PRELIMINARY INQUIRY INTO THE SALE OF ARMS TO IRAN AND POSSIBLE DIVERSION OF FUNDS TO THE NICARAGUAN RESISTANCE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP89T00142R000801150002-3
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 59
• Document Creation Date: December 22, 2016
• Document Release Date: December 5, 2011
• Sequence Number: 2
• Publication Date: February 2, 1987
• Content Type: REPORT

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100TH CONGRESS
1st Session
SENATE
REPORT
100-7
PRELIMINARY INQUIRY INTO THE SALE OF ARMS
TO IRAN AND POSSIBLE DIVERSION OF FUNDS
TO THE NICARAGUAN RESISTANCE
REPORT
OF THE
SELECT COMMITTEE ON INTELLIGENCE
UNITED STATES SENATE
FEBRUARY 2, 1987.?Ordered to be printed
U.S. GOVERNMENT PRINTING OFFICE
** 91 -MO WASHINGTON : 1987
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,smorrnoma.
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1
LETTER OF TRANSMITTAL
U.S. SENATE,
SELECT COMMITTEE ON INTELLIGENCE,
Washington, DC, January 29, 1987.
Hon. DANIEL K. INOUYE,
Chairman, Select Committee on Secret Military Assistance to Iran
and the Nicaraguan Opposition, US. Senate, Washington, DC.
DEAR DAN: Pursuant to Senate Resolution 23, transmitted here-
with is the report prepared by the Select Committee on Intelli-
gence summarizing the results of our preliminary inquiry into the
sale of arms to Iran and the possible diversion of .funds to the Con-
tras. In accordance with the terms of Senate Resolution 23, the
report describes in narrative form information which the Commit-
tee was able to learn during the course of its study and identifies
areas of inquiry that the Committee believes should be among
these pursued by the Special Committee.
In transmitting this report to your Committee, we would like to
share briefly with you the limited objectives of the Committee, a
sense of how the Intelligence Committee conducted the inquiry
upon which the report is based, and where we stand in terms of
gathering relevant information.
At the outset, it should be emphasized that the study by the In-
telligence Committee was necessarily limited, both in scope and in
time. It was never the goal or the mandate of the Intelligence Com-
mittee during this initial phase to conduct a definitive investiga-
tion into this complex matter. Rather, the Intelligence Committee
undertook its inquiry pursuant to its responsibility for oversight of
the nation's intelligence activities. Furthermore, we sought to
gather as much information as possible while recollections were
fresh and to collect in one place as many documents as possible
that would be pertinent to any future comprehensive investigation.
In addition, it was our hope that this preliminary work would help
the new Committee to accomplish its task more quickly insofar as
some of the groundwork would have been done. The Intelligence
Committee, we believe, succeeded in accomplishing this goal.
For all intents and purposes, the Committee commenced its in-
quiry on December 1 by issuing subpoenas to 15 individuals and en-
tities, as well as a series of invitations to appear, and concluded the
information gathering process on December 18. During this period,
the Committee received testimony from 36 witnesses and received
thousands of pages of documents. While it was impossible to in-
clude all details of documents and all information received because
of constraints of time and resources, nonetheless, the complete
record of information received, including any additional data which
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IV
was received after December 18, is herewith transmitted to the
Special Committee in addition to our report.
While documents and testimony received by the Committee
during the course of its study of this matter were voluminous, the
work of our Committee was only preliminary in nature for a
number of reasons related primarily to the time constraints de-
scribed above. First, a number of potentially useful witnesses could
not be called by the Committee or were out of the country and
therefore unable to testify. Secondly, while a total of 36 witnesses
appeared before the Committee, such key witnesses as Admiral
John Poindexter, Lieutenant Colonel Oliver North, Retired Major
General Richard Secord, Retired Colonel Robert Dutton, and Colo-
nel Robert Earl asserted their constitutional rights and declined to
testify. Director of Central Intelligence William Casey appeared
before the Committee just before this inquiry was commenced and
before the full scope of the situation was known by the public or by
the Committee, and prior to his unfortunate illness. Accordingly,
his testimony was general in nature and was not under oath.
Third, because of the pressure of time, the witnesses that appeared
before the Committee did so without the benefit of prior interviews.
Obviously, from an investigative standpoint, this precluded a com-
prehensive examination. And, when the witnesses did testify, con-
sistent with the Committee's objectives, the questioning was geared
toward information gathering purposes rather than toward pros-
ecution and confrontation. Fourth, except in two instances, wit-
nesses were not recalled to be questioned regarding information ac-
quired by the Committee subsequent to their initial appearance.
Any such information or documents, of course, are included in this
transmittal to the new Special Committee. Fifth, again consistent
with the Committee's information gathering purposes, subpoenas
were narrowly drawn. Consequently, there may still be documents
that we have not obtained that would be helpful to you. And, while
the staff has reviewed the vast majority of documents that were re-
ceived by the Committee, including all documents received from
public sources, time constraints have prevented a detailed analysis
of all documents from private sources. Finally, as noted above, new
information has come to light since the close of the fact finding
period with respect to which the Committee could not follow up if
it was to complete this report to the new Special Committee. This
includes information both reported in the media and contained in
documents that are still being delivered to the Intelligence Com-
mittee in response to our subpoenas. It was felt that since the new
Special Committee has now been charged with overall responsibil-
ity for the investigation, this information should simply be trans-
mitted to the new Committee rather than subjecting it to analysis
by the Intelligence Committee.
As noted above, the Committee heard testimony from 36 wit-
nesses and gathered thousands of pages of documents from both
public and private sources. When witnesses testified before us, they
did so behind closed doors and before only Senators and limited
Committee staff. The Committee was careful to sequester witnesses
as a precaution against coordinated or otherwise compromised tes-
timony. Again, our goal was to preserve the record for any future
investigation.
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With respect to the report itself, we have attempted to set forth
information received by the Committee in an objective manner,
without evaluation. We believe that this is necessary because any
conclusions based upon such inherently limited fact finding would
be necessarily premature. Therefore, the report seeks solely to be
an accurate and fair representation of the information which has
been presented to us. We have tried to indicate where there are
discrepancies in testimony about specific events or decisions and
where there are gaps in the information that we have learned.
Indeed, it is evident that this preliminary inquiry cannot provide a
final resolution to the fundamental questions facing the new Spe-
cial Committee.
Because so much attention has been given to earlier staff drafts
of reports which were not approved by the Intelligence Committee,
we would like to touch briefly on why this report has been adopted
by the Committee. First, the Committee believes that its report
should be primarily a summary of the information that we have
gathered and that it could not appropriately reach conclusions or
findings because of its preliminary nature, other than to note dis-
crepancies and gaps and to identify areas of inquiry which might
merit future consideration by your Committee. We believe that this
report accomplishes that goal.
Secondly, since January 6, the testimony of a dozen witnesses
has been transcribed and made available for preparation of this
report and thousands of pages of documents which had not been
previously indexed and reviewed, have now been analyzed. While
much of this information does not dramatically change the thrust
of the report, some of the information is clearly useful. If some of
the documents which were in our possession had not been reviewed
and analyzed before the issuance of a report, such an omission
could have adversely affected the credibility of the Committee's
work.
What we are presenting to you is, as we indicated, still necessari-
ly incomplete. We believe, however, that it is as complete and con-
sistent as it can be based upon the information made available to
us. This report describes the essence of much of the documents and
testimony that we have gathered, and it is our hope and belief that
the report, along with the documents and testimony transmitted
herewith, will provide a useful tool to your Committee staff as you
begin your work.
We look forward to working with you in this vital endeavor to
determine all the facts regarding this matter and the implications
for our national security and our foreign policy decision making
process. If the Members or the staff of the Senate Select Committee
on Intelligence can be of any assistance to you in the upcoming
weeks and months, please do not hesitate to call upon us.
Sincerely,
DAVID L. BOREN,
Chairman.
WILLIAM S. COHEN,
Vice Chairman.
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100TH CONGRESS
1st Session
SENATE
REPORT
100-7
PRELIMINARY INQUIRY INTO THE SALE OF ARMS TO
IRAN AND POSSIBLE DIVERSION OF FUNDS TO THE
NICARAGUAN RESISTANCE
FEBRUARY 2, 1987.?Ordered to be printed
Mr. BOREN, from the Select Committee on Intelligence,
submitted the following
REPORT
INTRODUCTION
In response to public and private reports and in accordance with
its responsibility for oversight of the nation's intelligence activities,
the Senate Select Committee on Intelligence on December 1, 1986,
undertook a preliminary inquiry into the sale of arms to Iran and
possible diversion of funds to the Contras. It was not the goal of the
Committee to conduct a definitive investigation into this complex
matter. Rather, the Committee sought only to gather as much in-
formation as possible while recollections were fresh and to collect
in one place as many relevant documents as possible.
Accordingly, two objectives were served: first, the Committee
learned a great deal of information that will be extremely useful in
the future as the Committee continues to perform its intelligence
oversight function; and, secondly, testimony and documents have
been preserved that the Committee hopes will contribute to the
Select Committee on Secret Military Assistance to Iran and the
Nicaraguan Opposition as it performs its investigative function. As
a result, the Select Committee should be able to save time by
moving more rapidly through the preliminary stages of its investi-
gation and thereby get the facts to the American public that much
sooner.
Consistent with these twin objectives, and pursuant to Senate
Resolution 23 (100th Congress), this report is in two parts: first,
Section I summarizes in narrative form the information given to
the Committee during the course of its inquiry which the Commit-
tee believes is materially relevant to the mandate of Senate Resolu-
tion 23. Since the fact finding of the Committee encompassed only
18 days, this narrative is necessarily incomplete and thus endeav-
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ors only to provide a general chronological framework of events de-
rived from the documents and testimony received by the Commit-
tee. Secondly, again consistent with Senate Resolution 23, Section
II sets forth certain unresolved questions and issues that the Com-
mittee recommends be pursued by the Select Committee.
THE IRAN INITIATIVE
Origins
The Committee's inquiry suggests that the Iran initiative origi-
nated as a result of the confluence of several factors including:
?A reappraisal of U.S. policy toward Iran by the National Secu-
rity Council, beginning in late 1984, with special emphasis on
building a constructive relationship with moderate elements in
Iran;
?Deep concern at the highest level of the U.S. Government over
the plight of American citizens held hostage in Lebanon;
?Israel's strong and continuing interest in furthering contacts
with Iran;
?Efforts on the part of private parties, including international
arms dealers and others.
Reappraisal of U.S. Policies
The formal reappraisal of U.S. policy toward Iran began in late
1984 when the National Security Council issued a National Securi-
ty Study Directive (NSSD). An NSC official involved in the policy
review testified that he was disappointed with the bureaucracy's
lack of imagination in responding to this study directive and with
the absence of any recommendation for change in policy.
In May 1985, the CIA National Intelligence Officer for the
Middle East prepared a five-page memo which went to the NSC
and the State Department, arguing for a change in U.S. policy that
would seek a more constructive relationship with Iranian leaders
interested in improved ties with the West. The memo argued in
part that the U.S. could permit allies to sell arms to Iran as one of
the alternative means of establishing Western influence so as to
offset growing Soviet inroads in Iran. Apparently using the argu-
ments in this memo two members of the NSC staff then prepared a
draft National Security Decision Directive (NSDD) which proposed
a departure in U.S. policy toward Iran. Describing the Iranian po-
litical environment as increasingly unstable and threatened by
Soviet regional aims, the draft NSDD stated that the U.S. is com-
pelled to undertake a range of short and long term initiatives to
include the provision of selected military equipment to increase
Western leverage with Iran and minimize Soviet influence.
National Security Adviser Robert McFarlane transmitted the
draft NSDD on June 17, 1985 to Secretaries Shultz and Weinberger
for their comment. State Department logs and Secretary Shultz's
testimony indicate that he responded in writing on 29 June that
the proposed policy was "perverse" and "contrary to our own inter-
ests." Weinberger made the following comment in the margin of
the draft, "This is almost too absurd to comment on." According to
Weinberger's testimony and that of Assistant Secretary of Defense
Armitage, Weinberger responded in writing opposing such sales.
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The Hostage Factor
Testimony by several senior Administration witnesses indicate
that during 1985, the Administration was preoccupied on a regular
basis with matters relating to terrorism and the state of U.S. hos-
tages. In particular, documents and testimony reflect a deep per-
sonal concern on the part of the President for the welfare of U.S.
hostages both in the early stages of the initiative and throughout
the program. The hostages included William Buckley, a U.S. offi-
cial in Lebanon. Information was received that in late 1985 the
Syrians informed Ambassador Vernon Walters that Buckley's
captors had tortured and killed him. The reports indicate that
this information was conveyed to Vice President Bush who found it
very distressing. The possibility of the release of U.S. hostages was
brought up repeatedly in conjunction with discussion of the pro-
gram.
Israeli Interests
According to documents and testimony received by the Commit-
tee, Israel had a strong interest in promoting contacts with Iran
and reportedly had permitted arms transfers to Iran as a means of
furthering their interests. A series of intelligence studies written in
1984 and 1985 described Israeli interests in Iran. These studies also
reported Israeli shipments of non-U.S. arms to Iran as well as the
use of Israeli middlemen as early as 1982 to arrange private deals
involving U.S. arms. In an interview with the Chairman and Vice
Chairman of the Committee on November 21, 1986, National Secu-
rity Adviser John Poindexter described Israel's interest in much
the same terms.
McFarlane testified that he was never informed by CIA that
Israel has been engaged in such activities during 1981-85. In fact,
McFarlane, prompted by news accounts of such activity on the part
of Israel, asked the CIA?and the DCI specifically?several times
whether the news reports were true. He was told they were not.
McFarlane testified that if he had known that the Israelis had pre-
viously shipped arms to Iran it would have made him less respon-
sive to later Israeli proposals to resume shipments. However, in his
first cable to Shultz in the matter, he stated that it was obvious to
him the Israeli channel into Iran had existed for some time. One of
the NSC staffers who drafted the NSDD testified that he was
aware of allegations that Israel was selling arms to Iran but dis-
counted such reports because he believed they failed to offer con-
clusive evidence and because Prime Minister Peres had assured the
U.S. that there was no such trade.
Private Parties
Documents and testimony indicate that Adnan Khashoggi and
other international arms dealers, including Manucher Ghorbanifar,
were interested in bringing the U.S. into an arms relationship with
Iran, and had discussed this at a series of meetings beginning in
the summer of 1984 and continuing into early 1985. These discus-
sions reportedly included the idea of an "arms for hostages" deal in
part as a means of establishing each country's bona fides. Kha-
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shoggi reportedly met with various leaders in the Middle East to
discuss policy toward Iran during this same period.
In July 1985 Khashoggi sent McFarlane a lengthy paper he had
written dealing with the political situation in Iran. McFarlane tes-
tified that he did not recall seeing these papers, but indicated the
existence of prior "think pieces" Khashoggi had sent him on the
Middle East. A staff member of the NSC testified that McFarlane
gave the Khashoggi paper to another NSC staffer. Michael Ledeen,
a professor at Georgetown University, and a part-time NSC con-
sultant beginning in February 1985, appears to have played a key
role in the initial contacts between the U.S. and Israel vis-a-vis
Iran. According to Ledeen, while on a trip to Europe in April 1985,
he spoke with a European intelligence official who had just re-
turned from Iran. The official characterized the internal situation
in Iran as more fluid than previously thought, and suggested it was
time for the U.S. to take a new look at Iran. He said that the U.S.
should discuss this with the Israelis, who the official believed were
unusually well-informed about Iran.
According to testimony by McFarlane, Ledeen apprised McFar-
lane of a forthcoming trip Ledeen planned to Israel and asked
whether he was interested in knowing whether Israel had any Ira-
nian contacts. McFarlane testified that he responded affirmatively.
McFarlane stated that he was aware that Ledeen was a friend of
Israeli Prime Minister Peres. Ledeen testified that he talked to
McFarlane in April 1985 about the possibility of raising contacts
with Iran with the government of Israel and that McFarlane
agreed, and requested specifically that Ledeen get Israel's perspec-
tive on fighting Iranian terrorism.
According to Ledeen, he traveled to Israel on 4-5 May 1985, and
discussed the situation in Iran with Prime Minister Peres. Peres
referred Ledeen to a retired Israeli intelligence official who agreed
with Ledeen that both countries needed to work together to im-
prove their knowledge of Iran. Ledeen testified that he reported his
talks in Israel to McFarlane in mid-May, and that McFarlane sub-
sequently arranged to task the Intelligence Community to produce
a Special National Intelligence Estimate (SNIE) on Iran.
Secretary of State Shultz learned of Ledeen's activities and, in a
message dated 5 June, complained to McFarlane that Ledeen's con-
tact with Israel had bypassed the Department of State. Shultz
noted that Israel's agenda regarding Iran "is not the same as ours"
and that an intelligence relationship with Israel concerning Iran
"could seriously skew our own perception and analysis of the Irani-
an scene." He added that we "are interested to know what Israel
thinks about Iran, but we should treat it as having a bias built in,"
and concluded that this initiative "contains the seeds of. . . seri-
ous error unless straightened out quickly." McFarlane responded
in a cable of June 7 that Ledeen had been acting "on his own
hook." With regard to the Iran initiative, McFarlane stated "I am
turning it off entirely," but added "I am not convinced that that is
wise."
On June 14, 1985, TWA Flight 847 was hijacked. According to
testimony by White House Chief of Staff Donald Regan, McFarlane
mentioned the possibility of requesting use of the Israeli channel to
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Iran in briefings to the President during the crisis. Regan said that
this was his first awareness of any such contacts.
According to testimony by McFarlane, on July 3, 1985, David
Kimche, Director General of Israel's Foreign Ministry and a former
intelligence officer, contacted McFarlane and reported to him that
Israel had succeeded in establishing a dialogue with Iran. Kimche
stated that as a result of growing concerns with Soviet pressures,
Iranian officials had asked Israel to determine whether the U.S.
would be interested in opening up political talks with Iran. Accord-
ing to McFarlane, Kimche stated that the Iranians understood U.S.
concerns regarding their legitimacy and therefore had proposed to
use their influence with radical elements holding U.S. hostages in
Lebanon. Although there was no specific Iranian request for arms,
Kimche admitted to the possibility that the Iranians might raise
the arms issue in the future.
In a cable from McFarlane to Shultz on July 14, 1985, McFarlane
stated that the proposal had also been raised several weeks earlier
by Peres to Ledeen. In the cable, McFarlane said that he had in-
structed Ledeen to say we did not not favor such a process. McFar-
lane also reported that Kimbhe, on instructions from Peres, had
come to inquire about the U.S. disinclination to pursue the initia-
tive and ask McFarlane to take up the proposal with appropriate
authorities. Then on July 14, "a private emissary" from Prime
Minister Peres came to press the point.
McFarlane further noted to Shultz the advantages and disadvan-
tages of the Kimche proposal, and gave a positive assessment of the
Iranian channel based upon his confidence in his Israeli contacts.
Finally, he stated that in the short term seven hostages might be
released and therefore that he tended to favor going ahead.
Shultz responded to McFarlane by cable the same day, noting
that the U.S. should make a tentative show of interest without
making any commitment and should listen and seriously consider
the idea of private U.S.-Iran relations. Shultz stated that McFar-
lane should manage the initiative, while making it known to the
Israelis that McFarlane and Shultz would be in close contact and
full agreement at every step.
