/87 at 106-07. 

57. Earl Dep., 5/22/87 at 107. Poindexter testified: "Obvi- 
ously with hindsight, it would have been prudent to have 
sat down and talked to him about that [the meeting with the 
Members of Congress] before he did it to provide more 
detailed guidance, but that was not the manner in which I 
was manning and directing Colonel North at the time." 
Poindexter Test., Hearings, 100-8 at 152. 

58. North Test., Hearings, 100-7, at 178. 

59. North Test., Hearings, 100-7, at 178. 

60. Poindexter Test., Hearings, 100-8 at 152-156. 

61. Ex. OLN-128, Hearings, 100-7. 

62. Poindexter Test., Hearings, 100-8 at 104. 

63. Poindexter Test., Hearings, 100-8 at 152. 

64. See Chapter 2. 

65. Ex. LAT-6, Hearings, 100-3. 

66. Q2392. 

67. Ex. LAT-6, Hearings. 

68. North Notebooks, 9/6/86 [Q2392]. North's notebook 
also indicates that the C/CATF was aware of the threat- 
ened press conference. 

69. Ex. LAT-6, Hearings, 100-3. 

70. North Test., Hearings, 100-7, at 86-87; Abrams Test., 
Hearings, 100-5 at 24-26. 



71. North Test., Hearings, 100-7, at 86-87. 

72. Tambs Test., Hearings. 100-3, at 383. 

73. Abrams Test., Hearings, 100-5 at 25. 

74. Tambs Test., Hearings, 100-3 at 383. 

75. Ex. LAT-6, Hearings, 100-3. 

76. PROF Note, 9/7/86 [N12159]. 

77. Costa Rica Closes Airstrip Near Nicaragua Border, The 
New York Times, 9/25/86, p. 13. 

78. Ex. OLN-307, Hearings, 100-7. 

79. Ex. OLN-131, Hearings, 100-7. 

80. Id. 

81. Ex. OLN-132, Hearings, 100-7, Part III. The memo- 
randum was "nonlog," meaning it had not been entered into 
the official NSC filing system. Poindexter had earlier direct- 
ed North not to put in writing matters relating to the 
Contra operation. 

82. Ex. OLN-132, Hearings. 100-7, Part III. 

83. Id 

84. Abrams Test., Hearings, 100-5, at 20, 24-26; C/CATF 
Test., Hearings, lOO-U at 95-98. 

85. See Chapter 2. 

86. Hasenfus Refers to Secret Airstrip, The New York 
Times 10/24/86 p. 7; Downed Airman Tells Predicament, Los 
Angeles Times, 10/25/86 p. 1. 

87. Crash Survivor Described as Adviser in El Salvador, The 
Washington Post, 10/8/86. 

88. North Test., Hearings, 100-7, at 179. 

89. KL-43 Message, RD00492. 

90. The meeting was described in a PROF from Cannis- 
traro to Poindexter: Ex. OLN-133, Hearings, 100-7. 

91. Ex. OLN-133. Hearings, 100-7. On October 9 the 
following entry appears in North's notebook: "Call C/ 
CATF, Cruz, Calero [about] press release. The A/C was 
providing humanitarian supplies to UNO fighters." 

92. Contras Take Responsibility for the Support Flight. The 
New York Times, 10/14/86, P. A9. 

93. North Test., Hearings, 100-7 at 179. 

94. Ex. OLN-99, Hearings, 100-7. 

95. Weekly Compilation of Presidential Documents, Vol. 
22, #41, at 1348-9; See also Elaborate System Supplies Con- 
tras, Los Angeles Times, 10/9/86 p. 1; Reagan on Downed 
Plane: Like Lincoln Brigade. New York Times, 10/9/86, p. 
A8 

96. Reagan Administration Denies U.S. Link to Plane. 
Washington Post, 10/8/86, p. Al; Downed Plane Not Ours, 
ShultzSays. Los Angeles Times, 10/8/86, P. 1. 

97. Transcripts of news shows in "Radio-TV Defense 
Dialog." 

98. Id. 

99. Shultz Test., Hearings, 100-9 at 204. 

100. Abrams Test., Hearings. 100-5 at 65-67. 

101. North Test., Hearings. 100-7, at 149. 

102. Shultz Test., Hearings, 100-9 at 202. 

103. Ex. EA-25, Hearings, 100-5. 

104. Id 

105. Ex. EA-28, Hearings, 100-5. 

106. Abrams Test., Hearings, 100-5 at 65. 

107. Abrams Test., Hearings, 100-5 at 63-69. 

108. North Test., Hearings, 100-7, at 180-181. 

109. North Test., Hearings. 100-7, at 165. 

1 10. Abrams Test., Hearings, 100-5 at 64-65. 

111. Abrams Test,, Hearings, 100-5 at 65-68. 

112. North Test., Hearings, 100-7, at 88. 

113. North Test., Hearings, 100-7, at 88. 



152 



Chapter 7 



114. Ex. OLN-94, Hearings, 100-7. 

115. North Test., Hearings, 100-7, at 156. 

116. C/CATF Test., Hearings, 100-11 at 157. 

117. C/CATF Test., Hearings, 100-11, at 156-157. 

1 18. Abrams Test., Hearings, 100-5 at 63. 

119. C/CATF Test., Hearings, 100-11 at 156-157; George 
Test., Hearings, 100-11 at 165. 

120. Abrams Test.. Hearings, 100-5 at 63-64. 

121. Abrams Test., Hearings, 100-5 at 64. 

122. Earl Dep., Sm/il, at 149-50, 169-70. 

123. Abrams Test., Hearings, 100-5 at 64. 

124. Abrams Test., Hearings, 100-5 at 65. 

125. North Test., Hearings, 100-7, at 179-80. 

126. Transcript at 33. 

127. Abrams Test., Hearings, 100-5 at 66. 

128. Transcript at p. 4. Similar denials were issued by 
CIA spokeswoman Kathy Pherson to reporters. For exam- 
ple, on October 10 the Los Angeles Times quoted her as 
saying, "We didn't have anything to do with the guy [Ha- 
senfus]. We didn't have anything to do with the plane. And 
we can say that, instead of our usual "No comment," be- 
cause a plane that flies in and drops supplies would violate 
congressional restrictions. We have not and will not violate 
congressional restrictions." Downed Flier Claims CIA Ties, 
Los Angeles Times, 10/10/86. 

129. George Test., Hearings, 100-11 at 216. 

130. George Test., Hearings, 100-11 at 217. 

131. George Test., Hearings, 100-11 at 217. 

132. George Test., Hearings, 100-11 at 219-221. 



133. C/CATF Test., Hearings, 100-11 at 120. 

134. Transcript at 20-21. 

135. C/CATF Test., Hearings, 100-11 at 121-122. 

136. C/CATF Test., Hearings, 100-11 at 120. 

137. C/CATF Test., Hearings, 100-11 at 122. 

138. C/CATF Test., Hearings, 100-11 at 121, 132-133. 

139. Abrams Test., Hearings, 100-5 at 74. 

140. Ex. EA-29, Hearings. 100-5. 

141. Ex. EA-28, Hearings, 100-5. 

142. Abrams Test., Hearings, 100-5 at 85-86. 

143. Ex. EA-30, Hearings, 100-5. 

144. Abrams Test., Hearings, 100-5 at 72. 

145. Ex. EA-30, Hearings, 100-5. 

146. Abrams Test., Hearings, 100-5 at 73. 

147. Ex. EA-30, Hearings, 100-5. 

148. Abrams Test., Hearings, 100-5 at 74-75. 

149. Abrams Test., Hearings. 100-5 at 77-79, 94, 146-149. 

150. Poindexter Test., Hearings, 100-8 at 89. 

151. Assistant Secretary Abrams testified that he had given 
Secretary Shultz categorical assurances of no U.S. Govern- 
ment involvement in the Hasenfus flight. (See fn. 100.) 
Abrams' explanation for his denials is discussed above. 

152. Poindexter Test., at 160-61. 

153. Norih Test., Hearings, 100-7, at 335. 

154. North Test., Hearings, 100-7 at 119. 

155. Poindexter Test., Hearings, 100-8 at 61. 

156. McFariane Test'., Hearings, 100-2 at 118. 

157. Ex. OLN-10, Hearings, 100-7. 



153 



Part 
The Arms Sales to Iran 



Chapter 8 

U.S.-lran Relations and the Hostages in 

Lebanon 



For many Americans, the most surprising and alarm- 
ing aspect of the Iran-Contra Affair was President 
Reagan's decision to sell arms to Iran. Only a few 
years before, that nation had humiliated the United 
States. From November 1979 to January 1981, Iran 
held American diplomats hostage, while Iranian mobs 
in the streets of Tehran chanted slogans calling for 
the death of President Carter and the destruction of 
U.S. interests throughout the Middle East. 

Since November 14, 1979, first in response to the 
hostage crisis and then because of the Iran-Iraq war, 
the United States had embargoed the sale of arms to 
Iran. Moreover, it had been the policy of the United 
States since December 1983 to pressure other govern- 
ments, through "Operation Staunch," to stop the sale 
of arms to Iran in order to help bring an early end to 
the Iran-Iraq war. 

The United States also opposed the transfer of arms 
to Iran because of its involvement in terrorist activi- 
ties. Following repeated attacks against Americans 
and U.S. interests in Lebanon, the Secretary of State 
officially placed Iran on a list of countries supporting 
terrorism. Reagan Administration policy on terrorism 
was well known and was clearly stated by the Presi- 
dent: "We make no concessions. We make no deals."* 

Why did the Reagan Administration make a com- 
plete about-face on both of these publicly stated poli- 
cies — to sell no arms to Iran and to make no conces- 
sions to terrorists? The background of recent U.S. 
policy toward Iran and of the seizure of American 
hostages in Lebanon provides a context in which to 
assess those policy reversals. 

No Regional Guarantees 

Partly in reaction to the war in Vietnam, the 
United States in 1969 began to shift to a worldwide 
policy of no longer directly guaranteeing the security 
of its regional allies. Instead, the United States would 
work with its friends to ensure that they had the 
military capability to defend themselves against inter- 
nal subversion or external threat. Under the Nixon 
Doctrine, the United States looked to regional 
powers, such as Iran, to serve as guardians of Ameri- 
can interests in distant corners of the world. 



Iran's armed forces, under Shah Mohammed Reza 
Pahlavi, served as a deterrent to regional aggression 
in this conception of American policy. "Iran," Presi- 
dent Carter declared during a 1977 trip to Tehran, 
"because of the great leadership of the Shah, is an 
island of stability in one of the more troubled areas of 
the world. "^ Equipped with the latest American 
weaponry and backed by a 350,000-man army, Iran 
had become America's policeman in the Gulf. The 
Shah relished the role and his power. "Nobody can 
overthrow me," he once boasted, "I have the support 
of 700,000 troops, all the workers, and most of the 
people. I have the power. "^ 

The Shah's power proved illusory. Growing pro- 
tests by students, leftists, and, most importantly, 
Muslim religious opponents led in February 1979 to 
the Shah's overthrow and his replacement by a Shiite 
Muslim religious leader, Ayatollah Khomeini, who 
had been forced into exile in 1964, first to Iraq and 
then to France. The new regime was contemptuous of 
both the United States— the "Great Satan"— and the 
West. Fiery Shiite clerics accused the United States of 
imperialism and the murder of thousands during the 
Shah's rule. America's fortunes in Iran had crumbled. 

If any doubt remained about the nature of the new 
regime, it was removed on November 4, 1979, 
when youthful Iranian militants — the Revolutionary 
Guards — stormed the U.S. Embassy in Tehran and 
took 66 American diplomats hostage. The hostage 
crisis lasted 444 days. It helped to drive one President 
from office and to elect another who pledged that 
America would not be so humiliated again.* 

Arms Sales to Iran 

In response to the Embassy seizure, the United States 
on November 14, 1979, embargoed all arms shipments 
to Iran as part of a general embargo on trade and 
financial transactions. Ten months later, however, the 
invasion of Iran by Iraq, on September 22, 1980, 
raised the question of who might ultimately be pun- 
ished by this punitive measure. The prospect of an 
Iranian defeat and an increase in Soviet influence in 
the region was of concern. 



157 



Chapter 8 



Figure 8-1. Map of Iran 




158 



Chapter 8 



Iran's armed forces were in disarray; the officer 
corps and enlisted ranks had been decimated by gov- 
ernment purges and desertions. Iran's mihtary arsenal 
was also in poor shape. Modern aircraft, armor, and 
naval vessels purchased by the Shah had been left 
unattended during the 24-month revolution and were 
badly in need of spare parts and maintenance. Adding 
to Tehran's vulnerability was the fact that most of the 
weaponry in the Shah's arsenal was of American man- 
ufacture, and the U.S. embargo prevented resupply. 
National Security Council (NSC) and Central Intelli- 
gence Agency (CIA) analysts concluded that the 
Ayatollah Khomeini was ill-prepared to meet Iraq in 
a modern war. 

Against this background, the Reagan Administra- 
tion's Senior Interdepartmental Group (SIG) con- 
vened on July 21, 1981, to discuss U.S. policy toward 
Iran. SIG members concluded "that U.S. efforts to 
discourage third country transfers of non-U. S. origin 
arms would have only a marginal effect on the con- 
duct and outcome of the war, but could increase 
opportunities for the Soviets to take advantage of 
Iran's security concerns and to persuade Iran to 
accept Soviet military assistance."^ While no agency 
representative argued in favor of U.S. action to en- 
courage an increase in arms supply to Iran, some 
expressed concern that a rigid U.S. policy against all 
arms transfers to Iran would not serve overall U.S. 
interests. 

The Joint Chiefs of Staff, however, strongly op- 
posed arms sales to Iran, which they believed would 
represent a profound shift in U.S. policy that "would 
be perceived by the moderate Arab states as an action 
directly counter to their interests."^ Similarly, they 
felt that any "improvement in the Iranian arms 
supply would intensify the war with Iraq" and possi- 
bly spill over into neighboring states. Administration 
policy against arms sales to Iran remained firm. 

Despite the U.S. embargo, Iran obtained weapons 
and military support services on the thriving world 
arms market. Oil was often the medium of exchange 
in elaborate barter deals, and Persian Gulf trade 
became an irresistible lure for international arms mer- 
chants. The Reagan Administration listed no fewer 
than 41 countries that had provided Iran with weap- 
ons since the start of the war.' 

As a result, by the spring of 1983, the tide in the 
Gulf war had turned in favor of Iran. A steady supply 
of munitions, artillery, and ground-to-air and ground- 
to-ground missiles had enabled the more numerous 
Iranian armed forces and Revolutionary Guards to 
expel Iraqi forces, seize and retain some small pieces 
of Iraqi territory, and shell the major city of Basra 
and the capital city, Baghdad. Once thought by West- 
ern analysts to be on the verge of collapse, Iran had 
rebounded from its earlier battlefield setbacks. 



Operation Staunch 

At this point the Administration decided to initiate 
Operation Staunch, a plan seeking the cooperation of 
other governments in an arms sales embargo against 
Iran. On December 14, 1983, the State Department 
instructed its Embassies in countries believed to be 
involved in arms trade with Tehran to urge their host 
governments to "stop transferring arms to Iran be- 
cause of the broader interests of the international 
community in achieving a negotiated end to the Iran- 
Iraq war." 

Within the U.S. Government, authorities increased 
surveillance of shipments of American equipment and 
spare parts destined (usually through intermediaries) 
for Iran. Between January 1984 and January 1987, the 
State Department sent more than 400 cables to Amer- 
ican overseas missions urging compliance with Oper- 
ation Staunch. Secretary Shultz personally urged 
member governments to work within the European 
Community to reduce the fiow of materiel to Iran. 

Reports persisted that Israel still actively supplied 
the Iranian military despite U.S. efforts to stop arms 
sales through Operation Staunch. Other reports hinted 
that U.S. and Israeli representatives met regularly to 
discuss Tehran's war needs. Widespread reports, par- 
ticularly from the Middle East, also suggested that the 
United States was violating its own arms prohibitions. 
The effectiveness of Operation Staunch was uncer- 
tain, but Iran's military potential clearly grew. 

The U.S. Government repeatedly and publicly reaf- 
firmed its commitment to lessening the flow of arma- 
ments to Tehran. A typical public statement from the 
State Department, dated May 1985, noted that: "The 
U.S. does not permit U.S. arms and munitions to be 
shipped to either belligerent and has discouraged all 
free-world arms shipments to Iran because, unlike 
Iraq, Iran is adamantly opposed to negotiations or a 
mediated end to the conflict."* 

Iran's Support of Terrorism 

The long-suppressed Shiite community in Lebanon, 
with close religious and familial ties to Iran, had 
found inspiration in the rule of the Ayatollah Kho- 
meini. In the aftermath of the Israeli invasion of Leba- 
non in June 1982, some Shiite groups in Lebanon used 
political kidnappings and terrorism against Americans 
and American institutions as retaliation against per- 
ceived U.S. support for the Israeli invasion and occu- 
pation of their country. The United States became 
aware in July 1982 that Iran was supporting groups in 
Lebanon, such as Islamic Jihad and the Hizballah 
(Party of God), that were suspected of terrorism. 

United States Marines had been sent to Lebanon 
briefly in August and September 1982 to supervise the 
withdrawal of forces of the Palestine Liberation Or- 
ganization (PLO) from Beirut and returned to Leba- 



159 



Chapter 8 



non soon thereafter in the aftermath of the Sabra and 
Shatila massacres. The purpose of the U.S. presence 
in Beirut was to help support the Government of 
Lebanon in its efforts to restore stabiUty and its au- 
thority throughout Lebanon. The U.S. troops came to 
be perceived in Lebanon as a partisan miUtia, howev- 
er, working on behalf of the Maronite-and-Christian- 
controlled government. 

A series of bold attacks followed against Americans 
and American interests throughout Lebanon. The 
U.S. Embassy in Beirut was destroyed in April 1983, 
killing 63, including 17 Americans. A suicide bombing 
on October 23, 1983, killed 241 Marines in their bar- 
racks in Beirut. This incident was followed in Decem- 
ber by a series of bombing attacks against the U.S. 
and French Embassies in Kuwait. The 17 men who 
were apprehended in the Kuwait attack were tried 
and sentenced to prison. The release of these "Da'wa 
prisoners" (as they came to be known after a pro- 
Khomeini party with supporters in several countries) 
became a key demand of the Hizballah as attacks 
against U.S. targets and the taking of American hos- 
tages continued in Lebanon. 

The Hizballah, a loosely structured movement cen- 
tered on the Shiite clans of the Bekaa Valley, 
emerged as a principal opponent of the United States 
and the Western presence in Lebanon. The use of 
force — particularly terrorism — against Western inter- 
ests in Lebanon was viewed by the more militant 
members of Hizballah as religiously sanctioned. 

From the outset, U.S. intelligence recognized that 
the Hizballah was composed of competing political 
elements, not all of whom were controlled by Iran. 
But frustration mounted within the Administration in 
the aftermath of the Marine barracks bombing, the 
Kuwait Embassy attack, and the assassination on Jan- 
uary 11, 1984, of the President of the American Uni- 
versity in Beirut, Malcolm Kerr. 

On January 20, 1984, the Secretary of State desig- 
nated Iran a sponsor of international terrorism. This 
decision was followed 4 days later by the announce- 
ment that Iran would be subjected to U.S. Govern- 
ment regulations limiting the export of U.S. military 
equipment to "countries that have repeatedly provid- 
ed support for acts of international terrorism."^ The 
State Department assured Congress that "[t]he ques- 
tion of further controls under this rubric is currently 
under active review at senior levels of the Adminis- 
tration."'" The Department announced these addi- 
tional measures based upon what it termed convincing 
evidence of a broad Iranian policy furthering terror- 
ism beyond its borders, including public statements by 
Iranian officials supporting those acts. 



Hostage-Taking Begins 

The hostage-taking that was to propel the Iran- 
Contra Affair began 6 weeks later. 

Three Americans were seized in Beirut in 1984: 
Jeremy Levin, Beirut Bureau Chief for the Cable 
News Network, on March 7; William Buckley, CIA's 
Chief of Station, on March 14; and the Reverend 
Benjamin Weir, a Presbyterian minister who had lived 
in the Lebanese capital for 30 years, on May 8, 1984. 
Buckley's capture was of special concern for CIA 
Director Casey. It was suspected at the time — and 
later confirmed — that Buckley was being tortured, 
and Casey wanted to spare no effort to get him back. 
Citing a continuing pattern of Iranian support for 
terrorism, the State Department imposed new restric- 
tions in September 1984 on the export to Iran of 
aircraft, spare parts for aircraft, and high-powered 
outboard motors. The Department also banned all 
other goods and technology to Iran intended for a 
"military end-use or end-user." 

The Administration staked out an increasingly 
tough pubUc position on dealing with terrorists. 
Speaking in New York on October 25, 1984, Secre- 
tary Shultz called for "swift and sure measures" 
against terrorists, both to prevent attacks and to re- 
taliate for them: "[W]e cannot allow ourselves to 
become the Hamlet of nations, worrying endlessly 
over whether and how to respond," he said." 

Yet the hostage-taking continued. Four Americans 
were seized in 1985: Father Lawrence Martin Jenco, 
Director of Catholic Relief Services in Beirut, on 
January 8; Terry Anderson, chief Middle East corre- 
spondent for the Associated Press, on March 16; 
David Jacobsen, Director of the American University 
Hospital, on May 28; and Thomas P. Sutherland, 
Dean of the American University's School of Agri- 
culture, on June 9. 

Throughout this period, the only positive develop- 
ment on the hostages came on February 13, when 
Jeremy Levin gained his freedom. It remains uncer- 
tain whether he escaped from, or was released by, his 
captors after nearly 11 months of confinement. 
Around the time that Levin was freed, the NSC, with 
the Joint Chiefs of Staff, created an interagency Hos- 
tage Location Task Force. 

On June 14, 1985, Shiite terrorists struck again, 
hijacking TWA Hight 847 and murdering one of its 
passengers. Navy diver Robert Stetham. National Se- 
curity Adviser Robert McFarlane publicly stated: "It 
is my purpose to remind terrorists and to keep them 
on notice that no act of violence against Americans 
will go without a response."*^ 



160 



Chapter 8 



The President spoke on the same subject on June These were strong and unambiguous words from 

30, 1985, "The United States gives terrorists no re- the President and a senior American official. Yet a 

wards and no guarantees. We make no concessions. few weeks later, President Reagan authorized Israel 

We make no deals." '3 to sell TOW antitank missiles to the government of 

leader. Seven months later he authorized the direct the Ayatollah Khomeini, the Hizballah's spiritual 
sale of arms to Iran. 



161 



Chapter 8 



Chapter 8 



1. The New York Times, July 1, 1985, at AlO. 

2. President Jimmy Carter, remarks (Dec. 31, 1977), in: 
Public Papers of the Presidents of the United States, Book 
II, 2221 (1978). 

3. The Washington Post (Mar. 6, 1978); U.S. News & 
World Report (June 26, 1978). 

4. There have been allegations that officials of the 1980 
Reagan campaign — in order to prevent a pre-election an- 
nouncement by President Carter (an "October Surprise") — 
met with Iranian intermediaries and agreed to ship arms to 
Iran in exchange for a post-election release of hostages. 
Reagan campaign aides were, in fact, approached by indi- 
viduals who claimed to be Iranian intermediaries about po- 
tential release of hostages, as were other campaign staffs. 
The Committees were told that the approaches were reject- 
ed and have found no credible evidence to suggest that any 
discussions were held or agreements reached on delaying 
release of hostages or arranging an early arms-for-hostages 
deal. 

5. L. Paul Bremer, III, Executive Secretary, Department 
of State to Richard V. Allen, White House, Memorandum, 
Subj. Iran SIG Meeting of July 21, 1981, 8125833, S (Sept. 
23, 1981), N33299. 



6. Paul F. Gorman, Lieut. Gen.. Assist, to the Chairman, 
JCS, Memorandum for Mr. L. Paul Bremer, III, Special 
Assistant to the Secretary and Executive Secretary, Depart- 
ment of State, Subj.: US Arms Transfer Policy Toward 
Iran, S, CM 1041-81 (Sept. 3, 1981), N33300. 

7. The New York Times, Apr. 11, 1987, at 2. 

8. U.S. Government. Department of State. "Iran-Iraq 
War," Gist (May, 1985). 

9. 15 C.F.R. Section 385.4(d). 

10. Developments In The Middle East, July, 1984: Hear- 
ings before the Subcomm. on Europe and the Middle East 
of the House Comm. on Foreign Affairs, 98th Cong., 2d 
Sess., 52 (July 25, 1984). 

11. George Shultz, speech, "Terrorism and the Modem 
World," delivered at the Park Avenue Synagogue in Man- 
hattan (Oct. 25, 1984); see The New York Times, at A12 
(Oct. 26, 1984); "Shultz Says U.S. Should Use Force 
Against Terrorism," The New York Times, at Al (Oct. 12, 
1984). 

12. Developments In The Middle East, June, 1985: Hear- 
ings Before the Subcomm. on Europe and the Middle East 
of the House Comm. on Foreign Affairs, 99th Cong., 1st 
Sess., 22 (June 19, 1985). 

13. The New York Times, July 1, 1985, at AlO. 



162 



Chapter 9 
The Iran Arms Sales: The Beginning 



In August 1985, the President decided that the United 
States would allow arms sales to Iran. The decision 
represented a reversal of U.S. policy against selling 
arms to Iran and, as it later turned out, against 
making concessions for the return of hostages. Yet it 
was made so casually that it was not written down, 
the President did not recall it 15 months later, and the 
Secretaries of State and Defense were not even told 
of it at the time. 

The President's decision triggered a series of arms 
transactions with Iran that continued for 15 months. 
At the initial transaction, the Iranians established a 
pattern of dealing that never changed: Iran would 
agree to get the hostages freed in return for arms; 
once the arms arrived, the Iranians would demand 
still more weapons; only after another arms shipment 
would a single hostage — not a group, as promised — be 
freed. But, instead of breaking off the transactions, the 
Americans continued to accede to the Iranian de- 
mands. What follows is the story of how the arms 
sales began. 

The Actors Take Their Places 

Long before the President made his decision, the indi- 
viduals and circumstances that propelled the sales 
were at work in Washington, Jerusalem, and Tehran. 

Since the fall of 1984, the National Security Coun- 
cil (NSC) staff had been pressing other Government 
agencies to develop a plan for opening a relationship 
with Iran and moderating that government's anti- 
American stance. The State Department and the De- 
fense Department opposed the notion, and while the 
Central Intelligence Agency (CIA) was favorably in- 
clined, officials there said renewed relations hinged on 
the release of seven U.S. hostages held by the pro- 
Iranian Hizballah in Lebanon and on a pledge by Iran 
to stop terrorist activities. 

In Jerusalem, officials were eager for better rela- 
tions with Iran, for two very pragmatic reasons: com- 
mercial and diplomatic. Israel had friendly relations 
with Iran under the Shah. Despite revolutionary 
Iran's vow to destroy Israel, the Israelis regarded Iraq 
as a greater threat to their security than Iran. Israel's 
goal was to create conditions for the resumption of 



commercial and diplomatic relations with a post-Kho- 
meini regime. 

Tehran had its own agenda. Rhetoric notwithstand- 
ing — the United States was considered "The Great 
Satan" and Israel a blasphemy — Tehran wanted 
modern tanks and high-technology antitank and anti- 
aircraft missiles to counter Iraq's Soviet-made fighter 
planes and modern tanks. It needed spare parts to 
maintain the arsenal of weapons that the Shah had 
purchased from the United States. 

The unlikely catalyst for bringing these disparate 
parties together was Manucher Ghorbanifar — a re- 
sourceful Iranian merchant living in Paris who under- 
stood the intersection of interests and saw how the 
American hostages could be used as an incentive for 
the sale of missiles to Iran. 

Ghorbanifar 

Since fleeing Iran in 1979, Ghorbanifar had sought 
to make a career as a broker through whom Western 
governments could develop contact with Iran. By 
1984, Ghorbanifar was well known to U.S. intelli- 
gence services, and details of his activities filled a 
thick file in the CIA's Operations Directorate. The 
CIA viewed Ghorbanifar with particular disfavor, but 
that did little to discourage the Iranian from trying to 
interest U.S. intelligence agencies in various schemes, 
all of which would financially benefit him. 

His CIA file describes Ghorbanifar as an Iranian 
businessman and self-proclaimed "wheeler dealer" 
who, prior to the 1979 revolution, had been the man- 
aging director of an Israeli-connected Iranian shipping 
company. According to rumors, Ghorbanifar also was 
an informant for SAVAK, the Shah's intelligence 
service, and had a relationship with Israeli intelli- 
gence; but those relationships have never been con- 
firmed. 

Ghorbanifar's business permitted him to travel out- 
side Iran, and, following the revolution, he chose 
Paris as his base of operations, particularly after he 
and his brothers, Ali and Reza, were implicated in an 
abortive July 9, 1980, coup attempt in Iran. Ghorbani- 
far apparently developed his own intelligence net- 
work and endeavored to sell his services to various 
Western governments. Ghorbanifar became a CIA re- 
porting source in January 1980. Described by the 



163 



Chapter 9 



Agency as a "rumormonger of occasional usefulness," 
Ghorbanifar lasted as a source only until September 
1981, when the Agency decided he was concerned 
solely with advancing his financial interests. • 

Information generated by Ghorbanifar continued to 
reach the CIA, however, both directly and through 
other intelligence agencies. In January 1984, Ghor- 
banifar contacted U.S. Army Intelligence in West 
Germany with tales of "Iranian terrorist organiza- 
tions, plans, and activities." ^ In mid-March, a CIA 
officer met with Ghorbanifar in Frankfurt to explore 
the data Ghorbanifar was offering. At that meeting, 
Ghorbanifar indicated he had information on the kid- 
napping, in Beirut, of CIA Chief of Station William 
Buckley. He identified an Iranian official (the Second 
Iranian), who would play a key role in the arms-for- 
hostages transactions a year later, as the "individual 
responsible" for the kidnapping.^ He also described 
an Iranian plot to assassinate U.S. Presidential candi- 
dates.'' 

A CIA-administered polygraph examination of 
Ghorbanifar on this information indicated he was 
lying. Ghorbanifar gave no satisfactory explanation 
for the results.^ Undeterred, he again approached the 
CIA in June 1984, this time trying to broker a meet- 
ing between the U.S. Government and another Irani- 
an official (the First Iranian).^ The First Iranian was 
also to be a key player in the arms-for-hostages trans- 
actions of 1985 and 1986. According to Ghorbanifar, 
the First Iranian was favorably disposed towards the 
United States.'' 

Again, Ghorbanifar was polygraphed, and again, 
the examination indicated he was lying.* This time, 
the CIA responded by publishing, on July 25, 1984, a 
rarely issued "Fabricator Notice," warning Agency 
personnel and other U.S. intelligence and law enforce- 
ment agencies that Ghorbanifar "should be regarded 
as an intelligence fabricator and a nuisance." ^ 

Ghorbanifar Proposes to Ransom the Hostages 

Ghorbanifar continued to seek a relationship with 
the U.S. Government. His first chance came in No- 
vember 1984 when he met Theodore Shackley, a 
former Associate Deputy Director for Operations of 
the CIA who had retired from the Agency in 1978. 
On behalf of his "risk management" firm, Research 
Associates, Inc., Shackley maintained contact with 
the former head of the Shah's SAVAK Counterespio- 
nage Department VIII, General Manucher Hashemi. 
At the suggestion of Hashemi, Shackley traveled to 
Hamburg, West Germany, where he met with a 
group of Iranians, including Ghorbanifar, the First 
Iranian and a Dr. Shahabadi, chief of the Iranian 
purchasing office in Hamburg and purportedly a 
friend of Saudi entrepreneur and arms dealer Adnan 
Khashoggi. At one meeting, on November 20, Ghor- 
banifar told Shackley that for a price he could ar- 
range for the release of U.S. hostages in Lebanon 



through his Iranian contacts. Ghorbanifar said he re- 
quired a response on the "ransom deal" by December 
7. Ghorbanifar added that he would not work with 
the CIA because the Agency was "unreasonable and 
unprofessional." '° Upon his return to the United 
States, Shackley sent a memorandum about his meet- 
ings with Ghorbanifar to Lt. Gen. Vernon Walters, 
Ambassador-at-Large in the State Department and 
a former Deputy Director of the CIA." Walters 
referred the memorandum to Hugh Montgomery, 
Director of Intelligence and Research in the State 
Department. Montgomery, in turn, passed the Shack- 
ley memorandum to Ambassador Robert B. Oakley, 
head of the State Department's counterterrorism ef- 
forts, and Assistant Secretary of State for Near East- 
ern Affairs Richard W. Murphy. Oakley and Murphy 
regarded the hostage ransom proposal as a "scam," 
and on December 11, 1984, Montgomery told Shack- 
ley that the State Department was not interested in 
pursuing the Ghorbanifar ransom proposal.'^ 

Ghorbanifar Tries Again 

Ghorbanifar still did not give up. Having failed 
with the CIA, the Army, and the State Department, 
he found another and ultimately more fruitful channel 
into the U.S. Government through Israel. A New 
York businessman, Roy Furmark, served as the con- 
tact point. Furmark had previously worked for Adnan 
Khashoggi, and was a friend of CIA Director William 
Casey. Furmark also knew Cyrus Hashemi, a natural- 
ized U.S. citizen of Iranian extraction whom Furmark 
tried to interest in a number of business ventures.'^ In 
January 1985, Furmark and Ghorbanifar met while 
Furmark was in Europe to discuss business opportuni- 
ties in Iran.'* 

Furmark later introduced Ghorbanifar to Hashemi 
and Khashoggi.'^ Ghorbanifar, at this time, was look- 
ing for sophisticated weapons for Iran, and Khashoggi 
suggested that Ghorbanifar try to develop access to 
the United States and its weapons through Israel. 
Sometime later, Khashoggi put Ghorbanifar and Ha- 
shemi in touch with an Israeli group: Al Schwimmer, 
an adviser to then Israeli Prime Minister Shimon 
Peres, and Ya'accov Nimrodi, an Israeli businessman 
with government service background.'^ Both Kha- 
shoggi and Hashemi saw the potential for huge profits 
if Ghorbanifar were to become the conduit for U.S. 
arms to Iran and gain control of trade between the 
United States and Iran." 

At Khashoggi's initiative members of the Israeli 
team met with Hashemi and Ghorbanifar in London, 
Geneva, and Israel in early spring. Weapons sales to 
Iran were discussed but the meetings produced noth- 
ing concrete.'* In late April, Ghorbanifar proposed 
to one of the Israelis that he be permitted to purchase 
U.S. -manufactured TOW antitank missiles from Israel, 
and, in return, he would obtain the release of CIA 



164 



Chapter 9 



Beirut Chief of Station Buckley, then a hostage in 
Lebanon.'^ 

Ledeen Gets Involved 

At about that same time, NSC consultant Michael 
Ledeen was trying to persuade National Security Ad- 
viser Robert McFarlane to use him as an informal 
channel to get intelligence on Iran from Israel, using 
his close personal relationships with several high- 
ranking Israeli ofricials.^° In March 1985, Ledeen met 
in Europe with a senior official from a western Euro- 
pean nation who told Ledeen that the United States 
could play a significant role in Iran. The foreign offi- 
cial recommended that the United States contact 
Israel because the Israelis had the best intelligence 
resources on Iran.^' Upon his return to the United 
States in early April, Ledeen proposed to McFarlane 
that he be authorized to meet with Israeli Prime Min- 
ister Peres and other Israeli officials to explore poten- 
tial Israeli-U.S. cooperation on Iran.^^ Although the 
NSC staff told McFarlane that "none of us feel Mike 
should be our primary channel for working the Iran 
issue with foreign governments," ^^ they were im- 
pressed with Ledeen's access to Prime Minister Peres, 
and therefore recommended that Ledeen informally 
meet with the Israelis to express interest in developing 
"a more serious and coordinated strategy for dealing 
with the Iranian succession crisis."^* McFarlane 
agreed. 

