Multimedia Mania/abacus-multimedia-mania.iso/dp/0106/01063.txt

Text File | 1993-07-27 | 27KB | 453 lines

$Unique_ID{bob01063}
$Pretitle{}
$Title{Iran-Contra Affair: The Report
Chapter 18   October 1986:  Exposure Threatened}
$Subtitle{}
$Author{Various}
$Affiliation{}
$Subject{north
casey
furmark
allen
arms
october
contras
poindexter
sat
memorandum}
$Date{1987}
$Log{}
Title:       Iran-Contra Affair: The Report
Author:      Various
Date:        1987

Chapter 18   October 1986:  Exposure Threatened

The Hasenfus Plane is Shot Down

     On October 5, 1986, a C-123 aircraft carrying ammunition, uniforms, and
medicine for the Contras was shot down over Nicaragua.  One crew member,
Eugene Hasenfus, survived and was captured by the Sandinistas. Documents on
board the airplane connected it to Southern Air Transport (SAT), a former CIA
proprietary charter airline based in Miami, Florida.

     The U.S. Government denied involvement, but several investigations by
Government agencies, as well as the press, commenced shortly thereafter.  A
CIA Station Chief in Central America, Tomas Castillo, sent a secret message to
Robert Dutton, Secord's top aide in the Contra resupply operation, alerting
him that the "situation requires we do necessary damage control."

North Tries to Slow the FBI Investigation of SAT

     Within days of the Hasenfus crash, FBI agents began interviewing SAT
employees.  They sought to determine whether arms or combatants had been sent
from the United States to support insurrection in Nicaragua, in violation of
the Neutrality Act.  Before the FBI agents could obtain any subpoenas, North
called FBI Executive Assistant Director Oliver Revell on October 8 and told
him he was concerned about the SAT investigation.  North assured Revell that
SAT was not involved in illegal activities.  North also indicated to Revell
that SAT was involved in the arms sales to Iran.  North had earlier told
Revell about the Iran arms sales in late July 1986 during an Operations Sub
Group meeting.  North told Revell that he did not know anything about the
C-123 that was shot down.  North said that SAT was still flying arms shipments
to Iran, and those missions would inevitably be disclosed if SAT was
investigated.

     Revell contacted the Miami FBI office and asked for a written briefing on
the investigation, but he did not slow it down.  Instead, he obtained
authority from Deputy Assistant Attorney General Mark Richard to begin an
official investigation on October 10, 1986.

North Tries to Slow the Customs Investigation of SAT

     The U.S. Customs Service also began an investigation after the crash.
Upon tracing the purchase of the C-123 to SAT, Customs agents served a broad
administrative subpoena on SAT.  A full-scale investigation would have
revealed payments for both the Iran flights and for arms shipments to the
Contras from the Enterprise's Lake Resources and Hyde Park Square accounts in
Switzerland.  In fact, during the May 1986 Tehran mission, the SAT crew
stopped in a European country on their return flight, loaded arms, and flew
them to a base in Central America for the Contra resupply operation.  One wire
transfer from Hyde Park Square paid for both missions.

     On October 9, 1986, North called U.S. Customs Assistant Commissioner for
Enforcement William Rosenblatt and said he was concerned about the SAT
subpoena.  North told Rosenblatt that the SAT people were "good guys" who had
done nothing illegal.  North denied that the SAT airplane contained arms when
it left the United States.  Relying on North's assurances, Rosenblatt took
steps to narrow the focus of the investigation to the airplane itself, and
whether arms or ammunition were being exported without a license.

     On October 17, David Major, an FBI agent on assignment to the NSC, sent a
PROF note to Alton Keel stating that the FBI investigation should be ending.
The note continued:

However, Customs is going after this case like a dog in heat.  They have a
task force investigating violations of (1) foreign asset laws (2) Nicaragua
trade embargo and (3) illegal export laws.  Treasury is running . . . hard on
this investigation and will most likely trip over legal but very sensitive
cover CIA operations not related to Nicaragua.

In the same time period, North called Rosenblatt and again assured him that he
had "double-checked" and there were no arms aboard the C-123 airplane.
Rosenblatt, who had by then received similar information from the Customs
agent in charge of the investigation, told North once again that Customs was
concentrating the investigation on the airplane itself to see whether special
licensing requirements had been violated.