McFarlane testified that he visited the President in the hospital
on either July 13 or 14, 1985. According to testimony by Regan, he
also attended the meeting and believes that it occurred three days
after the President's operation (i.e., July 16 or 17). Regan further
testified that at the meeting McFarlane requested the President's
authority to use an Israeli contact with an Iranian as a channel to
higher-ups in Iran. According to Regan, McFarlane was vague
about the specifics of the plan, and the President then questioned
McFarlane on his confidence in the Iranian contact, Ghorbanifar.
Regan testified that McFarlane defended Ghorbanifar on the basis
of Israeli assurances and the President authorized McFarlane to
explore the channel. Regan testified that it was his own opinion
that the release of hostages would have been a collateral benefit of
such an opening.
McFarlane testified that the plan he conveyed to the President
was essentially what Kimche had suggested. McFarlane stated that
he told the President that he would not be surprised if arms en-
tered into the relationship later. According to McFarlane, the
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President was enthusiastic about the opening, hoped it would lead
to the release of hostages, and authorized McFarlane to explore the
plan.
In his testimony, McFarlane categorically denied any discussion
of Ghorbanifar with the President, recalling that it was only in De.
cember that McFarlane became aware of Ghorhanifar's identity. It
should be noted, however, that McFarlane made reference to Ghor-
banifar in his July 14 cable to Shultz describing the proposal. Is
describing his contacts with the emissary from Peres and Kimche,
McFarlane stated that the Iranian officials named in the context of
the proposal are an ayatollah and "an advisor to the Prime Minis-
ter named Ghorbanifar."
Meanwhile, according to testimony by Ledeen, in early July he
was called by Kimche who said a friend, Al Schwimmer, was
coming to Washington and wanted to talk to Ledeen. Ledeen testi-
fied that he met with Schwimmer in early July. Schwimmer re-
counted a meeting he had attended a week or two before in Europe
with Kimche, Khashoggi and Ghorbanifar. Schwimmer said Ghor-
banifar had a lot of useful information about the situation in Iran
and that Ledeen should meet him as soon as possible.
According to Ledeen he reported his meeting with Schwimmer to
McFarlane. Ledeen told McFarlane he was going to Israel on vaca-
tion from mid-July to mid-August, and would, if McFarlane
thought it appropriate, meet Ghorbanifar. Ledeen testified that
McFarlane agreed.
Ledeen met Ghorbanifar in Israel in late July. Kimche, Schwim-
mer and Yaacov Nimrodi, an arms dealer and former Israeli mili-
tary attache in Tehran, also attended. At the meeting Ghorbanifar
gave what Ledeen described as "a great quantity" of information
on Iran. Ledeen testified that Ghorbanifar said that if relations be-
tween Iran and the U.S. were to improve, each side would have to
send the other clear signals about its seriousness, and that the Ira-
nian signal could be a release of the hostages in Lebanon (referring
specifically to U.S. Government official William Buckley) and ces-
sation or moderation of Iran-sponsored terrorism. According to
Ledeen, Ghorbanifar said that for the U.S. the only convincing ges-
ture would be to help Iran buy weapons it otherwise could not
obtain.
According to documents received by the Committee, Kimche
phoned McFarlane on July 30 to request an August meeting. Ac-
cording to testimony by Shultz, Kimche and McFarlane met at the
beginning of August 1985, at which Kimche indicated that the Ira-
nian not only wanted "a dialogue with America" but also wanted
arms from the U.S. and TOW anti-tank missiles from Israel. In
return the Iranians could produce hostages.
The August-September Shzpment of TOWs
On August 8, 1985 at a meeting of the National Security Plan-
ning Group in the White House residence, McFarlane, with Poin-
dexter, briefed the President, the Vice President, Shultz, Weinberg-
er, Regan, and Casey on the Kimche proposal to permit the sale of
TOWs to Iran through Israel. There is a divergence of views as to
whether approval was granted for the Israelis to ship arms to Iran
either at that meeting or subsequent to it. There is also conflicting
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testimony on which of the participants supported the proposal, al-
though opposition to the plan by Shultz and Weinberger is clear.
According to testimony by Regan, the President declined to au-
thorize the sale of TOWs because of misgivings about Ghorbanifar's
credentials and influence in Iran. Regan testified that the other
participants agreed it was premature to get involved in arms sales
to Iran. McFarlane, on the other hand, testified that Ghorbanifar's
name never came up at the August meeting.
In a November 1986 interview in conjunction with the Attorney
General's inquiry, Shultz "dimly recalled" a meeting at the White
House residence in August on the subject of an Israeli shipment of
TOWs to Iran. In his testimony before the Committee in December,
however, Secretary Shultz said there was a meeting on August 6,
1985 where McFarlane briefed the President on an Israeli request
for U.S. replenishment of Israeli TOW missiles proposed for ship-
ment to Iran. In return, according to Shultz, the U.S. was to get
four hostages and the entire transaction would be deniable. Shultz
said he opposed the proposal, but the President did not make a de-
cision.
According to testimony by McFarlane, the transfer was support-
ed by Casey, Regan, and Bush while Shultz and Weinberger op-
posed it. McFarlane testified that subsequent to the meeting Presi-
dent Reagan approved the Israeli request to ship arms to Iran and
to purchase replacements from the U.S. Presidental approval was
on the condition that the transfers would not contribute to terror-
ism or alter the balance of the Iran-Iraq war. Although there is no
written record of a decision at this time, McFarlane testified that
the President informed Shultz, Weinberger and Casey of his deci-
sion.
According to his testimony, McFarlane believed at the time that
the President's decision constituted an "oral Finding," which was
formally codified on January 17 in a written Finding. McFarlane
testified that when he an-TA-Forney General Meese discussed the
legality of an oral Finding November 21, 1986, Meese told him that
he believed an oral, informal Presidential decision or determina-
tion to be no less valid then a written Finding. According to docu-
ments received by the Committee, McFarlane, when interviewed by
Meese, made no mention of Presidential approval of the TOW ship-
ment of August-September 1985 or of an "oral Finding." McFar-
lane did tell Meese that he told Kimche at a December 1985 meet-
ing in London that the U.S. was disturbed about the shipment of
TOWs, and could not approve it.
One White House Chronology prepared in November 1986 simply
notes that McFarlane conveyed to Kimche a Presidential decision
that a dialogue with Iran would be worthwhile. However, a second
White House chronology presents conflicting accounts about wheth-
er the U.S. acquiesced in the Israeli delivery of 508 TOWs to Iran
on August 30.
According to testimony by McFarlane, Israel did not feel bound
to clear each specific transaction with the U.S. Israel proceeded on
the basis of a general authority from the President based on a U.S.
commitment to replace their stocks. Also Israel's negotiations on
hostages would not necessarily require U.S. approval.
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According to testimony by Ledeen, when he returned to the U.S.
in Mid-August, 1985, McFarlane informed him that the program of
contact with Iran would go forward and that a test of the kind
Ghorbanifar had proposed would occur. Accordingly, McFarlane
told Ledeen to work out arrangements with Kimche for receipt of
the hostages. McFarlane said he believed at this time that the sale
of TOWs would secure the release of all U.S. hostages.
Ledeen testified that he attended a meeting in Paris on Septem-
ber 4 with Kimche, Ghorbanifar, Schwimmer and Nimrodi. The
discussions were in two parts: (1) technical questions about trans-
fers of weapons from Israel to Iran and getting the hostages out of
Lebanon; and (2) conversation with Ghorbanifar about events in
Iran. Ghorbanifar told them they would soon see public statements
by leading Iranian officials making clear their intention to improve
U.S.-Iranian relations. Subsequently, according to testimony by
Ledeen, in the second week of September on the anniversary of the
Iranian revolution, the President and Prime Minister gave speech-
es in which the Soviets were attacked, but not the U.S. Ledeen saw
this as "in accordance with" Ghorbanifar's prediction.
According to testimony from a senior CIA analyst, in early Sep-
tember 1985 Ledeen provided him with information on Iranian-
sponsored terrorism and on Ghorbanifar. According to this analyst,
this was the first time Ledeen had identified Ghorbanifar by name
to the CIA. According to testimony by Ledeen, the subject of Ghor-
banifar's bona fides first came up in September 1985. However,
Shultz testified that he saw an intelligence report on July 16, 1985,
two days after he cabled McFarlane from Geneva, which indicated
that Ghorbanifar was a "talented fabricator." Ledeen testified that
he knew that the CIA was suspicious of Ghorbanifar, and that
Ghorbanifar had raised the subject himself, in one of their meet-
ings. According to testimony by Ledeen, it appeared to him that
Ghorbanifar's credentials were well-documented.
The Committee received testimony and documents, however, in-
dicating that the CIA had long been aware of Ghorbanifar's suspect
character. In August 1984 CIA had issued a notice to other govern-
ment agencies warning that Ghorbanifar was a fabricator. Docu-
ments indicate CIA was aware, of one instance in which Ghorbani-
far had reportedly offered to provide intelligence on Iran to a third
country in return for permission from the third country to contin-
ue the drug smuggling activities of Ghorbanifar's associates with
the country concerned.
According to the CIA analyst, North called him on September 9,
1985, and requested increased intelligence collection on Lebanon
and Iran. North told him there was a possibility of release of
American hostages. In mid-September North asked him for intelli-
gence collection on specific individuals in Iran who were in contact
with American officials. North later gave him a very restricted dis-
tribution list for the intelligence collected, which specifically left
out the Department of State. North said Shultz would be briefed
orally by McFarlane. As the intelligence began to come in, this
senior CIA analyst did not understand all the parties involved.
However, he felt the intelligence clearly showed that hostages and
some form of arms sales were involved.
,{.
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According to documents received by the Committee, the ship-
ment of 508 TOWs left Israel on August 30, 1985, transited a third
country and arrived in Iran on September 13. North later asserted
to Meese that he was totally unaware of the TOW shipment at the
time it occurred. He believed he first learned of it in a November
25 or 26 conversation with Secord while in Tel Aviv. North also
claimed that he did not know who had otherwise been aware of the
shipment. McFarlane told Meese that he thought he learned of the
shipment from Ledeen. He then informed the President, Shultz,
Weinberger, and Casey, but noted that the shipment had not
achieved the objective of release of all the hostages. According to
McFarlane, there was no official contact between the U.S. and Is-
raeli governments regarding the shipment.
On September 15, 1985, the Reverend Benjamin Weir was re-
leased from his captivity in Lebanon. According to testimony re-
ceived by the Committee, there was reason to believe at the time
that Ghorbanifar played a direct role in the event. In addition,
Ledeen testified that it was clear to the Israelis that there was a
causal relationship between the September arms shipment and
Ghorbanifar's role in it and the release of Weir. The view that the
Iranians helped to secure Weir's release appears to have been
shared by McFarlane.
It should be noted that the Committee also received testimony in-
consistent with this description of events. Secretary of Defense
Weinberger testified in response to a specific question that he
knew nothing about any connection between the release of Weir
and Israeli arms sales to Iran. Regan testified that McFarlane told
the President?in his presence?that the Israelis, "damn them,"
had sold 500 TOWs to the Iranians without U.S. knowledge. Regan
further testified that he, the President, McFarlane and Poindexter
decided to "ignore" the incident except to "let the Israelis know of
our displeasure" and "keep the channel open." According to
Regan's testimony this shipment of arms to Iran was not sanc-
tioned by the U.S. Government.
One White House chronology states that after discussing the
matter with the President, it was decided not to expose the action,
thus retaining the option of "exploiting the Israeli channel to es-
tablish a strategic dialogue."
The testimony of McFarlane is inconsistent with that of Regan.
McFarlane in testimony, disputed Regan's characterization of his
reaction to the TOW shipment and denied that the President had
ever expressed disapproval of the Israeli action. McFarlane testi-
fied that the President was "elated" at Weir's release and denied
that the President had ever instructed him to reproach the Israelis.
According to evidence received by the Committee, concurrently
with the arms shipment and hostage release?and perhaps connect-
ed with both?was an airplane flight out of Tabriz, Iran which
made an emergency landing in Tel Aviv. Ghorbanifar was very in-
terested in this event, and a CIA analyst studying the situation
was convinced that there was a correlation between Ghorbanifar,
the aircraft flight to Tel Aviv, and the release of Weir. The Com-
mittee has not established that there was a correlation between
these events.
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McMahon approved provision of this support, and asked for a full
briefing on the next business day.
On November 25, McMahon learned that a CIA proprietary had
flown the arms to Iran in support of an "NSC mission" without his
knowledge or approval. According to McMahon, he instructed that
no further CIA activity in support of the NSC operation was to be
conducted without a Presidential Finding authorizing covert action.
McMahon also directed that involved CIA officials brief the CIA
General Counsel, Stanley Sporkin, on what had transpired.
Sporkin testified that he recalled meeting with CIA personnel in
late November or early December at the DDCI's request, and
learned from them that the CIA was involved in a shipment of
arms to Iran. Later in the day, November 25, Sporkin informed
McMahon that a Finding would indeed be necessary for such activi-
ty to be authorized. McMahon directed that a draft finding be pre-
pared for the President's signature which would provide the neces-
sary authority for the CIA's activity in support of the NSC Iran ini-
tiative.
This cdraft finding was prepared by Sporkin, approved by DCI
Casey and -delivered to Poindexter on November 26. The draft Find-
ing authorized CIA to provide assistance to "private parties" seek-
ing to free American hostages. It also contained language retroac-
tively ratifying all previous activities undertaken by U.S. officials
in pursuit of this effort and directed that the Congress not be in-
formed until directed by the President.
Subsequent to the flight, no U.S. hostages were released. The Ira-
nians were dissatisfied with the type of Hawk missile they received
and believed they had been cheated. The Secretary of State later
stated that at that point he had believed the operation had col-
lapsed and expressed relief that it was over. However, in the CIA,
planning and support for future missions in support of the NSC op-
eration continued. The CIA officials who had responded to North's
first request testified that he was responsible for this contingency
planning and believed the direction from DDCI McMahon to cease
support did not prohibit such efforts. Until mid-December, a series
of messages relating to possible future missions was exchanged be-
tween CIA headquarters and U.S. posts in various European and
Middle Eastern countries. Documents received by the Committee
indicate that a variety of government officials, liaisons, and other
sources were involved during this time.
The Committee received testimony that senior CIA officials made
repeated calls to NSC staff in late November and early December
urging that the draft November 26 Presidential Finding be signed.
According to a memorandum for the record prepared by McMahon
on December 7, CIA was informed on December 5 that the Presi-
dent had signed the finding and had directed the CIA not to inform
Congress for reasons of safety of the hostages. Sporkin testified
that one of his assistants had been informed by North that the
finding had been signed and was in Poindexter's safe. CIA believed
the December 5 finding contained the provision retroactively ratify-
ing previous actions. However, the Committee has received no doc-
umentary evidence that any finding of November 26 or December 5
was ever signed.
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At the end of November, according to McFarlane's testimony, he
obtained the President's approval to go to London on December 8
to meet with Iranian intermediaries. A meeting of principals in the
White House was scheduled for December to discuss Iran.
The Presidential Finding
In an electronic message of December 4, North provided Poin-
dexter with a status report on the situation. North's message
stated that it was based on discussions held in Geneva between
Kimche, Secord, Ghorbanifar and the Iranian contact. The message
recounted Iranian unhappiness with the Hawk shipment in late
November. It indicated that release of the hostages is tied to a
series of arms shipments beginning later in December, and that
North, Secord, Kimche and Schwimmer were to meet in London on
December 7 to go over arrangements for the next shipments. it
stated that North had gone over all the plans with the CIA official
who hatt-agg-i-sieil in the November 25 flight. He indicated that the
only officials fully? informed- about the- longer term goals are
McFarlane, Poindexter and North.
On December 7, the President met with Shultz, Weinberger,
McMahon representing Casey, McFarlane and Poindexter to dis-
cuss the Iran initiative. Most participants who testified before the
Committee believed there was a consensus at this discussion that
McFarlane would inform the Iranians in London that the U.S.
would not trade arms for hostages. Shultz and Weinberger both tes-
tified that they left the meeting believing that the arms component
of the contacts with elements in Iran was over.
However, at least one participant, DDCI McMahon, testified that
there was no decision or consensus. He testified that the meeting
was divided over whether to proceed with the Iran initiative, with
White House staff supporting continuation and all others disagree-
ing. There also is disagreement in the Committee's record about
whether McFarlane's meeting with the Iranians in London was dis-
cussed at the December 7 meeting, or what specific guidance was
approved. Two participants did not recall any discussion of instruc-
tions McFarlane claimed to have received?to make clear that the
U.S. remained open to a political dialogue, but would not exchange
arms for hostages.
McFarlane testified that prior to meeting the Iranians in
London, he and North met Kimche. Kimche urged the U.S. to be more
patient and permit the Iranians to demonstrate their bona fides. Ac-
cording to McFarlane, he told Kimche his mission was "to close
down" the operation. He and North then met with Kimche, Nim-
rodi and Ghorbanifar, to whom McFarlane made it "emphatically"
clear that the U.S. would engage in no more arms transfers. Ac-
cording to McFarlane, Ghorbanifar argued strongly for continued
U.S. arms transfers, and McFarlane came away convinced the U.S.
should not "do business" with Ghorbanifar.
On McFarlane's return, he reported to the President and others
on his London meeting. According to Casey's written account of
that meeting, McFarlane recommended that the U.S. not pursue a
relationship with the Iranians through Ghorbanifar, of whom he
did not have a good impression, but that we should work through
others. Casey's memo said that "everyone" supported this idea,
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though it stated that the President "argued mildly" for letting the
Israelis go ahead without any U.S. commitment except to replace
arms they might ship. The memo indicated the President was con-
cerned for the fate of the hostages if we stopped the discussions,
and stated that Casey told the President that the contacts could be
justified later as trying to influence events in Iran.
At this time, CIA sent a message through its channels to posts in
countries involved in preparations for future missions, advising
them that "the deal" was apparently off and everyone should stand
down.
McFarlane resigned from the Government on December 11. He
testified that he had no further involvement with the Iran matter
during the period of January to April 1986.
In a memorandum of December 9, 1985 the day before McFar-
lane reported on his trip, North summarized the options on the
Iran program to Poindexter. North wrote that Ghorbanifar was a
reliable interlocutor. He noted that the U.S. should gain operation-
al control to avoid past problems experienced with Schwimmer, He
then posed five options: (1) allow the Israeli shipment of TOWs to
go forward, with U.S. replenishment; (2) attempt to rescue the hos-
tages; (3) allow Israel to make only a token shipment of TOWs as a
sign of good faith; (4) do nothing; (5) issue a covert action finding
and make arms deliveries ourselves through Secord. North indicat-
ed that there was little to lose by allowing Israel to go ahead with
the delivery of TOWs.
Meanwhile, as a result of Ledeen's activities, the question of
Ghorbanifar's bona fides as an intermediary arose again. Ledeen
testified that, at Ghorbanifar's request, they met during a private
trip made by Ledeen to Europe. At this time, Ghorbanifar again
provided information on developments in Iran and complained about
his treatment by the CIA.
