Reagan Held Informed of Contra Aid Strategy : Senate Committee Releases Report That Finds No Evidence President Knew of Funds Diversion

President Reagan was briefed several times last year on the efforts of Administration officials to skirt a congressional ban by seeking indirect aid for Nicaragua’s contra s, according to a report released by the Senate Intelligence Committee Thursday.

Included in the presidential briefings were Israel’s offer to supply Soviet-made weapons to the rebels and Brunei’s contribution of $10 million, the report said.

The committee said it found no evidence, however, that the President was ever informed before last November that profits from Iranian arms sales were being diverted to the contras.

The long-awaited 65-page report, which sums up results of the committee’s relatively brief investigation into the Iran-contra affair, acknowledges that a host of major questions remains to be answered--including such basic facts as how much money was involved. And it draws no conclusions about whether Reagan or his staff violated any laws.

Moreover, the report makes clear that the Intelligence Committee was unable to determine whether the anti-Sandinista rebels actually received any of the money from the Iranian arms sales--as Atty. Gen. Edwin Meese III reported last November.

In large part, the report’s limits reflect the fact that, although the committee heard three weeks of testimony late last year from many U.S. officials involved in the affair, it got no information from three key witnesses who refused to testify, invoking the Fifth Amendment right not to incriminate themselves. The three are former White House aides John M. Poindexter, Oliver L. North and retired Air Force Maj. Gen. Richard V. Secord.

Nevertheless, the report provides new insight into the President’s direct knowledge of the efforts by top Administration officials to obtain outside assistance for the contras at a time when direct U.S. military aid was prohibited by Congress and humanitarian aid to them was limited to $27 million. It cites at least three occasions on which Reagan was briefed directly by his staff on the funding effort.

Aid to the contras from sources outside the U.S. government was not covered by the congressional ban then in force and Reagan publicly supported private assistance for the rebels in Nicaragua. But Administration critics have argued that it was improper for Administration officials to become directly involved in soliciting and arranging for such indirect aid--especially from foreign governments.

In addition to portraying the extent of Reagan’s direct knowledge of these activities, the report sheds new light on the apparent shortcomings of the investigation conducted last November by Meese after he initially learned that some profits from the Iranian arms sales had been diverted to the contras.

The report suggests that Meese’s techniques were unusually informal and that he even allowed North to meet with others involved in the scheme before being questioned at the Justice Department.

Suggests Israeli Role

It is also clear from the report that the Iranian arms sales and contra funding were being run out of the White House on parallel tracks. And it strongly suggests that the Israeli government played an early role in the development of the idea of diverting arms sales profits to the contras, as well as of the sales themselves.

Among the details that emerged from the committee’s report:

--As early as Nov. 22, 1985, North acknowledged in a White House memo that he and Secord, a private citizen, already were involved in an enterprise that he described as “our Swiss Company,” Lake Resources Inc., that was preparing to move arms from Europe to the contras. The memo suggested that the firm’s first contra supply flight could be delayed to use the same plane to carry weapons to Iran.

It was not previously known that the White House-directed effort to supply the contras was already under way in 1985.

--At the time of the first known discussion between North and Israeli emissary Amiram Nir about the diversion of funds--in January, 1986--it is believed that the Israelis already were holding funds for that purpose from a November, 1985, shipment of Hawk anti-aircraft missiles to Iran. This adds to the accumulation of evidence suggesting that Israel played an early role in the development of the diversion plan.

--Secord’s business partner, Albert A. Hakim, is reported to have told the Iranians in early 1986 that to foster a relationship with the United States they should make a “contribution” for use by the contras beyond the purchase price of the weapons. There has been no previous evidence the Iranians were aware that some of the money from the arms transactions was to be skimmed for the Nicaraguan resistance.

Funneled Through Banks

--The CIA determined that the contras did not receive any large amounts of cash during the period when North apparently was diverting funds. It concluded that private funding for the Nicaraguan resistance generally was funneled through offshore bank accounts in the Cayman Islands and Panama controlled by contra leader Adolfo Calero.

--Manucher Ghorbanifar, the Iranian middleman in the arms deal who was described by the CIA as a known “fabricator,” is reported to have offered to provide intelligence on Iran to an unnamed third country if that country would allow a continuation of what the report characterized as “the drug-smuggling activities of Ghorbanifar associates.”

The report, which was approved by the committee by a vote of 14 to 1, indicates that North had told others he had high-level approval to divert profits from the Iranian arms sales to the contras. But North did not specify that the scheme was approved by the President and on one occasion said that he did not know who was involved beyond his boss, then-National Security Adviser Poindexter.

The President’s knowledge of other White House-orchestrated contra supply efforts was clearly documented in the report, however.

On May 15--the same day the White House was preparing materials for former National Security Adviser Robert C. McFarlane to take to Tehran for arms-and-hostages negotiations--the report indicates that Poindexter informed the President that the contras would soon be running out of money. Among the suggestions he made was that Reagan appeal directly to other heads of state to help the Nicaraguan resistance.

