LETTER TO DANIEL K. INOUYE FROM DAVID L. BOREN AND WILLIAM S. COHEN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP89G00643R001300120010-9
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 71
• Document Creation Date: December 23, 2016
• Document Release Date: December 8, 2011
• Sequence Number: 10
• Publication Date: January 29, 1987
• Content Type: LETTER

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PAT1KE LEARY. V[RMQNT * .tAM V ROM M. DELAWARE I*T~019tY`
LLOY
D BENTSEN. TEXAS ORRM MATCH. UTAH
Saw NUP,Q. GEORGIA FRANK MURKOWSKI. ALASKA
ERNESTF HOLLINGS. SOUTH CAROUNA ARLEN SPECTER PENNSYLVANIA JI
ROBERT C BYRD. WEST VIRGINIA EX OPPICIO
ROBERT DOLL KANSAS EX OERCIO
LILUJ ptates Penate
SELECT COMMITTEE ON INTELLIGENCE
WASHINGTON. DC 205 10-0 4 7 5
January 29, 1987
The-Honorable Daniel K. Inouye
Chairman
Select Committee on Secret Military Assistance
to Iran and the Nicaraguan Opposition
United States Senate
Washington, D.C. 20510
Pursuant to Senate Resolution 23, transmitted herewith
is the report prepared by the Select Committee on Intelligence
summarizing the results of our preliminary inquiry into the
sale of arms to Iran and the possible diversion of funds to
the Contras. In accordance with the terms of Senate Resolution
23, the report describes in narrative form information which
the Committee was able to learn during the course of its
study and identifies areas of inquiry that the Committee
believes should be among those 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 Intelligence Committee was necessarily limited, both in
scope and in time. It was never the goal or the mandate of the
Intelligence Committee during this initial phase to conduct a
definitive investigation 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 intent: .!n,? purposes, the Committee commenced its
inquiry on'December 'v issuing subpoenas to 15 individuals
and entities, as weir. 3s i -4eries of invitations to appear,
and concluded the it t i -n >~.3thering process on December 18.
i`~''I ru tU~ ~uIJtT~IJ
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The Honorable Daniel K. Inouye
January 29, 1987
Page Two
During this period, the Committee received testimony from
36 witnesses and received thousands of pages of documents.
While it was impossible to include 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
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
described 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 Colonel Robert Earl
asserted their constitutional rights and declined to testify.
Director of Central Intelligence William Casey appeared
before the Committee iust 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 comprehensive
examination. And, when the witnesses did testify, consistent
with the Committee's objectives, the questioning was geared
toward information gathering purposes rather than toward
prosecution and confrontation. Fourth, except in two
instances, witnesses were not recalled to be questioned
regarding information icouired by the Committee subsequent
to their initial aDpeur?ince. Any such information or
documents, of course, i- included in this transmittal
to the new Special I'r)-:Tircee. Fifth, again consistent
with the Committee's -f-)r-ration gathering purposes, subpoenas
were narrowly drawn. 1',-.rse.;uently, there may still be
documents that we h,:- -)t ')btained that would be helpful
to you. And, whi'..: j:` as reviewed the vast majority
of documents that - - . ; a?.j by the CuT-i ~ ~~
e, including -
all documents recPi.'? -.-Ib is sources, rime constraints
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The Honorable Daniel K. Inouye
January 29, 1987
Page Three
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 Committee in response to our
subpoenas. It was felt that since the new Special Committee
has now been charged with overall responsibility for the
investigation, this information should simply be transmitted
to the new Committee rather than subjecting it to analysis
by the Intelligence Committee.
As noted above, the Committee heard testimony from 36
witnesses 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 testimony. Again, our
goal was to preserve the record for any future investigation.
With respect to. the report itself, we have attempted to
set forth information receiv-ed 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
Special Committee.
Because so much attention has been eiven 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 itfnr'.)ti?-n that we hive ;athered and that it
could not appropr is to i v cone i-.:s i-ins or findings because
of its preliminary nature, ether than to note d_iscre.pancies
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The Honorable Daniel K. Inouye
January 29, 1987
Page Four
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 necessarily incomplete. We believe, however, that it
is as complete and consistent 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,
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Report on Preliminary Inquiry
.January 29, 1987
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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 information 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 investigation 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 Committee believes is materially relevant to
the mandate of Senate Resolution 23. Since the fact finding of
the Committee encompassed only 18 days, this narrative is
necessarily incomplete and thus endeavors only to provide a
.general chronological framework of events derived from the
documents and testimony received by the Committee. Secondly,
again consistent with-Senate Resolution 23, Section II sets forth
certain unresolved questions and issues that the Committee
recommends be pursued by the Select Committee.
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Origins
The Committee's inquiry suggests that the Iran initiative
originated as a result of the confluence of several factors
including:
- A reappraisal of U.S. policy toward Iran by the
National Security 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
Security 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 arguments 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 political environment as increasingly
unstable and threatened by Soviet regional aims, the draft NSDD
stated that the U.S. is compelled 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
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interests." 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.
The Hostage Factor
Testimony by several senior-Administration witnesses
indicate that during 1985, the Administration was occupied on a
regular basis with matters relating to terrorism and the state of
U.S. hostages. In particular, documents and testimony reflect a
deep personal 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. official in Lebanon. Information was
received that in late 1985 the Syrians informed Ambassador Vernon
Walters that Buckley's Iranian 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 program.
Israeli Interests
According to documents and testimony received by the
Committee, 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 Security Adviser John Poindexter
described Israel's interests in much the same terms.
McFarlane testified that he was never informed by CIA that
Israel had 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 previously shipped arms to Iran it would have made
him less responsive 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 discounted such reports
because he believed they failed to offer conclusive evidence and
because Prime Minister Peres had assured the U.S. that there was
no such trade.
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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 discussions reportedly included the idea of an "arms for
hostages" deal in part as a means of establishing each country's
bona fides. Khashoggi 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
testified 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 consultant 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 returned 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
McFarlane of a forthcoming trip Ledeen planned to Israel and
asked whether he was interested in knowing whether Israel had any
Iranian 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 perspective 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 improve their knowledge of Iran. Ledeen testified
that he reported his talks in Israel to McFarlane in mid-May, and
that McFarlane subsequently arranged to task the Intelligence
Community to produce a Special National Intelligence Estimate
(SNIE) on Iran.