According to Ledeen, when he returned to the United States in
late December 1985, he briefed DCI_Casey and other CIA, officials
about his conversations with:Ghorhanifar_ He said he stressed?to
them that Ghorbanifar was a useful channel in gaining a political
opening to elements in Iran, and that with proper precautions we
should keep working with him. Subsequent to this discussion,
Casey asked him to arrange for Ghorbanifar to submit to a CIA,
Ledeen contacted Ghorbanifar abroad and obtained his
agreement to the polygraph which was administered in mid Janu-
ary.
Ledeen also had Ghorbanifar visit Washington in late December.
There _Ghorbanifar met for the first time with CIA officials who
were aware of the arms sale efforts. Ghorbanifar discussed marly
matters of interest to U.S. officials, but the CIA's past experience
with him prompted caution. On December 23, Director Casey wrote
to the President that Ghorbanifar's information "could be a decep-
tion to impress up. It is necessary to be careful in talking with
Ghorbanifar." Casey told the President that the polygraph in Janu-
ary would help.
According to evidence received by -the Committer,,_the polygraph
indicated deception by Ghorbanifar on virtually all questions, in-
cluding whether he was under control of _the Iranian government,
whether he advance that no American hostages would be
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released as part of the November Hawk transactions, whether he
cooperated with Iranian officials to deceive the U.S., and whether
he independently acted to deceive the U.S.
According to testimony received by the Committee, the results of
this polygraph, as well as the fact that CIA had instructed all its
components in August 1984 to have no dealings with Ghorbanifar
were made known to the White House in January, 1986. Neverthe-
less,_the White House chose to continue to work with him?
corcjg to offe CIA- witness?it was North who was responsible for
keeping Ghorbanifar on the project after lie failecIthe_pygrapb A
'senior 1Directofate of-Operations official testified that while CIA
had suspicions about the cargo on the November 1985 flight, it was
not until these discussions with Ghorbanifar tri early January-that
th-erithew that the?dieCraft carried arms. Other documentation
submitted fo-the-Comrnittee, however, indicates that at least some
CIA officials overseas were aware of the nature of the cargo much
earlier and at least one reported this back to headquarters.
In eaiiy January, 1986, Mime -Minister Peres sent Amiram Nir,
Terrorism Advisor to the Israeli Prime Minister, as an emissary to
meet the President about the Iran initiative. According to evidence
received by the Committee, Nir urged the President and Poin-
dexter to reconsider the transfer of arms to Iran for the release of
hostages.
The Committee received copies of various draft findings prepared
during early January. One finding, dated January 6, was signed by
the President apparently after review and discussion with the Vice
President, Regan and Poindexter. This finding instructed that the
DCI not notify Congress until otherwise directed by the President.
The cover memorandum attached to this finding, written by North,
stated that he had spoken to Casey about this and Casey concurred.
According to testimony and documents received by the Committee,
prior to the signing of the January 6 finding, Casey, North and
Sporkin had met to discuss it. Sporkin testified that he recom-
mended that the revised finding specifically refer to release of the
hostages, but North objected. The purpose of the program was de-
scribed as helping to establish a more moderate government in
Iran. It was agreed not to refer to hostages because of the antici-
pated objections from Shultz.
On January 7, the President met in the Oval office with the Vice
President, Shultz, Weinberger, Casey, Meese, and Poindexter to dis-
cuss the Iran program. According to participants who testified, two
officials?Shultz and Weinberger?argued strongly against provid-
ing arms to Iran. According to these participants, the President
wished to keep the channel open, and left unresolved the issue of
providing arms to Iran. However, this Committee received conflict-
ing testimony as to whether a finding was discussed and, if so,
what the content of that discussion was.
Some participants clearly recall discussion of a finding, approval
by the President of a finding to authorize the program. They also
recall a discussion that withholding of notification of Congress
would be legal. Others do not recall specific discussion of a finding,
but agree the thrust of the meeting was to go ahead with the Iran
initiative. There was little discussion of the issue of notification of
Congress, but the Attorney General testified that his impression
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was that the operation was to be completed within a short time,
60-90 days.
Subsequent to the January 7 meeting, legal analysis of the find-
ing and various means to implement the program continued. The
Department of Defense insisted that the sale of arms by the De-
fense Department to a foreign country, be it Iran or Israel, could
not be hidden from Congress under the law. This argument applied
not only to future direct or indirect sales to Iran, but also to the
replenishment of Israel's TOW stocks, which had to be done under
this program because Israel could not afford the replacement cost
for the TOWs. The solution was to have DoD sell the arms to the
CIA under the Economy Act, an approach that CIA General Coun-
sel Sporkin had urged on legal grounds despite the Agency's desire
not to be involved. The CIA could then resell the arms, as part of a
covert action operation, to a private company that in turn would
sell them to Iran and (for the 508 TOWs) Israel. A small change in
the January 6 Finding, adding the words "and third parties," suf-
ficed to authorize this new approach.
A final meeting was held in Poindexter's office on January 16 to
review a final draft of the finding. Attending were Poindexter,
Casey, Meese, Sporkin and Weinberger. Weinberger again voiced
opposition to the program. There was also discussion of the ques-
tion of notification of Congress.
The Attorney General testified that he gave his opinion that
withholding notification was legal, on the basis of the President's
constitutional powers and justifiable because of jeopardy to the hos-
tages. Meese testified that it was his recollection that Congress was
to be notified as soon as the hostages were freed. Sporkin testified
that his recollection was that the participants agreed to defer noti-
fication of Congress until release of the hostages, even though they
understood this might mean a lengthy delay.
According to a memorandum from North to Poindexter, the final
finding was presented to the President on January 17 for signa-
ture. Poindexter orally briefed the President on the contents of the
finding, in the presence of the Vice President and Regan. Accord-
ing to the North memorandum, Poindexter indicated that in the
opinion of the Attorney General, the Finding would provide CIA
with the necessary authority to transfer arms legally. The memo-
randum noted that both sides had agreed that the hostages would
be released upon commencement of the arms shipments. It stated
that if the hostages were not released after the first shipment, the
remaining shipments could be suspended, or redirected to other
Iranian groups later. It recommended against notifying Congress.
The memorandum contained a notation that the President ap-
proved. The Committee has received a copy of the signed finding.
Weinberger testified before the Committee that later that day he
received a call from Poindexter informing him of the President's
action. Weinberger testified that he instructed his military gide,
Major General- CUllii-Porang?eliTi ti-an?Sier of the weapons
under the Economy Act to the CIA, and that the matter was to be
closely held at the direction of the President.
General Powell had had previous discussions with North about
the program and about Israel's problems in getting replacement
TOWs. Assistant Secretary Armitage testified that Weinberger
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gave his aide authority to inform Armitage, which was done at a
later date. Armitage testified that Deputy Secretary Taft later told
him that in April, Taft had seen the finding in Poindexter's office,
where it was kept. According to Armitage and a CIA official,
Powell worked with Major General Vincent Russo of the Defense
Logistics Agency to provide the materiel securely and without any
loss of funds for the Army.
CIA's Deputy Director for Operations testified that he was in-
formed by the DDCI or the DCI that CIA was going to provide sup-
port to a White House initiative which had two aims: (1) strategic
dialogue with Iran; and (2) the release of the hostages. On January
18, 1986, he and two other CIA officials, accompanied by the CIA
General Counsel, met with North and Poindexter at the White
House where they were told that the President had signed a Find-
ing the day before and that CIA would provide support for the ac-
tivity, which was to be run out of the NSC. They were also told,
according to testimony, that the Finding stipulated that Congress
was not to be informed because of the sensitivity of the hostage sit-
uation. Documents received by the Committee indicate that on Jan-
uary 21, the CIA was asked to assist LTC North in preparing for a
meeting in Europe with Ghorbanifar. They did so later that day.
The February Shipment of TOWs
According to documents received by the Committee, full-scale im-
plementation of the January 17 Finding began immediately. LTC
North flew to London to brief and negotiate with Ghorbanifar, who
was told what the United States was prepared to do as a sign of
good faith and interest in a long-term relationship. He was told
particularly that the United States would provide intelligence on
Iraqi positions in the war zone. Ghorbanifar also was told that
more TOW missiles would be sold to Iran and that the unwanted
Hawk missiles would be picked up and removed from Iran in con-
nection with the first delivery of 1,000 TOWs. (Then-General Coun-
sel Sporkin later told Attorney General Meese that a planned Eu-
ropean meeting that was discussed on January 18 never came off.)
According to documents received by the Committee, by January
24, LTC North had prepared a detailed plan of the program. The
plan provided for: provision of intelligence samples to Iran; the fi-
nancing and delivery of 1,000 TOW missiles to Iran, to be followed
by the release of all U.S. hostages and 50 Hizballah prisoners held
by Lanad in southern Lebanon, and the return of Hawk missiles to
Israel; and the financing and delivery of 3,000 more TOWs for Iran
and 508 TOWs for repayment to Israel. Secord was to be in charge
of aircraft requirements. The plan included a prediction that Kho-
meini would step down on February 11, the anniversary of the Ira-
nian Islamic Revolution; Ghorbanifar was telling U.S. officials that
other senior Iranians were urging Khomeini to do this so as to
ensure a smooth transition. A memorandum from North to Poin-
dexter contains a "notional timeline" and lists the persons who
were fully briefed on the plan: in the NSC, Poindexter, North and
Donald Fortier; in CIA, Deputy Director McMahon (as Director
Casey was out of the country), the Deputy Director for Operations,
one division chief, and one other official, on the outside, Richard
Secord; and in Israel, Amiram Nir and Prime Minister Peres. The
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NSC's Executive Secretary later testified that he was kept out of
the program throughout.
North's plan called for intelligence samples to be given to Ghor-
banifar in Europe on January 26, 1986. According to testimony and
a cable from Deputy Director McMahon to Director Casey, McMa-
hon argued strongly with Poindexter that this should not be done,
both because Ghorbanifar could not be trusted and because intelli-
gence could give Iran an advantage in the war; but, McMahon tes-
tified, Poindexter insisted, and he obeyed.
According to testimony of Robert Gates, who was Deputy Direc-
tor for Intelligence at the time, a meeting was held on January 25
at CIA to discuss preparation of intelligence material which was to
be passed to the Iranians. Participants testified that the meeting
was attended by officials from CIA and LTC North from the NSC.
Gates testified that he objected to the release of some specific intel-
ligence relating to Iraq but that he was overruled by the NSC, and
CIA was directed to prepare the intelligence material. A CIA offi-
cial was directed to take the intelligence sample to Ghorbanifar.
The intelligence material was given to Ghorbanifar in a meeting
held in Europe in late January, according to testimony and docu-
ments received by the Committee. Ghorbanifar complained bitterly
about his polygraph and argued as he had done in Washington on
January 13, that his Iranian contacts could be of great use to the
United States. (The CIA official testified that in early February,
the whole arms sale plan was discussed at a White House meeting
that included North, Secord, Deputy Assistant Secretary of Defense
Noel Koch, and two CIA officials. The Committee found no other
indication of a meeting at this time.)
According to documents received by the Committee, North's "no-
tional timeline" for the Iran arms sale program provided for a
funding mechanism in which Iranian funds would be put into an
"Israeli account" in Switzerland and then transferred to an ac-
count in the same bank that was controlled by Secord. Secord's ac-
count manager, in turn, would transfer enough funds to the CIA to
cover the actual cost of the arms and transportation. Those funds
would be transferred by the CIA to a Defense Department account,
at which point DoD could begin to move the materiel to a staging
area. According to testimony received by the Committee, on Janu-
ary 21, North tasked the CIA to open a Swiss bank account for
their part of the funding chain. According to testimony by CIA offi-
cials, CIA personnel decided that the fastest and most secure mech-
anism would be to use an existing account that also contained
funds for an unrelated operation. A CIA official gave the number
of that account to North; it was used for several months, until a
separate account was created in a routine manner. CIA testimony
indicates that there was no commingling of funds between the two
projects that used the same bank account for these months. Testi-
mony and documents also indicate that, in practice, DoD needed
only an assurance that CIA had the requisite funds in its posses-
sion. Actual payment occurred months later, after DoD had formal-
ly billed the CIA for the arms.
On January 18, MG Russo was tasked to provide 3,504 TOW mis-
siles to CIA upon certification that CIA had the funds set aside. On
February 7, the Army began to consider whether a provision of the
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Intelligence Authorization Act for FY 1986 required congressional
notification of this transfer of arms to CIA. On the 13th of Febru-
ary, the Army's Office of the General Counsel determined that con-
gressional notification was the responsibility of the CIA, rather
than the Army. A note of March 5 from MG Russo to MG Powell
conveyed Russo's belief that CIA had this responsibility and said
that CIA was fully aware of this. In the meantime, the Army had
given CIA a price of $3,515,000 for 1,000 TOWs.
On February 12 the CIA notified the Army that funds were avail-
able, and on February 13 the TOWs were turned over to the CIA.
The 1,000 TOWs were shipped to Israel on February 15-16, and
half of them were flown to Iran on February 17. The plane that
delivered the remaining TOWs, and picked up the 18 Hawks
returned them to Israel on February 18. Testimony indicates that
Khashoggi received four checks for $3 million each from Ghorbani-
far, and that $1 million went to the investors as interest, while an-
other $1 million covered expenses and profit.
According to documents and testimony received by the Commit-
tee, the next step was for a second set of intelligence materials to
be given to Ghorbanifar in Europe in mid-February. (This meeting
was originally scheduled for early February, and this date was used
in one White House chronology prepared in November 1986; it also
appeared in Director Casey's testimony on November 21. The Com-
mittee has no other indication that a meeting took place at that
time.) CIA prepared, with some reluctance, according to CIA wit-
nesses, the intelligence material that was provided to Iran. At one
point, according to testimony and documents, North asked Poin-
dexter to urge Director Casey to provide the needed material.
The meeting with Ghorbanifar took place a short time after the
first half of the 1,000 TOWs had been delivered to Iran. The U.S.
side included North and Secord, with Albert Hakim, and Iranian-
American and business associate of Secord, as interpreter. The in-
telligence was given to Ghorbanifar, and there was discussion of
the common Soviet threat that both Iran and the United States
saw in the region.
Later in February, the same Americans met with Ghorbanifar
and an Iranian official. Before this meeting, certain Hizballah pris-
oners were expected to be released; the capture of two Israeli sol-
diers by Hizballah in mid-February derailed any such expectations.
The meeting with the Iranian official was not very successful.
North reported by memo to McFarlane that Iran shared the Amer-
ican concern about the Soviet threat, but that their distrust of the
United States was also very great. In an electronic memorandum
to McFarlane, North stated that Ghorbanifar's translation of his
remarks had distorted much of what North had said and that this
was a particular problem. A later North memo stated, moreover,
that "it became apparent that our conditions/demands had not
been adequately transmitted to the Iranian Government by the in-
termediary. According to testimony received by the Committee, the
Iranian official indicated that Iran especially needed spare parts
for its Hawk anti-aircraft missile systems, rather than just more
TOWs. The U.S. side took his request and ordered the second half
of the 1,000 TOWs to be delivered; the Iranian agreed to consult
with his superiors on the prospects for a higher-level meeting and
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to return for further meetings. The 500 TOWs were delivered later
in February; no U.S. hostages were released. North later wrote
that it was agreed at the February meeting that the hostages
would be released during a high-level meeting in Iran, after which
the U.S. would sell Iran 3,000 more TOWs. Regan testified that the
President was informed of the sale of the 1,000 TOWs to Iran.
According to documents received by the Committee, in the wake
of the February meeting with the Iranian official, North remained
confident that the hostages would be released shortly. He proposed
that McFarlane be sent to a meeting in Europe the next week, but
found both Poindexter and Casey unenthusiastic, so he appealed to
McFarlane for help with Poindexter. By the next day, Poindexter
had agreed that McFarlane should go to Europe for the meeting.
Shultz testified that Poindexter showed him the terms or reference
that McFarlane would be given, which Shultz approved. Shultz tes-
tified that he was told the hostages would be released at the time
of the meeting.
Evidence received by the Committee indicates Director Casey
may have agreed to another meeting with the Iranian official. The
talking points prepared for him the day Poindexter showed the
terms of reference to Shultz indicate great concern over who would
attend that meeting. Ghorbanifar had been the original interpret-
er, but the CIA retained severe doubts of his reliability. Although
one CIA official had been in close contact with him and had ad-
vised working more closely with him, others indicated that Ghor-
banifar continued to be untrustworthy. The use of Hakim as an in-
terpreter was preferable, but CIA was concerned over Hakim's pos-
sible private interests in arms deals with Iran. Casey proposed that
a retired CIA officer who still consulted for the Agency be brought
on as interpreter and as a knowledgeable advisor to the program.
This was done in early March.
At the end of February, Israeli Prime Minister Peres wrote to
President Reagan encouraging him to continue his efforts to gain a
strategic opening in Iran and pledging to assist in this effort. Direc-
tor Casey proposed that the President call Peres to reassure him
that the program would continue and to thank him for Israel's as-
sistance. His talking points also argued, however, that the next
meeting should be U.S.-Iranian, without a direct Israeli role.
The McFarlane Mission to Tehran
In the period of March through May, 1986, all efforts in the Iran
arms sale program were directed at arranging a high-level meeting
between U.S. and Iranian officials. These efforts led to the McFar-
lane mission to Tehran in late May and the associated transfer of
Hawk missile parts to Iran. Throughout this period, no hostages
were released.
In early March, Ghorbanifar asked for another meeting with
U.S. and Israeli officials in Europe. Ghorbanifar was demanding
that the U.S. sell Harpoons and 200 Phoenix missiles to Iran,
which the U.S. Government was not prepared to do. One CIA offi-
cial noted that North was planning to take a hard line with Ghor-
banifar, while Israel was possibly providing additional non-U.S.
arms on the side to move the process along.
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The CIA officer brought on as an interpreter was briefed on the
program just before leaving for Europe. His testimony indicated
that he was told this was an NSC operation, with CIA providing
required support. The CIA officer had known of Ghorbanifar in
past years, and testimony indicates that he was horrified when he
learned that this was the channel being used by the U.S. Govern-
ment.
At the meeting in early March, Ghorbanifar conveyed the infor-
mation that senior Iranian officials agreed to a U.S. delegation vis-
iting Tehran for negotiations. He indicated that 240 types of spare
parts for the Hawk missile system would have to be provided by
the United States, but said that the arrival of the U.S. delegation
in Tehran with half of the parts would result in the release of all
the hostages. Testimony indicates that prices for the Hawk parts
were not discussed. North later wrote that the U.S. team empha-
sized the February understanding that deliveries would not precede
the hostage releases. They deflected the demand for Phoenix and
Harpoon missiles by arguing that Iran's launchers for the missiles
were inoperable. On March 11, according to Secretary Shultz's tes-
timony, Poindexter told him that a McFarlane trip to Europe was
off; this was ascribed to reservations on McFarlane's part.
During the first or second week of March, Gates asked analysts
to prepare briefing materials on the Soviet military threat to Iran
for use by McFarlane in briefing the Iranians. A week later, other
CIA analysts met with Gates and some of the participants in the
early March meeting with Ghorbanifar. They were provided a list
of Iranian intelligence requirements regarding Iraq and they dis-
cussed how to respond to it. The tasking and discussions in early
March eventually led to the materials that CIA would hand over in
mid-May and that would be used in Tehran in late May.
