$Unique_ID{bob01016} $Pretitle{} $Title{Iran-Contra Affair: The Report Chapter 3A The Enterprise Assumes Control of Contra Support} $Subtitle{} $Author{Various} $Affiliation{} $Subject{north contras air resupply secord country operation american support fdn} $Date{1987} $Log{} Title: Iran-Contra Affair: The Report Author: Various Date: 1987 Chapter 3A The Enterprise Assumes Control of Contra Support In the summer of 1985, Congress voted to appropriate $27 million for the Contras' humanitarian needs, including food, medicine and clothing. At the same time, the covert program, run by the National Security Council (NSC) staff entered a new and bolder phase. With the Contras' daily living needs taken care of by Congress, and their requirements for arms having been met through Country 2's prior donations, the NSC staff was able to focus on attempting to improve the Contras' military effectiveness. This involved establishing an air resupply program for the main Contra fighting force operating in the North of Nicaragua, the Nicaraguan Democratic Force (FDN), and promoting the opening of a second Contra front in the South of Nicaragua by supporting other Contra fighters, independent of the FDN, who were operating there. This support for the southern forces included the procurement of arms as well as the establishment of an air resupply program. Disappointed at the failure of Adolfo Calero to develop a logistics infrastructure, Lt. Col. Oliver North asked Gen. Richard Secord and his associates to assume new responsibilities that under the Boland Amendment the U.S. Government could not undertake. Secord agreed to continue to handle all future weapons procurement for the Contras and to acquire and operate a small fleet of planes to make air drops of weapons, ammunition, and other supplies to the Contras in both northern and southern Nicaragua. North arranged the funding for Secord to carry out these activities, directing third-country and private contributions to Secord that previously went to Calero. These funds were later augmented by the diversion from the Iranian arms sales that North, with Admiral John Poindexter's approval, initiated. Financed by contributions and the diversion, the Secord group purchased and operated five airplanes, built an emergency airstrip in Costa Rica, maintained an air maintenance facility and a warehouse in another Central American country, and hired pilots and crew to fly the air drop missions. They also purchased weapons and ammunition in Europe and delivered them to Central America for use by the Contras in the south and north. North called the organization "Project Democracy." Secord and his partner, Albert Hakim, referred to it as the Enterprise. The Enterprise, though nominally private, functioned as a secret arm of the NSC staff in conducting the covert program in Nicaragua. While Secord controlled the operational decisions of the Enterprise, North remained in overall charge of the Contra support program. He set the priorities and enlisted the support of an Ambassador, Central Intelligence Agency (CIA) officials, and military personnel to carry out the air resupply operation. He dealt with crises as they arose, sometimes on a daily basis. In carrying on these tasks, North had the unqualified support of Admiral Poindexter, who had replaced Robert McFarlane as National Security Adviser in December 1985. The efforts of the NSC staff and the Enterprise to carry out a government function with a makeshift covert organization were, however, dogged by problems from the beginning. The Enterprise's aircraft were in poor condition and the group had to overcome numerous tactical problems in carrying out its mission. While the Enterprise conducted routine air drops in northern Nicaragua, it was not able to begin a regular air drop operation in the south until late summer of 1986 - at a time when both Houses of Congress had voted to authorize the CIA to resume its support for the Contras with appropriated funds and when the Enterprise was trying to sell its assets to the CIA. The operation ended abruptly in October 1986 when the plane that Eugene Hasenfus was on was shot down while on a mission to drop supplies to the Contras in Nicaragua. Before that and for more than 2 years, the NSC staff had secretly achieved what Congress had openly disapproved in the Boland Amendment - an extensive program of military support for the Contras. The Boland Amendment operated as a restraint on disclosure, not on action, as the NSC staff placed policy ends above the law. The Enterprise's Mission is Expanded On June 12, 1985, the House passed a bill approving $27 million in humanitarian assistance to the Contras, paving the way for final approval and signature by the President in August 1985. While that vote virtually ensured that the Contras would have adequate food, medical supplies, and other provisions, it also strictly limited the money to nonmilitary uses. The provision of covert military assistance remained the secret business of the NSC staff. In the summer of 1985, articles appeared in the press speculating about the role of the NSC staff in assisting the Contras and Congress began inquiring of the National Security Adviser whether this was true. Yet, at this very time, the NSC staff decided to extend its