Secretary of State.:Shul?tz. J.-e.arned- o-f- Ledeen's activiti-es
and, in a message dated 5 June, complained to McFarlane that
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Ledeen's contact 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 Iranian 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.. .serious 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 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 US would be interested in opening up political talks
with Iran. According to McFarlane, Kimche stated that the
Iranians understood US concerns regarding their legitimacy and
therefore had proposed to use their influence with radical
elements holding US 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 instructed Ledeen to say we did not favor such a
process. McFarlane also reported that Kimche, on instructions
from Peres, had come to inquire about the US disinclination to
pursue the initiative 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
disadvantages 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 US should make a tentative show of interest without
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making any commitment and should listen and seriously consider
the idea of private US-Iran relations. Shultz stated that
McFarlane 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 entered into the relationship later. According to
McFarlane, the 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 December that McFarlane became aware of Ghorbanifar's
identity. It should be noted, however, that McFarlane made
reference to Ghorbanifar in h_ is July 14 cable to Shultz
describing the proposal. In 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 Minister 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
testified that he met with Schwimmer in early July. Schwimmer
recounted a meeting he had attended a week or two before in
Europe with Kimche, Khashoggi and Ghorbanifar. Schwimmer said
Ghorbanifar 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
vacation from mid-July to mid-August, and would, if McFarlane
thought it appropriate, meet Ghorbanifar. Ledeen testified that
McFarlane agreed.
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Ledeen met Ghorbanifar in Israel in late July. Kimche,
Schwimmer and Yaacov Nimrodi, an arms dealer and former Israeli
military 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 between Iran and the US were to improve, each side
would have to send the other clear signals about its seriousness,
and that the Iranian signal could be arelease of the hostages in
Lebanon (referring specifically to U.S. Government official
William Buckley)and--cessation_o-r_moderati-on of Iran-sponsored
terrorism. According to Ledeen, Ghorbanifar said that for the
US, the only convincing gesture 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.
According to testimony by Shultz, Kimche and McFarlane met at the
beginning of August 1985, at which Kimche indicated that the
Iranians not only wanted "a di-alogue with America" but also
wanted arms from the US and TOW anti-tank missiles from Israel.
In return the Iranians could produce hostages.
The August-September Shipment of TOWS
On August 8, 1985 at a meeting of the National Security
Planning Group in the White House residence, McFarlane, with
Poindexter, briefed the President, the Vice President, Shultz,
Weinberger, 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 testimony on which of the participants
supported the proposal, although opposition to the plan by Shultz
and Weinberger is clear.
According to testimony by Regan, the President declined to
authorize 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 shipment 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"makea-decision
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According to testimony by McFarlane, the transfer was
supported by Casey, Regan, and Bush while Shultz and Weinberger
opposed it. McFarlane testified that subsequent to the meeting
President Reagan approved the Israeli request to ship arms to
Iran and to purchase replacements from the U.S. Presidential
approval was on the condition that the transfers would not
contribute to terrorism 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 decision.
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 and Attorney General Meese
discussed the legality of an oral Finding November 21, 1986,
Meese told him that he believed an oral, informal Presidential
decision or determination to be no less valid than a written
Finding. According to documents received by the Committee,
McFarlane, when interviewed by Meese, made no mention of
Presidential approval of the TOW shipment of August-September
1985 or of an "oral Finding." McFarlane did tell Meese that he
told Kimche at a December 1985 meeting 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
whether 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.
According to testimony by Ledeen, when he returned to the US
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 US hostages.
Ledeen testified that he attended a meeting in Paris on
September 4 with Kimche, Ghorbanifar, Schwimmer and Nimrodi. The
discussions were in two parts: (1) technical questions about
transfers of weapons from Israel to Iran and getting the hostages
out of.Lebanon; and (2) conversation with Ghorbanifar about
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events in Iran. Ghorbanifar told them they would soon see public
statements by leading Iranian officials making clear their
intention to improve US-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 speeches 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
September, 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 Ghorbanifar'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 meetings. According
to testimony by Ledeen, it appeared to him that Ghorbanifar's
credentials were well-documented.
The Committee received testimony and documents, however,
indicating that the CIA had long been aware of Ghorbanifar's
suspect character. In August 1984 CIA had issued a notice to
other government agencies warning that Ghorbanifar was a
fabricator. Documents indicate CIA was aware, of one instance in
which Ghorbanifar had reportedly offered to provide intelligence
on Iran to a third country in return for permission from the
third country to continue 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 intelligence collection`on specific individuals in Iran who
were in contact with American officials. North later gave him a
very restricted distribution 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.
According to documents received by the Committee, the
shipment 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
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9
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 Israeli governments regarding the shipment.
On September 15, 1985, the Reverend Benjamin weir was
released from his captivity in Lebanon. According to testimony
received 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 inconsistent 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 sanctioned 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 establish 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 -thePresident
had ever expressed disapproval of the Israeli action. McFarlane
testified 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 connected with both -- was an airplane flight out of
Tabriz, Iran which made an emergency landing in Tel Aviv.
Ghorbanifar was very interested 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 Committee has not established that there
was a correlation between these events.
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The November 1985 Shipment o.f HAWKS
After the first shipment of TOWs, Ledeen continued to be
active., He held meetings in the Fall of 1985 with Kimche,
Schwimmer, Ghorbanifar, and Nimrodi. These meetings reportedly
dealt with intelligence on the situation in Iran and who might
want to cooperate with the U.S. Ghorbanifar also discussed the
offer to get hostages released and the weapons that Iran needed,
including HAWK missiles. Iran demanded an arms shipment before
each release while the United States and Israel pushed for
release in advance of any further arms shipments.
It is clear from testimony that the Iranians believed the new
channel with the U.S. would be productive. For example, they
appeared to expect to receive sophisticated weaponry such as
Phoenix and Harpoon missiles at some,point in the future.
Ledeen testified that he briefed McFarlane on these meetings.
He stated that this was a promising channel to pursue but that if
it continued on an arms for hostages basis, it would be difficult
to determine Iran's motives. Ledeen also suggested that if the
program were to continue there was a need to bring in an
intelligence service. Ledeen said McFarlane had a "bad feeling"
about the program and was going to stop it.
McFarlane testified that on November 17, while in Geneva for
the Summit, he received a call from Israeli Defense Minister
Rabin. Rabin requested assistance in resolving difficulties
Israel was having in a shipment of military equipment through a
European country onward to Iran. McFarlane told the Committee
that he called Colonel North, briefed him on the President's
August 1985 decision, and requested that he contact Rabin and
offer assistance.