     After Customs served a new subpoena on SAT on October 29, Craig Coy, one
of North's assistants, telephoned to tell Rosenblatt that he had spoken to
North and that they were concerned about the Customs agents being "all over"
SAT.  Rosenblatt then called North, who asked why the Customs agents were at
SAT, telling Rosenblatt, "We are right in the middle of a lot of sensitive
business here, I am trying to get some packages [hostages] out of here
. . . ."  Rosenblatt told North that the investigation of the C-123 was going
forward and other agencies were investigating as well.  North told Rosenblatt
to call Coy and tell him to take care of the other agencies, which Rosenblatt
did.  Rosenblatt took no steps, however, to terminate the Customs
investigation, and he had no further contact with North regarding SAT.

Poindexter Tries to Slow the Investigations

     Shortly thereafter, Poindexter called the Attorney General and asked him
to delay the investigations of SAT by the FBI and Customs.  According to the
Attorney General, Poindexter told him that the SAT employees were needed for
the Iran initiative.  Attorney General Meese also mentioned the Customs
investigation briefly to Treasury Secretary James Baker, but did not recall
discussing it any further with him thereafter.  Meese told Associate Attorney
General Steven Trott to ask FBI Director Webster to delay the SAT
investigation for 10 days.  On October 30, Trott called Webster and asked him
to delay all non-urgent investigative activity regarding SAT, telling him
that, without the delay, the investigation could compromise "sensitive hostage
negotiations."  FBI headquarters checked with their Miami office and was told
the investigation could be delayed for 10 days.  After more than 10 days had
passed, Trott raised the matter with the Attorney General at the FBI's
request, and several days later Attorney General Meese told him the FBI could
proceed.

House Committee Seeks Independent Counsel to Investigate Hasenfus Crash

     On October 17, 13 days after the Hasenfus crash, a majority of the
Democratic members of the House Judiciary Committee asked the Attorney General
to appoint an Independent Counsel to investigate North, Casey, Poindexter, and
others regarding their alleged involvement with the Contras.  The request
cited the Hasenfus crash and prior allegations by Senator John F. Kerry and
others regarding activities by Administration officials in support of the
Contras.  The Attorney General referred the letter to the Criminal Division of
the Justice Department, where it was in turn referred to the Public Integrity
Section.

     Once a request for an Independent Counsel is received from Congress, the
Justice Department has 30 days to report back.  The Justice Department's
Public Integrity Section began by asking the other sections of the Justice
Department, and the FBI and Customs, to identify any cases that might involve
Administration officials in the Contra operation.  The Public Integrity
Section learned that the Fraud Section was investigating allegations of
improper use of humanitarian aid through the Nicaraguan Humanitarian Aid
Office program to provide weapons to the Contras.  The Public Integrity
Section also learned that the FBI and U.S. Attorney's office in Miami were
investigating claims that North, Robert Owen, and others were providing
military aid to the Contras.

     Customs and FBI officials promised to provide synopses of pending cases.
The FBI provided no information prior to the appointment of an Independent
Counsel in December 1986.  Customs wrote a letter on November 14, 1986, which
did not mention North's requests to narrow subpoenas.

Furmark Visits the CIA:  Talk of "Diversion"

     While the investigations precipitated by the Hasenfus downing threatened
to expose the covert Contra support operation, another event in October 1986
threatened to expose the diversion: Roy Furmark, a business associate of Adnan
Khashoggi warned the CIA that, unless certain investors in the Iran arms sales
were repaid, they would publicly disclose what they knew of the arms sales and
the use of arms sales proceeds for the Contras.

     Furmark - who was also a former law client of Director Casey - met with
Casey, at Khashoggi's request, on October 7 in Casey's office.  Furmark said
that Khashoggi and two Canadian investors had supplied financing for the Iran
arms sales.  They claimed to have lost their $10 million advance when the
United States overcharged and then abandoned the First Iranian Channel in
favor of dealing with the so-called Second Channel.  Khashoggi wanted Furmark
to see if Casey could get the U.S. Government to make good on this loan.

     At their October 7 meeting, Furmark informed Casey of Khashoggi's role,
discussed the financial problems that had arisen, and said that Khashoggi was
under pressure from the two Canadians who had participated in the $10 million
financing.  Furmark warned Casey that Manucher Ghorbanifar - the initial
go-between for the United States with the Iranians - was also upset and was
threatening to tell members of the Senate Select Committee on Intelligence
(SSCI) about the arms sales.  When Casey suggested that the transaction
sounded like an Israeli arrangement, Furmark told Casey that North was
directing the deal.

     Although Furmark had known for some time of Ghorbanifar's speculation
that Iran arms sales proceeds had been diverted to the Contras, it is not
clear that he shared this speculation with Casey during their October 7
meeting.  Before the SSCI, Furmark initially testified that he "probably
alluded" to the possibility that some of the money might have gone to
Nicaragua.  He stated later, however, that he did not believe that he had
referred to the names of any countries.  North testified that Furmark had told
Casey in early October about the speculation surrounding the diversion to the
Contras.