covert program to include a system for resupplying Contras in the field. Some of the Contras fighting within Nicaragua were as many as 30 days away by land from border areas. To keep them supplied and to encourage other fighters to move from border sanctuaries to Nicaragua, a capacity to make aerial drops of ammunition and other supplies was essential. As early as February 1985, North had urged Calero to set aside $10 million from the funds raised from Country 2 to hire a logistics expert and create a resupply operation. But the available money was used to purchase and stockpile weapons. As a result, by summer 1986, the Contras had a surplus of arms. Their problem was how to deliver these weapons to the fighters. For North, the answer lay with Secord and his group. In early July, North held a meeting in Miami of Contra leaders and members of Secord's group to arrange for what Congress had refused to fund - the air resupply of lethal material for the Contra forces inside Nicaragua. Present were North, FDN leader Adolfo Calero, Enrique Bermudez, the FDN military commander, Secord, and his associates, Thomas Clines and Rafael Quintero. North began the meeting with an expression of a loss of confidence in the way the FDN was handling the donated funds he had directed to the FDN. Secord described North's remarks: The meeting commenced on a pretty hard note, with Colonel North being worried about and critical of the Contras, because he had been receiving reports that the limited funds they had might be getting wasted, squandered or even worse, some people might be lining their pockets. His concern, as he articulated it, was a very serious one. He was afraid that if anything like this was going on that since they were dependent on contributions that the image of the Resistance could be badly damaged; it could ruin us, in fact, and he was very, very hard on this point. North's solution, though not unveiled at the meeting, was to have Secord and his group take over the procurement function for the Contras. As Robert Owen, North's courier, testified, "I think he and General Secord felt they probably could do a better job" of handling the funds than the Contras. North had decided to furnish the FDN directly with arms, air support, and other supplies. He would no longer leave to the Contras the task of spending their own money on these goods and services. Almost immediately after the Miami meeting, Secord's partner, Albert Hakim, established the Lake Resources account in Geneva, Switzerland, and thereafter virtually all donated funds were directed by North to the Lake Resources account in Switzerland, not Calero's accounts. The Secord group - the Enterprise - would no longer function simply as an arms broker from which Calero would purchase the arms. With the contributions, it would make all the decisions on arms purchases and supply the Contras with the weapons and the other support they needed, without receiving from the Contras payment for the arms. The Contras' management of money was only one of the problems raised at the all-night meeting in Miami. More important was the need to create an airlift system to drop supplies to FDN troops inside Nicaragua and to open a Southern front. The first priority, all agreed, was the delivery of the arms already purchased to the soldiers fighting near and inside Nicaragua. Before the Boland Amendment was passed, the CIA helped to arrange the airlift of arms and other supplies to the troops. When the CIA withdrew, the Contras had difficulty maintaining this important logistical function. The FDN's aircraft were few and could not effectively and consistently penetrate Nicaraguan airspace past Sandinista defenses. Moreover, the FDN lacked properly trained personnel. The continuing resupply of troops and its attendant logistics, maintenance, and communications comprised the "sinews of war," the infrastructure necessary for any sustained and effective fighting force. North turned to Secord to establish and run the air resupply operation. The participants in the Miami meeting also agreed on the need to open a Southern front. With the FDN, the principal Contra force, operating in the North, the Sandinistas could concentrate their military forces on the Northern front. Forcing the Nicaraguans to fight a two-front war by building up a Contra force in the South was elemental military strategy. Calero, however, continued to concentrate his resources on his own organization in the North, the FDN. The air resupply and Southern front projects went hand-in-hand. Because neighboring countries were reluctant to permit land resupply from inside their borders, a southern force could not live without air resupply. And the FDN could not, or would not, undertake this mission on its own. Thus, the air resupply operation that North asked Secord to undertake was also the key to the Southern front. In giving this assignment to Secord, North testified that he acted with McFarlane's authority. McFarlane denied this. Poindexter, however, stated that he was "aware that Colonel North was concerned about the logistics operation, the way it was going, and I was aware that he was going to talk to General Secord about setting up a more professional logistics support operation as a private operation." The New Humanitarian