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$Unique_ID{bob01068}
$Pretitle{}
$Title{Iran-Contra Affair: The Report
Chapter 20B  November 22:  Diversion is Discovered}
$Subtitle{}
$Author{Various}
$Affiliation{}
$Subject{north
attorney
general
meese
diversion
reynolds
november
told
richardson
iran}
$Date{1987}
$Log{}
Title:       Iran-Contra Affair: The Report
Author:      Various
Date:        1987

Chapter 20B  November 22:  Diversion is Discovered

     With the first McFarlane interview behind them, Attorney General Meese
and Cooper began their interview schedule in earnest early Saturday morning.
At 8:00 a.m. they interviewed Secretary Shultz and his assistant Charles Hill
at the State Department.  Regarding the November 1985 shipment, Secretary
Shultz said that on November 18, 1985, McFarlane told him that Israel was
going to send HAWK missiles to Iran in a trade for the release of U.S.
hostages.  Secretary Shultz also informed Meese and Cooper that the President
had told him earlier that week that he [the President] had contemporaneous
knowledge of the November 1985 HAWK shipment.  Meese and Cooper asked Hill for
the notes of the Shultz/McFarlane conversation, which Hill provided on Monday
morning, November 24.

     Secretary Shultz testified that, during his interview, he expressed
concern that the Iran arms sales might be connected to the Contras. Secretary
Shultz said in his testimony he based this concern on the fact that Southern
Air Transport's name had come up in the Contra resupply operation and also in
the Iran arms transactions.  Secretary Shultz's version of this event is
corroborated by Hill's contemporaneous notes of Meese's interview of Shultz.
Those notes reflect that Secretary Shultz told Meese:  "Another angle worries
me.  Could get mixed up with help for freedom fighters in Nicaragua.  One
thing may be overlapping with another.  May be a connection."

     During his public testimony, Attorney General Meese initially denied that
Secretary Shultz had ever mentioned any connection between the Iran arms sales
and the Contras.  When Hill's notes were shown to the Attorney General at the
hearings, Meese denied that the notes were made at the interview, and stated
they were notes of a later meeting at the State Department between Shultz and
State Department Legal Adviser Abraham Sofaer.  During his next day of
testimony, Meese stated that the reference to a connection between the Iran
arms sales and the Contras was only to "a political connection that enemies of
the administration would love to wrap together" (which also appears in Hill's
notes).  Attorney General Meese denied that Secretary Shultz was referring to
any actual connection between the Iran arms sales and the Contras.

     Secretary Shultz's version is corroborated by Hill's contemporaneous
notes of Shultz's interview with Meese.  Moreover, on November 23, the day
after Secretary Shultz's interview with Meese, Sofaer told Cooper that he was
concerned that the surplus of funds from the Iran arms sales had possibly been
used by Southern Air Transport to subsidize the Contra resupply effort.

     After Secretary Shultz's interview, the factfinding team decided that
Reynolds and Richardson should go to the NSC to review documents.  They were
to look in particular for documents that would indicate whether the 1985
shipments were authorized by the U.S. Government.

     After Reynolds and Richardson left for the NSC, Attorney General Meese
and Cooper interviewed Stanley Sporkin, former General Counsel to the CIA.
Sporkin told them that he drafted a Finding in November 1985 after he learned
that the CIA had assisted in arranging transportation of the HAWK missiles to
Iran.

     Reynolds and Richardson arrived at the West Wing of the White House
sometime after 11:00 a.m.  NSC General Counsel Paul Thompson escorted them to
North's office in the Old Executive Office Building, where they met Earl. The
Justice Department officials told Earl they only wanted to see documents
relating to the Iran initiative.  Earl pulled out accordion-style brown
folders from the shelves behind North's desk and placed them on the table.

     Richardson also asked for documents from Poindexter's and Thompson's
files.  Thompson replied that they did not have any because as soon as they
had read the documents, they sent them back to the originating office.

     Reynolds and Richardson began to review the documents on the table at
approximately noon.  According to Reynolds, sometime during the first hour of
their review, Reynolds came across an undated, unsigned memorandum describing
the particulars of a proposed Iran arms transaction to take place in early
April 1986.  He read the memorandum and put it back.  He saw another version
of the memorandum with additional information describing an upcoming shipment
of arms to Iran including a financial breakdown of the transaction.  Reynolds
did not set aside either of these memorandums for copying.  He recalled that
neither version included any section setting forth the diversion of arms sales
funds to the Contras.  To the best of the Committees' knowledge, these
versions have never been recovered.

