$Unique_ID{bob01076} $Pretitle{} $Title{Iran-Contra Affair: The Report Chapter 22D Section 3: Expenditures} $Subtitle{} $Author{Various} $Affiliation{} $Subject{north secord enterprise robinette million system paid security expenses told see tables } $Date{1987} $Log{See Table 5*0107601.tab } Title: Iran-Contra Affair: The Report Author: Various Date: 1987 Chapter 22D Section 3: Expenditures All told, the Enterprise spent almost $35.8 million - out of the nearly $48 million it took in - on covert operations. [See Table 5: Enterprise Expenditures] When asked about the cash balances, North testified that Casey wanted the Enterprise to become a self-sustaining operation so that "there [would] always be something there which you could reach out and grab . . . at a moment's notice." But North also said that he was surprised by the size of the balance, adding, "I am not willing at this point to accuse anybody." He also acknowledged that he had been told in September 1986 - even though the cash balances were then approximately $5.3 million - about a shortage of money available for the Second Channel Iranian initiative. Throughout 1985 and the first half of 1986, Enterprise cash surpluses, including the Reserves, were increasing. They reached their height in May 1986. As of May 1, 1986, the funds in the accounts of the collecting companies, treasury companies, operating companies (collectively the "Enterprise companies") and the Reserves, contained approximately $10.8 million. In October 1986, at the same time New York businessman Roy Furmark was threatening to expose the initiative if the Iran arms financiers were not paid, the Enterprise companies and the Reserves still had a total cash balance in the vicinity of $6.1 million. Central American Expenditures In the beginning, the Enterprise simply sold arms to the Contras. Its Contra arms-brokering operation - complete with an offshore company and an offshore account - was only the first stage for the full-service covert organization that, according to North, Casey envisioned. From December 1984 through July 1985, Calero transferred $11.3 million to Secord. Secord used the money to provide five arms shipments, described by Secord as Phases I through IV (one of the five shipments was a supplement to a previous one). Secord spent a total of $9.4 million for the arms he sold to Calero, including transportation costs; however, the total cost - including commissions for Secord, Hakim, and Clines - exceeded $11.3 million; the shortfall was made up with other Enterprise funds, including donations from the private fundraising network. From February until May 1986, the Enterprise purchased approximately $3.1 million of military equipment from Defex, a Portuguese arms supplier. It delivered some of the arms, paid for largely by the Iranian weapon sales and third-country contributions, in three airlifts which took place in March, April, and May 1986 (described by Secord as phases V through VII). Additional arms purchased during the same period (the "stranded shipment") never reached the Contras. In addition, the Enterprise spent approximately $5.9 million for air resupply operations, which had been planned by North, Secord, Clines, and Quintero in July 1985. It acquired an air force, purchasing two C123 cargo aircraft, two Caribou aircraft, and three Maule aircraft. More than $1.5 million (out of the $5.9 million) was transferred by the Enterprise to various vendors through Amalgamated Commercial Enterprises (ACE), a Panamanian company established by Richard Gadd to pay for the Caribous, air crews and other expenses associated with the resupply operation. According to Gadd, he was originally told by Secord that he, Gadd, would own the aircraft through ACE, but Secord later changed his mind and the Enterprise retained ownership through its ]Udall Corporation. Operating the airplanes was expensive: the Enterprise paid Corporate Air Services a total of $437,688, directly and indirectly, for the crews used in the resupply operation. Southern Air Transport received approximately $2 million for aircraft spare parts, fuel, and other services in connection with the resupply operation. Eagle Aviation Services and Technology, Inc. (EAST), another Gadd company, received $657,804 for providing other air services. David Walker, a British expert in guerrilla warfare recruited by North, received $113,000 for his services on May 5, 1986. Secord noted that during the July meeting in Miami it was decided that the resistance needed "to get into some of the urban areas." North testified that in 1985, he authorized Walker to perform military operations "in Managua and elsewhere in an effort to improve the> perception that the Nicaraguan resistance could operate anywhere that it so desired." Later, Walker provided two technicians to help carry out a military operation in Nicaragua. Secord and Hakim testified that in 1986 Walker provided air crews for the resupply operation. The Enterprise acquired land for an airstrip in Costa Rica for a down payment of $125,000 and a purchase money mortgage of $4,875,000. A Central American contractor who constructed the airfield, received payments totaling $192,233 from February through July 1986. The Enterprise disbursed funds to a number of Contra leaders. It paid $50,000, $155,000, and $59,500, respectively, to three Contra leaders, and $400,000 to Calero and his broker for food supplies and other expenses. North may have had even more complex plans for payments to the Contras. The Mideast: Expenditures for the Iran Operations The Enterprise was involved in every NSC-connected shipment of weapons to Iran from November 1985 on. The net surplus generated by these transactions for the benefit of the Enterprise was $16.1 million. The first transaction, the Israeli November 1985 HAWK shipment, generated a