CIA Effort to Bail Out Two North Associates Indicated

The Central Intelligence Agency secretly paid $1.2 million for a shipload of Soviet Bloc and Portuguese weapons last fall in an apparent effort to financially bail out two key associates of Marine Lt. Col. Oliver L. North in the Iran- contra affair, private and U.S. government sources said Friday.

The two North associates, California businessman Albert A. Hakim and retired Air Force Maj. Gen. Richard V. Secord, are believed to have purchased the weapons originally for delivery to Nicaragua’s anti-Sandinista rebels, but sources said the CIA stepped in to buy them when the costly arms deal went sour.

Secord and Hakim paid $2.2 million to buy the 358 tons of assault rifles, hand grenades and other munitions in Poland and Portugal, sources said. But the two found themselves stuck with the weapons when unforeseen circumstances spoiled the plan for selling them to the contras.

Even with the $1.2 million from the CIA, Hakim and Secord may have lost $1 million on the deal, some sources said.

But other sources said it is not clear whether Secord and Hakim risked their own money in the venture or drew on other resources, such as the $10-million gift solicited from the Sultan of Brunei and the millions of dollars from the Iran arms sales that North had placed in Swiss bank accounts that summer.

Should it prove true that these funds were used, it would imply that the CIA spent $1.2 million in U.S. government funds to acquire arms that had already been paid for with $2.2 million in funds raised by North and other Reagan Administration officials as part of the Iran-contra dealings.

CIA spokesman George Lauder had no comment on the report.

Lawrence E. Walsh, the independent counsel investigating the Iran arms sales and the skimming of profits for the contras, is collecting data on the transaction.

More generally, Walsh is also reportedly looking into Hakim’s purchase of a Danish ship, the Erria, which was used to pick up the weapons in Poland and Portugal and to run other covert missions for North when North served on the staff of the White House National Security Council.

CIA Legally Buys Arms

The CIA’s arms purchase, completed last October only weeks before the Iran-contra scandal erupted, does not on its face violate the law. The agency can legally buy arms on the world market, and Congress funds covert CIA arms pipelines to Afghanistan and Angola, among other locales.

But the intelligence agency has long had a system for purchasing such arms--including East Bloc weapons--through established channels, rather than in one-time purchases such as this.

Thus the deal raises questions about the U.S. government’s involvement in North’s activities and tangled finances. Among them are whether the Secord-Hakim transaction involved Iran arms sale profits, whether anyone raised red flags about North’s role in the sale and whether anyone profited from the CIA’s $1.2-million buy.

The sale took place at a time when North and his boss, former National Security Adviser John M. Poindexter, were pressuring CIA Director William J. Casey to “make things right” for Secord. Poindexter, who resigned last November on the same day that North was fired, used those words in a memorandum about another apparent arms-transport contract that Secord was to receive.

Senator Evaluates Memo

Senate Intelligence Committee vice chairman William S. Cohen (R-Me.) told The Times on Thursday that Poindexter’s note indicates Casey was being asked to arrange the deal in such a way that the CIA could “get Secord involved and help (him) to make a profit.”

The Wall Street Journal, quoting anonymous sources, reported on Friday that North had personally urged Casey to purchase the arms from Secord and Hakim.

One informed source, without identifying the U.S. officials who personally sealed the transaction, said these officials appeared unaware of the role of Secord and Hakim as sellers and were “shocked” to learn of it. “They are scared that it will get out where they obtained this cargo,” he said.

The source did not know whether high-ranking U.S. officials knew details of the deal.

High-Level Approval

A second source said the sudden arms purchase almost certainly would have required high-level approval within the CIA, where North’s use of the Erria and his association with Secord and Hakim was widely known.

Secord and Hakim were North’s eyes and ears for some of his most daring ventures: marshaling private support for the contras and conducting the arms-for-hostages negotiations with Iran. Hakim arranged financing for both projects, and Secord oversaw transportation and other logistics.

U.S. and European sources, who refused to be named, said the CIA arms purchase appears to have sprung from a failed plan to sell arms to the United States for delivery to the contras.

Energy Resources International, a Panamanian company controlled by Hakim and Secord, spent $2.2 million last summer to purchase 358 tons of munitions in Poland and Portugal. The arms were loaded onto the Erria, which Hakim had purchased last April.