     Reynolds continued his document review of a folder containing
intelligence reports.  In the back of this folder was a white folder stamped
with a red White House label which contained what appeared to be a third
version of the memorandum he had seen earlier.  He quickly flipped through it.
He noted that page 5 included a paragraph stating that $12 million worth of
residual funds from the arms sales would be used to purchase supplies for "the
Nicaraguan Democratic Resistance Forces."  This materiel was needed to
"bridge" the gap between current shortages and "when Congressionally approved
lethal assistance . . . can be delivered."

     Reynolds was shocked.  He passed the memorandum to Richardson. Richardson
read it and was also surprised.  Reynolds intentionally did not clip the
document so as not to draw attention to it, but returned it to the file where
he could later find it.  He continued reviewing other documents.

     At approximately 1:45 p.m. Reynolds and Richardson broke for lunch with
Cooper and Attorney General Meese.  On the way out, they met North.  Reynolds
told North they had not seen any 1985 files, and North promised to produce
them.

     During lunch at the Old Ebbitt Grill, Reynolds told Attorney General
Meese and Cooper he had found a memorandum which indicated that $12 million
generated from the Iran arms sales may have gone to the Contras.  Attorney
General Meese and Cooper expressed great surprise.  There was discussion of
whether North wrote the memorandum.  The remainder of the lunch was devoted to
a discussion of the 1985 shipments and the data collected by McGinnis. There
was no discussion of securing documents.

     The Attorney General's methodology for conducting the inquiry changed at
this point.  Before discovery of the diversion memorandum, all interviews were
conducted by the Attorney General with another Justice Department official and
notes were taken.  Thereafter, with the exception of the North interview, all
interviews conducted by Meese were one-on-one, with no notes taken - including
interviews of Casey, McFarlane, Poindexter, Regan and the Vice President.
[Meese Test., Hearings, 100-9, 7/29/87, at 78-81.  Meese testified that the
reason he did not take notes of his interviews with Casey, McFarlane,
Poindexter, Regan or the Vice President was that he was not attempting to
solicit a great deal of information, but merely trying to confirm what North
had said.  Id. at 331-34.]

     After Reynolds and Richardson had left the NSC for lunch on November 22,
North reviewed more documents and selected some for shredding.  North's office
shredder was jammed, however, and other likely locations in the Old Executive
Office Building were not open.  Later, Earl saw North with a file full of
documents standing beside Paul Thompson.  North indicated he was going to the
White House Situation Room to use the shredder there.

     North testified that he was actually shredding documents in his office
while Reynolds and Richardson were present.  However, Reynolds and Richardson
denied this, and Earl, as noted, testified that North's office shredder was
jammed.

     While the Attorney General's team was meeting at the Old Ebbitt Grill,
Casey and Poindexter were also having lunch together.  They were joined by
North.  In his testimony, Poindexter recalled very little about that 2-hour
lunch other than that it was initiated by Casey and that Casey discussed his
testimony before the House and Senate Intelligence Committees the day before.

     Reynolds and Richardson returned to the NSC at approximately 3:30 p.m.
where they found North and Earl.  Richardson testified that everything
appeared to be as they had left it.

     While Reynolds and Richardson reviewed documents, North worked at this
desk and spoke on the telephone.  Richardson took notes of some of these
calls.  He overheard North speak to an Israeli using various code words,
including "Beethoven" in reference to Poindexter.  North told the Israeli that
a lot had come out about the Iran initiative already, but the most sensitive
information had not been exposed.

     During that afternoon, North sat down with Reynolds and Richardson and
told them he was ready to answer their questions.  They responded that they
were there only to review documents and the Attorney General would interview
North later.  According to Richardson, North said "he knew he would not be
long for this job."

     Reynolds and Richardson reviewed documents until approximately 7:15 p.m.,
at which time they and North left North's office.  Reynolds and Richardson
made plans to complete their review Sunday morning.