According to notes from the Attorney General's Inquiry, North
said he suspected that the Israeli shipment McFarlane mentioned
consisted of U.S. arms. Reportedly, North told Meese that he
called Rabin and was told Israel was having difficulty in getting
clearance for a flight to a European country. Rabin told him the
flight involved moving "things" to support a U.S. rapprochement
with Iran. North said he then contacted retired Air Force Major
General Richard Secord, whom he described as a close personal
friend, for assistance. Secord was to try to arrange a large
cargo aircraft of neither U.S. nor Israeli origin for the flight.
McFarlane testified that North called him in Geneva to
explain the problem. The Israelis had failed to make proper
customs arrangements for a flight to the European country.
Further, the only aircraft they had available was an El Al plane,
which was believed unsuitable because of national markings and
documentation. McFarlane testified that=North -toldhim-McFarlane'
might have to call the Prime Minister of the European country to
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11
get the necessary approval. McFarlane stated that he did so,
explaining to the Prime Minister that a transfer from Israel to
Iran was in progress and that the U.S. Government would
appreciate assistance. North also contacted a CIA official and
obtained CIA's support in trying to arrange the necessary flight
clearances.
A White House electronic message from North to Admiral
Poindexter on November 20 indicates that North had a detailed
understanding of the HAWK plan by that time. This message
indicates that Israel would deliver 80 HAWKs to the European
country November 22 for shipment to Tabriz; five U.S. hostages
would then be released to the U.S. Embassy in Beirut; $18 million
in payment had already been deposited in appropriate accounts;
retired USAF Major General Richard Secord would make all
arrangements; and replacements would be sold to Israel.
According to documents received by the Committee, North continued
to keep Poindexter informed on a daily basis about plans for an
impending shipment of HAWK missiles to Iran and the release of
American hostages. -
The Committee received evidence that McFarlane contacted
Secretary of State Shultz and Donald Regan and advised them that
hostages were to be released and some type of arms were to be
transported to Iran by Israel. This evidence indicates that
McFarlane told Regan and Shultz that Israel would buy
replacements for these arms from the United States. While Shultz
was advised that HAWK missiles were involved, Regan said that he
was informed of this fact sometime later.
Regan testified that McFarlane informed the President in
Geneva that some type of arms shipment was being considered, and
that if the operation were successful, hostages might be freed.
Shultz expressed reservations to McFarlane, but according to
Shultz, was told by McFarlane that he had cleared it with the
President.
After many communications between Washington and this -
European country, efforts to obtain flight clearances failed.
Secord was central to the effort to obtain flight clearances.
U.S. officials in the European country were instructed to expect
to be contacted by a Mr. "Copp" and to cooperate with him. 'The
messages between CIA Headquarters and the European capital
indicate Secord was essentially directing the effort to make
arrangements for the flight.
Several witnesses testified that North then asked the CIA to
identify a charter aircraft that might be used. In response, CIA
proposed using its proprietary aircraft and advised the company
to accept this NSC related mission.
The CIA proprietary flew from Israel in the latter part of
November, carrying 18 HAWK missiles identified as oil drilling
spare parts. According to testimony received by the Committee,-
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12
esthat the cargo was actually
there was speculation at the CIA
arms. When queried by nations responding o the CIA the car overflight clearances as twhahceaffirmedithat thegflight was
office again asked North,
carrying oil drilling equipment and was on a humanitarian
to copies of cables received by the
mission. According
Committee, in order to overcomernin certainccaseslwere?
granting flight clearances, U.S. officials. authorized to inform high host government officials that the
humanitarian purpose of the flight relateddtopprstigts and that
highest levels of the U.S. government
assistance.
According to his testimony to the Committee and memoranda for
November 23, that
was first
the record he prepared, it was on Saturday,
John McMahon, Deputy Director of Central Intelligence,
informed of CIA's support role. In McMahon's view, the Agency
was merely providing a secure channel of communications to assist
NSC personnel seeking flight clearances for the Israeli flight.
According to the evidence availle andthekCom ittae, Mc Mc bMah n
riefing a for full approved provision of this support,
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, henstructed tt hat
no further CIA activity in support of the NSC operation conducted without a Presideeaithat1involvedtClAloff9cialsrbriefaction. McMahon also direct rkin, on what had transpired.
the CIA General Counsel, Stanley SPO ersonnel
Sporkin testified IlatmberlatdtheeDDCI'sirequestp and
in late November or early Dece shi f arms
learned from them that the CIA was infomrmed McMahon
to Iran. Later in the day, ared
that a Finding would indeed be necessary for such abeip~ep to be
authorized. McMahon dira~u~e Whaahawouldtprovadegthe necessary
for the President's sign of the NSC Iran
authority for the CIA's activity in support initiative.
was prepared by Sporkin, approved by DCI
This draft finding
Casey and delivered to Poindexter onsNovembert26. Thatdraftties"
Finding authorized CIA to provide it also contained language
seeking to free American llsages.
retroactively ratifying a previous activities undertaken by
U.S. officials in pursuit of this effort and directed the
Congress not be informed until directed by
Subsequent to the flight, no U.S. hostages were released.
of HAWK missile they
The Iranians were dissatisfied with the type received and believed they had been cheated. beheeSecretary of
State later stated _that_at that point
operation had collapsed and expressed relief that it was over.
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However, in the CIA, planning and support for future missions in
support of the NSC operation continued. The CIA official 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 between 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
President had signed the finding and had directed the CIA not to
inform Cong-Tess 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 ratifying previous actions. However, the Committee
has received no documentary evidence that any finding of November
26 or December 5 was ever signed.
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 7 to discuss Iran.
The Presidential Finding
In an electronic message of December 4, North provided
Poindexter 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 had assisted 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 discuss
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
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testified 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 disagreeing. There also is disagreement in the
Committee's record about whether McFarlane's meeting with the
Iranians in London was discussed at the December 7 meeting, or
what specific guidance was approved. Two participants did not
recall any discussion of instructions 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, who urged the U.S. to be more
patient and permit the Iranians to demonstrate their bona fides.
According to McFarlane, he told Kimche his mission was "to close
down" the operation. He and North then met with Kimche, Nimrodi
and Ghorbanifar, to whom McFarlane made "emphatically" clear that
the U.S. would engage in no more arms transfers. According 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, 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 concerned 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 McFarlane
reported on his trip, North summarized the options on the Iran
progam to Poindexter-.- North wrote that Ghorbanifar was a.
reliable interlocutor. He noted that the U.S. should gain
operational control to avoid past problems experienced with
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15
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 hostages; (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 indicated 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 by Ledeen to Europe. At this time, Ghorbanifar
again p;ovided 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 Ghorbanifar. 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
polygraph. Ledeen contacted Ghorbanifar abroad and obtained his
agreement to the polygraph which was administered in mid January.
