Iran–Contra Affair

A political scandal in the United States, came to light in November 1986 during the Reagan administration; senior Reagan Administration officials secretly facilitated the sale of arms to Iran, the subject of an arms embargo with the hope that the arms sales would secure the release of American hostages being held by the Lebanese Shia Islamist group Hezbollah, and allow U.S. intelligence agencies to fund the Nicaraguan Contras:


Iran–Contra Affair

The scandal emerged when a Lebanese newspaper reported that the U.S. sold arms to Iran through Israel in exchange for the release of hostages by Hezbollah.

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Iran Payment Found Diverted To Contras; Reagan Security Adviser And Aide Are Out

By BERNARD WEINRAUB
Special to THE NEW YORK TIMES

Washington, Nov. 25--President Reagan said today that he had not been in full control of his Administration's Iran policy, and the White House said that as a consequence up to $30 million intended to pay for American arms had been secretly diverted to rebel forces in Nicaragua.

At the same time, the President announced that two men he held responsible--Vice Adm. John M. Poindexter, the national security adviser, and Lieut. Col. Oliver L. North, a member of the admiral's staff--had left their posts.

With the Administration already in turmoil over the earlier disclosure of clandestine arms shipments to Iran, and with speculation rampant about a major overhaul of the White House staff, the President's statement seemed to deepen a sense of disarray. By all accounts, Mr. Reagan now faces the most serious crisis in his six-year Presidency.

Shultz to Control Policy

The State Department, meanwhile, said Secretary of State George P. Shultz had been given control over future Iran policy, authority that apparently met his condition for remaining in office. State Department officials, including Mr. Shultz, have said they were left in the dark on much of the Iran operation.

Mr. Reagan stunned legislators and ranking Administration officials by announcing in a televised session with reporters that he had not been "fully informed" of some details of the Iran operation and that Admiral Poindexter and Colonel North were leaving after "serious questions of propriety had been raised."

Inquiry Still Under Way

Mr. Reagan said that, "although not directly involved," Admiral Poindexter had "asked to be relieved of his assignment" and would return to Navy duties. Colonel North, the President said, "has been relieved of his duties on the National Security Council staff." Colonel North was widely reported to be the central figure in the Iran arms deal.

After Mr. Reagan's announcement, Attorney General Edwin Meese 3d said the Justice Department was still investigating how Nicaraguan rebel forces, known as contras, received "somewhere between $10 and $30 million" paid to "representatives of Israel" funneling the arms to Iran.

Israeli and American sources said today that a Saudi arms dealer played a central role in financing the Iranian purchase of arms transferred by Israel to Iran on behalf of the United States.

And in its first official comment of the Iran affair, the Israeli Government said it had transferred arms to Iran at the "request" of the United States and did not know that some payments for these weapons were channeled to the Nicaraguan rebels.

In San Jose, Costa Rica, and in Miami, spokesmen for the Nicaraguan rebel coalition said they knew nothing of secret transfers of funds to their organization arranged by Colonel North.

'Only Colonel North Knew'

"The only persons in the United States Government that knew precisely about this--the only person--was Lieutenant Colonel North," said Mr. Meese. "Admiral Poindexter did know that something of this nature was occurring, but he did not look into it further.

"C.I.A. Director Casey, Secretary of State Shultz, Secretary of Defense Weinberger, myself, the other members of the N.S.C. none of us knew.

"The President knew nothing about it until I reported it to him," Mr. Meese told reporters in the packed White House press room. "I alerted him yesterday morning."

Later the Attorney General said a third person aware of the diversion of funds was Robert C. McFarlane, former national security director and a central figure in the plan to send arms to Iran. Mr. Meese said Mr. McFarlane was aware of the scheme in "April or May of 1986 at a time when he was no longer in the Government."

Asked why Mr. McFarlane failed to say anything to Mr. Reagan, Mr. Meese replied, "I don't know."

No Comment Available

Mr. McFarlane was reported to be out of the country. At his home in nearby Bethesda, Md., his wife said he would have something to say on Wednesday. Admiral Poindexter and Colonel North were unavailable for comment.

Some members of Congress expressed disbelief at Mr. Meese's account. "Surely someone else had to be involved," said Representative Jim Wright of Texas, the Democratic leader.

Mr. Reagan said that he would name a commission to examine the role of the National Security Council staff, which directed the Iran operation, and that the Justice Department would undertake a full-scale investigation of how the money was handled to determine whether Federal crimes were committed in channeling money to the contras at a time when Congress had barred military aid to them.

Unanswered Questions

The Administration's account, admittedly incomplete while its investigation continued, left several questions unanswered, among them these:

Whose idea was it to use money from the sale of arms to help the contras and who authorized the Israelis to make the deposits?

How did the Israelis get $10 million to $30 million more than the arms were said to be worth? Or were the arms worth more than the reported $12 million?

Which Israelis handled the transactions and the deposits? Were they officials or private individuals?

Did other American officials know of this plan to aid the contras?

When did the Admiral Poindexter decide to resign and why? When did he first mention it to White House officials?

Among those mentioned as successors to Admiral Poindexter, Administration officials said, were Secretary of the Navy John F. Lehman Jr., Max M. Kampelman, chief United States arms negotiator at Geneva, former Senator John Tower of Texas, Brent Scowcroft, head of the National Security Council under President Ford, and Paul Laxalt, the retiring Nevada Republican Senator and a close friend of Mr. Reagan.

