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The Boland restrictions and the NSC Contra program

In December 1981 President Reagan signed a Finding authorizing a covert Central Intelligence Agency operation to support the anti-Sandinista rebels. The first Boland Amendment (December 21, 1982) prohibited funds for overthrowing the Nicaraguan government; in early December 1983 Contra funding was capped at $24 million; in April 1984 the CIA's mining of Nicaraguan harbors was exposed; and the October 1984 amendment provided that "no funds available to the Central Intelligence Agency, the Department of Defense, or any other agency or entity of the United States involved in intelligence activities may be obligated or expended for the purpose or which would have the effect of supporting, directly or indirectly, military or paramilitary operations in Nicaragua by any nation, group, organization, movement, or individual."²³ National security adviser Robert McFarlane had, according to his testimony, been told by Reagan to keep the Contras alive "body and soul," and assigned the task to NSC staff member Oliver North. In May 1984 Saudi ambassador Prince Bandar bin Sultan agreed to give $1 million a month; Saudi Arabia ultimately gave $32 million and Taiwan $2 million.²⁴

CIA Director William J. Casey reorganized the CIA's Operations Directorate in 1984, removing the Latin American Division chief Dewey Clarridge and installing Alan Fiers as chief of the Central American Task Force; Fiers soon learned who had "taken the reins on contra activities: North." The CIA's deputy director for operations Clair George told Fiers in November 1984 that Casey had promised the President to take care of the Contras and that any denial of operational activity by North would be "just for show." North, on Casey's recommendation, asked retired Air Force Major General Richard Secord to help the Contra leader Adolfo Calero buy arms with Saudi money.² Walsh lists about $1.7 million in private contributions passed through the tax-exempt National Endowment for the Preservation of Liberty to accounts North controlled, and approximately $4 million from the Iran arms sales; the fundraisers Carl Channell and Richard Miller pleaded guilty in 1987 to conspiracy to defraud the United States and named North as an unindicted co-conspirator.¹⁵

On August 10, 1985 North flew to Costa Rica to meet Ambassador Lewis Tambs and the CIA station chief Joseph Fernandez about a secret airstrip for the Contra operation; Costa Rican officials disclosed the airstrip on September 25, 1986 after Ambassador Tambs had called President Oscar Arias to cancel a press conference.³ In 1985 and 1986 the Enterprise's air operation flew from Ilopango Airbase in El Salvador, where General Juan Rafael Bustillo ordered the operation's warehouse; the Hasenfus shootdown "settled irrevocably the question of CIA assumption" of the operation, in the words of Walsh's Enterprise chapter.⁶

The Enterprise

Secord and Albert Hakim founded Stanford Technology Trading Group International in 1983; by 1986, Walsh writes, its business "was the Enterprise." Its finances were managed in Switzerland by the fiduciary Compagnie de Services Fiduciaire, controlled by the American tax lawyer Willard Zucker. In late June 1985 North and Secord met Calero and the Contra commander Enrique Bermudez in Miami and told them that private and third-country donors would pay the Enterprise directly, removing Calero as a money-handler. In July 1985 Zucker's firm created a Liberian shell, Defex S.A., deliberately named like the Portuguese arms firm Defex, so that the Enterprise's mark-ups would appear in its books as payments to the supplier; Zucker's memorandum of July 8, 1985 describes the objective as having "sufficient debit advices" to show payments "approximating the amounts received." The Enterprise's receiving account was moved to Lake Resources in Geneva, and all receipts were commingled. Draws from Contra arms sales between April 1985 and September 1986 came to $4.579 million.⁶ The congressional Committees found that Secord testified his mark-up "averaged out almost exactly 20 percent" while the actual commission averaged 38 percent, and that Calero was unaware of it.³ In total the Walsh report counts "more than $47 million" through Enterprise accounts; the Committees' figure is nearly $48 million, of which $16.5 million supported the Contras or bought arms sold to them, $15.2 million was spent on Iran, Secord, Hakim and Thomas Clines took $6.6 million in commissions and profit, and about $1 million went to other North-sponsored covert operations.¹³