Third Countries Approached

On the following day, it said, the President presided over a meeting with his top advisers to discuss the solicitation of funds from other governments. According to documents obtained by the committee, the Administration officials decided at that meeting that money would be sought from third countries. Secretary of State George P. Shultz was instructed to draw up a list of countries to be approached.

In addition to seeking outside aid for the contras, the officials decided to ask permission from Congress to borrow from other programs for the contras, the committee report said.

It had been disclosed before the report that Assistant Secretary of State Elliott Abrams later convinced the sultan of oil-rich Brunei to contribute $10 million to the contras, ostensibly for “humanitarian” purposes.

Senate Intelligence Committee testimony described in the report shows that another country--which is understood to be Saudi Arabia--contributed about $30 million.

Likewise, the President was briefed in advance of his meeting with Israeli Prime Minister Shimon Peres on Sept. 15 that Israeli Defense Minister Yitzhak Rabin had offered to contribute “a significant quantity of captured Soviet-bloc arms” to the contras. A memo prepared by North for Poindexter said that the arms were to be picked up by a foreign-flag vessel that same week and delivered to the contras.

Told to ‘Say Thanks’

White House Chief of Staff Donald T. Regan told the committee that, although the subject of the Israeli arms shipment was not expected to be raised by Peres, the President was advised to “just say thanks” if the matter happened to come up in the discussion, the report said.

While it is not known whether Peres and Reagan discussed the offer, Poindexter apparently told North in a note two days before the meeting to “go ahead and make it happen” as a “private deal between Dick (Secord) and Rabin that we bless.”

The same note instructed North to put pressure on CIA Director William J. Casey “to make things right” for Secord.

The report gives a tangled account of how word of the cash-skimming operation surfaced, then spread through the White House and CIA as the Iran scandal broke in early November.

CIA director Casey had heard talk of a diversion of Iran arms money since early October, and the agency had “fairly significant” information on the diversion by early November, one official testified. The CIA’s comptroller learned of the possible diversion on Nov. 18 or 19.

Advised Poindexter

Poindexter, according to the report, was advised by CIA officials in mid-October that he should prepare a comprehensive statement about the diversion and “think seriously about having the President lay the project before the American public to avoid having it leak in dribs and drabs.”

Nevertheless, the subject was not included in papers prepared for Casey’s secret testimony to congressional intelligence committees last Nov. 21. Nor did Poindexter tell the intelligence committees of the diversion in his own briefings the same day, although he had known of the cash-skimming for some time.

Notes from Meese’s initial inquiry show that Shultz visited the White House the evening of Nov. 20 and told Reagan that parts of a 17-page summary prepared by the National Security Council “would not stand up to scrutiny.” Reagan’s response was not given in the report, but Meese testified that the next day Reagan asked him to “pull the facts together so they could have a complete account.”

That order would trigger the first inquiry into the Iran-contras affair. On Nov. 22, Justice Department aides uncovered documents in “NSC files at the White House” which discussed the diversion of Iran arms money to the contras.

At 11 a.m. on Monday, Nov. 24, Meese testified, he told the President and Regan that “money from Iranian arms transactions may have gone to the Nicaraguan resistance,” and that North had admitted to the diversion. Meese said the President “looked shocked and very surprised, as did Regan, who uttered an expletive.”

While the report catalogues numerous inconsistencies in testimony--particularly between McFarlane and Regan--it does little to resolve them. Starting with their recollections of the earliest stages of the deal, the two men offered the committee vastly different accounts, particularly of the President’s knowledge or involvement in the operation.

1985 Missile Delivery

One example is on the crucial issue of whether the President knew and approved of Israel’s August, 1985, delivery of 508 TOW anti-tank missiles to Iran. Many have argued that this sale was illegal, because it occurred four months before Reagan gave written approval to the operation.

The report said Regan told the panel that McFarlane had professed ignorance of that first shipment until after the fact.

“Regan testified that McFarlane told the President--in his presence--that the Israelis, ‘damn them,’ had sold 500 TOWS to the Iranians without U.S. knowledge,” the report said. “Regan further testified that he, the President, McFarlane and Poindexter decided to ‘ignore’ the incident except to ‘let the Israelis know of our displeasure’ and ‘keep the channel open.’ ”

On the other hand, the report said, McFarlane claimed that he had the President’s oral permission to allow the deal to proceed. It said that he “disputed Regan’s characterization of his reaction to the TOW shipment and denied that the President had ever expressed disapproval of the Israeli actions . . . and denied that the President had ever instructed him to reproach the Israelis.”

The report described intense efforts in March, April and May of last year to obtain release of U.S. hostages by selling arms to Iran. These efforts led to McFarlane’s mission to Tehran in late May, although no hostages were released.

In key meetings April 3 and 4, U.S. officials met with arms merchant Ghorbanifar in Washington to discuss terms of a deal. There are indications that the subject of diverting arms sale profits to the Nicaraguan contras arose at these meetings. Two memos indicated that Ghorbanifar discussed using the profits to support contras and “Afghan rebels, etc.”

A memo by North summarizing the meetings, dated April 4, also said that $12 million of the arms sale proceeds “will be used to purchase critically needed supplies for the Nicaraguan Democratic Resistance Forces.”