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$Unique_ID{bob01091}
$Pretitle{}
$Title{Iran-Contra Affair: The Report
Chapter 27C  Executive Order 12333, and NSDD 159}
$Subtitle{}
$Author{Various}
$Affiliation{}
$Subject{states
united
arms
iran
government
funds
president
congress
israel
sales}
$Date{1987}
$Log{}
Title:       Iran-Contra Affair: The Report
Author:      Various
Date:        1987

Chapter 27C  Executive Order 12333, and NSDD 159

     The procedures applicable to covert actions are governed not only by
statutes, but by executive orders and National Security Decision Directives
(NSDDs).  These are written regulations signed by the President of the United
States, and are binding on the entire executive branch until they are
rescinded or changed by the President.  They, too, were violated.

     Executive Order 12333 issued by the President provides that "no agency
except the CIA . . . may conduct any special activity (elsewhere defined to
include covert actions overseas) unless the President determines that another
agency is more likely to achieve a particular objective."

     There was no Presidential determination that the NSC staff should conduct
the Contra covert operation, and thus the NSC staff's covert action in support
of the Contras violated the President's executive order.

     Similarly, National Security Decision Directive 159, promulgated by the
President, provides that no covert action overseas may be conducted by any
agency of Government unless it is authorized by a written Finding signed by
the President.

     There was no written Finding signed by the President approving the covert
action by the NSC staff in support of the Contras.  Thus the NSC staffs
activity violated this directive.

Violations of 18 U.S.C. Section 1001

     We have described elsewhere (Part IV) the elaborate efforts by Government
officials to conceal their Contra-support activities from Congress.

     It is enough to say here that, among other things, Congress was told by
an Administration official orally and in writing in 1985 that the NSC staff
was not engaged in fundraising or arranging military support for the Contras.
Congress was personally told by North in 1986 that he was not engaged in
fundraising or giving military advice to the Contras.  Congress was told in
testimony by Administration officials in October 1986 that the Government had
no connection to the plane carrying Eugene Hasenfus.  And Congress was told in
testimony by Administration officials in October, November, and December 1986
that the Administration was not involved in raising funds for the Contras from
foreign countries, including specifically funds from Country 2.

     These statements were all untrue.  They were made by officials who had
varying degrees of knowledge about the facts they discussed.  Some of the
statements may have been unintentionally misleading and made by officials who
were themselves deceived; others were outright falsehoods.

     Most of these statements were not under oath.  But for the branches to
operate in a cooperative relationship, Congress must be able to rely on
statements even if unsworn.  Congress and the executive branch are partners,
not adversaries.

     The law recognizes this, and the false statement statute, 18 U.S.C. 1001,
provides felony criminal penalties for knowingly false, fictitious, and
fraudulent statements to Congress, even if not made under oath.

     Some officials claimed they were forced to choose between making false
statements and revealing information they believed should remain secret.
Government officials may claim any valid privilege including executive
privilege, as a basis for refusing to answer questions or provide documents,
and thus set in motion procedures for lawfully resolving the claim.  But under
the U.S. legal system, public officials do not have the option of making false
statements to Congress.

The Diversion - Boland Amendment

     The Committees find that the diversion of arms sales proceeds to the
Contras' war effort was an evasion of the Boland Amendment no matter how
narrowly that noncriminal statute is construed.

     The Boland Amendment provides that "no funds available to the Central
Intelligence Agency, the Department of Defense, or any other agency or entity
involved in intelligence activities" may be spent for military support of the
Contras.

     The missiles that were sold to Iran in 1986 came from Department of
Defense stocks.  The missiles had been purchased with money appropriated for
the Department of Defense by Congress, and the missiles belonged to the
Department of Defense.  The Department of Defense sold the missiles to the
Central Intelligence Agency, and the Central Intelligence Agency sold the
missiles to Iran.

     The memorandum to the President dated January 17, 1986, outlining the
arms sales the President approved that day spells this out very clearly.  It
states that the CIA would purchase the missiles from DOD and would sell the
missiles "directly" to Iran, using an "agent" - i.e., the various Enterprise
companies - to handle the actual transactions.

     Iran paid $28.5 million for those weapons.  In the ordinary course, the
purchase price is paid to the seller, i.e., the CIA.  In this case, however,
National Security Adviser Poindexter decided, on North's recommendation, that
only a portion of the money should go to the CIA, with the rest remaining in
the custody of Secord's companies before being used to support the Contras.
Thus, Poindexter testified:

     Q:  Who decided how that money would be used?

     A:  The - my guidance to Colonel North what he requested and I approved,
was that those funds should be used for support of the contras in Central
America so they could keep pressure on the Sandinistas.

     Q:  So the decision - and I think you said earlier in your testimony,
"the buck stops here" - the decision as to how that money was to be used was
made by you?