In July 1986 the Enterprise paid the Portuguese firm Defex $2.6 million and $500,000 to the arms dealer Monzer Al-Kassar for Contra weapons. Walsh's trial-proof estimate of the diversion is $3.6 million and excludes that $500,000 payment, because Al-Kassar "was not available to testify," as well as a $200,000 Jetstar and about $535,000 for the freighter Erria, bought in April 1986 through the Panamanian shell company Dolmy Business Inc. The Committees put the amount of the diversion at about $3.8 million of $16.1 million in Iran arms profits.³⁶ The writer Cheri Seymour wrote that Al-Kassar, a Syrian arms dealer, supplied drug profits to North for Contra arms, and Seymour and Gary Webb each state that the Tower Commission probe revealed Al-Kassar had been paid $1.2 million by Secord to move weapons from Israel to the Contras; the Tower Commission excerpts and the Walsh report, which place the Enterprise's payment to Al-Kassar at $500,000 in July 1986, contain no such figure. Seymour and Webb give the $1.2 million figure.⁷⁸

The Iran arms sales

In 1985 the Israelis, working through Michael Ledeen, David Kimche, Yaacov Nimrodi, Al Schwimmer and the broker Manucher Ghorbanifar, "an Iranian exile and former CIA informant who had been discredited by the agency as a fabricator,"⁶ sold 504 U.S.-made TOW missiles to Iran in August and September 1985 (96 on August 20 and 408 on September 14, the day the Reverend Benjamin Weir was released) after McFarlane obtained President Reagan's approval for Israeli sales with U.S. replenishment; McFarlane stood alone in testifying that Reagan had approved them, until notes found late in the investigation corroborated him. On November 24 to 25, 1985 the CIA arranged an airlift of 18 HAWK missiles from Israel to Iran aboard a CIA front-company plane; Iran rejected them after test-firing one. Poindexter later testified that he destroyed the December 1985 Finding that retroactively authorized the shipment.³⁴ Israel paid $1 million into the Enterprise's Lake Resources account on November 20, 1985 for the airlift; the Enterprise spent $127,700, and approximately $870,000 remained in the account, which Secord testified North told him they could use "for whatever purpose we wanted. We actually expended it on the Contra project."⁶

The Tower Commission report gives an account by George P. Shultz of a conversation in which McFarlane said that "Foreign Minister Yitzhak Shamir had told Mr. Kimche that he wanted to know explicitly whether I was informed."⁹ Shamir was foreign minister from March 1980 to October 20, 1986. In September 1986 a memorandum from North recorded that "Incoming PM Shamir and outgoing PM Peres have agreed that Nir will remain in his current capacity after the change of government in October."¹⁰

A January 17, 1986 Finding authorized direct U.S. sales to Iran with Secord as agent, and Amiram Nir replaced Kimche as the Israeli official in the deals. Ghorbanifar borrowed from the financier Adnan Khashoggi; between February 7 and 18, 1986 Khashoggi deposited $10 million into Lake Resources, of which $5 million came from his own account at the Bank of Credit and Commerce International in Monte Carlo and the remainder from a wealthy woman in Monte Carlo and from Galliot Lines, owned by the Syrian banker Oussama Lababidi. North and Secord negotiated a price of $10,000 per TOW, while telling the Department of Defense and CIA that Secord would receive $6,000; the Pentagon sold to the CIA at $3,700. The Enterprise's direct expenses were about $716,000, leaving a surplus of $5.6 million. Between February 17 and 27, 1986 1,000 TOWs were shipped.⁶ The Tower Commission quotes Ghorbanifar as saying North was "greatly relieved" when told the Iranians would pay $10,000 rather than $6,500 per missile.¹¹ On May 25, 1986 McFarlane, North and others flew to Tehran with HAWK spare parts and left on May 28 without a hostage release. An August 25, 1986 meeting in Brussels opened a "Second Channel" through a Islamic Revolutionary Guard Corps officer; a further 500 TOWs were sent on October 28, 1986, and the Committees' chronology states that 2,004 TOWs were sent in all, not the 1,000 President Reagan cited at his November 19 press conference.³

