Didn’t Know Iran Funds Were Sent to Contras--Casey

CIA Director William J. Casey, in more than five hours of secret testimony on Capitol Hill, denied Wednesday that he knew anything about the use of profits from Iranian arms sales to aid the Nicaraguan contras until just before the matter was made public, according to lawmakers who attended the closed-door session.

And, testifying under oath before the House Foreign Affairs Committee, Casey said the CIA was “not involved in the diversion of funds to the contras,” Rep. Peter H. Kostmayer (D-Pa.) said after the hearing.

The CIA director said he “was not informed” about the contra funds until just before Atty. Gen. Edwin Meese III disclosed the operation publicly late last month. “The first knowledge he had was when Atty. Gen. Meese informed him about it,” Kostmayer said. Rep. Gus Yatron (D-Pa.) gave a similar account of the testimony.

Shultz’s Claim Disputed

Casey also disputed Secretary of State George P. Shultz’s claim that he had been misled by Casey and then-National Security Adviser John M. Poindexter about the Iranian arms shipments. Shultz told reporters on Monday that he had assured U.S. allies this summer and fall that the U.S. government was not selling arms to Iran because Casey and Poindexter told him in May that the shipments had ended.

But Casey, according to a member of the committee who spoke only on the condition he not be identified, told lawmakers that “Shultz knew more” about the Iranian arms sales operation than he has indicated.

The CIA director, testifying for the first time to Congress since the diversion of funds to the contras was disclosed, described the Iranian arms operation in detail, lawmakers said. But, they added, he insisted the only money the CIA handled from the sales was $12.2 million that was owed to the U.S. government from Israeli sources--not the additional profit diverted to contra military suppliers.

The New York Times, citing three unnamed government officials, said Wednesday that Casey learned of the diversion of money to the contras a month before it was uncovered by Meese and his Justice Department inquiry. Casey’s statement before the Foreign Affairs Committee, lawmakers said, represents a denial of the New York Times report.

The CIA’s role in an arms shipment from Israel through Portugal to Iran in November, 1985, apparently led one senior Republican to conclude that serious mistakes were made by top officials of the spy agency.

Rep. William S. Broomfield (R-Mich.), the ranking GOP member of the Foreign Affairs Committee, said he thought Casey brought “good news and bad news.”

“The good news was that none of what he said indicated that the President knew or should have known of any wrongdoing,” Broomfield said. The bad news, however, was that senior officials of the CIA made “serious errors of judgment” that Broomfield said should lead to a shake-up at the top levels of the CIA. The congressman, in declining to elaborate on his statement, did not identify either the officials involved or their alleged misdeeds.

Lawmakers said that Casey never refused to answer any question, but that he appeared to be poorly informed about important details of the Iranian arms shipments. Rep. Morris K. Udall (D-Ariz.) said Casey left him with the impression “that he was on the sidelines and that others in the agency were doing the work.”

No Photographic Memory

And California Rep. Howard L. Berman (D-Panorama City) commented that “the director of our CIA has nothing close to a photographic memory,” adding: “We were left with the impression that the left hand doesn’t know what the right hand is doing, or people aren’t telling us everything.”

Committee Chairman Dante B. Fascell (D-Fla.) said that Casey “answered direct questions . . . to the best of his ability.”

But despite the extensive testimony this week from Casey, Shultz and former NSC Adviser Robert C. McFarlane, Rep. Lee H. Hamilton (D-Ind.) said that Congress still “doesn’t have answers to key questions.” Hamilton said that “(Oliver L.) North and Poindexter remain the key witnesses and until we have total disclosure from them, we won’t have a complete picture.”

The Senate and House intelligence committees also continued their separate private investigations into the Iranian arms shipments and funds for the Nicaraguan contras. The House committee received testimony from Robert M. Gates, deputy director of the CIA, and McFarlane. Poindexter once more refused to answer questions, citing his Fifth Amendment right not to incriminate himself.

Reagan’s Knowledge

Rep. Stephen J. Solarz (D-N.Y.) went further than any other lawmaker in arguing that President Reagan must have authorized the diversion of Iranian arms profits to the contras. Solarz, assessing the overall testimony before the Foreign Affairs committee this week, said: “I am very comfortable with the conclusion that the President must have known about the decision to divert these resources.”

