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$Unique_ID{bob01014}
$Pretitle{}
$Title{Iran-Contra Affair: The Report
Chapter 2E   Contra Aid:  Winter-Spring 1985}
$Subtitle{}
$Author{Various}
$Affiliation{}
$Subject{north
contra
congress
contras
support
aid
mcfarlane
resistance
country
leaders}
$Date{1987}
$Log{}
Title:       Iran-Contra Affair: The Report
Author:      Various
Date:        1987

Chapter 2E   Contra Aid:  Winter-Spring 1985

The Administration Returns to Congress

     When the President signed the Boland Amendment, he made it clear he would
return to Congress for additional Contra support:

I sincerely regret the inability of the Congress to resolve the issue of
continuing certain activities in Nicaragua . . . .  I am signing this act with
every expectation that shortly after the next Congress convenes it will
provide adequate support for programs to assist the development of democracy
in Central America. In the winter of 1985, the Administration pinned its hopes
on obtaining the $14 million in aid held out by the Boland legislation.  The
law provided for expedited consideration of such a request after February 28,
1985, if the President certified to Congress that Nicaragua was supporting
other Central American communist insurgencies.  McFarlane conveyed to his
staff, in particular to North and Donald R. Fortier, then Senior Director for
Policy Development, the President's "strong wish that we not break faith with
the Contras . . . .  [We need] to do everything possible to reverse the course
of the Congress, and get the funding renewed," he said.  "[T]he mission was to
win the vote the next time . . . ."

     The chances for success were dim from the start.  The new Chairman of he
Senate Intelligence Committee, David Durenberger, had warned publicly that he
would oppose both the release of the $14 million and any future Contra aid.
But the President had not given up.  He told a group of reporters, "We're
going to do our best."

     Defense Secretary Weinberger called for an updated legislative strategy
and new funding alternatives to win the battle in Congress.  White House
officials considered a number of legislative proposals including third-country
assistance and/or the supply of nonlethal aid coupled with third-country
lethal assistance.  Legislative strategy groups met to consider the proposals.
McFarlane, accompanied by North, traveled to Central America to gauge the
reaction of leaders in the region.  Donald Fortier was dispatched to Capitol
Hill to assess Congressional sentiment.

     While North assisted in drafting various legislative proposals, his
preferred option was to seek Congressional approval for sufficient sums to
fund an increased covert action program "adequate to achieve victory."  North
understood that foreign contributions would ensure Contra survival, but
success could only be achieved with increased funding:

[R]esources available to the resistance from sympathetic government(s) and/or
individuals will permit current small-scale operations to continue for at
least another 6 to 8 months.  A resumption of USG funding or additional
alternative resources would be essential in order to bring the scale of
activity to that which existed in the spring of 1984 and, over time, to
prevent an erosion of the will and determination of the FDN combatants.

North was optimistic that "[w]ith adequate support the resistance could be in
Managua by the end of 1985."

     Any legislative proposal for increased aid depended upon the Contras'
survival in the field.  McFarlane testified he told North that "unless the
Contras become a credible military force, they would never gain political
support in Congress and among the American people."  North was counting on the
Enterprise to provide the support necessary to maintain the Contras as a
viable force.

The Weapons Shipments from the Enterprise Continue

     In the spring of 1985, two weapons shipments arranged by Secord in
consultation with North and Calero would finally reach the Contras: first, in
February, a planeload of 90,000 pounds of munitions from Europe and, second,
in the spring, a sealift.  Both shipments were arranged through Transworld
Armament, and both apparently required end-user certificates.

     North needed the cooperation of Central American countries to provide
documentation and to receive the shipments for the Contras.  On March 5, 1985,
he proposed that one country be rewarded for its assistance.  In a memorandum
to McFarlane, North suggested that the Secretaries of State and Defense and
Chairman Vessey of the Joint Chiefs of Staff be asked to grant the Central
American country additional security assistance.

     The "real purpose" of this memo, North explained, was to:

find a way by which we can compensate [Country 14] for the extraordinary
assistance they are providing to the Nicaraguan freedom fighters.  At Tab II
are end-user certificates which [Country 14] provided for the purchase of
nearly $8 M worth of munitions to be delivered to the FDN.