The diversion, exposure and cover-up

On December 6, 1985 North told an Israeli official he planned to use profits from future arms sales to support the Contras; on April 4, 1986 he wrote an unsigned memorandum proposing $12 million in residuals "to purchase critically needed supplies for the Nicaraguan Democratic Resistance Forces," which, the Tower Commission found, "no evidence has emerged" was ever placed before Poindexter, the President or any other official.³¹¹ Poindexter told United States Congress he made the decision on his own, did not tell the President and believed he would have approved; North testified he believed the President authorized it. The Independent Counsel could not prove that Reagan authorized or knew of the diversion.¹ In the Tower Commission's account Attorney General Meese told it that North said in their November 23, 1986 interview that the Israelis had handled the money and that he gave them numbers of three Swiss accounts opened by Calero; the March 1988 indictment charged that the statement about Calero was false.¹¹¹²

North began shredding documents on November 21, 1986 after being told United States Department of Justice officials would inspect his files; a Justice Department official found the April 1986 memorandum on November 22; on November 24 Meese told Reagan of the diversion, and on November 25 Reagan announced Poindexter's resignation and North's dismissal.³ Walsh found that "the President's most senior advisers and the Cabinet members on the National Security Council participated in the strategy to make National Security staff members McFarlane, Poindexter and North the scapegoats," and that notes of Reagan's chief of staff Donald Regan showed Poindexter and Meese attempting to create a false account of the 1985 shipments from Israeli stocks; Weinberger's diary notes, withheld from investigators until late 1991, and the notes of Charles Hill and Nicholas Platt of the United States Department of State showed that Secretaries Caspar Weinberger and George Shultz knew more than they told Congress. Vice President George H.W. Bush "was fully aware of the Iran arms sales"; the Independent Counsel learned in December 1992 that he had not produced a diary containing contemporaneous notes, and the pardon of Weinberger on December 24, 1992 "pre-empted a trial in which defense counsel indicated that they intended to call Bush as a witness."¹

Investigations

President Reagan created the President's Special Review Board, known as the Tower Commission, on December 1, 1986 under Executive Order 12575, with former Senator John Tower as chairman. Its report of February 26, 1987 stated that Poindexter, North, Israeli participants and other key witnesses "refused to appear before the board," that the bank records could not be obtained, and that "there was considerable evidence before the board of a diversion to support the contras. But the board had no hard proof."³¹¹ The Lawrence Walsh was appointed on December 19, 1986. The Senate and House select committees were set up on January 6 and 7, 1987, held televised hearings from May 5 to August 3, 1987 with more than 250 hours of testimony from 28 public witnesses, took North's testimony for six days beginning July 7 and Poindexter's for five beginning July 15, and issued their report on November 18, 1987.³

The Joint Chiefs of Staff appear in the independent counsel's record of the Defense Department. Walsh's Part VIII records that General John W. Vessey, Jr., then chairman of the Joint Chiefs of Staff, recalled that Weinberger told him "incredulously," after attending a White House meeting in the summer of 1985, that someone had proposed contacts with Iran.¹³ Vessey recalled that Prince Bandar bin Sultan told him on two occasions that the Saudis were funding the contras, that on each occasion he reported the statement to Weinberger, and that Weinberger responded that he did not want the issue to become public; in his April 17, 1987 deposition to the Select Committees he described one such occasion.¹⁴ Weinberger's daily notes for March 13, 1985, made after a meeting with Vessey ("Jack Vessey in office alone"), record that Weinberger "passed on to him Jack Vessey's report that Bandar is giving $25 million to Contras" in a call to Robert McFarlane the same day, with the suggestion that, if so, the United States go for "covert non-lethal aid of $14 mil."¹³ The memorandum for the record of Deputy Director of Central Intelligence John N. McMahon on the March 15, 1985 breakfast of Weinberger, William J. Casey and McMahon records Weinberger's statement that he had heard that Bandar had earmarked $25 million for the contras in $5 million increments.¹⁵ The diary entry for August 22, 1985 records a meeting in Weinberger's office with McFarlane, Colin Powell and General Charles Gabriel, the acting chairman of the Joint Chiefs, at which an Israeli message that two Iranians had offered to return some hostages was discussed.¹⁶ The diary entry for November 21, 1985 records William J. Crowe, Jr. in office, regarding the president's decisions at Geneva and hostage rescue attempts.¹⁷