In mid-March, Ghorbanifar visited Tehran. He told U.S. officials
that he had met with several high officials and that the meetings
had been difficult. According to a CIA official, Nir, with whom
Ghorbanifar also spoke, said Iran's proposals were still unaccept-
able; Nir worried that Ghorbanifar might be losing credibility with
the Iranians and urged U.S. officials to work more closely with
Ghorbanifar. Ghorbanifar had been ill and was also having money
problems, which he pressed the U.S. Government to help solve. Nir
indicated that he and his associates were helping out Ghorbanifar
financially.
In late March, U.S. officials were told that Ghorbanifar was espe-
cially upset. An "NSC consultant," probably Ledeen, told one offi-
cial that Ghorbanifar suspected the CIA of entering the office of
one of his associates, Roy Furmark, as well as the home of a friend
in California. Ghorbanifar told both Nir and a CIA official that
Albert Hakim had tried to convince Ghorbanifar's Iranian channel
to leave Ghorbanifar out of the negotiations. To demonstrate their
support for Ghorbanifar, U.S. officials asked him to return to
Washington for another meeting.
U.S. officials met with Ghorbanifar in Washington on April 3
and, less formally, the morning of April 4. Discussions of the pro-
posed visit to Iran covered a wide range of detailed issues: where
the meetings would be held; how the U.S. delegation would fly in,
and with what passports; what communications they would have;
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what arms or material they would bring to sell to Iran; and how
the delivery of the arms and the release of hostages would be or-
chestrated. In addition to the 240 types of Hawk parts, Iran wanted
Hawk radars and mobile I-Hawk missile batteries, as well as more
TOW missiles. The Soviet threat to Iran and Afghanistan was an
area of agreement and Ghorbanifar said that Ayatollah Khomeini
was going to issue a "fatwa" against hostage-taking. The United
States insisted that all the hostages be released before the 240
Hawk parts were delivered, and only then would it discuss further
arms deals.
It is unclear whether the subject of devoting some profits to the
contras arose at this meeting. One memorandum indicated that
support for the mujahedin in Afghanistan was mentioned. Another
memo indicated that Ghorbanifar discussed using the profits to
support "Afghan rebels, etc." A third, undated memorandum ap-
parently referring to this April meeting indicated that Ghorbanifar
said the United States could do the same with Nicaragua.
A memorandum of April 4 set forth the results of the Washing-
ton meeting. The U.S. delegation visit was scheduled for April 20.
Before then, Iran would pay $17 million into an Israeli account;
$15 million of that would be moved into "a private U.S. corporation
account." Of that amount, $3.65 million would go to the CIA to
cover Hawk missile parts. This price, which testimony indicates the
Defense Department had been developing since March, was for
those parts that DoD could find in its stocks. Several hours after
the arrival of the U.S. delegation, which was to be met by Majlis
Speaker Rafsanjani, the hostages would be released; eight hours
later, the Hawk parts would be delivered. The memo states that
broader U.S. interests in the Soviet threat and in ending the Iran-
Iraq war were made clear. Ghorbanifar had proposed that if fur-
ther agreements were reached to sell TOWs to Iran, a portion of
those would be devoted to the Afghan rebels. This memorandum
also states that $2 million of the proceeds would finance Israel's
purchase of 508 TOWs to replace those sold to Iran in September
1985, and that "$12 million will be used to purchase critically
needed supplies for the Nicaraguan Democratic Resistance Forces. critically
needed
memo is discussed further in the section on the diversion of
funds.
Attached to the April 4 memorandum were draft "terms of refer-
ence" for use by McFarlane in a high-level meeting with Iranian
officials. Testimony and a retrospective memorandum for the
record indicate that North and Howard Teischer of the NSC staff
prepared the draft in late March, and that it was then revised by
Donald Fortier and reviewed by Admiral Poindexter for submission
to the President. The "terms of reference" attached to the April 4
memorandum are the same as those in documents of six weeks
later, when the mission to Tehran finally took place.
After his return to Europe, Ghorbanifar worked on the details of
the planned talks and on raising the "bridge" loan funds needed to
start the arms transfer process in light of Iran's refusal to pay
until it had received and inspected the materiel. Ghorbanifar told a
CIA official that LTC North had promised to sell Iran two Hawk
radars, as well as the 240 types of parts Iran had requested. He
also described his progress in gaining support for the visit among
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high-level Iranian officials whom he intended the American delega-
tion to meet.
In mid-April, further difficulties arose. Although Ghorbanifar as-
sured the United States that Iranian officials were prepared to
meet with McFarlane, he also reported that Iran was insisting
upon not releasing all the hostages before the Hawk parts were de-
livered; Iranian intransigence was increased, he said, by the real-
ization that McFarlane could not possibly carry all the parts on the
plane that would take him to Iran. Iran also continued to insist
upon Hawk radars, as well as the other parts.
On April 14, the United States attacked Libyan targets in re-
sponse to Libyan involvement in terrorism directed at U.S. inter-
ests. In the aftermath of that action, hostage Peter Kilbourn was
killed by his captors, reportedly at the behest of Libyan leader
Muammar Qadhafi. Some press stories have suggested that the
U.S. attack resulted in delays in the mission to Iran. A White
House chronology indicates that instead Iran wanted to accelerate
planning for the mission, so that it would not be accused of involve-
ment in the Kilbourn death. The Committee has found no other
documentation or testimony indicating that these events had an
impact on the arms sale program.
The Defense Department, meanwhile, continued to track down
the Hawk spare parts. CIA formally requested 234 types of Hawk
parts in mid-April, and two Hawk radars later in the month. By
the end of April, the cost of the Hawk spare parts that the Army
had located was fixed at $4.4 million, including transportation.
On April 22, the U.S. Customs Service announced several arrests
in a major "sting" operation involving the sale of arms to Iran; an
Iranian arms dealer, Cyrus Hashemi, had agreed to cooperate with
Customs authorities. Ghorbanifar, who was in Switzerland, was
jailed for a day. According to testimony of the CIA consultant, offi-
cials surmised that he had been held because he was an investor in
the failed scheme. This development seemed likely to make Ghor-
banifar (and Iran) more eager to do business through the one reli-
able channel to the United States, but it also made Iran ever more
insistent upon not giving Ghorbanifar the money in advance.
By late April, the lack of progress in arranging the high-level
visit to Iran had led the U.S. officials to decide that the operation
would be shut down unless there was movement within 2-3 weeks.
A CIA official wrote that the differences between the United States
and Iran appeared intractable. He suggested the sale of two Hawk
radars to Iran and renewed emphasis upon a long-term military
supply relationship with Iran. The CIA official noted that Israel
was eager for such a relationship and might be quietly supplement-
ing U.S. sales. Then Ghorbanifar and/or Nir apparently proposed
that the mission to Iran be only a preliminary meeting. U.S. offi-
cials rejected this idea, noting that if Iran understood and abided
by what had been agreed to in February, there would be no need
for any preliminary meeting. On May 5, a CIA official warned Di-
rector Casey and the Deputy Director that "the White House initia-
tive to secure release of American hostages in Lebanon remains
dead in the water."
At the end of April, documents indicate that the U.S. Embassy in
London became aware of the fact that Ghorbanifar and Khashoggi
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had approached a British businessman in hopes of getting a $50
million line of credit for arms sales to Iran with U.S. approval.
The businessman had been assured by Israeli officials that this
was a White House operation and did indeed have U.S. approval.
U.S. Ambassador Price reported this to the Department of State on
May 1. The next day, Under Secretary Armacost sent Secretary of
State Shultz a cable at the Tokyo economic summit; Armacost sum-
marized Ambassador Price's report which noted that "the State De-
partment has been cut out." On May 3, Admiral Poindexter spoke
with the ambassador and recommended that he discourage the
British businessman from getting involved. The ambassador's memo
on the call indicates that Poindexter assured the ambassador that
there was only a "small shred of truth" in the claim that the
White House approved of this operation. Meanwhile, in Tokyo, Sec-
retary Shultz, according to his testimony, tried to find Poindexter
to get an explanation; being unable to find him, Shultz went to
Chief of Staff Regan instead. Shultz testified that he recommended
that Regan speak to the President and end the matter once and for
all. According to Secretary Shultz, he was later told by both Admi-
ral Poindexter and Director Casey that the operation had ended.
In early May, just a few days after the incident just recounted,
U.S. officials again met with Ghorbanifar in Europe. Ghorbanifar
assured them that Financing for the arms sale would be no prob-
lem. Testimony and documents indicate that Ghorbanifar frequent-
ly left the talks to call Tehran. On one occasion, according to later
testimony, the CIA officer who was serving as interpreter joined in
the talks with Tehran to explain that the United States could not
or would not bring all the Hawk spare parts at the same time that
the McFarlane delegation arrived. The Iranian at first was unwill-
ing to agree to the release of all the hostages before all of the parts
arrived, but it was agreed that McFarlane's plane would bring as
many of the parts as possible, with the rest to arrive after release
of the hostages. A White House chronology indicates that at this
meeting, Israel privately indicated to the United States that it
wanted the replacement TOWs that the April 4 memo indicated
would be funded by this sale. The price for the Hawk spares that
was discussed at this meeting was roughly $22.5 million, plus over
$20 million for the Hawk radars, but the CIA officer who attended
the talks later testified that he was not present when such matters
were discussed. However, testimony indicates that LTC North dis-
cussed the overpricing problem with another CIA official. And the
CIA officer who attended the talks wrote that the dispute over how
many Hawk parts to deliver before the release of hostages re-
mained a problem. A CIA official has testified that reporting on
these matters was available to the McFarlane delegation.
Immediately after the Europe meeting in early May, U.S. offi-
cials moved to get ready for a trip to Tehran. The Defense Depart-
ment was told to be ready to transfer the Hawk spare parts. Prices
were quoted as $4.4 million for the Hawk parts and transportation;
$1.8 million for the 508 TOWs; and $6.2 million for the two radars.
On May 15, according to testimony, Adnan Khashoggi paid $15
million into the account of Lake Resources. CIA officials were later
told that Khashoggi had obtained this money from an Arab inves-
tor and two Canadians. Testimony indicates that Khashoggi was
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given post-dated checks totalling $18 million, which included 20
percent interest for the one-month loan. Testimony and documents
indicate that CIA officials were told in October 1986, that at the
May meeting of Khashoggi and Ghorbanifar, Ghorbanifar stated
that the high price was because the money was being used to sup-
port the Contras.
Director Casey has testified that on May 15, the President ap-
proved the McFarlane mission to Tehran. On the same day, accord-
ing to a later CIA letter to the Committee, the Hyde Park Square
Corporation deposited $6.5 million in the CIA's account in Switzer-
land, to cover both the Hawk parts and the 508 TOWs. (A White
House chronology lists the date as May 16, and a different CIA
memo cites May 20 as the date. Director Casey's testimony follows
the White House chronology. The May 20 date may reflect a second
deposit that was expected for the Hawk radars.) On May 16, the
CIA notified the Army of the availability of funds for both the
Hawk parts and the TOWs. The TOWs were transferred to the CIA
on May 19 and shipped to Israel on May 23. According to testimo-
ny, the Hawk parts were also supposed to be shipped to Israel
during this period. On May 20, the CIA certified the availability of
funds to test, inspect and service the old Hawk radars; the next
day, it received more detailed cost information on the radars.
A CIA official spoke with Ghorbanifar on May 18 and was as-
sured that the hostages would be available when the Americans ar-
rived in Tehran. He was also assured that McFarlane would meet
the top three political officials in Iran (i.e., President Khamenei,
Prime Minister Musavi and Majlis Speaker Rafsanjani). Three days
later, Ghorbanifar thanked the official for information relayed to
him by Richard Secord and described the greeting and accommoda-
tions that the U.S. team could expect.
McFarlane has testified that he received pre-trip briefings during
the week of May 19. He indicated that he was assured by Admiral
Poindexter that Secretary Shultz was involved in the planning for
the trip and that Secretary Weinberger had been apprised. His
terms of reference emphasized long-term U.S. and Iranian common
interests in opposing the Soviet threat. They accept the Iranian
revolution as a fact, but note the need for Iran to end its support of
terrorism and hostage-taking and its efforts to undermine Ameri-
can interests. They indicate that the United States wants neither
an Iraqi victory or an overwhelming Iranian victory in the Iran-
Iraq war. McFarlane's terms of reference show him to offer the
prospect of a limited military supply relationship, but say that this
depended upon whether Iran and America's convergent or diver-
gent interests come to loom larger in the overall picture.
The McFarlane delegation traveled from the United States to
Iran via Europe and Israel on May 23-25. In Israel they took on a
single pallet of the Hawk missile parts that Iran had requested.
McFarlane later testified that Secord met the plane in Israel, but
that McFarlane identified his role primarily in connection with the
aircraft. McFarlane's delegation included LTC North, Howard
Teischer (North's formal superior on the NSC staff), the CIA officer
who served as an interpreter, and others, including U.S. communi-
cators. McFarlane told Attorney General Meese that he brought no
inscribed Bible and that LTC North brought the cake that was
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mentioned in Iranian reports. McFarlane later testified that he
carried his own passport, and did not carry a cake or a Bible.
Teischer and the CIA officer testified that North brought the cake,
and the CIA officer remembered a Bible as well. Documents indi-
cate that, whether or not McFarlane actually carried a false pass-
port, one was prepared for him and was returned after the trip
with a one-week Iranian tourist visa and an entry cachet. Teischer
later testified that he took detailed notes on the meetings, and the
interpreter later wrote a memorandum on the meetings. This re-
port's treatment of the Tehran discussions is based upon the latter
source, plus McFarlane's cable to Poindexter.
The Tehran discussions got off to a slow start on May 25, with
the arriving delegation having to wait some time before any Irani-
an officials greeted them. They were taken to a Tehran hotel
where, late that afternoon, the first session was held. The Iranians
listed past sins of the United States and demanded that the U.S.
Government do more than had been agreed in February. The U.S.
delegation insisted that the February schedule be adhered to.
On the 26th, there were, again, no discussions until late in the
afternoon. The interpreter later noted that the Moslem holy period
of Ramadan, during which one fasts during daylight hours, may
have interferred with normal schedules. McFarlane began the dis-
cussions by presenting the U.S. position, emphasizing the long-term
interests as stated in the terms of reference. This was reasonably
well received, but the Iranians then presented a list of demands
from the captor of the U.S. hostages. They also accused the United
States of going back on its commitments, because McFarlane had
not brought half of the Hawk missile parts. Members of the U.S.
delegation were surprised at this allegation, but they subsequently
learned that Ghorbanifar had given the Iranians the impression
that they would bring half of the Hawks with them. The U.S. dele-
gation continued to insist that the hostages must first be freed
before any further delivery of arms.
When no progress could be made, McFarlane threatened to end
the discussion and leave. The Iranians protested that this was not
proper behavior; McFarlane then retired from the negotiations, in-
dicating that he would return if there were an agreement. The Ira-
nians then emphasized how risky it was for them to have this set
of discussions, and the American team came to the conclusion that
top-ranking officials?particularly Khomeini himself?had not been
informed of the meeting.
In a message to Admiral Poindexter after the May 26 session,
McFarlane indicated that the Iranians were saying the right gener-
alities and continually assured the U.S. team that they were
making progress on the hostages. But McFarlane, while suggesting
the sorts of future steps that the U.S. and Iran could take insisted
upon concrete acts from Iran before such steps could be taken. He
wired Poindexter that the Iranians had produced a competent ne-
gotiator to lead their team on the second day, but that McFarlane
had remained outside the negotiations to demonstrate the need for
more than rhetorical progress.
On May 27, it appeared to the U.S. team that the Iranians were
stalling, although the Iranians did drop nearly all of the Lebanese
demands that had been raised the previous day. The American
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team drafted an agreement that became the topic for discussion
that evening. At midnight the Iranians broke to caucus among
themselves. At about 2 a.m. on the 28th, the chief Iranian official
asked to see McFarlane. They asked for more time to gain control
of the hostage situation and obtained assurances that the remain-
der of the Hawk parts would arrive within a few hours of the re-
lease of the hostages. McFarlane gave them until early the next
morning, claiming that he had instructions to leave on the evening
of the 27th. In a second message to Admiral Poindexter, McFarlane
indicated that his discussions had been low-key and that the
common interests between the two countries had been understood.
The Iranian official had clearly been told, however, that the bal-
ance of the Hawk parts would be forwarded only after the hostages
were released. McFarlane recommended that, despite the vastly im-
proved tone in the discussions, the President authorized him to
leave on the 28th unless there was clear evidence on an impend-
ing hostage release. McFarlane added that he had told the Iranian
that further discussions could be arranged after the visit.
On the morning of May 28, one of the Iranians asked whether
the United States would settle for two of the hostages to be re-
leased before the delivery. McFarlane replied that although the
U.S. team was departing, the delivery would not be called off until
9:30. There was no signs of an impending release, however, and the
President gave McFarlane authority to decide when to leave. The
U.S. team left at 9. A later White House chronology, drawing upon
McFarlane's messages, stated that despite Iran's unwillingness or
inability to obtain the release of the hostages, the visit "established
the basis for a continuing relationship" and the CIA officer later
noted that the U.S. team did meet senior Iranians. One NSC staff
member later testified, however, that McFarlane was not pleased
with the results.
The CIA officer who served as interpreter later testified that
Ghorbanifar had told him at one of the sessions that other Iranians
might protest the price of $24 million for the Hawk spare parts.
Ghorbanifar, according to this testimony, asked the CIA officer to
uphold that price. The CIA officer says that he then spoke to LTC
North who could not explain it, and both approached another dele-
gation member about the matter, again without obtaining a satis-
factory explanation.
June-September, 1986
According to testimony by McFarlane, on May 29 he returned
from his mission to Tehran reinforced in his belief that the sale of
arms was a mistake and that it ought to be terminated. One NSC
staffer testified that the word quickly came down that the Presi-
dent had decided there would be no move by the United States to
further the sales; the next step was up to Iran.
An intelligence officer on the trip to Tehran with McFarlane,
while similarly discouraged by Iran's unwillingness or inability to
hold high-level meetings with McFarlane and to secure the release
of more hostages, felt that the United States had made its point to
Iranian officials regarding its seriousness and that, by the time the
trip ended, the Iranians truly wanted further talks. While not
quarreling with the idea that Iran would have to move first, an in-
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telligence officer on the trip to Tehran with McFarlane recom-
mended that if they continued talks with Iran, LTC North and he
should meet them in Europe to continue the negotiations.
Iranian officials soon heard of the American reaction to the
Tehran talks. A November 1986 chronology of the program pre-
pared by the NSC stafff indicates that on June 10, 1986 Majlis
speaker Rafsanjani made a speech that guardedly mentioned Irani-
ans interest in improved relations with the United States. The
Committee does not know whether that speech was seen as a signal
at the time, but CIA personnel were soon told that there might be
another meeting, and Iranian officials were made aware that a
meeting in Europe was possible.