In the attached memorandum to Weinberger, Shultz, and Vessey, drafted by
North, the real purpose behind the request was not stated.  The memorandum
contained no reference to the end-user certificates, "to the arrangements
which have been made for supporting the resistance through [Country 14]," or
to the Country 14 munitions "wish list" North attached for McFarlane's
information.  Instead, the request for aid was predicated on its merits.

     McFarlane testified that he recommended that the Cabinet approve
increased assistance based solely on his assessment of Country 14's need,
without taking into account its support of the Contras.  North testified that
he had not promised a "quid pro quo."  There was no "need" to make such a
promise to a country threatened by the Sandinista presence, he said.

Disbursements to Other Contra Leaders

     During the winter and spring of 1985, North decided to use the money sent
directly to Calero from Country 2 to support other Contra leaders.  To do
this, funds were withdrawn from Calero's account using traveler's checks, and
hand-carried to North.  North stored the checks in his safe.  Additional cash
was secured from Secord.

     North testified that the idea for maintaining this fund came from
Director Casey:

My recollection is that the very first traveler's checks came either very late
'84 or certainly early 1985 and that the sum total of traveler checks was
probably in excess of $100,000 or thereabouts.

I also had cash which I estimated to be somewhere in the neighborhood of 50 to
75 thousand dollars in cash, so we are talking about an operational account
that went from somewhere around 150 to 175 thousand dollars.  At various
points in time there would be considerable sums in it and at various points in
time there would be none in it.

My recollection is that I got the traveler's checks in packages of less than
$10,000.  I understand that others have remembered elsewise, but that is how I
remember it.

Those funds were used to support the operations that we were conducting. They
were used to support the covert operation in Nicaragua, and then eventually
were used to support other activities as well.  The fact that I had those
funds available was known to Mr. McFarlane, to Admiral Poindexter, to Director
Casey, and eventually to Admiral Art Moreau over at the Pentagon.  It also
came to be known to others, some of whom you have had testimony here.

                  *         *         *         *         *

What is important that you realize is that meticulous records were kept on all
of this.  I kept a detailed account of every single penny that came into that
account and that left that account.  All of the transactions were recorded on
a ledger that Director Casey gave me for that purpose.  Every time I got a
group of traveler's checks in, I would report them, and I would report them
when they went out, even going so far as to record the traveler's check
numbers themselves.

The ledger for this operational account was given to me by Director Casey, and
when he told me to do so, I destroyed it because it had within it the details
of every single person who had been supported by this fund, the addresses,
their names, and placed them at extraordinary risk.

     Poindexter testified that he knew of the account almost from the start,
in 1984:

[I]t was associated with the first contribution of Country 2, I think it came
to my attention, by Colonel North reporting to me, that Mr. Calero had
provided some funds to him, and it was my understanding it was cash, at least
that's my recollection of my understanding.

Poindexter "didn't see anything illegal about it," but, as he testified, "any
time you handle cash there are perception problems that can certainly develop
. . . .  And so I told Colonel North he should get rid of the money by
returning it or whatever, that I didn't think that was a good idea."  In fact,
the money was instead funneled to various Contra leaders throughout 1985 and
1986.

     One of the principal beneficiaries of North's fund was a Resistance
leader.  With McFarlane's approval, North decided to assume support for the
Resistance leader, using funds drawn from the Calero account.  North assured
McFarlane that Casey had been told that North would maintain contact with the
Contra leader.  Later, though, North reported that "the CIA will not be told
of the new source for [Resistance leader's] funds."

     By February 27, 1985, "Adolfo [Calero] ha[d] agreed to provide [the]
requisite funds in the blind without [the] [Resistance leader] becoming aware
of the source."  Eventually, Calero was to "deposit $6,250 per month in
[Resistance leader's] checking account without [his] knowledge [of the
source]."  But before the direct deposit mechanism could be put into
operation, North enlisted Robert Owen and Jonathan Miller, then-Deputy
Coordinator for Public Diplomacy at the State Department, to pass the money to
the Resistance leader.  Sometime in early March, North handed Owen and Miller
traveler's checks from his office safe, and requested that the checks be
cashed.  Miller and Owen did so, and returned to North's office.  Later that
day, at his apartment, Owen passed $6,000 to $7,000 in cash to the Resistance
leader.

