Inquiry Raising Questions Over Role of CIA and Casey

Congressional investigations of the secret Iranian arms sale and the diversion of some profits to support Nicaraguan rebels have raised new questions about the CIA’s role in the scheme and what CIA Director William J. Casey knew about it, Administration and congressional sources said Thursday.

Congressional investigators have learned that the CIA intensified its surveillance of Iranian arms dealers and government officials in Tehran as early as the summer of 1985, knowledgeable sources said--a new indication that the agency monitored the Iranian weapons trade during the entire period of the secret arms shipments.

White House officials issued an unusual order at the time, directing the CIA to withhold intelligence about Iranian arms movements from Secretary of State George P. Shultz, the sources said--revealing that Shultz was denied crucial information about the matter even before any U.S.-sponsored arms shipments began.

And knowledgeable sources said that CIA operatives discovered the secret Swiss bank accounts that were being used to funnel Iranian arms sale profits to the Nicaraguan contras more than two months ago, although it was not clear whether the agency knew where the money was coming from or who controlled the accounts.

Casey and other CIA officials have insisted that the agency never knew that money from the secret arms sales to Iran was diverted to fund the contras, who were barred from receiving U.S. military aid from 1984 until 1986.

The CIA director acknowledged Thursday, however, that he was tipped to the contra connection in a telephone call on Oct. 7 from Roy M. Furmark, a New York energy consultant. But Casey has said repeatedly--and continued to insist Thursday--that he did not learn of the diversion until he was informed of it by Atty. Gen. Edwin Meese III in November. Casey apparently has been drawing a distinction between receiving information about the operation and receiving an official account, although he acknowledged Thursday that he began raising questions about the link after talking to Furmark.

Despite Casey’s statements, several Administration officials and congressional investigators said there is evidence that he may have been aware of the diversion of funds before the Furmark conversation.

“He knew a good part of it, but only began to admit it when Furmark told him it would come out anyway,” said a congressional source who was familiar with Casey’s testimony and that of other CIA officials.

“I’m convinced that Casey was directly involved,” said an official who has helped manage the Administration’s overall contras policy but was not involved in the arms profits diversion. “I can’t prove it, but I can assure you that he was.”

Orders Conveyed by North

The 1985 orders to the CIA to increase its surveillance of Iranian arms dealers were conveyed from the White House to the CIA by then-NSC aide Oliver L. North. They came even before the first Israeli shipment of arms to Iran in August of that year, a sale condoned by the Administration. At the time, some within the Administration were laying plans to “make an opening” with Iran, a source on Capitol Hill said.

Shultz, who had argued against negotiating over the hostages with Iran, normally would have been on the list of Administration officials receiving copies of related intercepted telephone and cable communications, the sources said.

“When they began to set up the intelligence part of it for monitoring the communications, there were instructions given not to put Shultz on the distribution list for this information,” the source said.

The source added that North told CIA officials it was not necessary to provide the communications to Shultz because Robert C. McFarlane, who was then national security adviser, would brief the secretary of state himself.

McFarlane has asserted publicly that he briefed Shultz frequently about the operation, but Shultz has insisted that he was kept in the dark about most details.

There was no indication that the information was withheld from others on the intelligence list, including Defense Secretary Caspar W. Weinberger, Casey and key members of the National Security Council staff, the source said.

Shultz ‘Ticked Off’

Asked whether North had the authority to issue orders to the CIA, the source said: “You know damn well that North would not have done it on his own.” When the secretary of state ultimately learned that the information had been withheld, it “really ticked Shultz off,” the source said.

Sources also said that CIA operatives discovered more than two months ago the secret Swiss bank accounts that were being used to funnel Iranian arms sale profits to the contras.

Casey has told congressional committees that he was first tipped to the fund diversion when Furmark called him on Oct. 7 to tell him that a group of Canadian arms dealers had not yet received profits they had expected on their investment in the deal, and were threatening a lawsuit that would expose the operation.

The CIA’s discovery of the Swiss accounts followed reports from the agency’s operatives in Central America that the contras had begun receiving weapons and airlift help from a new group of private suppliers, led by retired Air Force Maj. Gen. Richard V. Secord, the sources said.

In addition, contra sources said they were told that Secord’s supply operation was financed by private businessmen in Saudi Arabia. One of the key figures in organizing and financing the secret weapons sales to Iran has been identified as Adnan Khashoggi, a Saudi billionaire.

Asked whether Casey might have been aware that some of the contras’ financial support came from Saudi Arabia, one rebel official laughed and said: “Casey knew more about it than we did.”

Messages Intercepted

The National Security Agency, which monitors international electronic communications, intercepted messages among the participants in the arms sales that revealed that the deal had produced large profits, sources said. The NSA’s intercepts on Iranian arms dealings are normally distributed to the CIA and other intelligence agencies, but it was not known whether these specific messages reached Casey and his aides.

Meanwhile, the Senate Intelligence Committee is examining the possibility that Duane (Dewey) Clarridge, a close Casey aide who ran the CIA’s covert war in Nicaragua from 1982 until 1984, may have been involved in diverting the Iranian arms money to the contras.

Clarridge has been head of the CIA’s counterterrorism group for the last year, an assignment that brought him into frequent contact with North, who handled both terrorism and Central American issues for the NSC. In 1984, Clarridge directed the CIA’s mining of Nicaragua’s harbors--an action that led Congress to halt U.S. funding of the rebels for two years.

Clarridge testified before the committee Thursday and was described by one senator as “very helpful.” The senator and other sources refused, however, to describe his testimony further.

Also contributing to this story was staff writer Michael Wines.