     North called Attorney General Meese at 3:40 p.m. that afternoon to
arrange the interview.  Meese asked to interview North on Sunday morning, but
North said he wanted to attend church and take his family to lunch first.
Meese agreed to set the interview for 2:00 p.m.

     Six minutes after North spoke to Meese on November 22, Casey called Meese
and said there were matters he wanted to discuss with him.  The two met at
Casey's home at 6:00 p.m.  By the time of this meeting, Attorney General Meese
had reason to believe that the CIA's version of Casey's proposed testimony was
almost certainly false.  Indeed, by then Attorney General Meese had
interviewed Secretary Shultz, who had contemporaneous documentation for his
recollection of the November 1985 HAWKs shipment, and former CIA General
Counsel Sporkin, who had been told by Casey's subordinates in November 1985
that missiles were shipped.  On another issue, the Attorney General had strong
reason to believe there was a connection between the arms sales (in which the
CIA had been involved) and the Contras: the diversion memorandum.

     Despite Casey's obviously central position in any investigation of these
matters, Attorney General Meese chose to meet Casey alone.  He took no notes
of the meeting, nor was the meeting otherwise recorded.  The Committees'
information about the meeting is thus derived solely from Attorney General
Meese's testimony.

     According to Meese, Casey said that he had been contacted in October 1986
by a former business associate named Roy Furmark.  Furmark told Casey that
certain Canadians who had financed the Iran arms sales had not been repaid and
were therefore threatening to expose the arms sales.  Furmark had represented
that the Canadians would claim that the proceeds had been used for "Israeli or
United States Government projects."  The Attorney General explained that Casey
said he had not told him about the Furmark visit earlier because, before the
factfinding inquiry began, there was no reason to tell the him.

     In testimony before the Senate and House Intelligence Committees in
December 1986, Attorney General Meese was not specifically asked about, and he
did not volunteer any reference to, proceeds being diverted to Israeli or U.S.
projects.

     Attorney General Meese has consistently claimed that he did not tell
Casey about the diversion memorandum, or ask him about the diversion, even
though Meese recognized it as a bombshell as soon as his staff reported it to
him.  The reason Attorney General Meese gave for not asking Casey about the
diversion memorandum was that he thought it inappropriate to do so until North
was questioned.  Attorney General Meese also testified that, despite the fact
that Casey mentioned a claim that proceeds had been diverted to U.S. projects,
Attorney General Meese did not feel the conversation could logically have led
to questions regarding a diversion of those proceeds to the Contras without
revealing to Casey what Meese knew. Attorney General Meese testified that, "I
felt it was not appropriate to discuss this with anyone, even as good a friend
as Mr. Casey, until I found out what it was all about."  So, in a meeting that
lasted between 30 minutes and an hour, Meese, according to his testimony,
avoided the subject.

     While Casey and Meese were meeting, Cooper and Associate Deputy Attorney
General William McGinnis were at the CIA interviewing attorneys from the CIA
General Counsel's office and operations officers regarding the events
surrounding the November 1985 HAWK shipment and subsequent Finding. Cooper
purposely did not ask questions at the CIA about the diversion for fear it
would get back to North.  Cooper did not mention the diversion memo to
McGinnis.

November 23:  Investigation and Obstruction Continue

     The Attorney General's investigation continued to build on Sunday,
November 23 toward the afternoon interview with North.  From 9:00 a.m. to
noon, Cooper and McGinnis completed more interviews at the CIA.  Reynolds and
Richardson returned to the NSC to continue their document review, although
they apparently never did complete it.

     At the CIA, Cooper and McGinnis interviewed Charles Allen, Duane
Clarridge, George Jameson, and David Doherty.  McGinnis interviewed Clarridge,
who told him that the CIA's involvement in November 1985 was limited to
providing to North the name of a proprietary airline to fly oil drilling
equipment to Iran.  Clarridge also explained that he made arrangements for
flight clearances.  [Cooper Dep., 6/22/87, at 180.  Evidence before the
Committees shows that Clarridge was sent a cable from a CIA Chief in Country
15 on or about November 23, 1985, reporting the HAWKs-for-hostages November
deal.  Notably, the cable is missing from the CIA's files.  Hearings, 6/24/87,
at 260-73; CI-C27.  The missing cable, if found, would have punctured any
claim that no one at the CIA was aware in November 1985 prior to the HAWK
shipment that the flight clearance problems and the use of a CIA proprietary
airline involved the shipment of weapons to Iran.  Id.]

