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$Unique_ID{bob01024}
$Pretitle{}
$Title{Iran-Contra Affair: The Report
Chapter 5A   NSC Staff in Criminal Investigations & Prosecutions}
$Subtitle{}
$Author{Various}
$Affiliation{}
$Subject{feldman
kellner
investigation
north
rosenblatt
fbi
customs
jury
agents
meese}
$Date{1987}
$Log{}
Title:       Iran-Contra Affair: The Report
Author:      Various
Date:        1987

Chapter 5A   NSC Staff in Criminal Investigations & Prosecutions

     During the period covered by the Boland Amendment, federal law
enforcement agencies conducted investigations that touched upon various
aspects of the secret Contra support operation.  Concerned that these
investigations, if pursued, would expose the NSC staff's covert operations,
North and Poindexter reacted by contacting the agencies involved.  They sought
to monitor investigations and, in some cases, to delay or impede their
progress by suggesting that national security was at stake. Confronted with
such assertions from White House officials involved with the nation's
security, law enforcement agencies understandably cooperated with the NSC
staff by delaying some investigations, arranging to move a convicted former
foreign official whom North was afraid would disclose facts about the Contras
to a minimum security prison, and giving Poindexter and North information
about other investigations.

     The Committees are aware of seven such episodes, three involving the
United States Customs Service and four involving the Department of Justice.
They represent an integral part of the NSC staff's efforts to keep its
operations even from those with legitimate law enforcement interests.

North and the Customs Service

Maule Aircraft Corporation

     In the summer of 1986, the United States Customs Service, following up on
a CBS news report, began an investigation into allegations that Maule Aircraft
Corporation of Macon, Georgia, had shipped four aircraft into Central America
to support the Contras in possible violation of U.S. export control laws.

     In August 1986, the Commissioner of the U.S. Customs Service, William von
Raab, was approached by North, who told him that Customs agents in Georgia
were giving Maule Aircraft Corporation a hard time.  North said the Maule
Corporation shipped aircraft such as "Piper Cubs" down south.  North also said
that Maule was "a close friend of the President."  Commissioner von Raab told
North he would look into the Customs Service investigation and assigned the
matter to William Rosenblatt, Assistant Commissioner for Enforcement.

     Rosenblatt contacted North, who told Rosenblatt that the people involved
in the sale and export of the four Maule aircraft were "good guys" and had
done nothing illegal.  North insisted that the aircraft were simply "super
Piper Cubs" and were exported only to a Central American country, where they
were used to supply the Contras with medical and humanitarian supplies.
Rosenblatt explained that in order to verify the legality of the transactions,
Customs needed certain documents and photographs of the aircraft, which North
promised to produce.  In exchange, Rosenblatt agreed to postpone issuance of
subpoenas.

     Over the course of the next several weeks, Rosenblatt continued to
contact North periodically to request the promised documentation, which North
led him to believe would be forthcoming "momentarily."  Because of North's
promises, Rosenblatt told the agent in charge to suspend issuing a grand jury
subpoena for Maule, although the agent asserted that the Maule officials were
"stone-walling" him.  In the interim, Rosenblatt found himself dealing with
North on two other matters, one involving a Customs informant named Joseph
Kelso and another involving Southern Air Transport's role in the Hasenfus
aircraft, where North asked Customs to narrow a subpoena so as not to expose
other sensitive operations.

     On November 10, Rosenblatt met with Commissioner von Raab to discuss
North's assertions that the Customs investigation could compromise national
security, including an effort to obtain the release of the hostages.  At that
meeting, von Raab advised Rosenblatt to speak with Robert Kimmitt, General
Counsel to the Treasury Department, about his inability to obtain the Maule
and SAT records.  Rosenblatt scheduled that meeting for the afternoon of
November 17.

     On the morning of November 17, Rosenblatt called North to attempt again
to get the promised documents on Maule Aircraft.  To Rosenblatt's surprise,
North indicated that he had the documents and would send them right over.
When they arrived, however, Rosenblatt was quite disappointed. They did not
include purchase orders, photographs, or other documents sufficient to dispose
of the Customs inquiry.  That afternoon, Rosenblatt met with Kimmitt and
related the entire episode involving Maule and SAT. At that point, the
investigation resumed, 6 weeks after it had been halted at North's request.