Delay Affects Plan

But the plan appears to have collapsed when Congress delayed passage of legislation last summer to appropriate $100 million in military and non-military aid for the contras. The delay apparently left Energy Resources without a ready buyer for the cargo.

“I think they took the cargo based on speculation . . . ,” one source said. “They thought the bill would come through in June or July, but Congress didn’t approve it so fast.”

In Washington, filibusters delayed approval of the aid package until October. But by September, the Erria had been idling off the coast of Portugal for several weeks, drawing the suspicions of authorities and placing Hakim and Secord under pressure to move the arms.

On Sept. 13, the Erria docked in Cherbourg, France, and transferred its cargo to a second ship. That vessel, the Iceland Saga, crossed the Atlantic to a Defense Department munitions depot near Wilmington, N.C., where the arms were unloaded last Oct. 8 and 9.

Records List Owner

U.S. Customs and Wilmington port records list the apparent owner of the cargo at that time as a firm variously called Overseas Trading Co. or Overseas Consulting, believed by U.S. government and European shipping sources to be a CIA front.

One source said an Overseas representative, whom he described as a “first-class” U.S. Army general, inspected the arms in France and authorized the payment of $1.2 million for them. He said the payment came from a Swiss bank account used by the CIA for covert arms purchases.

That source said flatly Thursday that the deal lost money for Energy Resources. “Hakim lost $1 million,” he said. “He had to get rid of the cargo.”

What the CIA got for its money, according to port records and knowledgeable sources, was 210 tons of Portuguese land mines, submachine gun ammunition and bullets for Soviet AK-47 rifles and another 158 tons of AK-47s and other East Bloc arms from Poland.

Shows Paper Loss

On paper, the gap between Energy Resources’ reported $2.2-million purchase price and the $1.2-million CIA sale price indicates that Hakim and Secord indeed lost money.

Other factors surrounding the deal cast some doubt on that conclusion.

The Senate Intelligence Committee report on the Iran arms affair released last month suggests that North and Poindexter lobbied CIA director Casey to reward Secord with profitable arms deals, apparently in return for his aid to North.

Last Sept. 13, as the Erria docked in Cherbourg, Poindexter dispatched a memo to North instructing him to keep the pressure on “Bill . . . to make things right for Secord,” according to the committee’s report.

A second memo cited in the report indicated that Poindexter had talked with Casey that same day about Secord. And a third note made it clear that North and Poindexter supported a move to give Secord another secret contract--to ship captured Soviet weapons from Israel to the contras.

Deal Discussed With Reagan

Poindexter also had discussed this arms delivery with President Reagan in advance of a Sept. 15 meeting with Israeli Prime Minister Shimon Peres, but it is not clear whether the Secord contract was raised in that session. The Soviet arms apparently were never shipped and Secord never received the contract.

So far as the 358 tons of Polish and Portugese armaments are concerned, some factors--including the fact that North controlled the Erria’s operations--suggest that instead of risking their own money in the $2.2 million purchase, Secord and Hakim may have used funds drawn from Swiss bank accounts under North’s control.

Hakim consistently refused to tell others where he got the $2.2 million used for the initial arms purchases in Szczecin, Poland, and Setubal, Portugal, one knowledgeable source said. “That’s one thing he would never discuss.”

Firm Arranges Bank Drafts

It is known that Hakim bought the Erria with Swiss bank drafts arranged by the Geneva firm Compagnie des Services Fiduciaires, which played a central role in processing payments for the secret sales of U.S. weapons to Iran and the reported later diversions of money to the contras.

Tom Parlow, a Danish shipping official who won a court order seizing the Erria for unpaid debts, told The Times last week that he believes the Swiss government has frozen accounts used to finance the vessel’s North-inspired adventures.

Asked about CSF’s role in financing the ship’s operations, CSF President Jean de Senarclens said Thursday in Geneva: “You know more than I do.”

William C. Rempel reported from Geneva and Michael Wines reported from Washington. Staff writer Richard E. Meyer also contributed to this story from Setubal, Portugal, and staff writer Sara Fritz contributed from Washington.