     Meanwhile, North, who had told the Attorney General he was not available
for an interview until the afternoon because he wanted to go to church, called
McFarlane Sunday morning and asked to meet with him. McFarlane was getting
ready to leave for church himself and told North to meet him at his office at
noon.  North said he would bring his attorney. North arrived alone at
McFarlane's office at 12:30 p.m..  North told McFarlane everything was on
track except for one thing that could be a problem: the diversion.  According
to McFarlane, he asked North if the diversion had been approved and North
replied that he would not do anything that was not approved.  North said that
the diversion was a matter of record in a memorandum he had written for
Poindexter.  North did not explain to McFarlane why he thought the diversion
could be a problem in light of his belief that all documents relating to the
diversion had been destroyed.  On the other hand, North testified that he
recalls only assuring McFarlane that all diversion documents had been
destroyed; he expressly did not recall telling McFarlane that there was a
memorandum describing the diversion that might cause a problem.

     At that point, attorney Thomas Green arrived at McFarlane's office. Green
told McFarlane he had been an Assistant U.S. Attorney and had dealt with
problems of this kind before.  Green advised McFarlane and North to state the
story truthfully and let the chipo fall where they may.  Not long thereafter,
Richard Secord arrived as well, but by that time, McFarlane had to leave for
an appointment.

     From approximately 12:45 p.m. to 2:00 p.m., Attorney General Meese,
Reynolds, Cooper, and Richardson met to discuss the upcoming interview of
North.  North arrived, alone, at approximately 2:15 p.m.  Meese did most of
the questioning.  Richardson and Reynolds took notes.

     The Attorney General began by telling North he wanted all the facts, and
did not want North to coverup to protect himself or the President.  He then
asked North to explain the arms sales from the beginning.  North replied with
a combination of fact and fiction.  All the while he knew that the Attorney
General was acting under orders from the President and that the Attorney
General's findings would be reported back to the President.

     North said he was unaware of the first shipment of 504 TOWs until after
it occurred.  Regarding the November 1985 HAWK shipment, North said he
received a call from McFarlane in Geneva who told him to contact Israeli
Defense Minister Rabin to help Israel move something to Iran.  North then
claimed that Defense Minister Rabin told him it was oil-related equipment.
North sent Secord to help with the shipment.  North also called Duane
Clarridge at the CIA to get a CIA proprietary to fly the equipment.  When
Secord saw the shipment in Israel, he told North the cargo was 18 or 19 HAWK
missiles.  The implication in North's statements - that he was unaware until
informed by Secord that the flight was to contain HAWK missiles - was false.
As North subsequently admitted in his public hearing testimony, he knew the
nature of the cargo from his first involvement in the November shipment.

     North also claimed, falsely, that Poindexter knew nothing of the November
1985 HAWK shipment.  North stated, again falsely, that when he discovered from
Secord that there were HAWKs on the plane he notified someone at the CIA,
possibly Casey.

     While lying to the Attorney General about other aspects of the November
1985 HAWK shipment, North admitted that his statements about that shipment in
the NSC chronology and at the November 20, 1986, meeting to review Casey's
draft testimony were false.  As discussed above, North had claimed in the
chronology and at the meeting that the United States had to force the Iranians
to return the HAWK missiles.  In his interview with the Attorney General,
North admitted that it was the Iranians who were dissatisfied and demanded
their money back.

     Attorney General Meese then asked North to describe the money flow.
Again, North lied.  North said the money passed from the Iranians to the
Israelis who in turn paid into a CIA account which reimbursed the Army for the
weapons.  North made no mention of Secord or the Lake Resources account
through which the money had actually passed.

     Then the Attorney General showed North the diversion memorandum.  The
first page referred to U.S. acquiescence in the August 1985 TOW shipment.
Meese asked North to explain if this was an arms-for-hostages deal.  North
asserted that, although he discussed the strategic opening of Iran with
President Reagan, with the President "it always came back to the hostages."
North said the President was drawn to the linkage between arms and hostages
and it was a terrible mistake to say the President wanted the strategic
relationship with Iran, because the President wanted the hostages.