     While Rosenblatt testified he never mentioned the Kimmitt or von Raab
meetings to North and he had no contact with North after November 17, North's
notes suggest that Rosenblatt did brief him on these matters after November
17.  A note dated "19 Nov. 86" reads:

     - Bill Rosenblatt
     - Joe Ladow - P/M Maule
     - Letter from Justice
     - Talk to Commissioner next week
     - Talked to Kimmitt re relationship
     - Profs w/C-123 military configuration required sojourn
     - Names in document - La dodge needed advice on how to handle
     - Call Von Raab

Kelso

     Another matter on which Customs had dealings with North involved Joseph
Kelso.  Kelso was on probation after a conviction for illegally exporting arms
to Iraq.  In 1986, he approached Customs under an alias and offered to work as
an informant.

     In the spring of 1986, Kelso, accompanied by a Customs informant,
traveled to Costa Rica to gather information on an alleged counterfeiting and
drug ring that supposedly included corrupt DEA agents.  Kelso and the
informant had not notified the U.S. Embassy or Costa Rican authorities of
their investigation, and Kelso was detained and questioned by the Costa Rican
authorities and DEA agents as to what he was doing in the country. Kelso was
then taken to John Hull's farm.  Hull reported the incident to North and Owen
in a letter.  At the same time, Tambs complained to Customs about their
sending informants into Costa Rica without notifying the Embassy.

     After returning to the United States, Kelso, who faced charges of
violating his probation, turned over tape recordings of his activities to
Customs, and claimed that, apart from his trip for Customs, he was working for
the intelligence community.  In or about September 1986, Rosenblatt called
North to find out if Kelso was working for the intelligence community.  North,
who was already aware of Kelso's visit to Costa Rica, suggested that
Rosenblatt allow Owen, whom Rosenblatt did not know, to listen to Kelso's
tapes to verify his claims.  Rosenblatt agreed on the assumption that Owen was
part of the NSC staff, or otherwise assisting North.

     After receiving the Kelso tapes from Rosenblatt in October, Owen made two
trips to Central America where he met with DEA agents.  Although Owen was
purporting to investigate Kelso's status, he never communicated further with
Rosenblatt, and Rosenblatt concluded from this silence that Kelso had not been
working for the intelligence community.

Miami Neutrality Investigation

     In connection with another investigation, this one conducted by the
Office of the United States Attorney for the Southern District of Florida,
North and Poindexter were able to obtain information concerning the
vulnerability of the Enterprise.

The Roots of the Investigation

     On July 21, 1985, the Miami Herald published an article by reporters
Martha Honey and Tony Avirgan.  In that article, a mercenary for Civilian
Military Assistance (CMA) named Steven Carr, who was then imprisoned in Costa
Rica, spoke of an arms shipment from Fort Lauderdale to a Central American
location.  The article caught the attention of the FBI in the Southern
District of Florida, which opened an investigation into Carr's allegations and
alerted FBI headquarters in Washington, D.C., as required in any matter
involving the Neutrality Act.

Garcia Allegations

     In December 1985, an individual named Jesus Garcia was convicted in the
Southern District of Florida on charges of possessing an unlicensed machine
gun.

     While Garcia was awaiting sentence, he offered through his attorney to
provide federal authorities with information relating to paramilitary plots in
Central America.  As a result of that offer, he was interviewed on January 7,
1986 by two FBI agents.  He claimed that he had been set up on the machine gun
charge by a person who supposedly worked for Tom Posey and the CMA, a
pro-Contra paramilitary group.  According to Garcia, Posey was attempting to
neutralize him because of his knowledge of a CMA plot to assassinate
Ambassador Lewis Tambs to collect a reward offered by a notorious drug kingpin
in Central America.  The assassination, Garcia told the FBI, would, as an
added benefit, be blamed on the Sandinistas, thereby assisting the Contras'
cause.  Garcia also gave the FBI further details on the gun shipment reported
earlier in the Miami Herald.

     The FBI agents and Jeffrey Feldman, the Assistant United States Attorney
conducting the investigation, were all skeptical.  Nevertheless, given the
gravity of Garcia's allegations, the investigation continued.  At the request
of the FBI, embassy officials in Costa Rica interviewed Carr and other
American mercenaries imprisoned in that country.  Hotel records at the alleged
site of a critical meeting seemed to confirm its occurrence. Flight plans and
records suggested that the alleged arms shipment also could have occurred.