     A:  Was my decision; that is correct.

     Poindexter could also have decided that all of the purchase price be
remitted to the CIA.  North testified as follows:

     Q:  The question was, if those higher-ups in the U.S. Government from
whom you sought approval decided that the $10 million [residue] should not,
any part of it, be sent to the contras but should all come back to the U.S.
Treasury, that is what would have happened isn't it?

     A:  Yes.

     Given the Enterprise's status as an agent, and the NSC staffs control
over the pricing and the proceeds of the arms sales, the full purchase price
was available to the CIA.  These funds, generated from the sale of U.S.
weapons, could no more be diverted to the Contras than the weapons themselves.

Proceeds of Arms Sales - Funds of the United States

     The Committees find that the full proceeds of the arms sales to Iran
belong to the U.S. Government.  Consequently, these funds are governed by
statutes applicable to Government funds, including statutes prohibiting
conversion of U.S. Government funds to unauthorized purposes.

     As already noted in the previous section, Secord's Enterprise received
the purchase price for the missiles in its capacity as agent for the United
States.  This conclusion is strongly supported by the documentary and
testimonial evidence.  The President approved the arms sales based on the
January 17, 1986, memorandum, which states that the purchase price "would be
transferred to an agent of the CIA," and that the CIA would "deliver the
weapons to Iran through the agent."  That memorandum is consistent on this
point with other documents in the Committees' possession.  [Other memorandums
confirm the Enterprise's role as agent in the Iran arms sales.  The proposal
to sell missiles directly to Iran first appeared in a December 9, 1985,
memorandum from North to Poindexter, suggesting "using Secord as our
conduit."  A memorandum by CIA General Counsel Stanley Sporkin dated January
15, 1986, makes three separate references to an "agent" who would supply the
weapons to Iran and "act as a middleman with our authority."  And the January
17, 1986, Memorandum to the President makes the final proposal to have the CIA
transfer the weapons "directly" to Iran "using an authorized agent as
necessary."]  Moreover, as noted above, the Enterprise conducted itself in a
manner consistent with its status as an agent of the United States, spending
money for Government purposes - for the Contras, for a foreign country, for a
ship, and for a DEA operation - all at the direction of Government officials.
The Enterprise's profits from the Iran arms sales were not the result of
entrepeneurial risks or skills.  The Government determined the price which the
Enterprise paid for the missiles and approved and negotiated the price at
which the missiles were sold to Iran.

     Government funds include not only funds in the physical possession of the
Government, but funds that, although in the possession of another, are under
the Government's control.  When an agent of the Government collects money owed
to the Government by a customer of the Government, the money belongs to the
Government and cannot be converted to some other use. Arbuckle v.  United
States, 146 F.2nd 657 (D.C. Cir. 1944).

     The chief legal officer of the United States appears to be in agreement
with the Committees on this point.  The Attorney General of the United States
took the position in an official request for assistance to the Central
Authority of Switzerland, dated December 12, 1986, that the full proceeds of
the arms sales were funds of the United States; and gave similar testimony to
these Committees.  Thus, referring to these funds he said:  "I would say that
as a general matter, it is highly probable that those funds should be on a
constructive trust theory or agency theory the property of the United States."

     Government funds coming into the hands of an officer or agent of the
United States must be paid immediately into the Treasury (31 U.S.C. Sections
484, 3302) and may not be applied to some other use (18 U.S.C. Section 641).
Consequently, it is the Committees' judgment that all funds derived from the
proceeds of the sale of arms to Iran currently in the custody of the
Enterprise or its representatives belong to the United States and by law
should be returned to the United States Treasury forthwith.

Iran Arms Sales:  Arms Export Control Act

     The Committees find that the Administration's approval of the transfer of
weapons to Iran by Israel violated the Arms Export Control Act (AECA).

     All the HAWKs and TOWs that Israel transferred to Iran in 1985 had
earlier been obtained from the United States under the AECA.  Agreements
between this country and Israel prohibited Israel from transferring the arms
to any third country without first obtaining written consent of the United
States.

     Under the AECA, the President may not provide that consent unless: (1)
the United States itself would transfer those arms to that country; (2) the
transferee country (here Iran) agrees in writing that it will not further
transfer the items without obtaining the consent of the President; and (3) the
President notifies Congress of the transfer (22 U.S.C. Section 2753(a)).

     The President's authorization of the 1985 Israeli transfers to Iran were
made without even a pretense of compliance with the AECA or Israel's written
agreements with the United States.  No written consent was sought or given;
and even if Israel had sought a written consent, this Government could not
have given it without changing its own regulations.  This is so because Iran,
which was considered a terrorist nation by the United States and which was the
subject of a U.S. arms embargo, was not eligible for direct sales.  No written
Iranian retransfer assurances were obtained nor could they have been.
Finally, no notice was given to Congress.