     Owen handled a number of transfers to Contra leaders.  He testified that
he paid "[s]omewhere between six and ten" Contra leaders, and the total amount
paid was "[s]omewhere around $30,000."  On March 22, 1985, for example, Owen
traveled to Central America carrying several thousand dollars in cash or
traveler's checks for delivery to a Contra leader.  In some cases, Owen's
efforts did not take him far from the White House itself.  In April, for
example, he waited outside the Old Executive Office Building in the rain. A
car drove up, and Owen passed cash to a Nicaraguan Indian leader sitting
inside.  These payments had a number of purposes:  One payment was made to an
Indian leader as a "quid pro quo" for ceasing negotiations with the
Sandinistas and joining instead with other Indian leaders to "work together in
a united front."

Keeping the Operation Secret

     North provided the logistical and funding assistance the Contras needed
to keep going in Central America at the same time that he worked to keep their
cause alive in Washington.  To persuade Congress to vote for renewed aid, it
was critical that the NSC staffs Contra assistance remain secret.  As North
warned Calero:  "Too much is becoming known by too many people.  We need to
make sure that this new financing does not become known.  The Congress must
believe that there continues to be an urgent need for funding."

     North actively cultivated an image of Contra self-sufficiency within the
Administration.  For example, he urged the CIA's Chef of the Central American
Task Force to reject the State Department's opinion that the Resistance had
become largely ineffective since U.S. funding ran out in May 1984.  "I told
[the Chief of the Central American Task Force]," wrote North, "that it was
important that the SNIE [Special National Intelligence Estimate] reflect the
fact that there was substantial outside support which had continued for some
months and showed no signs of abating."

     But even without such active encouragement, the secrecy shrouding North's
efforts contributed to the appearance of Contra self-sufficiency.  As funds
arrived and weapons were shipped, CIA intelligence reports confirmed that the
Contras remained not only a viable force, but were surviving on their own,
without apparent U.S. Government assistance.  By March, close to a year after
U.S. Government aid had ceased, Director Casey's subordinates provided Casey
with briefing materials, reporting surprise at the Contras' survival, but
noting there was little intelligence on how the Contras had managed to
flourish:

Since the cutoff of official funds to the anti-Sandinistas in May 1984 they
have been able to field a viable guerrilla fighting force, have increased
their numbers, and improved their tactical efficiency.  It is estimated that
to maintain the level of activity that they have it would cost an estimated
one and one half to two million dollars per month. There is, however, no
intelligence on the source of this income, except that it comes from private
groups, and possibly some U.S. business corporations.

     The secret of North's involvement, however, was not to last.  North's
name had begun to appear periodically in the press along with that of
Singlaub.  By March, Singlaub already had become something of a "lightning
rod" in the press, attracting attention as a private fundraiser for the
Contras.  According to Singlaub, North told him that his frequent visits to
the NSC were a source of concern.  But North "understood and agreed" that
Singlaub had to keep a "high profile" in order to raise funds, and he
supported the effort.  If Singlaub "had high visibility, [he] might be the
lightning rod and take the attention away from [North] and others who were
involved in the covert side of support."

Covert Operation and Legislative Strategy Intertwine

     While maintaining the secrecy of his Contra support activities, North
worked to promote a legislative strategy that would change both the
Congressional and the public perception of the Nicaraguan threat.  In March,
he and Donald Fortier sponsored an elaborate plan calling for lobbying, a
media blitz, and culminating in almost daily Presidential speeches and phone
calls in support of the initiative.  At its most ambitious stage, the plan
included a 10-page, day-by-day chronology to describe each of the players'
appointed tasks.