net surplus of $850,317. The transaction began when an Israeli intermediary deposited $1,000,000 into the Lake Resources account on November 20, 1985. Eighty Israeli-owned HAWKs were to be transported by the Enterprise to Iran in four separate shipments. Only 18 HAWKs were delivered, however, before the Iranians terminated the transaction. The Enterprise incurred charter expenses of $127,700 for the delivery of the 18 HAWKs, and $21,983 for a private jet for Secord. This left the Enterprise with $850,317. According to Secord, the Israelis told North that the extra money could be used for "whatever purpose we wanted." After discussing the matter with North, Secord agreed to use the money for the Contras and testified that he did so. The Enterprise's role in the next transaction - the sale of the 1,000 TOWs in February - was mare active. The Enterprise was the "commercial cut-out" for the CIA, receiving the money for the missiles from Ghorbanifar, paying the CIA for them, and delivering them to Iran. The net surplus from this transaction was approximately $5.5 million. As it did with the Calero arms sales, the Enterprise received payment to cover the cost of the arms before the arms were purchased. Between February 7 and 18, 1986, Khashoggi (who was financing Ghorbanifar) transferred a total of $10 million to the Lake Resources account for the shipment. On February 10 and 11, Secord directed a total payment of $3.7 million to the CIA for the TOWs. In addition, payments totaling $484,000 were made to Southern Air for the delivery of missiles from the United States to Israel; one payment of $185,000 was made to the Israeli Ministry of Defense to transport the TOWs from Israel to Iran; another payment of $100,000 was made to the Israeli Ministry of Defense for other related activities; aid $31,500 was paid to an Israeli bank for miscellaneous expenses. The Enterprise's role was the same in the third transaction - the deliveries of the HAWK replacement parts to Iran in May and August 1986, and the shipment of TOWs to Israel to replenish the TOWs scold to Iran in September 1985. The net surplus from this transaction was approximately $8.3 million. Khashoggi financed the May transaction for Ghorbanifar, transferring $15 million to the Lake Resources account on May 14 and 16, 1986, for the HAWK parts. On May 15 and 16, the Israeli Ministry of Defense transferred a total of $1,685,000 to the Lake Resources account for the TOWs. After Khashoggi's first payment was received, Secord directed the Enterprise to pay $6.5 million to the CIA to cover the cost of the HAWK spare parts and the TOWs. In order to pay for the delivery of the HAWK parts, the TOWs, and McFarlane's trip to Iran, the Enterprise paid $667,000 to Southern Air and $447,250 to the Israeli Ministry of Defense. Dutton received $40,000 to cover the cost of the crew and other expenses on the Israel-to-Iran leg of the mission. Secord also appears to have received $260,000 which was apparently related to the Iran transactions. Finally, the Enterprise paid $205,015 for expenses of chartering corporate aircraft for Secord and North in connection with their negotiations with the Iranians. The fourth and final transaction consisted of the shipment of 500 TOWs from U.S. stocks to Iran through the Second Channel. The net surplus was $1.4 million. The Second Channel advanced $3.6 million to Hyde Park Square on October 29, 1986, for the TOWs. Hyde Park, in turn, paid the CIA $2,037,000 for the missiles and incurred other expenses aggregating $161,240. Worldwide Projects The Enterprise's expenditures were not limited to Central America and the Middle East. In May 1986, North directed Secord to purchase a ship for other covert operations. Accordingly, the Enterprise spent $743,409 on the purchase and operation of a Danish vessel named the Erria. North directed a project with DEA agents to try to free certain hostages which contemplated paying bribes and, indirectly, a $2 million ransom to their captors. North turned to businessman and philanthropist H. Ross Perot, who agreed to provide $2 million for the project. In addition, North called upon the Enterprise which paid $30,150 to the DEA agents for their expenses. At North's request, the Enterprise paid $100,000 for radios supplied to a political party of a foreign nation. Another project involved an attempted propaganda effort in a foreign country. North disclosed to the Committees in an executive session that a number of other projects were in the planning stages. The North Residence Security System Another Enterprise expense was a home security system, which cost approximately $16,000, for the residence of Oliver North. As early as September 1985, North reported harassment which he attributed to anti-Contra demonstrators, including damage to part of the fence around his home and one of his cars. In the spring of 1986, the press reported that Abu Nidal, the international terrorist and assassin, had placed North on his "hit" list. When the FBI advised North that it was not authorized to provide protection, North made a request to Poindexter for assistance. Poindexter did not follow up on the matter. According to the Marine Corps, North did not request protection for his home from the Corps, an option that was available to him. North told Secord about the problem and Secord offered to help. Secord asked Glenn Robinette, an ex-CIA officer with experience in electronic surveillance and security, for assistance. Secord had hired Robinette in late March to do investigative work related to the Avirgan and Honey lawsuit, at a fee of $4,000 a month plus expenses. Robinette examined the North residence and met first with Mrs. North, then with North and Secord. Robinette proposed a security system designed primarily to provide protection from trespassers, not terrorists, at