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$Unique_ID{bob01012}
$Pretitle{}
$Title{Iran-Contra Affair: The Report
Chapter 2C   Keeping the Contras Together:  Spring-Summer 1984}
$Subtitle{}
$Author{Various}
$Affiliation{}
$Subject{contras
country
mcfarlane
north
support
cia
director
funds
president
testified}
$Date{1987}
$Log{}
Title:       Iran-Contra Affair: The Report
Author:      Various
Date:        1987

Chapter 2C   Keeping the Contras Together:  Spring-Summer 1984

     The Administration's proposal for $21 million in supplemental assistance
for the Contras now lay in doubt as Congress debated the course of U.S. policy
in Central America.  The uproar over the mining incident made any further
appropriation unlikely.  Indeed, House Speaker Thomas P. (Tip) O'Neill, Jr.
declared that, in his view, the President's funding request was "dead."

     With or without appropriated funds, the Administration planned to
continue supporting the Contras.  In McFarlane's words, the President directed
the NSC staff to keep the Contras together "body and soul."  In Poindexter's
words, the President "wanted to be sure that the contras were supported."

     McFarlane assigned this responsibility to North, who testified:

I was given the job of holding them together in body and in soul.

                  *         *         *         *         *

To keep them together as a viable political opposition, to keep them alive in
the field, to bridge the time between the time when we would have no money and
the time when the Congress would vote again, to keep the effort alive, because
the President committed publicly to go back, in his words, again and again and
again to support the Nicaraguan resistance.

Tapping Foreign Sources - The First Efforts

     With the appropriated funds projected to run out in May or June, the
Contras could be kept together only if an alternative source of funding could
be found.  The Administration began to look beyond the U.S. Treasury to
foreign countries for monetary support.  As early as February, North drafted a
National Security Decision Directive recommending "immediate efforts to obtain
additional funding of $10-$15 million from foreign or domestic sources to make
up for the fact that the current $24 million appropriation will sustain
operations only through June 1984."  While McFarlane struck this language from
an official policymaking document, he quietly pursued the same idea.

Looking to Country 1 for Contra Support

     McFarlane testified that perhaps as early as February 1984, he considered
"the possibility of in effect farming out the whole contra support operation
to another country, which would not only provide the funding, but give it some
direction."  In February or March, McFarlane pursued the idea with an official
from Country 1.  He inquired whether Country 1 would have any interest in
instructing "the contras in basic tactics, maneuver[s], and so forth."
Country 1 officials eventually declined the invitation.

     But McFarlane was not dissuaded from attempting a less ambitious plan for
third-country support.  On March 27, McFarlane met with Director Casey and
proposed a plan to approach third countries, including Country 1, for Contra
assistance.  In a memorandum of that date, Casey recounted McFarlane's plan:

In view of possible difficulties in obtaining supplemental appropriations to
carry out the Nicaraguan covert action project through the remainder of this
year, I am in full agreement that you should explore funding alternatives with
[Country 1] and perhaps others.

     Others were not in "full agreement," however, about an approach to
Country 1.  Secretary of State George P. Shultz testified that during other
discussions within the Administration about third-country funding, he
questioned the legality and wisdom of any third-country approach.  Shultz
testified that by April 18, McFarlane knew he (Shultz) felt it was a mistake
to approach Country 1 for Contra support.

     Nevertheless, McFarlane followed through with the plan recounted in
Director Casey's March 27 memo.  He directed Howard J. Teicher, the Director
of Near East Affairs at the NSC, to speak to an official in Country 1's
Ministry of Foreign Affairs about obtaining monetary support.  Teicher made
the approach, but Country 1 declined to be a part of the plan.  McFarlane, in
a memorandum of April 20, told Teicher that he was "disappointed in the
outcome but we will not raise it further . . . [w]e will not press them on the
question of assistance to the contras."

     In May, Secretary Shultz learned of Teicher's approach from the U.S.
Ambassador to Country 1, and he confronted McFarlane at the White House.
According to Shultz, McFarlane told him that Teicher's approach to Country 1
was without authorization and that Teicher was operating "on his own hook."
But Shultz later learned, to the contrary, from his Ambassador, that Teicher
had made a point of telling the Ambassador he was in Country 1 at McFarlane's
instructions.  Later, McFarlane told the Committees that he had directed
Teicher to seek a contribution from Country 1.