     During this phase of the investigation, the FBI received allegations that
North, Owen, and John Hull were involved in, or at least aware of, the gun
running plots.  This information was not supplied by Garcia, but came through
other sources.

     On March 14, 1986, an FBI agent and Feldman met with Anna Barnett, the
Executive Assistant United States Attorney.  While the FBI agent and Feldman
were in Barnett's office discussing the investigation, United States Attorney
Leon Kellner came in to inquire whether anyone was aware of an alleged plot to
assassinate Ambassador Tambs.  According to Kellner, he had just received a
call from someone at the Department of Justice in Washington who wanted
information about the investigation.  At or shortly after that meeting, it was
decided that the FBI agents and Feldman would travel to New Orleans to
interview Jack Terrell, a/k/a "Colonel Flaco," a former CMA mercenary who,
they had been told, knew more details of the conspiracy.

Activity in Washington

     The FBI agents had been advising headquarters by telex throughout the
early stages of the investigation and in early March had received a request
from Oliver Revell, Executive Assistant Director of the FBI, for a detailed
summary of their findings.  Their report was forwarded to headquarters on
March 20, 1986.

     Revell's inquiry was itself sparked by a request from Deputy Attorney
General D. Lowell Jensen for an update on the investigation.  Revell sent a
summary of the agents' report five pages in length, to Jensen.

     Upon receiving the memorandum, Jensen met with Attorney General Meese to
discuss the case.  Jensen recalls that he and Meese decided that Admiral
Poindexter, the National Security Adviser, should be briefed on the matter
because of its international implications and the possibility of danger to an
American diplomat.  Jensen was uncertain, however, whether he or Meese
initiated the proposal to brief Poindexter.  Meese testified at his deposition
that he did not recall discussing this matter with Jensen.

     Jensen also forwarded a copy of Revell's memorandum to Associate Attorney
General Steven Trott, who forwarded it in turn to Deputy Assistant Attorney
General Mark Richard.  On the "buck slip" accompanying the memorandum, Trott
wrote:

Please get on top of this.  [Jensen] is giving a heads up to the N.S.C.  He
would like us to watch over it.

Call Kellner, find out what is up, and advise him that decisions should be run
by you.

     On another buck slip attached to the memorandum for his own record,
Richard wrote, "3/26/86, spoke to Kellner - AUSA not back yet from [New
Orleans]."

     Richard recalls speaking with Kellner about the case on several occasions
over the next several months.  Trott and Jensen also believe they spoke to
Kellner about the case on a few occasions.  Each of them specifies that he
never attempted to impede or otherwise interfere in the investigation itself
and the Committees have no evidence that contradicts this.

     On March 26, 1986, Jensen went to the NSC and showed Poindexter a copy of
Revell's memorandum.  Jensen does not recall any discussion that may have
taken place.  Poindexter testified that he does not recall the briefing at
all.

Terrell and Costa Rica

     In New Orleans, Terrell provided the FBI agents and Feldman with
additional information on the alleged assassination plot and arms shipment.
When pressed, however, Terrell admitted that most, and perhaps all, of his
information was based on hearsay rather than on his direct participation or
observation.

     Feldman and the FBI agents traveled to Costa Rica on March 31, 1986, and
reported to the U.S. Embassy.  There they met with Tambs, who wanted to know
the purpose of their visit.  Feldman briefed Tambs thoroughly on their
investigation and intentions.  During that briefing, Feldman showed Tambs a
chart he had drawn to illustrate the supposed conspiracy that had been
described to him.  The chart showed a pyramid of participants, with lines of
involvement running up through John Hull and Robert Owen to Oliver North at
the top.

     When he saw the chart, Tambs summoned "Thomas Castillo," who introduced
himself to the investigators as a CIA station chief.  Castillo provided them
background information on Hull.  According to Feldman, Castillo also spoke of
North warmly as "the person who introduced me to the President of the United
States last week."

     Over the course of the next two days, Feldman, the FBI agents, and
various embassy personnel interviewed Steven Carr and several other imprisoned
mercenaries.  They attempted to set up an interview with Hull, who initially
agreed and then declined to speak to them.  Feldman was also told by an
employee at the U.S. Embassy that Hull had been contacted by the NSC about the
investigation.

