Pentagon Probing Price on Iran Arms : Undervaluation Could Have Created More Profits to Divert, Senator Says

After hearing two hours of closed testimony by Defense Secretary Caspar W. Weinberger, a leading member of the Senate Intelligence Committee said Wednesday that the Reagan Administration may have deliberately undervalued U.S. arms destined for Iran with the intention of creating huge profits to be used for secret purposes.

And the Pentagon said Wednesday that Weinberger has asked the inspector general of the Army to try to determine why the Defense Department received only $12 million for the arms shipped to Iran over the last year, while the Iranians may have paid considerably more. Some of the profits were secretly diverted to the rebels fighting the Sandinista government in Nicaragua, the Administration has acknowledged.

Sen. William S. Cohen (R-Me.), a member of both the Intelligence Committee and the select committee that will take over the Senate investigation after the new Congress convenes next month, said that Weinberger was questioned at the hearing about the price discrepancy but that no explanation has been provided.

Preparing for Probes

Weinberger and Atty. Gen. Edwin Meese III testified before the Senate Intelligence Committee as members of the specially created Senate and House select committees began preparing for their more extensive, Watergate-style investigations of the Iranian arms scandal.

House leaders announced Wednesday that Rep. Lee H. Hamilton (D-Ind.), outgoing chairman of the House Intelligence Committee, will head the 15-member House investigating panel. Rep. Dick Cheney of Wyoming, another Intelligence Committee member, will be the ranking Republican.

Meanwhile, Sen. Daniel K. Inouye (D-Hawaii), chairman of the Senate select committee, predicted that the investigation will continue through next September.

Cohen said that the $12-million price set by the United States represents a “substantial” reduction from the true value of the weapons and he joked that it was “at least wholesale.”

It is known that the Iranians paid considerably more than $12 million for the weapons, even though the exact sale price has never been disclosed. In addition to the share diverted to the contras, other funds apparently were siphoned off by arms dealers and middlemen who handled the transaction.

“It could have been an error, or it could have been a calculation to allow for higher margins,” Cohen said. “ . . . It could have been they were deliberately underpricing.”

It was the first time any congressional investigator has suggested that diversion of the profits from the Iranian arms sale was contemplated by Administration officials at the outset of the deal. Until now, it has been assumed that the money’s use was an afterthought. Administration officials have said that fired National Security Council aide Oliver L. North arranged the diversion and that only former National Security Advisers Robert C. McFarlane and John M. Poindexter had knowledge of it.

May Be Old Weapons

Cohen said that the Pentagon investigation may prove that the weapons were underpriced because they were older models no longer favored by the U.S. military. In fact, the Iranians are reported to have returned at least one arms shipment from the United States because the weapons were obsolete.

According to calculations made recently by the staff of Sen. Paul Simon (D-Ill.), the actual replacement value of the 2,008 TOW anti-tank missiles and the 235 I-Hawk air defense missiles shipped to Iran was about $80 million. Based on figures supplied to Simon’s office by the Army, the study concluded that the value of the TOW missiles alone was $28 million.

Simon has accused the Defense Department of undervaluing the weapons to circumvent the Arms Export Control Act, which requires that Congress be notified of arms shipments in excess of $14 million.

Disagreement on Panel

Meanwhile, Senate Intelligence Committee members disagreed publicly among themselves over whether the investigation had yet proved that a crime was committed by Administration officials involved in the arms deal.

Sen. Arlen Specter (R-Pa.), a former prosecutor in Philadelphia, asserted that the committee had ample evidence to bring felony charges against Poindexter and North for their alleged roles. As a result, he said, the Congress should proceed to grant immunity to the two men in exchange for their testimony.

Specter said that the charge against North and Poindexter would be “fraudulent conversion,” which he described as “a misappropriation of the money of the United States to the purposes of a third party--to wit, the contras--without legal authority.”

However, other members said that the committee has not yet proved conclusively that any money was diverted to the contras--even though Meese in his testimony before the committee repeated his assertion of Nov. 25 that profits from the Iranian arms sales went to the anti-Sandinista rebels.

Testified Four Hours

After testifying for about four hours, Meese told reporters that he still believes Iranian money was diverted to the contras, but he has no better proof than the committee.

