The Iran Deception : REAGAN’S GREATEST CRISIS : CHAPTER 9 : The Money Winds Up With the Contras

After six years of magic, President Reagan broke the spell. By deceiving the nation, he and those around him badly damaged his presidency. This traumatic tale is still unfolding, with no end in sight. This is how it developed.

One of the early signs of trouble came in Central America.

On Oct. 5, 1986, Sandinista soldiers shot down an aging C-123K cargo plane filled with weapons for the contras. Three crew members died: Capt. William H. Cooper, Wallace Blaine (Buzz) Sawyer Jr. and an unidentified Nicaraguan. One man had parachuted to safety. Bewildered and bedraggled, the sole survivor was led away from the wreckage with a rope.

“My name is Eugene Hasenfus,” he declared at a crowded press conference in Managua two days later. In subsequent interviews, he described in all-too-credible detail what he and his colleagues had been doing.

On the day of Hasenfus’ press conference, there was another sign of trouble, although it was hidden from public view. Roy Furmark, a New York businessman and consultant to arms merchant Adnan Khashoggi, flew to Washington to keep an appointment with an old friend, Bill Casey.

Furmark, his thick, dark hair combed back and his goatee neatly trimmed, climbed the long gray stone steps of the Old Executive Office Building, where Casey, as CIA director, kept a hideaway office down the hall from Oliver North. A small brass plate with Casey’s name marked the huge oak doors. Inside, Casey greeted him warmly.

“Bill,” Furmark told him, “we need your help.”

Furmark’s connection to Casey was New York industrialist John M. Shaheen. A former Navy captain, Shaheen had worked for Casey during World War II when Casey headed secret intelligence in Europe for the Office of Strategic Services, forerunner of the CIA. Over the years, the two friends and staunch Republicans had kept in touch.

Shaheen had built an empire on oil. Furmark had joined him in 1966 as an accountant and soo rose to be Shaheen’s top lieutenant. Casey had occasionally provided them with legal advice.

Furmark, 55, gruff and burly, and Casey, 73, rumpled and abrupt, had much in common: both grew up in blue-collar sections of New York, Furmark in Brooklyn, Casey in Queens.

Furmark still lived in New York, in a high-rise cooperative apartment in wealthy Brooklyn Heights, an area with vintage New York views of the Statue of Liberty shimmering in the distance and the dazzle of lower Manhattan’s skyscrapers. His work as an energy consultant--”an oil and gas man,” one associate put it--took him from Dallas to Dubai.

Casey too had made a fortune in New York, as a tax lawyer and author of specialized manuals on tax, real estate and investment law. From these books, he once joked, he “earned more royalties than Ernest Hemingway.” He had joined the government under Richard M. Nixon in a series of posts that included the chairmanship of the Securities and Exchange Commission. Still, New York--especially a rambling Victorian house called “Mayknoll” on Long Island’s North Shore--was home for Casey too.

Now, in a 30-minute conversation--and over the course of two more meetings--Furmark told Casey about a problem that made the Hasenfus crash pale by comparison:

Two wealthy Canadians, he told his friend, had backed Khashoggi in the Iranian arms deal. The investors were now threatening to “blow the lid” off the secret arms shipments by suing both Khashoggi and the U.S. government to get their money back. Khashoggi had sent Furmark to Washington to run interference because he had known Casey so long.

According to Casey’s subsequent testimony before Congress, the conversations with Furmark provided the CIA director with his first hint that a money connection existed between the Iranian arms shipments and the contras-- a connection that was in danger of becoming public knowledge.

Furmark told Casey that a cigar-chomping Toronto real estate developer named Walter (Ernie) Miller and his associate, Donald Fraser, a secretive Toronto accountant and financier with homes in Monaco and the Cayman Islands, had become involved when Khashoggi needed help financing the aborted July and August Iranian arms shipments, which were financed as one.

“The Iranians would not pay for anything until they received it,” Furmark later explained. “The Americans would not ship anything until they were paid in advance. Someone had to have the courage to pay in advance for the goods, and Khashoggi had the courage to do that. So he provided the bridge financing.”

Actually, the Canadians helped Khashoggi get $10 million from a Cayman Islands bank, Furmark said, along with another $5 million from investors in Europe and the Middle East. On May 15 the $15 million was placed in an account at Switzerland’s third-largest bank, Credit Suisse in Geneva. The account was registered to Lake Resources Inc., a company apparently controlled by business partners Richard Secord and Albert Hakim.

The trouble apparently began when a hitch developed in the arms shipments; as Furmark described it, that left millions of the investors’ dollars tied down with no chance of repayment unless the deal came unsnagged.

“Eight million dollars was received” from Iran, Furmark said. “But the bulk of the shipment (from the United States) has yet to be made. And so that is what the problem is. If they (the Reagan Administration) would make the shipment to the Iranians, the Iranians would, upon inspection, pay into the account (the rest of the money), which would then repay the bridge financing which the Canadians were involved in.”

By Furmark’s account, Casey stared at him in amazement.

“Lake Resources is not one of our (CIA) accounts,” he said. “I don’t know whose it is. . . . Maybe it’s an Israeli operation. Maybe it’s across the street.” Casey picked up a telephone and called across the street to Poindexter in the White House. Poindexter was not in. Casey told Furmark he would look into it.

Furmark returned to Washington nine days later, on Oct. 16, 1986, to brief Casey’s aides. This time, the CIA chief invited him aboard a government jet. “He was going to New York,” Furmark said, “and he asked me if I wanted to hitch a ride with him and his wife.”

On the plane, Furmark pleaded for help again. “Why can’t someone make a partial arms shipment to show the business is still alive?” he said he asked. Casey replied that he would look into it.

Furmark relayed this to Khashoggi and Manucher Ghorbanifar, the Iranian arms dealer.

Five weeks later, Khashoggi sent Furmark back to Washington. On Tuesday, Nov. 24, a day before the contra connection became public, Furmark went to CIA headquarters in suburban Langley, Va.

“Ghorbanifar thinks some of the money may have gone to the contras, “ Furmark said he told Casey. “There’s roughly $15 million unaccounted for.”

Again, Casey called the White House. This time he asked for Chief of Staff Donald Regan. Again, he had no luck; Regan was not in. He tried Poindexter but could not reach him either. Finally he called North.

“There’s a guy here who says you owe him $10 million on the Iran thing,” Furmark recalled Casey telling North.

North and Casey chatted a while, Furmark said. Then, Furmark said, Casey hung up and told him: “North says the Israelis or the Iranians owe you the money.”

Furmark protested.

But complaints from middlemen were only one of the operation’s problems. The arms sales were still not achieving the release of all the American hostages in Lebanon.

In early November, well after the final Oct. 27 weapons shipment had arrived in Iran, North and Secord reportedly were in Beirut. Reagan was at his Santa Barbara ranch after a long campaign swing just before the Nov. 4 congressional elections. Poindexter was at a Santa Barbara hotel, monitoring the release efforts on a CIA radio channel. At midnight, he called Reagan. One hostage--David Jacobsen, the American University hospital director abducted 17 months earlier--was coming out.

Reagan still hoped for the freedom of two more captives: Terry Anderson, the Associated Press bureau chief, and Thomas Sutherland, the dean of agriculture at American University. The night dragged on. Finally, hopes shrank to the release of one more captive besides Jacobsen. At 4:30 a.m. on Nov. 2, Poindexter penned a draft statement for Reagan: “I am pleased to announce that two of the Americans held hostage in Beirut have been released . . . ,” it began.

The statement was never issued.

Jacobsen came out alone.