Looking to Country 6 for Contra Support

     Another third-country funding option considered by the CIA during the
spring of 1984 was an approach to Country 6.  In his March 27 memorandum,
Casey indicated that Country 6 officials already had been approached and that
the initial reaction had been favorable.  Between April 10 and 13, 1984, Duane
(Dewey) Clarridge, Chief of the Latin American Division of the CIA Directorate
of Operations traveled to Country 6.  While there, CIA Deputy Director John N.
McMahon, told Clarridge to "hold off" on his discussions because of the recent
harbor mining disclosures.  Upon his return to the United States, Clarridge
wrote:

Current furor here over the Nicaraguan project urges that we postpone taking
[Country 6] up on their offer of assistance.  Please express to [Country 6
official] my deep regret that we must do this, at least for the time being,
and I fully realize that he cannot crank up assistance on a moment's notice,
should we decide to go forward in the future.

     Clarridge testified that neither Casey's March 27 memorandum nor the
cable traffic (in some cases captioned, "[Country 6] Assistance to the
Nicaraguan Project"), represented CIA efforts to solicit Contra assistance
from Country 6.  He conceded that the documents showed that, prior to his
arrival, Country 6 had offered to aid the Contras, and that an offer may have
been made as early as January 1984 in a meeting between Director Casey and a
Country 6 official.  But before he arrived in Country 6, Clarridge testified,
"a decision had been taken . . . that we would neither ask for any assistance
nor would we accept any . . . ."  Clarridge did not explain why, if the
Country 6 offer of assistance was dead before his visit, he urged on his
return "we postpone taking [Country 6] up on their offer of assistance."

Country 2 Contributes Funds

     By May 1984, the Contras had exhausted the last portion of the $24
million Congressional appropriation for fiscal 1984.  McFarlane testified that
possibly as early as May, he met with the Ambassador from Country 2 and
explained that it was almost "inevitable that the Administration would fail"
to win Congressional support for the Contras.  According to McFarlane, the
Ambassador offered to "provide a contribution of $1 million per month,
ostensibly from private funds that would be devoted to - as a humanitarian
gesture - to sustenance of the Contras through the end of the year."  In his
testimony, McFarlane denied that any solicitation of Country 2 had occurred,
and insisted the Country 2 contribution was merely a gift.

     After receiving the contribution and informing his deputy, Admiral
Poindexter, McFarlane charged North with the responsibility for arranging the
transfer of funds:  "[I] asked him to be in touch with the contra leaders and
to find out where the bank account was kept . . . .  Lieutenant Colonel North
came back and provided the name of the bank, its address and the contras'
account number for the bank in Miami . . . ."  McFarlane communicated this to
the Ambassador by handing him an index card with the account number on it.
North testified that it was McFarlane who asked him "to establish the initial
resistance account offshore to which money was sent by a foreign government."

     According to McFarlane, the President was informed of the Country 2
contribution shortly after it took place.  McFarlane placed a note card into
the President's morning briefing book.  He chose this method of informing the
President of the contribution to reduce any chance that others at the
President's daily briefing might become aware of the funding scheme.  After
the meeting, McFarlane was called in to "pick up the note card which," he
recalled, "expressed the President's satisfaction and pleasure that this had
occurred."

     McFarlane also testified he informed selected members of the executive
branch of the funding.  "Within a day or so," he told Vice President George
Bush, and at a weekly breakfast with the Secretaries of State and Defense, he
"drew them aside" and informed them that the Contras would be "provided for"
until the end of the year.  Neither Secretary, according to McFarlane's
testimony, asked the source of the funds.  McFarlane testified that it was
"likely" he told then-Chief of Staff, James A. Baker III "[i]n the spring of
'84," and that it was "possible" he told then-Counselor to the President Edwin
Meese III of the Country 2 contribution.  McFarlane claimed he did not inform
Director Casey of the Country 2 funding.

