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$Unique_ID{bob01011}
$Pretitle{}
$Title{Iran-Contra Affair: The Report
Chapter 2B   Administration Response to Congress:  May-Sept 1983}
$Subtitle{}
$Author{Various}
$Affiliation{}
$Subject{administration
north
finding
aid
covert
cia
new
congress
president
contras}
$Date{1987}
$Log{}
Title:       Iran-Contra Affair: The Report
Author:      Various
Date:        1987

Chapter 2B   Administration Response to Congress:  May-Sept 1983

     In May 1983, both the House and Senate Select Committees on Intelligence
challenged the Administration's Nicaragua policy, but in different ways.  The
Senate Intelligence Committee "took the rather unusual step of requiring" that
"the Administration articulate, in a clear and coherent fashion its policy
objectives."  Before the Committee would vote for more aid, it wanted a new
Presidential Finding.

     The House Permanent Select Committee on Intelligence, on the other hand,
favorably reported a new bill, the "Boland-Zablocki" bill, to the full House
for consideration.  The bill barred aid for the Nicaragua covert action
program, but it also took the Administration at its word about the need to
stop arms flows to El Salvador.  The legislation provided $80 million in
assistance to Central American governments to stop the flow of arms to rebel
groups, but no funds for "support of military or paramilitary activities in
Nicaragua."  Despite strong Administration opposition, the House passed the
bill on July 28, 1983, by a vote of 228-195.

     With its implicit threat of an aid cutoff, the Boland-Zablocki measure
challenged the Administration to articulate a plausible rationale for covert
aid.  The bill exposed the loose fit between the Administration's announced
policy of stopping arms flows to El Salvador and its covert support of the
Contras.  If the Administration really wanted to stop arms flows to El
Salvador, it could do so directly, said the Congress; but if its purpose was
to aid the Contras in overthrowing the Nicaraguan Government, there would be
no funding.

     The Administration responded to the threat of an aid cutoff in three
different ways.  First, the Administration established a public relations
office in the State Department attempting to muster the public and
Congressional support necessary for the Contras.  Second, anticipating that a
cutoff might nevertheless occur, the Administration developed a secret plan to
stockpile weapons for the Contras at the CIA.  Finally, at the same time, to
satisfy Congressional demands, the Administration agreed to draft a new
Finding.

White Propaganda

     In June of 1983, the Administration decided upon a new method of trying
to win public support for the President's policy in Central America.  On July
1, 1983, then National Security Adviser Clark announced that "the President
had decided that the Administration must increase our efforts in the public
diplomacy field to deepen the understanding of the support for our policies in
Central America."

     As a result, an office of Public Diplomacy for Latin American and the
Caribbean (S/LPD) was established in the State Department, headed by Otto
Reich, who eventually was given the rank of Ambassador.  The S/LPD was an
interagency office with personnel contributed by the Department of State, the
Department of Defense (DOD), the Agency for International Development, and the
U.S. Information Agency.  Although created as part of the State Department,
the office was established at the direction of the National Security Council.
The S/LPD's activities were coordinated by an interagency working group
staffed by the NSC.  The principal NSC staff officer was a former senior CIA
official.  With the knowledge and approval of Director Casey, he was detailed
to the NSC staff for a year.  He later became Special Assistant to the
President with responsibility for public diplomacy matters.

     The mission of the office - public diplomacy - was a "new,
non-traditional activity for the United States government," according to the
State Department.  In fact, "public diplomacy" turned out to mean public
relations - lobbying, all at taxpayers' expense.  The office arranged speaking
engagements, published pamphlets, and sent materials to editorial writers. In
its campaign to persuade the public and Congress to support appropriations for
the Contras, the office used Government employees and outside contractors -
including Richard Miller and Francis Gomez who would later work with North to
provide Contra assistance.

     A Deputy Director of S/LPD, Jonathan Miller, reported the office's
success in what he labeled a "White Propaganda Operation," which sought to
place op-ed pieces in major papers by secret consultants to the office.  By
Reich's own description, the office adopted "a very aggressive posture
vis-a-vis a sometimes hostile press."  It "briefed Members of Congress,
reached out to audiences previously overlooked, found new ways of reaching
traditional audiences, and generally did not give the critics of the policy
any quarter in the debate."  It claimed that "[a]ttacking the President was no
longer cost free."