Ledeen traveled to Israel in early May.^^ On May 
3 he met with Prime Minister Peres and then with a 
former senior official of the Israel Defense Forces. ^^ 
During the meetings, Ledeen said he was acting on 
McFarlane's behalf, although in a private rather than 
official capacity, and expressed interest in sharing in- 
telligence on Iran. According to Ledeen, the Ameri- 
cans held hostage in Lebanon were not discussed at 
these meetings in early May.^' An Israeli official, 
however, recalls Ledeen's telling him about offers by 
various Iranians to help get the hostages released.^® 
According to Ledeen, the Prime Minister asked him 
to advise McFarlane that Israel wanted to sell artil- 
lery shells or pieces to Iran but would do so only if it 
received U.S. approval.^* 

The NSC Reconsiders Iran Policy 

When he returned to the United States, Ledeen told 
NSC staff member Donald Fortier that the Israelis 
were interested in working with the United States on 
Iran. At the time, Fortier was working closely with 
CIA National Intelligence Officer for the Near East 
and South Asia, Graham Fuller, who was updating 
the Special National Intelligence Estimate (SNIE) on 
Iran at McFarlane's request.^" A SNIE represents the 
U.S. intelligence community's short-term assessment of 
a given country or situation in response to a specific 
need. Both the SNIE circulated on May 20 and a 



memo submitted by Fuller three days earlier to CIA 
Director Casey, included a recommendation of arms 
sales through an ally as one of a number of options 
for pursuing an opening to Iran. 3' The NSC staff 
concluded that Israel should be that country, al- 
though Fortier continued to question whether Ledeen 
was the appropriate intermediary through which the 
United States should deal with Israel. ^^ 

On June 3, 1985, McFarlane approved a second 
Ledeen trip to Israel, ^^ but Ledeen's return to Israel 
was delayed when Secretary of State George P. 
Shultz protested Ledeen's earlier trip.^* Shultz had 
heard from the U.S. Ambassador to Israel that 
Ledeen had been in Israel talking to Israeli officials 
about obtaining intelligence on Iran, without notice to 
the U.S. Embassy. ^^ Shultz complained to McFarlane 
that neither he nor the U.S. Ambassador to Israel had 
been informed of the trip, and pointed out that Israel 
and the United States had differing interests in Iran. 
He also questioned the wisdom of relying upon Israeli 
intelligence about Iran.^^ McFarlane told Shultz that 
Ledeen had taken the May trip "on his own hook." 
He also said he was "turning [the Iran initiative] off 
entirely."^'' In fact, McFarlane told Ledeen to post- 
pone, not cancel, the trip.^* 

Major policy changes call for consultation with the 
Secretaries of State and Defense and an opportunity 
for the President to consider their views. McFarlane 
thus began the established process of interdepartmen- 
tal policy formulation. He had earlier requested the 
CIA to prepare the updated SNIE on Iran, and in 
June he asked members of his staff to prepare a draft 
National Security Decision Directive (NSDD). An 
NSDD is a Presidential directive establishing policy 
in a particular area. It is the result of an analytical 
process, including discussions among the interested 
parties. 

Fortier and Howard Teicher of the NSC staff sub- 
mitted the draft NSDD to McFarlane on June 11, and 
on June 17, McFarlane circulated this draft to Secre- 
tary Shultz, Secretary of Defense Caspar W, Wein- 
berger, and CIA Director Casey. The draft NSDD 
recommended, among other things, that anti-Kho- 
meini factions in Iran should be supported, and that 
U.S. allies and friendly states should be encouraged to 
"help Iran meet its import requirements . . . 
includ[ing] provision of selected military equip- 
ment."^^ To bolster the NSC's analysis, McFarlane 
cited the CIA's earlier intelligence estimate that had 
recommended such arms sales, and warned of the 
Soviet threat to Iran.'*" 

Only Casey endorsed the draft NSDD.*' Secretary 
Weinberger wrote on the transmittal note accompany- 
ing the draft, "This is almost too absurd to comment 
on. . . . It's like asking Quadaffi to Washington for a 
cozy chat.'"*^ Weinberger's response to the National 
Security Adviser was less sarcastic but unambiguously 
negative.''^ Secretary Shultz's response was also nega- 



165 



Chapter 9 



live. He criticized the idea of relaxing the arms em- 
bargo against Iran, warned against the danger of 
strengthening Iran, and disagreed with the notion that 
Iran was in danger of faUing into Soviet hands.''* 
During the same period, the President was sharply 
critical of Iran. In a speech to the American Bar 
Association on July 8, 1985, the President declared 
Iran to be part of a "confederation of terrorist states 
... a new international version of Murder Incorpo- 
rated." He added, "Let me make it plain to the assas- 
sins in Beirut and their accomplices that America will 
never make concessions to terrorists."*^ 

The Discussions Continue 

While the Secretaries of State and Defense were 
opposing any relaxation of the arms boycott of Iran, 
Israel was receiving different signals from the NSC 
staff. Ledeen testified that McFarlane had authorized 
him to tell Prime Minister Peres that Israel could 
engage in a one-time arms sale to Iran of artillery 
shells or pieces, "but just that and nothing else."*® 
One of the Israeli participants reported to another 
Israeli participant, however, that the authorization 
conveyed by Ledeen from McFarlane was for a trans- 
fer of TOW missiles.*' 

By early June, the Israelis were considering a trans- 
action linking the sale of TOWs to the release of the 
American hostages.** However, the Israelis were un- 
willing to proceed without evidence of a clear, ex- 
press, and binding consent by the U.S. Government to 
the proposed transaction.*^ 

On June 19, Ghorbanifar, accompanied by Fur- 
mark, met in Israel with the Israeli team. Ghorbanifar 
proposed that the Israelis sell 100 TOWs to Iran 
through him. He also agreed to set up a meeting with 
an Iranian official.^" 

The Israelis reported these developments to McFar- 
lane. In late June, according to McFarlane's testimo- 
ny, David Kimche, the Director General of the Israeli 
Foreign Ministry, became involved in the project. 
Kimche had an established relationship with McFar- 
lane and Ledeen.^' While in Washington for another 
purpose in early July, he briefed McFarlane on the 
ongoing contacts of Israeli and Iranian officials, and 
the Iranians' interest in establishing contact with the 
United States. ^^ Kimche recommended that the dis- 
cussions with the Iranians continue. McFarlane told 
Secretary Weinberger about the meeting, and Wein- 
berger's military assistant, Lt. Gen. Colin Powell, re- 
called that McFarlane discussed both the sale of arms 
to Iran and the hostages. ^^ 

On July 8, 1985, members of the Israeli team met in 
Hamburg with Ghorbanifar, Khashoggi, Khashoggi's 
son-in-law, and the First Iranian. Before the meeting, 
Ghorbanifar told the Israelis that the sale of 100 
TOWs was essential to enhance his credibility with 
Iran, and claimed that the sale would be followed by 
the release of the American hostages.** 



Ghorbanifar described the First Iranian as a politi- 
cally powerful individual in his own right, with close 
personal connections to Khomeini, and a leader of 
one of Iran's revolutionary organizations.^* 

At the meetings, the First Iranian spoke of the need 
for a party who could act as a bridge between Iran 
and the United States, of the threat of Soviet influ- 
ence in Iran, and of the risks he had taken in meeting 
with Israel in order to promote an opening with the 
United States. The participants also discussed missiles 
and hostages.*® The First Iranian promised to present 
a comprehensive written proposal within a week. 

Shortly after that meeting, according to Ledeen's 
testimony, Schwimmer flew to Washington and met 
with Ledeen on July 11, 1985. He briefed Ledeen on 
Ghorbanifar's proposal to obtain the release of the 
American hostages in exchange for TOW missiles.*' 
Ledeen then wrote McFarlane, "The situation [con- 
cerning Iran] has fundamentally changed for the 
better."** On July 13, he briefed McFarlane orally on 
the Israeli talks with the Iranians.*^ 

After meeting with Ledeen, McFarlane cabled Sec- 
retary Shultz with a summary of the proposal con- 
veyed by Israel: 

The short term dimension concerns the seven 
hostages; the long term dimension involves the 
establishment of a private dialogue with Iranian 
officials on the broader relations. . . . They [the 
Iranians] sought specifically the delivery from 
Israel of 100 TOW missiles. . . .^° 

McFarlane recommended to Shultz that the United 
States go forward with a tentative show of interest, 
although his admonition proved to be prophetic: 

Then one has to consider where this might lead 
in terms of our being asked to up the ante on 
more and more arms and where that could con- 
ceivably lead. . . .®' 

Shultz responded to the proposal with caution, rec- 
ommending that "we should make a tentative show of 
interest without commitment." ®^ 

In the meantime, Israel awaited the United States' 
response on whether it was authorized to sell the 
TOWs. 

The President Is Informed 

McFarlane decided to take the matter to President 
Reagan, even though the President was in the hospital 
recuperating from surgery. By this time, the release of 
the hostages had become an immediate concern to the 
President. He had met with the hostage families for 
the first time in late June, and had been moved by the 
experience. On July 3, he had attended a National 
Security Planning Group meeting to discuss the hos- 
tages, and had come away frustrated at the lack of 
alternatives. 



166 



Chapter 9 



McFarlane met with the President at the hospital 
on July 18. Donald Regan, the White House Chief of 
Staff, was present.®^ What was discussed at this meet- 
ing is not clear: Apparently no one took notes. Regan 
did not recall any mention of arms at the meeting, ^^' 
and McFarlane's accounts have varied: More than a 
year later, on November 21, 1986, McFarlane wrote 
in a PROF note to Poindexter that the President "was 
all for letting the Israelis do anything they wanted at 
the very first briefing in the hospital."^* But during 
the public hearings McFarlane stated that the Presi- 
dent's position was that no U.S. owned items from the 
United [S]tates [could be] proper[ly] shipped at that 
time.^^ This left open the possibility that the Israelis 
were free to ship from Israel Israeli-owned TOWs 
that had been acquired from the United States. ^^ 

McFarlane testified that the Israelis were informed 
that the President was unwilling to allow the United 
States to supply arms directly to Iran.^' Ledeen testi- 
fied, however, that, in accordance with McFarlane's 
instructions, he informed the Israelis that the Presi- 
dent approved "in principle" the sale of TOWs by 
Israel subject to further review of the details.®* 

But Israeli Defense Minister Yitzhak Rabin would 
not proceed unless he received assurances that the 
Secretary of State knew of the plan and that the 
President unequivocally approved. The Israelis were 
concerned that the initiative could become public; and 
without specific American approval, Israel would be 
the target of criticism. In the meantime, the Israelis 
had received the First Iranian's written proposal, 
dated July 16, 1985, which was passed on to Ledeen. 
The proposal was general, promising a more concrete 
plan in the near future. It contained no commitment 
for the release of the hostages.®* 

The Israelis insisted on meeting with Ghorbanifar 
to secure a commitment for the release of the Ameri- 
can hostages in return for the shipment of 100 
TOWs.''" The meeting took place in Israel on July 25. 
Ghorbanifar stressed the need for the 100 TOWs and, 
for the first time, mentioned spare parts for antiair- 
craft missiles." He also said that the Iranians needed 
other weapons as well. Ghorbanifar stated that the 
weapons would not only strengthen his and the First 
Iranian's credibility in Iran, but also win the support 
of the military. The Israelis told Ghorbanifar that 
they could recommend that their government supply 
the missiles only if secrecy would be maintained and 
the hostages released. Ghorbanifar stated that within 
2 to 3 weeks of delivery of the missiles, the hostages 
would be released, although he warned that the Irani- 
ans might want to keep a few of the hostages for 
leverage. '2 On July 28, the Israelis briefed Ledeen on 
the meeting with Ghorbanifar, and on the Israeli deci- 
sion not to proceed unless U.S. authorization was 
more unequivocal. Ledeen reportedly said the Israelis 
had already received sufficient authorization from the 
response that the President had given in the hospital. 
But the Israelis were insistent on confirmation.''' 



The Israeli Arms Sales Are Authorized 

On August 2, according to McFarlane's testimony, 
Kimche fiew to Washington to meet with McFarlane 
and to obtain the specific U.S. position on Israel's sale 
of the TOWs. The meetings occurred on August 2 
and 3. McFarlane made no memorandum of the meet- 
ings, and recollections differ. All agree, however, that 
the Israelis asked for permission to sell 100 TOWs, 
and that McFarlane agreed to present the issue to the 
President.''* 

The White House log records an August 6 meeting 
between McFarlane and the President, the Vice Presi- 
dent, Secretaries Shultz and Weinberger, and Regan. 
McFarlane reported that the Iranians wanted a dia- 
logue with the United States and 100 TOWs from 
Israel in return for which four hostages would be 
released.''^ McFarlane also said that the United States 
would be able to deny any connection to or knowl- 
edge of the sale, a suggestion the Secretary of State 
regarded as untenable.'® Secretary Shultz told the 
President that it "was a very bad idea," and that 
despite the talk of better relations, "we were just 
falling into the arms-for-hostages business and we 
shouldn't do it." ■" 

Secretary Weinberger also opposed the sale. He 
and Secretary Shultz argued that the initiative would 
not work, and that the sale would contradict the U.S. 
efforts to persuade other countries to observe the 
embargo.'* None of the witnesses recalls the Vice 
President's position, and there is no evidence that 
Casey was consulted by the NSC staff at this stage. 
McFarlane, according to Ledeen, directed that Casey 
and the CIA not be informed for fear that the CIA 
might leak." 

Chief of Staff Regan testified that the President told 
McFarlane to "go slow" at the August meeting and 
to "make sure we know who we are dealing with 
before we get too far into this." *" According to all 
the participants, the President announced no decision 
at the meeting. 

Several days later, the President telephoned McFar- 
lane and, according to McFarlane, authorized the Is- 
raelis to proceed with the sale in modest quantities of 
"TOW missiles or other military spares" that would 
be replenished by the United States. The President 
stipulated that the sales not affect the balance of the 
I ran- Iraq war, not be used for terrorist purposes, and 
not include such major items as aircraft.*' McFarlane 
told Poindexter about the conversation, but Poin- 
dexter did not recall its contents.*^ Regan recalled 
that the President appeared upset when he learned in 
September that TOWs had been shipped. 

The President, in his Tower Board interview, origi- 
nally confirmed that he had authorized the sale, but 
later stated that he had no actual recollection one 
way or another.*^ No documents record the decision. 



167 



Chapter 9 



The Tower Board concluded that the President 
most likely approved the Israeli sales before they oc- 
curred. The evidence supports that conclusion. The 
Israelis expressly sought the President's approval of 
the Israeli sales and confirmation that the Secretary of 
State had been consulted. By McFarlane's own admis- 
sion, he told the Israelis that they were authorized to 
sell the TOWs.*^° McFarlane had no motive to ap- 
prove a sale of missiles to Iran if the President had 
not authorized it. Moreover, Ledeen testified that 
McFarlane told him of the President's decision.** 
McFarlane also contemporaneously reported the 
President's approval to Kimche.®^ 

The President's decision on the arms sale conveyed 
by McFarlane to the Israelis committed the United 
States to the policy unsuccessfully advocated in the 
draft NSDD — the sale of weapons by an American 
ally to Iran. 

Preparations for the Delivery 

In early August, the Israelis began to make the 
necessary arrangements to obtain the 100 TOWs 
through the Israeli Ministry of Defense.*^ Ghorbani- 
far, in the meantime, was meeting with Khashoggi in 
Spain to arrange financing for the initial TOW pur- 
chase. The Israeli Ministry of Defense was unwilling 
to supply the TOWs until payment had been deposit- 
ed. Iran, on the other hand, was unwilling to pay 
until the missiles were delivered. Ghorbanifar asked 
Khashoggi to "bridge" this gap by lending him $1 
million, which Ghorbanifar could then deposit with 
the Israelis and repay upon payment by Iran. Kha- 
shoggi agreed.*'' On August 7, Khashoggi ordered 
the transfer of $1 million into an Israeli intermediary's 
account.** Back in Washington, McFarlane asked 
Ledeen to coordinate with the Israelis on the release 
of the hostages in Lebanon.*^ 

Preparation for the TOW shipment continued in 
Israel. On August 12, the Israelis decided to deliver 
the TOWs to Iran by chartering a "neutral," non- 
Israeli DC-8 aircraft. Still unresolved at this time, 
however, was the price to be charged by the Israelis 
to Ghorbanifar for the missiles and the price to be 
paid by them to the Israeli Ministry of Defense for 
the TOWs. After considerable bargaining, Ghorbani- 
far agreed to pay $10,000 per missile, $2,000 less than 
he was receiving from the Iranian Government. 

The Israelis did not agree on the price the Ministry 
of Defense would receive until after the missiles were 
delivered to Iran. The Ministry of Defense wanted 
$12,000 per missile, which it calculated to be the 
replacement cost per missile. The Israeli intermediar- 
ies maintained that they could only pay $6,000 per 
missile, because the remainder of what they received 
from Ghorbanifar was required for heavy shipping 
costs and other substantial expenses. ®° The Ministry 
of Defense eventually received $3 million from an 



Israeli intermediary for the 504 TOWs in March 
1986.91 

Israel Ships 96 TOWs— But No Hostage 
Is Released 

On August 19, Ghorbanifar returned to Israel 
where he met with the Israeli team. Ghorbanifar ad- 
vised that he had made payments in Iran but he was 
not certain how many hostages would be released. As 
for CIA Station Chief Buckley, Ghorbanifar said that 
the Iranians recognized his "special value" and, there- 
fore, would return him last.^^ That same day, the 
DC-8 transport aircraft arrived in Israel, and was 
loaded with 96 (rather than 100) TOW missiles.'^ In 
the early morning hours of August 20, the plane left 
Israel bound for Iran, with Ghorbanifar on board. 
The TOWs were then delivered and the aircraft re- 
turned to Israel late that same day.'* 

But no hostages were released. Ghorbanifar had an 
explanation: contrary to his plan, delivery of the mis- 
siles was taken by the Commander of the Iranian 
Revolutionary Guards rather than by the Iranian fac- 
tion for whom they were intended. ^^ Still, Ghorbani- 
far remained hopeful that he could produce the hos- 
tages. With McFarlane's assent, Ledeen met with 
Kimche in London on August 20 to discuss ways to 
bring the hostages out of Lebanon. ^^ 

From London, Ledeen flew to California, where 
the President was vacationing, to brief McFarlane on 
his meeting with Kimche and to obtain McFarlane's 
authorization for a meeting in Europe with Ghorbani- 
far and the Israelis. 9'' On August 22, McFarlane ap- 
proved another trip to Europe for Ledeen. 9* On 
August 30, McFarlane arranged for the State Depart- 
ment to provide NSC staff member Oliver L. North 
with a passport in the name of William P. Goode for 
use in "a sensitive operation in Europe in connection 
with our hostages in Lebanon." ^s On August 27, the 
Government of Iran transferred $1,217,410 to Ghor- 
banifar's Swiss account. On August 29, Ghorbanifar 
repaid Khashoggi the $1 million loaned by Khashoggi 
on August 7.'"° Khashoggi told the Israelis that, be- 
cause he had been repaid for the first loan, he would 
agree to loan $4 million to permit Ghorbanifar to 
purchase an additional 400 TOWs from the Israe- 
lis. '"i 

400 More TOWs for 1 Hostage 

On September 4 and 5, Ledeen met in Paris with 
Ghorbanifar and members of the Israeli team. Since 
no hostages had been released despite the delivery of 
the 96 TOWs on August 20, severe arguments oc- 
curred at the meeting.'"^ Ghorbanifar indicated that 
one hostage would be released provided the Israelis 
sold Iran an additional 400 TOW missiles. We are 
satisfied from our review of all the evidence that the 
President was informed and approved of the transac- 



168 



Chapter 9 



tion in the hope that the hostages would be released. 
The second shipment was approved by Prime Minis- 
ter Peres and Defense Minister Rabin on September 
9.'°^ On September 10, Khashoggi ordered the trans- 
fer of $4 million into an Israeli intermediary's account 
to finance Ghorbanifar's purchase of the 400 
TOWs.'°'' The money reached the Israeli account on 
September 13 and Ghorbanifar repaid Khashoggi that 
$4 million the following day.'°* 

The aircraft used to transport the second shipment 
of TOWs to Iran arrived in Israel on September 14. 
The DC-8 was loaded with 408 missiles (bringing the 
total of TOWs shipped to 504), and, early the next 
morning, it flew to Tabriz to make delivery. On 
board was Ghorbanifar's Iranian assistant, Mahadi 
Shahista. Tabriz, rather than Tehran, was used as the 
Iranian delivery point to prevent this shipment from 
falling into the hands of the Revolutionary 
Guards. '06 

The Iranians made it clear that this was an arms- 
for-one-hostage bargain. They gave McFarlane the 
choice of any hostage other than Buckley."" Ghor- 
banifar told the Israelis that Buckley was too ill to be 
released.'"* In fact, Buckley had died in June of a 
pulmonary condition brought on by prolonged inter- 
rogation, torture, and mistreatment. 

On September 15, American hostage Reverend 
Benjamin Weir was released near the U.S. Embassy in 
Beirut. '09 

On September 17, the Israeli intermediary's account 
received an additional $290,000 from Ghorbanifar for 
the expense of transporting the 504 TOWs to Iran,"o 
and on September 18, Iran transferred $5 million to 
Ghorbanifar's Swiss account for the additional TOWs. 

Despite the fact that all the TOWs were delivered, 
only one hostage had been produced, not the group 
that Ghorbanifar originally had promised. Still, the 
President continued to receive optimistic reports on 
the initiative. However, no other hostages were re- 
leased for the 504 TOWs. 

NSC Staff Limits Distribution of 
Intelligence 

At the NSC, North was charged with making the 
necessary arrangements in the event that any hostages 
were released as the result of the September 1 5 TOW 
delivery. North had been briefed on the initiative ear- 
lier.'" 

On September 12, North contacted Director Casey 
for assistance in obtaining intelligence on Ghorbanifar 
(who was then using an alias) and the Second Iranian. 
Casey put North in touch with CIA's National Intelli- 
gence Officer for Counter-Terrorism, Charles Allen, 
who arranged for intelligence support. "^ At McFar- 
lane's instruction, North told Allen to distribute the 
intelligence only to McFarlane, Vice Admiral A. S. 
Moreau, Jr. of the Joint Chiefs of Staff, Casey, and 
North. ' ' ^ Secretaries Shultz and Weinberger were 



not to receive the intelligence. (Weinberger later 
found out about — and demanded — this intelligence.) 
Denied access to the intelligence, the State Depart- 
ment was not told of the Israeli TOW shipment, was 
not advised of the linkage of Weir's release to arms 
shipments, and was not informed of the President's 
decision or the U.S. Government's involvement. 

Replenishment 

McFarlane assured the Israelis that the TOWs 
shipped to Iran would be replenished at a price to be 
determined. But, McFarlane emphasized, the linkage 
between the Israeli sale to Iran and the U.S. sale to 
Israel could not be obvious."* 

On September 19, Ledeen sent a message to 
McFarlane regarding replenishment of Israeli TOW 
stocks in September: "Issue of replacements: The 
people who sold the soap for us want to replenish 
their supply." "* 

The Initiative Continues: The Ante Is 
Upped 

Despite Ghorbanifar's failure to secure the release 
of the four or five hostages originally promised, dis- 
cussions of further arms deals continued. In late Sep- 
tember, Ghorbanifar met with members of the Israeli 
team and Ledeen in Paris. This time, Ghorbanifar 
asked for antiaircraft missiles, including a new 
HAWK missile to attack high-flying aircraft. (The 
HAWKs do not have that capability, but apparently 
none of the participants was aware of this.) Ledeen 
reportedly consented to a HAWK transaction with 
Iran, but demanded that the hostages be released."® 
Ledeen recalls that McFarlane approved the sale of 
HAWKs before November, but Ledeen could not 
recall when."'' Nor could he recall this Paris meet- 
ing. ' ' ® 

In the meantime. North had received information 
that another U.S. hostage, allegedly Buckley, would 
be released between October 3 and 5."® However, 
the Islamic Jihad in Lebanon announced, on October 
3, that it planned to execute Buckley. North asked 
Ledeen to arrange for Ghorbanifar to come immedi- 
ately to the United States to discuss the hostages. On 
October 8, Ghorbanifar arrived in Washington, ac- 
companied by Schwimmer and Nimrodi, and met 
with Ledeen at the Old Executive Office Building. '^o 

At the meeting, Ledeen reportedly stated that the 
trading of arms for U.S. hostages was a bad idea that 
should be stopped. Ghorbanifar agreed.'^' Nonethe- 
less, the Iranian continued to press for a variety of 
weapons for Iran. '^^ 

At a subsequent meeting with North and McFar- 
lane, Ledeen maintains that he again expressed his 
reluctance to be involved with this arms-for-hostages 
arrangement; preferring to pursue a strategic, not an 
arms, relationship with Iran.'^^ McFarlane, on the 



169 



Chapter 9 



other hand, has stated that Ledeen was the person 
who communicated the most outrageous arms propos- 
als to him, and that he, McFarlane, is the one who 
was "consistently against arms-for-hostages." ^^* 
Ledeen kept his reports oral,'^^ and there is no writ- 
ten record from the fall of 1985 in which Ledeen or 
McFarlane protest arms sales. Whatever McFarlane's 
and Ledeen's own views may have been, arms were 
the currency for the Iran initiative, and McFarlane 
authorized Ledeen to go to Geneva in late October 
for a meeting that was to strike the deal for the Israeli 
HAWK shipment in November. '^^ 

Meeting in Europe, October 1985 

According to Ledeen, the purpose of the late Octo- 
ber meeting was not to strike an arms-for-hostages 
deal with the Iranians, but rather to approach the 
U.S.-Iranian initiative from the strategic, geopolitical 
perspective. Ledeen testified that he and the First 
Iranian discussed ways to improve U.S./Iranian rela- 
tions without trading arms for hostages. In fact, 
Ledeen maintained that like himself, this Iranian was 
"vociferously opposed to what had been done in pro- 
viding weapons to the Iranian regime over the course 
of the past couple of months, said that all we could 
achieve by sending arms to Iran was to strengthen the 
Khomeini regime, which was the opposite of what he 
thought we were about."i27 n ^35 Ledeen's belief 
that "so long as the Iranians are able to obtain weap- 
ons from the United States as a result of [a] dialogue 
with us, they will say anything and they will do 
anything in order to continue to get these weapons, 
and so long as that pipeline of weapons functions, we 
will never be able to evaluate their real inten- 
tions."*^^ 

Ledeen stated that upon his return from Europe, he 
reported to McFarlane that the First Iranian thought 
he could have his people occupy "key positions in the 



[Iranian] government" if the United States would help 
by providing a quantity of "small arms and training." 

By other accounts, however, such political discus- 
sions are not all that transpired at the late October 
meeting. According to one of the Israeli intermediar- 
ies, the Iranian official emphasized that efforts must 
be continued for the release of the four remaining 
hostages in exchange for arms, particularly HAWK 
missiles. Also according to the Israeli intermediary, 
Ledeen was pressing, on behalf of the U.S. President, 
for all four hostages to be released as soon as possible 
and all at once, and he promised that following their 
release the U.S. would assist Iran as far as it could. '^^ 

This appears to have been the last meeting among 
Iranian, Israeli, and American representatives before 
the shipment of HAWK missiles to Iran in late No- 
vember 1985. 

The Lessons of the First Arms 
Shipment 



The August-September 1985 TOW transaction set the 

pattern for the entire Iran initiative: 

—A promise by the Iranians to release the hostages in 

exchange for an agreed quantity of weapons. 

—The breach of that promise after delivery of the 

weapons. 

—The delivery of more weapons in response to new 

demands by the Iranians. 

—The release of a single hostage as an enticement to 

further arms transfers. 

The lesson to Iran was unmistakable: All U.S. posi- 
tions and principles were negotiable, and breaches by 
Iran went unpunished. Whatever Iran did, the U.S. 
could be brought back to the arms bargaining table by 
the promise of another hostage. 



170 



Chapter 9 



Chapter 9 



1. CIA Background Report on Manucher Ghorbanifar, C 
1461 at 1462. 

2. CIA Report, Army Intelligence and Security Com- 
mand (INSCOM) Report on Iranian Terrorism, 1/24/84, C 
1434-35. 

3. CIA cables on William Buckley, C 1502-12. 

4. C 1507. 

5. CIA cable on Ghorbanifar, 7/25/84, C 1463. 

6. Memo to CIA Chief of the Near East Division on the 
First Iranian, 6/19/84, C 1479. 

7. C 1479. 

8. C 1461, 1463. 

9. C 1463-64. 

10. Report on American Hostages in Lebanon, 12/22/84, 
N 7451-56; Shackley Int., 2/27/87, at 5-7. 

11. N 7451-56. 

12. Montgomery Int., 3/4/87. 

13. Furmark Dep., 7/22/87, at 18-19. In May 1984, Fed- 
eral criminal charges were filed against Cyrus Hashemi and 
his brothers, Reza and Jamshid, among others, for alleged 
arms export control violations. Ultimately, Hashemi ar- 
ranged with the U.S. Customs Service to run a sting oper- 
ation that resulted in the April 22, 1986, indictment of 17 
individuals in the Southern District of New York on 
charges that they had engaged in an illegal scheme to smug- 
gle $2.5 billion in U.S. made weapons to Iran. Until his 
death, apparently of natural causes, in July 1986, Hashemi 
was to be the primary prosecution witness at the trial of 
that case. CIA Memo on Cyrus Hashemi, C 9059-61. 

14. Furmark Dep., 7/22/87, at 22-23. 

15. Id. at 36-38. 

16. Furmark Dep., l/ll/il, at 52-55. Furmark places 
Khashoggi's introduction of Ghorbanifar to Schwimmer and 
Nimrodi in June. 

17. Furmark Dep., 7/22/87, at 53. 

18. Israeli Historical Chronology. Classified information 
from the Israeli Chronologies is used in this Report pursu- 
ant to specific agreement between the Government of Israel 
and the Committees. See, Appendix, "Organization and 
Conduct of the Committees" Investigation." 

19. Id. 

20. Ledeen Dep., 3/11/87, at 9-11. 

21. W. 

22. Id. at 13-15. 

23. PROF Note from Donald Fortier to McFarlane on 
Iran, 5/28/85, N 16390. 

24. Id.; PROF Note from Fortier to McFarlane on 
Ledeen and Iran, 4/9/85, N 16390-91; PROF Note from 
McFarlane to Fortier on Ledeen and Iran, 4/9/85, N 15306. 

25. Ledeen Dep., 3/11/87, at 14, 16. 

26. Id at 16-20. 

27. Id at 17-19; Ledeen Dep., 6/19/87, at 40-43. 

28. Israeli Historical Chronology. 

29. Ledeen Dep., 3/11/87, at 17-19; Ledeen Dep., 6/19/ 
87, at 40-43. 

30. N 16394. 

31. Graham Fuller Memo, 5/17/85, to Casey: Subj; Irani- 
an Policy, D 570-75. 

32. N 16394. 

33. N4113. 

34. Ledeen Dep.. 6/19/87, at 44. 

35. Ex. GPS B. 



36. Ex. GPS 5. 

37. Ex. GPS 6. 

38. Ledeen Dep., 6/19/87, at 45. 

39. McFarlane Memo, 6/17/85, to Shultz and Weinberg- 
er: Subj: U.S. Policy Toward Iran, N 53467. 

40. Ex. CWW 4. 

41. Casey Memo, 7/18/85, to McFarlane: Subj: Draft 
NSDD re U.S. Policy Toward Iran, N 7583. 

42. Ex. CWW 4; Weinberger, 7/31/87, at 86. 

43. Ex. CWW 5. 

44. Ex. GPS 7; Shultz Test., 7/23/87, at 64. 

45. President Reagan's Speech to American Bar Associa- 
tion, 7/8/85. 

46. Tower at B-6. 

47. Israeli Historical Chronology. 

48. Id. In early June 1985, Khashoggi advised the Israelis 
that Khashoggi would deal directly with Ghorbanifar and 
the Israelis, to the exclusion of Hashemi. Israeli Historical 
Chronology. When, in June, Khashoggi excluded Hashemi, 
Hashemi reacted by trying to market Ghorbanifar to the 
CIA, through one of Director Casey's close friends, John 
Shaheen. 

On or about June 16, 1985. Shaheen called Casey and 
relayed a message from Hashemi offering to set up a meet- 
ing in Europe with a high-ranking Iranian official to discuss 
Iran's interest in acquiring U.S. TOW missiles and Iran's 
ability to help obtain the release of American hostages held 
in Lebanon. Before talking to Casey, Shaheen had dismissed 
part of Hashemi's proposal, telling him. "no weapons, no 
Da'was." Casey Memo, 6/17/85, to CIA Chief of the Near 
East Division: Subj: Release of the Hostages, C 8965-66. 

Hashemi had tried to deal with Casey before without 
success. However, this time, Casey agreed to Shaheen's 
proposition, and directed the Chief of the Near East Divi- 
sion of the CIA's Operations Directorate to pursue the 
matter. The State Department was told that Casey was 
"very anxious to move ahead on a proposal" for a meeting 
with an Iranian representative; but, as outlined in a memo- 
randum to Under Secretary of State Michael Armacost, the 
proposal made no mention of any arms sales. By June 24, 
Armacost had approved a plan by which a meeting would 
be set up between foreign intermediaries and the Iranian 
contact to be produced by Hashemi. Richard Murphy 
Memo, 6/22/85, to Armacost: Subj: Possible Iranian Con- 
tact, S 3812-13. 

In early July, Hashemi identified his Iranian contacts as 
the Second Iranian, described by Hashemi as Deputy Prime 
Minister of Iran, and Manucher Ghorbanifar, described by 
Hashemi as a ranking Iranian intelligence officer. CIA 
Memo for the Record, 7/9/85, Subj: John Shaheen and 
Hashemi, C 9082-84. The CIA recognized the Second Irani- 
an as a significant Iranian official and Ghorbanifar as a 
"fabricator" with whom it did not wish to do business. The 
Agency suspected a scam but was nonetheless prepared to 
pursue a meeting between foreign intermediaries and the 
Second Iranian. Efforts in that regard continued through 
July and August. CIA Cable on Possible Contacts with 
Iranian Government Reps., 7/85, C 1475-77; CIA Memo for 
the Record on Hashemi, 7/23/85, C 9072; CIA Cable. 7/85, 
C 9073; CIA Cable re the Second Iranian Meeting, C 9074; 
CIA Memo for the Record on Hashemi, 7/15/85, C 9075- 



171 



Chapter 9 



76; CIA Memo for the Record on Hashemi, 7/15/85, C 
9011-lS; CIA Memo for the Record on Hashemi, 7/23/85, 
C 9079; S 3812-16. However, no meeting with the Second 
Iranian occurred at that time. C 9059-60; George Test., 
Hearings. 100-11, at 191-192; Former Chief/NE (CIA) Dep., 
4/28/87, at 26-53. 