     North received a briefing from Owen on Feldman's visit.  In a letter
dated April 7, 1986, Owen identified each of the investigators who had
appeared in Costa Rica, then wrote:

According to [Castillo], Feldman looks to be wanting to build a career on this
case.  He even showed [Castillo] and the Ambassador a diagram with your name
at the top, mine underneath, and John's underneath mine, then a line
connecting the various resistance groups in [a Central American country.]

Feldman stated they were looking at the "big picture" and not only looking at
a possible violation of the neutrality act, but at possible unauthorized use
of government funds, They went several times to the prison to question the
five in jail.  They tried to talk with John, but he was advised not to talk
with them unless he had a lawyer present.

April 4 Meeting

     Feldman met late on the afternoon of April 4, 1986, with Kellner and
Barnett to discuss the results of his trip to Costa Rica, Also present were
Larry Scharf (Special Counsel to the United States Attorney) and Richard
Gregorie (Chief Assistant United States Attorney).

     Feldman explained to them that, while the assassination plot seemed to be
fading as a cause for concern or a vehicle for prosecution, the gun-running
charges seemed to have some basis in fact.  Others at the meeting believed,
however, that Feldman was having a difficult time fitting a complex
combination of facts, witnesses, and actors into a coherent theory of
prosecution.

     At one point, the topic of the Boland Amendment was raised.  Because no
one in the room was familiar with the details of that legislation Barnett
asked Assistant United States Attorney David Leiwant to locate it with the
research computer.

     According to Leiwant, when he arrived at Kellner's office with the
printout, only Kellner, Barnett, and Feldman were present and Kellner was on
the telephone talking to someone at the Department of Justice. According to
Leiwant, when Kellner hung up, he turned to Barnett, Feldman, and Leiwant and
said that the Department wanted them to "go slow" on the investigation.
Leiwant could tell from Kellner's expression and tone of voice that Kellner
was disdainful of that suggestion and had no intention of actually slowing the
investigation.

     If Leiwant's account of this meeting is correct, the Department of
Justice would appear to have been exerting improper influence to delay an
investigation, albeit influence brushed aside by Kellner.  But each of the
other participants in the April 4 meeting deny that any such telephone
conversation took place.  Richard, Trott, Jensen, and Meese also deny that any
telephone call like that described by Leiwant occurred or that anyone, to
their knowledge, attempted to slow the investigation at any time.

     At the end of the meeting on April 4, Kellner asked Feldman to draft a
memorandum pulling together the results of the investigation to date as well
as Feldman's approach to any possible prosecution.

The Meese Aside

     On April 12, Meese, along with Jensen and Revell, arrived in Miami to
visit a number of FBI agents wounded in a shoot-out the day before.  Kellner
accompanied Meese on his visits.

     During the day, Meese pulled him aside and asked him about the Garcia
investigation.  Kellner believes that he told Meese that there did not appear
to be much substance to the assassination allegations, but that the
gun-running investigation was continuing.  Kellner testified that Meese
neither stated nor implied that the investigation should be slowed or
conducted in any other particular manner.

     Meese recalls asking Kellner about the matter, although he does not
recall pulling Kellner aside to do so.  Meese testified that he mentioned that
case in particular because it had received attention by the press. Meese also
denies that he attempted to affect the course of the investigation.

The Feldman Memoranda

     On April 28, Feldman provided the first in what was to become a series of
memorandums to Kellner.  Both Feldman and Kellner felt that it was
unsatisfactory.  On May 14, Feldman therefore produced a more detailed
memorandum, 20 pages in length.  It reviewed the facts gathered to that time
and concluded that it was appropriate to issue grand jury subpoenas for
various documents and witnesses.  Feldman wrote:

The Bureau believes that a grand jury is necessary for several reasons.
First, it would dispel claims that the Department of Justice has not
aggressively pursued this matter.  Second, a grand jury would eliminate some
of the deception they believe they have encountered during their interviews
with Jesus Garcia, Daniel Vasquez Sr., Ronald Boy, and Max Vargas.  Finally,
the grand jury would give the Department of Justice access to Costa Gun Shop's
business records and CANAC's bank records.