     At the same time, North proposed a "Fallback Plan," should Congress
refuse to provide aid or lift the Boland Amendment restrictions.  In a
memorandum to McFarlane, North noted that the Contras had sufficient funding
for munitions to carry them through October I, 1985, but they needed money for
the following year.  The fallback plan, sent to McFarlane on March 16, called
for Country 2, described as the "current donor," to contribute an additional
$25 million to $30 million to the Resistance for the purchase of arms and
munitions; for the President to appeal to the public for contributions instead
of seeking a Congressional appropriation; and for a tax-exempt foundation to
be established to receive the contributions. McFarlane rejected the idea of
the Presidential appeal, expressed doubt about seeking more money from Country
2, and approved the establishment of a tax-exempt foundation.

     With McFarlane ruling out a return to Country 2, a return to Congress was
the Administration's only hope for renewed Contra funding.  During March 1985,
North focused his attention on the elaborate legislative strategy plan he had
been working on since late February.  The plan was developed in conjunction
with a peace initiative drafted by North in a Miami hotel room with FDN head
Adolfo Calero and other Contra leaders, which became known as the San Jose
Declaration.  North arranged the deadline for a Sandinista response to the
peace plan to coincide with the vote by Congress.  If the Sandinistas rejected
the overture, as North anticipated, then "special operations against highly
visible military targets in Nicaragua," were timed to follow in the hopes that
successful and "visible" Contra military activities might favorably influence
Congress's decision on Contra aid.

     At the last minute, however, the Administration considered delaying the
submission of the Administration's new aid request to Congress.  North
recognized that if the vote were delayed, the Contras' planned military
operations would not serve as an effective tool in influencing Congress's
decision on the aid proposal.  He strongly recommended to McFarlane that the
vote take place as originally scheduled.  He wrote:

The deadline for substantive negotiations . . . was carefully chosen to ensure
that the internal opposition would have a specific date for their own planning
purposes.  Military operations were planned based on the expiration of the
offer on April 20 . . . .  [A]n attack is scheduled for April 25.  Based on my
request Calero has agreed to postpone the attack for five days.  The force
which is being inserted to conduct this operation cannot be logistically
supported in this area after May 5.  The resupply situation will require that
they be withdrawn after that date.

                  *         *         *         *         *

It is my belief that urging the resistance leaders (particularly Calero) to
accept a major delay . . . will result in a breakdown of the unity we have
achieved.  [Calero] has only cooperated to date in the unity effort because he
trusts the only persons in the U.S. Government who have supported the movement
since October 1984 - North and McFarlane.

The Administration Responds to Congressional Defeat

     In early April, the Administration submitted a Contra aid proposal to the
Congress, along with its own peace plan modeled on the San Jose Declaration.
The President pledged that lethal aid would only be provided if the
Sandinistas rejected the proposal.  The plan provoked controversy, and on
April 23, the House rejected the Administration's proposal.

     When the House rejected the bill, the President's first step was to
reassure Central American leaders that he had not given up on Contra aid.  As
to one country, the President had special cause for concern: A military leader
had seized ammunition intended for the Contras.  The President telephoned the
head of state and received an assurance that the ammunition would be delivered
to the Contras.

     Publicly, the President expressed his determination "to return to the
Congress again and again."  Soon after the House defeat, the Administration
was back on Capitol Hill hoping to mold a compromise in support of nonlethal
aid.

     Meanwhile, Nicaraguan President Daniel Ortega traveled to the Soviet
Union and throughout Europe, seeking renewed assistance for the Sandinista
forces.  President Ortega's visit to Moscow prompted the President to issue a
warning to Congress:

And whatever way they may want to frame it, the opponents in the Congress of
ours, who have opposed our trying to continue helping those people, they
really are voting to have a totalitarian Marxist-Leninist government here in
the Americas, and there's no way for them to disguise it.  So, we're not going
to give up.

     President Ortega's Moscow trip also prompted a renewed sense in Congress
that something had to be done to support the Contras.  With strong support
from Congressional leaders, President Reagan announced the imposition of
economic sanctions against Nicaragua on May 1, 1985.