49. Israeli Historical Chronology. 

50. Id. 

51. McFarlane Test., Hearings. 100-2, at 43. 

52. Id. at 43-44. 

53. Powell Dep., 7/19/87, at 5-7. 

54. Israeli Historical Chronology. 

55. Id 

56. Id 

57. Ledeen Dep., 6/19/87, at 51. Approximately 2 months 
prior to the meeting with Schwimmer, Shackley told 
Ledeen about a meeting Shackley had had with an "Iranian 
in Europe" who offered to "arrange the Ransom of Buckley 
and possibly other American hostages." Shackley also gave 
Ledeen a memorandum describing the proposal, N 7452-56. 
Although Shackley was describing his meeting with Ghor- 
banifar in November 1984, see pp. 6-8, and the memoran- 
dum mentions Ghorbanifar by name, Ledeen testified that 
he passed the memorandum on to North without reading it 
and that he had never heard of Ghorbanifar before meeting 
with Schwimmer on July 11. Ledeen Dep., 3/11/87, at 28- 
30. 

58. Note to McFarlane from Wilma Hall, his secretary, 
on Schwimmer and Ledeen, 7/11/85, N 10579. 

59. Ledeen also gave McFarlane a document written by 
Khashoggi that advocated an overture toward Iran. 

60. Ex. GPS 9. 

61. Id 

62. Ex. GPS 10. 

63. McFarlane Test., Hearings. 100-2 at 45-47. Regan 
Test., Hearings. 100-10, at 6. 

63a. Regan Test., Hearings. 100-10, at 6. 

64. Ex. 59. 

65. McFarlane Test., Hearings, 100-2, at 46. 

66. Id 

67. Id 

68. Ledeen Dep., 9/10/87, at 27-28. 

69. Israeli Historical Chronology. 

70. Id 

71. Id 

72. Id 

73. Id 

74. McFarlane Test., Hearings, 100-2, at 48-49; Israeli 
Historical Chronology. 

75. Shultz Test., Hearings. 100-9, at 27. 

76. Id 
11. Id 

78. Weinberger Test., Hearings, 100-10, at 131-32. 

79. Ledeen Dep., 6/19/87, at 74. 

80. Regan Test., Hearings.\QO-\Q, at 12. 

81. McFarlane Test., 5/11/87, at 114-21. 

82. Poindexter Test., 7/15/87, at 38. 

83. Tower at B-19, 20. 

83a. McFarlane Test., Hearings. 100-2, at 49. 

84. Ledeen Dep., 6/19/87, at 58-61. 

85. McFarlane Test., Hearings. 100-2, at 50. 

86. Israeli Historical Chronology. 

87. Furmark Dep., l/ll/il. at 73-76. 

88. Israeh Financial Chronology. 



89. Ledeen Dep., 6/19/87, at 66; Ledeen Dep., 6/19/87, 
at 61-65. 

90. Israeli Historical Chronology. 

91. Id 

92. Buckley died in June 1985 after long interrogation and 
torture. But the U.S. Government believed that he was still 
alive as late as the fall of 1985, and was seeking his release. 

93. The TOWs were packed in pallets of 12 missiles each, 
and no unpacked missiles were shipped for safety reasons. 
Israeli Historical Chronology. 

94. Id. The Tower Board Report states that the first 
shipment by the Israelis of 100 TOWs occurred August 30, 
1985. See Tower at B-26. The Board's source for that date 
is not apparent from the text of the Report. The August 20 
date from the Israeli Chronology appears accurate given the 
context of related events. 

95. Id at 27. 

96. Ledeen Dep., 3/11/87, at 52; Ledeen Dep., 6/19/87, 
at 66-68. 

97. Ledeen Dep., 3/11/87, at 52-53. 

98. PROF Note by McFarlane on Ledeen, 8/22/85, N 
17790. 

99. Tower at B-25; see also North Memo to McFarlane: 
Subj: Fake Passport for North, N 6412-13. Ledeen has testi- 
fied that to his knowledge, this was North's first involve- 
ment in and knowledge of the Iran initiative. See Ledeen, 
Tower Int. (1) at 46 and (2) at 74; Ledeen Dep., 6/19/87, at 
72. 

100. Israeli Historical Chronology. Only the $1 million 
repayment figure is derived from the Israeli Chronology. 

101. Id 

102. Id 

103. Id 

104. Israeli Historical Chronology; Israeli Financial Chro- 
nology. 

105. Israeli Financial Chronology. 

106. Israeli Historical Chronology. 

107. McFarlane Test., 5/11/87, at 122-23. 

108. Israeli Historical Chronology. 

109. Id 

110. Israeli Financial Chronology. The Tower Report's 
analysis of this transaction differs from that provided by the 
Israelis. According to Tower, Ghorbanifar initiated the 
transaction with a $4 million check to Khashoggi. Kha- 
shoggi transferred $4 million to the Israeli account on Sep- 
tember 14. The Iranians transferred $5 million to Ghorbani- 
far's Swiss account on September 18. Ghorbanifar then noti- 
fied Khashoggi to negotiate the $4 million check. Ghorbani- 
far paid later an additional $250,000 to the Israeli account 
for "additional eight TOW missiles." Tower at B-176-77. 

111. North Test., Hearings, 100-7, Part II, at 25, 48. 

112. Charles Allen, National Intelligence Officer, Memo 
Subj; Initiative to Secure Release of American Hostages, 
10/7/85, I 0644; Allen Dep., 4/21/87, at 49-58. 

113. Charles Allen, Tower Int. at 6. Within the CIA, 
Allen testified that the intelligence reports were provided to 
DDO Clair George, Allen Dep., 4/21/87, at 77-79. George 
denies receiving the material generated prior to the Finding. 
George Test., 8/5/87, at 277. 

114. McFarlane Test., Hearings. 100-2, at 49. 

115. N 16502; Ledeen Dep., 3/11/87, at 59-60; Ledeen 
Dep., 6/19/87, at 68-80. 

116. Israeli Historical Chronology. 

117. Ledeen Dep.. 9/10/87, at 17. 



172 



Chapter 9 



118. Id. at 16-17. 122. Id. at 81. 

119. I 0645. 123. Ledeen Dep., 3/11/87, at 71-78; Ledeen Dep., 6/19/ 

120. Ledeen Dep., 6/19/87, at 81. Ledeen disputes the 87, at 81-88. 

representation in Charles Allen's memorandum, I 0644-46, 124. McFarlane letter published in Wall Street Journal, 8/ 

linking the October 8 meeting to the threat on Buckley's life 14/87. 

by the Islamic Jihad. Ledeen says there was no expectation 125. Ledeen Dep., 9/10/87, at 15. 

of hostage releases in early October. See Ledeen Dep., 6/ 126. Ledeen Dep., 3/11/87, at 78-82. 

22/87, at 132-39. 127. Ledeen Dep., 3/11/87, at 81-82. 

121. Ledeen Dep., 6/19/87, at 83-84; Ledeen Dep., 6/22/ 128. Id at 83, 78. 

87, at 181-83. 129. Israeli Historical Chronology. 



173 



Chapter 10 

Arms to Iran: A Shipment of HAWKs 
Ends in Failure 



An Israeli-American plan to sell HAWK missiles to 
Iran in exchange for American hostages crystallized 
in November 1985. The plan — which grew out of the 
late October meeting in Geneva among Michael 
Ledeen and Iranian and Israeli officials and interme- 
diaries — ultimately led to a shipment of 18 HAWK 
antiaircraft missiles by a CIA airplane from Israel to 
Tehran on November 24 and 25. As the plan evolved, 
National Security Adviser Robert McFarlane had 
contacts with senior Israeli officials, brought aspects 
of the plan to the attention of the President, Chief of 
Staff Donald Regan, and the Secretary of State, and 
gave Oliver North increasing responsibility for over- 
seeing the plan's implementation. The planning and 
execution of the operation did not proceed smoothly, 
and in the end, no hostages were released. 

Ledeen Brings Home a Plan 

NSC consultant Michael Ledeen returned to Wash- 
ington from the Geneva meeting at the end of Octo- 
ber 1985. He told North and McFarlane of the Na- 
tional Security Council Staff of the proposal by Man- 
ucher Ghorbanifar and the other Iranians that the 
United States provide specified missiles in return for 
the release of U.S. hostages in Lebanon. On October 
30, 1985, Ledeen first met alone with North and then 
with both North and McFarlane.' In the first meet- 
ing, Ledeen said that the "First Iranian," a highly 
placed Iranian official who acted as a go-between in 
the arms sales negotiations, "wants to be U.S. ally — 
has support in Tehran." Ledeen spelled out the Irani- 
ans' demands for securing the American hostages' 
freedom. He told North that, "to get hostages out," 
the Iranians wanted a "blanket order" of 150 HAWK 
missiles, 200 Sidewinder missiles, and 30 to 50 Phoe- 
nix missiles. The proposal contemplated that the hos- 
tages would be released in three groups, with separate 
arms deliveries to Iran to occur before the second and 
third releases. Ledeen raised the unresolved problem 
of U.S. replenishment of the 500 TOWs withdrawn 
from Israeh reserves and shipped to Iran in August 
and September 1985 prior to the release of hostage 
Benjamin Weir. Ledeen said Israeli Defense Minister 
Yitzhak Rabin was "complaining about" the United 



States' failure to make good on its promise to replace 
those items. ^ 

North and Ledeen met with McFarlane later that 
day to continue the discussion. Ledeen, claiming that 
improved U.S. -Iranian relations could follow an 
agreement, advocated cooperation with the Israelis 
"to bring out credible military and political leaders" 
in Iran. McFarlane expressed skepticism even about 
the existence of moderate elements in Iran, let alone 
their ability to come to power. Nevertheless, he did 
not oppose renewing arms shipments to Iran. McFar- 
lane instructed North and Ledeen that "not one single 
item" of armaments should be shipped to Iran without 
the release of "live Americans."^ McFarlane, Deputy 
National Security Adviser John Poindexter, and other 
senior American officials often repeated this instruc- 
tion over the next several months, but it was consist- 
ently disregarded. 

Ledeen's meeting with the First Iranian in Geneva 
led to meetings between the Americans and Israelis in 
early November 1985. The Iranians had significantly 
increased their demands for weapons. Moreover, the 
Israelis still sought replenishment of the TO'.Vs they 
had sold to Iran. 

On November 8, David Kimche, the Director Gen- 
eral of the Israeli Foreign Ministry, met in Washing- 
ton with McFarlane, North, and Ledeen.* This was 
one of a series of meetings that McFarlane had with 
Kimche in the fall of 1985.^ Ledeen arranged this 
session in the hope of keeping the Iran initiative 
moving: 

I asked Kimche to talk to McFarlane because I 
was convinced that McFarlane was getting ready 
to resign, and was in a bad psychological state 
and was planning to abandon the entire Iranian 
initiative. I urged to Kimche to talk to McFar- 
lane to ask him, first, not to resign; and second, 
not to abandon the political initiative with regard 
to Iran.® 

North-Nir Dialogue Begins 

North and Amiram Nir, the Israeli Prime Minister's 
Adviser on Combatting Terrorism, met in Washington 
on November 14.' Although they apparently did not 
discuss arms sales to Iran, they did set the foundation 



175 



Chapter 10 



for a variety of future Israeli-U.S. covert operations. 
North jotted notes indicating that this operation could 
require at least a milhon dollars a month "for near 
term and probably mid-term rqmts [requirements]." 
North's notes list several unanswered questions: 

• How to pay for 

• How to raise $ . . . 

• Use Israelis as conduit? 

• Go direct? 

• Have Israelis do all work w/U.S. pay? 

• Set up joint/Israeli cover op ® 

On November 19, North and Nir discussed two 
code-named covert operations, "T.H. 1," the one they 
had discussed on November 14, and "T.H. 2." North's 
notes reflect that the second operation would also 
require a source of "op[erational] funds. "^ In mid- 
November, North did not have answers to the fund- 
ing question. But, according to North, within a few 
months, he and Nir had solved the problem: they 
would use the Iran arms sales profits.'" Planning for 
the privately funded joint covert activities began. 

McFarlane Briefs CIA 

On November 14, after a regular weekly meeting 
attended by Director of Central Intelligence William 
Casey, his deputy, John N. McMahon, and Poin- 
dexter, McFarlane told Casey of "the Israeli plan to 
move arms to certain elements of the Iranian military 
who are prepared to overthrow the government."" 
McMahon said McFarlane provided this information 
casually as the meeting was breaking up. Casey relat- 
ed this information to McMahon on the drive back to 
Langley.'^ McMahon recalled that this information 
left him with the impression that the NSC staff was 
merely monitoring an ongoing Israeli effort.'^ 

McFarlane Gives Rabin the Go-Ahead 

The following day, Israeli Defense Minister Rabin 
met with McFarlane at the White House and told him 
that Israel was about to make another arms shipment 
to Iran and would need replenishment from the 
United States.** Rabin wanted "to reconfirm that the 
President of the United States still endorsed this con- 
cept of Israel negotiating these arms sales." McFar- 
lane replied that the President's authorization for 
Israel to sell arms to Iran subject to replenishment by 
the United States was still in effect, and that this was 
"based upon recent questions and reaffirmation by the 
President that I had received."'^ Rabin also sought 
reassurance that the matter was indeed a joint project 
between the United States and Israel. McFarlane re- 
plied that while the United States supported Israel's 



activities, it was going along with Israel on this 
matter. ' ^ 

Rabin raised the still unresolved question of the 
U.S. commitment to replenish the 504 TOW missiles 
sent to Iran in August and September. McFarlane 
replied that he was aware of the difficulties and that 
within two weeks he would be sending North to 
Israel to find a technical means of achieving the re- 
placement.''' 

McFarlane Briefs the President 

McFarlane told the President about the developing 
plans for the HAWK transaction shortly before they 
left on November 17 for a summit meeting with 
Soviet leaders in Geneva. Regan, who was present, 
said it was: 

[JJust a momentary conversation, which was not 
a detailed briefing to the President, that there [is] 
something up between Israel and Iran. [McFar- 
lane said] [i]t might lead to our getting some of 
our hostages out, and we were hopeful. . . .'^ 

McFarlane did not stress that what he and Rabin saw 
as Ghorbanifar's unreliability was adding to the risks 
of the operation. Instead, McFarlane merely made "a 
passing reference here or there" about these concerns, 
and did not discuss them at length with the President 
at the time. '^ The President's reaction was "cross 
your fingers or hope for the best, and keep me in- 
formed."^" 

The November HAWK Shipment 

By the third week of November, the Israeli interme- 
diaries and the Americans believed they had reached 
an agreement with Ghorbanifar on a plan that would 
gain release of all the hostages by Thanksgiving. The 
plan was, in essence, a straight swap: U.S. -made mis- 
siles in Israeli stocks would be sold to Iran in ex- 
change for American hostages. As the exchange date 
approached, many details remained unresolved. They 
were only hammered out in separate and frantic long- 
distance negotiations among the Israeli intermediaries 
and Ghorbanifar, Ghorbanifar and his contacts in the 
Iranian Government, and Israeli Government officials 
and NSC officials. 

How Many Missiles? 

One critical component of the plan was unsettled 
until the eleventh hour — the number and type of mis- 
siles that the Israelis would ship to Iran. As evidenced 
by their late October proposal, the Iranians wanted to 
purchase immediately hundreds of millions of dollars 
worth of sophisticated U.S. -made missile systems for 
use in their war with Iraq. The Israelis were con- 
cerned about depleting their stocks. The Americans, 
who had not found a solution to the replenishment 



176 



Chapter 10 



requirements arising out of the August and September 
missile shipments, sought an agreement involving 
smaller quantities of missiles shipped over time. The 
middlemen in the transaction — Ghorbanifar and Al 
Schwimmer and Yaacov Nimrodi, Israeli arms dealers 
also involved in the negotiations — had substantial 
monetary incentives to negotiate a deal in which large 
quantities of weapons and money would change 
hands. 

By Sunday, November 17, the planners had decided 
on an initial shipment of 80 HAWK missiles. 2' This 
shipment was to be just the start of a much larger, 
phased transaction. 

On November 18, North called Schwimmer, who 
was in direct contact with Ghorbanifar. They dis- 
cussed a sale of 600 HAWKs to Iran in groups of 100 
spread out over the next 3 or 4 days. Schwimmer told 
North that the first shipment of 100 missiles had been 
"approved" in Tel Aviv and that it was to be fol- 
lowed by the release of five "boxes," the code name 
for the American hostages. ^^ After the call. North 
wrote in his Notebook: "Schwimmer to P/U [pick up] 
HAWKs in U.S."^^ That day, an Israeli official told 
Prime Minister Shimon Peres that the Americans 
were willing for 500 HAWK missiles to be supplied, 
but it was proposed that Israel supply 80 HAWKs. ^^ 

There is other evidence of plans for a very large 
weapons shipment to Iran: In mid-November a Euro- 
pean broker sought an air carrier to transport immedi- 
ately 10 planeloads of armaments in long crates from 
the capital of Country 15 to Tehran. ^^ An airline 
owned by the CIA became aware of the shipment. ^^ 
This CIA airline proprietary learned that "[t]he cargo 
is declared to be medicine but is in reality ammunition 
etc." ^' When this same proprietary was called in 
about 10 days later by CIA officials to move HAWK 
missiles, the company's manager concluded that the 
cargo was the same as what the European broker had 
offered earlier.^® 

By November 20, the plan — as reported by North 
to Poindexter — had moved away from one involving 
500 to 600 HAWKs toward one that included these 
components: First, 80 HAWKs from Israeli stocks 
were to be moved to Iran on Friday, November 22, 
on three planes spaced apart by 2 hour intervals. 
After the planes were launched, but before they 
landed in Iran, five American and possibly one 
French hostage would be released. After the hostages 
were freed, 40 more HAWKs would be moved to 
Iran. The United States would replenish Israel's 
stocks promptly by sale at a mutually agreed price. ^^ 

North's notes from the same day confirm that the 
initial delivery was to be 80 items, but indicate a key 
difference from what he had reported to Poindexter: 
the American hostages would not to be freed all at 
once in advance of the arrival of any HAWKs, but 
rather would be released sequentially after each ship- 
ment. After referring to the total of 80 HAWKs, 
North wrote: 



—One 27-2 
27-3 
26-1 
6+ 1 French ^° 

This notation appears to mean that 2 hostages were to 
be released after a first shipment of 27 missiles, 3 
hostages were to be released after a second shipment 
of the same amount, and 1 hostage would be released 
after a third shipment of the remaining 26 items. In 
fact, within a few days, an initial load of HAWKs 
arrived in Tehran without any prior hostage release. 

McFarlane's instruction not to ship weapons with- 
out the prior release of the hostages thus was not 
followed. From this point on, the Iranians would 
always insist on sequential delivery of weapons, fol- 
lowed by the release of hostages. On November 20, 
North wrote in his notebook: "120 HAWKs=l) 5 
Amcits, 2) Guarantee that no more." ^' 

North's notes also suggest that although the initial 
shipment quantity had been reduced from 600 
HAWKs, additional arms shipments to Iran were con- 
templated after the shipment of 120 HAWKs. Follow- 
ing a description of the sequence of delivery for the 
first 80 HAWKs and the hostage releases. North 
wrote: "After— 40 more HAWKs, 200 SW [Sidewind- 
er] missiles, 1900 TOWs." ="2 

McFarlane Puts North in Charge 

While McFarlane was at the Geneva summit with 
the President, North became immersed in the details 
of the HAWK transaction. North testified that he was 
"thrown into this on the night of November 17," in 
almost simultaneous telephone calls from Rabin and 
McFarlane. ^^ Rabin told North that the plan called 
for Israel to move 80 HAWK missiles by November 
20. He said that Israel was unwilling to commence the 
shipment without satisfactory arrangements for re- 
plenishment by the United States.^* According to 
North's notes, McFarlane told North to solve Rabin's 
replenishment problem, and "to keep orders under 
$14M" each — the threshold figure for reporting for- 
eign military sales to Congress. ^^ After the calls from 
McFarlane and Rabin, North "flew up immediately 
[to New York] to talk with Mr. Rabin." In New 
York, he met with officials of the Israeli Ministry of 
Defense Procurement Mission, who wanted to ar- 
range replenishment sales to Israel of 508 TOWs and 
120 HAWK missiles. 3 6 

The next day. North or Poindexter asked Lt. Gen. 
Colin Powell, then military assistant to Secretary of 
Defense Casper Weinberger, about the availability 
and price of HAWKs and TOWs, and the legality and 
method of transferring such missiles. The requester 
initially sought information on a proposed transfer of 
500 HAWKs, but, in accordance with the evolving 
plan, soon cut the number to 120. Powell understood 



177 



77-02O 



Chapter 10 



that the ultimate destination of the weapons would be 
Iran and that Israel was acting as an intermediary.^'' 
After receiving this request, Powell contacted Noel 
Koch, Principal Deputy Assistant Secretary of De- 
fense for International Security Affairs, who in turn 
asked Henry Gaffney, Director of Plans, Defense Se- 
curity Assistance Agency (DSAA), to find out how 
many HAWKs were available for immediate transfer. 
DSAA is the entity within the Department of De- 
fense that is primarily responsible for arms sales to 
other governments. Koch asked Gaffney to prepare a 
Point Paper examining the requirements for notifica- 
tion of Congress and whether the ultimate destination 
of the weapons might be concealed.''* 

Gaffney testified that he understood from his supe- 
riors that the Point Paper should cast a negative view 
of the transaction to reflect Secretary Weinberger's 
presumed opposition to arms transfers to Iran.'® He 
completed his paper, entitled "HAWK Missiles for 
Iran," on November 22 or 23 and submitted it to 
Powell. Powell testified that he gave the paper to 
Secretary Weinberger,*" who did not, however, 
recall receiving it.*" 

Gaffney's Point Paper included important informa- 
tion about the price and availability of HAWKs: 164 
missiles were available for foreign sale at that time; 
the missiles cost the United States approximately 
$300,000 per unit; and replacement cost would be as 
much as $437,700 per unit. Transportation and admin- 
istration charges would have to be added. Seventy- 
nine of the missiles were available for immediate ship- 
ment. This state of the inventory may be one reason 
why the number of HAWKs planned for immediate 
shipment from Israel to Iran — and therefore the 
number which the United States would have to quick- 
ly replenish — was set at 80. Gaffney's Point Paper 
also described political drawbacks of a weapons trans- 
fer to Iran.''^ 

Gaffney testified that under the Arms Export Con- 
trol Act, Iran was not an eligible country for direct 
sales from the United States, and that, in his view, 
even if Iran were to become eligible, the contemplat- 
ed sales of HAWKs could not be made directly or 
indirectly (through Israel or otherwise) unless the 
President notified Congress. In addition, Gaffney tes- 
tified that if the transfer were to be made by Israel, 
U.S. -Israeli agreements require advance, written U.S. 
consent. U.S. law mandates that the President cannot 
give that consent without certain conditions being 
met in advance, including obtaining assurance from 
Iran that it would use the weapons only for self- 
defense and would comply with U.S. restrictions on 
retransfer to another country. These were conditions 
that Iran could not or would not meet.*' 



McFarlane Informs the President and the 
Secretary of State 

While they were still in Geneva, McFarlane updat- 
ed the President and Chief of Staff Donald Regan on 
the status of the HAWK shipment and the anticipated 
hostage release.*'' McFarlane informed them that the 
Israelis were about to ship the weapons, and ex- 
pressed hope*^ that the hostages would come out by 
the end of the week.*^ McFarlane specifically told 
the President that Israel was about to deliver 80 
HAWK missiles to Iran via a warehouse in Country 
15, and that Israel wanted the United States to re- 
place those missiles.'" 

McFarlane testified that he simply told the Presi- 
dent that the Israelis were about to act, but did not 
ask for specific approval: 

[T]he President provided the authority in early 
August for Israel to undertake, to sell arms to 
Iran, and to then come to the United States for 
replenishment, to buy new ones. That didn't re- 
quire then the Israelis to come back to us on each 
occasion and get new approval.** 

The President asked McFarlane to arrange a meeting 
at which the President and his top advisers would 
review the initiative after the summit.*® 

At about the same time, McFarlane also told Secre- 
tary of State George Shultz of the impending arms- 
for-hostages swap.*" McFarlane called Secretary 
Shultz by secure phone "out of the blue, about a 
hostages release and arms sales to Iran."*' McFar- 
lane explained that Israel was about to ship 100 
HAWKs to Iran through Country 15, that the ship- 
ment would occur only if the hostages were released, 
and that the United States would sell replacements to 
Israel.*^ Secretary Shultz understood it as "a straight- 
out arms-for-hostages deal." He expressed his opposi- 
tion, and rebuked McFarlane for not informing him 
about it earlier: "I told him I hoped that the hostages 
would get out, but I was against it, and I was upset 
that he was telling me about it as it was just about to 
start so there was no way I could do anything about 
it." *' When asked about Secretary Shultz' account, 
McFarlane testified: "I don't recall it that way." ** 

Even as McFarlane was filling in Shultz on the 
broad outline of the plan, his NSC subordinates took 
steps to keep the Department of State hierarchy in 
the dark about the complex diplomatic problems 
caused by the operation. For instance. Secretary 
Shultz was not told of the back-channel communica- 
tions and actions of State Department officials, taken 
at the behest of CIA and NSC officials, to support the 
HAWK shipment." 

North Recruits Secord 

As McFarlane had explained to the President and 
Secretary Shultz, the plan was to move 80 HAWKs 



178 



Chapter 10 



from Tel Aviv to the capital of Country 15, transfer 
them to other planes, and then ship them on to Iran. 
The planners chose this circuitous routing because 
direct flights from Israel to Iran would draw attention 
given the poor relations between Israel and Iran.^'^ 
Because the cargo was arms, special clearances had to 
be obtained from the government of Country 15. As 
the pilot who ultimately flew the HAWKs to Iran 
stated: 

Everybody can fly [in Europe] without clear- 
ances unless you have . . . sensitive stuff like 
arms aboard, and then you have to have diplo- 
matic clearance.^'' 

A problem developed on November 18: The gov- 
ernment of Country 15 was unwilling to grant the 
special clearances. On that day, North asked Richard 
Secord — his confederate in the covert operation sup- 
porting the Contras — to fly to Country 15 to "see 
what he could do to straighten out the mess."*^ 
Secord said this was when he learned of the Iran arms 
initiative. ^^ North explained the secret operation to 
Secord, indicating that it had been sanctioned by the 
United States, that it had run into difficulties in Coun- 
try 15, and that there was "quite a bit of urgency" to 
get Secord to go there. According to Secord, North 
"knew that we had — my organization had had exten- 
sive deals with the armament [industry]" in Europe 
and "wondered if I could arrange for this transship- 
ment."^° 

The next day. North gave Secord a letter on White 
House stationery, signed by North "for" McFarlane, 
stating 

Your discrete [sic] assistance is again required in 
support of our national interests. At the earliest 
opportunity, please proceed to [the capital of 
Country 15] and other locations as necessary in 
order to arrange for the transfer of sensitive ma- 
teriel being shipped from Israel. 

As in the past, you should exercise great caution 
that this activity does not become public knowl- 
edge. You should ensure that only those whose 
discretion is guaranteed are involved.^' 

McFarlane testified he was not aware that North 
was providing this letter to Secord, and that his per- 
mission was not sought to send it out.^^ 

Secord arrived in Country 15 on November 20.®^ 
He and his associate Thomas Clines, who Secord said 
"had really been handling all of the matters for the 
Enterprise" in Europe, together started "to work the 
problem . . . through our colleagues in the armament 
industry . . ."^* 

Million-Dollar Deposit to Lake Resources 

On November 18 — the same day that he brought 
Secord into the deal — North began to arrange for a 



$1 -million transfer from Israeli intermediaries to the 
account of Lake Resources,''^ a Panamanian company 
controlled by Secord and referred to by North as 
"our Swiss Co[mpany]."^8 Lake Resources and its 
account at Credit Suisse in Geneva had been estab- 
lished by North and Secord in May 1985 "to receive 
monies in support of the covert operations."®'' Prior 
to this deposit, which was made on November 20,** 
Secord and North had used the company exclusively 
for supporting the Contras. 

The purpose for this $1 -million deposit is unclear. 
North and Secord testified that the payment was for 
chartering planes to move the 80 HAWKS to Iran.^s 
The Israeli Historical Chronology affirms this expla- 
nation.'" North and Secord, however, were unable to 
explain why they were asking for transportation ex- 
penses on November 18 when, according to Secord, 
his original assignment was only to help obtain land- 
ing clearances for planes already chartered by 
Schwimmer." It was not until November 22, when 
Schwimmer's charter unexpectedly fell through, that 
Secord's role was expanded. '^ At that time, the 
amount Secord expected to pay for chartering planes 
was less than $1 million. '^ 

Some evidence suggests that Secord made, or con- 
templated making, expenditures in Country 15. One of 
the persons with whom Secord was working, an offi- 
cer of a European arms company, reportedly attempt- 
ed to bribe an official of the government of Country 
15 to obtain the necessary clearances,'''' and there are 
references to Secord having spent substantial sums in 
Country 15.'^ However, bank records do not show 
any such payments out of the Lake Resources ac- 
count. 

Whatever the initial purpose of the deposit, the 
Committees have ascertained its use. Secord used ap- 
proximately $150,000 to pay for air charters relating 
to the HAWK shipment, and the remaining $850,000 
was spent to support the Contras and to make profit 
distributions to Secord and his business associates, 
Albert Hakim and Thomas Clines.''* North testified 
that in early 1986 he told the Israelis that the money 
had been used "for the purpose of the Contras" and 
that they acquiesced.'" The first "diversion" to the 
Contras of money received in connection with the 
Iranian arms sales had occurred. 

Confusion in Country 15 

The plan to ship the HAWKs through Country 15 
faced collapse because the government there refused 
to grant the necessary clearances. Upon arriving in 
Country 15, Secord and his associates — the European 
businessman and Clines — tried to overcome this prob- 
lem. ''* All three were fully aware that the cargo to be 
moved was HAWK missiles.''^ Because their efforts 
were outside normal diplomatic channels and in con- 
tradiction to stated U.S. policy, they were not well- 
received by the government of Country 15.*° 



179 



Chapter 10 



The European businessman may have tried to solve 
the problem even before Secord arrived. The Deputy 
Chief of Mission of the U.S. Embassy in Country 15 
recalled learning on November 23 that about one 
week earlier the European businessman had ap- 
proached an official of Country 15 and offered what 
the official considered to be a bribe to assist in the 
transit of a shipment involving the United States, 
Israel, and Iran.*' If this approach occurred around 
November 16, as the evidence suggests, then it draws 
into question Secord's testimony that he was not 
brought in until November 18. 

On November 20, the European businessman called 
an official of Country 15's Foreign Ministry and ex- 
pressed the hope that the Foreign Ministry would 
grant permission for two aircraft carrying weapons 
from Israel for Iran to transit the country. To the 
official, the businessman appeared to be "acting as a 
broker for the arms deal." The European businessman 
referred to an "American general," presumably 
Secord, involved in the undertaking. The foreign gov- 
ernment was disturbed by the businessman's approach, 
and the next day another official asked the American 
Embassy for "information about this strange case." 
The Embassy, unaware that the U.S. Government 
supported this shipment of weapons to Iran, told the 
Foreign Ministry that the shipment was not author- 
ized by the United States and was contrary to U.S. 
Government policy strongly opposing arms sales to 
Iran.*^ 

Contributing to the confusion of the government of 
Country 15 was another incident on November 21. 
"Anonymous people claiming to 'represent the Ameri- 
can administration' " attempted to intercept the coun- 
try's Foreign Minister and Prime Minister at the air- 
port of the capital of Country 15 following their 
return from the European Economic Summit in Brus- 
sels.*^ A CIA cable reporting this incident stated that 
this approach, while unsuccessful, was "particularly 
upsetting" to the foreign government because it 
"aroused both attention and suspicion."** 

North Updates Poindexter 

As the operation faltered on November 20, North 
reported to Poindexter and portrayed a mission well 
under control. He made no mention of the obstacles 
faced in Country 15: 

The Israelis will deliver 80 Mod HAWKS to [the 
capital of Country 15] at noon on Friday 22 Nov. 
These 80 will be loaded aboard three chartered 
aircraft, owned by a proprietary which will take 
off at two hour intervals for Tabriz, [Iran]. The 
aircraft will file for overflight through the [cap- 
ital of Country 16] FIR enroute to Tabriz [from 
Country 15]. Appropriate arrangements have 
been made with the proper . . . [Country 16] air 
control personnel. Once the aircraft have been 
launched, their departure will be confirmed by 



Ashghari [a pseudonym for Ghorbanifar] who 
will call [the Second Iranian official] who will 
call [an Iranian in Damascus] who will direct 
[another Iranian in Beirut] to collect the five rpt 
five Amcits [American citizen hostages] from 
Hizballah and deliver them to the U.S. Embassy. 
There is also the possibility that they will hand 
over the French hostage who is very ill. 

There is a requirement for 40 additional weaps of 
the same nomenclature for a total requirement of 
120. $18M in payment for the first 80 has been 
deposited in the appropriate account. No acft will 
land in Tabriz until the AMCITS have been de- 
livered to the embassy. The Iranians have also 
asked to order additional items in the future and 
have been told that they will be considered after 
this activity has succeeded. All transfer arrange- 
ments have been made by Dick Secord, who 
deserves a medal for his extraordinary short 
notice efforts. 

Replenishment arrangements are being made 
through the MOD [Israeli Ministry of Defense] 
purchasing office in NYC. There is, to say the 
least, considerable anxiety that we will somehow 
delay on their plan to purchase 120 of these 
weapons in the next few days. JAW [in accord- 
ance with] your instructions I have told their 
agent that we will sell them 120 items at a price 
that they can meet. I have further told them that 
we will make no effort to move on their purchase 
LOA [Letter of Offer and Acceptance] request 
until we have all five AMCITS safely delivered. 
In short, the pressure is on them.*^ 

This PROF message is clear evidence that North in- 
formed Poindexter in detail of the HAWK transac- 
tion — including the involvement of Secord and the 
replenishment arrangements — well in advance of the 
shipment. 