     After that exchange, the Attorney General turned to the diversion.  He
directed North's attention to the section of the memorandum describing how the
"residuals" would go to the Nicaraguan Resistance.  North appeared to be
"visibly surprised."  He asked if they had found a "cover memo."  Reynolds
said that none had been found - without first questioning North as to whether
he recalled a cover memo, or to whom it had been directed, or what it said.
After Reynolds informed North that no cover memo had been found, the Attorney
General asked North if they should have found a cover memo, and North said
"no."

     The Attorney General asked North if he had discussed the diversion with
the President.  North replied that Poindexter was the point of contact with
the President.

     Attorney General Meese pointed out that if the President had approved the
diversion, North probably would have a record of it.  North agreed and said he
did not think it was approved by the President.  The Attorney General asked
whether other files might contain a document indicating Presidential approval,
and North said he would check.

     The Attorney General asked North if there was anything more.  North said
that only the February 1986 shipment and the second shipment had produced
residuals to the Contras.  North also said that only three people in the
Government knew of the diversion - Poindexter, McFarlane, and himself. North
said the CIA did not handle the "residuals" and, though some in the CIA may
have suspected a diversion, he did not think anyone at the CIA knew.  If
North's testimony at the public hearings was truthful, then these statements,
too, were lies.  At the hearings, North testified that Casey knew, approved,
and was enthusiastic about the diversion as early as February 1986.

     And of course, North was aware when he spoke to the Attorney General that
Earl knew of the diversion.  [North Test., Hearings, 100-7, Part I, 7/8/87, at
139-40.  Indeed, North had told Earl during the spring of 1986 that Casey knew
of the diversion.  Earl Dep., 5/2/87, at 37.]

     North claimed that the diversion was an Israeli idea, probably Nir's -
another lie refuted by documentary evidence.  He said the money went straight
from the Israelis into three Swiss bank accounts opened by FDN leader Calero.
In fact, the diverted funds were deposited to the Swiss account maintained by
Secord and Hakim.  North claimed that the October 1986 shipment of TOWs did
not produce residual funds because North, over Nir's objection, charged much
less for the weapons.  He did this, he said, because the Contras had $100
million in U.S. aid and North did not want to create the impression of private
profit.

     The Attorney General asked North if there were any other items he had not
told them about and North responded negatively.  However, North volunteered
that if the diversion were kept quiet, the only other problem would be the
November 1985 HAWK shipment, which someone ought to say was authorized.  The
Justice Department officials made no reply.

     Attorney General Meese then confirmed to North that he had to share this
information with the President and determine if he was aware of it. Meese
again asked North about other problem areas, including complaints from people
who financed the deals and lost money.  North responded only that Ghorbanifar
had lost money in a "sting."

     At this point in the interview, the Attorney General left to pick up his
wife at the airport.  Cooper continued further questioning North regarding
authority for the 1985 shipments.  Cooper asked North if he believed at the
time that the November shipment contained oil drilling equipment.  North
replied that he really thought it was munitions, but boasted that he could
nevertheless pass a lie detector test on whether he thought it was oil
drilling equipment.

     North also volunteered that Southern Air Transport (SAT) hauled the 1986
arms shipments and that SAT was being investigated by the Justice Department
for its involvement in the Contra resupply operation.

     The North interview concluded at 5:55 p.m. as the Attorney General was
returning.  North was not told what would happen next.  Although the Justice
Department officials noticed North's surprise that they had a copy of the
diversion memorandum North had written, no one asked North if he had shredded
or otherwise disposed of documents, nor did the Justice Department officials
take any steps to secure North's remaining documents.

     Later that night, Sofaer called Cooper to find out the status of the
investigation.  Cooper asked the basis of Sofaer's earlier concern about the
possibility of surplus funds being generated from the Iran arms sales. Sofaer
explained that he thought there may have been a difference between the
purchase price and cost price.  Sofaer also volunteered that he suspected that
SAT may have been given excess profits from the Iran arms sales to finance the
Contra resupply operation.  Cooper did not mention the diversion memorandum or
North's interview.

     That evening, North called McFarlane and Poindexter.  Afterwards, North
shredded additional documents at his office until at least 4:30 a.m., when a
security guard noticed that North's office had not been secured for the day.
North responded to the officer's security report by claiming that when the
officer checked the office, North was in the bathroom.