In late June, all the parties were apparently trying to patch to-
gether a new schedule of arms deliveries and hostage releases. Ac-
cording to one report, Iran was considering whether to release a
hostage before any further deliveries of arms. Another report sug-
gests that Israel offered to "sweeten the pot" by adding some free
equipment to the proposed arms sale package.
According to testimony received by the Committee, the Iranians
were upset by the high prices being charged, especially for spare
parts for Hawk missile systems and by the fact that the U.S. had
not upheld its part of the deal in shipping one half of the Hawk
missile spare parts to Tehran with the U.S. delegation in May of
1986. A CIA official who participated on the trip contends that no
such promise had been made. At the same time, according to the
testimony of a CIA official it became clear that Iran was unable to
control the captors of U.S. hostages. By early July, two CIA officers
were comparing notes on whether the program was in danger; one
has testified that he also made LTC North aware of Iranian anger
over the high prices. Through early July, various schedules were
floated without success. Iran had a price list for Hawk parts, and
the gross discrepancies between that list and the prices being
charged to Iran were too large to explain away or to ignore.
During this same period, Iranian officials privately told officials
of two other countries that they desired better relations with the
United States; in one case they noted the possibility of hostage re-
leases. LTC North noticed both these approaches and by July 17
had secured approval for positive responses to Iran through those
countries.
In mid-July, there was some progress. It was made clear to Iran
through multiple channels that there would be no further move-
ment by the United States unless a hostage was released. Accord-
ing to documents received by the Committee, the Iranians accepted
this and took steps to arrange for the release of a hostage. Iran
also agreed to pay $4 million for the Hawk parts that had been de-
livered on McFarlane's plane.
A Casey memo to Poindexter indicates that in late July, when no
hostage had yet been released, the United States told Ghorbanifar
that the deal was off. A day later, however, it was learned that a
hostage would indeed be released, and Father Jenco was released
on July 29.
In this memorandum, to Poindexter, dated July 29, Director
Casey detailed the role of participants in the arms sales program
and made the case for meeting Iranian expectations about what
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would happen next. Casey argued that Ghorbanifar, while uncon-
trollable, "appears to respond generally to Nir's direction." Nir and
Israeli officials would continue to work for the release of American
hostages, Casey said, because their reputations were on the line
and because the program was consonant with Israeli interests.
Were the United States not to respond to this Iranian move, on the
other hand, "matters could turn ugly" and "it is entirely possible
that Iran and/or Hizballah could resort to the murder of one or
more of the remaining hostages." Casey admitted that piecemeal
releases were unpleasant, but he saw this as perhaps "the only way
to proceed." He also felt that resol,ition of this issue could lead to
longer term "contacts with moderate factions in Iran".
LTC North sent a memorandum to Admiral Poindexter, also
dated July 29, proposing that Poindexter get the President's ap-
proval to ship the remaining Hawk parts to Iran. North also sent
an electronic message to McFarlane emphasizing that Father
Jenco's release had been on outgrowth of McFarlane's mission to
Iran, rather than the result of any Syrian role. The document in-
cludes a notation by Admiral Poindexter, dated July 30, that the
President had approved the shipment of the remaining Hawk parts
to Iran. On the same day, Vice President Bush was given a briefing
in Jerusalem by Mr. Nir. The Vice President attended the meeting
at the suggestion of LTC North. According to a memorandum dated
a week later by an official who was present at the briefing, Nir in-
dicated he was briefing the Vice President at the request of Prime
Minister Peres. He conceded the problems encountered in the pro-
gram, but argued that the Iranians with whom they were dealing
were ones who could "deliver." He also discussed the problem of
the sequence of release of additional hostages. According to the
memo, the Vice President made no commitments and gave no di-
rection to Nir.
Apparently in response to the approval of President Reagan, the
Hawk parts reached Iran on August 3.
During the same period, according to documents received by the
Committee, the United States was developing an alternative chan-
nel of communications with Iranian officials. In mid-July, Albert
Hakim and a U.S. Government employee met with an acquaint-
ance of Hakim's who was interested in putting together arms deals.
The acquaintance knew of an Iranian official who wanted to con-
tact the U.S. Government and talk about arms sales. Hakim had
things arranged so that the Iranian would be steered toward him,
rather than toward participants in the existing channel. By late
July, LTC North reported to Admiral Poindexter that there had
been meetings with some people to see whether they could become
intermediaries; it is not clear whether he was referring to the mid-
July meeting or to a later one. Hakim was pleased because his ac-
quaintance was willing also to consider deals for non-lethal items;
Hakim reportedly stated that he wanted to pursue that avenue ir-
respective of whether the U.S. Government used the channel. One
proposal that later bore fruit was for some medical supplies to be
sold at cost.
According to testimony received by the Committee, in August,
Secord and Hakim met with the Iranian official who had sought to
contact the U.S. Government to arrange arms sales. Secord report-
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ed to North that he was impressed with the Iranian, who knew
about the existing channel but reportedly viewed Ghorbanifar and
other intermediaries as untrustworthy. The Iranian promised not
to disrupt the existing channel, but said that he would consult with
his government about opening a second channel to the U.S. Gov-
ernment.
For the first channel, August 1986 was a time of continuing ef-
forts and growing concern. Two CIA officials testified that they
became more upset over Ghorbanifar's situation as they tried to
understand the financing of this program and could not make
sense of it. Ghorbanifar admitted to trying for a profit of 60 per-
cent on top of the base price, but it would have taken a margin at
least five times that to explain the figures that the CIA officials
now understood to be involved. At some point during the summer
of 1986, CIA's Near East Division asked another office to help it
prepare a fake price list to justify the inflated Hawk part prices.
The latter office later recalled that it had recommended that the
division go to the Defense Department for help instead, and the
Committee does not know whether a fake price list was ever actu-
ally prepared.
According to documents and testimony received by the Commit-
tee, in early August, efforts were resumed in the old channel to ar-
range for possible shipment of the two Hawk radars that Iran
wanted. In mid-August, Amiram Nir told CIA personnel that he
had authorized most of what Ghorbanifar had offered in the way of
price cuts and alternative schedules, although Ghorbanifar had of-
fered at least one item that was not authorized. Nir also conceded
that Ghorbanifar was probably no longer trusted by the Iranians.
The latest proposal involved the Hawk radars, some electron tubes
for the Hawk systems, 1,000 TOWs, another trip to Tehran, and an
Israeli sale, along with the staggered release of the three remain-
ing hostages.
Later in August, at a meeting of Ghorbanifar, Nir and North, a
new schedule was proposed that added still another 1,000 TOWs,
instead of the Israeli sale, and added the requirement that William
Buckley's body be returned for proper burial. By late August, prep-
arations for a shipment of 500 TOWs had begun.
According to documents received by the Committee, on Septem-
ber 2, North sent Admiral Poindexter a memorandum on "Next
Steps with Iran." Among other things, he recounted the messages
being sent through two friendly countries, the latest Ghorbanifar
proposal, and the emergence of a possible new channel. His propos-
al, reached in conjunction with the CIA, was that the Ghorbanifar
channel be pursued as the primary effort.
North's proposal appears to have been rejected by either Poin-
dexter or the President, for a September 8 memorandum from
North to Poindexter mentions "guidance" to seek the simultaneous
release of all three hostages, rather than sequential releases. This
memorandum was a supplement to the September 2 memo, and
again states that it was prepared in conjunction with the CIA. The
memo noted that it had proved impossible to convince the first
channel to consider simultaneous release of all the hostages; that
DOD had located enough material to make a sequential release ap-
proach attractive to the Iranians; that the first channel may now
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have been acting pursuant to direction by the new channel; and
that Director Casey, having conducted a review of the Iranian
project that day, considered Ghorbanifar's channel "the only
proven means" to get hostage relesses, and so supported expedi-
tious efforts to meet the plan proposed by Ghorbanifar, while hold-
ing out hopes that the new channel might make modifications later
in September. The memo argued that 'our window of opportunity
may be better than it will ever be again".
After meeting with Poindexter, LTC North told a CIA official
that the old channel was to be shut down and put on hold, and the
new channel was to be developed instead. According to a memoran-
dum received by the Committee, LTC North had been warned that
the Ghorbanifar channel would have to be closed in a secure
manner, which meant finding enough money to get Ghorbanifar
out of trouble. The memo noted a figure of $4 million. Further, ac-
cording to testimony received by the Committee, others were
warned of the risks associated with closing down the Ghorbanifar
channel at that time.
A CIA official testified that he began at this time to consider the
possibility that one reason for Ghorbanifar's problems was a diver-
sion of funds, in light of Secord and Hakim's roles in providing aid
to anti-Sandinista forces. These concerns, especially the concern
that Ghorbanifar's problems could lead somebody to go public, led
the CIA official to raise the issue with Director Casey and Deputy
Director Gates in early October, just as another source began to
warn of a possible lawsuit. These events are discussed later in this
report.
In mid-September, the visit of Israeli Prime Minister Peres and
other officials to Washington prompted lower-level meetings with
Nir, followed by briefings of the President and Poindexter for their
meetings with Peres and Nir respectively. North's paper for Poin-
dexter's use in briefing the President noted that the Israelis were
nervous about U.S. intentions regarding the Iran program. The
memorandum recommended that the President note his apprecia-
tion of the Israeli role and indicate our intentions to continue to
coordinate closely with Israel vis-a-vis Iran. Ledeen attempted to
see Secretary Shultz around this time to discuss the program, as he
would again in October, but Shultz testified that he declined to
meet with Ledeen.
According to testimony and documents received by the Commit-
tee, during September there was a shift to the new channel. In
early September, the shipment of medical supplies that Hakim had
proposed in July began to move forward as the CIA took steps to
purchase and pack the materials.
In the early fall, there was a meeting between the new channel
and U.S. officials, arranged by Secord. According to documents and
testimony received by the Committee, the Iranian official said that
he was meeting the U.S. team in order to upgrade the channel be-
tween the United States and Iran. The Iranian said that Iran
would handle the old channel, and that he should be considered the
new one.
According to documents received by the Committee, the hostage
issue was treated at the meeting "as an obstacle, not a key issue in
arriving at a strategic relationship". The Iranian said that Iran op-
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posed hostage taking and terrorism, and the Ayatollah Khomeini
had prepared a "fatwa" condemning the taking of hostages (which
had been promised by Ghorbanifar in April). Another Iranian told
a U.S. participant that the hostage matter "would soon be settled."
Iran's intelligence needs were also presented in detail, and there
was a discussion of a joint U.S.-Iranian committee that could
handle the improving relations?first in secret, then in the open.
According to documents and testimony received by the Commit-
tee, the U.S. team told the Iranian official that to show U.S. seri-
ousness, the Voice of America would mention Iran as one of the
countries the United States wished to thank for refusing to grant
landing rights to the hijackers of a TWA aircraft in Karachi. A few
days later, NSC and CIA officials met to discuss a draft of the edi-
torial. Working through State Department officials, the NSC staff
convinced USIA that this unusual request came from "the highest
levels" of the government, and the editorial was broadcast over a
three-day period.
By the end of September, the stage was set for a complete switch
to the new channel, and, in effect, the first channel was left to fend
for itself.
Compromise of the Program
According to Roy Furmark, at the end of September 1986, Kha-
shoggi asked Furmark to visit Casey and ask for his assistance.
Khashoggi was deeply involved in financing arms deals between
the U.S. and Iran, and he was owed $10 million. The funds be-
longed to some investors and had been deposited in an account be-
longing to Lake Resources, a firm connected to North, Secord, and
Hakim. According to Furmark, Khashoggi assumed that Lake was
a U.S. Government account. The solution, he said, was for the U.S.
Government either to refund the $10 million or to complete the
weapons shipment.
According to the testimony of Gates and a CIA officer, in early
October 1986 a CIA officer expressed concern to DDCI Gates that
abandoning the old channel altogether for the new channel might
be a risk to operational security because the old channel had not
been taken care of financially.
At the same time, Gates was reportedly informed of speculation
by this CIA officer that there was the possibility of funds from Ira-
nian arms sales having been diverted to other U.S. projects, includ-
ing the "Contras". Gates directed that Casey be briefed and the
CIA officer testified that he met with Casey on October 7 and re-
peated what he had told Gates. At this meeting, Casey told the CIA
officer that he had received a call that day from Roy Furmark, a
former legal client and long-time acquaintance. Casey said that
Furmark had told him that Khashoggi had put up the money to
finance the purchase of arms by Iran, but that the money was not
actually Khashoggi's; that Khashoggi had borrowed the money
from two Canadians for a 20 percent return on the investment after 30
days; and that the Canadians had not been repaid and were threat-
ening to go public with the details of the operation. According to
the CIA officer, Casey called Poindexter that same day and told
him of Furmark's call. (It should be noted that Furmark testified
that he had met with, not called, Casey that day.)
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According to documents received by the Committee, during this
same timeframe a meeting was scheduled in Europe with the new
Iranian channel. In preparation for this meeting, North drafted a
memorandum for Poindexter to send to Casey, stating that the
President had authorized the delivery of intelligence information to
the Iranians. The January 6, 1986, Presidential Finding was cited
as the authority.
The CIA assembled an intelligence package in preparation for a
meeting in Europe with the new Iranian channel. The CIA author
of the memorandum transmitting the package cautioned, however,
that "such information, if it were to come into Iranian possession,
would likely help Iran plan and execute military operations
against Iraq".
According to testimony received by the Committee, the European
meeting took place between the U.S. team, which consisted of
North, Secord, and a CIA officer, and the new Iranian channel,
and, subsequently, on October 9, North visited CIA headquarters
and briefed Casey and Gates on the meeting. According to testimo-
ny by Gates, during the course of this briefing, he asked North if
there was any CIA involvement in North's efforts on behalf of pri-
vate funding for the Contras. Gates testified that North responded
that there was no CIA involvement. Gates further testified that at
this same meeting, he urged Casey to insist on getting a copy of the
Iran Finding, a document which the CIA did not have. North said
that he would assist in this effort, and a few days later the CIA
received the Finding.
According to documents received by the Committee, shortly
thereafter, a CIA officer drafted a memorandum analyzing the
NSC arms to Iran initiative which, in part, proposed certain
damage control procedures in the event the initiative became
public and speculated that creditors might assert that money from
the arms sales was being "distributed to other projects of the U.S.
and Israel". Upon seeing the memo, Casey called Poindexter and
set up an appointment for the next day.
Casey and Gates saw Poindexter on October 15 and gave him a
copy of the memorandum. Gates testified that he and Casey recom-
mended to Poindexter that the President ought to reveal the initia-
tive to the public, to avoid having it "leak out in dribs and drabs."
Meanwhile, according to Gates, he directed the CIA's General
Counsel to review all aspects of the Iran project to insure that the
CIA was not doing anything illegal. The General Counsel subse-
quently reported to Gates that he had looked into the situation and
that there was "nothing amiss from the CIA standpoint".
On October 16, at Casey's direction, a CIA officer met with Fur-
mark to discuss the Iran initiative and Khashoggi's involvement in
financing the arms sales. Subsequent to the meeting, a memo to
Casey was drafted recounting the conversation with Furmark,
which provided in part that Furmark had recommended an Iranian
arms shipment "to maintain some credibility with the
Iranians . . . and to provide Ghorbanifar with some capital so that
the investors can be repaid partially and so that Ghorbanifar can
borrow money to finance additional shipments." This, according to
Furmark, would keep the process rolling and could result in re-
lease of additional hostages.
STAT
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A follow-up meeting with Furmark in New York with two CIA
officers occurred on October 22. According to documents and testi-
mony received by the Committee, in addition to discussing the
sources of financing for the various shipments of arms to Iran, Fur-
mark said that Ghorbanifar firmly believed that "the bulk of the
$15 million [for the Hawk spare parts] had been diverted to the
Contras." The CIA officer testified that it was his impression that
Furmark shared Ghorbanifar's belief. Upon their return, the two
CIA officers briefed Casey, including the subject of possible diver-
sion of funds to the Contras. A summary memorandum was drafted
for Casey to send to Poindexter, but it was never signed by the DCI
and was apparently never sent to Poindexter.
The next arms shipments to Iran continued during this period.
At a meeting in late October, the Iranians produced a check for $4
million to pay for 500 TOWs. Of this amount the CIA received
$2.037 million on October 28, and on October 29, 500 TOW missiles
were shipped from Israel to Iran. On that same day, North sent a
message to Poindexter providing a status report on the meeting
with the Iranians. According to that document, the United States
was assured of getting two hostages back "in the next few days".
On November 2, hostage Peter Jacobsen was released.
According to testimony received by the Committee, the October
29 shipment of arms from Israel to Iran?for which the Israelis re-
ceived 500 TOWs in reimbursement on November 6?marked the
end of U.S.-Iranian arms deals. On November 3, the Lebanese
newspaper Al Shiraa reported that the United States had been sup-
plying arms to Iran and stated that McFarlane had visited Tehran
earlier in the year to meet with Iranian officials.
According to documents and testimony received by the Commit-
tee, Secretary of State Shultz, upon learning of the revelations,
sent a cable to Poindexter in which he expressed his concern over
possible press attempts to portray the arms deal as a violation of
U.S. counterterrorism policy. Shultz suggested that the best course
of action would be to go public on the NSC initiative in an attempt
to make it "clear that this was a special one time operation based
on humanitarian grounds and decided by the President within his
Constitutional responsibility to act in the service of the national in-
terest." Shultz testified that he did not know at this time about the
January 17 Presidential Finding authorizing the arms transfers to
Iran and that neither he nor Secretary Weinberger learned of the
Finding until it was revealed at a White House meeting on Novem-
ber 10.
According to documents received by the Committee, Poindexter,
by cable, rejected the Secretary's advice, citing a need to get the
hostages out and a desire to brief the Congressional Intelligence
Committees. According to the cable, Poindexter had spoken with
Vice President Bush, Weinberger, and Casey and they had all
agreed with the necessity for remaining "absolutely close-mouthed
while stressing that basic policy toward Iran, the Gulf War and
dealing with terrorists had not changed".
On November 7, Furmark told the CIA officer with whom he had
been meeting that the Canadian investors who had not received
their funds from Khashoggi were planning to sue the Saudi arms
dealer and a private firm into which they paid the $11 million to
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?71:1A, ?
',1-r .,,,Z r'' .31.1.,,,?-?,?41^ liff,r,t4e
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35
cover the cost of the Hawk missile parts". According to documents
received by the Committee, Furmark said that he had persuaded
the Canadians to delay their lawsuit. Furmark indicated he was
unimpressed with the new Iranian channel and expressed support
for the ability of Ghorbanifar, who "coordinated his initiatives. . .
with all significant factions in Iran".
In November, the U.S. team, including North, met again with
the new Iranian channel. During three days of meetings with the
Iranians, the topics included hostages release, Dawa Prisoners being
held by Kuwait, the Israeli role in the arms transfers, and Iranian
intelligence requirements. The new channel admitted that Iran
owed Ghorbanifar $10 million, but stated that Ghorbanifar owed
Iran 1,000 TOW missiles.
According to testimony received by the Committee, by this point
the Executive branch had come to believe that the Senate and
House Intelligence Committees would have to be briefed on the Ira-
nian initiative. The CIA thereupon began to prepare the materials
needed for Casey's presentation. The CIA officer who had dealt di-
rectly with the Iranians was asked to prepare an outline of the
meetings he had attended, and the CIA Comptroller attempted to
reconstruct the financial aspects of the Iran program.
