Low Iran Arms Price Called Honest Error

The Pentagon committed “an honest mistake” when it undercharged the CIA by $2.5 million for 2,008 TOW anti-tank missiles later shipped to Iran as part of the Reagan Administration’s secret arms deal, the Army inspector general concluded Friday.

Pentagon spokesman Robert B. Sims said that the finding refutes charges by some members of Congress that the undercharging was a deliberate attempt to get around a law requiring that Congress be notified of arms shipments worth more than $14 million.

Defense personnel who drew up the billing documents “didn’t know whether the missiles were going to a foreign country or when or what,” Sims said after releasing a statement on results of the inspector general’s investigation.

Weinberger Ordered Probe

The arms were sent to Iran in an effort to obtain the freedom of U.S. hostages in Lebanon and to improve relations with moderates in the Iranian government, according to President Reagan’s order authorizing the shipments. Questions about the pricing of the weapons arose when congressional investigators began tracing the financing of the arms deal, and Defense Secretary Caspar W. Weinberger ordered an inquiry.

The inspector general’s statement said that the Pentagon should have charged the CIA, which arranged for the shipments’ delivery, $9.9 million instead of $7.4 million for the TOW missiles, the investigation found. Two different models of the missile were involved in the sale, and the Army inadvertently applied the price of the cheaper model to the entire transaction, the statement said.

A corrected bill is being sent to the CIA, the statement added.

Spare Missile Parts

A related shipment of spare parts for the Hawk missile system was correctly priced at $4.3 million, according to the statement. Thus, the combined shipments of TOW missiles and Hawk missile parts should have been transferred to the CIA for $14.2 million instead of the original billing of $11.7 million.

Some members of Congress have suggested that the arms were underpriced in a deliberate attempt to circumvent the Arms Export Control Act, which requires notification of Congress of arms shipments in excess of $14 million.

“Nothing has been found to show that the error was anything but an honest mistake,” the Pentagon statement said. “We think it was an honest error by people who furnished pricing data before it was realized that it would be necessary to use two different TOW models, because we had insufficient stock of the lower-priced TOW.”

No Disciplinary Action

The statement said that, because of the complexity of the process, officials were “not prepared to affix responsibility to any single individual or section.” It added that “no disciplinary action has been taken nor is indicated, to date.”

In the transaction, the price of the weapons was subsequently hiked by middlemen, investigations have indicated. Some of the profits apparently were diverted secretly to aid rebels fighting the Sandinista government in Nicaragua.

Sims said that 1,508 TOW missiles priced at $3,494 apiece had been transferred to the CIA in addition to 500 updated models that should have been priced at $8,070 apiece but, instead, carried the lower price tag in the original billing. The undercharge was magnified, he said, by a failure to levy a standard fee for packing, crating and handling services. The fee was $627,729 and will be included in the corrected bill, he said.