     But McFarlane's account was disputed by other witnesses.  Secretary of
Defense Caspar W. Weinberger had no recollection of being so advised by
McFarlane; and Secretary Shultz testified that he was told of the contribution
for the first time in June 1986 after Admiral Poindexter became concerned that
the Secretary of State had not been told of the Country 2 contribution.  Baker
denied any knowledge of the contribution.

The June National Security Planning Group Meeting

     On June 25, the National Security Planning Group met to consider options
for funding the Contras.  In attendance were the President, Vice President
Bush, Secretary Shultz, Secretary Weinberger, Director Casey, Meese, and
McFarlane.  Director Casey urged the President to seek third-country aid.
Secretary Shultz responded that Chief of Staff James Baker had told him that
if the U.S. Government acted as a conduit for third-country funding to the
Contras, that would be an "impeachable offense."  Casey responded that it was
permissible if the plan called for direct contributions from third countries
to the Contras.  Meese recalled that there was an opinion by Attorney General
William French Smith that provided authority for such a plan, but also noted
that if an opinion were sought, Justice Department lawyers should be given
guidance on what the opinion should say.  The meeting ended without any firm
conclusion.  McFarlane advised than: no one was to do anything without the
necessary Justice Department opinion.  Although McFarlane had already secured
the contribution from Country 2, neither he nor anyone else mentioned it.

     And although McFarlane had urged those at the National Security Planning
Group meeting not to do anything, that very day North arranged for the
transfer of Country 2 funds to Contra leader Adolfo Calero.  North's notes
reveal that on June 25, 1984, he told Calero that funds would be transferred
"w/in 24 hrs.," through an offshore account.  North issued a series of
instructions to Calero:  "Never let agency know of amt, source, or even
availability" of the funds; "No one in our govt. can be aware"; and "Your
organization must not be aware."

     North made these plans to send the Country 2 funds to Calero despite his
apparent knowledge of the legal difficulties expressed earlier that day at the
National Security Planning Group meeting.  His notes reflect that he was
advised of those discussions by Clarridge of the CIA.  North recorded phrases
such as "impeachable offense" (presumably referring to Secretary Shultz's
remark), and "going to French Smith - reading on US seeking alternative
funding."  The note continues:  "Seek 3rd party funding."

     The next day, Director Casey met with Attorney General Smith along with
members of the Justice Department and the CIA legal staff.  In a memorandum
recording the meeting, the CIA's General Counsel, Stanley Sporkin, reported
that in response to Director Casey's question about the "legal limits" of
funding options, the Attorney General stated:

that he saw no legal concern if the United States Government discussed this
matter with other nations so long as it was made clear that they would be
using their own funds to support the Contras and no U.S. appropriated funds
would be used for this purpose.  The Attorney General also said that any
nation agreeing to supply aid could not look to the United States to repay
that commitment in the future.  The DCI [Director of Central Intelligence]
made it clear that if there is a possibility this option might be used, he
would advise the CIA oversight committees.

The Intelligence Committees were not advised of the Country 2 contribution
until 1987.

Providing Support - The Private Network

     With funds available from Country 2, North turned to creating a mechanism
for providing materiel support for the Contras.  "When we ran out of money,"
North testified, "when people started to look in Nicaragua and Honduras and
Guatemala and El Salvador and Costa Rica for some sign of what the Americans
were really going to do," a decision was made to create an infrastructure,
what North termed a "covert operation" to provide the operational support
denied by Congress.

     North testified that, at Casey's suggestion, he turned to Retired U.S.
Air Force Maj. General Richard V. Secord:

[I]n 1984, we were approaching the proscriptions under Boland, Director Casey
and I had a number of discussions.  I had made a number of trips, and
obviously by then I had become much more engaged in the support for the
resistance.

Director Casey is the one who had suggested General Secord to me as a person
who had a background in covert operations . . . and was a man who, by Director
Casey's definition, got things done, and who had been poorly treated.  Those
were his words.

I approached General Secord in 1984 and asked that he become engaged in these
activities . . . .

I went back to him again and at some point in '84, he agreed to become
actively engaged.  He agreed to establish, and did, private commercial
entities outside the United States that could help carry out these activities.
It was always viewed by myself by Mr. McFarlane, by Director Casey, that these
were private commercial ventures, private commercial activities . . . .