Aid As the Enterprise began implementing the plans laid in Miami, the Contras received a boost from Washington. On August 8, 1985, President Reagan signed legislation authorizing $27 million in humanitarian aid to the Contras. For the first time since May 1984, the Contras would receive U.S. Government funding as well as intelligence support from the CIA. Although the Boland Amendment remained in effect, new legislation specified that the Amendment did not prohibit exchanging information with the Contras. The legislation prohibited the CIA or the Department of Defense (DOD) from administering the new humanitarian funds and required that the President ensure that any assistance "is used only for the intended purpose and is not diverted" for the acquisition of military hardware. The State Department was chosen to administer the aid. By executive order signed on August 29, 1985, the President created the Nicaraguan Humanitarian Assistance Office (NHAO) in the State Department. The State Department was reluctant to accept this responsibility. The Department had no experience and lacked the organization to feed and provide for the daily needs of troops. To run NHAO, Secretary George P. Shultz tapped Ambassador Robert Duemling, a seasoned diplomat, but with no prior experience in administering an aid program. Secretary Shultz cautioned Duemling to administer the aid not only with "enthusiasm" but also with "care." Ambassador Duemling found the program difficult to administer from the start. Nicaragua's neighbors did not officially recognize the Contra movement, even though Contras operated unofficially out of their territory. The cargo of the initial NHAO flight on July 10 was impounded when local Central American authorities learned that an NBC film crew was on board at the invitation of Calero's brother. Thereafter, that Central American country barred, for a period of time, the entry of NHAO employees, which prevented them from conducting any on-site accounting of supplies or of the Contras' needs. Deumling's difficulties were definitional as well as operational. NHAO had continually to assess whether various items were "humanitarian" within the meaning of the statute. Preparations for the Resupply Operation In the beginning of August, Secord met with North and others to discuss the steps necessary to establish the resupply program. First, a logistics organization consisting of aircraft, spare parts, maintenance, communications, and trained personnel had to be set up. For that, Secord turned to former Air Force Lt. Col. Richard Gadd, who since his retirement from the military in 1982 had been providing, through a private business, air support to the Pentagon. The second task was to obtain a secure operating base from which the aircraft could launch their missions. For this, Quintero, on Secord's instructions, consulted with the Contra leaders and chose a military airbase in a Central American country ("The Airbase".) Secord and North concurred in this choice. Finally, Secord concluded that to establish a sustained air resupply operation on the Southern front, an emergency airstrip was necessary in the South. North suggested to Secord Santa Elena in the northwest corner of Costa Rica, which North believed could also be used as a covert secondary operating base for resupply to the Southern front. U.S. Support for the Covert Operation The plans made in Miami for a resupply operation and a Southern front could not have been implemented without the active support of U.S. Government officials. In July 1985, almost immediately after the Miami meeting, North asked Lewis Tambs, the newly appointed Ambassador to Costa Rica, to help open a Southern front for the Contras, a request that Poindexter approved. Tambs agreed without consulting Secretary Shultz. Later that summer, North specifically asked for Tambs' help, as well as that of CIA Chief Tomas Castillo, to facilitate the construction and use of the airfield. North testified that he had received authorization from Director of Central Intelligence William J. Casey to bring Castillo into the resupply operation. Moreover, according to North, the airstrip was discussed in the Restricted Interagency Group on Central American Affairs, which consisted of, among others, North, the Chief of the Central American Task Force (CATF) at the CIA and the group's chairman, Elliott Abrams, Assistant Secretary of State for Inter-American Affairs. Abrams acknowledged the discussions, but testified that he believed "private benefactors, as we used to call them, were building the airstrip." The Airfield Is Planned On August 10, 1985, North flew to Costa Rica where he met with Castillo and Tambs. North and Castillo discussed the establishment of a secret airbase that would permit moving all Contra military operations inside Nicaragua for resupply by air. Castillo and Tambs then worked to achieve the establishment of the airfield and air resupply depot for the Contra forces. Castillo reported these developments to the Chief of the CATF at CIA headquarters. The Chief replied that he was pleased with these developments but he "emphasize[d]" to Castillo that neither the CIA nor DOD could "become involved directly or indirectly" in the project. Less than a week later, North sent Robert Owen to Costa Rica