     Later, the Comptroller General would find that some of the office's
efforts, in particular Jonathan Miller's "White Propaganda," were "prohibited,
covert propaganda activities," "beyond the range of acceptable agency public
information activities . . . ."  In a September 30, 1987, letter, the
Comptroller General concluded that S/LPD had violated "a restriction on the
State Department's annual appropriations prohibiting the use of federal funds
for publicity or propaganda purposes not authorized by Congress."

The CIA Tries to Stockpile

     In the summer of 1983, while efforts were underway at the State
Department to change public opinion, the CIA began secret preparations in the
event Congress decided to cut off aid to the Contras.  In that event, the
Agency planned to obtain equipment free of charge from the DOD.

     On July 12, the President directed that the DOD provide enhanced support
for the CIA in its efforts to assist the Contras.  One day later, the CIA sent
a "wish list" to the DOD, requesting that $28 million in equipment be
transferred to it, "free-of-charge."  The list covered everything from medical
supplies to aircraft, and included a request for personnel.  The Joint Chiefs
of Staff proposed that each of the four services carry a quarter of the cost
of these transfers.  The equipment then could be stockpiled by the CIA and
provided to the Contras if the need arose.  The CIA would not run afoul of any
aid ceiling since it had not paid for the equipment.  The equipment involved
had been paid for out of the normal DOD budget allocation. In short, money
appropriated by Congress for one purpose would be used for another, bypassing
any limits Congress might place on CIA appropriations, such as the
then-pending Boland-Zablocki bill.

     By late summer, the DOD's General Counsel concluded that a
nonreimbursable transfer would violate the Economy Act, a law requiring that
the DOD be reimbursed for the cost of interagency transfers.  The CIA would
have to pay for all items except surplus equipment.  From the CIA's
perspective, this defeated the purpose of the plan: to avoid the expenditure
of CIA funds and shift the cost to the DOD.  The project was finally
terminated on February 12, 1985, after the CIA had obtained, without cost, 3
surplus Cessna aircraft and, at cost, 10 night vision goggles, 1 night vision
sight, and a Bushmaster cannon.

The September 1983 Finding:  A New Rationale for Covert Aid

     Trying to forestall a complete cutoff of Congressional aid, the
Administration accepted the Senate Intelligence Committee's proposal that it
draft a new Finding defining and delimiting the purposes of the covert
program.  By August, Director Casey had presented the Committee with a first
draft and later, in September, proceeded to "informally discuss the finding
with Senator Goldwater and other key Senators of the SSCI."  Within the
Administration, the Finding was, as North put it, "thoroughly scrubbed" by the
State Department and NSC staff as well by as the Justice Department and
lawyers from DOD and CIA.

     On September 16, 1983, at a National Security Planning Group (NSPG)
meeting, Director Casey briefed the President and his advisers from the State
and Defense Departments on the draft Finding.  The Director explained that the
earlier Finding had been "modified to reflect [a] change of objectives
. . . ."  No longer was the covert program justified solely by the need to
curb Cuban support for the Sandinistas or to stop arms flows out of
Nicaragua.  A new, and broader, rationale was added: covert aid was intended
to pressure the Sandinistas to negotiate a treaty with nearby countries.

     The new Finding also reflected a change of tactics.  Congress would not
accept a Finding broad enough to permit paramilitary operations conducted by
U.S. citizens.  The Administration gave its assurances that aid for
paramilitary operations would be limited to third-country nationals.  Casey
told the President that the "new Finding no longer lets us engage in PM
[paramilitary operations]."

     Three days later, on September 19, 1983, the Finding was signed.  The
next day, the Intelligence Committees received briefings on it.  Shortly
thereafter, the Senate Intelligence Committee voted to provide aid for a
continued covert operation in Nicaragua.

     The new Finding, however, was not without problems.  The Administration's
stated objective in supporting the Contras was now to pressure the Sandinistas
into accepting a treaty that had to include free elections.  If, as the
President believed, the Sandinistas could not win such an election, they would
never agree to such a treaty.  Only the prospect of a military defeat would
push them toward a negotiating posture.  Yet, the renunciation of a military
victory was the price set by 'Congress for a bipartisan compromise.  The
Finding thus contained within it a paradox that would haunt the
Administration's Nicaragua policy.