It was clearly indicated that Mr. McFarlane and Admiral Poindexter and in fact
almost drawn up by Director Casey, how these would be outside the U.S.
Government, and that I told them right from the very beginning that those
things that he did deserved fair and just compensation.

[I]t was always the intention to make this a self-sustaining operation and
that there always be something there which you could reach out and grab when
you needed it.  Director Casey said he wanted something you could pull off the
shelf and use at a moment's notice.

The network, albeit privately run, was created for the purpose of pursuing
"foreign policy goals."  According to North:  "It was never envisioned in my
mind that this would be hidden from the President."

     The President has publicly stated that he was kept informed of some of
the efforts by private citizens to aid the Contras.  Poindexter testified the
President "knew the contras were being supported . . . by third-country funds
and by private support activity . . . ."  There is no evidence, however, to
suggest that the President was ever informed about an "off-the-shelf" covert
operation.

Secord's Initial Role

     General Secord had served in the Air Force until 1983, when he retired
and entered private business.  During his service in the Air Force, he was
involved in special operations with the CIA in Laos.  From 1978 to 1981,
Secord headed the U.S. Air Force International Programs office.

     In summer 1984, Secord's first assignment from North was to assist the
Contras in buying weapons with the funds sent to Calero by Country 2.  In
July, Secord, accompanied by his associate and former CIA operative, Rafael
Quintero, met with Calero to discuss the Contras' need for low-priced weapons.
He left the meeting with a weapons list.  Although Secord was not an arms
dealer, he agreed to act as a broker to procure the weapons with his business
partner, Albert A. Hakim, a naturalized American of Iranian descent.  In his
testimony, Secord referred to the operation that he and Hakim used for Contra
support as "the Enterprise."

Owen's Role

     North also obtained the assistance of Robert W. Owen to act on his behalf
with Contra leaders.  Owen was a private citizen who was a teacher before he
joined the staff of Senator Dan Quayle in 1982.  After leaving Senator
Quayle's staff in 1983, Owen joined Gray & Co., a public relations firm in
Washington, D.C.

     In the spring of 1984, while Owen was at Gray & Co., a Contra
representative approached the firm seeking representation.  Owen was asked to
contact the Nicaraguan Democratic Forces (FDN).  He turned to North, whom he
had met the year before while working for Senator Quayle.  Owen learned from
North that the Contras needed money, and they discussed a plan to set up a
group of European proprietary companies to purchase weapons overseas.  During
the discussions, North asked Owen to travel to Central America to determine
the Contras' requirements over the next several months.  Owen agreed.  Taking
a leave of absence from his firm, Owen traveled to Central America in late May
or early June 1984 and met with Contra leaders.  He was told, and subsequently
repeated to North, that the Contras "would need $1 million a month, and if
they wanted to increase in size they would need about a million and a half
dollars a month."  Between October 1984 and March 1986, Owen made more than
seven trips to Central America collecting information and delivering
intelligence and money to the Contras on North's behalf.  He was given the
code name "T.C." (The Courier), and in his own words, he served as North's
"eyes and ears" in Central America.

Boland II

     In the summer of 1984, CIA covert assistance to the Contras began to wane
as funds were depleted.  Meanwhile, legislation - the second Boland Amendment
- that would bar the Agency from future support for the Contras had been
passed by the House in early August.  According to McFarlane, as the CIA
stepped out of the picture, the task of supporting the Contras fell to the
NSC:  "[t]he President had made clear that he wanted a job done.  The net
result was that the job fell to the National Security Council staff."

     In late August, North traveled to Central America to meet with Calero to
resolve "immediate operational/logistic problems."  McFarlane advised North:
"Exercise absolute 'stealth.'  No visible meeting.  No press awareness of your
presence in the area."  On September 1, North proposed to McFarlane that he
obtain a "private donor" for a new helicopter to replace one shot down the day
before.  The National Security Adviser penned a note:  "I don't think this is
legal."  One month later, on October 9, North proposed a National Security
Decision Directive calling "for the CIA to provide assistance to the
Nicaraguan Resistance Forces in interdicting Soviet arms bound for the FSLN in
Managua."  Once again, McFarlane wrote on the cover sheet:  "Ollie/Ken
[deGraffenreid].  Pls check w/CIA legal counsel promptly to confirm this is
legal . . . ."