Casey testified before the Senate Intelligence Committee on No-
vember 21, 1986. He did not mention any possibility that there had
been a diversion of funds from the arms sales to Iran. When asked
about this omission, Gates later testified that the reason for the
omission was that "the information was based on analytical judg-
ments of bits and pieces of information by one intelligence officer,
and that they [Casey and Gates] didn't consider that very much to
go on, although it was enough to raise our concerns to the point
where we expressed them to the White House."
According to the Attorney General's inquiry, prior to appearing
before the Senate Intelligence Committee, Shultz went to the
White House and informed the President that some of the state-
ments being made about the Iran arms affairs would not stand up
to scrutiny. Shultz also informed Meese of his feelings on this
matter. A Justice Department staff member then obtained informa-
tion from the State Department about the November 1985 Hawk
missile shipments that did not fit with other information gathered
by the Attorney General. At that point, Meese decided to go see the
President.
The same day that Casey testified before the Senate Intelligence
Committee, the Attorney General met with the President and Chief
of Staff Regan to discuss the need for an accurate account of the
arms deals, particularly in light of the upcoming testimony before
Congressional Committees. According to Meese, the President
asked him to "review the facts" to get an accurate portrayal of the
various agencies and their involvement. Meese later testified that
he "didn't smell something was wrong," but was bothered by
"things we didn't know." This was not an investigation said Meese,
but simply an attempt "to pull the facts together so that we would
have a coherent account." Regan suggested that the review be com-
pleted prior to the 2 p.m. NSC meeting on Monday. According to
testimony by Meese, he then discussed his mission with FBI Direc-
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tor Webster, and the two of them agreed that it was not a criminal
matter and it would not be appropriate to involve the FBI.
Meese testified that on the afternoon of November 21, he assem-
bled a team of three lawyers "who had experience with this type of
matter." Meese then made a list of people to talk with, including
North, Shultz, Weinberger, Poindexter, McFarlane, and the CIA's
General Counsel.
According to the Attorney General's inquiry, one of the first per-
sons interviewed by Meese was McFarlane, who said he had told
Kimche at a December meeting in London that the United States
was "disturbed about TOWs?can't approve it." By contrast,
McFarlane testified that he had told Meese during this interview
that the President had favored the Iran initiative from the begin-
ning. McFarlane stated that Meese seemed glad to hear this, as an
early Presidential approval would legitimize subsequent acts. Ac-
cording to McFarlane, Meese then opined that an oral, informal
Presidential decision or determination was no less valid than a
written Finding.
At 8:00 a.m. Saturday, Meese spoke with Shultz to discuss the
Secretary of State's recollection of certain events. Meese testified
that he was not shocked to learn that Shultz had not known of the
January 17 Presidential Finding and stated that he himself had
heard nothing of it after it had been signed.
According to testimony by Meese, on the morning of November
22, the Meese team discovered the early April NSC memo which
referred explicitly to the diversion of arms profits to the Contras.
Assistant Attorney General William Bradford Reynolds told Meese
about the document at lunch Saturday. Meese testified that this
was the first time that he felt as if something was "not in accord
with the President's plan."
According to the Attorney General's inquiry, the next day, the
Meese team?including the Attorney General?met with North.
Meese reportedly told North that there would be some people who
were concerned with protecting the President, but that facts were
what was needed. In response to Meese's question about whether
McFarlane's problem was the perception or the fact of arms to Iran
for hostages, North stated that he believed the President himself
authorized the deal. North said that when he spoke with the Presi-
dent it was in terms of a strategic linkage. With the President, said
North, it always came back to hostages. According to Meese, North
said it was a terrible mistake to say that the President wanted a
strategic relationship, because the President wanted the hostages.
According to testimony by Meese, on November 24, 1986, at 11
a.m. he met with the President and the Chief of Staff and told
them of indications that money from the Iran arms sales might
have gone to the Contras. The Attorney General's announcement
of this on November 25, led the Committee to begin the inquiry
herewith reported.
As recently as mid-December, State Department and CIA offi-
cials met with an Iranian representative to discuss U.S. policy
toward Iran. The State Department official relayed the message
that there would be no more arms to Iran unless Iran stopped sup-
porting terrorism and agreed to negotiate an end to the war with
Iraq. U.S. hostages, said the official, must be released uncondition-
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ally. The Iranians, in turn, cited a previously-agreed upon nine-
point agenda which included the repair of Phoenix missiles, an ap-
proach toward Kuwait about releasing Dawa prisoners, and ship-
ment of 1,000 TOWs to Iran. Following this unsuccessful session,
the CIA officer met privately with the Iranian, without the State
Department's knowledge or approval.
According to testimony received by the Committee, on December
19 Senator Dave Durenberger, Chairman of the Intelligence Com-
mittee, and Bernard McMahon, the Committee's staff director, met
with the President, Peter Wallison, Don Regan, and Alton Keel, at
the request of the White House to discuss matters relating to the
sale of arms to Iran and possible diversion of funds to the Contras.
The Committee was not informed of this meeting until January 20,
1987.
According to testimony received by the Committee, on December
20 Senator Dave Durenberger and Bernard McMahon met with the
Vice President, Craig Fuller and a second member of his staff to
discuss matters relating to the sale of arms to Iran and possible di-
version of funds to the Contras. The Committee was not informed
of this meeting until January 20, 1987.
Q$QTHE NICARAGUAN RESISTANCE
The Committee initiated its preliminary inquiry on December 1,
1986 after the Attorney General disclosed evidence of the possible
diversion of funds from the Iran arms sales to the Nicaraguan re-
sistance. According to documents and testimony received by the
Committee, several individuals played key roles in both the arms
sales to Iran and the possible diversion of funds to the Nicaraguan
resistance, including Lt. Colonel North, Retired Major General
Richard Secord, and Secord's business associate, Albert Hakim.
North was assigned NSC responsibility for the Nicaragua-Central
America account.
McFarlane testified that in preparing his response to press re-
ports and Congressional inquiries in the summer of 1985, he went
to considerable length in interviews with North and looking at files
to determine the nature of North's activities in connection with the
Nicaraguan resistance. He further testified that North assured him
categorically at that time that his role was nothing more than en-
couraging the Contras and advising people who volunteered sup-
port that they should contact the Contras. McFarlane further testi-
fied that he had learned nothing since that time to contradict this
view of North's activities.
The initial CIA action officer on the Iran project met with North
on several occasions in 1986. The CIA officer described Secord and
Hakim as "almost co-equal lieutenants" of North. The CIA action
officer testified that on a trip in February he learned from North
that Secord and Hakim were the principal aides to North in his
Contra activities. North did not describe those activities to the CIA
officer other than saying that Hakim was responsible for the effort
in Europe to help the Contras. In March 1986, the CIA officer knew
that North was very active in the Contra program. It seemed to the
CIA officer as if North was splitting his time between the Contras
and the Iran project and that he was having trouble keeping up
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with both. North was visiting Honduras and going to meetings and
othewise working hard on support for the fighters. The CIA officer
testified that North's activities were widely known in the CIA and
the NSC.
A White House document indicates that Lt. Colonel North de-
scribed Albert Hakim to Admiral Poindexter on February 18, 1986
as Vice President of one of the European companies set up to
"handle aid to resistance movements."
Another White House document reflects that in a secure message
from North to McFarlane on February 27, 1986, summarizing a
meeting in Europe, North described Hakim as an American citizen
who "runs the European operation for our Nicaraguan resistance
support activity."
According to documents reviewed by the Committee, in late No-
vember 1985, North received assistance from Secord in resolving
problems with an arms transfer to Iran. A White House document
dated November 22, 1985, indicates that North and Secord were al-
ready involved in an enterprise North referred to as, "our Swiss
Company," Lake Resources, and that an aircraft belonging to Lake
Resources was in a European country in November to pick up arms
for the Nicaraguan resistance. It was to be the first direct flight to
the resistance field at Bocay and the arms packages had para-
chutes attached. This flight was to be delayed so that the plane
could be used for the transfer to Iran (ultimately another plane
was used for the arms transfer).
This document also reflects that North described these circum-
stances to Poindexter. The document also shows North saying that
he (North) would meet with Adolfo Calero, a Contra leader, to
advise him of the delay in arrival of the arms.
A separate White House document reflects that North advised
Poindexter on December 4, 1985 that North was using an oper-
ations code for Iranian matters similar to the one used to oversee
deliveries to the Nicaraguan resistance. North reported that the
latter code had never been compromised.
According to evidence received by the Committee, a direct con-
nection between the arms sales to Iran and aid to the Nicaraguan
resistance was made in January, 1986 in discussions between North
and Amiram Nir, terrorism advisor to Israeli Prime Minister
Peres. Notes taken at the interview of North by Meese on Novem-
ber 23, 1986 quote North as saying that he had discussed support
for the Nicaraguan resistance with Nir in January, 1986 and that
Nir proposed using funds from arms sales to Iran for that support.
[According to some notes, North believed Nir made the suggestion
on his own.] The Attorney General testified that he was uncertain
as to whether North or Nir brought up the subject of Nicaraguan
resistance. North also recalled turning down other Nir suggestions
that U.S. funds to Israel or Israel's own funds could be used to sup-
port the Nicaraguan resistance.
Other notes of that interview reflect only that Nir told North in
January that the Israelis would take funds from a residual account
and transfer them to a Nicaraguan account.
Notes of the Meese-North interview further reflect that North
commented that he had discussed Israeli help in general with De-
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fense Minister Rabin, but could not recall asking specifically for
help from the Israelis.
According to documents received by the Committee, by the time
of the North-Nir discussion in January, the Israelis may have been
holding funds from the November 1985 Hawk transfer available to
use for the Nicaraguan resistance. A CIA document reflects that
during one of the breaks in a CIA polygraph examination of Ghor-
banifar in January 1986, he commented that the Israelis received
$24 million as soon as the Hawk shipment was delivered and that
they were holding all of the funds. The Iranians were requesting
the funds be returned. Ghorbanifar reportedly stated that the Is-
raelis told him they had "doubled" the cost of the shipment appar-
ently because the Americans were involved. Ghorbanifar reported-
ly stressed how upset the Iranians were at not getting the $24 mil-
lion back.
On November 24, 1986, the day after Meese met with North, an
attorney, Tom Green, met with Assistant Attorney General Charles
Cooper. According to Cooper's notes, Green said he represented
North and Secord and described the role played by Secord and
Hakim in the Iran project. Green reportedly said that at a meeting
on the arms sales in Europe in early 1986, where Hakim served as
interpreter for the Americans, Hakim told the Iranians that in
order to foster the relationship and show their bona fides, the Ira-
nians should make a contribution over the purchase price for use
of the Contras or "of us." Green added that Hakim probably said
the U.S. Government was desirous of this. Green said that was the
basis upon which the February shipment of TOWs was priced.
According to Cooper's notes, Green said the money from that
sale was routed through Israelis into Hakim's financial network.
Hakim, in his private capacity, routed money into other accounts
belonging to foreigners. The same thing happened again in May.
Green reportedly said none of this violated the law because no U.S.
money was involved?only Iranians making a contribution.
On of after April 4, 1986, an undated White House document (the
"Undated Memorandum") was prepared that outlines past develop-
ments and future plans for the Iran program. Evidence received by
the Committee, including the text of the Undated Memorandum
and an attachment styled "Terms of Reference" and dated April 4,
suggests the Undated Memorandum was written in this time
period. The Undated Memorandum provided that $12 million of the
residual funds from an arms transaction would be used to purchase
critically needed supplies for the Nicaraguan Democratic Resistance
Forces. The Undated Memorandum described this material as essen-
tial to cover shortages in resistance inventories resulting from their
current offensive and Sandinista counter-attacks and to "bridge" the
period until Congressionally-approved lethal assistance beyond "de-
fensive" arms could be delivered. At the bottom of the page on which
this discussion appears was a recommendation that Presidential
approval be obtained for certain parts of the plan for the Iran program
that did not include the diversion of funds to the Nicaraguan
resistance. The Undated Memorandum was unsigned and specified no
addressee, and it is not clear to the Committee who, if anyone, saw it.
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The Undated Memorandum was discovered in the files of the
NSC on November 22, 1986 by members of the Attorney General's
staff. Meese made an appointment to meet with North the next
day, at which time North was questioned at some length about the
Iran program and then confronted with the Undated Memoran-
dum.
Notes taken at the November 23 meeting indicate that North
confirmed the accuracy of the Undated Memorandum as reflecting
the plan for use of residual funds from the Iran arms sale for the
Nicaraguan resistance. Notes of the meeting recount North saying
the $12 million figure in the memo was based on what he was told
by the Israelis and that he did not know how much was moved to
the Nicaraguans?the Israeli (Nir) decided the amount given to the
resistance, with no involvement by the CIA or NSC.
According to the notes of the Attorney General inquiry, North
stated that he had not discussed the matter with the President. Ac-
cording to documents received by the Committee, North was in 17
meetings with the President over the two year period, 1985-1986,
and none alone, and had one phone conversation with the Presi-
dent on December 4, 1986.
According to testimony by Meese, North said that he did not
know the amount of money involved. North said the CIA did not
know about the handling of the money, although some might sus-
pect.
Notes taken at the meeting further reflect that North said Presi-
dential approval of something would be reflected in the working
files. Asked whether he would have a record if the President ap-
proved in this case, the notes reflect that North replied affirma-
tively, and said he didn't think it was approved.
Notes taken at the meeting further reflect that North described
the money that the Israelis were to get to the Nicaraguans as Ira-
nian money from profits of the arms deals and saying he under-
stood this part of the deal. The notes further reflect that North
said he had told McFarlane in April or May 1986 about the deals
and that the only three people who could know in the U.S. were
McFarlane, Poindexter and North.
According to testimony by McFarlane, during their return trip
from Tehran, North told McFarlane that part of the profit from
the arms transaction was going to the Nicaraguan resistance.
McFarlane testified that he took it from the summary reference
that this was a matter of policy sanctioned by higher authority.
McFarlane testified that he did not ask North whether there was
a Finding specifically sanctioning the transfer of funds to the Con-
tras. He testified that North's portrayal of the Contra connection
was "part and parcel of a series of activities that had been going
on." McFarlane testified that he did not report what he had been
told by North about the use of Iran arms profits for the Nicara-
guan resistance.
Moreover, McFarlane testified that when he asked North on No-
vember 23, 1986 who had approved such action, North responded
that he would never do anything without it being approved by
higher authority and that he could not account for who was in-
volved beyond Poindexter.
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The notes of the Attorney General's inquiry further reflect that
North said after the meeting with Nir in January 1986, he had con-
tacted Adolfo Calero and as a result of the contact three accounts
were opened in Switzerland. The notes quote North as saying he
gave the account numbers to the Israelis, and money was deposited
in those accounts. North guessed the money got to the Contras;
they knew money came and were appreciative.
Notes taken at the meeting further reflect that North identified
two transaction from which money may have been diverted to
the Contras; 1) the transfer of 1,000 TOWs in February [1986], from
which $3-4 million may have gone to the Contras; and 2) the trans-
action [in May 1986] involving payment for Hawk parts and pay-
ment for replenishment of the 508 TOWs.
Notes taken at the meeting indicated North said there was no
money for the Contras in the October shipment of 500 TOWs to
avoid a perception of private profit and because the resumption of
US. funding made it unnecessary. According to North, Nir was
upset because the October price was not the same as charged earli-
er.
When Attorney General Meese testified before the Committee,
he said that North was surprised and visibly shaken when shown
the Undated Memorandum. According to testimony by Meese,
North said that he did not recall the account numbers which were
given to the Israelis and that Israelis arranged for the money to be
deposited. Meese testified that North was very definite that the
money got to the Nicaragua resistance forces, but could not remem-
ber or did not know the amount apart from an estimate of $3-4
million on one occasion.
Meese testified that he got the impression that the three bank
accounts were set up by somebody representing the Nicaraguan re-
sistance forces, that the numbers were given to North, and that
North gave them to the Israelis.
Meese further testified that he was not positive that North told
him the Undated Memorandum was not used or sent for approval.
Meese testified that North did not mention any problem in his
mind that, by some interpretations, U.S. money was being used for
the Nicaraguan resistance. Meese testified that he did not go into
that with North and that there was no discussion of the Congres-
sional restriction on soliciting funds.
Meese testified that he did not advise North of his right to coun-
sel because he did not consider his inquiry to be a criminal investi-
gation.
Meese testified that North did not explain how he reported the
arms sale matter to Poindexter. Meese testified that he got the im-
pression that there was very little real communication about it be-
tween North and Poindexter and that North was not acting on
orders from anyone.
Regan testified that he never saw the Undated Memorandum
until shown it by White House counsel several days before his tes-
timony and that his reaction on seeing it was he could not believe
it. Mr. Regan further testified that the President was never in his
presence briefed on anything of that nature and that he is confi-
dent the President would not have approved it if he had been told
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by Poindexter or North. Regan testified that he had not shown the
document to the President.
During the same general time period, the President had two
meetings which appeared to relate to Central American policy at
which North was present. The exact topic of discussion cannot be
determined from records available to the Committee. Both meet-
ings occurred on April 23. White House documents list as the gen-
eral topic of one meeting a discussion of a recent trip by Elliott
Abrams to El Salvador, Honduras, and Costa Rica. The meeting
was attended by the President, the Vice-President, Deputy Secre-
tary of State John Whitehead, Abrams, Regan, Poindexter, and
Fortier in addition to North. The other meeting for which no topic
is listed was attended by the President, North, Regan, Poindexter,
a Central American security official and his wife, and the senior
CIA officer in that country. The CIA officer was later the subject of
an internal CIA investigation initiated in the Fall of 1986 concern-
ing unauthorized contacts with private supporters of the Nicara-
guan resistance.
According to documents and testimony received by the Commit-
tee, it is possible that the following two events occurred on the
same day, May 15, 1986. First, according to a chronology of the
Iran program prepared at the White House in November 1986, the
Terms of Reference for Mr. McFarlane's trip to Tehran were ap-
proved on May 15, 1986. These Terms of Reference appear to be
identical to the Terms of Reference dated April 4 which were found
in NCS files attached to the Undated Memorandum discussing di-
version of funds to the Contras. Second, Poindexter gave the Presi-
dent a status report on the Nicaraguan resistance in preparation
for an NSPG meeting on Central America scheduled for the next
day. According to Poindexter's memorandum, Poindexter included
in his status report a note that outside support for the Nicaraguan
resistance would be consumed by mid-June and no further signifi-
cant support appeared readily available. The memorandum stated
that the $100 million aid request was stalled in Congress. Poin-
dexter identified as options: reprogramming; Presidential appeal
for private donations; and direct and very private Presidential
overture to certain heads of state.
Regan testified that the President met with McFarlane prior to
his trip to Tehran and discussed the objectives for McFarlane's
talks with the Iranians. Regan testified that he did not recall
seeing a document entitled "Terms of Reference" similar to the
Undated Memorandum, nor did he recall approval ever being given
for such a document. Regan testified, however, that the President's
approval should have been required if those instructions were
given to McFarlane for his visit to Tehran. A copy of Terms of Ref-
erence identical to those attached to the Undated Memorandum
and bearing the date May 21, 1986 has been located in White
House files.