Forcing the Issue:  The Dec. Funding Cap and Intensifying Covert Operations

     One day after the September Finding was briefed to the Intelligence
Committees, an unnamed Administration official was quoted in The New York
Times explaining the rationale of the new Finding:  "Yes, we are supporting
the rebels until the Nicaraguans stop their subversion," an "approach," the
official urged, that "should end the argument over whether the Administration
was violating its pledge by doing more than just stopping the arms flow."

     But Administration hopes that the September Finding, and its new
rationale for covert action, would end the debate on Contra aid were quickly
dashed.  Discussions were held on the House floor over the advisability of
continuing covert aid, and the President took his cause to the public in his
radio addresses.  In October, the House voted to halt all aid to paramilitary
groups fighting the Nicaraguan Government.  The Senate, however, wanted to
continue aid.  In early December, the House and Senate agreed to a compromise:
A "cap" of $24 million would be placed on Contra funding, and the CIA would be
barred from using its contingency reserves to make up any shortfall.

     Congress and the Administration recognized that the $24 million
appropriation would be insufficient to sustain a covert operation through the
fiscal year.  Therefore, the door was left open for a future Administration
funding request to carry the program for the balance of the year if
negotiations for a peace treaty were thwarted by the Sandinistas.  The
President was required to report to Congress by March 15 on the steps taken to
achieve a negotiated settlement in Central America.

The Decision to Bring the Situation to a Head

     Having survived the threat of a total cutoff of funds for the Contras,
the Administration decided to intensify the CIA's covert activities while
funding still remained.  Charged by the new National Security Adviser, Robert
McFarlane, to prepare an "in-depth review" of the Administration's Central
America policy, a Special Interagency Working Group (SIG) concluded:  "Given
the distinct possibility that we may be unable to obtain additional funding in
FY 84 or FY 85, our objective should be to bring the Nicaragua situation to a
head in 1984."  At a January 6 NSPG meeting, the President and his advisers
concurred in the SIG recommendation:  "Our covert action program should
proceed with stepped up intensity."

     Even before the decision had been officially acknowledged, plans had been
implemented to step-up paramilitary operations in Central America.  In the
fall, speedboats carried out attacks against Sandinista patrol craft and fuel
tanks.  By November, a more heavily armed speedboat had been developed for
following operations.

     At the end of December, and thereafter, the mining and other operations
increased.  In early January, the CIA proposed attacks against fuel supply
depots and transmission lines along the "entire Pacific coast of Nicaragua."
On January 7, three magnetic mines were placed in Sandino harbor; on February
3, an air attack destroyed a Sandinista "communications and naval arms depot";
and on February 29, more mines were placed at Corinto.  By March 29, plans had
been made to support an attack by Eden Pastora on San Juan del Norte; it was
hoped that the attack would result in the installation of a provisional
government.

The Role of Lt. Col. Oliver North

     At the NSC, Lt. Col. Oliver North became the liaison with the CIA in its
intensified covert effort.  A graduate of the U.S. Naval Academy, he had
distinguished himself on the battlefield in Vietnam, winning a Silver Star, a
Bronze Star, and two Purple Hearts.  He was assigned to the NSC in October
1981, where he quickly established a reputation with his superiors as a
staffer who could get a job done.

     North was energetic, articulate, action-oriented, and had a reputation
for bypassing red tape.  His superiors could depend on him not only to carry
out orders, but to keep them informed.  North was a prodigious writer, often
staying in his office until late at night to complete lengthy papers or other
work.

     As described by a number of his colleagues, North's relationship to
McFarlane was very close.  With McFarlane's rise to the position of National
Security Adviser, North came to play an increasingly large role not only in
the operational aspects of Contra policy, but also in forging that policy.
North already had contacts in Central America who were pleased with his
success.  On November 7, 1983, John Hull, Indiana native, ranch owner in Costa
Rica, and Contra supporter, wrote that "B.G.," or "blood and guts," as North
was known, was to have a new boss, Robert McFarlane.  Hull hoped this would
make North "more powerful as we need more like him."