North Asks the CIA for Assistance 

Secord and the European businessman were unable 
to budge the government of Country 15. With only 
hours left before an Israeli plane carrying 80 HAWKs 
was to depart for the capital of Country 15, North 
urgently sought assistance from McFarlane, the CIA, 
and the State Department. North called McFarlane 
on the evening of November 21; they discussed 
whether McFarlane should call Country 15's Prime 
Minister or Foreign Minister in the morning.*^" 

Informed by Secord of the difficulties in Country 
15, North immediately asked CIA official Duane 
Clarridge to assist in obtaining clearances for the 
plane going there. *^ Clarridge said Secord should 
contact the CIA Chief in Country 15, whose name 
North then relayed to Secord.*' At the same time, 
Clarridge sent "flash" cables instructing the CIA 



180 



Chapter 10 



Chief in Country 15 and his deputy to report immedi- 
ately to the office for a "special assignment."** 

The next morning, November 22, Secord, using his 
Copp pseudonym, called the CIA Chief and said that 
he urgently needed clearance for an El Al charter 
flight scheduled to leave Tel Aviv in 20 minutes and 
fly to the capital of Country 15. Secord urged the 
CIA Chief to call an official of Country 15 and em- 
phasize the urgency of obtaining the clearance. At 
this point, the CIA Chief suggested enlisting the help 
of the Deputy Chief of Mission at the U.S. Embassy 
in Country 15.*^ 

North Brings State Into the Operation 

At about this time, North pressed to involve the 
U.S. Embassy directly in the efforts to obtain the 
clearances. North accurately told Robert B. Oakley, 
then Director of the Office of Counterterrorism and 
Emergency Planning at the Department of State, that 
Israel had encountered problems obtaining clearances 
in Country 15 for a transshipment of HAWK missiles 
for Iran. In contrast, North falsely told Oakley that 
he had learned of the shipment when " 'one of his 
people' went to an arms warehouse [in Country 15] to 
obtain arms for the Nicaraguan Resistance, and 
learned that the Israelis had been obtaining arms from 
the same source for shipment to Iran." In any event, 
Oakley gave North permission to tell the Embassy in 
Country 15 that the State Department was "aware" of 
the unfolding operation and that the Embassy "could 
request clearances." ®° Thereafter, the CIA Chief was 
instructed to insure that if the Deputy Chief of Mis- 
sion felt compelled to communicate with the State 
Department, he should use only the CIA channel.^ ^ 

The NSC also involved Oakley and the State De- 
partment in another capacity. On November 21, 
Oakley notified the CIA's counterrorism component 
that "information from the NSC indicated that one or 
more U.S. hostages would soon be released in Leba- 
non." Oakley reported that a team was departing for 
Wiesbaden, West Germany, to await the arrival of the 
hostages. The team arrived in Wiesbaden the follow- 
ing day, and remained there until November 27. ^^ 

On November 22, Oakley reported to Secretary 
Shultz (who had returned from Geneva) and others at 
the State Department "that the hostages would be 
released that afternoon in exchange for 120 HAWKs 
at $250,000 each— worth $30 million in all." Secretary 
Shultz and his advisers. Deputy Secretary John C. 
Whitehead and Undersecretary Michael Armacost, 
shared their apprehension about the endeavor. The 
Secretary, who "regarded it as a $30 million weapons 
payoff," told his deputies: "Bud [McFarlane] says he's 
cleared with the President."*^ 

The next day. Secretary Shultz was told that no 
hostage had been released and that the deal had col- 
lapsed.^* That was false. The operation was still 



being actively pursued, and the movement of 18 
HAWKs was yet to occur. 

Jumbo Jet Departs for Country 15 
Transit Point 

Although the clearance for landing in Country 15 
had not been authorized on the morning of November 
22, the El Al 747 carrying the 80 HAWK missiles 
was ordered to take off for that country's capital. As 
the plane neared its "go — no go point," frantic efforts 
were underway to change the country's government's 
position. Clarridge cabled the CIA Chief in Country 
15 and ordered him to "pull out all the stops" to 
solve the problem. ^^ Secord called an official in 
Country 15's foreign ministry, who said that the gov- 
ernment had decided to withhold permission based 
upon the U.S. Embassy's previous statement that the 
United States did not concur in the shipment.** 
Hoping to reverse this position, the Deputy Chief of 
Mission made hurried phone calls attempting to 
summon the Country 15 Foreign Minister out of a 
cabinet meeting; and Secord told the CIA Chief that 
"McFarlane was being pulled out of [a] meeting with 
[the] Pope" to call the Foreign Minister.*^ 

All these efforts were in vain. By early afternoon, 
Secord, who was in radio contact with the El Al 
plane,®* telephoned North and informed him that the 
government of Country 15 had refused permission. 
He said the aircraft had been ordered back to Tel 
Aviv.®* 

North and Clarridge Bring In a CIA 
Airline 

Due to the delays, the El Al plane, which the 
Israelis had reserved for this operation for only a 
limited time, was no longer available. '°° Clarridge, 
North, and Secord scrambled to find other ways to 
transport the HAWK missiles to Iran. Within hours, 
Clarridge met with the Chief of the CIA's air branch 
and told him "we [have] a very sensitive mission in 
the Middle East and we need a 747 aircraft right 
away." The branch chief could not locate such a 
large aircraft on short notice, but suggested that a 
CIA airline proprietary might be able to move the 
cargo.'"' At 4 p.m. on November 22, an air branch 
official called the CIA project officer for the proprie- 
tary, and asked whether its Boeing 707 cargo planes 
were available to move 80 pieces of "sensitive hi 
priority cargo" from Tel Aviv to the capital of Coun- 
try 15. The project officer reported that at least one 
of the airline proprietary's planes was available.'"^ 

Clarridge's actions resulting in the involvement of 
the air proprietary were at North's request and with 
the authority of CIA Associate Deputy Director of 
Operations, Edward Juchniewicz.'°^ Juchniewicz 
spoke with both Clarridge and North on November 
22, and told them he had no objection to giving 



181 



Chapter 10 



Secord the commercial name of the airhne proprie- 
tary to charter the necessary flights.'"* Over the next 
48 hours, Clarridge and CIA air branch personnel 
closely managed the proprietary's flight activities in 
support of this covert operation.'"^ Before the oper- 
ation was over, the proprietary's project officer also 
became directly involved in coordinating matters.'"^ 

Clarridge Brings in Another CIA Chief 

Even as the problems in Country 15 remained unre- 
solved, Clarridge, on the evening of November 22, 
moved to obtain clearances from another country, 
Country 16, for overflight rights into Iran."" Clar- 
ridge cabled the CIA Chief in Country 16 proposing 
that he ask Government authorities for "overflight 
clearances for three commercial DC-8 aircraft (or 
similar aircraft) flying on a chartered basis from 
[Country 15] to Tabriz and then retracing their 
route." Clarridge explained that this was "a National 
Security Council initiative and has the highest level of 
USG [United States Government] interest." The CIA 
Chief was to explain that "the purpose of the flight is 
humanitarian in nature and is in response to terrorist 
acts." Clarridge specifically instructed that the U.S. 
Ambassador to Country 16 "should not be in- 
formed." '°* 

Schwimmer's DC-8 Charter Falls Through 

On the evening of November 22, Schwimmer 
called North to say the charter of the DC-8s for the 
Country 15-to-Iran leg of the mission had fallen 
through. In a PROF note to Poindexter, North updat- 
ed the situation as of 7:00 p.m.: 

Unbelievable as it may seem, I have just talked to 
Schwimmer, in TA [Tel Aviv,] who advises that 
they have released their DC-8s in spite of my call 
to DK [David Kimche] instructing that they be 
put on hold until we could iron out the clearance 
problem in [the capital of Country 15]. Schwim- 
mer released them to save $ and now does not 
think that they can be re-chartered before 
Monday.'"^ 

Within minutes of Schwimmer's call, North and 
Secord discussed a substitute method of transporting 
the missiles from Country 15 to Iran. Secord suggest- 
ed that the European businessman's company try to 
find some planes."" North wrote to Poindexter that 
Secord would solve the problem by diverting a plane 
from the Contra operation to the Iran operation: 

Advised Copp of lack of p/u [pick up] A/C 
[aircraft]. He has advised that we can use one of 
our LAKE Resources A/C which was at [the 
capital of Country 15] to p/u a load of ammo for 
UNO [United Nicaraguan Opposition]. He will 
have the a/c repainted tonight and put into serv- 
ice nit [no later than] noon Sat so that we can at 



least get this thing moving. So help me I have 
never seen anything so screwed up in my life. 
Will meet with Calero tonite to advise that the 
ammo will be several days late in arriving. Too 
bad, this was to be our first direct flight to the 
resistance field . . . inside Nicaragua. The ammo 
was already palletized w/ parachutes attached. 
Maybe we can do it on Weds, or Thurs. 

More as it becomes available. One hell of an 
operation. ' ' ' 

In fact, it appears that Lake Resources had no planes 
at this time. Nevertheless, this PROF note reveals 
that North was beginning to meld the two operations 
he was overseeing and to recognize that the Lake 
Resources enterprise could operate in a variety of 
settings. 

Over the next 12 hours, Secord and others tried to 
hire a cargo carrier for the Country 15-to-Iran leg. 
They unsuccessfully sought to convince officials of a 
European national airline to take on the assign- 
ment."^ By the morning of November 23, Secord 
had identified an aircraft to make the flight,"* but 
this plane was never used. 

Clarridge's Office Becomes the 
Command Post 

By November 23, Clarridge's office at Langley had 
become the command post for coordinating the 
HAWK transport. North was there most of the 
(jgy 115 ;^]so present and assisting were the CIA air 
branch chief, an intelligence officer, and Charles E. 
Allen. "^ Numerous problems with aircraft and flight 
clearances continued to crop up. As the situation de- 
teriorated, Clarridge sent cables to the far-flung CIA 
stations involved, and North stayed in continuous 
contact with Secord in Country 15 and Schwimmer 
in Israel. 

Clarridge's superiors, specifically Juchniewicz and 
McMahon, were aware of at least some aspects of the 
activity being directed from Clarridge's ofiice. Juch- 
niewicz's office received all of the cables being sent to 
and from Clarridge on the operation."' In a memo- 
randum for the record written 2 weeks later, McMa- 
hon stated: 

On Saturday, 23 November 1985, Ed Juch- 
niewicz asked me if I was aware of all the activi- 
ty transpiring on the effort to get the hostages 
out. He showed me a cable to [the capital of 
Country 15] asking that we pass a message to the 
[Deputy Chief of Mission] from the Deputy As- 
sistant to the President for National Security Af- 
fairs [Poindexter]. The message assured the 
[Deputy Chief of Mission] that only the Secre- 
tary of State and Ambassador Oakley were aware 
of the operation. I told Juchniewicz that I was 
unaware of the specifics of the operation but due 



182 



Chapter 10 



to the sensitivity of the operation, it was appro- 
priate that we pass correspondence between the 
NSC and the ambassadors overseas, but only 
communications, that we could not be involved 
without a Finding."* 

McMahon testified that he did not know then that the 
CIA's airline proprietary had been brought into the 
operation. ' ' ^ 

Allen also learned that day of the CIA role in the 
operation. North called him in the morning and asked 
him to deliver to Clarridge intelligence data on the 
Iran initiative. Allen showed the materials to Clar- 
ridge, who told him that North "had requested some 
assistance in obtaining a name of a reliable charter 
airline," that he was considering using the Agency's 
airline proprietary, and that he was trying to obtain 
landing and transit clearances in Country 15.'^° 

The Oil-Drilling Equipment Cover Story 

During the planning of the HAWK missile ship- 
ment, the Israeli and American participants agreed to 
keep the true nature of the operation secret. They 
would use a false "story line" that the cargo to Iran 
was oil-drilling equipment.'^' Several American offi- 
cials who knew of the operation were advised of this 
cover story but understood that it was false and knew 
that the cargo was missiles. 

At the time, the President and Regan knew that the 
cargo comprised HAWK missiles and were specifical- 
ly told of the false story before the shipment was 
made, presumably by McFarlane. Regan testified: "I 
recall that that was to have been a cover story if 
discovered, it was to have been said that these were 
oil-drilling parts."'^^ 

The government of Country 1 5 also was aware that 
the clearances being sought by Secord and others 
were for moving missiles through its capital and into 
Iran as part of an effort to gain the release of Ameri- 
can hostages. Secord understood that both the Prime 
Minister and Foreign Minister were informed. Indeed, 
Secord testified that it was not possible to ship 
HAWKs through the foreign capital without the host 
country knowing, because special handling of the 
weapons was required at the airport. '^^ 

North claims he used the cover story when he 
brought Clarridge and Allen into the operation. As he 
later testified, "I lied to the CIA because that was the 
convention that we had worked out with the Israelis, 
that no one else was to know."'^"* Allen testified that 
North "stated emphatically" that the cargo was oil- 
drilling equipment, but that he (Allen) had "serious 
doubts" about whether this was true.'^* 

If Clarridge did not know the contents of the cargo 
at the start, he soon learned it. In Country 15, late in 
the morning of November 23, Secord gave the CIA 
Chief a full accounting of the mission. Their meeting 
occurred in a car in a hotel parking lot. Secord re- 
vealed his identity, explained he was formally associ- 



ated with the NSC, and specifically told the officer 
that the planned flight would contain HAWK missiles 
being sent to Iran in exchange for hostages. '^^ 

The CIA Chief testified that he returned to his 
office and sent two cables to Clarridge through the 
"Eyes Only" privacy channel he was using on the 
HAWK project. The first cable contained a general 
report, mentioning the discussion with Secord but not 
setting forth the substance of the conversation. '^^ 
The second cable reported that the flights would con- 
tain HAWK missiles sent to secure the release of the 
hostages.'^* The Committees' investigation did not 
locate this cable. But the CIA Chiefs subsequent tes- 
timony about its existence was corroborated in testi- 
mony by the CIA Deputy Chief '^9 and by the 
Deputy Chief of Mission — who at the time either read 
the cable or was told about it by the CIA Chiefs" 
In addition, the CIA communicator, who transmitted 
the cable from Country 15, vividly recalls being 
shocked when he read the message and learned that 
the United States was sending arms to Iran.'^' 

Clarridge received additional information that re- 
vealed that the cargo was HAWKs: North testified 
that shortly after the shipment occurred, if not before, 
he had told Clarridge the true nature of the cargo. '^^ 
Moreover, on November 23, Allen showed Clarridge 
a report that, according to Allen, would cause "one 
[to] think that this initiative had involved arms in the 
past."'^^ Allen suspected that the November ship- 
ment also involved arms and "couldn't help but be- 
lieve that [Clarridge] suspected that. Particularly he 
could see the [report] as clearly as I, and he leafed 
through [its contents] ... I left the folder with him 
and then picked it up later." '3* After the shipment, 
Clarridge received additional information that made 
clear that the cargo was missiles.'^'' 

Clarridge insisted in testimony before these Com- 
mittees that he had no recollection of having learned 
that the cargo was missiles prior to early 1986.'** 
This testimony conformed to the false story certain 
Administration officials put out in November 1986 
when they were trying to conceal the advance knowl- 
edge in the U.S. Government of the shipment of 
HAWK missiles. 

The Committees are troubled by the fact that the 
cable informing Clarridge of Secord's detailed ac- 
count of the operation, and an earlier cable Clarridge 
sent to the CIA Chief at the outset of the oper- 
ation,'*' are inexplicably missing from an otherwise 
complete set of 78 cables sent by CIA officials during 
the operation.'** 

Country 15 Routing is Abandoned 

By the afternoon of November 23, the plan to 
transship the missiles through Country 15 was aban- 
doned. The previous evening, McFarlane had called 
the country's Foreign Minister and believed he had 
received a "green light" for the flights. '^^ However, 



183 



Chapter 10 



the foreign government still insisted that the United 
States provide a diplomatic note setting forth the 
nature of the cargo and the shipping route, and stat- 
ing that the release of American hostages was the 
purpose of the shipment. '''° The foreign government 
wanted this documentation because it saw the oper- 
ation as "so directly in conflict with known U.S. 
policy and [its own] policy."'*' The American plan- 
ners balked,'*^ apparently out of a concern about 
creating a formal paper record of the true nature of 
the operation. Later that day, the Deputy Chief of 
Mission, on instructions from Poindexter, handed the 
Foreign Minister a terse diplomatic note stating that 
the U.S. Embassy "expresses regret that the Govern- 
ment of [Country 15] was unable to fulfill the request 
of the Government of the United States for the hu- 
manitarian mission."'*^ Clarridge cabled the CIA 
Chief in the capital of Country 15 that in light of the 
diplomatic message, "it is obvious . . . that we are 
closing down [the Country 15] aspect of this oper- 
ation."'** 

As the Country 15 transit plan was falling through, 
North and Clarridge sought a substitute transit point. 
Clarridge cabled the CIA Chief in the capital of an- 
other country, Country 18, to request assistance in 
obtaining landing rights in that country for "5 sorties" 
by a CIA airline proprietary 707 airplane between Tel 
Aviv and Tabriz, the first to occur "in the next 12 
hours or so . . . and likely result in the release of the 
hostages."'*^ 

Meanwhile, still on November 23, Israeli military 
personnel began to load the HAWKs into the CIA 
proprietary airplane at the Tel Aviv airport. If they 
had not already been told, the proprietary's crew sur- 
mised from the appearance of the crates that their 
cargo was missiles and reported this to the airline 
manager.'*® 

Later that day, the participants decided to move 
the shipment directly from Tel Aviv to Iran, without 
transiting a third country. Under the new plan, one of 
the proprietary's planes would make a series of fiights 
to move the 80 HAWKs.'*' After dismissing one 
route, the planners selected a shorter — but more dan- 
gerous — route across Country 16.'*® But obtaining 
overflight clearances from Country 16 remained a 
problem, so Clarridge once again cabled the CIA 
Chief there. '*'' Several hours later, the CIA Chief 
replied that the Government of Country 16 was sup- 
portive, but needed "some idea of what the aircraft 
would carry as presumably they would not be 
empty." '^° Late that night, Clarridge sent two more 
increasingly urgent cables to the CIA Chief in Coun- 
try 16. In conformity with the cover story, these 
cables told the CIA Chief to advise the government 
of Country 16 that "the aircraft are carrying sophisti- 
cated spare parts for the oil industry" and that the 
five flights would be spread over a number of 
days. '^' 



North and Clarridge, working with Schwimmer, 
continued to coordinate the flight activity on Sunday, 
November 24. At the last minute, they decided that, 
at least on the first sortie, the plane should land at a 
transit point in another country. Country 17, to dis- 
guise the fact that the shipment was moving from 
Israel to Iran.'^^ While this decision was being made, 
the CIA Chief in Country 16 informed Clarridge that 
the government there had approved the five over- 
flights, but that "incoming flight cannot come directly 
from [Country 17]. "'*3 

CIA Airline Proprietary Moves the 
Missiles 

On November 24, the CIA proprietary aircraft car- 
rying 18 HAWK missiles flew from Tel Aviv to the 
transit point in Country 17. Because Schwimmer had 
sent the plane without a cargo manifest, the pilot 
lacked the documentation required by customs offi- 
cials at the transit point, who wanted to inspect the 
cargo. '^* Simultaneously, Schwimmer and the propri- 
etary manager, along with North and Clarridge, fran- 
tically discussed how to solve this. While there is 
evidence to the contrary, it seems the pilot simply 
talked his way out of the problem. '^^ 

After getting out of the transit point in Country 17, 
the pilot ran into trouble while flying over Country 
16. According to the airline manager's report, 

nothing was prepared for overflight in [Country 
16] and [the pilot] had again to talk his way 
through. Since they [the Country 16 ground con- 
trollers] repeatedly insisted on a diplomatic clear- 
ance number, he made one up which was not 
accepted after long negotiations and then he fili- 
bustered one hour and 30 min his way through 
[Country 16], using different altitudes, positions 
and estimates that he told [Country 16's] Military 
with whom he was obviously in radio con- 
tact . . . 

However, radar realized his off-positions which 
gave additional reason for arguments and time 
delays.'^® 

Cables the next day from the CIA Chief in Country 
16 to Clarridge suggested several reasons why the 
pilot encountered these difliculties. For example, the 
destination of the plane was changed at the last 
minute from Tabriz to Tehran, which "provoked 
query" from Country 16 because it did not square 
with the clearance request.'*' Other discrepancies 
caused outright anger: 

[An official of Country 16 was] quite upset over 
multiple flight plans received, fact first flight 
came directly from [the transit point in Country 
17] and did not request clearance beforehand and 
conflicting stories about plane's cargo. [The CIA 



184 



Chapter 10 



Chief] told [the official] it was oil industry spare 
parts, telex from carrier stated medical supplies 
and the pilot told ground controllers he was car- 
rying miUtary equipment. . . . 

Bottom line is that [the government of Country 
16] still wants to assist but has developed a little 
cynicism about our interaction with them on the 
matter.'^* 

Ironically, the pilot reportedly told the flight control- 
lers the true nature of the cargo even while Clarridge 
was spreading the cover story to high level officials 
of Country 16.'5» 

The only part of the operation that went smoothly 
was the flight into Tehran. The Second Iranian Offi- 
cial and Ghorbanifar, who were in Geneva, passed 
word to officials in Tehran to prepare to receive the 
plane. The plane landed in Tehran early in the morn- 
ing.'*" After an encounter with a military officer 
who apparently was unaware of the operation, "a 
civilian with a submachine gun on his back" arrived 
at the aircraft.'®' The pilot understood that this 
person was a member of the Iranian Revolutionary 
Guard. He instructed the pilot not to disclose to 
anyone at the airport that the flight had originated in 
Israel, arranged for the unloading of the plane by 
military personnel, and got the crew to a hotel — 
formerly the Sheraton — in downtown Tehran. '^^ 

Fourteen hours later, after a warm send-off that 
included caviar, the plane departed Tehran at 12:15 
p.m. E.S.T., on Monday, November 25.'®^ The air- 
line proprietary crew expected they would return 
shortly with more missiles and told the Iranian at the 
airport, "Don't worry, we [will] come back."'** 
However, the airline manager radioed them after they 
were airborne and instructed them not to return to 
Israel.'*^ Problems surfacing in both Washington and 
Iran put an end to the CIA proprietary airline's role. 
Within a few days, Secord, using funds from the Lake 
Resources account, wired a $127,700 payment to the 
proprietary.'** 

Aftermath of the HAWK Flight 
The Failure Sinks In 

On November 25, with the Americans still enter- 
taining the hope that one or more hostages might be 
released, senior White House and CIA officials were 
informed about the weekend's activities. Poindexter 
told the President at his regular 9:30 a.m. briefing that 
a shipment of arms to Iran had just taken place.'*' 

At 7 a.m. that morning at CIA headquarters, 
Edward Juchniewicz told McMahon that Secord and 
"those guys" at the NSC had "used our proprietary 
to send over some oil supplies" to Iran. McMahon's 
reaction was anger: 



I said goddam it, I told you not to get involved. 
And he [Juchniewicz] said, we're not involved. 
They came to us and we said no. And they asked 
if we knew the name of a secure airline and we 
gave them the name of our proprietary. I said, 
for Christ's sake, we can't do that without a 
Finding.'*^ 

McMahon said that at the time he accepted Juch- 
niewicz's report that the cargo had been oil-drilling 
equipment: "[M]y focus was that we had done some- 
thing wrong . . . and I didn't care what was on that 
airplane." McMahon's view was that any use of the 
CIA airline proprietary at the direction of CIA but 
without a Presidential Finding was illegal.'* 8' 

Shortly after talking to Juchniewicz, McMahon 
went to Deputy Director for Operations Clair 
George's office where several staffers were discussing 
the weekend's activities. McMahon told them "that 
they weren't going to do anything more until we got 
a Finding."'*^ That same morning. North sent word 
to Schwimmer that the operation was to be put on 
hold.''" 

McMahon also moved quickly to contact CIA Gen- 
eral Counsel Stanley Sporkin on the matter of the 
airline proprietary's activity.''" McMahon testified 
that "during the day I called Sporkin several times 
and I told him that I wanted a Finding and I wanted 
it retroactive to cover that flight."'''^ Sporkin re- 
called that McMahon simply asked him to look into 
the legal aspects of the activity, but did not declare 
that a Finding was necessary.'''^ 

Late in the day, two officers from the Operations 
Directorate, an air branch officer and his group chief, 
were directed to brief Sporkin on the proprietary's 
flight."'' The CIA officials most involved in the op- 
eration — Clarridge, Allen, and the chief of the air 
branch — were not selected to do the briefing. At 
Sporkin's request, his deputy, J. Edwin Dietel, sat in 
on the briefing.'''^ 

The participants' accounts of the briefing of Spor- 
kin differed significantly. The air branch subordinate 
officer said that the meeting lasted about 45 minutes 
and that he and his superior explained to the lawyers 
that the airline proprietary — acting at the direction of 
the NSC staff and with the approval of Juch- 
niewicz — had moved some cargo from Israel to Iran. 
He testified that as of November 25, he knew nothing 
about the cargo other than its weight and dimensions 
and that that was the only information about the 
cargo that was discussed at the briefing. He recalled 
that the lawyers exhibited no curiosity about the 
nature of the cargo and that there was no mention 
that the cargo was either oil-drilling equipment or 
military equipment. He also testified that nothing was 
said to indicate that the proprietary's flight was relat- 
ed to an effort to free hostages."* 



185 



Chapter 10 



The CIA group chief said he did not even know of 
the activity being scrutinized until that morning. He 
stated in an interview that he and the subordinate 
explained that a CIA proprietary plane, acting in a 
strictly commercial capacity, had carried "commercial 
cargo" into Iran. The subject of weapons being 
aboard the plane did not arise, he said. He added that 
at this point he understood that the cargo might have 
been farm equipment and that the shipment was not 
part of an NSC staff operation. ^ ' ' 

Notwithstanding these divergent accounts from of- 
ficials of the Operations Directorate, it is clear that 
the briefers told Sporkin that missiles had been trans- 
ported, and the shipment was part of an effort to free 
the hostages. Sporkin testified: "What they told me 
indicated an involvement in a shipment of arms to 
Iran.""* Sporkin's deputy, Deitel, specifically re- 
called that the briefers said the cargo was missiles.'''^ 
Sporkin testified that the briefers probably specified 
the exact type of missiles being shipped. '*° 

During the briefing, Sporkin tentatively concluded 
that a covert action Finding was necessary to author- 
ize the previous activity.'*' He stated that there 
should be no more flights to move the rest of the 
cargo in Israel until the matter could be looked into 
further.'*^ After the briefers left, two senior staff 
attorneys, whom Sporkin had enlisted earlier and who 
were waiting for the briefing to end, were called into 
the room. Sporkin related to them that a shipment of 
"military equipment or missiles" from Israel to Iran 
had just occurred and that more flights were contem- 
plated. '^^ 

Sporkin then dictated a draft Finding that author- 
ized the CIA to assist in "efforts being made by 
private parties" to obtain the release of hostages 
through the provision of "certain foreign materiel and 
munitions" to the Government of Iran. The draft 
stated that Congress would not be notified of the 
operation "until such time as [the President] may 
direct otherwise" and that the Finding "ratifies all 
actions taken by U.S. Government officials in further- 
ance of this effort."'** Sporkin directed one of the 
lawyers, Bernard Makowka, to stay late and work on 
the Finding.'** Later that night, Sporkin informed 
McMahon "that a Finding would be required, not so 
much from the airlift standpoint, but from our in- 
volvement in influencing foreign government officials 
to assist the mission."'*^ Sporkin and his deputies met 
on the morning of November 26, and worked up a 
final draft of the Finding.'*'' In its entirety, the Find- 
ing stated: 

Finding Pursuant to Section 662 of The Foreign 
Assistance Act of 1961, As Amended, Concerning 
Operations Undertaken by the Central Intelligence 
Agency in Foreign Countries, Other Than Those 
Intended Solely for the Purpose of Intelligence Col- 
lection. 



I have been briefed on the efforts being made by 
private parties to obtain the release of Americans 
held hostage in the Middle East, and hereby find 
that the following operations in foreign countries 
(including all support necessary to such oper- 
ations) are important to the national security of 
the United States. Because of the extreme sensi- 
tivity 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 501 of the National Security Act of 1947, 
as amended, until such time as I may direct oth- 
erwise. 

SCOPE: Hostage Rescue— Middle East 
DESCRIPTION 

The provision of assistance by the Central Intelli- 
gence Agency to private parties in their attempt 
to obtain the release of Americans held hostage 
in the Middle East. Such assistance is to include 
the provision of transportation, communications, 
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 facilitate the release of 
the American hostages. 

All prior actions taken by U.S. Government offi- 
cials in furtherance of this effort are hereby rati- 
fied.'** 

The draft Finding referred to no objective of opening 
a diplomatic channel with Iran. Yet, this was the 
justification for the arms deals that the Administration 
offered after they were exposed in November 1986. 
Rather, the Finding depicted a straight swap of arms 
for hostages. 

Sporkin sent the proposed Finding to Casey on 
November 26.'*^ That morning, Clair George 
phoned North to tell him that Sporkin had deter- 
mined a Finding was necessary.'^" Later that day, 
after Casey called McFarlane and Regan "to ascertain 
that indeed this had Presidential approval and to get 
assurances that a Finding would be so signed," Casey, 
who agreed a Finding was needed,'^' delivered the 
text to Poindexter.'^^ Poindexter did not immediately 
present it to the President. Over the next several days, 
Casey, McMahon, and George made repeated inquir- 
ies to Poindexter and other "NSC personnel" and 
"continuously receive[d] reassurances of the Presi- 
dent's intent to sign the Finding." '^^ 

The President Renews His Approval 

On the day the CIA sent the proposed Finding to 
the White House, November 26, the President author- 
ized continuing the arms-for-hostages transaction.'^* 



186 



Chapter 10 



North's notes indicate that he was so informed by 
Poindexter at an hour-long meeting: 

0940-1050. Mtg w/JMP. RR directed op[eration] 
to proceed. If Israelis want to provide diff model, 
then we will replenish. We will exercise mgt 
over movmt if yr side cannot do. Must have one 
of our people in on all activities.'^* 

Later that day, North related to an Israeli official 
that the Americans wanted to carry on even if the 
supply of additional arms was needed and even if the 
weapons had to come from the United States.'^® But 
events not within the control of the American side 
prevented immediate progress in accord with the re- 
newed authorization of the President. 

The Iranians Feel Cheated 

After midnight on November 26, Allen learned that 
officials in Iran were upset that the wrong model of 
HAWKs had been delivered.'^' The Iranians also 
complained through Ghorbanifar that the missiles had 
Israeli markings, which "the Iranians took to be a 
prov[o]cation." ' ^ * 

On November 25 or 26, Ghorbanifar, "on the very 
edge of hysteria," called NSC consultant Michael 
Ledeen, and said "the most horrible thing had hap- 
pened. . . . [TJhese missiles had arrived and they were 
the wrong missile." '^^ Ghorbanifar gave Ledeen an 
urgent message from the Prime Minister of Iran for 
President Reagan: "We have done everything we said 
we were going to do, and you are now cheating us, 
and you must act quickly to remedy this situation." 
Ledeen conveyed this to Poindexter.^"" 

At this point. North dispatched Secord to Israel. 
During meetings with Kimche and Schwimmer, 
Secord quickly deduced the source of Iran's displeas- 
ure: according to him, Schwimmer and Nimrodi had 
promised Ghorbanifar that the missiles being provided 
could shoot down high-flying Soviet reconnaissance 
planes and Iraqi bombers. The I-HAWK missiles that 
were provided, like all HAWKs, had no such capabil- 
ity.^"' The Iranians were insisting that "these embar- 
rassing missiles" be removed from Tehran. ^°^ 

Money Flows Back and Forth 

In advance of the HAWK shipment, on November 
22, Iran made two transfers — one of $24.72 million, 
the other of $20 million — to bank accounts in Switzer- 
land to which Ghorbanifar had access. ^"^ Iran appar- 
ently understood that the larger transfer was its pur- 
chase price for 80 HAWKs, at a unit cost of approxi- 
mately $300,000,204 

On November 22, Ghorbanifar transferred to an 
Israeli intermediary's account $18 million and $6 mil- 
lion. ^^^ According to an Israeli intermediary, the $18 
million was the purchase price paid by Ghorbanifar 
for 80 HAWKs and the $6 million was to be held in 
trust by the Israeli intermediary at Ghorbanifar's re- 



quest. Later, it was to be paid back to Ghorbanifar, 
with Ghorbanifar intending to keep $1 million for 
himself and use the remainder for payments to certain 
Iranians.^"** North was aware of the $18 million de- 
posit. On November 20, he wrote in his notebook: 
"18M Deposited Covers 80H 225K." 207 

Around the time that the Israeli intermediary re- 
ceived these funds from Ghorbanifar, he transferred 
$1 million to Lake Resources on North's demand. 2"* 
On November 22, the Israeli intermediary paid the 
Israeli Ministry of Defense $11.2 million for the 80 
HAWKs at a price of $140,000 per missile.^os Thus, 
the Israeli intermediary had received from Ghorbani- 
far $11.8 million more than his total payments to 
Israel and Lake Resources. According to the Israeli 
intermediary as reported in the Israeli Financial Chro- 
nology, $6 million of this residual was held in trust by 
the Israeli intermediary for Ghorbanifar and the re- 
maining $5.8 million was to cover shipping and other 
expenses for the rest of the operation. 2'" The Chro- 
nology indicates that Ledeen and North agreed with 
the Israeli intermediary that this money be kept in the 
Israeli intermediary's account for these purposes. 2" 

Israel intended to purchase replacement HAWKs 
with the sum received from the Israeli intermediary. 
It was doubtful whether the amount received — 
$140,000 per missile — would be enough to purchase 
replacements at standard U.S. prices. On November 
19, North and the head of the Israeli Procurement 
Mission in New York discussed replenishment, and 
North's notes of the conversation refer to a price of 
"$220K/230K each for Hawks." 212 However, Poin- 
dexter had instructed North, and North had told the 
Israelis, "that we will sell them [Israel]" replacement 
HAWKs "at a price that they can meet." ^'^ 

When the HAWK deal collapsed in late November, 
the Israelis and Ghorbanifar reversed the flow of 
funds. On November 27, the Israeli Ministry of De- 
fense returned $8.17 million to the IsraeH interme- 
diary. This was $3.03 million less than the Israelis had 
paid to the Ministry of Defense. The difference, ac- 
cording to the Israeli Chronology, represented the 
prorated charge for the 18 missiles delivered to Iran 
at $140,000 per item and a deduction of $510,000 for 
expenses incurred by the Ministry of Defense in the 
HAWK transaction and in previous transactions. ^'^ 

Also on November 27, the Israeli intermediary 
transferred to Ghorbanifar the sum of $18.6 million. 
This represented a prorated refund of Iran's purchase 
price for the 62 HAWKs that had not been deliv- 
ered.2** Thus, at the end of November 1985, the 
Israelis held more than $5 million in residuals from 
the failed transaction, most of which was repaid to 
Ghorbanifar by the Israeli intermediary and to the 
Israeli Ministry of Defense after Iran returned 17 
HAWKs to Israel in early 1986.2'6 



187 



Chapter 10 



Conclusion 

The shipment of HAWKs to Iran was bad poUcy, 
badly planned and badly executed. In contradiction to 
its frequently emphasized public policy concerning 
the Iran-Iraq war and nations that support terrorism, 
the United States had approved the sale of arms to 
Iran. The United States had agreed to a sequential 
release of hostages following successive deliveries of 
weapons; thereafter, this departure from policy 
became the norm. This precedent, established in No- 
vember 1985, gave the Iranians reason to believe that 
the United States would retreat in the future from its 
demand for the release of hostages prior to any weap- 
ons shipments. 



The planning and execution of the operation were 
also flawed. By the time the U.S. Government 
became directly involved, official disclaimers by un- 
witting State Department officials had already com- 
plicated the foreign relations aspect of the project. 
And the mission itself jeopardized the security of the 
CIA airline proprietary's operation.^'' 

Finally, the cover story that was used by certain 
NSC and CIA officials in November 1986 was first 
employed in November 1985 for purposes of oper- 
ational security. The President, Secretary Shultz, 
McFarlane, Poindexter, North, and various CIA offi- 
cials, however, were fully aware in November 1985 
that Israel was shipping HAWKs to Iran — not oil- 
drilling equipment — with U.S. approval and assistance 
to obtain the release of the American hostages. 