Maintaining the Covert Operation

     Before the Congress rejected the Administration's aid proposal, North was
optimistic about the Contras' prospects.  In an early April 1985 memo to
McFarlane, North explained what the operation had achieved up to that point,
and the plans he had for its future.  Based on information provided by Calero,
North outlined what the Contras had spent "since USG funding expired in May
1984."  Of the "grand total" of $24.5 million received by Calero, "$17,145,594
has been expended for arms, munitions, combat operations, and support
activities."  Extolling the FDN's nearly twofold increase in size, and its
newly acquired expertise in guerrilla warfare, North emphasized that the money
had been spent wisely:  "In short, the FDN has well used the funds provided
and has become an effective guerrilla army in less than a year."

     The image of Contra military capability cultivated by North was arguably
at odds with reality.  U.S. Army General Paul F. Gorman, Commander of the
Southern Command from May 1983 through February 1985, told the Committees that
"the prospects of the Nicaraguan resistance succeeding [were] dim at best."
Specifically referring to Congressional testimony he gave in June and December
1985, Gorman testified:

what I was saying in those days was that I did not see in the Nicaraguan
resistance a combination of forces that could lead to the overthrow of the
government or the unseating of the Sandinistas . . . .  The training of the
Contras was, when I last saw them in 1985, abysmal . . . .  I didn't regard
them as a very effective military organization, based on what I could see in
reflections of battles, in communications on both sides.  The Sandinistas
could wipe them out.

Regarding North's reaction to his views, Gorman added:

Oliver was terribly concerned about my attitude, and he knew that I was
travelling up here on the Hill and in other circles where I was being asked to
comment on the prospects of these people.

     Q:  I take it Colonel North, who had been your friend . . . was not
pleased with the position you were taking?

     A:  No . . . .  I made a speech over at the National Defense University
which was reported in the Washington Post . . . and Oliver . . . got very
exercised because in it I said . . . I can't see any amount of money or any
amount of time, given the present set of conditions, that would be efficacious
. . . .  Oliver got very exercised about that and called me and said would you
try to put together an op ed piece . . . which he allegedly was going to get
placed in the Washington Post.  It never was, and I gather it's because what I
wrote displeased him.

Gorman concluded by telling the Committees, "it was also very clear to me, he
[North] saw me as a problem in terms of what I was saying, and I think he was
just doing his damndest to get me to shut up - old General, put a cork in it."

     In the spring, North had made ambitious plans for the Contras' future,
according to his April 11 memo.  The force would be increased in size.  Two
special operations were planned:  an "attack against Sandino airport with the
purpose of destroying" Sandinista HIND-D helicopters; and a "ground operation
against the mines complex" in Nicaragua securing the principal lines of
communication in and out of Puerto Cabezas.  Finally, North told McFarlane the
Contras would open a Southern front.

     These plans were soon stalled, though, when in late April, Congress
rejected the Administration's funding request.  The defeat precipitated a
crisis atmosphere among Contra leaders, who had planned on renewed
Congressional funding.  There were daily contacts between Contra leaders and
North, and between North and the CIA Chief of the Central American Task Force.
The problems of the Resistance were further complicated when one Central
American country, responding to Sandinista encroachment, ordered the Contras
to move to less exposed locations.

     Meanwhile, in Congress, a consensus was building in favor of humanitarian
aid.  By May 15, 1985, Congressional leaders were seeking counsel from the NSC
on the Administration's position about a Contra support bill that was limited
to nonlethal aid.  North, along with other NSC staff members, drafted talking
points for a meeting between McFarlane and Minority Leader Robert H. Michel,
emphasizing that the "primary goal" was to lift the Boland Amendment
restrictions, "which severely limit our ability to support/advise the now
unified Nicaraguan resistance."

     By the end of May, North was optimistic that the Boland Amendment
restrictions would be lifted, at least with respect to the CIA's provision of
intelligence and political support.  But even if they were lifted, and
Congress appropriated humanitarian aid, North did not contemplate that his
covert operation would end.  He told McFarlane in a May 31 memo:

Plans are underway to transition from current arrangements to a consultative
capacity by the CIA for all political matters and intelligence, once
Congressional approval is granted on lifting Section 8066 [Boland Amendment]
restrictions.  The only portion of current activity which will be sustained as
it has since last June, will be the delivery of lethal supplies.