to scout the Santa Elena site. Owen met with Tambs, who introduced him to Castillo as a North emissary. The next day, Owen and Castillo surveyed Santa Elena. Owen took photographs and returned to Washington with a map, photos, and a description of various logistical problems presented by the air strip. North later told Castillo that he thought Santa Elena was an ideal place for a refueling and resupply base. Meanwhile, North recruited a former Marine colleague, William Haskell, to negotiate the purchase of the land at Santa Elena for the airfield. By the beginning of September, Haskell, under the alias of Olmstead, arrived in Costa Rica to meet with Joseph Hamilton, an American who headed the group that owned the land at Santa Elena. While Tambs assisted in bringing the parties together, Castillo alerted North that local groups had to be involved in the construction. Eventually, Secord paid more than $190,000 for local contractors and guards at the airstrip. On October 3, Haskell called North with news of Hamilton's tentative approval for the sale of the land. Shortly thereafter, North, Haskell, Secord, Gadd, and Hakim met. At North's request, Gadd agreed to assemble a team and assume responsibility for constructing the airstrip. The Airbase Is Secured Once the Airbase in the other Central American country was selected as the most desirable main base for the air resupply operation, North also took the necessary steps to obtain host-government approval, which required the assistance of other U.S. Government officials. North's notebooks reflect that on September 10, 1985, he met with Col. James Steele, a U.S. Military Group Commander stationed in Central America, and Donald Gregg, Vice President Bush's National Security Adviser. Among the discussion topics North listed was a "Calero/Bermudez visit to [the Airbase] to estab[lish] log[istical] support/maint[enance]," as well as other possible locations for the resupply base. Gregg, however, testified that he did not know of the resupply operation prior to the summer of 1986. On September 16, North's notebooks reflect a call from Steele, "what about Felix - help for a/c [aircraft] maint[enance]." An ex-CIA operative, Felix Rodriguez had volunteered as a private American citizen to aid a Central American Air Force in counterinsurgency maneuvers. Rodriguez had a close relationship with a local Commander stationed at the Airbase ("The Commander"). In a letter dated September 20, North asked Rodriguez to obtain service space at the Airbase for one C-7 Caribou aircraft and for occasional Maule maintenance. The Maule would be operated by the FDN and the Caribou by a private contractor for aerial resupply of both the FDN in the North and eventually in support of a Southern front, North wrote. North also said Rodriguez could use North's name with the Commander. Rodriguez agreed to help and obtained the Commander's approval. Poindexter had sanctioned North's efforts to obtain the Central American country's help in the logistics of air resupply. Securing suitable aircraft that the Enterprise could afford proved difficult. In the summer of 1985, North met with both Secord and Calero on the most immediate aircraft needs of the FDN and the resupply operation. They decided that their first need was a C7 Caribou, a twin-engine propeller aircraft capable of carrying a 5,000-pound cargo over a 900-mile range. By November 1985, Gadd, whose task it was to locate and purchase the airplanes, had found three surplus C-123 airplanes belonging to a Latin American Air Force. Gadd had earlier formed Amalgamated Commercial Enterprises (ACE), a shelf company registered in Panama, to hold title to the aircraft. ACE was owned equally by Gadd and Southern Air Transport of Miami, which was to provide maintenance and other logistical support. The logistics director of the Latin American Air Force was unwilling to sell the airplanes - whose use was for military transport - to Gadd without a sign of official U.S. Government approval. So, Gadd turned to North for assistance, who decided to intercede in an effort to obtain the airplanes. North told Gadd and Secord that he requested both Robert McFarlane and the State Department's assistance. On November 15, North indicated in his notebook that he called "Elliott" "re call to [the Latin American country]" for the purpose of telling [that country] that "ACE is OK." Abrams, however, denied any knowledge of the planes belonging to the Latin American country's Air Force. In addition, North asked Vince Cannistraro, a colleague at the NSC, to intercede with the Latin American country. In the PROF note on November 20, North referred to Cannistraro's upcoming call and provided the following talking points: A reputable business organization called A.C.E. Inc. is negotiating with your air force to buy three excess C-123 aircraft, a number of engines (48) and some spare parts. A.C.E. is a legitimate company which will use the aircraft for a good purpose that is in the interest of your country and ours - humanitarian aid deliveries to anti-communist resistance forces (. . . Nicaragua). Apparently the logistics director for the air force . . . was concerned that A.C.E. (Amalgamated Commercial Enterprises) may not be legitimate or that the A/C could be used for drug