     In 1985, the Secretary of Defense stated vigorously to the President that
he believed the sales were illegal.  He restated his belief before these
Committees in 1987:

     A:  But my feeling about that was, as I've mentioned to you earlier, that
the Export Control Act doesn't permit a blanket approval in advance or
anything of that kind and does not permit exports, did not permit exports to
Iran, neither that Act nor some others, and did not permit the Israelis to
export anything we hadn't specifically authorized.

     Q:  So if Israel had earlier purchased arms from the United States under
the Arms Export Control Act and not pursuant to an intelligence activity, your
position was that the law forbade them to transfer them to any third country
without going through various kinds of waivers and reporting requirements?

     A:  Yes.  Right.

Later he testified:

     Q:  So it would have been - you're saying it would have been a violation
of law for Israel to have - ?

     A:  I don't know of anything that would have taken it out of the normal
course.  I haven't researched the problem and had a legal opinion on it.  My
view is that our Arms Export Control Act would make that kind of transaction
illegal, yes.  That is just my own conclusion.

     The Administration takes the position that the CIA may transfer weapons
as part of an intelligence operation, outside the context of the AECA, by
using the President's powers under the National Security Act.  That is the
approach the President used in 1986 regarding his January 17, 1986, Finding.
However, no such Finding existed for the sale of 504 TOWs; only a retroactive
Finding existed for the November 1985 HAWKs sale; and the weapons transferred
by Israel to Iran were governed by the AECA having been earlier transferred to
Israel pursuant to that Act.

     The Department of Justice, in a legal opinion on December 17, 1986,
concluded that the 1985 Israeli shipments did not violate the AECA.  In
reaching this conclusion, the opinion assumed that Israel was acting solely as
a "conduit" in a direct sale by the United States to Iran; that the United
States promptly replenished all Israeli weapons with identical weapons; that
the Israelis had no financial interest in the transaction; and that the United
States asked Israel to engage in these transfers as an accommodation to the
United States.  The opinion also recognized that its conclusion depended on
the correctness of these assumptions.

     The assumptions are, in fact, incorrect.  It was the Israelis who first
suggested and engaged in the arms sales.  Israel was more than a conduit. The
initiative was considered a joint venture by the United States and Israel;
Israel ended with newer TOWs than it started with; and the prolonged
negotiations over replenishment reveal the financial interest Israel had in
the transaction.  Since its assumptions were incorrect, the legal conclusion
of the Department of Justice opinion must be discounted. Moreover, even if the
assumptions were correct, it is not clear that the Department of Justice legal
opinion is correct.

Violation of 18 U.S.C. Section 1505 and the Presidential Records Act

     The destruction or alteration of documents or the giving of false
testimony to frustrate a Congressional inquiry is a felony if done with
"corrupt" intent - i.e., the purpose of impeding an inquiry (18 U.S.C. Section
1505).

     Even if a subpoena has not been issued, an individual on notice of a
planned Congressional inquiry cannot lawfully alter or destroy documents for
the purpose of preventing Congress from developing the facts if he knows such
documents may be subpoenaed or requested.  E.g., see United States v. Vesich,
724 F.2nd 471 (5th Cir. 1984); United States v. Tallant, 407 F.Supp. 878,888
(N.D. Ga. 1975).

     Starting at least as early as November 10, 1986, the Administration was
put on notice that various Congressional committees planned inquiries into the
sale of arms to Iran.  Both the House and Senate Intelligence Committees told
the White House of the inquiries and arranged for Poindexter and Casey to
appear before them on Friday, November 21, 1986. Thereafter, several
Administration officials took actions which had the effect of concealing this
Government's participation in the Israeli shipments that violated the Arms
Export Control Act.

     On November 18, 1986, 3 days before the scheduled appearance of Casey and
Poindexter, Presidential aides began to focus on the legal problems attending
U.S. involvement in the Israeli shipments made prior to the January 17, 1986,
Finding.  Then during the next 3 days, several Administration officials
involved in the pre-Finding shipments told conforming stories denying U.S.
involvement in these shipments, at times using a false cover story that the
United States had been told that the Israelis were shipping oil-drilling
equipment, not arms.  These officials wrote this false cover story into NSC
chronologies; they told the false cover story in one version or another to
Congress and to the Attorney General; and they destroyed documents that would
have revealed the truth.

     The full facts concerning this effort, in the face of imminent
Congressional probes, to alter the historical record, are described in Part
IV.  Whether or not any of the individuals had the requisite criminal intent
to violate 18 U.S.C. Section 1505, their conduct violated the very thrust of
that law - to ensure that Congress' access to the truth would not be
obstructed.