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 many 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 deception to impress up. It is necessary
to be careful in talking with Ghorbanifar." Casey told the
President that the polygraph in January would help.
According to evidence received by the Committee, the
polygraph indicated deception by Ghorbanifar on virtually all
questions, including whether he was under control of the Iranian
government, whether he knew in advance that no American hostages
would be 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.
Nevertheless, the White House chose to continue to work with him
and, according to one CIA witness, it was North who was
responsible for keeping Ghorbanifar on the project after he
failed the polygraph. A senior Directorate of Operations
official testified tha_t.while -CIA had suspicions about the cargo
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it was not until these discussions
on the November 1985 flight,
with Ghoa er in early January that they knew that the
C officials
subm rcarried arms. Other doctmattieast someiClAd
aircraft
Committee, however, indicates tha o much earlier, and
.
overseas were awae ortediththe is naturetoohef the
at least one repep
In early January, 1986, Prime Minister Peres.sentnPmiramaNyr,
Terrorism Advisor to the Israeli Prime Mini's ter,
to meet the President aboutthe Iran initiative. Accordng to
evidence received by the Committee, Nir-urged--the-President and
ndexter to reconsider the transfer of arms to Iran for the
Poi
release of hostages.
The Committee received copies of various draft findings
signed d early January. One finding, dated Jry
prepared was
prepared during after review and discussion
signed by the President with the Vice President, Regan and Poindexter. This finding
instructed that the DCI not notify Congress until otherwise
directed by the President. The cover memorandumoattathedasoythis C finding, written by North, stated that he had testimony and
concurred. According Wing of the
received Casey the Committee, prior to the sig
January documents and
nuaumery y6 6 finding, eciby Casey, North and Sporkin had met to discuss it. Sporkin testified that thehat but i North
to
objectsspecifically refer to
ro ram was described as helpnot
objected The purpose o of f the p 9 It was agreed
establish a more moderate government in Iran. from
to refer to hostages because of the anticipated objections
Shultz.
On January 7, the President met ins Casey, oval officePoithether
Vice President, Shultz, Weinberger, C
to discuss the Iran program. According to participants who testified, two officials -- Shultz and Weinberger -_ atortheuedse
providing arms to Iran. According e and
strongly against p the channel op
to Iran. However,
participants, the President-wished to keep
left unresolved the issue of providing
this Committee received conflicting testimony as to whether a
if so, what the content of that
finding was discussed and,
discussion was.
o
Some participants clearly reindindiuauthor~zeathenpirng/ram.
of
approval by the President of a f g to of notification
They also recall a discussothersadownothtecall specific
but agree the thrust of the meeting was
discussion would be legal.
discussion of a finding,
to go ahead with the Iran initiative. There was re little
discussion of the issue of notification of one but the
testified that his impression was that the
Aorney Gwasrto tbe completed within a short time, 60-90 days.
opeperation
bse uent to. the January meeting, legal analysis of the
Su Q lement-.the program continued.
finding and various-means-t? imp
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The Department of Defense insisted that the sale of arms by the
Defense 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 Counsel 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," sufficed 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 question 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 hostages. 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 notification 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
signature. Poindexter orally briefed the President on the
contents of the finding, in the presence of the vice President
and Regan. According 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 memorandum 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 approved. 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 aide, major General Colin Powell, to arrange for
transfer of the weapons under- the-Economy Act to the CIA, and
that the matter was to be closely held at the d-irection of the
President.
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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
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
informed by the DDCI or the DCI that CIA was going to provide
support to a White House in-itiative 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 Finding the day before and that CIA would
provide support for the activity, 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 situation. Documents received
by the Committee indicate that on January 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
implementation 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
connection with the first delivery of 1,000 TOWs. (Then-General
Counsel Sporkin later told Attorney General Meese that a planned
European 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
financing 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 Lahad 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-TOwsfor-repayment to Israel. Secord
was to be in charge of aircraft requirements. The plan included
a prediction that Khomeini would step down on February 11, the
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anniversary of the Iranian 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 Poindexter 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, Amiran Nir and Prime Minister Peres. The NSC=s---Executiv_e___
Secretary later testified that he was kept out of the program
throughout.
North's plan called for intelligence samples to be given to
Ghorbanifar in Europe on January 26, 1986. According to
testimony and a cable from Deputy Director McMahon to Director
Casey, McMahon argued strongly with Poindexter that this should
not be done, both because Ghorbanifar could not be trusted and
because intelligence could give Iran an advantage in the war;
but, McMahon testified, Poindexter insisted, and he obeyed.
According to testimony of Robert Gates, who was Deputy
Director 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 intelligence relating to Iraq but that he was
overruled by the NSC, and CIA was directed to prepare the
intelligence material. A CIA official 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 documents 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
"notional 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
account in the same bank that was controlled by Secord. Secord's
account 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- DoP--could begin to move the materiel to a
staging area. According to testimony received by the,
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Committee, on January 21 North tasked the CIA to open a Swiss
bank account for their part of the funding chain. According to
testimony by CIA officials, CIA personnel decided that the
fastest and most secure mechanism 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. Testimony and documents also
indicate that, in practice, DoD needed only an assurance that CIA
had the requisite funds in its possession. Actual payment
occurred months later, after DoD had formally billed the CIA for
the arms.
On January 18, MG Russo was tasked to provide 3,504 TOW
missiles to CIA upon certification that CIA had the funds set
aside. On February 7, the Army began to consider whether a
provision of the Intelligence Authorization Act for FY 1986
required congressional notification of this transfer of arms to
CIA. On the 13th of February, the Army's Office of the General
Counsel determined that congressional 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
available, 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 and
.returned them to Israel on February 18. Testimony indicates that
Khashoggi received four checks for $3 million each from
Ghorbanifar, and that $1 million went to the investors as
interest, while another $1 million covered expenses and profit.
According to documents and testimony received by the.
