Possibility of Reagan Arms OK Raised : He May Have Acted When Sedated, Meese Reportedly Testifies

Despite earlier White House denials, President Reagan may have approved the first shipment of U.S. arms to Iran when ill or under sedation, which may have left him unable to recall his action later, Atty. Gen. Edwin Meese III was reported to have told the House Intelligence Committee Friday.

That explanation, disclosed by a member of the committee, lends credence to former National Security Adviser Robert C. McFarlane’s contention that he received oral approval from Reagan for the deal.

Arms Shipped by Israel

The U.S.-made arms were shipped to Iran by Israel, which would have been legally barred from selling them without presidential approval.

“The explanation is that Reagan either was in the hospital or recovering,” said Rep. George E. Brown Jr. (D-Colton), the committee member. “He may have been under sedation. . . . (Meese) gave the impression that it was a difficult time for the President.”

Reagan underwent major abdominal surgery for colon cancer on July 13, 1985, and he left the hospital on July 20. The first arms shipment occurred the next month. Brown quoted Meese, who testified in closed session, as saying that the meeting between McFarlane and Reagan would have been a private one.

White House Comment

(White House spokesman Ben Jarratt told the Washington Post Friday night that “Congressman Brown has misrepresented Meese’s testimony, and the implication that the President made any decisions under sedation is absurd.”)

In his testimony before the Senate Intelligence Committee on Dec. 6 and again before the House Intelligence Committee on Dec. 9, McFarlane said that the President had given him oral approval for the first arms shipment to Iran. In an open session before the House panel, McFarlane said that the approval was given “to me and . . . to his Cabinet officers in separate but related talks directly with them, either one-on-one or in groups.”

It is not known what, if anything, McFarlane has said in closed committee hearings about when he received the oral approval. It has been reported, however, that, while Reagan was recovering from surgery, McFarlane visited him at Bethesda Naval Hospital and discussed with him the possibility of approving Israeli arms for Iran as a way of cultivating relations with so-called moderates in Iran.

Meese’s testimony as related by Brown would be the first time an Administration official has edged away from the White House’s insistence that Israel made the August, 1985, shipment on its own, without U.S. authorization. Israel has maintained that the shipment was approved.

The issue is crucial not only as a test of the veracity of McFarlane and Administration officials but also because an unauthorized shipment could be grounds for the suspension of U.S. aid to Israel.

A Justice Department spokesman could not be reached for comment on Meese’s reported statements.

In other developments Friday:

--Intelligence sources said that U.S. officials apparently skimmed profits from only one of the three direct U.S. arms shipments to Iran this year to aid the Nicaraguan rebels. That probably would mean that the actual amount of money--if any--that was diverted to the Nicaraguan rebels was much smaller than the $30-million maximum originally estimated by Meese.

--Meese told reporters that Lt. Col. Oliver L. North, the fired White House aide considered the key figure in the case, assured him that Reagan knew nothing of the diversion of the profits to the contras.

North Pleads Ignorance

--Brown quoted Meese as telling the committee that North had pleaded ignorance of how much money was in the bank accounts being used to fund the contras or who was controlling the accounts.

Thus far, Meese has been one of the few officials who has heard North’s version of events. He and several Justice Department aides questioned North extensively over the weekend before the diversion of profits was disclosed on Nov. 25. The Administration has said that North, the NSC’s point man in relations with the contras, arranged the diversion.

Since the scheme was disclosed, North has refused to testify before three congressional committees, citing the Fifth Amendment protection against self-incrimination.

“Col. North told me at the time I talked to him that the President did not know about any funds going to the contras,” Meese said. “The only people in the government who knew anything about the diversion of funds, or about the funds being made available to the contras, were himself, Adm. (John M.) Poindexter (McFarlane’s successor as national security adviser) and Mr. McFarlane.”

Disagree in Testimony

White House Chief of Staff Donald T. Regan and McFarlane have disagreed in congressional testimony over whether Reagan approved the first arms shipment by Israel. McFarlane insisted that the President had approved the deal orally, while Regan was equally adamant that he had not.

“There was a legitimate difference of opinion,” Brown said, adding that Meese was “allowing that (McFarlane’s version) is conceivable.”

Separately, congressional investigators have found evidence that no more than $4 million to $10 million was unaccounted for in the controversial arms transactions--all of it coming as profit from a single direct arms shipment from the United States to Tehran.

“We’ve got a pretty good idea that it was all involved in one deal in mid-1986,” one source said. “Our information is that, if there was a diversion--and there is money missing--then the only money in the arms deals we can see is missing is in one arms deal. And there’s a question as to where it went.”

Multiplied by Three

Meese said his estimate that up to $30 million was diverted to the contras was based on the assumption that money was skimmed from all three U.S. arms shipments to Iran in 1986--in other words, Meese took the $10-million estimate for one shipment and multiplied by three.

Meese said that his larger estimate was based on “the information we had available at the time” and came almost entirely from a conversation with North.

Despite CIA estimates that the anti-government rebels in Nicaragua received more than $10 million in military aid from private U.S. sources this year, congressional investigators so far have yet to uncover proof that any of their money came directly from Iranian arms sale profits.

‘Circumstantial’ Evidence

Senate Intelligence Committee Chairman Dave Durenberger (R-Minn.) said his investigation has established that the secret plan to divert the Iranian profits to the contras existed, but he has turned up only “circumstantial” evidence that it was carried out.

Meese agreed that his own investigation yielded equally unclear results. “Nothing I have heard at any time from anybody would give me conclusive proof that money did in fact get to the contras,” he said. “I only know that people told me that it was intended that money would be made available to the contras.”

One source said the evidence of the plan was a memo--undated and unsigned--that appeared in files that were found in North’s office. The sources estimated that the memo was written some time around last April.

Sen. Dennis DeConcini (D-Ariz.), who has heard much of the closed-session testimony before the Senate Intelligence Committee, said that all the committee members know is that profits were skimmed from the arms sales about the same time that the U.S.-based contra supply effort was shifting into high gear.

Airplane Purchases

“There’s certainly a line and a chain here of unaccountable funds,” DeConcini said. “At the same time, a company purchased a lot of airplanes that have been involved in the transport of some materials.” He appeared to be referring to Southern Air Transport, the Georgia company whose planes were supplying the contras.

Another member of the Senate Intelligence Committee, Sen. William S. Cohen (R-Me.), said it is possible that the money skimmed from the arms sales is still in a Swiss bank account, the records of which have not been available to congressional investigators.

“It’s possible that money is still in the account,” Cohen said. “It’s possible that middlemen skimmed a good portion of it off. It’s possible that the funds were converted from cash into kind--namely, types of weapons that could have been either transferred to the contras or equipment used (to get the arms to Central America), transportation or so forth.”

Limited Immunity Urged

Congressional investigators had hoped that they could find the answers they are seeking if North agreed to testify. Reagan has urged that North and Poindexter be offered limited immunity as an inducement to testify.

However, Meese indicated that even North may not be able to fill the gaps in the trail of funds, Brown said.

When Meese confronted the NSC aide, “Col. North could not give him the details of the amount of money that went into the various bank accounts that were involved, what happened to the money,” Brown said. “That is still a secret.”

Staff writers Tom Redburn and Sara Fritz contributed to this story.