     North became a strong advocate within the NSC staff of intensified covert
support for the Contras.  He was the point of contact, transferring
information from the CIA to the National Security Adviser for the President's
approval.  For every significant, and sometimes insignificant, operation, he
provided a memorandum to the National Security Adviser destined for the
President.  His reports were detailed and enthusiastic, his recommendations
supportive of further operations.

     In his new assignment, North looked to Casey for guidance.  In his words,
Director Casey was a "teacher or philosophical mentor" of sorts, to whom he
looked for help and advice on a regular basis.  "Bill Casey was for me a man
of immense proportions," North testified, "a man whose advice I valued greatly
and a man whose concern for this country and the future of this land were, I
thought, on the right track."  "History," North stated "will bear that out."

Tension Between the 1983 Finding and Intensified Operations

     In a series of memorandums written between October 1983 and March 1984,
North recorded the CIA's increasing covert presence in the region.  Relatively
minor operational details were given to the President, as on November 4, when
North advised McFarlane to suggest an increase in the number of weapons
supplied to the Contras by 3,000.  The President approved the recommendation.
North not only sought approval for, but also reported the results of, various
actions proposed to him by Agency personnel.  On February 3, he reported a
successful attack on a Sandinista communications and naval arms depot.
Admiral Poindexter penned, "Well done," and checked North's recommendation
that the President would be briefed.

     North frequently stated in his memorandums that the actions recommended
were within the September 1983 Finding.  Yet, progress toward negotiations and
success in arms interdiction were not the focus of his attention; instead, the
destruction of Sandinista fuel supply lines or the mining of harbors was the
subjects of these memorandums.  North kept his superiors advised of Contra
actions that would weaken the Sandinista regime, explaining that the purpose
of the mining and attacks was to enhance the Contras' military strength, while
"reduc[ing] the mobility of Sandinista military units."

     North could contend that such military activities were within the scope
of the Finding because of the Finding's essential ambiguity: Paramilitary
action, once authorized, may be used to promote a diplomatic end while at the
same time furthering the cause of military victory.  But by March of 1984, it
had become clear that the diplomatic end the Finding described was not what
North anticipated or encouraged.  In memoranda to McFarlane, he proposed
significant military actions against the Sandinistas, the details of which
cannot be disclosed for national security reasons, but which give substance to
the testimony of Clair George, CIA Deputy Director for Operations, that
North's ideas were often extreme, "crazy," or "hairbrained."  The memos reveal
the same enthusiasm for covert paramilitary operations that North would later
bring to his work as the "switching point" for Contra support during the next
2 years.

The Money Begins to Run Out

     By February 1984, the $24 million earmarked by Congress for the Contras
was being quickly depleted.  On February 13, North wrote to McFarlane,
emphasizing the importance of obtaining "relief from the $24 M ceiling," but
recognizing that "[c]ongressional resistance on this issue is formidable":

[P]rospects for success are bleak even with a concerted effort.  At some
point, we may have to reassess our prospects and decide whether prudence
requires that we somehow stretch our FY84 effort to avoid running out of
funds.

In a memorandum drafted by North for the President, McFarlane concluded that
"[u]nless an additional $14 M [million] is made available, the [Contra aid]
program will have to be drastically curtailed by May or June of this year."

The Harbor Mining Disclosures

     In early April, the country learned that the U.S. Government was involved
in the mining of Nicaraguan harbors.  U.S. Government presence in Nicaragua
had become "embarrassingly overt."  As McFarlane testified:  "The disclosure
that harbors had been mined in Nicaragua was received very badly . . . ."

     Some in Congress believed that the Administration had misrepresented the
activities it conducted under the September 1983 Finding.  Senator Barry
Goldwater, Senate Intelligence Committee Chairman, charged that his Committee
Members had been deceived at the very moment they were being asked to vote to
support Contra aid.  "[I]t is indefensible on the part of the Administration
to ask us to back its foreign policy when we don't even know what is going
on," he declared.

     After initial assertions by Director Casey and the National Security
Adviser that full and detailed disclosure had been provided to Congress, the
Administration decided to end the escalating battle and offered a truce.  On
April 26, Director Casey "apologize[d] profoundly," conceding inadequate
disclosure.  But the "apology" could not heal the "fracture" between Congress
and the Administration that the mining had created.  The Administration's
policy to bring the situation "to a head" had backfired: the plan, rather than
attracting support, lost it.