     In the meantime, Charles Allen of the CIA had heard from North in early
September that the First Channel was being shut down and that the Second
Channel had "flourished into full bloom."  Allen was disturbed by this news,
"because I couldn't figure out why we would so abruptly shut down the first
channel unless we had a very good plan for shutting it down in a way that
Ghorbanifar and these creditors of Ghorbanifar would feel assuaged."  Allen
shared his concerns with Robert Gates of the CIA on October 1.  Gates, too,
was disturbed and asked Allen to brief the CIA Director.

     Allen and Gates arrived in Casey's office together on October 7, after
Furmark had departed.  Allen told Casey of his misgivings.  Casey rejoined
that he had just met with Furmark, who had described Khashoggi's financial
problems with other investors whom Allen understood to be Canadian.  Casey did
not mention that funds might have been diverted to the Contras.

     In his appearance before the Tower Board, Gates recalled that "Allen
shared his speculation with the Director about the possibility that some of
the money was being diverted to the Contras.  The Director told him [Allen] to
put all of that down on paper."  [Gates, Tower Test., at 19.  A week passed
before Allen submitted the requested memorandum to Casey.]

     A few days later, on October 9, North, back from the Frankfurt
negotiations with the Iranians, briefed Casey and Gates on the status of the
Iran initiative.  It does not appear that, in the presence of Gates, Casey
shared with North Allen's suspicions about the diversion to the Contras.
[Tower Test., at 22-23.  Gates did take advantage of the opportunity presented
by the meeting with North to ask whether the CIA was involved in private
fundraising for the Contras.  North responded that the Agency was "clean."  In
exonerating the CIA, North offered a "cryptic comment about Swiss accounts and
the Contras."  No one pursued the comment and the meeting concluded.]

     Allen's October 14 memorandum provided a lengthy account of the Iran
initiative, including a brief summary of the recently concluded meetings in
Frankfurt, the status of Ghorbanifar's financial situation, and a summary of
information that Ghorbanifar might expose.  The memorandum did not expressly
allege that the profit from the arms deals might have gone to the Contras;
rather, it recorded Ghorbanifar as stating that, "some of . . . [the] profit
was redistributed to other projects of the US and of Israel."  [N 10.  Gates
found the terseness of the Allen memorandum noteworthy.  In testimony before
the SSCI, Gates stated:  "And in fact, in the [Allen] memorandum of six or
seven or eight pages - I don't recall how long it is - single-spaced there is
only one sentence that refers to possible diversion of funds . . . .  There is
no mention in the memorandum specifically of a diversion to the Contras.  That
reference to me was oral on the 1st [of October] and repeated again to the
Director on the 7th."  Gates apparently believed this news was relegated to
such obscurity because it was based on "shaky stuff."  Gates Test., SSCI, at
22,34.]

     Gates and Casey met with Poindexter the following day, October 15.
Poindexter read Allen's memorandum.  Although Poindexter acknowledged in his
testimony that the memorandum contained the news that Ghorbanifar or his
financiers were saying that their money went to Central America, and although
Poindexter and Casey met alone, Poindexter testified that he and Casey did not
discuss the diversion.  Casey simply recommended, according to Poindexter,
that Poindexter seek the advice of White House Counsel with respect to
disclosure of the initiative.  Poindexter, however, did nothing because he did
not trust the White House Counsel.

     After meeting with Poindexter, Gates and Casey directed Allen to meet
with Furmark the next day, October 16.  Allen met Furmark, and sent a
memorandum of the meeting to Casey.  Allen's memorandum recited Furmark's
account of the origins of the Iran arms transactions and Ghorbanifar's current
financial condition.  Furmark recommended that the United States consider yet
another arms transaction to maintain credibility with the Iranians and to
provide Ghorbanifar with enough capital to make a partial repayment to
Khashoggi's creditors.  As with Allen's October 14 memorandum, this memorandum
contained no specific reference to a diversion of funds to the Contras.
According to Allen, he wished to protect himself from any indiscriminate use
of the memorandum.

     In his meeting with Allen on October 16, Furmark gave Allen a rundown of
the transactions to date.  He claimed the shipment of HAWK spare parts in May
1986 resulted in the release of U.S. hostage Father Lawrence Jenco.  Furmark
warned Allen that the Canadians would go public with the "back-channel" arms
sales unless the United States shipped additional weapons through Ghorbanifar
so that Khashoggi could be repaid.

