CIA'S ROLE IN THE IRANIAN INITIATIVE

• Document Type: FOIA
• Keywords: INVESTIGATION
• Keywords: IRAN CONTRA
• Keywords: GHORBANIFAR MANUCHER
• Collection: FOIA Collection
• Document Number (FOIA) /ESDN (CREST): 0001001268
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 5
• Document Creation Date: June 22, 2015
• Document Release Date: June 9, 2009
• Case Number: F-1992-00896
• Publication Date: January 8, 1987

APPROVED FOR
RELEASE DATE:
23-Mar-2009
AN ADDRESS TO CIA EMPLOYEES BY
ACTING DIRECTOR OF CENTRAL INTELLIGENCE
ROBERT M. GATES
8 January 1987
8 January 1987
Following is the text of the address entitled "CIA's Role in the Iranian
Initiative" given by the Acting Director of Central Intelligence in the
Headquarters Auditorium on 8 January 1987.
"I want to speak to you today on two developments of intense interest and
concern to all of us at CIA -- the Agency's role in the Iran affair and the
illness of Director Casey. Both of these involve the Agency family and you
deserve a detailed report."
THE' DCI
 "CIA obtained quotes for the costs of the TOW missiles and HAWK
equipment through the Department of Defense._ We then added estimates for
other associated expenses. To date, we have only paid CIA's costs for
preparing and transporting the equipment and acquiring the medical supplies
(which total around $50,000) and a single billing from Department of Defense
for $5.6 million. All other billing from Department of Defense is still
pending. If our estimates are accurate, some $350,000-of the Iranian funds
will be left over after all bills associated with the operation are paid.
Now let me turn to our money-handling role. We were not -- I repeat
not -- involved in middle-man financing or any of the financial arrangements
between the Iranian side and the intermediaries, or between intermediaries
and-the NSC. My understanding, based on what we have learned over the last
several weeks through our own investigation and from other information
surfacing in the media, is that money raised by private investors would flow
through intermediaries to an Israeli-controlled account. From there, money
would flow to Swiss accounts apparently controlled by one of the
intermediaries. It was from these latter accounts that our CIA.account would
receive electronic transfers in an amount equal to what we needed to cover
Department of Defense costs. We never knew, and still do not know, how much
money flowed through the accounts controlled by the intermediaries.
"The total of $12.2 million connected with the Iranian operation.
deposited into our accounts in Switzerland has been fully accounted for.
"In addition to the logistics and finance activities described above,
CIA also provided other support to the NSC effort. Through the NIO for
Counterterrorism, we continued to task collection assets for coverage of bran
and Lebanon. 'Moreover, elements in the Directorate of-Intelligence, were
asked to provide tactical support and prepare materials to help implement the
NSC initiatives; the office of Communications provided secure communicatiops.
and two commo officers for the McFarlane mission in May; and our office of -
Technical Service prepared documentation for the mission members and provided
recording equipment. Finally, a .handful of our personnel were involved in a
total of 12 meetings between the U.S. representatives on the one hand and the'
intermediaries and the Iranians on the other. A Farsi-speaking CIA annuitant(
was made available to assist in the NSC project. In providing the support
described above, we expended a total of $87,478 in appropriated CIA funds.
"I believe our activities under the Finding were carried out properly
and competently. We can account for every penny that came into our hands and
for all equipment that was used."
"We now come to the third phase:- the speculation that some of the
 "We learned in late June and July 1986 that officials in Tehran were
complaining to(.Chorbani_ar_)the Iranian expatriate intermediary, about the
price charged for the HAWK spare part?s,,..:'Tehran was complaining that it had
been charged six times the going ratet.>TThe,. details of this running argument
were well known to the key CIA officials involved, but they assumed that they.,
problem resulted either from middle-man fees.or'were part of other arms deals
Chorbanifar had arranged on the side..
"By late August-early September 1986, our NIO was becoming worried.. about
the operational security of the NSC project and was beginning to wonder also
about a possible diversion of funds. These reservations were shared by the
CIA annuitant involved. They knew about the running argument over the price
Chorbanifar charged Tehran for the HAWK spare parts, as well as the fact that
some of those private citizens involved in the Iran project were also active
in efforts to get private benefactors to aid the Contras.
"On 1 October, the NIO met with me to report on the "new channel" being
opened to Tehran (which would cut out Ghorbanifar); he also expressed deep
concern about the operational security of the project. In reviewing the
situation, he pointed out that the. investors involved with Ghorbanifar had
not been repaid for putting up the front money for the HAWK spare parts deal
and that there were many confusing reports relating to claims by:Tehran that
it was overcharged for the spare parts.
"The NIO also speculated that some of the funds from the Iranian arms
sales may have gone to support the Contras. He told me that he had no
evidence to support this speculation. I was nonetheless disturbed by this
development and directed the NIO to brief the DCI.
"The NIO met with?the DCI on 7 October 1986, repeated his suspicions
about the diversion of funds as well as his worries about'the Iran project's
operational security.,,, The'DCI told him.to draft amemorandum outlining his
concerns.
"The same day,'7 October, the DCI received a telephone call from a New
York businessman. In 1976-79, Mr. Casey had done some legal work fotthe
company the businessman worked for and the Director. had not seen him 'since
then. The businessman said on the phone that he had something important, that
he wanted to inform the DCI about and came down.to Washington the same day.