Walsh's Final Report (August 4, 1993) states that the Iran operations were carried out with the knowledge of Reagan, Bush, Shultz, Weinberger, Casey, McFarlane and Poindexter, of whom only Weinberger and Shultz dissented, and that "large volumes of highly relevant, contemporaneously created documents were systematically and willfully withheld from investigators by several Reagan Administration officials." Casey, hospitalized with a fatal illness before the Independent Counsel was appointed, was never formally investigated. Walsh observed that the problems were "not those of rogue operations, but rather those of Executive Branch efforts to evade congressional oversight," and that grants of immunity to North, Poindexter and Albert Hakim by Congress, and the attorney general's discretion under the Classified Information Procedures Act to refuse to declassify information, undermined prosecutions.¹

Prosecutions and pardons

After the Independent Counsel's appointment 14 persons were charged, 11 were convicted (two convictions being overturned on appeal), two were pardoned before trial and one case was dismissed when the Bush administration declined to declassify information needed at trial. Pleas: Carl Channell (April 29, 1987) and Richard Miller (May 6, 1987); McFarlane (March 11, 1988); Secord (November 8, 1989, one felony of false statements to Congress); Hakim (November 21, 1989, a misdemeanor of supplementing North's salary, with Lake Resources Inc. pleading to theft of government property); Fiers (July 9, 1991, two misdemeanors); Elliott Abrams (October 7, 1991, two misdemeanors, including his solicitation of $10 million from the Sultan of Brunei). Convictions at trial: Clines (September 18, 1990, four tax-related felonies, 16 months); North (May 4, 1989, three counts, vacated July 20, 1990, dismissed September 16, 1991); Poindexter (April 7, 1990, five felony counts, reversed November 15, 1991, certiorari denied December 7, 1992, indictment dismissed in 1993); George (December 9, 1992, two felonies, pardoned before sentencing). The case against Joseph Fernandez was dismissed on November 24, 1989 after Attorney General Richard Thornburgh blocked the disclosure of classified information ruled relevant to the defense; the Fourth Circuit upheld that ruling on September 6, 1990.¹⁸

On December 24, 1992 President Bush pardoned Weinberger (indicted June 16, 1992, trial set for January 5, 1993), Duane Clarridge (indicted November 26, 1991 on seven counts of perjury and false statements, trial set for March 15, 1993), George, Abrams, Fiers and McFarlane. Fernandez, whose case had been dismissed, was not among those pardoned.¹⁸

The Contra network and drug trafficking

The Kerry Committee's report of December 1988 stated that "individuals who provided support for the Contras were involved in drug trafficking, the supply network of the Contras was used by drug trafficking organizations, and elements of the Contras themselves knowingly received financial and material assistance from drug traffickers," and that "in each case, one or another agency of the U.S. government had information regarding the involvement either while it was occurring, or immediately thereafter." It found that the State Department paid funds Congress had authorized for humanitarian assistance to traffickers, "in some cases after the traffickers had been indicted by federal law enforcement agencies on drug charges." It found no evidence that the Contra leadership participated directly in narcotics smuggling, but that the FDN "did move Contra funds through a narcotics trafficking enterprise and money laundering operation," and that "some officials may have turned a blind eye." It concluded that "there are serious questions as to whether or not U.S. officials involved in Central America failed to address the drug issue for fear of jeopardizing the war effort against Nicaragua," citing the delay in dealing with Manuel Noriega, the premature public announcement of the DEA's Barry Seal sting of Sandinista officials shortly before a crucial congressional vote on Contra aid, and the case of the Honduran General Jose Bueso Rosa, convicted of a plot to assassinate President Roberto Suazo Cordova financed by a $40 million cocaine sale, who received a light sentence after U.S. officials intervened.¹⁹ The Kerry report also described Contra supply contractors paid by the State Department's Nicaraguan Humanitarian Assistance Office, the Contra supply officer Mario Calero's agreement with the pilot Frank Moss, and the passage of Contra funds through traffickers.¹⁹

