Casey Concedes He Knew Vaguely of Contra Aid Earlier : Canadian Group Put Up Millions to Fund U.S. Arms Sales, Panel Is Told

A New York businessman told the Senate Intelligence Committee in closed session Thursday that a Canadian investment group put up millions of dollars to fund U.S. arms sales to Iran and that he had personally informed CIA Director William J. Casey in early October that some funds had been diverted to the Nicaraguan rebels, committee sources said.

Casey has insisted he did not know about the diversion of arms profits to the contras until Atty. Gen. Edwin Meese III told him about it in November, but on Thursday he acknowledged publicly for the first time that he was at least vaguely aware of the operation more than a month before Meese’s disclosure.

At the time Meese publicly described the diversion of funds to the contras on Nov. 25, the attorney general insisted that Casey had been unaware of any connection between the Iranian arms sale and the contras.

Need for Canadian Funds

According to sources, the Canadians were needed to finance the deal because the Pentagon refused to release weapons from U.S. arsenals without receiving $12.2 million--the total value of the goods--and the Iranians refused to pay in advance. Sources said the Canadians apparently were drawn into the deal by Manucher Ghorbanifar, an Iranian who acted as a go-between.

On Thursday, the CIA director acknowledged that he had learned about the contra connection in a telephone call on Oct. 7 from Roy M. Furmark, the New York energy consultant who spent nearly four hours Thursday testifying before the Senate Intelligence Committee about his knowledge of the Canadian investors’ role in the operation.

Word of Casey’s disclosure only served to heighten congressional pressure on President Reagan to oust the 73-year-old CIA director. House Intelligence Committee Chairman Lee H. Hamilton (D-1231971374not only by what Casey knew but also by what he did not know.

“When a New York businessman, Furmark, can call up Director Casey and tell him what the NSC is doing and what arms merchants are doing and what (the Administration) is doing that he doesn’t know about, it shows that the process has gone amok,” Hamilton said.

President’s Responsibility

“The responsibility has to be with the President to correct that kind of thing . . . and to prevent it from happening,” he said.

Even though some senators found it hard to believe, those who heard Furmark’s testimony said it added significantly to their understanding of how the Iran-contra operation was funded. “With each witness that comes before this committee,” marveled Sen. William S. Cohen (R-Me.), “the picture becomes clearer, the story more confounding.”

Neither the witness nor members of the committee would identify publicly the Canadian investors who put up money for the deal. In fact, Furmark was so fearful of publicity that he eluded reporters by literally running from the Senate committee hearing room to a waiting taxi.

The Canadians were the only up-front investors in the deal, as far as Senate investigators know. Sources said the Canadian government had no role.

Congressional sources said that Furmark, who apparently had no direct role in the deal, first got involved when he took it upon himself to telephone Casey on Oct. 7 to report that the Canadian investors had been repaid only $10 million of their investment, though they were expecting $20 million.

Furmark is a business associate of Saudi billionaire Adnan Khashoggi, who has been identified by U.S. and Israeli sources as a broker in the arms deal.

Although Furmark told Casey that he believed the money had been diverted to fund the Nicaraguan rebels, Casey has indicated on a number of occasions that he knew nothing about the contra connection until he learned about it from Meese.

In talking to reporters Thursday, the CIA director said he did not actually “learn” about the diversion of funds to the contras until he talked to Meese, but that he had “questions” about it after his conversation with Furmark. He reportedly told members of the House Foreign Affairs Committee on Wednesday that he began raising questions about it with National Security Adviser John M. Poindexter after his call from Furmark.

Meese Won’t Comment

Meese declined comment on the apparent conflict between Casey’s testimony and Meese’s statement that the CIA director did not know of the link between the transfer of Iranian arms funds to the contras until Meese learned of it. A Justice Department spokesman said the attorney general “doesn’t want to respond in any way.”

Ironically, even after hearing testimony from Furmark, congressional investigators said they still have no evidence to prove that the money was diverted to the contras.

“Somebody obviously made some money and somebody lost some money,” Cohen said after hearing Furmark’s testimony. “We have not at this point in time received any sufficient evidence as to what if anything happened to the funds.”

Unable to Trace Funds

Bernard F. McMahon, staff director of the Senate Intelligence Committee, said that after nearly two weeks of hearings the panel has still been unable to determine what happened to the $10 million to $30 million that Meese reported had been diverted to the contras. McMahon said the committee has been trying without success to develop a flow chart of the money.

“Nobody can establish beyond a shadow of a doubt where the missing money went,” he said. “Everybody’s got their own theory. . . . Maybe it went to the contras. It might have gone into some middleman’s pocket. It might have gone in the form of cash. It might have gone in the form of remuneration in kind, like jeeps. It may have been all of the above. It may have been split six, seven different ways.

“Some may have been taking it out somewhere. Some may have been overcharging for equipment and putting the money in their pockets. Some may have been advertising there was more equipment there and fooling investors at the front end. There’re a lot of different possibilities here.”

Searching for Truth

In Omaha, Neb., Committee Chairman Dave Durenberger (R-Minn.) said the truth of what happened to the money is not likely to be known until Poindexter agrees to testify along with his former aide, Oliver L. North, and retired Air Force Maj. Gen. Richard V. Secord, who was a central figure in the contra supply operation. All three have refused to testify, citing the Fifth Amendment right against self-incrimination.

Durenberger said that Poindexter and North should “either take off their uniforms or . . . take off their Fifth Amendments.” He added that while he does not believe the President was involved in any wrongdoing, the silence of his former aides is “making it look a lot more like he’s guilty.”

He added that Reagan made a mistake in creating a secretive environment in which North and Poindexter were “using a bunch of rug merchants” to conduct foreign policy.

Praise for President

Cohen, meanwhile, praised the President for supplying the Senate Intelligence Committee with a variety of White House documents requested for the investigation. McMahon said the committee Thursday received five documents--about one-third of those it requested.

Hamilton also said his committee will never learn all of the facts unless Poindexter and North testify. He called for Reagan to get complete disclosure from those who have worked for him and make that knowledge public.

Like Hamilton, a second member of the House Intelligence Committee, who refused to be identified, said Casey’s credibility had been impeached by the contradiction of when he knew about the contra connection. “The director has a real credibility problem,” he said.