According to documents received by the Committee, on May 16,
1986, the President held an NSPG meeting where solicitation of
third-country humanitarian support for the Nicaraguan resistance
was discussed. Those present included the President, Vice Presi-
dent, Craig Fuller, Secretary Shultz, Ambassador Habib, Assistant
Secretary Abrams, Secretary Baker, Secretary Weinberger, Under
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Secretary Ikle, Director Casey, the CIA task force chief, General
Wickham, Lt. Gen. Moellering, Don Regan, Admiral Poindexter,
William Ball, Djerejian, McDaniel, Burghart, and North.
White House documents reflect that the issues discussed at this
meeting included the negotiation process and the status of Conta-
dora, and the $100 million aid package before Congress for the Nic-
araguan resistance. The document states that the situation with
the resistance was good but could reverse abruptly as they were
running out of money. Two options to get the money were consid-
ered?seek to get reprogramming through Congress or go to other
countries. The final decision was to look at both approaches. Ac-
cording to the documents, Secretary Shultz was to provide a list of
countries which could be approached.
Abrams testified that the State Department had legal authority
from Congress to solicit humanitarian assistance from third coun-
tries. According to Abrams, Secretary Shultz agreed it was a good
idea to do so.
According to testimony by Shultz, in June 1986 Abrams came to
Shultz with a proposal to seek such aid and said there was a Swiss
account that could receive the money and Shultz approved. Shultz
testified that apart from a request for communications equipment,
which was not honored, only one country was asked for a contribu-
tion pursuant to this policy.
Regan recalled such an NSPG discussion, although not the pre-
cise date of May 16, and testified that there was absolutely no men-
tion of the possible use of funds from the Iran arms sale, including
sales by third parties or countries, to provide humanitarian or mili-
tary assistance to the Nicaraguan resistance.
Shultz testified that in June, McFarlane telephoned him to
report that a third country had previously contributed $31 million
to the Nicaraguan resistance. McFarlane, in his testimony, recalled
a similar phone call to Shultz informing him of a $30 million third
country contribution to the FDN.
August-September, 1.986
According to testimony received by the Committee, in August,
pursuant to the policy approved by the President in May, Abrams
approached a third country and asked it to contribute $10 million
for humanitarian assistance to UNO. Abrams reportedly met with
a representative of that country on August 8; he pointed out that
Congress had approved $100 million but it had not been appropri-
ated yet and money was needed to bridge this gap between the pre-
vicius $27 million [in humanitarian aid] and passage of the appro-
priation by Congress, which the Contras had not yet received.
When the third country agreed, Abrams asked the CIA task force
chief and North for advice on handling the contribution.
According to testimony received by the Committee, the task force
chief recommended having UNO open a bank account in its name
and then having NHAO or the State Department monitor the ex-
penses and authorize them from that account. Abrams agreed, and
the task force contacted UNO Secretary General Naio Sommariba
arid asked him to open an offshore bank account for use to deposit
the funds. According to testimony received by the Committee, this
was done at a bank in the Bahamas, with signatures of Sommariba
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and his accountant on the bank account. According to testimony
received by the Committee, Abrams needed the account number ur-
gently and the number was obtained and passed on to Abrams at a
meeting in the NSC situation room. The task force chief said he
provided this assistance on his own authority after consulting with
the task force lawyer to make sure it was legal. He testified that he
informed CIA Deputy Director for Operations and the Latin Amer-
ica Division Chief after the fact, and they raised no questions as to
legality. The task force chief went on to testify that this was the
way he handled 95 percent of his activities. CIA officials considered
that the State Department was legally within its bounds to solicit
the money and did not consider CIA's assistance to be in any way
circumventing the law.
Abrams testified that he asked both the CIA task force chief and
North to provide accounts for the donation from the third country.
He testified that the account opened by North was with Credit
Suisse. Abrams testified that he discussed the situation with
Charles Hill, Executive Assistant to Secretary Shultz, and they de-
cided to use the account opened by North without procedures for
monitoring expenditures from the account.
Abrams testified that in September and October the State De-
partment sought assurances from the donating country that they
were going to give the $10 million and would deposit it in the ac-
count provided by North. Documents received by the Committee
confirm this statement.
Abrams testified that on several occasions after that he checked
with North to see if the money had been deposited. According to
Abrams, North reported to him on several occasions that the
money had not reached the account. According to documents and
testimony received by the Committee, in late November, Abrams
turned over the information on the account to the State Depart-
ment legal advisor, and the FBI began looking into the matter.
According to a document submitted by the Justice Department to
the Swiss government in December 1986, the Credit Suisse account
number that North gave Abrams is the same as the number of the
account suspected of being used by North, Hakim, and Secord for
proceeds from Iran arms sales.
In preparation for a meeting on September 15, 1986 between the
President and Israeli Prime Minister Peres, North prepared a
memorandum for National Security Advisor Poindexter on matters
the Prime Minister might raise with the President. The memoran-
dum reported that on the previous Friday, September 12, Israeli
Defense Minister Rabin had offered a significant quantity of cap-
tured Soviet bloc arms for use by the Nicaraguan resistance. These
arms were to be picked up by a foreign flag vessel the week of Sep-
tember 15 and delivered to the resistance. The memorandum ad-
vised that if Peres raised this issue, the President should thank
him because the Israelis held considerable stores of bloc ordnance
compatible with arms used by the Nicaraguan resistance. Poin-
dexter noted on the memorandum received by the Committee, that
he discussed it with the President.
Regan testified that he attended a briefing of the President one
hour before the Peres meeting and that the Rabin offer was dis-
cussed. Regan testified that the subject was not expected to come
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45
up at the President's meeting, but that if Peres raised it, the Presi-
dent should "just say thanks." Regan recalled no discussion as to
legality under American law.
Regan testified that the President never told him what came up
in a 15 minute private meeting between the President and the
Prime Minister, and the subject did not come up in the open meet-
ing.
According to a document received by the Committee, two days
before the President's meeting with Peres, Poindexter had replied
by note to a message from North advising him to "go ahead and
make it happen" as a "private deal between Dick and Rabin that
we bless." Poindexter's note also referred to another note providing
that Poindexter had talked to Casey that morning about Secord.
Poindexter instructed North to keep the pressure on "Bill" to
"make things right for Secord."
CIA
In testimony to the Committee, the senior CIA analyst on the
Iran project stated that he began a thorough analysis of the intelli-
gence on the program in mid-September 1986 and became con-
cerned that Iran was being overcharged and that the funding
might have been diverted for other projects including support for
the Nicaraguan resistance.
He testified that he had conversations with Ghorbanifar and
with Nir in August and September about funding problems with
the Iran arms transfers. He knew, he said, that North was active
in political support of the Contras and that Hakim and Secord
were involved in flights to supply the Contras as well as the Iran
program. Because the money issue was unresolved, he suspected
money was already spent or allocated.
The CIA analyst testified that on October 1, 1986, he brought his
concerns to the Deputy Director of Central Intelligence, Robert
Gates. He explained that given the individuals involved, he was
concerned that funds were being diverted to Central America.
According to testimony, Gates was surprised and disturbed and
told the analyst to see Director Casey. The analyst testified that he
and Gates did not discuss the legality or illegality of diversion.
They talked about it being an inappropriate commingling of sepa-
rate activities and the risk to operational security.
Gates testified to the Committee that the analyst viewed the
problems as a serious threat to the operational security of the Iran
project. Gates recalled that the analyst's conclusion that some of
the money involved was being diverted to other U.S. projects, in-
cluding the Contras.
Furrnark
According to testimony by Roy Furmark, a New York busines&
man and a lawyer for Adnan Khashoggi, Ghorbanifar told him in a
meeting in August in Paris, that proceeds from the inflated Iran
arms sale prices may have gone to Afghanistan or Nicaragua. Fur-
mark testified that at the end of September, Khashoggi asked him
to visit Casey to get the U.S. to resolve the financial problems. Fur-
mark testified that all those involved considered the Lake Re-
sources account at Credit Suisse to be an American account. Fur-
STAT ?
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46
mark testified that he had known Casey for twenty years in busi-
ness matters, OSS dinners, et cetera.
In a letter to Attorney General Edwin Meese dated late Novem-
ber 25, 1986, Casey described Furmark as a friend and former
client?someone he had not seen in six or seven years.
Furmark and Casey met on October 7, 1986 and, according to
Furmark's testimony, he told Casey about the financial problems
with the Iran project and that Casey seemed unaware of details.
Furmark testified that Casey tried to call Poindexter who was not
in and that Casey said he would look into it.
In a letter to Attorney General Meese dated November 25, 1986,
Casey said Furmark had provided him with more information than
Casey had ever heard about the Ghorbanifar-Israeli channel to the
Iranians. The letter quotes Furmark as saying that he had been in-
volved in a Ghorbanifar-Israeli channel to the Iranians from its in-
ception. Casey advised the Attorney General that he and Gates had
passed Furmark's information on to Poindexter a day or so after
the October 7 meeting.
Also on October 7, a meeting was held between a senior CIA ana-
lyst, the Deputy Director of CIA, Bob Gates, and Casey. This senior
CIA analyst testified he believed Furmark did not mention to
Casey on October 7 the possibility that Iran arms proceeds had
gone to the Nicaraguan resistance.
Casey later told the analyst that he, Casey, called Poindexter on
October 7 and that Poindexter knew of the problem raised by Fur-
mark.
Gates testified that it was possible that during the October 7
meeting Furmark may have raised with Casey the possible diver-
sion of money to the Contras.
At the meeting with Casey on October 7, Gates told Casey of the
senior analyst's concerns about the possible diversion of funds to
Central America. Casey directed the analyst to put all his concerns
in writing. Gates testified that Casey was startled by the informa-
tion.
Gates further testified that on October 9, 1986, Casey, Gates, and
North met for lunch to give North an opportunity to debrief Casey
and Gates on a meeting on the Iran project that had recently taken
place in Europe. Gates testified that problems with the Iran pro-
gram were discussed and that, during lunch North made a very
cryptic reference to a Swiss account and money for the Contras.
Gates recalled that he and Casey did not pursue it but instead
asked North whether there was any direct or indirect CIA involve-
ment in any funding efforts for the Contras. North's response re-
portedly was that CIA was "completely clean" and that he had
worked to keep them separate. Gates testified that he and Casey
discussed after lunch the fact that they did not understand North's
comments. After the lunch, Gates noted for the record that North
had "confirmed" that the CIA "is completely clean on the question
of any contact with those organizing the funding and operation,"
and that a clear separation between all CIA assets and the private
funding effort had been maintained. A senior CIA analyst testified
that Gates later told him that there had been a discussion with
North of integration of the private effort to support the Contras
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47
and CIA activities, and that North had told Gates there was no
commingling and CIA was clear.
On October 14, 1986, Gates and the senior CIA analyst met with
Casey and gave him the memorandum prepared by the analyst
pursuant to the October 7 meeting. A cover memorandum from the
analyst to Casey and Gates said the analyst had not consulted with
North or other individuals involved on the U.S. side in drafting the
memorandum. The attached 7-page memorandum discussed the
risk that Ghorbanifar might disclose to the press an account,
charging that the U.S. Government had failed to keep several
promises to him and that both the U.S. and Israeli governments
had acquired substantial profit from the Iran arms transactions,
some of which was redistributed to "other projects of the U.S. and
Israel." The analyst testified that the reference in his memo to
"other projects" related only to speculation about possible allega-
tions of improper diversions of money to Central America, misap-
propriation of funds by arms dealers, and indications of funds
needed for some unknown purpose by an Israeli official.
Casey advised the Attorney General in his November 25, 1986
letter that he had this memorandum prepared and believed it was
delivered to the NSC to review the state of play on the channel to
the Iranian government. Gates testified that the next day, October
15, 1986, he and Casey met with Poindexter and delivered a copy of
the analyst's memorandum. Gates testified that they advised Poin-
dexter, in view of the people who knew about it, to think seriously
about having the President lay the project before the American
public to avoid having it leak in dribs and drabs.
According to his November letter to Meese, Casey said that he
and Gates urged Poindexter to get all the facts together and have a
comprehensive statement prepared because it seemed likely that
the litigation which Furmark said his clients were contemplating
would require it.
In the same letter, Casey stated that Gates had said he would ap-
prise the CIA General Counsel of the matters and get his advice.
Gates testified that he did ask CIA General Counsel Dave Doherty
to review all aspects of the project and to ensure that the Agency
was not involved in any illegalities. According to Gates, Doherty
later told him that he had looked into things and not found any-
thing wrong. Doherty testified that Gates mentioned that Southern
Air Transport was involved, linking the whole thing to Central
America, because Southern Air transport was also shipping materi-
al to the Nicaraguan resistance. According to Doherty, the FBI was
looking at the issue of humanitarian funds to see if any were being
spent unlawfully.
According to testimony by Doherty, Gates also mentioned to the
General Counsel speculation and rumors that Iran funds could
have been sent to Central America as part of private funding ef-
forts. Doherty testified that Gates told him he was concerned that
CIA did not know how funding transfers were being handled by the
NSC and middlemen.
Doherty further testified that he undertook no review other than
to evaluate the activities as described to him by Gates. He testified
that he did not interview other CIA employees, nor did he suspect
NSC involvement in diversion to the Contras. According to other
STAT
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1
testimony received by the Committee, Doherty did, however, direct
in late October or early November that nothing relating to the
Iran program be destroyed. Two CIA employees, concerned, subse-
quently put all notes, documents, et cetera in a box.
Furmark testified that he next talked to Casey on October 16,
1986, and again asked for Casey's help in getting the U.S. Govern-
ment to resolve his clients' financial claims. According to his letter
to the Attorney General of November 25, Casey had a senior CIA
analyst and a CIA contract employee go up to New York to discuss
the whole thing at length with Furmark. Memoranda dated Octo-
ber 17 and November 7 discussed their meetings with Furmark.
The memorandum dated October 17 recounted a brief conversa-
tion between the senior CIA analyst and Furmark on October 16. It
did not mention use of arms sale profits for "other projects," but
did relate Furmark's allegation that $3 million of the $8 million
paid by the Iranians for the May 1985 transaction had been used
"to cover expenses and for other matters" and that $10 million was
still owed to the Canadian investors who financed the May transac-
tion.
The senior CIA analyst's memorandum dated November 7 de-
scribed a meeting between Furmark and the senior CIA analyst on
the afternoon of November 6 in Washington in which Furmark
warned that the Canadian investors intended to expose fully the
U.S. Government's role in the Iran arms transactions. Furmark,
according to the memorandum, said they knew that Secord was
heavily involved in managing the Iran arms transactions for
North, and that Secord was also involved in assisting North in sup-
port of the Contras in Nicaragua. Furmark also said the Canadians
believed they had been swindled and the money paid by Iran for
the arms may have been siphoned off to support the Contras in
Nicaragua.
According to testimony by Gates, on November 6, Casey and
Gates met with Poindexter at the White House. According to testi-
mony by Gates, Casey recommended that Poindexter bring in the
White House counsel, but Poindexter replied that he did not trust
the White House counsel and would talk instead to Paul Thompson
(a lawyer and military assistant to Poindexter). Gates also said he
learned at that meeting that Casey had a prior discussion with
Poindexter in which he may have recommended that North obtain
legal counsel. A similar rendition of this conversation was later
contained in Casey's November letter to the Attorney General.
The senior CIA analyst and the CIA contract employee returned
to New York on October 22 to meet with Furmark and afterward
drafted a memorandum for Casey to send to Poindexter. The
memorandum reported that Ghorbanifar had told Furmark and
Khashoggi that he believed the bulk of the original $15 million
price for the May shipment was earmarked for Central America.
The memorandum continued that in this regard, Ghorbanifar told
Furmark that he was relieved when the $100 million aid to the
Contras was passed by Congress.
According to the memorandum, Furmark also presumed that $2
million of the $8 million paid by the Iranians to Ghorbanifar went
to Nir, as agreed to at a meeting among the financiers, Ghorbani-
far, and Nir in May.
STAT
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A signed copy of this memorandum has not been received by the
Committee. In his November 25, 1986 letter to the Attorney Gener-
al, Casey said he had not read it "until this morning" and did not
recall ever having read it before. In this letter Casey further said
that he had been told the memorandum was prepared but appar-
ently never went forward.
The senior CIA analyst testified that he was not looking at the
question of improprieties but rather as an intelligence officer was
focusing on damage control.
The analyst testified that Furmark felt Ghorbanifar firmly be-
lieved money was diverted to the Contras, and the analyst had the
impression Furmark also believed the money was diverted.
According to testimony by the analyst, the October 22 meeting
with Furmark was the first time he had heard a direct allegation
that Ghorbanifar suspected the bulk of funds raised for Hawk
spare parts had gone to the Contras. He testified that the quick
briefing he and the CIA contract employee gave Casey after their
October 22 meeting with Furmark included mention of diversion.
The contract employee who drafted the memo to Poindexter, testi-
fied that Casey may have conveyed its substance to Poindexter by
phone and that Casey remembered seeing the memo.
According to notes of the Attorney General's inquiry, North told
Meese on November 23, 1986 that Poindexter had asked North in
mid-November to compile a history of the Iran program. North re-
portedly told Meese that he went to the files and also talked to
McFarlane, Poindexter, and others in compiling the chronology.
None of the materials prepared in the White House during this
period and received by the Committee referred to the use of Iran
arms sales proceeds for the Nicaraguan resistance, although one
chronology dated November 17 and labeled "maximum version"
has in handwriting at the end of a list of Iran program accomplish-
ments the notation "Nicargua" [sic].
NSC Executive Secretary Rod McDaniel testified that sometime
during October or November, North commented to the effect that
"one of the great ironies was how the Iranians were helping the
contras." McDaniel testified that he did not give much thought to
the comment at the time because North was given to hyperbole.
According to testimony received by the Committee, on Wednes-
day, November 19, Casey was briefed in preparation for his appear-
ance before the Senate Intelligence Committee set for November
21. Testimony received by the Committee indicated that in this
briefing Casey may have been made aware that there might be a
problem in the area of diversion of Iran project funds to the Con-
tras. The CIA task force chief recalled being totally flabbergasted
upon learning of the possible interconnection between Nicaragua
and the Iran program from Casey's aide.
The CIA Comptroller testified that he learned of the possible di-
version of funds to the Contras on November 18-19. The Comptrol-
ler recalled that a CIA operations officer speculated that money
may have been diverted as they were preparing Casey's testimony
for November 21.
The Comptroller's testimony that he shared this information
with the CIA Executive Director and learned that Casey and Gates
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50
had made their concerns known to Poindexter after learning of the
subject in October.
The CIA Inspector General testified before the Committee and
described as "fairly significant" the evidence that had begun to de-
velop in the CIA by early November that some diversion might be
taking place. The IG testified that he asked for the senior CIA ana-
lyst memos about suspected diversion of money to Central America
prepared on October 14 and confirmed, that Casey and Gates saw
Poindexter the next day to discuss the issue.
In other testimony, the executive assistant to Deputy Director for
Operations at CIA testified that although there is a record in the
DO registry of a memo from the senior CIA analyst on the ana-
lyst's third meeting with Furmark, he had only a vague recollec-
tion of the DDO having viewed the memo. The executive assistant
said he had helped draft Casey's testimony for November 21, but in
none of the drafts was there ever any mention of diversion of
funds.