The National Security Archive's briefing book prints North's notebook for July 12, 1985, in which Secord is quoted as saying that "14 M to finance [the arms in a Honduran warehouse] came from drugs," and North's August 9, 1985 entry that a Honduran DC-6 used for runs out of New Orleans "is probably being used for drug runs into U.S."; the briefing book also notes that DEA agents testified on July 28, 1988 that North had wanted $1.5 million in Cartel money carried by a DEA informant given to the Contras.¹² The Kerry report states that the pilot Floyd Carlton testified that Noriega was paid $100,000 to $250,000 for each of four cocaine flights he piloted for the Medellin Cartel, and that the same Panamanian general met North in June 1985 and again in London on September 22, 1986 to discuss sabotage in Nicaragua; when North proposed a meeting on August 23, 1986, Poindexter replied, "I have nothing against him other than his illegal activities," and Walsh records that the decision was made not to pay Noriega the $1 million.¹²¹⁹²⁰

Webb wrote that Kerry investigation director Jack Blum told him: "We were even dumped on by the Iran-Contra Committee. They wouldn't touch this issue with a ten-foot pole," and that during North's July 1987 testimony two men from Baltimore stood with a banner reading "Ask about the cocaine smuggling" before police removed them. Webb also wrote that the plane shot down over Nicaragua was a Fairchild C-123K called The Fat Lady, based at Mena, Arkansas before Barry Seal sold it, after which it flew weapons for North and the FDN; that Hasenfus was a former Air America cargo handler; that congressional records show North was regularly briefed by the CIA on Seal's joint CIA-DEA sting of the Sandinistas and allegedly leaked it to the press shortly before a critical vote on Contra aid; and that the Enterprise's flights from Ilopango reportedly brought cocaine back on return flights, with Hangar No. 4 there used by the CIA until it was turned over to North's operation in 1985. The Committees' account identifies the aircraft only as one belonging to the Enterprise, with a Southern Air Transport identification card found on the pilot.³⁸

The Octopus and the BCCI cluster

The writer Cheri Seymour wrote that the Iran-Contra Affair was a significant component of Danny Casolaro's "The Octopus" investigation, which Casolaro believed was interconnected with the PROMIS Software Scandal and the BCCI scandal; that he obtained photocopies of checks drawn on BCCI accounts for Khashoggi and Ghorbanifar from Bob Bickel, who had them from the October Surprise source Richard Brenneke; that Ian Stuart Spiro's name appeared in North's notebooks and his death was linked to a spy network and the affair; that Ari Ben-Menashe, a self-described Israeli military intelligence officer, tipped off the Lebanese magazine; and that the former White House aide Barbara Honegger alleged in her book October Surprise that Al-Kassar's heroin smuggling network in Italy was used to launder North Atlantic Treaty Organization arms stocks, diverting them to Iran with the help of Italian intelligence officials linked to the P2 lodge.⁷ The Walsh report places Khashoggi's own BCCI account in Monte Carlo as the origin of $5 million of the February 1986 bridge financing.⁶