Committee, 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 Committee has no other indication that a
meeting took place at that time.) CIA prepared, with some
reluctance, according to CIA witnesses, the intelligence material
that was provided to Iran. At one point, according to testimony
and documents, North asked Poindexter 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
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L1
with Albert Hakim, an
U.S. side included North and Secord- as and
Iranian-American and business associaten to Se -cord? as at,
both Iran
interpreter. The intelligence
there was discussion of the common o vet threat that
and the United States saw in the region. n February, the same Americans met wit
and an ate Iranian official. Before this meeting, crtai
to be released; the capture of two
prisoners were expected GhorHizballah
any
Hizballah in mid-February derailed such
Israeli soldiers by with the Iranian official was not very
expectations. The meeting memo to McFarlane that Iran shared
successful. North n about by but that tthe American concebStatesewas Soviet tvery great. Itn their
North stated ayt.
distrust of the United
electronic memorandum to McFarlane, problem.
c
Gh North at's translation of his remarka s had distorted much o
t
what at Nohad said and that thiser, that "it became apparented
A later North memo stated, uately transmi
our conditions/demands had not been adeq According to
to the Iranian Government by the intermediary.
ci l HAWK
received by the Committee, the Iranian off
arts The
testimony ecially needed spare p
indicated that Iran eSP rather than just more TOWS.
anti-aircraft missile systems, hal de took his request and ordered therSed to consult with
1,000 side
TOWS to be delivered; the Iranian age and to
prospects for a higher-level meeting
1,0
his superiors on the . The 500 TOWS were delivered in late
e that
return for further meetings would hostages were releasedat thethostag later wrote
be
February; no meeting th
it was agreed at the February in Iran, after which the
released during a high-level meeting Regan testified that the
U.S. would sell Iran 3,000 more TOWS.
President was informed of the sale of the 1,000 TOWS to Iran.
in the wake
the Committee,
According to documents received by official, remained
meeting with the Iranian He
of the Ftbtuaty es would be released shortly. the next
confiden ae sent t that the hostages g in Euroseic, so he
ndexter and Cmeaseetying
week, utfound McFarlanepoib
u the next day,
week, but with Poindexter. By for the
appealed to McFarlane for help o to Europa
Poindexter had agreed that McFarlane should g
r showed Shultze terms
Shultz testified that Poindexte
would
meeting.
of reference that McFarlane would g
d. Shultz testified that he was told the hostages
approve eting.
be released at the time of the
Evidence received by the Committee indicates Director Casey
with the Iranian official.
may have agreed to another meeting Poindexter showed the
The talking points prepared for him the great concern over who
terms of reference to Shultzhed~ole e of interpreter was
final
would attend that meeting. T
troubling. Ghorbanifar had been the original
particularly
particularly but the CIA retained sev alehadubeen in his contact
reliability. Although one CIA Off . ici
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with him and had advised working more closely with him, others
indicated that Ghorbanifar continued to be untrustworthy. The
use of Hakim as an interpreter was preferable, but CIA was
concerned over Hakim's possible 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. Director Casey proposed that the President call Peres to
reassure him that the program would continue and to thank him for
Israel's assistance. 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 McFarlane 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
official noted that North was planning to take a hard line with
Ghorbanifar, while Israel was possibly providing additional
non-U.S. arms on the side to move the process along.
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. Government.
At the meeting in early March, Ghorbanifar conveyed the
information that senior Iranian officials agreed to a U.S.
delegation visiting 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 emphasized the February under-standing that
deliveries would not preceed the hostage releases. They
deflected the demand for PHOENIX and Harpoon missiles by arguing
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that Iran's launchers for the missiles were inoperable. On March
11, according to Secretary Shultz's testimony, 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 discussed 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 toldU.S.
officials that he had met with several high official's-and that
the meetings had been difficult. According to a CIA official,
Nir, with whom Ghorbanifar also spoke, said Iran's proposals were
still unacceptable; 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
especially upset. An "NSC consultant," probably Ledeen, told one
official 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
proposed 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; 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
orchestrated. 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
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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 apparently 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
Washington 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 further 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." The memo is
discussed further in the section on the diversion of funds.
Attached to the April 4 memorandum were draft "terms of
reference" 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 high-level Iranian officials whom he
intended the American delegation to meet.
In mid-April, further difficulties arose. Although
Ghorbanifar assured 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
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: J
parts were delivered; Iranian ecouldanotnpossibly carry
said, by the realization that McFarlane
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
LibyanetargetsSin
response to Libyan involvement
hostage Peter
?that
reaction ortedly at the behest of
interests.' In the aftermath
Rilbourn was killed by Tpress stories have suggested
Libyan leader Muammar Qadhafi. Some p
that the U.S. attack resuindacatesdelays
that insteadmIranowantedrto?
A White House chronology
accelerate planning for the mission, so that it wouldCnotbe e
accused of involvement in the Rilbourn death. The mitte
has found.no other documentation onyrindicating that
these events had an impact arms sal pogram.
The Defense Department, meanwhile,
requestedu234ttypescofdHAWR
the HAWK spare parts. CIA formally
parts in mid-April, and two HAWK
theaHAWKasparenpartsmthat.the
By the end of April, the
Army had located was fixed at $4.4 million, including
transportation.
Service
On April 22, the U?S?~~Customs
involvinguthedsaleeoflarms
arrests in a major '1sting Hashemi, had agreed to
to Iran; an Iranian arms dealer, Cyrus
cooperate with Customs autorritties. Accorbanif r,testiwas inf the
Switzerland, was jailed for a Y to o bee CIA consultant, officials failed scheme. heThis devnelheld
he was an investor in the fa
likely to make Ghorbanifar (and Iran) more eager to do business
through the one reliable channel to the United States, but it
also made Iran ever more insistent upon not giving
the money in advance.
By late April, the lack of progress in arranging the dec high-level visit to Iran had led the downUunlessfthereswas movement
s
that the operation would be shut
within 2-3 weeks. A CIA official wroteLhatithradifferences
between the United States and Iran apped
suggested the sale of two HAWK radars to Iranatidnrenewedth Iran.
emphasis upon a long-term military supply
The CIA official noted that Israel was eager for such
U.S.
relationship and might already be quietly supp
sales. Then Ghorbanifar and/or.Nir apparently proposed that the
mission to Iran be only a preliminary meeting. U.S. officials
rejected this idea, noting that if bruary?rtheredwouldobeano needefory
what had been agreed to in FOreMay, 5, a CIA official warned
House
any preliminary meeting.
Director Casey and thahots"tthae
initiative to secure
remains dead in the-.waxer.?
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At the end of April, documents indicate that the U.S. Embassy
in London became aware of the fact that Ghorbanifar and Khashoggi
had approached a major British arms dealer in hopes of getting a
$50 million line of credit for arms sales to Iran with U.S.
approval. The British dealer 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 summarized Ambassador Price's report
which noted that "the State Department has been cut out." On May
3, Admiral Poindexter spoke with the ambassador and recommended
that he discourage the British dealer 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, Secretary 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 Admiral 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 problem. Testimony and documents indicate that Ghorbanifar
frequently 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 unwilling 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 discussed
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
remained 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.
officials moved to-get- ready for- a trip to Tehran. The Defense
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Department 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
investor and two Canadians. Testimony indicates that Khashoggi
was given post-dated checks totalling $18 million, which included
20 percent interest for a 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 support the contras.