188 



Chapter 10 



Chapter 10 



1. North Notebook, 10/30/85, Ex. CG-40, Hearings, 100- 
11. 

2. Id. 

3. Id. 

4. McFarlane Calendar, 11/8/85, MF0OO856-57; Ledeen 
Dep., 6/22/87, at 231. 

5. McFarlane Test., Hearings, 100-2, at 97. 

6. Ledeen Dep., 6/22/87, at 231. 

7. North Calendar, 11/14/85, N329. 

8. North Notes, 11/14/85, Ex. OLN-69A, Hearings, 100-7, 
Part III. 

9. North Notes, 11/19/85, Ex. OLN-69A, Hearings, 100-7, 
Part III. 

10. North Test., Executive Session, 1/9/^1, at 6-10. 

11. McMahon, Memorandum for the Record, 11/15/85, 
C4510. 

12. McMahon Dep., 6/1/87, at 90. 

13. Id 

14. McFarlane Test., Hearings, 100-2, at 97, 100. Accord- 
ing to the Israeli Historical Chronology, Rabin did not 
discuss with McFarlane during this visit that Israel was 
planning another arms shipment to Iran. 

15. W. at 51-52, 100. 

16. Israeli Historical Chronology. According to the Israe- 
lis, in a telephone conversation on November 21, Rabin 
stressed to McFarlane that if the Iranian project were not 
viewed as a joint U.S.-Israel operation, Israel would not 
undertake it alone. Id. 

17. Israeli Historical Chronology; see also McFarlane 
Test., Hearings, 100-2, at 97. 

18. Regan Test., Hearings, 100-10, at 12. 

19. McFarlane Test., Hearings, 100-2, at 51-52. 

20. McFarlane Tower Int., 2/19/87, at 41. 

21. North Notebook, 11/17/85, Ex. OLN-69A, Hearings, 
100-7, Part III. 

22. North Notebook, 11/18/87, Ex. OLN-69A, Hearings, 
100-7, Part III. 

23. North Notebook, 11/18/85, Ex. OLN-69A, Hearings, 
100-7, Part III. According to the Israelis, Israel approved 
only a shipment of 80 HAWKs. Israeli Historical Chronolo- 
gy- 

24. Israeli Financial Chronology. On November 19, 
North and the head of the Israeli Procurement Mission in 
New York discussed a sale by the United States to Israel of 
600 of the Pentagon's most advanced version of the HAWK 
missile, presumably to replenish a similar number of 
HAWKs to be shipped by Israel to Iran. North Notebook, 
11/19/85, Ex. OLN-69A, Hearings, 100-7, Part III. 

25. Airline Proprietary Manager Memorandum, 11/21/85, 
C9706; Airiine Proprietary Manager Dep., 6/11/87, at 71- 
74. 

26. Airline Proprietary Manager Memorandum, 11/21/85, 
C9706; Airline Proprietary Manager Memorandum, 11/30/ 
85, C6522-C6529, at 6; Airiine Proprietary Manager Dep., 
6/11/87, at 71. 

27. Airline Proprietary Manager Memorandum, 11/21/85, 
C9706. 

28. Airline Proprietary Manager Dep. at 80; Airline Pro- 
prietary Manager Memorandum, 11/30/85, C6522-C6529 at 
I, 6. 

29. PROF Note from North to Poindexter, 11/20/85, Ex. 
JMP-17, Hearings, 100-8. 



30. North Notebook, 11/20/85, Ex. JMP-84, Hearings, 
100-8. 

31. Id 

32. Id 

33. North Test., Hearings, 100-7, Part I, at 51, 59; North 
Notebook, 11/17/85, Ex. OLN-69A, Hearings, 100-7, Part 
III. 

34. Id 

35. Id. The Arms Export Control Act bars the President 
from authorizing a transfer of any "major defense equip- 
ment valued (in terms of its original acquisition cost) at 
$14,000,000 or more" unless he submits an unclassified 
report on the sale to the Speaker of the House and the 
Senate Committee on Foreign Relations. 22 U.S.C. Section 
2753(d). 

36. North Test., Hearings, 100-7, Part I, at 51. 

37. Powell Dep., 6/19/87, at 15-19. 

38. Gaffney Test., Hearings, 100-6, at 133-39; Ex. DOD 1, 
3, 5, Hearings, 100-6. Gaffney's notes of November 18-19 
also indicate that the United States had shipped 100 
HAWKs to Israel 2 weeks previously. In fact, on Novem- 
ber 21, 1985, an Israeli ship, Zim Houston, took on 100 
HAWKs and other weapons in New Jersey and sailed for 
Israel. Those HAWKs were transferred pursuant to a Letter 
of Offer and Acceptance between the United States and 
Israel entered into in 1982. (Validated Shipper's Export 
Declaration and attachments, 11/6/85, U.S. Customs, N.Y., 
N.Y. S2045659). 

39. Gaffney Test., Hearings, 100-6, at 112. 

40. Powell Dep., 6/19/87, at 32-33. 

41. Weinberger Dep., 6/17/87, at 22-23, Ex. CWW-9. 

42. Ex. DOD-5, Hearings, 100-6. Gaffney's paper provid- 
ed as follows: 

The modalities for sale to Iran present formida- 
ble difficulties: 

Iran is not currently certified for sales, including 
indirectly as a third country, per Sec. 3 of the 
AECA. 

Congress must be notified of all sales of $14 
million or more, whether it is a direct sale or 
indirect to a third country. The notice must be 
unclassified (except for some details), and the sale 
cannot take place until 30 days after the notice. 
The 30 days can be waived for direct sales, but the 
third country transfer has no such provision, and 
notice must still be given in any case. 

Thus, even if the missiles were laundered 
through Israel, Congress would have to be noti- 
fied. 

It is conceivable that the sale could be broken 
into 3 or 4 packages, in order to evade Congres- 
sional notice. While there is no explicit injunction 
against splitting up such a sale (subject to check 
. . .), the spirit and the practice of the law is 
against that, and all Administrations have observed 
this scrupulously. 
Ex. DOD-5, Hearings. 100-6. 

43. Gaffney Test., Hearings, 100-6, at 61-64. 

44. McFarlane Test., Hearings, 100-2 at 102; Regan Test., 
Hearings, 100-10, at 13. 



189 



Chapter 10 



45. In retrospect, McFarlane quantified his hope for re- 
lease of the hostages at no more than a 20 percent probabili- 
ty. McFarlane Test., Hearings, 100-2, at 102. Even this 
would have been too optimistic. A CIA polygraph test of 
Ghorbanifar 2 months later "indicated that he knew ahead 
of time that the hostages would not be released and deliber- 
ately tried to deceive us. . . ." Memorandum for the 
Record, Subject: Manucher Ghorbanifar Polygraph Exami- 
nation, C6090. 

46. McFarlane Test., Hearings, 100-2, at 102. 

47. Regan Test., Hearings, 100-10, at 13. 

48. McFarlane Test., Hearings, 100-2, at 261. 

49. McFarlane Test., Hearings, 100-2, at 55. This meeting 
occurred on December 7. 

50. McFarlane Test., Hearings, 100-2, at 102. 

51. Shultz Test., Hearings, 100-9, at 28. 

52. Id. at 28; Charles Hill Notes, 11/18/85, Cooper Ex. 
CJC-17, Hearings, 100-6. 

53. Shultz Test., Hearings, 100-9, at 28-29. 

54. McFarlane Test., Hearings, 100-2, at 102. 

55. Shultz Test,, Hearings, 100-9, at 29. 

56. North told Poindexter a few days later that direct 
flights would "compromise origins and risk eventual uncov- 
ering of many operational details." North PROF message to 
Poindexter, 11/22/85 (19;27;15) Ex. OLN-45, Hearings, 100- 
7, Part III. Historically, weapons shipments to Iran from 
Israel during the last decade had been disguised by moving 
them through other countries. A purpose for disguising 
such flights is to prevent the Iraqis from intercepting them. 
Airline Proprietary Manager Dep., 6/11/87, at 24-27. 

57. CIA Air Proprietary Pilot Dep., 6/25/87, at 77. 

58. North Test., Hearings, 100-7, Part I, at 51. 

59. Secord Dep., 6/10/87, at 85-86. 

60. Secord Test., Hearings, 100-1, at 79-80. 

61. Letter from McFarlane to Secord, 11/19/85, Ex. 1, 
Hearings. 100-1, at 415. 

62. McFarlane Test., Hearings, 100-2, at 209. 

63. Secord Dep., 6/10/87, at 83-84. 

64. Secord Test., Hearings, 100-1, at 80. 

65. North Notebook, 11/18/85, Ex. OLN-69A, Hearings, 
100-7, Part III. 

66. North to Poindexter PROF Note, 11/22/85, (19:27:15) 
Ex. OLN-45, Hearings, 100-7, Part III. 

67. North Test., Hearings, 100-7, Part I, at 58; Panamani- 
an Public Instrument, 5/14/85, H679. 

68. CSF Ledger for Lake Resources, H986. 

69. Secord Test., Hearings, 100-1, at 83, 87-88; North 
Test., Hearings, 100-7, Part I, at 54. 

70. Israeli Historical Chronology. 

71. Secord Test., Hearings, 100-1, at 80; Secord Dep., 6/ 
10/87, at 89. 

72. Secord Dep., 6/10/87, at 87-88; Secord Test., Hear- 
ings, 100-1, at 88. 

73. On November 22, Secord arranged a charter for sev- 
eral fights between Tel Aviv and Country 1 5 at a total cost 
of $60,000, plus fuel, landing, and handling costs. These 
flights never occurred. Airline Proprietary Manager's 
Memorandum Re: Mission TLV/THR, 11/30/85, C6522; 
Airline Proprietary Manager Dep., 6/11/87, at 65-66. 
Secord ultimately paid $127,700 to the CIA airline proprie- 
tary, which flew two planes to Tel Aviv and one to Tehran 
via Country 17. Airline Proprietary Receipt Records, 11/ 
29/85 and 12/3/85, C6567 and C6573. 

74. DCM Dep., 5/27/87, at 24-25. 



75. After the flight to Tehran, Secord— who was then in 
Paris — remarked to the manager of the proprietary airline 
that he had "to go back to [the capital of Country 15] to 
save $225,000." Airline Proprietary Manager Dep., 6/11/87, 
at 148, 171. An entry in North's notebook states "Dick 
Copp— Spent 750K in [Country 15]." North Notebook, 11/ 
24/85, Ex. OLN-69A, Hearings, 100-7, Part III. 

76. Financial Chronology, Accounting Workpaper. In ad- 
dition to the $127,700 paid to the CIA air proprietary, 
Secord spent $21,983 on chartering a private jet to attend 
meetings related to the operation. 

77. North Test., Hearings, 100-7, Part I, at 56. 

78. Secord Dep., 6/10/87, at 88-89. 

79. Secord Dep., 6/10/87, at 99. 

80. CIA cables after the operation was over explained 
that these were the reasons for the poor reception. CIA 
Cables, capital of Country 15 to Headquarters, 11/26/85 
and 11/27/85, C5794-95 and C5796-97. 

81. DCM Dep., 5/27/87, at 24-25. 

82. Cable from American Embassy in Country 15 to De- 
partment of State Headquarters, 11/22/85, S000304. 

83. CIA Cable, capital of Country 15 to Headquarters, 
11/23/85, C5758-59. 

84. Id. 

85. PROF Note, North to Poindexter, 11/20/85, 21:27:39, 
Ex. JMP-17, Hearings, 100-8. 

85a. North Notebook: 11/21/85, Ex. OLN-69A, Hearings, 
100-7, Part III. 

86. North Notebook, 11/21/85, Ex. OLN-69A, Hearings, 
100-7, Part III; Clarridge Dep., 4/27/87, at 7-8. 

87. North Notebook, 11/21/85, Ex. OLN-69A, Hearings, 
100-7, Part III. 

88. CIA Cables, Headquarters to capital of Country 15, 
11/22/85, Ex. DRC-1-1 and 1-2, Hearings, 100-11. 

89. CIA Cable, capital of Country 15 to Headquarters, 
11/22/85, Ex. DRC-1-4, Hearings, 100-9. 

90. Oakley Affidavit, 7/2/87, Ex. GPS-55., Hearings, 100- 
9. 

91. CIA Cable, Headquarters to capital of the Country 
15, 11/22/85, Ex. DRCl-5, Hearings, 100-11. 

92. Letter from John A. Rizzo to Paul Barbadoro, 7/17/ 
87, C10123. 

93. Shultz Tower Test., 1/22/87, at 28. 

94. Shultz Test., Hearings, 100-9, at 29. 

95. CIA Cable, Headquarters to capital of Country 15, 
11/22/85, Ex. liKC-X-d, Hearings, 100-11. 

96. CIA Cable, capital of Country 15 to Headquarters, 
11/22/85, Ex. DRC 1-7, Hearings, 100-11. 

97. Id 

98. CIA Cable, capital of Country 15 to Headquarters, 
11/22/85, Ex. DRC-1-8, Hearings, 100-11. 

99. North Notebook, 11/22/85 (incorrectly dated 11/21/ 
85), Ex. OLN-69A, Hearings, 100-7, Part III. 

100. PROF Note, North to Poindexter, 11/22/85 
(19:27:15), Ex. OLN-45, Hearings, 100-7, Part III. 

101. CIA air branch chief Dep., 6/19/87, at 19-22. 

102. Handwritten Notes of CIA Airline Proprietary 
Project Officer, 11/22/85, C6535-C6538. 

103. Clarridge Dep., 4/27/87, at 59-60. 

104. Juchniewicz Dep., 4/23/87, at 8-19. 

105. CIA air branch chief Dep., 6/19/87, at 22-31. 

106. Airline Proprietary Project Officer Dep., 6/12/87, at 
69 



190 



Chapter 10 



107. North had incorrectly reported to Poindexter two 
days earlier that this matter had already been taken care of. 
North PROF message to Poindexter, 11/20/85 (21:27:39), 
Ex. JMP 17, Hearings, 100-8. 

108. CIA Cable, Headquarters to capital of Country 16, 
11/22/85, Ex. OLN-61, Hearings, 100-7, Part III. 

109. PROF Note, North to Poindexter, 11/22/85 
(19:27:15), Ex. OLN-45, Hearings. 100-7, Part III. 

110. North Notebook, 11/22/85, Ex. OLN-69A, Hearings. 
100-7. Part III. 

111. PROF Note, North to Poindexter, 11/22/85 
(19:27:15), Ex. OLN-45, Hearings, 100-7, Part HI. 

113. CIA Cable, capital of Country 15 to Headquarters, 
11/23/85, Ex. DRC 1-19, Hearings, 100-11. 

114. CIA Cable, capital of Country 15 to Headquarters, 
11/23/85, C5742. 

115. North Test., Hearings, 100-7, Part I, at 60. 

1 16. CIA air branch chief Dep., 6/19/87, at 21-25. 

117. The cable routings reflect that the copies of cables 
were sent to office of the Directorate of Operations. 

118. Memorandum for the Record, Subject: NSC Mission, 
John N. McMahon, 12/7/85, Ex. DRC-12, Hearings, 100-11. 

119. McMahon Dep., 6/1/87, at 104. 

120. Allen Dep., 4/21/87, at 157-61. 

121. North Test., Hearings, 100-7, Part I, at 38. 

122. Regan Test., Hearings, 100-10, at 24. 

123. Secord Dep., 6/10/87, at 100-01. 

124. North Test., Hearings, 100-7, Part I, at 38. 

125. Allen Dep., A/l\/?,l, at 161, 165, 176-77. 

126. CIA Chief in Country 15 Dep., 4/13/87, at 19-21. 

127. CIA Cable, capital of Country 15 to Headquarters, 
11/23/85, Ex DRC 1-19, Hearings, 100-11. 

128. CIA Chief in Country 15 Dep., 4/13/87, at 25-28. 

129. Deputy CIA Chief in Country 15 Dep., 7/15/87, at 
30-35. In addition, CIA records confirm that a cable of 
which no copy can be found was sent at this time and 
assigned a unique file number. 

130. DCM Dep., 5/27/87, at 34-37. 

131. CIA Communicator Dep., 7/13/87, at 66-68. 

132. North Test., Hearings, 100-7, Part I, at 63, 70. 

133. Allen Dep., 7/2/87, at 674. 

134. Id. at 676. 

135. North Test., Hearings, 100-7, Part I, at 38; Allen 
Dep., 4/21/87, at 167-68; Clarridge Test., Hearings, 100-11, 
at 7, 20-21. 

136. Clarridge Test., Hearings, 100-11, at 8, 20-21. 

137. The first cable that the CIA Chief in Country 15 
sent to Headquarters on this matter stated it was a reply to 
Cable 625103. CIA Cable, capital of Country 15 to Head- 
quarters, 11/22/85, Ex. DRC 1-3, Hearings, 100-11. No 
cable having this number was located. 

138. The Committees have been informed that copies of 
privacy channel cables are ordinarily sent to the office of 
the Deputy Director for Operations. CIA officials have 
searched for the missing cables, and they were unable to 
locate them or account for the fact that they are missing. 
The Committees have also been informed that officers as- 
signed to the office of the Deputy Director for Operations 
do not have a recollection of seeing the missing cables. 

139. PROF Note, North to Poindexter, 11/22/85 
(19:27:15), Ex. OLN-45, Hearings, 100-7, Part III; CIA 
Cable from capital of Country 15 to Headquarters, 11/26/ 
85, C5794-95. 



140. DCM Dep., 5/27/87, at 10, 20-21; CIA Chief in 
Country 15 Dep., 4/13/87, at 16, 22. 

141. CIA Cable from capital of Country 15 to Headquar- 
ters. 1 1/26/85, C5794-95. 

142. DCM Dep., 5/27/87, at 22-24. 

143. Id. at 24; Diplomatic Note from U.S. Embassy in 
Country 15 to Ministry of Foreign Affairs, 11/23/85, Ex. 
GPS- 14, Hearings, 100-9. 

144. CIA Cable, Headquarters to capital of Country 15, 
11/23/85, Ex. DRC 1-29, Hearings. 100-11. 

145. CIA Cable, Headquarters to capital of Country 18, 
11/23/85, Ex. OLN-62, Hearings, 100-7, Part III. 

146. Airline Proprietary Pilot Dep., 6/25/87, at 49-50, 64, 
141; Airline Proprietary Manager Dep., 6/11/87, at 108-09. 
In fact, the crew immediately surmised it was a large arma- 
ment cargo which the airline proprietary had learned a few 
days earlier was being moved from the capital of Country 
15 to Iran under a cover story that it was medicine. Airline 
Proprietary Manager Dep., 6/11/87, at 71-77. Two days 
later, the proprietary's project officer told the CIA's air 
branch chief that the crew believed that the cargo was 
missiles and had joked that "we should be firing them at 
Iran rather than Hying them into Iran." Airline Proprietary 
Project Officer Dep., 6/12/87, at 48-49. The air branch 
chief testified that he did not know the cargo was missiles 
until months later. CIA air branch chief Dep., 6/19/87, at 
43-44. 

147. Airline Proprietary Manager Memorandum, 11/30/ 
85, Re: Mission TLV/THR, C6523-24 (hereinafter "Airline 
Proprietary Manager's Report"), at 2-3. The Americans de- 
cided it was too dangerous to fly the other plane into Iran 
because it was registered in the United States. The plane 
which was used was registered in another western hemi- 
sphere country. Schwimmer argued the U.S. plane could be 
used safely by painting a false registration on its tail or by 
flying it in a formation with the other plane so as to dis- 
guise it from radar operators. The airline proprietary man- 
ager reported to CIA that Schwimmer "must be crazy" and 
rejected these proposals. Id. at 3; Airline Proprietary 
Project Officer Dep., 6/12/87, at 37-38; Airline Proprietary 
Manager Dep., 6/11/87, at 116-19. 

148. Airiine Proprietary Pilot Dep., 6/25/87, at 40-42, 48. 

149. CIA Cable, Headquarters to capital of Country 16, 
11/23/85, C5749. 

150. CIA Cable, capital of Country 16 to Headquarters, 
11/23/85, C5759. 

151. CIA Cable, Headquarters to capital of Country 16, 
11/24/85, C5763; CIA Cable, Headquarters to capital of 
Country 16, 11/24/85, C5764. 

152. Airline Proprietary Manager Dep., 6/11/87, at 138- 
39. 

153. CIA Cable, capital of Country 16 to Headquarters, 
11/24/85, C5767. 

154. Airiine Proprietary Pilot Dep., 6/25/87, at 56-57, 70 
71; Airline Proprietary Manager's Report at 4. 

155. Airhne Proprietary Project Officer Dep., 6/12/87, 
41-42. 

1 56. Airline Proprietary Manager's Report, at 4. 

157. CIA Cable, capital of Country 16 to Headquarters, 
11/25/85, C5774. 

158. CIA Cable, capital of Country 16 to Headquarters, 
11/25/85, C5775. 

159. The pilot denied that he had any serious problems 
with the overflight of Country 16 and insisted he did not 



191 



Chapter 10 



and would never tell ground controllers he was carrying 
arms. Airline Proprietary Pilot Dep., 6/25/87, at 78-79. 

160. Airline Proprietary Pilot Dep., 6/25/87, at 96. 

161. Airline Proprietary Manager Report, at 4. 

162. Airline Proprietary Pilot Dep., 6/25/87, at 99-100. 

163. Airline Proprietary Manager's Report at 6; Airline 
Proprietary Pilot Dep., 6/25/87, at 121. According to the 
Israeli Historical Chronology, the Iranians were displeased 
with the inissiles prior to the departure of the plane, and the 
Iranian Prime Minister impounded the aircraft, crew, and 
missiles. According to this account, an Israeli intermediary 
personally interceded to persuade the Iranians to release the 
crew and plane. Israeli Historical Chronology. 

164. Airline Proprietary Pilot Dep., 6/25/87, at 116. The 
pilot, believing he probably would be back the next day, 
ordered a carpet from a rug merchant and arranged to have 
it put on what he thought would be the next flight. Id., 113- 
14. 

165. Id. at 122-23. 

166. Airline Proprietary Receipt Records, 11/29/85 and 
12/3/85, CIIN 2561 and 2567. 

167. Poindexter Test., Hearings, 100-8, at 124; Poindexter 
Notes, 11/25/85, Ex. JMP-19, Hearings, 100-8. 

168. McMahon Dep., 6/1/87, at 95. 
168». Id, at 97-101. 

169. Id, at 95-96, 103. 

170. North Notebook, 11/25/85, Ex. OLN-69A, Hearings, 
100-7, Part III. 

171. Memorandum for the Record, 12/7/85, John N. 
McMahon, Ex. DRC-12, Hearings, 100-11. 

172. McMahon Dep., 6/1/87, at 96. 

173. Sporkin Test., Hearings, 100-6, at 116-19. 

174. Group Chief Interview Report, 6/1/87. 

175. Dietel Dep., 6/5/87, at 4. 

176. CIA air branch subordinate Dep., 6/5/87, at 16, 134- 
46; CIA air branch Interview Report, 6/1/87. 

177. Group Chief Interview Report, 6/1/87. 

178. Sporkin Test., Senate Select Committee on Intelli- 
gence, 12/3/86, at 9. 

179. Dietel Dep., 6/5/87, at 6. 

180. Sporkin Test., Hearings, 100-6, at 128. 

181. Sporkin Test., Hearings, 100-6, at 118. 

182. CIA air branch subordinate Dep., 6/5/87, at 142-43. 

183. Makowka Dep., 5/15/87, at 25-28. 

184. Transcription of Sporkin's secretary's shorthand 
notes of 11/25/85, Ex. SS-1, Hearings, 100-6; Sporkin Test., 
Hearings. 100-6, at 13-14. 

185. Makowka Dep., 5/15/87, at 31-32. 

186. McMahon Memorandum for the Record, Ex. DRC- 
12, //earmgi, 100-11. 

187. Makowka Dep., 5/15/87, at 33. 

188. Finding, undated, CIIN 103. 

189. Note for the Director from Stanley Sporkin, 11/26/ 
85, Ex. SS-2, Hearings, 100-6. 

190. North Notebook, 11/26/85 (misdated 10/26/85) Ex. 
OLN-47, Hearings, 100-7, Part III. North had already heard 
through Clarridge of McMahon's angry reaction. Just after 
midnight on November 26, North wrote: "Call from Clar- 
ridge — summoned in by Clair [George]/McMahon — '[t]his 



is criminal.' — Told Agency was "freight forwarder' by 
Dewey." North Notebook, 11/26/85 (misdated 10/25/85). 
Clarridge testified; "I specifically don't remember this tele- 
phone call and it [North's note] is inaccurate." Clarridge 
Test., Hearings, 100-11, at 19. 

191. McMahon Dep., 6/1/87, at 122. 

192. McMahon Memorandum for the Record, Ex. DRC- 
12, Hearings. 100-11; Memorandum from Casey to Poin- 
dexter, 11/26/85, Ex. JMP-18, Hearings, 100-8. 

193. McMahon Memorandum for the Record, Ex. DRC- 
12, Hearings. 100-11; McMahon Dep., 6/1/87, at 107-08. 

194. North Test., Hearings, 100-7, Part I, at 66. 

195. North Notebook, 11/26/85, Ex. OLN-69A, Hearings, 
100-7, Part III. 

196. Israeli Historical Chronology. 

197. Allen Dep., 4/2\/&l, at 168. 

198. Ledeen Dep., 3/11/85, at 95. 

199. Ledeen Dep., 6/19/87, at 100. 

200. Ledeen Dep., 3/11/87, at 86-87. 

201. According to the Israeli Historical Chronology, the 
promises regarding the capability of the missiles were made 
by Ghorbanifar, not the Israelis. 

202. Secord Test., Hearings, 100-1, at 83-85. 

203. Tower Review Board Report at B-179. On Novem- 
ber 25, Iran made a third transfer of $20 million (Id.) The 
purpose of the two $20 million transfers is unclear, but $40 
million is the amount which Ghorbanifar had available for 
proposed weapons purchases in late 1985 and early 1986. 

204. Israeli Financial Chronology. 

205. Israeli Financial Chronology. On November 20, 
North reported to Poindexter that "$18M in payment for 
the first 80 has been deposited in the appropriate account." 
(North PROF Note to Poindexter, 11/20/85 (21:27:39)) 

206. Israeli Financial Chronology. 

207. North Notebook. 11/20/85, Ex. JMP-84, Hearings, 
100-8. 

208. Israeli Financial Chronology. The $1 million transfer 
actually preceded the intermediary's receipt of funds from 
Ghorbanifar. 

209. Id 

210. Id 
in. Id 

212. North Notebook, 11/19/85, Ex. OLN-69A, Hearings, 
100-7, Part III. 

213. PROF Note, North to Poindexter, 11/20/85 
(21:27:39), Ex. JMP-17, Hearings. 100-8. 

214. Israeli Financial Chronology. 

215. Israeli Financial Chronology. The Israeli interme- 
diary claims that during this same period he paid an addi- 
tional $700,000 to various other Iranians and $88,752 to 
defray expenses incurred during the operation. Israeli Finan- 
cial Chronology. 

216. Id 

217. Airline Proprietary Project Officer Dep., 6/12/87, at 
102-05. The manager of the airline was furious: "I was 
really upset that I was put in this situation where I risk the 
clandestine layout of the whole company just for a stupid 
flight like that." Airline Proprietary Manager Dep., 6/11/ 
87, at 46. 



192 



Chapter 1 1 

Clearing Hurdles: The President Approves A 

New Plan 



The difficulties with the November 1985 HAWK 
shipment and the failure to secure the release of more 
hostages did not end the arms-to-Iran initiative. 
Having already traveled down the path of bargaining 
for the hostages' lives, the President and his NSC staff 
were reluctant to turn back. North quickly began to 
plan another arms deal, and the President signed the 
Finding that Stanley Sporkin prepared immediately 
after the HAWK shipment. North claimed repeatedly 
in December that reversing course would cause the 
radical captors to kill the hostages. 

North had another motivation for continuing the 
arms deals. As he explained to Israeli officials in early 
December, he wanted to divert profits to benefit the 
Contras he was supporting in Nicaragua. 

In December 1985 and January 1986, the Secretar- 
ies of State and Defense argued aggressively to the 
President against trying to trade arms for hostages. 
Among other things, they asserted that this initiative 
was illegal and contrary to longstanding U.S. public 
policy against providing arms to terrorist states and 
bargaining with terrorists. 

Secretary Weinberger and Secretary Shultz' argu- 
ments, together with a first-hand assessment by 
McFarlane that the Iranian intermediary was the 
"most despicable man" he had ever encountered, 
caused the initiative to lose momentum in December. 
However, in early January the Israelis approached 
Poindexter — who had replaced McFarlane as National 
Security Adviser — with a new plan that Poindexter 
and North quickly embraced. The President decided 
to go forward. He signed an expanded Finding and 
directed that the covert activity not be reported to 
Congress. 

Unlike the 1985 transactions, the President decided 
that the weapons for Iran would now come directly 
from U.S. stocks. The NSC staff took charge of the 
initiative, relegating the Israelis to a secondary role. 
Secord was designated as the agent of the U.S. Gov- 
ernment in the future transactions. This created the 
opportunity to generate profits on the arms sales that 
the Enterprise could use for its other covert 
projects — including support of the Contras. 



The Players Change 



John Poindexter — soon to be elevated to National Se- 
curity Adviser — and Oliver North met on November 
27, 1985, to devise a new plan. Poindexter directed 
North to have Richard Secord or Israeli official 
David Kimche deliver a message to soothe the Irani- 
ans' feeling of having been cheated because the 
HAWKs delivered three days earlier did not meet 
their expectation. North and Poindexter also discussed 
a "change of team" on the operation. North's notes of 
the meeting indicate that the United States was pre- 
pared to deliver 120 items (probably a new version of 
HAWKs) in exchange for all the hostages after the 
first delivery and a commitment by Iran of no future 
terrorism. * 

The change in team included removing Michael 
Ledeen, the NSC terrorism consultant, as an interme- 
diary. When Ledeen gave Poindexter the message 
that the Iranians felt cheated, Poindexter told him, 
"We're going to take you off this thing for awhile 
because we need somebody with more technical ex- 
pertise. "^ This was the last time Ledeen spoke to 
Poindexter on the Iran initiative, "since from the time 
[Poindexter] became National Security Adviser, 
[Ledeen] was unable to get an appointment with 
him."^ 

In late November, Secord, Iranian go-between 
Ghorbanifar, Kimche, and Israeli arms dealers Al 
Schwimmer and Yaacov Nimrodi met in Paris.* Ac- 
cording to notes North took when Secord briefed him 
on the meeting, Ghorbanifar was "angry," apparently 
because the Iranians wanted "something to deal w[ith] 
Soviet Recon[naisance]" — such as Phoenix or Har- 
poon missiles — rather than the HAWKs that were 
delivered.* Ghorbanifar advanced a set of proposals 
that "blatantly" called for the swapping of arms for 
hostages.* The first proposal, as later related to North 
by Secord, provided for a phased exchange of 3200 
TOW missiles for hostages: 

600 TOWs = 1 release 
H -I- 6 hrs later = 2000 TOWs = 3 release 
H-f 23 hrs = 600 TOWs = 1 release' 
The other options were variations in which other 
armaments — such as Maverick air-to-surface missiles, 



193 



Chapter 1 1 



Dragon surface-to-surface missiles, Improved-HAWK 
missiles, spares for F-4 air planes, ground artillery, 
and bombs — would be substituted for some or all of 
the TOWs. Ghorbanifar's proposal also contemplated 
arms deliveries beyond the initial swap.® The Paris 
group agreed to meet with U.S. representatives in 
London on December 6 to pursue these proposals.* 

North Looks for Weapons 

During the first few days of December, North had 
separate meetings with Assistant Secretary of Defense 
Richard L. Armitage and Israeli Ministry of Defense 
officials. ' ° The purpose of these sessions was to estab- 
lish liaison between the Pentagon and the Israelis and 
to identify methods of obtaining weapons to ship to 
the Iranians or to replenish Israeli stocks following 
Israeli shipments." One of the Israeli officials met 
Armitage at the Pentagon on December 2.'^ Armi- 
tage testified that he could not recall whether he met 
with the official or what they discussed. ^^ Armitage 
testified that he warned North of resistance to the 
plan within the Defense Department, noting that Sec- 
retary Weinberger would be "appalled" if he knew 
North was dealing with Iranians.'* Nonetheless, after 
this meeting, Armitage asked Dr. Henry Gaffney, Di- 
rector of Plans, Defense Security Assistance Agency 
(DSAA), to prepare a paper on I-HAWKs and I- 
TOWs and directed Glenn A. Rudd, Deputy Director 
of DSAA, to prepare a paper on the legal methods 
for transferring TOW and HAWK missiles to Iran.'^ 

Rudd's two-page paper, entitled "Possibility for 
Leaks," discussed legal methods of selling HAWKs 
and TOWs to Iran and outlined the inherent risks of 
Congressional disclosure or discovery by the security 
assistance community. Rudd concluded there was no 
way to transfer the weapons, whether directly to Iran 
or through Israel to Iran, under the Arms Export 
Control Act without notifying Congress; nor, he said, 
was there any way to prevent the security assistance 
community of bureaucrats, diplomats, and arms manu- 
facturers and dealers from learning of the transfers. ' ^ 

When he received Rudd's paper, Armitage instruct- 
ed Rudd to treat the matter as very confidential and 
destroy all drafts. Armitage kept the sole copy in his 
personal office safe.'' When Armitage briefed Wein- 
berger prior to a December 7, 1985, meeting at the 
White House, they reviewed "all the arguments that I 
[Armitage] had laid out, plus the legal arguments 
which I had mentioned in passing, and that he had 
absorbed."'** 



•Weinberger did not recall such a meeting, but did not dispute 
that it had occurred. Weinberger Test., Hearings, 100-10, at 97. In 
any event, at the White House meeting on December 7, he was 
well-prepared to attack the plan on a variety of legal and policy 
grounds. 



North Lays Out A Plan 

On December 4, North wrote a PROF message to 
Poindexter setting out the current situation and pro- 
posing a new arms-for-hostages transaction. He de- 
scribed the "extraordinary distrust" the Iranians de- 
veloped because Schwimmer and Ledeen had prom- 
ised that the missiles shipped in November could fiy 
high enough to stop Soviet reconnaissance flights. He 
said, "None of us [Kimche, Meron, Secord] have any 
illusions about the cast of characters we are dealing 
with on the other side. They are a primitive, unso- 
phisticated group who are extraordinarily distrustful 
of the West in general and the Israelis/U.S. in particu- 
lar." '^ 

While acknowledging "a high degree of risk" in 
continuing the operation, North emphasized, "we are 
now so far down the road that stopping what has 
been started could have even more serious repercus- 
sions." He exhorted Poindexter to press on in a way 
that suggested the United States was already subject 
to Iranian extortion: 

If we do not at least make one more try at this 
point, we stand a good chance of condemning 
some or all [of the hostages] to death and a 
renewed wave of Islamic Jihad terrorism. While 
the risks of proceeding are significant, the risks of 
not trying one last time are even greater. ^° 

North outlined the proposal slated for the upcom- 
ing meeting in London. He said the "package" would 
comprise deliveries from Israel of "50 I HAWKs w/ 
PIP (product improvement package) and 3300 basic 
TOWs" and reported that the Iranians had already 
deposited $41 million to pay for these items and that 
this sum was "now under our control."^' The sched- 
ule that North laid out made plain that this would be 
an unadulterated swap of arms for hostages: 

H-hr: 1 707 w/300 TOWs = 1 AMCIT 
H+lOhrs: 1 707 (same A/C) w/300 TOWs = 1 
AMCIT 

H+16hrs: 1 747 w/50 HAWKs & 400 TOWS = 
2 AMCITs 

H-h20hrs: 1 707 w/300 TOWs = 1 AMCIT 
H-h24hrs: 1 747 w/2000 TOWs = French Hos- 
tage ^^ 

As it had been previously, the schedule was set up so 
that the Americans had to deliver weapons before the 
Iranians would produce any hostages. 