     By early October, Congress had adopted the Boland Amendment to an omnibus
appropriations bill.  Signed into law by the President on October 12, 1984,
the bill would later be referred to as Boland II.  It provided in relevant
part:

During fiscal year 1985, no funds available to the Central Intelligence
Agency, the Department of Defense, or any other agency or entity 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.

Similar provisions were adopted as parts of the Defense and Intelligence
Authorization bills.

     While Boland II cut off all funding for the Contras, it held out some
hope for renewing Contra aid in the future by providing that the
Administration could seek a $14 million appropriation on an expedited basis
after February 28, 1985.  But, even as the bill held out a future hope, its
sponsors made clear that the law was intended to achieve an immediate cutoff
of aid.  As Representative Boland put it, the law "clearly ends U.S. support
for the war in Nicaragua.  Such support can only be renewed if the President
can convince the Congress that this very strict prohibition should be
overturned."

     Poindexter and North, who admitted assisting the Contras in their
military activities, had a different view.  Both testified that they did not
believe that Boland II was applicable to the NSC staff and that while the CIA
could no longer provide any assistance to the Contras, the NSC staff was free
to do so.  Poindexter put it succinctly:  "I never believed, and I don't
believe today, that the Boland Amendment ever applied to the National Security
Council staff . . . ."

     Their former superior, Robert McFarlane, was surprised by that view.
McFarlane, who denied authorizing the NSC staff to provide military assistance
to the Contras, maintained that the "Amendment governed our actions."  In
"cutting off money for the Contras," he understood Congress to say "we don't
want any money raised for the Contras."  McFarlane testified that he
repeatedly addressed the NSC staff with "a kind of litany of mine, . . .
[not to] 'solicit, encourage, coerce, or broker'" financial contributions for
the Contras.  According to McFarlane, he specifically told North to "stay
within the law and to be particularly careful not to be associated with or
take part in any fundraising activities."  He dismissed his instruction to
North to keep the Contras "together body and soul" as meaning nothing more
than "smoke and mirrors."  What he intended North to provide was only moral
and political, not military, support.

     North and Poindexter both denied hearing McFarlane's warnings against
solicitation and entreaties to observe the law.  Both claimed that they were
acting within their legal rights in aiding the Contras.  North stated that all
of his acts were authorized by his superiors, and Poindexter, speaking as one
of those superiors, confirmed that he had given North a "broad charter" to
support the Contras and had "authorized in general" North's actions in
carrying out that charter.  McFarlane testified he was unaware of the breadth
of North's activities.

     In any case, Poindexter and North were not deterred by Boland II in
assisting the Contras.  Thus, after the Boland Amendment passed, Poindexter
explained to McFarlane his Nicaraguan strategy for the future:  "continue
active negotiations but agree on no treaty and agree to work out some way to
support the Contras either directly or indirectly.  Withhold true objectives
from staffs."

     Indeed, Boland II was a spur to action.  The CIA had to withdraw from
supporting the Contras and, according to North, this meant he "was the only
person left talking to them."  As North put it:  "The U.S. contact with the
Nicaraguan resistance was me, and I turned to others to help carry out that
activity."  Poindexter saw it the same way:

Very frankly, we were willing to take some risks in order to keep the Contras
alive, as I said, until we could eventually win the legislative battle.

So for all intents and purposes, Colonel North largely took over the - much of
the activity that [the] CIA had been doing prior to their being prohibited
from carrying [on] activity because of the Boland Amendment.

As Poindexter summed up North's role, "[O]nce the CIA was restricted," North
was the "switching point that made the whole system work . . . the kingpin to
the Central American opposition . . . ."

     Boland II did not deter North - it simply reinforced the need to keep
what he was doing secret from Congress, the public, and others in the
Government. The CIA support of the Contras had not been kept from Congress -
it was openly debated on the floor and was funded by appropriations.  With
Boland II, the assistance - now handled by the NSC staff - went underground.