Shultz Calls Envoy Home, Saying He Dealt in Secret

Acting without the knowledge of Secretary of State George P. Shultz, the U.S. ambassador to Lebanon used a secret CIA communications channel from Beirut and covert meetings here to discuss the Iranian arms-and-hostages deal with White House and other government officials, an angry Shultz disclosed Monday.

Shultz, testifying under oath before the House Foreign Affairs Committee, said he was unaware until last weekend that the envoy--career diplomat John H. Kelly--had engaged in repeated discussions behind his back with National Security Council officials.

Using arms sales to Iran as an “inducement” to win freedom for Americans held in Lebanon by pro-Iranian terrorists was the subject of the discussions, he said.

“I am, to put it mildly, shocked to learn this after the event from an ambassador,” Shultz declared, saying he has ordered Kelly “to return to Washington immediately, bringing with him all records of such activities, to be available to the FBI and other appropriate investigative bodies.”

At the White House, press spokesman Larry Speakes said that President Reagan also was unaware of the “back channel” discussions between the National Security Council and Kelly.

The secretary’s testimony shed new light on the lengths to which NSC officials at the White House went on behalf of the controversial Iranian operation, in which U.S. arms were sold to Tehran and profits from the shipments were diverted through a Swiss bank account to Nicaragua’s anti-Sandinista guerrillas.

The clandestine arms sales, which the White House has insisted were designed to strengthen future relations with so-called Iranian moderates as well as to help free American hostages, were carried out at a time when the Administration was publicly pressuring allies not to sell arms to Iran.

Shultz, who opposed the arms sales and testified that his knowledge of the overall arms program was “fragmentary,” said that Kelly met with National Security Council officials in Washington and later conferred with White House officials through a CIA communications link that bypassed the routine system of routing embassy communications through the State Department.

Committee Members Shocked

Shultz’s revelations prompted shocked reaction among the members of the committee.

Rep. Lee H. Hamilton (D-Ind.) said, “I don’t think I have ever heard of that happening before--totally bypassing an American secretary of state, who is his boss.” And Rep. Daniel A. Mica (D-Fla.) referred to the envoy as a “rogue ambassador.”

While believed to be rare, similar incidents have occurred in the past. During his tenure as national security adviser to President Richard M. Nixon, for example, Henry A. Kissinger is known to have dealt directly with U.S. ambassadors overseas on occasion and to have ordered them not to reveal the contacts to the State Department.

Responded to Directive

Shultz said he learned of Kelly’s role in the operation only when the ambassador, a 21-year veteran of the Foreign Service, responded to “an all-posts directive” dispatched from the State Department to embassies around the world, asking them to report to Washington any information they had on the arms sale project.

As he presented Kelly’s document to the committee, Shultz kept up a running commentary on it, interspersing his reading of the ambassador’s report with his own icy reactions.

According to Shultz, Kelly reported that before taking up his post in Beirut in the late summer of this year, he met in Washington in July or August with Robert C. McFarlane, President Reagan’s former national security adviser, “who briefed me on the hostage negotiations involving arms to Iran as an inducement.”

In addition, Shultz said, Kelly reported that he had had “numerous conversations” between Oct. 30 and Nov. 4 with Marine Lt. Col. Oliver L. North and with Richard V. Secord. North was relieved of his duties Nov. 25 as deputy director for political-military affairs on the NSC staff when it was announced by Atty. Gen. Edwin Meese III that he had drawn up the plan to divert Iran arms profits to the contras. Secord, a retired Air Force major general and private businessman, is also said to have played a key role in the affair.

During that five-day period, Kelly reported: “I received and sent numerous ‘back channel’ messages to and from the White House, Adm. Poindexter, concerning the hostage negotiations. Those messages were transmitted and received in what is referred to as the ‘privacy channel,’ using CIA communications facilities.” Vice Adm. John M. Poindexter succeeded McFarlane as the national security adviser, resigning at the time North was dismissed.

Kelly said that copies of the messages were destroyed in Beirut--standard practice, Shultz added, “given the situation there.”

Chain of Command Cited

Shultz, asked whether Kelly’s channels to the White House violated State Department regulations, replied:

“There is supposed to be--I say supposed to be--a chain of command that goes from the President to me--not to the NSC--to me and through the assistant secretary, by and large, to the ambassador. That’s the chain of command.”

“If something comes up that causes an ambassador to go outside of that chain of command, there needs to be a good reason,” said Shultz, a former Marine. “Now it may be very well that Ambassador Kelly will say that he was told on the authority of the President that he was supposed to do this.”

But, the secretary of state continued, “I would think that he would have checked with me to see if that were so.”

Wider Consultation

McFarlane, testifying at Monday’s hearing after Shultz, told the committee:

“My point in talking to him (Kelly), and this absorbed perhaps five or 10 minutes of the whole conversation, was to say that this matter is one that has been developed with the secretary of state and the President and other Cabinet members.”

In response to a question from Rep. Gus Yatron (D-Pa.), McFarlane said he was unaware of any secret channel between the White House and the Beirut embassy.

And at the White House, where there was little public reaction to Shultz’s testimony, Speakes said that the secretary’s revelation about Kelly’s contact was a surprise and that the President “didn’t know about it.”

Envoy’s Background

Kelly, 47, is unmarried, an important factor in choosing him to serve in the dangerous Beirut post.

Kelly, who entered the Foreign Service in 1965, has held a wide variety of administrative positions, serving in Turkey, France and Thailand before taking up the Lebanon ambassadorship in late August.

His brother, James Kelly, is currently senior director for Asia affairs on the National Security Council.

Times staff writer Karen Tumulty contributed to this story.