     The meeting with Allen was cut short so that Furmark and Allen could join
Casey and his wife on an airplane to New York.  En route, Furmark and Casey
again discussed the arms sales in general.  Casey still did not acknowledge
that the United States had any responsibility for the arms sales, but
indicated he was working on the problem.  Furmark suggested, as he had to
Allen, that Casey promote another arms sale to help Ghorbanifar financially.
Casey was noncommittal, but promised to get back to Furmark.

     North's notebooks show that Furmark's recommendation to generate funds to
pay Khashoggi's creditors received serious consideration.  North wrote of a
conversation with Israeli official Amiram Nir on October 22:  "Best way to
recoup funds to pay off Furmark, et al is to overcharge on subsequent
deliveries."

     On October 22, Charles Allen, George Cave, and Roy Furmark met in New
York.  In the course of that meeting, Furmark raised, for the first time with
Allen, the possibility that funds used to finance the arms sales might have
been diverted to the Contras.

     Allen and Cave reported their discussion with Furmark to Casey, who
appeared "deeply disturbed" by what he was told.  Allen and Cave then jointly
prepared a memorandum for Casey to send to Poindexter.  Allen's testimony
dated the Casey memorandum at October 23.

     This Allen-Cave memorandum set forth detailed accounts (attributed to
Furmark) of the early stages of the Iran initiative and the financing of the
HAWK spare parts transaction.  It also referred to Ghorbanifar's accusation,
which Furmark had repeated, that some of the "bulk of the original $15 million
price tag was earmarked for Central America."  The memorandum "laid out
starkly . . . that Ghorbanifar had made allegations of diversion of funds to
the Contras," but it did not offer an assessment by Casey, Cave, Allen, or any
other CIA official, of the accuracy of Ghorbanifar's charges.  Furthermore, as
with the previous memorandums, the memorandum made no reference to Allen's own
suspicions that the Americans had inflated the price and directed some of the
money to the Contras.

     Although Casey spoke to Poindexter by secure telephone about the
Allen-Cave briefing on the Furmark meeting, the memorandum never reached
Poindexter.  According to Allen, the memorandum "fell into the wrong outbox;"
it was not discovered until November 25; and Casey was "deeply upset" when he
discovered that he had not signed or sent it.

     Allen and Furmark met once more on November 6.  By this time the feared
publicity of the Iran initiative had occurred.  Allen prepared a memorandum
for Casey the following day, which reported that the Canadian investors -
having been deprived of the threat of exposing the initiative - were now
threatening a lawsuit over their failure to be paid.  The memorandum also
showed that Furmark again alerted Allen to the remaining trump card in the
investors' deck:  linking the overcharges on the HAWK spare parts to the
diversion.  Furmark also told Allen of his discovery that Secord was involved
in both the arms sales and the Contra resupply operation.

     Allen reported to Casey that Furmark was most interested in prompting
another arms deal so that Ghorbanifar could recoup his money, and that unhappy
investors could make some "nasty allegations against the US Government and key
officials" if the matter went unresolved.  On the latter point, however, Allen
added reassuringly that "much of what they know is speculation and cannot be
proven."

     At Furmark's request, Casey met with him again on November 24 at CIA
headquarters.  Furmark and Casey reviewed the finances of the Iran arms
transactions beginning in February 1986.  This review established that the
transactions had resulted in excess funds; Casey told Furmark that he did not
know where that money had gone.

     In Furmark's presence, Casey unsuccessfully tried to reach the
President's Chief of Staff, Donald Regan.  He then called North and said
"there's a guy here says you owe him $10 million . . . ."  North reportedly
responded:  "[T]ell the man that the Iranians or the Israelis owe them the
money."  [After the Attorney General announced the discovery of the diversion
on November 25, 1986, Furmark called Casey after being subpoenaed by
Congress.  Casey told him to "just follow us."  Furmark Dep., 7/22/87, at
170.]

     Once Casey learned that Furmark and Ghorbanifar surmised that profits
from the Iran arms sales had gone to the Contras, he advised North.  North
testified that this occurred in early October after the Hasenfus crash.
According to North, the meeting with Furmark triggered Casey to instruct North
"that this whole thing was coming unraveled and that things ought to be
'cleaned up'. . . ."  In response, North testified, he "started cleaning
things up;" he "started shredding documents in earnest after [this] discussion
with Director Casey in early October . . . ."  [North Test., Hearings, 100-7,
Part I, 7/7/87, at 19.  Notably, at a meeting with the Second Channel in
Europe on October 29-30, attended by North, Cave, Secord, and Secord associate
Albert Hakim, North stated that he did not care if Ghorbanifar was paid, but
that "what I'm more interested in is that the people to whom he owes money
get paid."  Cave stated that Ghorbanifar owed those people "10 Million."
C 298.]