North also reported to Poindexter that "replenish- 
ing Israeli stocks" is "probably the most delicate 
issue." He proposed that the Israelis purchase replace- 
ments with cash, rather than with Foreign Military 
Sales credits. However, he ignored the legal question 
about third-country transfers under the Arms Export 
Control Act. Lastly, North told Poindexter that be- 



194 



Chapter 1 1 



sides themselves, only National Security Adviser 
Robert McFarlane and Duane Clarridge of the CIA 
had a complete understanding of the full plan.^^ Clar- 
ridge has denied that he and North discussed this 
plan, and said that the appearance of his name in 
North's PROF message is probably due to North's 
"tendency to use my name with McFarlane and Poin- 
dexter because if I said it was a good idea, then they 
tended to think it was a good idea."^* 

The following day. North put the proposal into an 
unsigned, unaddressed memorandum. This memoran- 
dum made clear that all 3,300 TOWs and all 50 Im- 
proved HAWK missiles would come from Israel's 
"prepositioned war reserve."^* North's memorandum 
proposed not only that Congress not be notified about 
the operation and replenishment, but also that there 
be a cover story to explain why Israel needed to buy 
weapons: 

The Israelis have identified a means of transfer- 
ring the Iranian provided funds to an Israeli De- 
fense Force (IDF) account, which will be used 
for purchasing items not necessarily covered by 
FMS. They will have to purchase the replenish- 
ment items from the U.S. in FMS transaction 
from U.S. stocks. Both the number of weapons 
and the size of the cash transfer could draw at- 
tention. If a single transaction is more than 
$14.9 M, we would normally have to notify Con- 
gress. The Israelis are prepared to justify the large 
quantity and urgency based on damage caused to 
the equipment in storage.^^ 

Although the Finding CIA Counsel Stanley Sporkin 
drafted in November contemplated delayed Congres- 
sional notification. North's proposal represented an 
entirely different approach: structuring the transaction 
so as to evade Congressional reporting altogether. 
As North was putting together his plan for a new 
arms-for-hostages deal, the CIA stood by to provide 
support for more flights into Iran. In the days after 
the HAWK shipment, Clarridge and CIA stations in 
Countries 16 and 18 exchanged numerous cables relat- 
ing to clearances for anticipated flights from Israel to 
Iran transiting at Country 18 and overflying Country 
16.2' On November 27, Clarridge told the stations 
that the "operation is still on but we have encoun- 
tered delays" and that "whatever was supposed to 
happen after the first sortie did not happen and we 
are regrouping. "^^ On December 3, he reported to 
them: "We are still regrouping. Key meetings of prin- 
cipals will take place this weekend with earliest possi- 
ble aircraft deployments sometime mid to late week of 
December 8."29 Clarridge left the United States on 



other business in early December. However, before 
leaving he told his deputy to expect another flight to 
Iran on a project being run by the NSC for which the 
CIA would be asked to obtain clearances. ^° (For an 
organizational chart of the CIA in 1985, see Figure 
11-1.) 

The President Signs a Finding 

McFarlane returned to his office on December 3 for 
the first time after the Geneva summit. He had al- 
ready told the President of his decision to resign, and 
he tendered his resignation the following day.^' On 
December 3 and 4, McFarlane had several lengthy 
meetings with Poindexter. However, he does not 
recall any discussion of the status of the covert action 
Finding^^ — which CIA Director William Casey had 
delivered to Poindexter with a recommendation that 
the President sign it and about which McMahon had 
been anxiously pestering Poindexter for days.^^ 

On December 5, in one of his first acts as National 
Security Adviser, Poindexter presented the Finding to 
the President at his daily national security briefing. 
The President signed it.^* Poindexter's notes of his 
daily briefing of the President refer to the Finding.'^ 
Chief of Staff Donald Regan was present at this brief- 
ing, but testified that he has no recollection of the 
Finding or the President's signing it: 

I have racked my brains since I've read about it 
in the press, that you have had testimony to that 
effect. I've checked with my members of the 
staff, the White House staff who were working 
with me at the time, as to whether they remem- 
ber it. No one can remember seeing that docu- 
ment.^® 

Poindexter testified that he was never happy with 
the Finding because it failed to mention any objec- 
tives other than trading arms for hostages. He said he 
submitted it to the President without the staffing and 
review that normally accompanies a Finding. In fact, 
other than Casey and McMahon — who both urged 
that the Finding be signed — Poindexter did not recall 
discussing it with anyone else.^'* 



♦McMahon recalled that Sporkin told him he was going to con- 
sult with the Department of Justice and the White House counsel 
before finalizing the Finding. (McMahon Dep., 9/2/87, at 52) 
North testified that he believed that Meese had "seen and ap- 
proved" this Finding before it was signed. However, he based this 
not on personal knowledge but on his understanding that "[ajll 
Findings are reviewed by the Attorney General." (North Test., 
Hearings, 100-7, Part I, at 71-72) Both Poindexter and Meese testi- 
fied that Meese was not consulted. (Poindexter Test., Hearings, 1(X)- 
8, at 125; Meese Test., Hearings, 100-9, at 8-9). 



195 



Chapter 1 1 



>• 
u 

c 

O) 

< 

o 

c 

0) 

■«> 

c 



0) 

o 



C 

(0 

O 

c 
,o 

(0 
N 

"E 

(0 



II 


i^^ 


o 


^f 


LL 


MJZU- 


o 
m 
cc 


FELLIG 

OMMU 

STAF 


Q 


!zO 



UJ 

o 



CD 



< 

EC 

H 
Z 
LU 

o 

LL 
O 
CC 

o 

H 
O 
111 

gc 
o 



0) 
O) 



LU 

oc> 

\-'3 
O-i 
LU LU 

D- 

^< 
3E 



QUJ 



Q. 

E 
o 
o 



<n 

(0 



Ijo 






2 ra 

Si 



o.> 



y « m 

m — I 



O <B ■ 
_l 



e 8 

o p 

lU < 

eoioc 

2 i 
s < 





T 




T 




1 1 1 




1 1 1 
























>. 




























a 










s 




>» 




C 


o 


2 




s 


o 


I» 


<s 

c 






o 

° <D 

gw 

t ra 








II 


c 

CO 

c 
Li. 

o 


03 

o 

_J 

o 




<» 1- 


1 = 


o 
"o « 

Op 


Q. 


O 

HI 
LU 
O 




O" 




(D 




(Sltl 


(B 


a> 




O ™ 


oS 






T3 








^oa 




o 




E 


(0 


E 


o 










C 




c 








E 


o 






^ 




o 




o 


o 


o 




c 


c 


O 


O 





cr 
o 

I- 
o 

LU 

OC r»- "J 

— DC CD 



LU 
O 



Q. 
LU 
Q 



LU 

H 
2 





> 




CD 


DC 


n 


O 


_i 


H 


o 


O 


z 


LU 


X 


-DCO 




3 


LU 

o 


LU 


z 


Q 


LU 




C) 




CO 



GC 
O 

DEocp 

ClO< 
i.lJ-OC 

a. o 





£ 


o 


o 




(0 












a> 


o 


nr 


tn 


(rt 








o 




Q. 


(t 




O 


g 




=8 



C3 





CA 








> 


o 


CO 

r 


(B<l 






c 


(T 


O 


ii^ 




CO 




F 







r 




■c 


CD 


03 


f^ 


3 
O 


r 


li 


o 


CO 








o 


3 




ai 


■D 
O 

Q. 


'^ 


o 


CO 

c 


O 




< 



o <0 

t — 
O 2 

c 

O 





CO 




CO 




>» 


o 


CO 


o 


c 

< 


IT 


*— 


o 


■=; 




o 




CO 





CA 




tf> 




>. 


,, 


CO 






(D 


< 


C) 




n~ 


01 


o 


n 




o 








-I 




LU 



08 




c 


M 




in 




•>^ 








CO 


CO 




liJ<l 


CO 


c 

CO 


z 


^ 






o 


r: 








~i 


o 


o 


iccol 


o 





1 




05 




tf) 


ort 


> 






CO 


c 

< 


^ 


c 


< 


u 


o 


® 


OJ 


f- 




< 






o 






(0 




_i 



^ 




() 




(0 
03 


c 

CD 

F 





u. 


QC 0| 


„ 


0) 


n 


> 






s 


a 


cool 


o 









c 




(U 




fc 


m 






o 




0> 


(l> 


> 


Q) 


Cl> 


c 


o 


m 




r 


oiu| 


CD 
O 


oQ 


»: 




O 







CD 




C) 


CO 

o 


? 


■o 


0} 


«<y5l 










cu 


o 


c 

0) 


CO 

E 


o 


o 


u. 


c 









en 




c 




o 










o 


CD 


cr 


n 


o 


n 


.t- 




O 


z 




o 




w 





CD 




o 




? 


o 


CD 

in 


CI 




ic 


CO 

o 


n 


c 








o 




CD 




1- 



o 




r 


CD 


Q. 


r 




CD 


nHJI 


o 








() 


n 


^ 




n 


CO 






IS 


CD 


r 


n 


o 












Z 





rn^nrnrnrn 



< 



O 



c 

CD 





4r 




O 




U 




CQ 








o 


in 

00 


.£ 


O) 


S 






•> 


-3 


a. 


O 


< W 



196 



Chapter 1 1 



Poindexter testified that, to him, the primary signifi- 
cance of the Finding was its retroactivity — a feature 
that was highly unusual, if not unique.* He said, 
"There really wasn't a forward-looking aspect to the 
Finding. "3* However, at the time that the Finding 
was signed, Poindexter was considering the detailed 
plan that North had presented for further arms sales, 
and this was the subject of a meeting two days later 
with the NSC principals. 

The original of the signed Finding was kept in Paul 
Thompson's safe at the NSC.^^ Contrary to normal 
practice, the CIA and other agencies were not given 
a copy. Indeed, no copies were made. McMahon said 
that he knew of no other occasion when this oc- 
curred. ''° 

When the Iran initiative was unraveling almost a 
year later, Poindexter destroyed this Finding. He be- 
lieved that if the Finding came to light it would cause 
"significant political embarrassment" to the President 
because it would reinforce the emerging picture that 
the United States had traded arms for hostages.*' In 
addition, the Finding was evidence of the Administra- 
tion's contemporaneous knowledge of the HAWK 
shipment, a fact that Poindexter, Casey, North, and 
others sought to conceal in November 1986. 

Poindexter Briefs Shultz 

The same day the President signed the Finding, 
Poindexter briefed Secretary of State George Shultz 
by telephone on the status of the Iran initiative. The 
briefing — Shultz's first from Poindexter on the sub- 
ject — was not complete: Poindexter did not even men- 
tion the Finding. Not knowing he was hearing only 
part of the story, Shultz commented at the time to an 
aide, "he [Poindexter] told me more than I had 
known before of what went on in the latter half of 
1985 and I felt this was a good thing and we were off 
to a good start.'"* 2 Shultz told Poindexter that the 
Iran initiative was a "very bad idea'"*^ and that "[w]e 
are signaling to Iran that they can kidnap people for 
profit."** 

That same day, December 5, CIA Deputy Director 
John McMahon convened a meeting with several top 
CIA officials, including Robert Gates, Edward Juch- 
niewicz, and Chief of the Near East Division (C/NE). 
McMahon said that a meeting with the President was 
slated for the weekend to "take stock" of U.S. efforts 
to free hostages and expand ties with Iran. He re- 
quested that various facts relating to Iran's military 
strength and the status of the Iran-Iraq war be pulled 
together. Someone at the meeting reviewed what had 



* Poindexter testified that he could recall only "one or possibly 
two other findings that had a retroactive nature to them. I, frankly, 
was always uncomfortable with that, because I thought it didn't 
particulary make a lot of sense." (Poindexter Test.. Hearings. 100-8 
at 18) In Executive Session, Poindexter testified that after further 
thought, he could not recall any other retroactive Findings. (Poin- 
dexter Test., Executive Session, 8/6/87, at p. 8). 



already happened, including the November 24 ship- 
ment and the preparation and signing of the Finding, 
and the planning for more shipments, including 
North's chartering of planes and his upcoming trip to 
London for more talks. *^ 

North Raises Contra Diversion with 
Israelis 

On the day after the President signed the Finding, 
December 6, North remarked during a meeting with 
Israeli officials that the United States wanted to use 
profits from the upcoming arms sale to Iran to fund 
U.S. activity in Nicaragua. The meeting, which was 
held in New York, concerned replenishment of Israeli 
TOWs. One of the Israeli officials made handwritten 
notes of this meeting on December 12, 1985. Accord- 
ing to these notes, the Israelis were told by North 
that not only did the United States have no budget to 
pay for the 504 TOW missiles (and planned on the 
Israeli Government's receiving this money from the 
Israeli intermediaries), but that in the future the 
United States wanted to generate profits from this 
transaction in order to finance part of its activity in 
Nicaragua. According to the Israeli Historical Chro- 
nology, North had a position paper with him at the 
meeting that he said was to be presented to the Presi- 
dent at a meeting the following day.*®** 

North testified that he recalled no such conversa- 
tion, though he could not rule it out: 

My recollection was that the first time it [the 
diversion] was specifically addressed was during 
a [later] meeting with Ghorbanifar. It may well 
have come up before, but I don't recall it.*' 

North testified that his "clearest recollection" was 
that the notion of using the residuals for the Contras 
was first suggested by Ghorbanifar in January 1986. *8 
North flew from New York to London on Decem- 
ber 6 and met with Secord, Ghorbanifar, Kimche, 
Schwimmer, and Nimrodi to discuss the 50-HAWK, 
3,3(X)-TOW proposal that North had previously pre- 
sented to Poindexter.** Ghorbanifar acknowledged 
that the Iranians were having increasing difficulty 
maintaining control over the Hizballah captors and 
pressed vigorously for a quick renewal of arms ship- 
ments.^" 

The President and His Advisers Review 
the Initiative 

While North was moving full-steam ahead in the 
negotiations, the President and his top national securi- 
ty advisers debated the Iranian initiative at an infor- 



•• Two of the Israeli officials at the December 6 meeting, who 
did not take notes, did not recall the remarks of North recorded by 
the other Israeli official in his notes. Israeli Historical Chronology. 



197 



Chapter 1 1 



mal meeting on the morning of Saturday, December 
7, in the White House residence. Present were the 
President, Secretaries Shuhz and Weinberger, McMa- 
hon (sitting in for Casey, who was out of town), 
McFarlane, Poindexter, and Regan.*' According to 
McFarlane, the purpose of the meeting was "to 
review what has taken place since the President's 
approval of August and the negative viewpoints of 
the Secretaries of State and Defense to the effect that 
we hadn't achieved our purpose, and [that the initia- 
tive] was degenerating into an arms for hostage ar- 
rangement."*- The discussion that ensued "was now 
more specific than it had been in August, and it was 
about a specific plan" to trade weapons for hos- 
tages.*' 

Secretary Shultz, Secretary Weinberger, and Regan 
all voiced strong opposition to the initiative. Secre- 
tary Shultz advanced multiple policy reasons for not 
pursuing it. His "talking points" for the session stated 
that the initiative would "negate the whole policy" of 
not making "deals with terrorists"; that he doubted it 
would buy the United States influence with moderates 
in Iran; that it would undoubtedly become public and 
"badly shakeQ" moderate Arabs when they learned 
that the United States was "breaking our commitment 
to them and helping the radicals in Tehran fight their 
fellow Arab Iraq"; and that U.S. allies would be 
"shocked if they knew we were helping Iran in spite 
of our protestations to the contrary."*'' 

Secretary Weinberger also forcefully voiced oppo- 
sition, including on legal grounds. He said the pro- 
posed arms deal would violate both the U.S. embargo 
against the shipment of arms to Iran and the restric- 
tions on third-country transfers of U.S. -provided arms 
in the Arms Export Control Act. He later testified: 
"[T]here was no way in which this kind of a transfer 
could be made if that particular Act governed."** 

Secretary Weinberger also pressed many of the ar- 
guments made by the Secretary of State: 

I ran through a whole group [of specific objec- 
tions] and raised every point that occurred to me, 
including the fact that we were at the same time 
asking other countries not to make sales of weap- 
ons to Iran, that there was no one of any reliabil- 
ity or, indeed, any sense with whom we could 
deal in Iran and the government, and that we 
would not have any bargain carried out, that if 
we were trying to help get hostages released, 
why there would be a real worry that the matter 
would not be held in any way confidential, that 
we would be subjected to blackmail, so to speak, 
by people who did know it in Iran and else- 
where, and that we had no interest whatsoever in 
helping Iran in any military way, even a minor 
way, and that in every way it was a policy that 
we should not engage in and most likely would 
not be successful.*^ 



Secretary Weinberger told the President that the initi- 
ative "wouldn't accomplish anything, and that they 
[the Iranians] would undoubtedly continue to milk 
us."*'' McMahon argued that the long-range rationale 
of the arms transactions — to bring about a more mod- 
erate regime in Iran — was unfounded. 

I said that I was unaware of any moderates in 
Iran, that most of the moderates had been slaugh- 
tered by Khomeini, that whatever arms we give 
to these so-called moderates they will end up 
supporting the present Khomeini regime and they 
would go to the front and be used against the 
Iraqis and that would be bad.*** 

McMahon "was convinced that all of this was an 
arms for hostage arrangement, no matter what you 
called it. . . ."*^ There is evidence that McMahon 
also argued that Ghorbanifar was unreliable.*" 

The President, along with McFarlane and Poin- 
dexter, spoke in favor of continuing the initiative.®'* 
According to Secretary Shultz: 

The President, I felt, was somewhat on the fence 
but rather annoyed at me and Secretary Wein- 
berger because I felt that he sort of — he was very 
concerned about the hostages, as well as very 
much interested in the Iran Initiative.®^ 

Secretary Shultz testified that the President was 
"fully engaged" in the conversation and frustrated 
with the situation.®' 

In response to Weinberger's legal objections, Shultz 
recalls that the President responded: " 'Well, the 
American people will never forgive me if I fail to get 
these hostages out over this legal question,' or some- 
thing like that." Weinberger replied: " '[B]ut visiting 
hours are Thursday', or some such statement."®*** 

The participants left the meeting with different 
views about whether the initiative would proceed. 
According to Poindexter, the President wanted to 
pursue every means of trying to get the hostages 
back.®* But McFarlane recalled that the President, 
with disappointment and frustration, approved the po- 
sition of no more arms sales to Iran, at least pending 
the London meeting.®® McMahon said that no deci- 
sion was made, and that the President left the meeting 
to do his Saturday afternoon radio broadcast, telling 
his advisers to "talk more on this and see what ought 
to be done."®' Secretary Weinberger testified that he 
believed the initiative had been put to rest once and 
for all. Indeed, he returned to the Pentagon after the 



•Casey was also in favor of continuing the initiati\ e al this point, 
according to Poinde.xter. Poindexter Test.. Hearings. 100-8. at 25. 

••Shultz testified that this "banter" between the President and 
Secretary Weinberger did not ha\'e the tone of the President advo- 
cating violating the law, but rather "was the kind of statement that 
I aiti sure we all make sometimes when we are frustrated " Shultz 
Test., Hearings. 100-9. at .^2. 



198 



Chapter 11 



meeting and told his military aide that "this baby had 
been strangled in its cradle, that it was finished."** 
And Secretary Shultz "wasn't sure" where things 
stood after the meeting, but believed that he and 
Secretary Weinberger had prevailed.^* 

A striking aspect of the December 7 meeting was 
what was not discussed: According to McMahon and 
Weinberger, neither the November shipment of 
HAWK missiles, nor the Finding that was signed just 
two days earlier, came up.''° 

Despite varying impressions of the meeting, the 
President directed McFarlane to go to London to 
meet with Ghorbanifar and others. Poindexter testi- 
fied that the purpose was to "check out" the Israeli 
channel to Iran so that the President could have first- 
hand information on which to base a decision."* 
McFarlane testified that his purpose was to stress to 
Ghorbanifar that the United States was open to politi- 
cal discourse with Iran but no arms sales. '^ But there 
is evidence of a more specific purpose: McFarlane 
was to try to talk Ghorbanifar into arranging a release 
of the hostages outside the framework of an arms 
deal, or at least before any more arms deliveries.'^ 
Poindexter proposed at one point during the meeting 
that McFarlane also have authority, if the Iranians 
rejected this approach, to inquire whether the British 
Government would perform the replenishment sales 
to Israel that Weinberger had argued the United 
States could not make.''* There is no evidence that 
such an approach was made. 

McFarlane Meets Ghorbanifar in 
London 

On December 8, McFarlane joined Kimche, Secord, 
North, Nimrodi, and Ghorbanifar in London. '^ 
McFarlane presented an agenda that focused on a 
political opening with Iran and on areas of possible 
common interests between the United States and Iran. 
In contrast, Ghorbanifar wanted to talk only about 
specified numbers of TOW missiles for each hos- 
tage.'^ Ghorbanifar explained that the Iranians were 
very angry over receiving the wrong kind of HAWK 
missiles. McFarlane responded: "[G]o pound sand, 
that is too bad."'" McFarlane was "revolted" by the 
bargaining and found Ghorbanifar to be a "borderline 
moron."''* 

North's view of the meeting was slightly different. 
He thought McFarlane was telling Ghorbanifar that 
there could be no more arms sales until after the 
hostages were released, not that McFarlane was pre- 
cluding arms sales. ''^ Once again, as the initiative 
began to come apart. North raised the specter of the 
death of the hostages in retaliation for a U.S. decision 
to break off the negotiations. In a memorandum to 



McFarlane and Poindexter, he wrote: "[A]ll it would 
take for the hostages to be killed is for Tehran to 
'stop saying no' [to the captors]. "*° 

McFarlane, North, and Secord flew back to Wash- 
ington together on December 9. On the way back, 
McFarlane said he was very unhappy with Ghorbani- 
far's arms-for-hostages pitch. He viewed Ghorbanifar 
as a businessman interested only in profit and "one of 
the most despicable characters he had ever met."*' 

North was unhappy with McFarlane's negative re- 
action*^ and that day wrote an "eyes only" memoran- 
dum to McFarlane and Poindexter entitled "Next 
Steps." In it. North reviewed options that he saw as 
necessary "[i]f we are to prevent the death or more of 
the hostages in the near future."*^ After reviewing 
the problems of Ghorbanifar's untrustworthiness, 
Schwimmer's arrangement of previous deals that an- 
gered the Iranians and left Israel with inadequate 
funds for replenishment, and the United States' "lack 
of operational control over transactions with Ghor- 
banifar," North initially set out four options: the arms- 
for-hostage swap discussed in London, an Israeli de- 
livery of 400 to 500 TOWs to Iran to restore "good 
faith," a military raid, and "do nothing." North sum- 
marily rejected the "do nothing" approach: 

Very dangerous since U.S. has, in fact, pursued 
earlier Presidential decision to play along with 
Gorbanifahr's plan. U.S. reversal now in mid- 
stream could ignite Iranian fire — hostages would 
be our minimum losses.** 

North testified that Casey shared his view that termi- 
nating the negotiations would lead to the death of the 
hostages.*^ 

At the end of the memo. North described a "fifth 
option": the United States would directly sell arms to 
Iran, acting pursuant to a Presidential Finding and 
using Secord as an operational "conduit."*^ The Iran 
initiative was restructured over the next few weeks to 
closely resemble this 'Tifth option." Moreover, using 
the Enterprise as a conduit for the arms sales pro- 
ceeds facilitated the diversion of funds to the Contras 
that North had mentioned to the Israelis only a few 
days earlier.** 

McFarlane Briefs the President on tlie 
London Meeting 

On December 10, McFarlane briefed the President 
on the London meeting. Also present were Casey, 



•In fact. Ihe United States already had substantial first-hand in- 
formation on Ghorbanifar from both CIA officials and Ledeen. 



••On the same day that North prepared this "Next Steps" memo- 
randum, he also met with the General Counsel of the CIA, Stanley 
Sporkin. (North Calendar. 12/9/85. N336) Sporkin recalls that 
McMahon was to attend this meeting as well and that the purpose 
was to discuss McMahon's desire that the CIA's role in the Iran 
initiative be eliminated or reduced. Sporkin Test., Hearings. 100-6, 
at 127-128. 



199 



Chapter 1 1 



Poindexter, North, and Regan.*'* McFarlane empha- 
sized that Ghorbanifar lacked integrity and that the 
initiative was unlikely to bear fruit if he remained the 
channel to the Iranians.** At the same time, McFar- 
lane or North said that abandoning the initiative 
would risk the lives of the hostages.*^ The President 
seemed influenced by this concern.*" 

No decision was reached about the future of the 
initiative, and again there were differing perceptions 
about what would happen. The President continued 
to hope that its continuation might lead to freedom 
for the hostages. McFarlane recalled that the Presi- 
dent asked, 

[W]hy couldn't we continue to let Israel manage 
this program, and was expressing and searching 
for, I think understandably, ways to keep alive 
the hope for getting the hostages back, and it is 
quite true that the President was profoundly con- 
cerned for the hostages.*' 

Casey left the meeting with "the idea that the Presi- 
dent had not entirely given up on encouraging the 
Israelis to carry on with the Iranians."*^ 

I suspect he would be willing to run the risk and 
take the heat in the future if this will lead to 
springing the hostages. It appears that Bud 
[McFarlane] has the action.*^ 

Poindexter testified that the President was disappoint- 
ed that Ghorbanifar appeared to be so unreliable, but 
was reluctant to abandon the project.** In contrast. 
State Department officials were left with the impres- 
sion that the initiative was dead. Under Secretary of 
State Michael Armacost reported to Shultz, who was 
in Europe, that "Bud's recommendation, upon return- 
ing from his latest discussions, was to drop the enter- 
prise. That has now been agreed."*^ 

Late that evening, Clarridge's deputy, who was the 
acting Chief of the CIA's European Division in Clar- 
ridge's absence, cabled CIA stations in Countries 16 
and 18 to inform them that there would be no more 
flights, at least in the short run. He wrote: 

As late as last night the negotiating was still 
going on. We have just received word now that 
the deal is apparently all off. Don't know why 
yet or whether there is a possibility that it will 
revive in the future. . . . [F]or now it looks like 
we are standing down.*® 

Poindexter to North: Keep Trying 

Following the briefing, Poindexter had the clear im- 
pression that the President wanted to continue the 
program, and he moved to put it "on a sounder foot- 

•Some of the participants place Weinberger at this meeting, but 
he has no recollection of it. 



mg. 



Casey too was "a very strong advocate of 



proceeding."** Poindexter told North to continue his 
efforts to keep the Iran initiative moving forward.** 
This involved at least three steps: first, preparing a 
fully staffed and more comprehensive covert action 
Finding; second, substituting a new team — to be lead 
by North and Israeli Amiram Nir — to replace Ledeen, 
Schwimmer, and Nimrodi; and third, finding a legal 
way to sell arms to Iran. On this last point, Poin- 
dexter asked North to work with "the appropriate 
people at CIA and in [Attorney General] Ed Meese's 
office, if not Ed Meese himself" '°° 

The CIA Evaluates Ghorbanifar 

Ledeen, with North's approval, aggressively urged 
the CIA to establish an intelligence relationship with 
Ghorbanifar. In early December, Ledeen met with 
the CIA's Duane Clarridge and Charles Allen. He 
told Allen the history of the Iran initiative, including 
the HAWK missile debacle. He then explained why 
he believed Ghorbanifar had contacts that could help 
the CIA gain insights into the Iranian regime and 
assist its counterterrorism efforts. Ledeen said Ghor- 
banifar was "a good fellow who is a lot of fun" and 
"praised [him] to the hilt."'°'** Allen passed the 
information to the CIA's Near East Division for eval- 
uation. '°^ 

After meeting with Ghorbanifar in mid-December 
in Switzerland, Ledeen met with Casey on December 
19 and repeated his arguments for dealing with the 
Iranian. Casey reacted favorably but indicated a need 
to clear up the controversy over Ghorbanifar's poor 
record with the CIA.i°=' 

Casey called Deputy Director for Operations Clair 
George and instructed him to arrange a new evalua- 
tion of Ghorbanifar.'"* On December 22, the Chief 
of the Iran branch at the CIA interviewed Ghorbani- 
far at Ledeen's home. Ledeen and Allen were there 
and North showed up near the end. Ledeen told the 
Chief of the Iran branch that Ghorbanifar is "a won- 
derful man . . . almost too good to be true." The 
conversation focused on terrorism and leading person- 
alities in Iran.'°^ 

The Chief of the Iran branch reported to his CIA 
superiors that he was "only further convinced of the 
untruthfulness or lack of trust that we could put in 
Mr. Ghorbanifar." They decided that Ghorbanifar 
should be given a polygraph test, and Ghorbanifar 
agreed.'"® After hearing the briefing on Ghorbanifar, 
Casey sent the President an "eyes only" letter stating 
that one of the ongoing initiatives to free the hostages 
was a plan involving Ghorbanifar. Casey wrote of 



••At this time, Ledeen also outlined Ghorbanifar's proposal for 
an anti-Libyan "sting" operation in which the assassination of a 
leading opponent of Qadhafi would be staged and later revealed to 
be faked. Ledeen Dep,, 6/22/87, at 167, 172-74. 



200 



Chapter 1 1 



Ghorbanifar: "He has 3 or 4 scenarios he would hke 
to play out."'"'' 

The decision to consider continued reliance on 
Ghorbanifar was remarkable. Previously, Agency offi- 
cials had found his information so marked by deceit, 
lies, and self-serving proclamations that it had issued a 
"burn notice" warning the U.S. intelligence communi- 
ty that he could not be trusted and should not be 
dealt with.'"" Moreover, the information Ghorbanifar 
was providing was almost impossible to corroborate. 
He alone was explaining the Iranian position on the 
hostage issue. The last deal he had helped arrange, 
the November HAWK shipment, had been a com- 
plete disaster. 

Acceleration of the Initiative: 
January 1986 

Israelis Add a New Element to the 
Negotiations: The Southern Lebanon 
Army Prisoners 

In mid-December, 1985, Amiram Nir, adviser to the 
Prime Minister of Israel, became involved in the Iran 
operation; he later became the liaison to the Ameri- 
cans and Ghorbanifar. Nir, who reportedly was un- 
aware of the secret Iranian arms deals prior to this 
time, had spent the last month exploring whether 
American hostages in Lebanon would be released if 
the Southern Lebanon Army freed Shiite prisoners. 
Nir proposed to his superiors that he discreetly get 
the reaction of the Americans to a hostage release 
initiative along these lines. ^"^ 

After being briefed on the U.S. -Israeli Iran oper- 
ation, Nir began work on a plan linking that operation 
with his own plan. He presented to high-ranking Is- 
raeli officials a proposal that included: (1) a direct sale 
of TOWs out of Israeli arsenals to Iran and the simul- 
taneous release of American hostages; (2) a purchase 
by Israel from the United States of replacement arms, 
using the proceeds from the Iran sale; (3) exerting 
Israeli influence to obtain the release of prisoners held 
by the Southern Lebanon Army; (4) the handling of 
all logistics by the Israelis to enable the Americans to 
deny any involvement; and (5) the construction of a 
convincing cover story to explain the release of the 
hostages and the prisoners. ''° Nir then went to 
London in late December to meet, for the first time, 
with Ghorbanifar and one of the Israeli intermediar- 
ies. The three hammered out a detailed — but tenta- 
tive — plan embodying these elements. The Israeli 
Government authorized Nir to present this plan to the 
United States but made clear that the transaction 
could occur only with U.S. agreement to the entire 
concept and that Israel would assist in whatever way 
the Americans requested, but not play a leading 
role. 1 ' > 



Nir Comes to Washington 

On January 2, 1986, Nir flew to Washington to 
meet with Poindexter and North at the request of 
Prime Minister Peres. "^ In an opening meeting with 
North in a hotel, Nir said that he had an idea about 
how to improve the progress of the Iranian oper- 
ation. '''' Nir met later that morning with Poindexter, 
North, and Don Fortier, Poindexter's deputy, and laid 
out his plan. ' ' * The central features of the proposal 
were recorded by Poindexter in his notes: the Israelis 
would ship to Iran 4,000 "unimproved TOWs"; after 
the delivery of the first 500, all five American hos- 
tages would be released; simultaneously the Southern 
Lebanon Army would release "20-30 Hizballah pris- 
oners who don't have blood on their hands." "^ If the 
American hostages were released, Israel would ship 
to Iran the other 3,500 TOWs and Iran would "con- 
firm" its agreement for "no more hostages [and] 
terror."!'^ Under the plan, the United States would 
replace the TOWs only if the hostages were released. 
If the hostages were not released, replenishment was 
not required and Israel would have lost 500 TOWs. If 
they were freed, then the United States would replace 
the 4,000 TOWs, plus the 500 TOWs the Israelis had 
shipped in 1985. ''' 

Rapid replacement of the TOWs was of particular 
concern to Nir. He emphasized that the number of 
TOWs would decrease Israel's arsenal when tension 
with Syria increased the urgency to keep Israel's arse- 
nal at full strength. To address Israel's concerns about 
readiness, Nir called for the United States to "preposi- 
tion" substitute TOWs near Israel as soon as possible 
in case a sudden need for them occurred. Thereafter, 
the United States was to proceed with "regular steady 
replacement" of the TOWs by sale to Israel. The 
Israelis also wanted a U.S. commitment that, if the 
operation were exposed, the United States would say 
it knew of the operation and did not object. ' ' * 

Nir and North Discuss Use of Residuals 

Nir's proposal included another feature: generating 
profits that could be diverted to other covert projects. 
This was not a new concept: Nir and North had 
talked generally about joint covert operations in No- 
vember, and North had told other Israelis in Decem- 
ber that the United States wanted to use profits from 
the arms sale under discussion at that time to finance 
U.S. activities in Nicaragua. 