As the DCI.has testified, it quickly emerged that the businessman knew more
about the financial aspects of the'NSC project with Iran than CIA or the DCI
did. His role was that of.an'advisor`to Adnan.Khashoggi., He had worked with
Ghorbanifar, the Iranian intermediary, almost from the inception'-of his
effort to develop an American-Iranian-relationship.. He told the DCI that,
during 1986, he and Khashoggi had gotten a group of Canadian investors t.o put
.up something on the order of $15 million to finance arms sales by the U.S. to
 they had advanced. He said they intended., to bring formal legal action to
recover their money. He was concerned that this would destroy prospects of
getting additional hostages out, as well as ruin what he saw and sought as an
emerging if embryonic relationship between the United States and Iran. It
was not until two weeks later that the businessman first mentioned
speculation about funds going. to the Contras.
That same afternoon of 7 October, the DCI called Admiral Poindexter and
reported this information to him. He seemed surprised and clearly
concerned. It was obvious that this information represented a major risk to
the operational security of the Iranian initiative. The DCI advised
Poindexter to prepare a comprehensive statement for possible release fully
covering all aspects of the Iranian initiative arid-to consult with the White
House Counsel.
"On 9 October, the DCI and I met with North to receive a briefing on his
recent meeting in Europe with Iranians representing a new channel to senior
officials in Tehran (i.e., a channel separate from the one involving
Ghorbanifar). The DCI expressed worries about the loose ends from the
earlier channel and his concerns about operational security.
"The conversation then turned to Central America and the downing of a
Contra supply plane and capture of Eugene Hasenfus. .I directly asked North
if there was any CIA involvement, direct or indirect, in the private funding
effort on behalf of the Contras. We accepted fully DO assurances that our
officers had kept their distance, but regarded this as an opportunity to
reassure ourselves that there had been no slip ups unknown to our own
managers. North told the DCI and me that, based on his knowledge of the
private funding efforts on behalf of the Contras, 'CIA is completely clean'
of any contact with those organizing and funding the operation.. -Because of
questions. and publicity-that week surrounding the downing'of the-supply. plane
and the arrest of Hasenfus, I made a record .of North's response. It was in
the context of this discussion I recall-North making a cryptic-reference to
Contras. I assumed at the time it had to doyonly with
Swiss accounts and the
the private effort on.behalf:of.the Contras aindtherefore-neither,I-nor the
DCI pursued it.
"The DCI and I further pursued problems in the Iranian.operation-with
Poindexter on 15 October. At this meeting, we gave him the memorandum the
'.DCI had asked the NIO to prepare, laying out all his concerns and we sat with
"him while he read it. We reiterated our concern.that the NSC project"was'.
.about to spin out of control. .The DCI suggested-again that he consult White
House Counsel.
"In subsequent conversations.with.the-New York businessman,.:on
ctober, the NIO obtained . further. details on.-the=unhappiness of . the .'.
'-:
-;investors. .On 22 October, the' NIO was ; told - that: the Iranian middleman
Gho.raanifar .had, said.. he. believed.:-that a significantr.share.of the $15.;million
 ,raised by the investors was 'earmarked for Central America.' This latter
information from the businessman was passed to Colonel North by the NIO.
"In deciding what action to take on the serious threats to the security
of the operation and speculation reaching us in October, we had to balance a
number of factors. First of all, the information, while deeply disturbing,
was extremely difficult for CIA to interpret and weigh -- especially since we
had little knowledge of the financial mechanics of the. NSC operation.
"Throughout the late spring and summer of 1986, our officers familiar,
with the operation had seen fragmentary references to "overcharging" and had
picked up other reflections of dissatisfaction with the. financial
arrangements on. the part of both the Iranians and the-intermediaries. But
again, this was very difficult for our people to interpret since it was never
clear if these references related to the NSC deal or to other deals the.
intermediaries were involved in. For that matter, such allusions did not
seem all that unusual given the nature of haggling that goes on in the black
arms market and in the context of the tens of billions of dollars in arms`
being sold to Iran by others.
"A great deal of attention has been devoted to the NIO's memorandum of...
.14 October and its one..reference.to Ghorbanifar possibly alleging diversion
of-some.Iranian funds to other U.S. Government projects... Even more attention
has been given to the businessman's remarks later to the effect that
Ghorbanifar believed some of the money may have been used for Central
America.. It is essential that you appreciate that in none of this were there
any allegations of CIA involvement, or NSC or White House involvement.
What's more, the central figure in the speculation was Ghorbanifar,'about
whose reliability there were serious misgivings inside.the Agency from the.::-
outset.' We simply did not .-- could not -- put much weight-on speculation:
from?Ghorbanifar,
."We believed in;~October,; aid scontinue to pbelieve,' that'based on ..'the
.vague informatidn.'and.-speculation we had at the time,. we leaned forward with
respect:to concern for;-propriety. Taking all together the NIO's speculation
rfm_ l.-October, North's abbreviated and. cryptic, remark on 9 October,ana'
subsequent comments from the businessman-in late October and early November,
no evidence or - CIA, NSC, or-any ot
we had _.anyjndication..that' her. US
Government institution was involved in a diversion of.funds; that any.funds?'
'
had in fact been diverted;?or`that any laws had been broken. In fact, we..
.received no.'additional~.'information along these lines-until the Attorney
General's tatement; on 25.November 1986.
We concluded:that~none.of the operational security aspects ' or the
speculationconcerning the , funding relatedto the._parC'of the transaction
which',CIA,was~"involved..",..Security`' concerns;. posed -by unhappy investors,$an
the vague speculation-,sourced`- to Chorbanifar. about the ,funding involved.
fin8.~ncial aspects; of the Iranian initiative arranged by; the NSC and yabout