But Solarz acknowledged he “did not hear anybody say that they knew for a fact that the President had authorized the diversion.” And other lawmakers heatedly disputed his conclusion. Contending that he was “outraged” by Solarz’s televised remarks, Rep. Michael DeWine (R-Ohio) said: “There is no evidence, absolutely no evidence that we have heard that would link the President of the United States to any of these illegal activities.”

Most committee members on the way out of the House Intelligence Committee hearing said they learned little new from either Gates or McFarlane.

‘Honest and Forthright’

Rep. George E. Brown Jr. (D-Colton) said that both Gates and McFarlane seemed “quite honest and forthright.” Brown added, however, that “the key here is there are still people we haven’t talked to, and it’s going to be hard to get them.” Those people, he said, are ex-NSC aide North and retired Air Force Maj. Gen. Richard V. Secord, who has been identified as a key intermediary in both the Iran arms transactions and the shipment of military supplies to the U.S.-backed rebels in Nicaragua.

The Senate Intelligence Committee called one witness, Robert Dutton, a retired Air Force colonel who is an associate of Secord. Committee members said that Dutton took the Fifth Amendment. Dutton is believed to have supervised a secret airlift operation for the contras run from El Salvador’s Ilopango air base.

Sen. Dave Durenberger (R-Minn.), chairman of the Senate Intelligence Committee, said his panel also has “alerted” Cabinet members who serve on the National Security Council that they may be summoned to appear next week.

‘A Huge Plane’

Sen. William S. Cohen (R-Me.), a member of the Intelligence Committee, said the panel has heard no evidence to refute McFarlane’s claim that President Reagan approved the 1985 arms shipments that were first made in August. He also confirmed that the committee has evidence the arms shipments to Iran were much larger than the equivalent of a single planeload, as President Reagan initially described the total U.S. shipments. “It’s got to be a huge plane,” Cohen said.

Casey, in his testimony before the Foreign Affairs Committee, also denied any personal knowledge of the “back channel” communications established by the CIA between the White House and the U.S. ambassador to Lebanon, John H. Kelly, that was disclosed by Secretary of State Shultz on Monday. Casey, according to Kostmayer, told the committee he had “no physical record and no recollection of that,” but that he would check CIA records for any evidence of the messages.

The State Department said Wednesday that FBI agents have questioned Kelly about his involvement in the Iranian arms deal and that the head of the U.S. embassy in Syria has also been ordered home to talk about the matter.

Deputy spokesman Phyllis Oakley gave no further information, however, and Kelly himself refused to comment to reporters.

Eagleton’s Withdrawal

David Ransom, who has been acting as chief of the embassy in Damascus since Ambassador William Eagleton was withdrawn last month in protest against Syrian support of international terrorism, was talking with officials in the Bureau of Near Eastern Affairs Wednesday, bureau spokesman Donald Cofman said.

“The department is in the normal process of talking to a great many people about all the facts and ramifications,” Oakley said. She refused to say whether Ransom would also be questioned by the FBI or other agencies outside the department, or whether he is believed to have detailed knowledge of the Iranian arms sale.

Fascell, the Democratic chairman of the House Foreign Affairs Committee, and Broomfield, the ranking Republican, continued to argue over whether to seek legal immunity for the testimony of Poindexter and North. With Republicans seeking to minimize the political damage from the Iran-contra affair, Broomfield argued that the two former NSC officials “deserve immunity” in order to avoid “a prolonged investigation on this entire Iran initiative.”

But Fascell, pointing out that other congressional committees will be responsible next year for formal investigations of the matter, told reporters that he is “certainly not ready to do that” because it would be “very premature.”

ACLU Objection

Meanwhile, in a related development, the American Civil Liberties Union on Wednesday objected to the House Foreign Affairs Committee’s requiring North and Poindexter to invoke their Fifth Amendment right against self-incrimination before a public session of the panel.

In a letter to Fascell, Morton H. Halperin, director of the ACLU’s Washington office, said: “Any testimony elicited from a witness who may be charged with a crime ought to be heard in executive session. . . . In no event should a witness who invokes the privilege be compelled to appear before an open committee session to restate his or her position.”

Meanwhile, Archibald Cox, former Watergate special prosecutor, called on Congress to continue its investigations because an independent counsel “is limited to investigating indications of criminal misconduct.”

Staff writers Maura Dolan, Sara Fritz, Paul Houston, Ronald J. Ostrow, Don Shannon and Karen Tumulty also contributed to this story.