According to testimony by Meese, he spoke with Poindexter after
the President's news conference on November 19. Meese testified
that he was concerned about the absence of a "factual chronology"
and Casey's forthcoming testimony. Meese said he had also talked
to Poindexter earlier in the day in Poindexter's office after a meet-
ing where Casey was present. Poindexter reportedly asked Meese
to come back the next day to help prepare Casey's testimony.
The NSC staff had prepared a 17-page historical summary of the
Iran program dated November 20 which appears to contain numer-
ous important omissions and misstatements of fact about the pro-
gram (the White House chronology). According to testimony by
Meese, on November 20 he and Assistant Attorney General Charles
Cooper went to a meeting at the White House where Casey, Poin-
dexter, and others from the NSC staff reviewed Casey's testimony
and a chronology to see if they squared with Meese's recollection of
the legal discussions and the facts. Meese testified that he left
before the meeting was over, but that Cooper stayed. In the
evening, Meese received a secure call advising him that other Jus-
tice Department officials working on the Iran matter were con-
cerned about gaps in information and inconsistent recollections.
On the same night of November 20, according to notes of the At-
torney General's inquiry, Secretary Shultz went to the White
House residence to see the President and told him that some of the
statements would not stand up to scrutiny.
Meese testified that on the morning of Friday, November 21,
when Casey was testifying on the Hill, after learning from his staff
of more discrepancies with State Department information, he met
with the President and Regan. Meese testified that he reported his
concerns about the need for an accurate account, particplarly in
view of upcoming testimony to Congressional committees. The
President reportedly asked Meese to review the facts to get. an ac-
curate portrayal by the different agencies involved. Meese testified
that he 'didn't smell something was wrong," but was bothered
"that there were things we didn't know." According to Meese, the
President did not request an investigation but asked Meese to pull
the facts together so they could have a coherent account. Regan re-
portedly suggested that Meese's review be completed by 2:00 p.m.
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on Monday, November 24, when an NSC meeting on Iran was
scheduled.
Meese testified that he later discussed the Iran matter with FBI
Director Webster and told him what the President has asked Meese
to do. According to Meese, he and Webster agreed that, as there
was no criminal matter involved, it would not be appropriate to
bring in the FBI.
On the afternoon of November 21, Meese assembled a small team
of Justice Department officials and aides, including Assistant At-
torneys General Charles Cooper and Bradford Reynolds. This team
did not include any senior Department officials responsible for
criminal investigations.
According to testimony received by the Committee, in this same
time period, on November 21 Poindexter briefed the leadership of
the SSCI in the White House in the morning. In the afternoon
Casey appeared before the Committee on the Hill, accompanied by
other CIA officials. The possibility of use of Iran arms sale proceeds
for the Nicaraguan resistance was not mentioned.
Gates later testified that the reason Casey said nothing about the
possible diversion of funds was that they knew nothing more on
November 21 than they did on October 14, i.e., bits and pieces of
information and analytical judgments by one intelligence officer,
and that this was not considered very much to go on. The senior
CIA analyst testified that he helped prepare the DCI's testimony
which focused on what CIA knew and what support they gave the
NSC. He said there was no discussion in his presence of the possi-
bility of diversion of funds.
The next morning, Saturday, November 22, while Meese was
meeting with Shultz, members of the Attorney General's staff in-
cluding Reynolds, examined documents in NSC files at the White
House. Meese later testified that Poindexter had given permission
for this file review and that NSC staff including North and Paul
Thompson were present in the NSC offices when it was conducted.
Meese testified that he received no information that North shred-
ded documents in his office.
Meese's staff went through the documents presented to them and
had copies made of those they thought important. The Attorney
General's staff discovered in NSC files the Undated Memorandum
which included a discussion of use of Iran arms sale proceeds for
the Nicaraguan resistance. Reynolds advised Meese of this discov-
ery at lunch. Meese testified that following a meeting with former
CIA General Counsel Sporkin in the afternoon, Meese made an ap-
pointment with North to meet the following day. Meese testified
that he had planned to interview North in the morning, but agreed
to a delay until 2:00 p.m. because North wanted to have time to go
to church and be with his family.
According to testimony received by the Committee, North ar-
ranged to consult with an attorney after meeting with lawyers
from the Justice Department on Saturday, November 22, to obtain
legal counsel.
According to testimony by Meese, that Saturday evening Meese
met with Casey at Casey's home. They had talked on the phone
earlier in the day. At their meeting Casey discussed Furmark and
the Canadian investors. Meese recalled no mention of the Contras,
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52
Nicaragua, anti-Sandinistas, Democratic Resistance, Freedom
Fighters or Central America. At one point he said it was possible
that Casey may have mentioned something similar, but he subse-
quently said he was sure Casey did not mention the possible diver-
sion of funds.
McFarlane testified that on Sunday morning, November 23,
North called him and asked to meet him in McFarlane's office. Ac-
cording to McFarlane, North arrived at 12:30 p.m. and the two had
a private discussion for about fifteen minutes. North said he would
have to lay the facts out for the Justice Department later that day
on the diversion of Iran money to the Contras. McFarlane testified
that North also stated it was a matter of record in a memorandum
North had done for Poindexter. McFarlane asked if it was an ap-
proved matter, and was told that it was.
According to McFarlane, North stated that McFarlane knew
North wouldn't do anything that was not approved.
McFarlane testified that after their private meeting, an attorney
named Tom Green arrived; as the meeting ended, Secord arrived.
McFarlane testified that he learned later that Green was Secord's
lawyer.
At 2:00 that afternoon North met with Meese, Reynolds and
Cooper, and another Justice Department official named Richard-
son, who took extensive notes. According to the notes, Meese began
by explaining that he wanted to get all the facts from everyone in-
volved and flesh out different recollections. Meese said he had
talked to the President and Poindexter. He stated that the worst
thing that could happen was if someone tried to conceal something
to protect themselves or the President or put a good "spin" in it.
Meese testified that he did not know North well on a personal
basis, but did have considerable contact with him in and out of the
White House on a casual basis. Based on his discussion with North
and what he read subsequently, Meese was convinced North was
"zealous about the mission he felt he had." Meese concluded that
North had let Poindexter know what he was doing and had not
been forbidden from doing it. Meese testified that it never occurred
to him that there would be any collusion of an untoward nature
and that it was at the time still not a criminal matter. North was
questioned at some length about the Iran program before being
confronted with the Undated Memorandum with the passage on
use of residual arms sale funds for the Nicaraguan resistance.
Meese testified that he recalled being disturbed and troubled, but
not apprehensive. Steps were taken, however, to get McFarlane in
right away, the next morning?North had said he told McFarlane
during the Tehran trip about use of Iran arms proceeds for the
Nicaraguan resistance.
Meese was asked by the Committee if he sought out Poindexter
immediately so as to prevent any communications between Poin-
dexter and North on what North had just told Meese and the other
Justice Department officials. Meese testified that he did not.
Meese testified the next morning, Monday, November 24. Meese
met with his staff and went over what they had found. Meese re-
called asking his attorneys to look over what criminal laws or
others laws might be applicable. Meese was not sure whether he
talked to the FBI Director on Monday.
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Later that morning Meese also talked to McFarlane to find out
what he knew about money being available to the Nicaraguan re-
sistance. According to Meese, McFarlane said he knew nothing
until his trip to Tehran, and that was the only thing he knew
about it. Meese's conversation with McFarlane was brief; he said
he was only trying to verify certain facts. Meese also talked briefly
to Weinberger by phonn; Weinberger did not have much to add.
Meese testified that at 11 a.m. that morning he met with the
President and Regan telling them that during his review, Meese
had come across indications that money from Iranian arms trans-
actions may have gone to the Nicaraguan resistance. Meese testi-
fied he told them he had talked to North who had acknowledged
that in fact that had happened.
Meese told the President he had not completed his review and
would get back to him later that afternoon after talking to other
people, including Poindexter. Meese said the President looked
shocked and very surprised, as did Regan, who uttered an exple-
tive.
Meese recalled that at this meeting or at one later in the day,
the President said it was important "to get this out as soon as pos-
sible." Regan recalled a discussion with Meese in the morning at
which Meese told him he needed to arrange a meeting with the
President about what he had found out on Monday afternoon.
Meese testified that he talked to Poindexter in the latter's office
very briefly on Monday afternoon. No notes were taken and Meese
was alone. Meese recalled telling Poindexter what had been
learned from North and asking if he knew about the matter. Ac-
cording to Meese, Poindexter said yes, he knew about it generally.
According to Meese, Poindexter said North had given him "enough
hints" that he knew there was money going to the Contras, but he
"didn't inquire further." Meese further testified that Poindexter
said he had already decided he would probably have to resign be-
cause of it.
Meese testified that he asked Poindexter if he had told anyone
about the money going to the Contras, and Poindexter said he had
not. Their conversation lasted about ten minutes, because Meese
needed to get back to see the President. Meese testified that he did
not consider his talk with Poindexter an "investigation" or a
"criminal investigation," and Meese said he did not consider the
matter a law violation "on its face." He was trying, he said, to find
out what happened from a respected member of the Administra-
tion.
Meese testified that he met with the President and Regan at 4:30
p.m. that afternoon and related what he had learned, including
Poindexter's acknowledgement that he had knowledge of the
Contra funds. Meese said he discussed looking at what applicable
criminal laws there might be. They arranged to meet again the
next morning at 9:00 after sorting things out because it was "a tre-
mendous surprise and shock to everybody." Meese testified that he
knew that "neither Don Regan nor Ronald Reagan knew anything
about this." Regan recalled the President's dismay and surprise at
the discovery, and his decision to go public with it. Regan testified
that the President had made clear to his staff that while he strong-
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ly supported the Nicaraguan resistance, such support should be
provided by lawful means.
Meese testified that he talked with the Vice President that
Monday and told him what had been learned. Meese "asked him if
he had known anything about it, and the Vice President said no,
he had not." Meese also recalled that the possibility of Poindexter's
resignation was discussed Monday evening, possibly between Regan
and the President. Meese learned that Regan talked to Casey on
Monday night.
Two other meetings occurred on Monday, November 24. Accord-
ing to his notes, Assistant Attorney General Cooper met with Tom
Green who said he represented North and Secord. After discussing
Hakim's role in proposing use of Iran arms proceeds to the Nicara-
guan resistance, Green said Hakim and Secord felt like they were
doing the Lord's work. They believed they were not violating any
laws. Cooper's notes say Green warned that if the matter blew up,
Iran would kill one or more of the hostages and two other individ-
uals would also probably be killed.
According to testimony by Furmark, also on Monday, he met
again with Casey at CIA headquarters. According to Furmark,
Casey told him there was $30,000 in the account. Furmark assumed
he meant the Lake Resources account. Furmark testified that
Casey called North. Then Casey stated repeatedly that he did not
know where the money was. Casey also called Assistant Attorney
General Cooper. Furmark testified that Casey's staff told him the
only way they knew about the Lake Resources account was because
Furmark had told them about it. According to Furmark, North ap-
parently told Casey that the Iranians or the Israelis owed Ghorban-
ifar and Khashoggi the money. Furmark said Casey tried and
failed to reach Regan and Meese.
Meese testified that he met with Casey at Casey's home the next
morning at 7 a.m., Tuesday, November 25. Casey had called Meese
at 6:30 to ask him to stop by. Meese could not recall the conversa-
tion, except that it was generally about the situation and what
Meese had learned. Casey told Meese that Regan had talked to him
the night before about the money-to-the-Contras situation. While
with Casey, Meese received a call from Regan who said he was
going to talk with Poindexter. Regan verified that Meese would be
at the White House at 9:00. Casey also apparently told Meese he
would send him the Furmark memoranda, which he did by letter.
At 8:00, according to his testimony, Regan talked with Poindexter
and indicated he felt Poindexter should be ready to resign when he
saw the President at 9:30. Regan testified that when he questioned
Poindexter about his negligence, Poindexter responded that he had
felt sorry for the Contras and wanted them to get help. He had,
therefore, not questioned where the money came from.
Meese testified that at 9:00 he met with the President and
Regan. He testified that he told them more of what he had found
out and that a criminal investigation would probably be convened.
According to Meese, they realized this was "a very momentous oc-
casion" and that the worst thing for the President would be the ap-
pearance of covering up. The emphasis was on getting it out to the
Congressional leadership and the public and, in parallel with that,
commencing a criminal investigation.
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Meese disclosed his findings at a noon press conference. Meese
testified that he arrived at the $10-30 million figure he used at the
press conference by taking North's statement that $3-4 million
went to the Nicaraguan resistance on one occasion and the April 4
document which referred to $12 million. North had said two or
three shipments were involved. Multiplying the sums for one trans-
action by three gave $10-30 million as an approximation.
Meese told the Committee that after his press conference and a
luncheon with the Supreme Court, Meese walked back to the Oval
Office with the President. He told the President that he was going
back to the Justice Department because they were pursuing a
criminal investigation.
Meese recalled that, at the press conference, he did not know if
any criminal violations were possibly involved. According to his
testimony, Meese commenced a criminal investigation that after-
noon.
He directed the Deputy Attorney General notify the White
House Counsel to be sure that security precautions were taken on
all documents, and he directed the Assistant Attorney General for
the Criminal Division to meet with the Assistant Attorney General
for the Office of Legal Counsel (Mr. Cooper) to discuss possible laws
that might apply, including criminal laws. Meese testified he also
met with FBI Director Webster and told him he was turning the
matter over to the Criminal Division and would "probably" need
FBI resources. According to Meese, FBI resources were requested
the next day, November 26.
Meese testified that Israeli Foreign Minister Peres called him on
the afternoon of November 25. According to Meese, Peres said they
had heard what had happened and that all they had done was tell
the Iranians where to put the money. They had not handled the
money. They had told the Iranians what bank accounts to put the
money into, and how much.
According to an NSC staff member who shared North's office
suite, a security officer came to the office on the evening of Novem-
ber 25 for the purpose of sealing the office. The staff member said
he had no knowledge that any papers were destroyed.
On November 25, 1986, Assistant Secretary Abrams and the CIA
task force chief appeared before the Committee at a regular hear-
ing to review implementation of U.S. Nicaragua programs. In re-
sponse to questions about third-country support for anti-Sandinista
forces, neither witness revealed the solicitation of $10 million in
August. In testimony on December 8, 1986, under oath, Mr.
Abrams apologized to the Committee for withholding this informa-
tion. He said he did not feel he had been asked a direct question
and did not realize until shown the transcript that his statements
clearly left a misleading impression.
After the initiation of the Committee's initial investigation on
November 28, the Committee received information indicating that
profits from Iranian arms sales were deposited in account(s) in a
Swiss bank called Credit Fiduciere Services (CFS) and that such ac-
counts were opened and/or controlled by Richard Secord, Thomas
Clines, and Theodore Shackley. CFS then transferred money to its
subsidiaries in Grand Cayman which disbursed it to the Nicara-
guan resistance.
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This report was based on sources of unknown reliability and the
committee has not been able to verify its contents.
According to testimony received by the Committee, private fund-
ing for the Nicaraguan resistance generally was funnelled through
offshore bank accounts in the Cayman Islands and Panama con-
trolled by Adolfo Calero. However, the Committee received no
direct testimony regarding the actual receipt of specific amounts of
money by the Nicaraguan resistance. According to testimony by
the CIA task force chief who was responsible for monitoring the fi-
nancial status of the Nicaraguan resistance, there was no unusual
infusion of funds to the Nicaraguan resistance in 1986.
UNRESOLVED ISSUES
The Intelligence Committee has, as reflected in this report, gath-
ered a considerable amount of information, both through testimony
and documentation, regarding the sale of arms to Iran and possible
diversion of funds to the Nicaraguan resistance. This information,
we believe, will be helpful to the Select Committee as it undertakes
its investigation into these matters.
In accordance with Senate Resolution 23, the Committee recom-
mends that the Select Committee pursue a number of questions
and issues on which this information bears. These items are not
meant to be limiting in any way to the work of the Select Commit-
tee, but, consistent with provisions of Senate Resolution 23, they
are areas of inquiry that the Intelligence Committee believes the
Select Committee might consider as part of its investigation.
1. What role did members of the White House staff play in plan-
ning and implementing the sale of arms to Iran and the possible
diversion of funds to the Nicaraguan resistance?
2. What role did the CIA and other U.S. Government agencies or
their officials play in planning and implementing the sale of arms
to Iran and the possible diversion of funds to the Nicaraguan re-
sistance?
3. What role did private individuals, both citizens of the U.S. and
citizens of foreign countries, including private arms dealers and
financiers, play in planning and implementing the sale of arms to
Iran and the possible diversion of funds to the Nicaraguan resist-
ance? Why did U.S. officials rely upon such private individuals in
lieu of established U.S. Government agencies?
4. What role did officials, agents, .representatives and emissaries
of foreign countries, including, without limitation, Israel and other
Mideast nations, play in planning and implementing the sale of
arms to Iran and the possible diversion of funds to the Nicaraguan
resistance?
5. When, by whom and to what extent were the activities of indi-
viduals acting independently or on behalf of the U.S. in planning
and implementing the sale of arms to Iran and the possible diver-
sion of funds to the Nicaraguan resistance authorized by the offi-
cials of the U.S. Government?
6. When, by whom and to what extent were the activities of indi-
viduals acting independently or on behalf of the U.S. in planning
the sale of arms to Iran and the possible diversion of funds to the
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Nicaraguan resistance made known to officials of the U.S. Govern-
ment?
7. How were funds raised by or with the participation of U.S. of-
ficials for the benefit of the Nicaraguan resistance from any and
all sources, including, without limitation, private individuals, third
countries, and the sale of arms to Iran? How and by whom were
such funds administered? In what way, to whom and for what pur-
poses were such funds expended?
8. Except as authorized by Congress, what forms of assistance,
other than funds, were provided by or with the participation of
U.S. officials to the Nicaraguan resistance and by whom? When, by
whom and to what extent were such other forms of assistance au-
thorized by or known to officials of the U.S. Government?
9. To what extent was assistance, both financial and otherwise,
that was provided to the Nicaraguan resistance by private citizens
and officials of the U.S. Government consistent with applicable
law?
10. To what extent was assistance to Iran, including, without lim-
itation, the sale of arms and the provisions of intelligence, consist-
ent with applicable law?
- 11. To what extent were the objectives of U.S. officials in selling
arms to Iran frustrated by the participation and possible enrich-
ment of private individuals?
12. To what extent were the objectives of U.S. officials in raising
funds for the Nicaraguan resistance, whether or not such objectives
were authorized by applicable law, frustrated by the participation
and possible enrichment of private individuals?
13. Whether upon being made aware of information with regard
to the unauthorized and possibly unlawful provision of financial
and other assistance to the Nicaraguan resistance, U.S. officials
acted properly in investigating and reporting such information.
14. How, when, and by whom were financial decisions made and
implemented with respect to the sale of arms to Iran, including,
without limitation, the basis upon which prices for arms were de-
termined, the way in which funds were raised, administered and
expended to effect the sales, and by whom, when, how and to whom
the proceeds from such sales were distributed?
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