Poindexter recalled that at either the January 2 
meeting or another meeting with Nir a few days later, 
"[t]here also was a very brief, general discussion 
about some other cooperative activities.""^ North — 
who talked alone with Nir several times during the 
first days of January — testified to a more specific dis- 
cussion about uses for the "residuals": 



201 



Chapter 1 1 



I recall that we met New Year's day or the day 
after . . . and it was his [Nir's] proposal at that 
point to use the profits by the arrangement they 
envisioned, selling Israeli TOWs at a profit, re- 
plenishing them with part of that money, using 
part of that money for other operations. ... I do 
not believe he mentioned contras at that meeting, 
but my recollection is we began to talk in early 
January about other joint U.S. -Israeli, and in 
some cases unilateral Israeli operations of a cer- 
tain kind ... .120 

A New Finding Is Prepared 

Poindexter realized from the start that if the United 
States embraced the Nir proposal for revitalizing the 
Iranian initiative, a new covert action Finding would 
be essential. In notes that he wrote on a fiight to join 
the President in California immediately after the Janu- 
ary 2 meeting he jotted: "Covert Finding — already 
pregnant for 500."^^' Poindexter testified that the 
"500" was a reference to the TOWs that Israel had 
already shipped to Iran with U.S. approval but with- 
out a Finding. '22 

On the same day that Nir advanced his new pro- 
posal. North contacted Sporkin to set in motion the 
drafting of a new covert action Finding to authorize 
the activity. North told Sporkin he wanted a more 
expansive Finding than the one Sporkin prepared in 
November. He said it should "cover certain other 
activities, that there was a broader concept to the 
relationship that was being considered with Iran."'23 

A first draft of the new Finding, prepared by a 
CIA staff lawyer who was told nothing of the No- 
vember Finding, '24 did not mention the objective of 
gaining the release of American hostages. It did au- 
thorize shipment of arms to Iran. This draft included 
the standard provision calling for the Director of 
Central Intelligence to report the activity to the Intel- 
ligence Committees of Congress. '25 

On January 3, Sporkin edited the draft Finding, 
making several significant changes. First, he put the 
provision calling for Congressional notification in 
brackets, and above it inserted new language directing 
that the Director instead "refrain from reporting . . . 
until I [the President] otherwise direct." Sporkin 
made this change to present squarely to the President 
the alternatives on notification. Sporkin also changed 
the description section of the Finding. He apparently 
sent this draft to North during the day on January 
3. '26 The draft contained no references to hostages. 

North asked Sporkin to meet with him that night to 
work on the Finding. Before agreeing to this, Sporkin 
tracked down Casey — who was vacationing in Flori- 
da — and asked if he should do so. Casey told Sporkin 
that he knew nothing about what was going on, but 
that Sporkin should meet North and keep Casey in- 
formed. '2'' 



At the meeting. North showed Sporkin another 
draft of the Finding. '^s xhe preamble of the North 
draft included only the nonnotification alternative, a 
modification that Poindexter, and — North assumed— 
the President, approved. '^^ Among other changes 
were inclusion of a reference to "third parties" and a 
reference to "USG" (U.S. Government) — rather than 
just the CIA — as the entity authorized by the Finding 
to act.'^° Sporkin understood "third parties" to refer 
"to the people that were working with Iran, Ghor- 
banifar," as well as the Israelis who, Sporkin learned, 
were involved in the initiative in November.'" The 
North draft, like the Sporkin draft, contained no ref- 
erence to the central quid pro quo for the arms 
sales — the hostages. 

Later that evening or the following day. North 
called Casey, and Casey's reaction to the renewed 
initiative was positive. North then reported to Poin- 
dexter that Casey "thought the Finding was good and 
that this is probably the only approach that will 
work."' ^2 

The next day, North drafted a cover memorandum 
for Poindexter to send to the President with the Find- 
ing. North wrote that Nir had proposed a plan "by 
which the U.S. and Israel can act in concert to bring 
about a more moderate government in Iran." He said 
that under the plan, this goal was to be achieved by 
providing "military materiel, expertise and intelli- 
gence" to "Western-oriented Iranian factions." Pro- 
viding such items to moderates would enable them to 
come to power by "demonstrat[ing] their credibility 
in defending Iran against Iraq and in deterring Soviet 
intervention," North said. '^^ 

North's draft cover memorandum described the 
role to be played by the United States under the plan: 

As described by the Prime Minister's emissary 
[Nir], the only requirement the Israelis have is an 
assurance that they will be allowed to purchase 
U.S. replenishments for the stocks that they sell 
to Iran. Since the Israeli sales are technically a 
violation of our Arms Export Control Act em- 
bargo for Iran, a Presidential Covert Action 
Finding is required in order for us to allow the 
Israeli sales to proceed and for our subsequent 
replenishment sales. '^^ 

North's memorandum thus makes plain that he under- 
stood that, without a Finding, the sale of U.S. -made 
weapons by Israel to Iran would violate the Arms 
Export Control Act. 

The memorandum also stated that if the plan were 
approved and the Finding signed, Israel would "uni- 
laterally" commence delivery of TOW missiles to 
Iran in January, the United States would replenish 
Israeli stocks in less than 30 days, and five American 
hostages in Beirut would be released. '^^ The memo- 
randum made no reference to Nir's proposal regard- 
ing release of dozens of prisoners held by the South- 



202 



Chapter 1 1 



ern Lebanon Army, nor to the plan to use profits for 
other covert operations. 

On Sunday, January 5, North, Sporkin, and Casey 
met at Casey's home to discuss the new plan and the 
draft Finding. Casey read the draft Finding along 
with a draft cover memorandum and voiced his ap- 
proval. '^^ Sporkin, however, felt uncomfortable 
about omitting the hostage release objective from the 
Finding and raised this concern with Casey. Accord- 
ing to Sporkin, North explained to Casey that the 
State Department did not want this in the Finding 
because it would create an appearance of a "hostage- 
for-arms shipment" and therefore would not "look 
right."* Sporkin argued that the hostage release 
aspect of the Finding was a "very important element" 
that "ought to be in there." Casey agreed.'^'' 

Apparently around this time, North also revised the 
cover memorandum to the President. He deleted the 
statement that the contemplated Israeli sales were a 
"technical violation" of the Arms Export Control Act 
and included a sentence expressly recommending that 
"you exercise your constitutional prerogative to 
withhold notification of the Finding to the Congres- 
sional oversight committees until such time that you 
deem it to be appropriate."*^* 

On Monday, January 6, North hand-carried the 
draft Finding and cover memorandum to Attorney 
General Meese for his review. North discussed it with 
the Attorney General and his deputy, D. Lowell 
Jensen. Attorney General Meese approved the Find- 
ing and the "procedures we were using," according to 
North. *^^ Attorney General Meese does not recall 
the meeting, but is "satisfied that it took place. "''"' 
Jensen testified that North presented the papers for 
"informational" purposes only, and that the Attorney 
General was not asked for, and did not offer, any 
opinion.'*' 

The President and Advisers Consider the 
New Proposal 

At the morning national security briefing on Janu- 
ary 6, Poindexter told the President of the Nir pro- 
posal.'''^ The Vice President, Regan, and Don For- 
tier were also present.'*^ The President "indicat[ed] 
he was in general agreement" with the proposal and 
decided there would be a full NSC meeting the fol- 
lowing day on the proposal and the Finding. Poin- 
dexter presented the President with the January 6 
draft of the Finding at this briefing. Poindexter did 
not intend that it be signed at this point because it had 
not yet been "fully staffed" and discussed among the 
President's national security advisers. But the Presi- 
dent, not realizing that the Finding was only a pro- 
posal for discussion, read it and signed it, reflecting 
his agreement. '■*■* 



• Secretary of State Shultz, in fact, had argued at the December 
7 meeting against any arms-for-hostages trade. 



At the full NSC meeting on January 7 were the 
President, the Vice President, Secretaries Shultz and 
Weinberger, Attorney General Meese, Casey, Poin- 
dexter, and Regan. '""^ While Secretaries Weinberger 
and Shultz continued to object strenuously, all others 
favored the plan or were neutral.'*® Secretary Wein- 
berger, who said he had no advance knowledge about 
the subject, found it to be "very much a re-run" of 
the December meeting, except that now the President 
decided to go forward with the plan: 

I made the same points, George Shultz made the 
same points. Bill Casey felt that there would be 
an intelligence gain, and there was also talk of 
the hostages as one of the motivating 
factors, . . . but the responses of the President 
seemed to me to indicate he had changed his 
view and had now decided he wanted to do 
this.'*'' 

There is no record that the Vice President expressed 
any views. 

At the meeting, Attorney General Meese provided 
a legal opinion that the arms sales could be done 
legally with Israel making the sales and the United 
States replenishing Israel's stocks.'** Secretary Wein- 
berger again objected that the proposed transaction 
would violate the Arms Export Control Act; the At- 
torney General responded that there were mecha- 
nisms outside the AECA through which the operation 
could proceed legally, including "the President's in- 
herent powers as Commander in Chief, the President's 
ability to conduct foreign policy. . . ."i*^ Meese 
referred to a 1981 written legal opinion by Attorney 
General William French Smith stating that the CIA 
could legally sell to third countries weapons obtained 
from the Defense Department under the Economy 
Act. On this authority, he "concurred with the view 
of Director Casey that it would be legal for the Presi- 
dent to authorize arms transfers pursuant to the Na- 
tional Security Act."'^° 

Secretary Shultz felt that it was very clear that the 
President wanted to go forward with the plan. To the 
Secretary of State, the lack of opposition "almost 
seemed unreal," and he left the meeting "puzzled, 
distressed."'^' What Secretary Shultz did not know 
was that the President had signed a Finding on Janu- 
ary 6. That act, an indication of the President's re- 
solve, was not mentioned. 

North Proceeds With Plans for 
Replenishment 

That day. North called Nir in Israel and said that 
the United States was prepared to proceed with Nir's 
plan, subject to certain conditions. North said that 
both the President and Secretary Weinberger had 
agreed to the plan. North gave Nir this encoded mes- 
sage: 



203 



Chapter 1 1 



1. Joshua [President Reagan] has approved pro- 
ceeding as we had hoped. 

2. Joshua and Samuel [Secretary Weinberger] 
have also agreed on method one [replenishment 
by sale, as opposed to "method two," replenish- 
ment by prepositioning]. 

3. Following additional conditions apply to 
Albert [Code name for operation?]. 

A. Resupply should be as routine as possi- 
ble to prevent disclosure on our side. May 
take longer than two months. However, 
Albert says if crisis arises Joshua promises 
that we will deliver all required by Galaxie 
[apparently C 5A cargo plane] in less than 
eighteen hours. 

B. Joshua also wants both your govt and 
ours to stay with no comment if operation is 
disclosed. 

4. If these conditions are acceptable to the 
Banana [Israel] th[e]n Oranges [U.S.] are ready to 
proceed. *^^ 

Neither of the "additional conditions" proposed by 
the U.S. side dealt with the substance of the oper- 
ation. North's notes reflect that the purpose for "rou- 
tine" resupply spread over a period of months was to 
enable the purchases by Israel to be broken "into lots 
of less than Cong[ressional] limit" and to avoid "rais- 
ing eyebrows." ^^^ The "no comment" proposal 
would enable the United States — even after the oper- 
ation was publicly exposed — to avoid acknowledging 
its central role. 

Nir and North also discussed terms for replenish- 
ment sales. '^* By this time, the Chief of the Israeli 
Procurement Mission in New York and Noel Koch, 
Principal Deputy Assistant Secretary of Defense for 
International Security Affairs, had been designated as 
the Israeli and American contacts for hammering out 
the details. '^^ Nir told North that Israel could not 
use the money the Iranians had paid for the 504 
TOWs shipped in 1985 to buy replacements because 
this money was not available. On this point, North's 
notes state: "Regarding the first 504, it was agreed 
that the $ was used for other purposes." ^^^ Over the 
next few days, Nir told North that Israel could pay 
only $5,000-55,500 per missile and that the Depart- 
ment of Defense, using a replacement cost figure, was 
demanding that Israel pay more.'''' 

On January 9, Nir and North discussed how to use 
the money Iran would pay for the TOWs. North 
jotted the following calculation: 

$10M total 

2.5 to Ops 

1.5 to Gorba 

$6M avail for 4500' ss 



The note indicates that Israel was to receive $10,000 
per TOW from Iran, or $10 million for the first 1,000 
TOWs. From this sum, $2.5 million was to be divert- 
ed to "Ops," '^3 which North testified were the joint 
Israeli-U.S. covert operations previously discussed 
with Nir.'^" Another $1.5 million was to go to Ghor- 
banifar. The remaining $6 million would be available 
to pay the United States for the replacement TOWs. 
If this scheme were followed for each of the four 
planned shipments of 1,000 TOWs, $10 million would 
go for other covert operations and Israel would have 
$24 million to spend on replacement TOWs — enough 
to purchase 4,000 missiles at $6,000 each, or 4,500 
missiles at a price of $5,333 each. 

The next day, January 10, Koch and North con- 
ferred about replacement of the Israeli TOWs. 
North's notes reflect that one option they considered 
was selling Israel Improved TOWs "at cos[t]."'^' 
The reference to Improved TOWs is significant be- 
cause Israel was planning to send basic TOWs to 
Iran. Thus, the proposed transaction would substan- 
tially upgrade Israel's arsenal at no cost to that coun- 
try. The possibility that this might be an objective of 
the operation had caused some CIA lawyers discom- 
fort. '62 

After this conversation, Koch queried DOD 
Deputy Director Rudd about TOW prices. He appar- 
ently asked if it would be possible to ship 4,000 Basic 
TOWs to Israel or Iran for $12 million, or at a price 
of $3,000 per TOW. Rudd later told Koch that while 
this quantity was available, the lowest price at which 
basic TOWs had previously been sold was $6,800 per 
missile.'®^ 

In addition to the price, Koch was concerned about 
secrecy and Congressional notification. He knew that 
if the total value of the purchase exceeded $14 mil- 
lion, a Congressional notification would be required. 
Rudd told Koch a notification that the Israelis were 
buying 4,000 basic TOWs would be tantamount to 
announcing that the missiles were intended for an- 
other purchaser; informed persons would know the 
Israelis would have no use for more basic TOWs than 
it already had.'^* 

Rudd counseled that the best way to get missiles 
secretly from the Defense Department to Iran would 
be to "go black" — that is, make it a covert operation 
with Defense selling the missiles to the CIA under an 
Economy Act transfer and the CIA transferring them 
to Iran pursuant to an intelligence Finding. Koch 
conveyed this conclusion to North and Weinberger's 
military aide, Lt. Gen. Colin Powell.'®* "Going 
black" appeared to overcome two difficulties in the 
replenishment issue: (1) maintaining secrecy and 
avoiding Congressional notification, and (2) avoiding 
the strictures of the AECA. 

On January 12, Koch met the head of the Israeli 
Procurement Mission at National Airport in Washing- 
ton to continue negotiations on price. Koch reported 



204 



Chapter 1 1 



on this meeting to North and to Powell, who suggest- 
ed that Koch meet with Secretary Weinberger. Koch 
met with the Secretary the next day. He described the 
Secretary as "generally agitated over this" and be- 
lieved "this thing . . . was a very foolish undertak- 
ing." Koch commented to Secretary Weinberger, 
"'Do we have a legal problem with this? Is somebody 
going to go to jail?' and [the Secretary's] response 
was in the affirmative. But I did not take that serious- 

ly.M66 

In a subsequent conversation with Koch, North ap- 
parently expressed a hope that the matter could be 
solved and the initial steps of the operation finished in 
time for the President to refer to the freeing of the 
hostages in his State of the Union message later in 
January. North jotted in his notes: "Try to get results 
by State of Union."'®' 

Legal Problems Identified With 
Replenishment Approach 

While North continued to work with the Israelis on 
the replenishment problem, CIA lawyers were raising 
legal objections. One prepared a memorandum for 
Sporkin identifying the restrictions and various notifi- 
cation requirements that the Arms Export Control 
Act and Foreign Assistance Act placed on third-coun- 
try transfers.'^* The lawyers concluded that weapons 
that had earlier been acquired from the United States 
under either of these acts could not be sold to Iran 
without "U.S. consent, notice to Congress, and the 
eligibility of the third country recipient for U.S. 
aid."'®^ Because the planners had determined there 
would be no notice and because Iran's terrorist activi- 
ties rendered it ineligible, the Israeli saleAJ.S. replen- 
ishment approach was not feasible. '''° However, the 
lawyers concluded that a sale of weapons from DOD 
stocks to the CIA under the Economy Act, followed 
by a CIA sale to Israel or Iran, would be legal. A 
Presidential Finding would be required.''" 

Ghorbanifar Fails Polygraph 

Ghorbanifar returned to Washington in January for 
his new polygraph. The examination was conducted 
at the CIA on January 11 and lasted five hours. "^ 
The CIA polygraph operator concluded that Ghor- 
banifar lied on 13 of 15 items on which he was ques- 
tioned. '^^ According to George, "The only questions 
he passed were his name and his nationality."""* 

After the test, a CIA officer reported in a memo- 
randum to Casey, McMahon, and Clair George: 
"Ghorbanifar is a fabricator who has deliberately de- 
ceived the U.S. Government concerning his informa- 
tion and activities. It is recommended that the 
Agency have no dealing whatsoever with Ghorbani- 
far.""^ Afterwards, Ghorbanifar showed up at Le- 
deen's house "furious" and "hurting" because the 
questioning was more expansive than he had expected 



and because he claimed to be physically injured by 
the examination techniques."® 

The following day, the Chief of the CIA's Iran 
branch briefed George and the Chief of the Near East 
Division (C/NE) on the negative results. They in- 
structed him to have no further contact with Ghor- 
banifar or Ledeen."'' George viewed the polygraph 
results as confirming his view of Ghorbanifar and 
declared to Casey that the Operations Directorate 
would have nothing more to do with the Iranian. He 
told North of this decision on January 13."* A few 
days later, the Operations Directorate disseminated a 
notice saying the CIA would do no more business 
with Ghorbanifar."^ 

Ghorbanifar's polygraph failure, however, did noth- 
ing to squelch his relationship with Casey and the 
NSC staff. Indeed, North — who "wanted" Ghorbani- 
far to pass'®° — had braced himself for a negative 
result. He told Ledeen beforehand that the CIA 
would make sure Ghorbanifar flunked because they 
did not want to work with him.'*' Casey, notwith- 
standing Clair George's advice to terminate the Ghor- 
banifar relationship, found a way to deal with Ghor- 
banifar outside the normal Operations Directorate 
headed by George. Casey ordered Charles Allen, who 
was the CIA's senior antiterrorism analyst, to meet 
with Ghorbanifar "to determine and make a record of 
all the information that he possessed on terrorism, 
especially that relating to Iranian terrorism — ^just take 
another look at this individual."'*^ In George's view, 
Allen virtually became the case officer for Ghorbani- 
far.'*^ To George, there could not have been a 
"better mismatch" between Allen — who had no expe- 
rience managing an agent — and Ghorbanifar — who 
was especially "complex" and difficult to control.'*'* 

Allen spent five hours with Ghorbanifar at Le- 
deen's home on January 13 "to assess Subject's access 
to Iranian Government leaders" and to obtain infor- 
mation from him on terrorists. Ghorbanifar set out 
several areas in which he wished to work with the 
U.S. Government and the CIA, including the ongoing 
White House effort to gain the release of the hostages 
in Lebanon; the blunting of Iranian-, Libyan-, and 
Syrian-sponsored terrorism; and assisting in the over- 
throw of Qadhafi.'** Allen thought some of Ghor- 
banifar's specific proposals worth pursuing, but he 
considered several of them outlandish, not worthy of 
exploration, and "very, very filled with hyperbo- 
le."'*® 

During this session, Ghorbanifar told Allen that 
funds generated through the projects he was discuss- 
ing could be used for "Ollie's boys in Central Amer- 
ica."'*'' Allen recorded this remark in his handwrit- 
ten notes of the meeting as "can fund Contras."'** 
He did not, however, refer to it in his memorandum 
to Casey and others on the session.'*' He later ex- 
plained that at the time he did not "consider it impor- 
tant or even relevant to my particular mission," that 



205 



Chapter 1 1 



he did not discuss it with anyone else, and that he 
"promptly forgot it."'*° 

On January 14, Allen briefed Casey on his session 
with Ghorbanifar. He told Casey that Ghorbanifar 
was "very hard to pin down," "very flamboyant," 
"very clever, cunning." Indeed, Allen called him a 
"con man," to which Casey jokingly responded: 
"Maybe this is a con man's con man then." For the 
moment, Allen said, he was given no further assign- 
ment concerning Ghorbanifar.'^^ 

Restructuring the Deal 

In mid-January, the plan for the operation was re- 
structured in two significant respects. First, weapons 
to be shipped to Iran would come from U.S. — not 
Israeli — stocks. Second, at the direction of Poindexter, 
Casey, and North, Richard Secord was brought into 
the operation as a "commercial cut-out": a conduit for 
the money to be paid by Iran to the United States for 
the missiles. This latter change enabled the "diver- 
sion" of funds to support the Contras, which had 
already begun in November with the use of a part of 
the Israelis' $1 million deposit to Lake Resources, to 
continue in a more direct manner. 

A one-page, unsigned memorandum dated January 
13, 1986, updated Casey on the "TOW for Hostage 
deal." The memorandum shows that legal obstacles 
and the high cost of Improved TOW missiles were 
pushing the planners toward transforming the deal 
into one in which the Iranians would receive basic 
TOWs sold by DOD to CIA under the Economy 
Act. After a review of the problems with other meth- 
ods, the memorandum stated: 

Therefore they want to use the second option 
under which CIA would buy 4,000 basic TOWs 
from DOD for $21 million. As far as Defense is 
concerned these purchases would be for general 
CIA uses. . . . The money for the Iranian ac- 
count would be transferred to the Israelis. The 
Israelis would transfer that money to a CIA ac- 
count to pay for this purchase of the Tows from 
DoD, the shippers would move the Tows to the 
Israelis who would then move them on to the 
Iranians. '^^ 

North met with Ledeen and Ghorbanifar that 
evening to discuss the plan. Ghorbanifar proposed 
that he would buy the TOWs from the United 
States — rather than from Israel — for $10,500 each. He 
said this was the same price he had paid the Israelis 
for the 504 TOWs in 1985. Ghorbanifar stated that he 
had "officially offered" the same rate to the Israelis 
for this deal, but that they now were asking for differ- 
ent terms. Ghorbanifar said that he had $40 million 
for the 4,000 TOWs, and that out of that sum he 
expected to receive— or at least wanted— $500,000. 
Ghorbanifar also explained that the total deal, negoti- 
ated with Nir before Christmas, called for the Israeli- 



U.S. side to provide 4,000 TOWs, the release of 100 
Hizballah prisoners held by the Southern Lebanon 
Army, and intelligence.'^^ 

After this meeting, North called Koch and raised 
the idea of designating Secord as the person to whom 
the United States would sell the TOWs. North's notes 
suggest that DOD would sell missiles directly to 
Secord with no involvement of the CIA and that 
Secord would deliver the TOWs to the Israelis.'®* 
On the morning of January 14, North received a call 
back from Koch who expressed concern about how 
Secretary Weinberger would react to using Secord. 
North's notes of the call state: "Secretary will 
blanch."'*^ 

Both Poindexter and Casey, however, approved Se- 
cord's pivotal role in the operation. According to 
Secord, Poindexter invited him to the White House, 
told him the President had approved a renewed arms 
transaction with Iran, and asked for his assistance.'®^ 
On January 14, Casey told North, according to 
North's notes, that "Secord Op [is] O.K."'®' 

North met with Poindexter that evening. They dis- 
cussed inserting Secord into the transaction as an 
"agent for the CIA. . . ."'^s Under this arrangement, 
the Iranians would receive missiles from Israeli 
stocks; and Secord, acting as an agent for the CIA, 
would simultaneously buy basic TOW missiles from 
DOD and sell and ship them to Israel as replace- 
ments. The CIA would not actively participate in the 
operation. Poindexter directed North to discuss this 
approach with Casey.'®® This plan called for the pri- 
vate North/Secord enterprise in lieu of the CIA. The 
CIA would have a role in name only. The Economy 
Act authorized intergovernmental transfers of weap- 
ons, but would not permit DOD to sell directly to 
Secord unless he were designated an "agent" of the 
CIA. 

The barrier to the plan was Secretary Weinberger. 
Although Casey was on board. Secretary Weinberger 
continued to raise objections both to the plan and to 
Secord's involvement. In a PROF message to Poin- 
dexter on January 15, North wrote: 

Casey believes that Cap [Weinberger] will contin- 
ue to create roadblocks until he is told by you 
that the President wants this to move NOW and 
that Cap will have to make it work. Casey points 
out that we have now gone through three differ- 
ent methodologies in an effort to satisfy Cap's 
concerns and that no matter what we do there is 
always a new objection. As far as Casey is con- 
cerned our earlier method of having Copp 
[Secord] deal directly with the DoD as a pur- 
chasing agent was fine. He did not see any par- 
ticular problem w/ making Copp an agent for the 
CIA in this endeavor but he is concerned that 
Cap will find some new objection unless he is 
told to proceed. 2°° 



206 



Chapter 1 1 



In the same PROF message, North indicated that 
the "most recent proposal" to use Secord as an agent 
for the CIA depended on the IsraeHs' agreeing to pay 
a higher price than they were then offering the 
United States. The message suggests that North, 
knowing that Ghorbanifar was wilHng to pay $10,000 
a TOW to the Israelis, was seeking to have more of 
the residual profit flow to the American side rather 
than to Schwimmer and Nimrodi. 

Minutes after writing this PROF message, North 
met with Sporkin to discuss Secord's role.^°' Sporkin 
interrupted this meeting to telephone one of his staff 
lawyers, George Clarke, to discuss whether there 
would be any "problems or reporting requirements" 
with the North/Poindexter proposal to use Secord as 
an "agent" of the CIA but to otherwise leave the 
CIA out of the operation. ^"^ North came on the line 
to exhort Clarke to endorse this approach. ^"^ Ac- 
cording to a "memorandum for the record" written 
by Clarke, the conversation went as follows: 

1. At approximately 1420 hours today I received 
a secure line telephone call from the General 
Counsel. He wanted to discuss whether I saw 
any problems or reporting requirements with a 
proposal to have DoD provide weapons to a 
CIA "agent" who would pay for the weapons 
with money supplied by a friendly third country. 
The agent would then supply the weapons to the 
intended recipient country. The agent would 
have no connection with CIA other than to act 
as a "middle man" with our authority. 

2. I told the General Counsel that I would feel 
more comfortable if CIA were directly involved 
in the activity and that it would be essential that 
we act in furtherance of a traditional covert 
action objective. . . . 

3. Despite repeated urgings to concur in vari- 
ations that would have DoD provide the weap- 
ons without other than token CIA involvement, I 
did not do so. . . .^°^" 

Sporkin recalled an "argument with one of my 
people" about whether there was a way to structure 
the transaction without the CIA's getting involved. 
"The answer was no way."^"* 

After this meeting, Sporkin prepared a paper for 
Casey. He advised that the "preferred way to handle 
the proposal" was for the CIA to take control of the 
materiel through an Economy Act transfer from 
DOD before it was moved to the Middle East. Spor- 
kin wrote that he could find no precedent for the 
purchase of materiel from DOD by someone acting as 
a CIA "agent," where the CIA had no other role in 
the transaction. Sporkin's paper did not address 
whether the CIA, after acquiring the arms from 
DOD, could deal with an intermediary, such as 
Secord, rather than directly with the foreign country 



recipient.^"* One of Sporkin's main concerns was the 
question of notifying Congress; 

The key issue in this entire matter revolves 
around whether or not there will be reports made 
to Congress. Each of the Acts involved — the 
Foreign Assistance Act, the Arms Export Con- 
trol Act, and indeed the National Security Act as 
amended — have certain reporting provisions in 
them. While the National Security Act provides 
for a certain limited reporting procedure, it is my 
view that there may be other ways of making a 
suitable report by exercise of the President's con- 
stitutional prerogatives. 

One such possibility would be not to report the 
activity until after it has been successfully con- 
cluded and to brief only the chairman and rank- 
ing minority members of the two Oversight Com- 
mittees. This would maximize the security of the 
mission and reduce the possibility of its prema- 
ture disclosure. ^"^ 

Later that afternoon. North spoke again with Sporkin, 
who urged that the "final proposal" be "run by" the 
Attorney General.^'" 

At 2:30 p.m. that day. North received a call from 
Nir. The conversation again focused on the financial 
aspects of the transaction. North's notes refer to a 25 
percent cut to be paid to "other Iranians" and a 15 
percent cut to "accountant," the code name for 
Schwimmer. Most significantly, the two discussed Se- 
cord's receiving more for the TOWs than he would 
have to pay to DOD. North wrote; "7500 each to 
Copp. 5300 each to DOD."208 Using these figures, 
and assuming that the deal would involve 4,000 
TOWs, Secord would receive $8.8 million over his 
cost of buying the missiles from DOD. 

The next day, January 16, North continued to try 
to find a way to start the part of the operation that 
would lead to the release of the American hostages, 
namely, the shipment of 1,000 TOWs to Iran. At 
Poindexter's request. North first contacted McFarlane 
to find out what the understanding had been on re- 
plenishment of the first 504 TOWs, an issue that con- 
tinued to be a sticking point for Israel. McFarlane 
replied that the United States had undertaken to sell, 
over time, "requisite TOWs to replace the TOWs that 
they sent for Weir.''^"^ In his notes of this phone call. 
North wrote; "The objection in law [is] based on 
Arms Export Control Act."^'° North passed this in- 
formation to Poindexter, along with an explanation 
that replenishment had been blocked because the Is- 
raelis lacked sufficient funds to purchase Improved- 
TOWs and because bureaucratic problems had pre- 
vented a purchase of basic TOWs.^" 

North came up with a modified plan to get the 
operation moving. He proposed to Poindexter that 
Nir deal directly with Ghorbanifar and receive $10 



207 



Chapter 1 1 



million for the first 1,000 TOWs to be shipped by 
Israel. Schwimmer and the Iranian officials would be 
"cut-out" from the expected profits, and a much 
larger sum would be available to Nir for replenish- 
ment or other uses. North also proposed that Secord 
purchase 504 TOWs from the United States and ship 
them to Israel as replenishment for the 1985 transac- 
tions.^'^ 

That same afternoon, Poindexter convened in his 
office a meeting of senior administration officials to 
discuss the structuring of the transaction, the continu- 
ing objections of Secretary Weinberger, and the pro- 
posed Finding.^'^ Present were Secretary Weinberg- 
er, Casey, Attorney General Meese, Sporkin, and pos- 
sibly North. ^'''* The Attorney General said Israel 
should not ship weapons out of its stocks and recom- 
mended that the United States instead sell directly to 
the Iranians. Restructuring the operation in this way, 
he explained, would avoid the restrictions of the 
Arms Export Control Act, including Congressional 
reporting requirements.^*^ 

Sporkin recalled that no decision was made at the 
meeting and that Secretary Weinberger wanted addi- 
tional time to examine the revised structure of the 
plan: 

[A]s we were breaking up, the Secretary of De- 
fense said that I want to review all this. I want to 
have my lawyers look at it and to see if that 
analysis is correct. And so the meeting broke up 
without there being any decision made. 

The next day, I received a call from the Direc- 
tor — I think it was the next day — in which he 
said that he received a call from the — from the 
Secretary of Defense, who said that his people 
have looked it over and they agree with the 
analysis and they have signed off on the 
project.^ '^ 

Secretary Weinberger was unable to recall, or find 
anyone at the Defense Department who had per- 
formed, any such legal review. 

President Signs A New Finding 

Poindexter now arranged to get the President to 
sign the Finding. At the January 17, 1986 national 
security briefing attended by the President, the Vice 
President, Regan, Poindexter, and Fortier, Poindexter 
discussed the plans and referred to a new cover 
memorandum. The President did not read the memo- 
randum, but he signed the Finding. To indicate the 
President's decision, Poindexter wrote "RR per JMP" 



• Poindexter recalled that Shultz was also present. Poindexter 
Test., Hearings, 100-8, at 35. Shultz testified that he was not, Shultz 
Test., Hearings, 100-9, at .13, and Sporkin testified that he was told 
Shultz had been invited but could not make it. Sporkin Test., 
Hearings, 100-6, at 149. Weinberger had no recollection of attend- 
ing this meeting. Weinberger Test., Hearings, 100-10, at 141. 



on the approval line of the memorandum. At the 
bottom of the memorandum, he also wrote: "Presi- 
dent was briefed verbally from this paper. VP, Don 
Regan and Don Fortier were present."^''' 

The January 17 Finding was almost identical to the 
draft Finding presented to the President on January 6. 
The only change was the insertion of the words 
"third parties" in the list of entities to be assisted by 
the CIA.^'* The Committees have received from 
NSC files a copy of the January 6 version of the 
Finding that bears Sporkin's handwritten insertion of 
this phrase.^ '^ Sporkin testified that this change was 
made merely to make the first paragraph of the Find- 
ing symmetrical with the second, which already con- 
tained a reference to "third parties." He said that the 
term did not refer to Secord but to Ghorbanifar and 
other Iranian intermediaries.^^" 

The cover memorandum, which North prepared 
and Poindexter signed, contained the same summary 
of the Nir proposal that North had included in his 
January 4 draft cover memorandum. However, the 
new memorandum stated that for legal reasons the 
operation should not be conducted as Nir proposed 
and should instead proceed with sales of arms from 
the CIA through an agent directly to Iran. Following 
the advice Attorney General Meese had provided the 
previous day, the memorandum stated: 

We have researched the legal problems of Israel's 
selling U.S. manufactured arms to Iran. Because 
of the requirement in U.S. law for recipients of 
U.S. arms to notify the U.S. government of trans- 
fers to third countries, I do not recommend that 
you agree with the specific details of the Israeli 
plan. 

The memorandum outlined the new plan to make 
direct sales from the CIA to Iran through Secord, 
who was identified only as "an authorized agent": 

The objectives of the Israeli plan could be met 
if the CIA, using an authorized agent as neces- 
sary, purchased arms from the Department of 
Defense under the Economy Act and then trans- 
ferred them to Iran directly after receiving ap- 
propriate payment from Iran. 

This new method was to accomplish the 4,000- TOW 
transaction that Nir had originally proposed. The 
memorandum stated: 

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 weap- 
ons to Iran through the agent. If all the hostages 
are not released after the first shipment of 1000 
weapons, further transfers would cease. ^^' 



208 



Chapter 1 1 



As was the case with North's earlier draft, the 
cover memorandum to the President from Poindexter 
stated that "[t]he Israehs are very concerned [about] 
Iran's deteriorating position in the war with Iraq" and 
"beheve it is essential that [Israel] act to at least 
preserve a balance of power in the region." In fact, 
Secretaries Weinberger and Shultz and Deputy Direc- 
tor McMahon all subsequently testified that this as- 
sessment of the state of the Iran-Iraq conflict was 
contrary to U.S. intelligence estimates. Secretary 
Weinberger stated: 

I certainly did not have the view that Iraq was 
winning or anything of that kind. Quite to the 
contrary. As a matter of fact, it was basically 
Iraqi military strategy not to pursue any kind of 
decisive military end. . . .^^^ 

Secretary Shultz said that while there was an intelli- 
gence estimate in mid-1985 suggesting that the Iranian 
position was deteriorating, he and others in the State 
Department had objected to it and by early 1986 
there was a "reassessment" to the effect that Iran was 
viewed as "very much the aggressive country in the 
war."^^^ McMahon made the same point: "I don't 
have the vaguest idea where Poindexter got the idea 
that the Iraqis were about to take over Tehran. It just 
wasn't in the cards. "^^^ 

The cover memorandum also gave the President a 
lineup of the varying positions of his advisers on the 
proposed operation: 

You have discussed the general outlines of the 
Israeli plan with Secretaries Shultz and Wein- 
berger, Attorney General Meese and Director 
Casey. The Secretaries do not recommend you 
proceed 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 ap- 
prove the attached Finding.^^* 



Defense Secretary Weinberger testified to the Com- 
mittees that he was unaware that a Finding had been 
signed. ^^^ However, he recalled that around January 
18, Poindexter told him the President had decided to 
sell 4,000 TOW missiles to Iran and instructed him to 
make the missiles available. ^^'' 

Secretary of State Shultz testified he was unaware 
even of the Presidential decision to sell the weapons. 
He recalled a luncheon with the President's other top 
advisers on January 17, during which he expressed 
opposition to what he thought was still an unap- 
proved plan to sell weapons to Iran.^^® 

According to the Tower Board, in his diary entry 
for January 17, 1986, the President wrote: "I agreed 
to sell TOWs to Iran.""9 

Conclusion 

With the signing of the Finding, the Administration 
was embarked on an arms-for-hostages initiative with 
Iran in which the United States — not Israel — would 
play the lead role. The President set this course over 
the continued objections of his Secretaries of Defense 
and State, and notwithstanding the CIA's renewed 
determination that the Iranian intermediary, Ghorban- 
ifar, could not be trusted. 