“So far, I’ve not seen anything that would provide any evidence of anything different from what we originally found,” said Meese, whose original investigation included a talk with North. “I would say that what I said in the overview on Nov. 25 is essentially correct.”

He insisted also that North, the NSC’s point man in relations with the contras, acted alone without the approval of the President or any other official.

“My own conclusion is that I have no personal information and have received no information that there was anyone higher in the Administration than Col. North involved in the diversion of funds to the contras,” he said.

No Data on Fund Use

Meese denied that he had received “any report or memorandum” from CIA Director William J. Casey in early October about the diversion of funds and held to his story that he was unaware of it until shortly before his public announcement on Nov. 25.

When asked how a White House official like North could have acted alone, he replied: “You are always going to have situations in a large organization where an individual or individuals can do things that are not authorized, that are opposed to what the policy decisions have been.”

One source close to the investigation said that Meese had interviewed the principals in the case, including Poindexter, North, Casey and White House Chief of Staff Donald T. Regan. An aide to Meese took written notes during the sessions, this source said, and records of the interviews have been turned over to the intelligence panel.

Chairman Dave Durenberger (R-Minn.) said that Meese’s testimony supported his own view that no one higher in the White House chain of command was involved, but other committee members disagreed.

‘An Open Question’

“As to whether (North) acted wholly on his own or with authority from others is still an open question,” said Cohen. “Each of us comes to our own different conclusions.”

McFarlane, who testified before the committee two weeks ago, will be recalled by the panel today in an attempt to resolve conflicts between his account of the Iran arms sales and that of Regan. Regan insisted that Reagan did not approve the first arms shipment to Iran in August, 1985, but McFarlane said that he did.

Meanwhile, Inouye, a veteran of 22 years in the Senate who served on the Watergate Committee, said he is concerned that the Soviet Union might take advantage of the United States while the country is in the throes of the current crisis.

“We view the present situation as potentially explosive and dangerous,” he said. “We also know that, in the past, when adversary countries have perceived our leadership as being wounded, they attempted to do mischief.”

But he quickly added: “I’m not suggesting that our President is wounded badly, but there is no question that the President has been injured.”

Both Inouye and the vice chairman of the Senate select committee, Sen. Warren B. Rudman (R-N. H.), said they viewed Reagan’s decision to sell arms to Iran as a mistake. But Inouye said he is not convinced that the President violated any law.

He said the committee’s hearings probably will begin in February and that the investigation could be completed by the end of September. His prediction clearly disappointed Rudman, who, like many other Republicans, had been predicting that the investigation could be wrapped up in a matter of weeks.

“It’s not going to be a fishing expedition nor is it going to be a witch hunt,” Inouye said.

After choosing the members of their select investigating committee Wednesday, House leaders said that it is too early to discuss the possibility of offering Poindexter or North the limited immunity that President Reagan has proposed. Poindexter and North have both cited the Fifth Amendment protection against self-incrimination when asked to testify before Congress.

When asked whether he favors immunity, Hamilton noted that a independent counsel has yet to be appointed and said: “Anything we do ought to be done with his advice and counsel.”

Nonetheless, there is significant support for immunity among the select panel’s six GOP members.

Rep. William S. Broomfield of Michigan, ranking Republican on the House Foreign Affairs Committee and a select committee member, said that immunity “would ensure that the Congress and the American people find out what happened and would also protect Col. North’s constitutional rights.”

Added Rep. Michael DeWine (R-Ohio): “We don’t have the luxury of dragging this out for a year. . . . At some point, I think immunity is going to have to be used.”

Many Democrats have suggested that Reagan’s call for immunity was politically motivated and amounted to an effort to shift to Congress some of the pressure for disclosing the facts surrounding the secret arms sales to Iran and the diversion of profits to the contras.

Rep. Jim Wright (D-Tex.), who will become Speaker in the next Congress, noted that Reagan has the power to pardon North and Poindexter if they are convicted of a crime. “Anybody who wears the uniform of the country owes a responsibility to the country. I should think he would want to be responsive to the request of his commander in chief,” Wright said.

White House spokesman Larry Speakes said that Reagan was “disappointed” that the Senate Intelligence Committee has refused to offer Poindexter or North immunity to compel them to testify.