Director Casey has testified that on May 15, the President
approved the McFarlane mission to Tehran. On the same day,
according to a later CIA letter to the Committee, the Hyde Park
Square Corporation deposited $6.5 million in the CIA's account in
Switzerland, 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
testimony, 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
assured that the hostages would be available when the Americans
arrived 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 accommodations 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 American interests. They indicate that the
United States wants -ne-ither- an- =Iraqi victory or an -overwhelming
Iranian victory in the Iran-Iraq war. McFarlane's terms of
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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 divergent 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. communicators. McFarlane told Attorney General
Meese that he brought no inscribed Bible and that LTC North
brought the cake that was 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 indicate that, whether or
not McFarlane actually carried a false passport, 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 report'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
Iranian 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 interfered with normal schedules. McFarlane began the
discussions 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 captors 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. deiegation were surprised at this
allegation, but they sutseguently learned that Ghorbanifar had
given the Iranians the :"pression that they would bring half of
the HAWKs with them: -e !.S. delegation continued to insist
that the hostages must :.:s_ re f:eed before any further delivery
of arms.
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When no progress could be made, McFarlane
esthreatenedhio end
the discussion and leave. The Iranians p the not proper behavioratMoFa~haeehehwouldtreturnrif there were an
negotiations, indicating it was for
agreement. The Irsetaof discussions, andhtherAmerican team came
them m to to have this
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
generalities and continually assured the U.S. team that they were
making progress on the hostages. But McFarlane, while suggesting
the sorts of future the be
insisted upon concrete a
taken. He wired Poindexter that the Iranians had produced but
competent negotiator tOlead their team
the negotiationsdtoay, that McFarlane had remained outside 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 The the
Lebanese demands that had been raised the previous day.
American 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 thek28t , the cc hief Iranian
official asked to see McFarlane. They
gain control of the othegHAWKtpartsnwouldoarrivedwithinaacfew
that the remainder of gave them until
early th
hous of e tneextemorning, claimingathat he had linstructions to
leave on the evening of the 2eahthatnhissdiscussionsghadobeenlra
Poindexter, McFarlane indicat ries low-key and that the common interests
officialehadtclearlycbeen told,
had been understood. The Iranian
however, that the balance of parts would e becommendedd
only after the hostages were
that, despite the vastly improved tone in the discussions, the
President authorize him to 2th
clear evidence on an impending
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
released before the delivery.
the U.S. team was departing, the delivery would not be called off
until 9:30. There was no sign of an impendingdrelease, however,
and the President gave McFarlane authority to ci when to
leave. The U.S. team left 9A Stlater ated thatedespitecIran~sogy,
drawing upon McFarlane 's messages,
unwillingness or inability basos btain the release
the visit "established the
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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 delegation member about the matter, again
without obtaining a satisfactory explanation.
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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
President had decided there should 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 intelligence officer on the trip to
Tehran with McFarlane recommended 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 prepared
by the NSC staff indicates that on June 10,1986 Majlis speaker
Rafsanjani made a speech that guardedly mentioned Iranian
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
together a new schedule of arms deliveries and hostage releases.
According to one report, Iran was considering whether to release
a hostage before any further deliveries of arms. Another report
suggests 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 schedule-s-we.r.e -floated _without success. Iran .had .a .
price list for HAWK parts, and the gross discrepancies between
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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 releases. 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
movement by the United States unless a hostage was released.
According 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 delivered 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
would happen next. Casey argued that Ghorbanifar, while
uncontrollable, "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 resolution 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 approval
to ship the remaining HAWK parts to Iran. North also sent an
electronic message to McFarlane emphasizing that Father Jenco's
release had been an outgrowth of McFarlane's mission to Iran,.
rather than the result of any Syrian role. The document includes
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 indicated he was briefing the vice President at
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the request of Prime Minister Peres. He conceded the problems
encountered in the program, 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 direction 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
channel of communications with Iranian officials. In mid-July,
Albert Hakim and a U.S. Government employee met with an
acquaintance of Hakim's who was interested in putting together
arms deals. The acquaintance knew of an Iranian official who
wanted to contact 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 acquaintance was willing also to consider
deals for non-lethal items; Hakim reportedly stated that he
wanted to pursue that avenue irrespective 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
reported 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. Government.
For the first channel, August 1986 was a time of continuing
efforts 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
percent 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 actually prepared.
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According to documents and testimony received by the
Committee, in early August, efforts were resumed in the old
channel to arrange 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 offered 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 remaining 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, preparations for a shipment of 500 TOWS had begun.
According to documents received by the Committee, on
September 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
proposal, 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
Poindexter 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 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
approach attractive to the Iranians; that the first channel may
now 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 releases, and so supported
expeditious efforts to meet the plan proposed by Ghorbanifar,
while holding 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 sh-ut down and put on hold, and the
new channel was to be developed instead. According to a
memorandum 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-- no-ted a--figure o,f--$-4 mil-lion. Further,
according to testimony received by the Committee, others were
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35
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 diversion 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 Poindexter'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 appreciation 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
Committee, 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 between the Un-i-ted 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 opposed 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
Committee, the U.S-;~--team told the Iranian official that to show
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36
U.S. seriousness, 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 editorial. 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,
Khashoggi 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 belonged to some investors and had been deposited in an
account belonging to Lake Resources, a firm connected to North,
Secord, & 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 Iranian arms sales having been diverted to other U.S.
projects, including the Contras". Gates directed that Casey be
briefed and the CIA officer testified that he met with Casey on.
October 7 and repeated 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 investment after 30 days;and that the Canadians
had not been repaid and were threatening 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.)
According to documents received by the Committee, during this
same time frame a meeting was scheduled in Europe with the new
Iranian channel. -In-preparation--fo-r--this me-eti-ng-,--North drafted--
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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 testimony by Gates, during the course of this
briefing, he asked North if there was any CIA involvement in
North's efforts on behalf of private 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
recommended to Poindexter that the President ought to reveal the
initiative 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 subsequently 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
Furmark to discuss the Iran initiative and xhashoggi'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
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38
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
release of additional hostages.
A follow-up meeting with Furmark in New York with two CIA
officers occurred on October 22. According to documents and
testimony received by the Committee, in addition to discussing
the sources of financing for the various shipments of arms to
Iran, Furmark 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 upon their
return, included the subject of possible diversion of funds to
the Contras. A summa-ry--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
received 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
supplying 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
Committee, 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 interest." 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 November 10.