In a change from the 1985 arms deals, Poindexter, 
Casey, and North had structured the transactions 
planned for 1986 in a manner that would leave the 
United States in possession and control of the large 
"residuals" that would flow from the sales. Secord 
and the Lake Resources Enterprise were established 
as a conduit for the money paid for the missiles by 
Iran. North and Nir had several ideas about how 
these profits would be used. Foremost in North's 
mind was the potential for diversions to the Contra 
effort. 



209 



77-02b 0-87 



Chapter 1 1 



Chapter 11 



1. North Notebook, 11/27/85 (misdated 10/27/85), 
Q1357. 

2. Ledeen Dep., 6/19/87, at 112. 

3. Id. at 112. 

4. Secord Test., Hearings, 100-1, at 90. 

5. North Notebook, 12/1/85, Q1360-Q1361. 

6. Secord Test., Hearings, 100-1, at 90. 

7. North Notebook, 12/1/85, Q1361. 

8. W. 

9. Secord Test., Hearings, 100-1, at 90. 

10. Israeli Historical Chronology; North Notebook, 12/2/ 
85, Q1367. 

1 1 . Israeli Historical Chronology, to the extent the pas- 
sage refers to replenishment of Israeli stocks. 

12. Id. 

13. Armitage Dep., 7/22/85, at 169, 173. 

14. Id at 174. 

15. Gaffney Test., Hearings, 100-6, at 65-67; Extract from 
Gaffney Work Diary, Ex. DOD-8, Hearings, 100-6; Gaff- 
ney-Rudd Dep., 6/22/87, at 2-7. 

16. "Prospects for Immediate Shipment of I-HAWK and 
I-TOW missiles," Ex. DOD-9, Hearings, 100-6. 

17. Gaffney-Rudd Dep., 6/22/87, at 19. 

18. Armitage Dep., 7/22/87, at 207. 

19. PROF Note, North to Poindexter, 12/4/85 (02:02:55), 
Ex. JMP-21, Hearings, 100-8. 

20. Id 

21. Id. 

22. Id 

23. Id 

24. Clarridge Test., Hearings, 100-11, at 22. 

25. Unsigned Paper, "Special Project Re Iran," 12/5/85, 
Hearings, Ex. OLN-49, 100-7, Part III. 

26. Id. (emphasis added). 

27. CIA Cables between Headquarters and CIA Chiefs in 
Countries 16 and 18, C5774-5814. 

28. CIA Cable from headquarters to CIA Chief in Coun- 
try 16, C5805; CIA Cable from headquarters to CIA Chiefs 
in Countries 16 and 18, C5810. 

29. CIA Cable from Headquarters to CIA Chiefs in 
Countries 16 and 18, 12/3/85, C5812. 

30. CIA Deputy Chief, Europe, Interview Report, 8/26/ 
87. 

31. McFarlane Test., Hearings, 100-2, at 55, 104-05. 

32. Id at 105. 

33. Poindexter Test., Hearings, 100-8, at 18, 123. 

34. Id at 17-18, 123-25. 

35. Poindexter Handwritten Note, 12/5/85, Ex. JMP-20, 
Hearings. 100-8. 

36. Regan Test., Hearings, 100-10, at 13-14. 

37. Poindexter Test., Hearings, 100-8, at 17-18, 125. 

38. Id at 273. 

39. Id at 19. 

40. McMahon Dep., 6/1/87, at 109. 

41. Poindexter Test., Hearings, 100-8, at 18-21. 

42. Shultz Test., Hearings. 100-9, at 7. 

43. Id at 7. 

44. Shultz Tower Int., 1/22/87, at 29. 

45. Memorandum for the Record by McMahon's Special 
Assistant, 11/28/86 (reconstruction of notes from 12/5/85 
meeting), 10396-97. 

46. Israeli Historical Chronology. 



47. North Test., Hearings, 100-7, Part I, at 295. 

48. North Test., Hearings, 100-7, Part I, at 106, 294-95. 

49. Secord Test., Hearings, 100-1, at 91. 

50. North Notebook, 12/6/85, Q1377. 

51. The Vice President was not present. 

52. McFarlane Test., Hearings, 100-2, at 55. 

53. Weinberger Test., Hearings, 100-10, at 135-36. 

54. Shultz Talking Points, 12/7/85, Ex. GPS-16, Hearings, 
100-9. 

55. Weinberger Test., Hearings, 100-10, at 137. 

56. Id at 136. 

57. Weinberger Tower Int., 1/14/87, at 11. 

58. McMahon Dep., 6/1/87, at 124. 

59. Id at 127. 

60. Allen Dep., 4/21/87, at 169. 

61. Shultz Iran Chronology, Ex. GPS-B at 3, Hearings, 
100-9. 

62. Shultz Test., Hearings, 100-9, at 31. 

63. W. at 31-32. 

64. Id at 32. 

65. Poindexter Test., Hearings, 100-8, at 25. 

66. McFarlane Test., Hearings, 100-2, at 56. 

67. McMahon Dep., 6/1/87, at 125. 

68. Weinberger Test., Hearings, 100-10, at 137. 

69. Shultz Test., Hearings, 100-9, at 32. 

70. McMahon Dep., 6/1/87, at 127-28; Weinberger Test., 
Hearings, 100-10, at 138. 

71. Poindexter Test., Hearings, 100-8, at 26. 

72. McFarlane Test., Hearings, 100-2, at 56. 

73. Shultz Iran Chronology, Ex. GPS-B at 3, Hearings, 
100-9. 

74. Id 

75. McFarlane Test., Hearings, 100-2, at 56-57; Secord 
Test., Hearings, 100-1 at 92. 

76. McFarlane Test., Hearings, 100-2 at 57. 

77. Id at 103. 

78. Id at 57, 180. 

79. Memorandum from North to McFarlane and Poin- 
dexter, 12/9/85, Ex. OLN-51, Hearings. 100-7, Part III. 

80. Id 

81. Secord Test., Hearings, 100-1, at 92-93. 

82. Allen Dep., 4/24/87, at 255. 

83. Memorandum from North to McFarlane and Poin- 
dexter, 12/9/85, Ex. OLN-51, Hearings, 100-7, Part III. 

84. Id. (emphasis in original). 

85. North Test., Hearings, 100-7, Part I, at 285. 

86. Memorandum from North to McFarlane and Poin- 
dexter, 12/9/85, Ex. OLN-51, Hearings, 100-7. 

87. North Test., Hearings, 100-7, Part I, at 282; Memoran- 
dum from Casey to Deputy Director of Central Intelli- 
gence, 12/10/85, Ex. CG-47, Hearings, 100-11; Regan Test., 
Hearings, 100-10, at 14. 

88. Id.; Memorandum from Casey to Deputy Director of 
Central Intelligence, 12/10/85, Ex. CG-47, Hearings, 100- 
1 1; Poindexter Test., Hearings, 100-8, at 29-30. 

89. Id.; McFarlane Test., Hearings, 100-2, at 57; Poin- 
dexter Test., Hearings, 100-8, at 26-27. 

90. Memorandum from Casey to Deputy Director of Cen- 
tral Intelligence, 12/10/85, Ex. CG-47, Hearings, 100-11. 

91. McFarlane Test., Hearings, 100-2, at 59. 



210 



Chapter 1 1 



92. Memorandum from Casey to Deputy Director of Cen- 
tral Intelligence, 12/10/85, Ex. CG-47, Hearings. 100-11. 

93. Id. 

94. Poindexter Test., Hearings, 100-8, at 335. 

95. State Department Cable, from Armacost to Shultz, 
12/11/85. Ex. GPS-17, Hearings, 100-9. 

96. CIA Cable, Headquarters to CIA Chiefs in Countries 
16 and 18, 12/11/85, Ex. OLN-69, Hearings, 100-7 Part III. 

97. Poindexter Test., Hearings, 100-8, at 127-28. 

98. North Test., Hearings, 100-7, Part I, at 285. 

99. Id.; Poindexter Test., Hearings, 100-8, at 128. 

100. Poindexter Test., Hearings, 100-8, at 127-28. 

101. Allen Memo, for Record, 12/18/85, Ex. CG-45, 
Hearings, 100-11; Allen Dep., 4/24/87, at 229; Ledeen 
Dep., 6/22/87, at 166-80, 248-50. 

102. Allen Dep., 4/24/87, at 288-89. 

103. Ledeen Dep., 6/19/87, at 114; Ledeen Dep., 6/22/ 
87, at 187-88, 246. 

104. Clair George Test., Hearings, 100-11, at 210. 

105. Memorandum for Director of Central Intelligence 
from Chief, Iran branch. Subject: Meeting with Michael 
Ledeen/Manuchehr Ghorbanifar, Ex. CG-49, Hearings, 100- 
11. 

106. Clair George Test., Hearings, 100-11, at 210. 

107. Letter from Casey to the President, 12/23/85, 
C4852-53. 

108. CIA Fabricator Notice on Ghorbanifar, 7/25/84, 
C 1462-64. 

109. Israeli Historical Chronology. 

110. W. 

nx.id. 

112. Poindexter Handwritten Notes, 1/2/86, Ex. JMP-23, 
Hearings. 100-8. 

113. Israeli Historical Chronology. 

114. Id.; Poindexter Test., Hearings, 100-8, at 27-29. 

115. Poindexter Handwritten Notes, 1/2/86, Ex. JMP-23, 
Hearings, 100-8. 

116. W. 

117. W. 

118. W. 

1 19. Poindexter Test., Hearings, 100-8, at 57. 

120. North Test., Hearings, 100-7, Part I, at 296. The 
Israeli Chronologies do not corroborate this version. 

121. Poindexter Handwritten Note, 1/2/86, Ex. JMP-23, 
Hearings, 100-8. 

122. Poindexter Test., Hearings, 100-8, at 130. 

123. Sporkin Test., Hearings, 100-6, at 129. 

124. Roseman Dep., 6/10/87, at 8-9, 18. 

125. Draft Covert Action Finding, 1/2/86, Ex. SS-6, 
Hearings. 100-6. 

126. Draft Covert Action Finding (Sporkin-redraft), 1/3/ 
86, Ex. SS-8, Hearings, 100-6; Sporkin Test., Hearings, 100-6, 
at 133-134. 

127. Id at 135-136. 

128. W. at 136. 

129. Id.; North Test., Hearings, 100-7, Part I, at 289; Draft 
Covert Action Finding (North redraft), 1/3/86, Ex. SS-9, 
Hearings, 100-6. 

130. Id 

131. Sporkin Test., Hearings, 100-6, at 136. 

132. Memorandum from North to Poindexter, Subject: 
Covert Action Finding on Iran, 1/4/86, Ex. OLN-52, Hear- 
ings, 100-7, Part III. 



133. Unsigned Memorandum for the President from Poin- 
dexter, prepared by North, undated, Ex. OLN-52, Hearings, 
100-7, Part III. 

134. Id 

135. Id 

136. Sporkin Test., Hearings, 100-6, at 139-142. 

137. Id at 142-144. 

138. Unsigned Memorandum for the President from Poin- 
dexter, Prepared by North, undated, N 1323-25 

139. North Test., Hearings, 100-7, Part I, at 289; North 
Calendar, 1/6/86, N11822; Jensen Dep., 7/6/87, at 19-33. 

140. Meese Test., Hearings, 100-9, at 196. 

141. Jensen Dep., 7/6/87, at 27. 

142. Poindexter Test., Hearings, 100-8, at 30. 

143. NSC Meeting Chronology, unsigned and undated, 
N7718. 

144. Poindexter Test., Hearings, 100-8, at 30. 

145. NSC Meeting Chronology, unsigned and undated, 
N7718. 

146. Shultz Test., Hearings. 100-9, at 33. 

147. Weinberger Test., Hearings, 100-10, at 138-40. 

148. Poindexter Test., Hearings, 100-8, at 31. 

149. Weinberger Test., Hearings, 100-10, at 139. 

150. Meese Test., Hearings, 100-9, at 197. 

151. Shultz Test., Hearings. 100-9, at 33. 

152. North Notebook, 1/7/86, Ex. OLN-69A, Hearings, 
100-7, Part III. 

153. Id 

154. Id 

155. Id 

156. Id. The Israeli Historical Chronology does not sup- 
port this note. 

157. North Notebook, 1/9/86, Ex. OLN-69 A, Hearings, 
100-7, Part III; Israeli Historical Chronology. 

158. North Notebook, 1/9/86, Ex. OLN-69 A, Hearings, 
100-7, Part III. 

159. Id 

160. North Exec. Sess. Test., 7/9/87, at 10. 

161. North Notebook, 1/10/86, OLN-69A, Hearings, 100- 
7, Part III. 

162. Memorandum for the Record, George W. Clarke, 1/ 
15/86, Ex. SS-17, Hearings, 100-6. 

163. Koch Test., Hearings, 100-6, at 71-72; Rudd Dep., 6/ 
16/87, at 16-19. 

164. Koch Test., Hearings, 100-6, at 72. 

165. Id at 72-73. 

166. Id. at 14-11. Weinberger did not recall such a discus- 
sion. 

167. North Notebook, 1/13/86, Ex. OLN-69 A, Hearings, 
100-7, Part III. 

168. CIA Legal Staff Memorandum, Subject: Third 
Country Transfer of Equipment Provided Under the For- 
eign Assistance or Arms Export Control Acts, Ex. SS-20, 
Hearings, 100-6. 

169. CIA Legal Staff Memorandum, Subject: Proposed 
Iran Finding, 1/7/86, Ex. SS-13, Hearings, 100-6. 

170. Id 
111. Id 

172. CIA Memorandum on Ghorbanifar Polygraph, 1/13/ 
86 (incorrectly dated '85), C6092-95. 

173. Id 

174. George Test., Hearings, 100-11, at 159. 



211 



Chapter 11 



175. Routing and Record Sheet from Chief of the Near 
East Division of the CIA to various CIA officials, 1/13/86, 
C6089. 

176. Ledeen Dep., 6/22/87, at 260-61. 

177. Chief of CIA Iran branch Int., 4/13/87. 

178. North Notebook, 1/13/86, Ex. OLN-69A, Hearings, 
100-7, Part III; George Test., Exec. Sess., Hearings, 100-11, 
at 159-60. 

179. Id. at 160. 

180. George Test., Exec. Sess., Hearings, 100-11, at 159. 

181. Ledeen Dep., 3/11/87, at 100-01. 

182. Allen Dep., 4/24/87, at 312. 

183. George Test., Exec. Sess., Hearings, 100-11, at 161. 

184. Id. 

185. Allen Memorandum for the Record, 1/29/86, Ex. 
CG-5\, Hearings, 100-11. 

186. Allen Dep., 4/24/87, at 324-35. 

187. Memorandum for Carroll L. Hauver from Charles E. 
Allen, February 13, 1987, CI 84-85. 

188. Allen Handwritten Notes of Meeting with Ghorbani- 
far, 1/13/86, CI 80. 

189. Allen Memorandum for the Record, 1/29/86, Ex. 
CG-5\, Hearings, 100-11. 

190. Allen Dep., 6/4/87, at 323-27. 

191. W. at 339-40. 

192. Unsigned Memorandum, 1/13/86, Ex. OLN-55, 
Hearings, 100-7, Part III. 

193. North Notebook, 1/13/86, Ex. OLN-69A, Hearings, 
100-7, Part III. 

194. North Notebook, 1/13/86, Ex. OLN-69A, Hearings, 
100-7, Part III. 

195. North Notebook, 1/14/86, Ex. OLN-69A, Hearings, 
100-7, Part III. 

196. Secord Test., Hearings, 100-1, at 96-97. 

197. North Notebook, 1/14/86, Ex. OLN-69A, Hearings, 
100-7, Part III. 

198. Id. 

199. Id. 

200. North PROF, 1/15/86, 13:02:18, Ex. OLN-57, Hear- 
ings, 100-7, Part III. 

201. Sporkin Calendar, 1/15/86, C1780; North Calendar, 
1/15/86, N11824. 

202. Memorandum for the Record, George Clarke, 1/15/ 
86 (1440 Hours) Ex. SS-17, Hearings, 100-6. 

203. Id.; Clarke Dep., 6/3/87, at 66-67. 



Senate Select Committee on Intelli- 



1/15/ 



203a. Ex. SS-17. 

204. Sporkin Test., 
gence, 12/3/86, at 77. 

205. Talking Points prepared for Casey by Sporkin, 
86, Ex. SS-16, Hearings. 100-6. 

206. Sporkin Talking Points for Casey, 1/15/86, Hearings, 
Ex. SS-16, Hearings. 100-6. 

207. North Notebook, 1/15/86, Ex. OLN-69A, Hearings, 
100-7, Part III. 

208. North Notebook, 1/15/86, Ex. OLN-69A, Hearings, 
100-7, Part III. 

209. North Notebook, 1/16/85 (misdated 1/15/86), Ex. 
OLN-69A, Hearings, 100-7, Part III. 

210. Id 

211. PROF Note, North to Poindexter, 1/16/86 
(13:39:54), Ex. OLN-57, Hearings, 100 7, Part III. 

212. Id 

213. Sporkin Test., Hearings, 100-6, at 149; Poindexter 
Test., Hearings, 100-8, at 35; PROF Note, North to Poin- 
dexter, 1/15/86 (18:37:47), Ex. OLN-57, Hearings, 100-7, 
Part III. 

214. NSC Meeting Chronology, N7718; Poindexter Test., 
Hearings, 100-8, at 35. 

215. Poindexter Test., Hearings, 100-8, at 128. 

216. Sporkin Test., Hearings, 100-6, at 149-50. 

217. Memorandum for the President from Poindexter, 1/ 
17/86, Subject: Covert Action Finding Regarding Iran, Ex. 
JMP-28, Hearings, 100-8; Iran Finding, 1/17/86, Hearings, 
Ex. JMP-29D, Hearings. 100-8. 

218. Iran Finding, 1/17/86, Hearings, Ex. JMP-29D, 
Hearings, 100-8. 

219. Iran Finding, 1/6/86 (Draft with Sporkin handwrit- 
ten edits), Ex. SS-15, Hearings, 100-8. 

220. Sporkin Test., Hearings, 100-6, at 153. 

221. Memorandum for the President from Poindexter, 1/ 
17/86, Ex. JMP-28, Hearings. 100-8. 

Weinberger Test., Hearings, 100-10 at 146. 
Shultz Test., Hearings, 100-9 at 159. 

224. McMahon Dep., 9/2/87 at 68. 

225. Memorandum for the President from Poindexter, 1/ 
17/86, Ex. JMP-28, Hearings, 100-8. 

226. Weinberger Test., Hearings, 100-10. at 242. 

227. Weinberger Test., Hearings, 100-10, at 381-383. 

228. Shultz Test., Hearings, 100-9, at 187-188. 

229. Tower Report at III-12. 



222. 
223. 



212 



Chapter 12 

Arms Sales to Iran: The United States Takes 

Control 



The President's decision to sign the Finding on 
Friday, January 17, 1986, marked the beginning of 
U.S. control over the Iran arms sales initiative. In 
November 1985, the United States had acted as a 
necessary and supporting player to the Israeli plan to 
ship weapons; the January 17 Finding established that 
weapons from U.S. stocks would be transported and 
sold under U.S. control. 

The Finding also brought the Central Intelligence 
Agency (CIA) into the initiative in a more substantial 
way than it had been in the prior shipment. Yet de- 
spite the Finding, the CIA would continue to play 
only a supporting role to the National Security Coun- 
cil (NSC)-sponsored initiative. While providing logis- 
tic and technical support — and a mechanism for get- 
ting the weapons from the Department of Defense 
(DOD) under the Economy Act — the CIA deferred 
to the NSC staff in evaluating the reliability of the 
intermediaries and the likelihood of success of the 
initiative. 

Over the next few months, negotiations among the 
Iranian representatives, the intermediary, and the 
American officials continued. The pattern established 
in the 1985 sales would continue. In February, the 
United States sold 1,000 TOW missiles to Iran and no 
hostages were released. Instead, the Iranians insisted 
on the sale of HAWK spare parts and the United 
States agreed. 

Although the arms sales were a failure in achieving 
the goals set forth in the Finding, they were success- 
ful in another way. The Iranians were willing to pay 
substantially more for the military goods than they 
cost, and part of the excess filled the bank account of 
the Enterprise. As North testified, the possibility of 
using these profits to aid the Contras provided addi- 
tional incentive to pursue the Iranian initiative. 

The Finding Is Implemented 

On January 18, CIA General Counsel Stanley Spor- 
kin, CIA Deputy Director for Operations Clair 
George, and the CIA Deputy Chief of the Near East 
Division (DC/NE) met in the White House Situation 
Room with National Security Adviser John Poin- 
dexter, Oliver North, and Richard Secord to define 
the Agency's responsibilities. Poindexter and North 



told the CIA representatives that the Finding had 
been signed and discussed with them the CIA's role in 
the arms sales initiative. The CIA's "point man," DC/ 
NE, was to arrange for the Agency to acquire 4,000 
TOW missiles from the DOD for sale to Iran. He was 
also instructed to establish a CIA account through 
which funds could be delivered to the Department of 
Defense for purchase of the missiles.' Although the 
Finding was directed to the CIA, the Agency's re- 
sponsibilities as outlined at the meeting put it in a role 
of lending logistic support for the NSC staff, which 
would be principally conducting the negotiations. 

DC/NE recalled that the group discussed a provi- 
sion in the Finding that instructed the CIA Director 
not to notify Congress of the covert activity: 

I think Admiral Poindexter did say that this was 
a very sensitive undertaking . . . and that the 
President felt very strongly that the Congress 
would not be notified until a later date. I took 
that later date to mean after the hostages were 
released . . . that after the delivery of the first 
shipment of TOWs the hostages would be re- 
leased, meaning all of the American hostages in 
Lebanon. So we were looking at this ... as a 
fairly short- termed thing. ^ 

At the January 18 meeting, George met Secord for 
the first time when Secord was introduced as a con- 
sultant to the NSC'' George knew of Secord's past 
association with Edwin Wilson, the former CIA offi- 
cer who was then serving time in a Federal prison for 
a variety of offenses. George was concerned about 
Secord's involvement and following the January 18 
meeting advised Director Casey of his opinion.* 
George cautioned Casey: "If they are going to ship 
arms to Iran for hostages . . . don't use Secord."^ 

George expressed even greater disapproval when 
he discovered that Iranian intermediary Manucher 
Ghorbanifar was to be involved. The exact point at 
which George became aware of Ghorbanifar's role in 
the Iran initiative is unknown, although he implied in 
testimony that he knew either as a result of, or short- 
ly following, the January 18 meeting. Shortly after 
Ghorbanifar failed a CIA polygraph test on January 



213 



Chapter 12 



11, 1986, George issued a "field notice"* to senior 
CIA officials in Europe instructing them to avoid 
dealing with Ghorbanifar. Only a few days later 
while in the White House, George was "given the 
Finding to which, surprise, surprise, the guy I am 
going to be dealing with or supporting the National 
Security Council to deal with, is Ghorbanifar."® 

Prior to the signing of the January 17 Finding, 
George advised North of Ghorbanifar's polygraph 
test results. He also recalled warning Casey against 
dealing with Ghorbanifar, but "before I could go 
through one more fight about Mr. Ghorbanifar, [the 
CIA] received a Presidential order which . . . ended 
up meaning we were dealing with Mr. Ghorbanifar." 
Eventually, Casey designated Charles Allen to over- 
see Ghorbanifar's activities.' 

North told the CIA officers that the arms sales 
were imminent. DC/NE moved quickly to implement 
the plan: on January 20, he instructed the CIA Direc- 
tor of Finance to designate a Swiss bank account that 
could be used immediately for a large deposit. The 
finance officer identified a Swiss account number, 
which DC/NE later forwarded to the NSC. A 
"clean," or unused, account was originally requested 
to avoid commingling funds from the sale of TOWs 
with those used for other Agency purposes. Because 
the Agency's finance officers needed several days to 
open a clean account, DC/NE decided to use an 
existing CIA account customarily available for large 
transactions.* 

DC/NE told his finance officers to expect a deposit 
of $30 million. He based this figure on an estimate he 
had received from DOD of approximately $6,000 per 
TOW and indicated that the deposit would come 
from a "private source."^ 

DC/NE asked North for a contact at DOD with 
whom he could arrange to obtain the TOWs. North 
told DC/NE to contact Secretary Weinberger's mili- 
tary aide, then-Maj. Gen. Colin Powell. When DC/ 
NE telephoned Powell several days later, the general 
explained that he was aware of the sensitivity of the 
operation, knew where the weapons were to be deliv- 
ered, and knew the covert activity was supported by 
a Finding. Powell named Lt. Gen. Vincent M. Russo 
as the CIA's contact at DOD.'° 

Russo told DC/NE originally that the price would 
be around $6,000 per TOW, a price with which 
North had problems. DC/NE recalled North's reac- 
tion to that figure: 

The initial price was precisely — it was Russo tell- 
ing me it was going to be something around 
6,000 per. And I recall telling North that and he 
recalled — it doesn't make any difference to me 
[DC/NE] whether they charge three or six or 



*A "field notice" is a fabricator warning issued to specific CIA 
stations, as opposed to a "burn notice," which receives world-wide 
CIA distribution. 



nine — I recall North saying, 'well, that is too 
high, they must be giving you a brand new mis- 
sile replacement cost figure, and they should be 
charging for the oldest model TOW in stock. We 
don't care if these things in fact work real well. 
Tell the Army that we want the oldest thing they 
can find in the warehouse.' So I went back to 
Russo and said, let me make clear that we don't 
need the very best, latest thing right off the fac- 
tory line. 

The eventual price was approximately $3,400 per 
TOW, including freight costs." 

North's attitude that he did not "care if these things 
in fact work real well" is inconsistent with the goals 
of opening a broader initiative with Iran and freeing 
the hostages. Demonstrably antiquated or unworkable 
merchandise most likely would promote distrust; 
indeed, the controversy over the November 1985 
HAWK shipment had been caused in part by the 
Iranians' claim that the 18 HAWKs did not meet their 
expectations. 

DC/NE next directed a CIA logistics officer to 
coordinate through the Defense Department for the 
TOW purchases. DC/NE told the officer that the 
weapons transfer was a direct arms-for-hostages ex- 
change that would occur soon. The officer stated that 
the proposed price of the TOWs — $6,000 each — was a 
reasonable cost for the improved version of the mis- 
sile. Upon contacting Russo, however, he learned that 
the CIA could obtain the basic TOW, the oldest one 
in the Army's stocks, for approximately $3,400 per 
missile. ^^ 

On January 20, North noted: "Price must be firm 
for Defense [Department] — Must be less than 6K." 
Under the figure showing 4,504 TOWs, North jotted, 
"Nir knows lOK upper limit — Dick [Secord] arrange 
w/Nir".i3 The notes suggest that Nir and North had 
agreed that the TOWs sold to Iran must not exceed 
$10,000 per unit but that the CIA would not pay 
more than the original DOD price of $6,000 per 
TOW. In the plan to sell 1,000 of the missiles to Iran 
in February, North and Nir were expecting to obtain 
$4 million above the cost of the missiles. When North 
learned he could obtain the basic TOW for substan- 
tially less, the anticipated profit for the Enterprise 
increased. 

The Army Executes the Tasking 

On January 18, Powell telephoned Gen. Maxwell 
R. Thurman, Vice Chief of Staff of the Army, with a 
secret, "close hold" assignment for the Army: to pre- 
pare 4,000 basic TOW missiles to be shipped to the 
CIA.'* Within a week, the number was increased to 
4,508 to cover the 508 missiles'^ Israel had shipped in 
September that McFarlane had agreed to replenish. 
Thurman, who was not told the ultimate destination 



214 



Chapter 12 



of the missiles or the purpose of the shipment, dele- 
gated the responsibility down the chain of com- 
mand'® and ultimately to Maj. Christopher Simp- 
son. ■ '' 

The instructions were to maintain a degree of secre- 
cy unusual even for weapon transfers to the CIA: no 
notes; communications only by secure telephone or 
face to face; and the number of people privy to the 
operation kept to a minimum. The imposition of such 
extraordinary secrecy led the Army to bypass its 
normal system for interagency transfers, with that sys- 
tem's safeguards against underpricing, depleting stock- 
piles, and affecting defense readiness.'* Even though 
the secrecy guidelines were strictly observed, an ap- 
parently accidental error in the price became crucial. 
By inadvertently using the wrong stock number for 
the TOW, the Army underpriced the missile and cre- 
ated a price differential broad enough to generate a 
significant surplus of funds for the Enterprise. 

Pricing the TOW Missiles 

Simpson went directly to the TOW Project Manag- 
er at the Army Missile Command at Redstone Arse- 
nal in Huntsville, Alabama. Powell had been asked to 
provide a "basic," or "vanilla," TOW — one that had 
not been manufactured since 1975. The basic TOW, 
however, had experienced mechanical problems that 
required the Army to make design modifications.'^ 
The TOW Deputy Project Manager informed Simp- 
son he had sufficient basic TOWs to meet the order 
but that the TOWs needed the safety modification, 
which would add to the expense.^" 

Simpson set about pricing the TOWs in what 
seemed to be a logical manner — he checked the 
Army's catalogue of inventoried items, complete with 
national stock numbers and prices. Simpson found the 
price to be $3,169 for a basic TOW, to which he 
estimated an additional $300 for the safety modifica- 
tion — a total of $3,469 per missile. Simpson quoted 
that price to the CIA.^' 

There were, however, eight different models of 
TOWs listed in the catalogue. Unknown to Simpson, 
when safety modifications became a required feature, 
the Army created a new stock number for the basic 
TOW with the modification and a corresponding 
new, and much higher, price. Using the correct stock 
number, the Army should have provided the CIA a 
cost of $8,435 per missile. ^^ 

Although Simpson's testimony is inconsistent on the 
question of whether he was aware that the Army 
catalogue price for the basic TOW with modifications 
was $8,435, there are indications that some officials in 
the Army became aware of the erroneous price. The 
original paperwork providing for the transfer of the 
TOWs from their storage depot carried the correct 
price, $8,435, not the $3,469 price that Simpson had 
computed. As the TOWs traveled from the depot to 
Redstone Arsenal, the price was dropped from the 



accompanying documentation. By the time the CIA 
received the first shipment of missiles, the receipt 
reflected Simpson's price of $3,469. Indeed, while the 
transfer documents accompanying the first and third 
shipments from the Army and the CIA carried the 
Simpson price, the receipts for the second shipment 
did not reflect any price. Testimony from Army offi- 
cials about the changing prices in these documents has 
been inconsistent and inconclusive. 

Amid the pricing confusion, the CIA received a 
better missile than it had bargained for. While the 
Army had basic TOWs in stock, it did not have 
sufficient parts to perform the safety modification. It 
tried to sell the CIA a more expensive and later 
version of the TOW, the improved TOW, or "I- 
TOW," which did not require modification. However, 
the CIA would not pay more than the quoted price of 
$3,469. As a result, the Army had to alter the TOW 
package, selling the I-TOW launch motor with the 
basic TOW warhead, which produced a superior 
product. ^^ 

Army officials included in these pricing decisions 
have denied any intent to lower the price of the 
TOWs, and the Committees have found no evidence 
to the contrary. What is apparent, however, is that in 
fulfilling the CIA request for TOWs in early 1986, the 
Army bypassed its usual method of obtaining, pricing, 
and transferring weapons. The emphasis on keeping 
the transaction secret, even from those involved in 
the process, led to a significant pricing error, one that 
North exploited to the advantage of the Enterprise. 
Without this pricing error, there would have been a 
much smaller difference between the $10,000 per 
TOW Ghorbanifar was willing to pay and the actual 
cost of the TOWs — and the diverted profits to the 
Enterprise would have been minimal. 

The London IMeeting 

Armed with a low, firm price for the TOWs, 
North, Secord, and Amiram Nir, an adviser to Israeli 
Prime Minister Shimon Peres, met with Ghorbanifar 
in London on January 22, their first meeting follow- 
ing the President's approval of the Finding. North 
expressed reservations about the operation, explaining 
that the United States desired a more moderate Irani- 
an regime, a cessation of terrorism by Iran, and the 
return of the American hostages. In his notes of that 
date. North recorded a plan that included, in addition 
to TOWs and intelligence, the release of Hizballah 
prisoners held by the Southern Lebanon Army for 
hostages: 

Phase I 

A-Provide small piece of Intel 

B-Iranian Govt will release $40M 

C-$10M sent to (blank) 

D-1000 TOWs, Basic Intel Package, 



215 



Chapter 12 



Hizb[allah] Prisoners from [Southern Lebanon 
Army] = hostage release.^** 

North testified that he was dissatisfied with the 
notion of selhng weapons to Iran until this meeting 
with Ghorbanifar.2^ North's stated reluctance is in- 
consistent with the testimony of Sporkin and others, 
who described North as a strong advocate for the 
plan and a leader in getting it adopted by the Presi- 
dent.^^ Nevertheless, according to North, the induce- 
ment that caused him to embrace the plan was a 
suggestion by Ghorbanifar to divert profits from the 
arms sales to the Contra forces. 

North described his conversation with Ghorbanifar 
during a lull in the London meetings: 

Mr. Ghorbanifar took me into the bathroom and 
Mr. Ghorbanifar suggested several incentives to 
make that February [TOW] transaction work, 
and the attractive incentive for me was the one 
he made that residuals could flow to support the 
Nicaraguan resistance. He made it point blank 
and he made it by my understanding with the full 
knowledge and acquiescence and support, if not 
the original idea of the Israeli intelligence serv- 
ices, the Israeli Government ... I think you have 
seen it in my messages to my superiors, I was not 
entirely comfortable with the arrangements that 
had been worked in the summer of 1985 and in 
the autumn and winter of 1985. I made it very 
clear. I was after all the person who had the 
responsibility for coordinating our counterterror- 
ist policy. I had written for the President's 
words, "We will not make concessions to terror- 
ists." For the very first time in January, the 
whole idea of using U.S. weapons or U.S. -origin 
weapons or Israeli weapons that had been manu- 
factured in the United States was made more 
palatable. I must confess to you that I thought 
using the AyatoUah's money to support the Nica- 
raguan resistance was the right idea and I must 
confess to you that I advocated that.^' 

The tape recording of that meeting does not reflect 
the private conversation which North described. In- 
stead, it reveals that Ghorbanifar discussed assisting 
the Contras openly, in the presence of North, Nir, 
and Secord: 

GHORBANIFAR: "I think this is now, Ollie, 
the best chance because we ne