The Travelers Check Ledger

     As set out in Chapter 2, North received from Contra leader Adolpho Calero
a large number of travelers checks for distribution to Contra leaders and for
a variety of other programs.  North asserted that he maintained "meticulous
records" of the receipt and disbursement of these checks in a ledger provided
by Casey.  Fawn Hall and Robert Owen testified to seeing North make entries in
such a ledger.

     North destroyed this ledger, according to his testimony, at the direction
of Casey to protect sensitive names and information.  North told the
Committees that Casey had instructed him sometime between October 13 and
November 4 to "'get rid of that book because the book has in it the names of
everybody, the addresses of everybody.  Just get rid of it and clean things
up.'"

     North's explanation of why he destroyed the ledger is inconsistent with
other of his actions.  For example, North preserved his notebooks, which also
recorded the names of those helping the Contras and included numerous
references to payments made to them, as well as other highly sensitive and
classified matters.  When he was dismissed from the NSC staff, North took
these notebooks with him and kept them in a nonsecure environment, at the same
time that he was destroying the ledger which had been maintained in an NSC
vaulted office.

     As a result of this destruction, no written record exists to verify
North's testimony that checks he cashed for his personal use actually were
reimbursements for his out-of-pocket expenses on behalf of the Contras.

The Fall Guy Plan

     Throughout the events of the Iran-Contra Affair, deception was viewed as
a necessary component.  At the same time, according to North's testimony,
Casey recognized the need for an ultimate coverup in the event of public
disclosure.  [As noted earlier, North's testimony attributing knowledge and
statements to Casey after Casey's death should be viewed with caution,
particularly insofar as such testimony, albeit under oath, tends to exculpate
North.]

     As far back as the early spring of 1984, North said he and Director Casey
had discussed a "fall guy plan."  Their discussion took place in the context
of Congress' impending cutoff of U.S. aid for the Contras (the Boland
Amendment).  According to North, when "we eventually decided to pursue
availing ourselves of offers from foreign governments [to fund the Contras],
it was seen that there would need to be someone who could . . . take the fall"
in the event of public disclosure.  The idea was to provide North's superiors
with "plausible deniability" - although in this instance, that term meant
avoiding accountability to the U.S. Government rather than avoiding disclosure
to U.S. adversaries.

     As North's operational role expanded to the Iran arms sales and the
diversion of proceeds derived therefrom, he testified, he volunteered to be
the "fall guy" for both the Contra support and the arms sales operations. In
his words, "I'm not sure Director Casey ever said, 'It has to be you, Ollie.'
It was probably Ollie saying, 'Well, when that [disclosure] happens, it will
be me.'"

     North made no secret among his colleagues that he was to be a "scapegoat"
or "fall guy" if the Iran or Contra support activities became public.  He made
this comment to at least Poindexter, Robert Earl (one of North's aides), and
Owen.

     Disclosure of the arms sales in early November 1986 triggered discussions
about implementing the fall guy plan.  According to North, shortly after the
initial November disclosures, Casey told him that he [North] might not be "big
enough" to be the "fall guy."  Casey indicated that "it's probably going to go
higher," and he suggested that "Poindexter might have to be a fall guy."
Although North did not recall a conversation with Poindexter about this
specific aspect of the plan for "plausible deniability," he did recall that he
and Poindexter discussed in early November the likelihood that both of them
would have to bear the blame.

     North testified that he previously had discussed both the fact and
necessity of the "fall guy plan" with Poindexter and McFarlane (as well as
with Casey), and that he did not recall any discussion with anybody about the
legal propriety of this plan.  Poindexter testified, however, that he "was not
a party to any plan to make Colonel North or to make me, for that matter, a
scapegoat."  He nevertheless admitted that "[periodically] Ollie would
indicate that he was 'willing to take the rap.'" McFarlane flatly denied that
any "fall guy plan" ever existed.

     North testified that, but for the criminal investigation of the
Iran-Contra Affair, he was prepared to go through with the "plan, resign in
disgrace, and take the heat for the President."  (There is no evidence that
the President was aware of or condoned the "fall guy" plan.)  Nevertheless,
when an Independent Counsel was appointed and North was the only person
specifically named in the order of investigation, North, who by then had
retained counsel, changed his mind and decided to protect himself.  [North
testified that, "I never in my wildest dreams or nightmares envisioned that we
would end up with criminal charges."  North Test., Hearings, 100-7, Part I,
7/8/87, at 145; 7/13/87, at 41.]  North testified that he did not tell Casey
or Poindexter of this change in attitude.