According to documents.received_by the Committee, Poindexter,
by cable, rejected'-th-e -Secretary'sadvice,- citing a need to get
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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 f rom Kfiashoggi were pinning to -sue-th-e- Saudi arms -
dealer and a private firm into which they paid the $11 million to
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
Iranian, the topics included hostage 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
Iranian initiative. The CIA thereupon began to prepare the
materials needed for Casey's presentation. The CIA officer who
had dealt directly 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
November 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 judgments 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
statements being made about the Iran arms affair would not stand
up to scrutiny. -Shultz-als-o informed Meese of his feelings on
this matter. A Justice Department staff member then obtained
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information 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--Cong-r-ess-iona-l--Committees:-- Ac-coord-ing t-o ---
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 completed prior to the 2 p.m. NSC
meeting on Monday. According to testimony by Meese, he then
discussed his mission with FBI Director 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
assembled 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
persons 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
beginning. McFarlane stated that Meese seemed glad to hear this,
as an early Presidential approval would-legitimize subsequent
acts. According -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 on Saturday. Meese
testified that this was the first time that he felt as if
something was "not in accord with the President's plan."
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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 President it was in terms of a strategic linkage.
With the President-,._.sa.i.d-No.rth, 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
officials 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 supporting terrorism and agreed to negotiate an end to
the war with Iraq. U.S. hostages, said the official, must be
released unconditionally. The Iranians, in turn, cited a
previously-agreed upon nine-point agenda which included the
repair of PHOENIX missiles, an approach toward Kuwait about
releasing Dawa prisoners, and shipment 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 Durenber-ger-, -Chairman of. the ...... Intelligence Committee, 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
diversion of funds to the Contras. The Committee was not
informed of this meeting until January 20, 1987.
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SUPPORT TO THE 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 resistance. 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
reports 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 encouraging the contras and advising people
who volunteered support that they should contact the contras.
McFarlane further testified 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 with both. North was
visiting Honduras and goi-ng-to meetings and otherwise 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
described 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 Feburary 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
November 1985, Nor_th_.-rec.eived..as.sis.tance.. f.r,om_ Secord . in resolving
problems with an arms-t-ransfer to Iran. A White House document
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dated November 22, 1985, indicates that North and Secord were
already 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 parachutes 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
circumstances 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 operations
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
connection 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 November 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 Israeli's
,own funds could be used to support 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 Defense 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 Ghorbanifar 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
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reportedly stated that the Israelis told him they had "doubled"
the cost of the shipment apparently because the Americans were
involved. Ghorbanifar reportedly stressed how upset the Iranians
were at not getting the $24 million 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 pr--o-jest. -- 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 Iranians 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 or after April 4, 1986, an undated White House document
(the "Undated memorandum") was prepared that outlines past
developments 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 the
transaction would be used to purchase critically needed supplies
for the Nicaraguan Democratic Resistance Forces. The Undated
Memorandum described this material as-essential to cover - -
shortages in resistance inventories resulting from their current
offensives and Sandinista counter-attacks and to "bridge" the
period until Congressionally-approved lethal assistance beyond
"defensive" 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.
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 Memorandum.
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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-.Attor-ney___Generah- i--nqu-ir-y-,------
North stated that he had not discussed the matter with the
President. According 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 President 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
suspect.
Notes taken at the meeting further reflect that North said
Presidential approval of something would be reflected in the
working files. Asked whether he would have a record if the
President approved in this case, the notes reflect that North
replied affirmatively, 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 Iranian money from profits of the arms deals and
saying he understood 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 transcation 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 contras. 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 Nicaraguan resistance.
Moreover, McFarlane testified that when he asked North on
November 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
involved beyond Po-i4nde=xte-r-.?
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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 contacted Adolfo Calero and as a result of that 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- fu.rthe.r . reflect that North
identified two transactions from which money may have been
diverted went to the contras: 1) the transfer of 1000 TOWs in
February [1986], from which $3-4 million may have gone to the
contras; and 2) the transaction [in May 1986] involving payment
for HAWK parts and payment 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 U.S. funding made it unnecessary. According to North, Nir was
upset because the October price was not the same as charged
earlier.
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 the Israelis arranged for the money to
be deposited. Meese testified that North was very definite that
the money got to the Nicaraguan resistance forces, but could not
remember 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
resistance 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 Congressional re-strictions on soliciting funds.
Meese testified that he did not advise North of his right to
counsel because he did not consider his inquiry to be a criminal
investigation.
Meese testified that North did not explain how he reported
the arms sale matter to Poindexter. Meese testified that he got
the impression that there was very little real communication
about it between North and Poindexter-and- that North was-not -
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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
testimony 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 confident the President would not have approved it if he
had been told 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
meetings occurred on April-23. white House documents list as the
general 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
Secretary 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 concerning unauthorized contacts with private
supporters of the Nicaraguan resistance.
According to-documents and testimony received by the
Committee, 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
approved on May 15, 1986. These Terms. of Reference appear to be
identical to the Terms of Reference dated April 4 which were
found in NSC files attached to the Undated Memorandum discussing
diversion of funds to the contras. Second, Poindexter gave the
President 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 significant support appeared readily available. The
memorandum stated that the $100 million aid request was stalled
in Congress. Poindexter 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,
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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 Reference 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
President, Craig Fuller, Secretary-Shultz, Ambassador Habib,
Assistant Secretary Abrams, Secretary Baker, Secretary
Weinberger, Under 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
Contadora, and the $100 million aid package before Congress for
the Nicaraguan 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 considered -- seek to get reprogramming through Congress or
go to other countries. The final decision was to look at both
approaches. According 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 countries. 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 contribution pursuant to this policy.
Regan recalled such an NSPG discussion, although not the
precise date of may 16, and testified that there was absolutely
no mention of the possible use of funds from the Iran arms sale,
including sales by third parties or countries, to provide
humanitarian or military 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, 1986
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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
appropriated yet and money was needed to bridge this gap between
the previous $27 million [in humanitarian aid] and passage of the
appropriation 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
expenses and authorize them from that account. Abrams agreed,
and the task force contacted UNO Secretary General Naio Sommariba
and 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 and his accountant on the bank account. According to
testimony received by the Committee, Abrams needed the account
number urgently 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 America 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 decided to use the account opened by North without
procedures for monitoring expenditures from the account.