running or the like. This is not the case. It would be very helpful if you could contact someone who can clarify the good reputation of A.C.E. and encourage [the logistics director] to consummate the offer which has been made by A.C.E. The need is great for these planes. They will help the cause of democracy where it is most needed. Nonetheless, the Government of the Latin American country did not approve, and the Enterprise had to look elsewhere. From the inception of the air resupply operation in July 1985, North impressed upon Secord the fact that they were operating with donated funds that were strictly limited. Consequently, more preferable airplanes that were examined by Gadd and discussed by North and Secord, such as the Casa 212 and the 1100 turbo jet propeller-driven aircraft, were rejected because of their high cost, in favor of the less expensive C-7 and C-123. Country 3 Comes Through More third-country money was needed to support the Contras. McFarlane had barred a return to Country 2, and John K. Singlaub had since the end of 1984 been trying unsuccessfully to obtain money from Country 3. In the summer of 1985, North turned to Gaston Sigur, a Senior Director for Far Eastern and Asian Affairs on the NSC staff, to seek his assistance with Country 3. According to Sigur, North told him that it was an "emergency situation," and that he and McFarlane were aware that Country 3 "might have an interest in giving some assistance, financial assistance in the humanitarian area to the Contras." North, too, testified that he had gone to Sigur with the knowledge, and approval, of McFarlane. McFarlane testified to the contrary, claiming that he was "firm" with North "in saying to him absolutely no participation by you or any other staff member in any kind of approach to this country." Sigur recalled that when North asked him to set up the meeting, he inquired, "[N]ow everything here is quite legal?" to which North replied, "[O]h yes, we have checked all that out and there is no question about that." Sigur met with a Country 3 official and, without mentioning any specific amount of money, learned that the representative needed "to go back to his home government on it." The same day, Sigur went to McFarlane and told him that any contribution from Country 3 would have to be made directly through U.S. Government channels. According to Sigur, "Mr. McFarlane's response to that was that this is not possible, that cannot be done, and so I saw that as the end of that, and I told Colonel North about it." North was not deterred. He asked Sigur to arrange a face-to-face meeting with the Country 3 representative. At the ensuing meeting at the Hay-Adams Hotel in the fall of 1985, North told the Country 3 representative that "this country [U.S.] would be very grateful if they were to make the contribution." North's plea was successful. Sometime later, the Country 3 official responded with a $1 million contribution in "humanitarian assistance. North then sent Owen to give the official an envelope containing the Swiss bank number of the Enterprise's Lake Resources account. The $1 million was transferred to Lake Resources and another $1 million followed in the early months of 1986. The Link With NHAO Without the knowledge of its supervisors, the Nicaraguan Humanitarian Assistance Office (NHAO) program was used to further the Enterprise's activities. Robert Owen became the first link between NHAO and the covert operation. In mid-September 1985, Owen applied to Ambassador Duemling for a position in the humanitarian aid office. North recommended Owen as a "can do" person "who knows the scene," but Duemling declined to hire him. Duemling still refused to hire Owen even after the three directors of the United Nicaraguan Opposition (UNO) - Calero, Arturo Cruz, and Alfonso Robelo - wrote Duemling requesting Owen's help. North, however, continued to press for Owen's employment. At a Restricted Interagency Group meeting on October 11, North complained about the October 10 NHAO resupply flight impounded by Central American authorities, claiming that it would never have happened if Owen had been working for NHAO. Only then did Duemling relent and agree to fund a UNO contract with Owen's company, the Institute for Democracy, Education and Assistance, Inc. (IDEA), to assist in disbursing the humanitarian aid. North exploited Owen's new position by using his trips, funded by humanitarian aid dollars, to transfer and receive information about the Contra war and the fledgling resupply operation. Following his trips to Central America, Owen would submit two reports - one to NHAO describing humanitarian services performed and another to North describing his activities in coordinating lethal aid. The grant agreement with the State Department barred Owen from performing "any service" related to lethal supply "during the term of this grant." North also told Owen that he should introduce Gadd to Mario Calero, who was in charge of purchases for the FDN in the United States, so that Gadd might get a contract to fly humanitarian aid supply missions. Later, North personally accompanied Gadd to meet with Ambassador Duemling and urged Duemling to award Gadd an air delivery contract, to which Duemling, unaware of Gadd's role in the lethal resupply operation, agreed.