     Within a few days, Kellner returned the memorandum to Feldman with the
notation "I concur, we have sufficient evidence to institute a grand jury
investigation into the activities described herein."

     Kellner then convened a meeting in his office on May 20 to discuss the
case.  Present, once again, were Kellner, Barnett, Scharf, Gregorie, and
Feldman.  As the discussion progressed, Scharf and Gregorie set forth a number
of reasons why they believed it premature to issue grand jury subpoenas.
Gregorie, at his deposition, summarized those reasons:

Before you go into the grand jury, as I told Jeff, you have to have some idea
where you're going and what you're looking for.

Up until that time, he had some wild stories that were concocted by freelance
newspaper reporters about mercenaries who were unreliable, individuals who had
failed a polygraph, people who were unreliable, and we did not have a stage
set of facts [sic], and I did not think it was appropriate to go into the
grand jury with a bunch of people who we were later going to find out were
totally lying and totally misled in a grand jury, going to confuse them.

What I saw was a confused mess of facts that were leading in no particular
direction, and had no form or substance to them.

     By the end of the meeting, a consensus developed that further interviews
should be conducted before resorting to the grand jury.  Feldman, who had
requested authorization to go to the grand jury initially, acquiesced in the
decision and agreed to have the FBI conduct the additional interviews.

     After Kellner changed his mind and concluded that grand jury subpoenas
would be premature, he asked Feldman to redraft the May 14 memorandum to
reflect that conclusion.  Feldman did so, and submitted a revised version to
Kellner on May 22.  Feldman did not change the original date on the revised
memorandum.

     Kellner asked Scharf to review this new version, and Scharf made a number
of changes.  Most important, he included a reference to the Christic Institute
litigation filed in the Southern District of Florida on May 30 and added to
the conclusion a number of reasons why resort to a grand jury would be
premature.  Scharf had these changes made on a word processor, but did not
change the original date or author.  As a result, when Kellner submitted the
memorandum to the Department on June 3, it still bore the date of May 14 even
though it referred to an event that occurred on May 30.  Feldman did not see
this final version of his memorandum before Kellner sent it on to Washington.

Further Investigation

     The FBI agents undertook the additional investigation requested by
Feldman.  On July 31, 1986, they presented Feldman with a lengthy "prosecution
memorandum" that included their most recent findings.  Feldman, in turn,
forwarded that report to Kellner on or about August 14.

     On August 29, 1986, Kellner told Feldman to suspend any further
investigation on the matter until he (Kellner) returned from an impending trip
to Washington.  According to Feldman, Kellner told him that "politics" were
involved.  Feldman found this statement surprising and disturbing, because it
was the first, and only, time Kellner had indicated to him that such
considerations were relevant.  When Kellner returned from Washington shortly
thereafter, he told Feldman to proceed.

     Kellner confirmed Feldman's version of this incident.  According to
Kellner, shortly before he was to leave for Washington he received a letter
from John Hull making serious allegations of impropriety by members of Senator
Kerry's staff, who were also investigating Garcia's allegations. Hull also had
included affidavits from some of the imprisoned mercenaries retracting some of
their prior statements regarding gun-running and Contra support.  Kellner
stated that he feared that he was being put into the middle of a political
dispute, and wanted to talk to Mark Richard about the allegations before
proceeding further.  After that discussion, Kellner immediately authorized
Feldman to proceed.  Both Feldman and Richard confirmed this explanation.

     Meanwhile, Kellner had reviewed the prosecution report cursorily and
forwarded it, in mid-August, to Richard Gregorie for his input.  On October 6,
the day after the Hasenfus crash, Gregorie responded to Kellner that he felt
the case was ready to go to the grand jury.  The prosecution memorandum then
rested again with Kellner, who forwarded his own approval to Feldman in the
first week in November - six months after Feldman had first suggested the need
for a grand jury.  The relative inactivity from mid-August to the first week
in November was again frustrating to Feldman and the FBI agents, and was
explained by Gregorie and Kellner as due to the general press of other
matters.

     Upon receiving approval from Kellner, Feldman proceeded with the
investigation.  The Independent Counsel subsequently declined to take over the
case and Feldman was continuing to investigate the matter at the time he was
deposed by the Committees.