Footnotes

Walsh, Lawrence E. Final Report of the Independent Counsel for Iran/Contra Matters, vol. I (Washington, D.C.: U.S. Court of Appeals for the District of Columbia Circuit, Division for the Purpose of Appointing Independent Counsels, August 4, 1993), Executive Summary. https://fas.org/irp/offdocs/walsh/execsum.htm ↩︎
Walsh, Final Report, vol. I, Part I, "Iran/contra: The Underlying Facts," sections "The Reagan Administration's Contra Policy," "The Funding Cut-Off." https://fas.org/irp/offdocs/walsh/part_i.htm ↩︎
Brinkley, Joel, and Stephen Engelberg, eds. Report of the Congressional Committees Investigating the Iran-Contra Affair, with the Minority Views, abridged edition (New York: Times Books/Random House, 1988), "Iran-Contra Chronology," Parts I to III and the Committees' findings (S. Rept. 100-216, H. Rept. 100-433, November 18, 1987). https://archive.org/details/reportofcongres00unit ↩︎
Walsh, Final Report, vol. I, ch. 1, "United States v. Robert C. McFarlane." https://fas.org/irp/offdocs/walsh/chap_01.htm ↩︎
Walsh, Final Report, vol. I, ch. 27, "President Reagan," section on contra financial support. https://fas.org/irp/offdocs/walsh/chap_27.htm ↩︎
Walsh, Final Report, vol. I, ch. 8, "The Enterprise and Its Finances," including notes 5, 30 to 35 and 51. https://fas.org/irp/offdocs/walsh/chap_08.htm ↩︎
Seymour, Cheri. The Last Circle: Danny Casolaro's Investigation into the Octopus and the PROMIS Software Scandal. TrineDay, 2010. ↩︎
Webb, Gary. Dark Alliance: The CIA, the Contras, and the Crack Cocaine Explosion. Seven Stories Press, 1998, Prologue, ch. 6 ("They were doing their patriotic duty") and ch. 4. ↩︎
Report of the President's Special Review Board (Tower Commission), February 26, 1987. https://archive.org/details/towercommission00unit ↩︎
Memorandum from Oliver North, September 1986, reproduced in the Tower Commission report. https://archive.org/details/towercommission00unit ↩︎
Tower Commission, Report of the President's Special Review Board (February 26, 1987), Part I, "Contra Diversion" and "N.S.C. Staff and Support for the Contras" (excerpts published by the American Presidency Project). https://archive.org/details/tower-commission-report-excerpts-reagan ↩︎
National Security Archive, "The Contras, Cocaine, and Covert Operations," Electronic Briefing Book No. 2 (North notebooks of July 12 and August 9, 1985; North and Poindexter electronic messages of August 23, 1986). https://nsarchive2.gwu.edu/NSAEBB/NSAEBB2/index.html ↩︎
Lawrence E. Walsh, Report of the Independent Counsel for Iran/Contra Matters, Part VIII, notes 10 and 165 (Vessey, Select Committees deposition, April 17, 1987, pp. 30-31; Weinberger diary, March 13, 1985, ALZ 0039320B-C). https://irp.fas.org/offdocs/walsh/part_viii.htm ↩︎
Walsh, Part VIII, notes 168-170 (Vessey, FBI 302, June 11, 1992, pp. 6-7; Vessey, FBI 302, February 11, 1987, p. 1; Vessey, Select Committees Deposition, April 17, 1987, pp. 5-9). https://irp.fas.org/offdocs/walsh/part_viii.htm ↩︎
Walsh, Part VIII, note 167 (McMahon, memorandum for the record, March 15, 1985, ER 26,187-88 and ER 92-00116-17). https://irp.fas.org/offdocs/walsh/part_viii.htm ↩︎
Walsh, Part VIII, notes 16-18 (Weinberger diary, August 22, 1985, ALZ 0039606-07; Weinberger calendar, LC-007474; Powell, Select Committees deposition, June 19, 1987, p. 5). https://irp.fas.org/offdocs/walsh/part_viii.htm ↩︎
Walsh, Part VIII, citing Weinberger diary, November 21, 1985 (ALZ 0039802-03). https://irp.fas.org/offdocs/walsh/part_viii.htm ↩︎
Walsh, Final Report, vol. I, "Summary of Prosecutions." https://fas.org/irp/offdocs/walsh/summpros.htm ↩︎
U.S. Senate, Committee on Foreign Relations, Subcommittee on Terrorism, Narcotics and International Operations, Drugs, Law Enforcement and Foreign Policy, S. Prt. 100-165 (December 1988), "Summary of Findings," chapters on the Contras and on Panama, and the Conclusions. https://archive.org/details/Kerry-Report-Drugs-Contras ↩︎
Walsh, Final Report, vol. I, ch. 25, "United States v. Elliott Abrams," section on the September 19 and 20, 1986 meetings. https://fas.org/irp/offdocs/walsh/chap_25.htm ↩︎

31 KiB Raw Blame History