In the meantime, Alton G. Keel Jr., Admiral Poindexter's deputy and a longtime Government official, was named acting head of the National Security council. Mr. Meese said President Reagan would name a permanent director "as soon as possible."

Asked if Colonel North would be prosecuted, Mr. Meese replied, "We are presently looking into the legal aspects of it as to whether there's any criminality involved."

Mr. Meese answered with a quick "no" when asked if it would be appropriate to name a special prosecutor to examine the matter until the Justice Department completed its review.

Administration officials said Mr. Meese had questioned Colonel North in the Attorney General's office on Sunday. The day before, the Marine officer was questioned at length in his office by Justice Department lawyers, officials said.

Details of Transfer Unclear

Details of the way the funds were siphoned to the contras were not clear, but Mr. Meese said that with Colonel North's knowledge, $10 million to $30 million collected by Israeli middlemen for the military equipment was transferred to Swiss bank accounts set up by the rebels.

The funds "were just provided to the contras through this bank account and that was the end, so far as we know of anyone in the United States Government knowing anything about what happened."

By all indications, the Israelis overcharged for the arms and the additional money was placed in the back account of the contras. But it was left unclear if the plan to overcharge was made at the request of United States or Israeli officials.

Perhaps the clearest explanation of the arrangement came from Mr. Wright, the new House majority leader, who said that Mr. Meese had told Congressional leaders at a private briefing this morning that Israel and the Iranians had negotiated a price. The deal struck was greater than the cost to the United States Government.

Wright's Version of Flow of Funds

Mr. Wright described the transaction this way: The arms were sold by the Israelis to the Iranians for $19 million, after which the Central Intelligence Agency reimbursed the Defense Department for $3 million, covering its costs. Of the remaining $16 million, Mr. Wright said, about $12 million was placed in a Swiss bank account for the contras and Adolfo Calers, a contra leader, drew the money.

Mr. Meese said "this was all done during a period when the funding was not being provided by the Congress" for the contras.

Asked if there had been any violation of the law, he replied; "That's something we're looking at in the present time, because it depends on two things: Precisely what was done, and precisely who did it in terms of what people who are United States officials or United States citizens actually participated in and what their conduct was. That's what we're still looking at.

"We haven't had a chance to interview everyone."

Mr. Meese said the scheme to divert money to buy arms for the contras came to light last weekend during a Justice Department investigation of documents relating to the arms sale. He attributed the money transfer and the apparent breakdown of checks and balances to a system of "compartmentalized" information where "a lot of people did not know certain things that were going on that were being done by others."

Pressure on Reagan

Longtime supporters of President Reagan, convinced that he would resist appeals that he overhaul his staff to end the furor over dealing with Iran, began a campaign last week that resulted in the departure today of the two key foreign policy operatives, aides and other Reagan confidants said.

Those familiar with the effort said that it had come about out of near desperation on the part of some who believed that the Reagan Presidency was being seriously damaged by internal bickering and disarray.

Today Mr. Reagan, wearing a grim expression, told reporters in the White House press room that he had asked Mr. Meese last Friday for a "complete factual record with respect to the implementation of my policy toward Iran." The report Mr. Meese prepared, after extensively questioning Colonel North, led Mr. Reagan to conclude that he "was not fully informed of the nature of one of the activities undertaken in connection with this initiative."

"This action raises serious questions of propriety," Mr. Reagan said.

Mr. Meese said Israel paid the C.I.A.--the agent for the United States Government--about $12 million for the arms sent by the Defense Department. In turn, he said, the Israelis sold the arms to the Iranians at a far higher price, with the difference placed in the Swiss bank account for the contras.

"All of these transactions that I'm referring to took place between January 1986 and the present time," Mr. Meese said.

After how he discovered the actual transfer of funds, Mr. Meese replied:

"In the course of the review of documents, we came across a reference to the possibility of differences in amount between the funds being paid by Iran and the amount of the actual weapons--that was one thing.

"And secondly, there were some references to this in one particular document that we found. While it didn't reveal the whole situation, we then found that as the basis for proceeding further and discussing with one of the participants what this all meant and that how this got started."

Mr. Meese did not identify the document, but in a comment to reporters during the briefing, he said there had been a "thorough review of a number of intercepts." Intercepts is Justice Department jargon for the results of electronic eavesdropping, and the possibility was raised that the transcript might have included such eavesdropping.

Mr. Meese found that all United States funds and property "were accounted for."

Mr. Meese said the first United Sates-sanctioned arms shipment to Iran took place in 1985 without Mr. Reagan's knowledge and was approved by the President only after the fact. In all, there were at least three shipments of United States arms to Iran, he said.

Brief Appearance by Reagan

Mr. Reagan devoted less than four minutes this morning to his surprise disclosure, and he left Mr. Meese to take the questions.

Mr. Reagan, following his statement, refused to answer questions. He seemed tense, almost angry. Asked if anyone else in the Administration would be dismissed, he curtly replied: "No one was let go. They choose to go."

Mr. Reagan then walked briskly out of the briefing room.

source: Iran Payment Is Found Diverted to the Contras; Two Reagan Men Are Out,
The New York Times.

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