Abrams testified that in September and October the State
Department sought assurances from the donating country that they
were going to give the $10 million and would deposit it in the
account 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
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November, Abrams turned over the information on the account to
the State Department 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
memorandum reported that on the previous Friday, September 12,
Israeli Defense Minister Rabin had offered a significant quantity
of captured Soviet bloc arms for use by the Nicaraguan
resistance. These arms were to be picked up by a foreign flag
vessel the week of September 15 and delivered to the resistance.
The memorandum advised 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. Poindexter 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
discussed. Regan testified that the subject was not expected to
come up at the President's meeting, but that if Peres raised it,
the President 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
meeting.
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."
In testimony to the Committee, the senior CIA analyst on the
Iran project stated that he began a thorough analysis of the
intelligence on the program in mid-September 1986 and became
concerned that Iran was being overcharged and that the funding
might have been diverted for other projects including support for
the Nicaraguan resistance. - --
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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 separate 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, including the contras.
FURMARK
According to testimony by Roy Furmark, a New York
businessman 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. Furmark testified that at the end of September,
Khashoggi asked him to visit Casey to get the U.S. to resolve the
financial problems. Furmark testified that all those involved
considered the Lake Resources account at Credit Suisse to be an
American account. Furmark testified that he had known Casey for
twenty years in business matters, OSS dinners, et cetera.
In a letter to Attorney General Edwin Meese dated late
November 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 tetified 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 -
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been involved in a Ghorbanifar-Israeli channel to the Iranians
from its inception. 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
analyst, 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 Furmark.
Gates testified that it was possible that during the October
7 meeting Furmark may have raised with Casey the possible
diversion 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 information.
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 program 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 involvement in any funding efforts.for the contras. North's
response reportedly 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 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 -Ghorbanfar might disclose to the-press
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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 allegations of improper diversions of
money to Central America, misappropriation of funds by arms
dealers, and indications of funds needed for some unknown purpose
by an Israeli off-ici_al.-
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 Poindexter, 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 apprise the CIA General Counsel of the matter 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 anything 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 material 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
efforts. 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 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
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employees, concerned, subsequently 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.
government 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 October 17 and November 7 discussed their meetings with
Furmark. - _._.__ .__ _.. . ______. -?--?.- _ _-.
The memorandum dated October 17 recounted a brief
conversation 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-transaction.
The senior CIA analyst's memorandum dated November 7
described 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
support 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
testimony 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
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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,
Ghorbanifar, and Nir in May.
A signed copy of this memorandum has not been received by
the Committee. In his November 25, 1986 letter to the Attorney
General, 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 apparently 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
believed 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, testified 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
reportedly 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 accomplishments
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
Wednesday, November 19, Casey was briefed in preparation for his
appearance before the Senate Intelligence Committee set for
November 21. Testimony: re-ceived by-the Committee -indicated that
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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 contras. 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 diversion of funds to the contras on November 18-19.
The Comptroller 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
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
develop in the CIA by early November that some diversion might be
taking place. The IG testified that he asked for the senior CIA
analyst memos about suspected diversion of money to Central
America on November 13 and that Casey and Gates saw Poindexter
the next day to discuss the issue again.
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 analyst's third meeting with Furmark, he had only a vague
recollection 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 meeting 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
numerous important omissions and misstatements of fact about the
program (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,
Poindexter, 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 heleft before the meeting was over, but that
Cooper stayed. In the evening, Meese received a secure call
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advising him that other Justice Department officials working on
the Iran matter were concerned about gaps in information and
inconsistent recollections.
On the same night of November 20, according to notes of the
Attorney 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,
particularly in view of upcoming testimony to Congressional
committees. The President reportedly asked Meese to review the
facts to get an accurate 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 reportedly suggested that
Meese's review be completed by 2:00 p.m. 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 Attorneys 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 possibility of diversion of funds.
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The next morning, Saturday, November 22, while Meese was
meeting with Shultz, members of the Attorney General's staff
including 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 shredded 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 discovery at lunch. Meese testified that following a
meeting with former CIA General Counsel Sporkin in the afternoon,
Meese made an appointment 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
arranged 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, 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
-subsequently said he was sure Casey did not mention the possible
diversion of funds.
McFarlane testified that on Sunday morning, November 23,
North called him and asked to meet him in McFarlane's office.
According 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 approved 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 than Green
was Secord's lawyer.--------
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At 2:00 that afternoon North met with Meese, Reynolds and
Cooper, and another Justice Department official named Richardson,
who took extensive notes. According to the notes, Meese began by
explaining that he wanted to get all the facts from everyone
involved 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
Poindexter 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 recalled 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.
Later that morning Meese also talked to McFarlane to find
out what he knew about money being available to the Nicaraguan
resistance. 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 phone; 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
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had come across indications that money from Iranian arms
transactions may, have gone to the Nicaraguan resistance. Meese
testified 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
expletive.
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 possible." 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.
According 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 because 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 Administration.
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 tremendous 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 strongly supported the Nicaraguan resistance,
such support should be'provided by lawful means.
Meese testi-f -ed---t-ha-t--he- talked with the Vice President that
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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.
According 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 Nicaraguan 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 individuals 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 repeated 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 apparently told Casey that the Iranians or the Israelis
owed Ghorbanifar 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
conversation, 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
occasion" and that the worst thing for the President would be the
appearance of covering up. The emphasis was on getting-it out to
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62
the Congressional leadership and the public and, in parallel with
that, commencing a criminal investigation.
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 transaction 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 afternoon.
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
November 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
hearing to review implementation of U.S. Nicaragua programs. In
response 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 information. He said he did not feel he had
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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 accounts 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 Nicaraguan resistance.
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
funding for the Nicaraguan resistance generally was funnelled
through offshore bank accounts in the Cayman Islands and Panama
controlled 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
financial status of the Nicaraguan resistance, there was no
unusual infusion of funds to the Nicaraguan resistance in 1986.
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II. Unresolved Issues
The Intelligence Committee has, as reflected in this report,
gathered 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
recommends 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
Committee, 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
planning 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 resistance?
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 resistance? 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
individuals acting independently or on behalf of the U.S. in
planning and implementing the sale of arms to Iran- and the
possible diversion of funds to the Nicaraguan resistance
authorized by the officials of the U.S. Government?
6. When, by whom and to what extent were the activities of
individuals 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 Nicaraguan resistance made known to officials of the
U.S. Government?
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7. How were funds raised by or with the participation of
U.S. officials 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 purposes 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 authorized 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 limitation, the sale of arms and the provisions of
intelligence, consistent 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
enrichment 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
determined, 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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