a cost of $8,500. According to Robinette, North responded to the effect, "Please try to keep it along those lines. Remember, I am a poor lieutenant colonel." Robinette paid the installers of the system, which included a remote control electronic gate, approximately $13,900-$6,000 in May and roughly $7,900 on July 10th when the installation of the system was complete. At the time of each payment, Robinette reported to Secord, rather than North, for reimbursement because he was "working for Secord." Secord reimbursed Robinette for his time and expenses with $7,000 in cash and a $9,000 check drawn by Zucker from Enterprise funds and mailed to Robinette at Secord's request. On August 6, 1986, at a meeting in the White House, North told Members of the House Permanent Select Committee on Intelligence, who were inquiring about his involvement with the Contras, that he had installed, at his own expense, a security system to protect his family from anti-Contra demonstrators. North testified that a bill never came for the security system and that he assumed that "an accommodation was worked between Mr. Robinette and General Secord to make a gift out of [the] security System." Secord, in an interview, denied that he made the gift or approved it. From Secord's viewpoint, there was a misunderstanding: Robinette asked for his expenses and Secord never realized that those expenses were for the security system rather than for investigative work. Robinette testified as follows: Q: When you went to General Secord to seek reimbursement [for the final payment to the security company], you told him what you were seeking reimbursement for, didn't you? A: Yes, sir. Q: He knew he was paying you for the security system, didn't he? A: That would be my understanding, sir. I usually told him what I was asking to be paid for. Q: There is no question about it, is there? A: No, sir, there is no question about it. In December 1986, North realized that the gift of the security system "just didn't look right." By that time, North had been named in the Justice Department application for the appointment of an Independent Counsel. North called Robinette and asked him to send a bill. Since the system had already been paid for, Robinette assumed that North wanted to make it appear that he (North) had actually paid the bill. Robinette, who told Secord that he was going to send North a bill, sent North two back-dated bills of payment due, dated months earlier but actually written and delivered at the same time in December 1986. North, in turn, wrote two back-dated letters, designed to fit with Robinette's bills, which told a false story about financial arrangements relating to the security system. In the first, dated May 18, 1986, but written in December 1986, North stated that it was his understanding that he could pay for the system either through 24 monthly installments or by making his house a demonstration unit. North concluded the letter by informing Robinette that he was selecting the second option. In the second letter, dated October 1, 1986, but also written in December, North apologized for the delay in responding to the first and second notices and reminded Robinette that he wished to pay for the system by making his home available as a demonstration unit. In his testimony, North stated that he typed at least one of the letters on a demonstration typewriter in a typewriter store, rather than using a home typewriter. On the morning of March 16, 1987, as Robinette went out to get his morning paper, he was interviewed by a reporter about the driveway gate which was part of the North security system. Robinette stated that he installed the gate for North at no charge, hoping that North "might steer business his way" and that he would be able to put in gates for North's neighbors. Later in the day, North called Robinette, asking to meet with him on the following day at his lawyer's office, and requesting that Robinette bring copies of the back-dated letters. Robinette gave the letters to North's attorneys, but did not say they were spurious. Robinette then went to see Secord who, upon learning that Robinette had sent North a bill for the security system, stated, "You did the right thing." That same afternoon Robinette received a call from North's attorney, who told him not to protect North, and to "tell the truth, tell the truth, tell the truth." He also advised Robinette to get an attorney. Robinette did so. Later, after receiving immunity, he related the above-described events to the Independent Counsel and the Committees. North testified that in fabricating the letters in December 1986, "I did probably the grossest misjudgment that I have made in my life." He added that he had acted, in accepting the system, to protect his family and told the Committees, "If it was General Secord who paid the bill . . . you guys ought to write him a check, because the Government should have done it to begin with." North offered no explanation as to why he also created the false record, other than that the gift "just didn't look right." Unexplained Cash Expenditures The CSF ledgers record expenditures of approximately $902,110 during the period from March 1985 to October 1986 without identifying their specific purpose. Two transactions accounted for the bulk of these funds. The first involved a $260,000 cash disbursement on May 21, 1986. In the second transaction, $310,000 was withdrawn from the Hyde Park account on July 18, 1986. The ledgers state that in both cases, the funds were "in transit," but where they went is unknown. In addition, the Enterprise transferred $152,200 to an account called Codelis. Finally, Hakim, Secord, and Clines received cash totaling $179,610 from various Enterprise accounts; these transactions were listed as "business expenses," and were in amounts of up to $50,000 each.