THE TOWER COMMISSION REPORT : But Panel Can’t Account for $22.8 Million in Arms Deal : No Proof of Funds Diversion to Contras

Despite its intense investigation, the Tower Commission said Thursday that it was unable to prove that Reagan Administration officials had succeeded in their attempt to divert profits from the Iran arms sales to support Nicaraguan contras.

The panel determined for the first time, however, that $22.8 million from the secret arms sales is unaccounted for. In addition, the report shows that the transactions involved more than $64 million--and perhaps as much as $104 million--in weapons sales to Iran, far more than had been disclosed.

Although the commission found “considerable evidence” that the missing money went to the contras, it still had “no hard proof.”

No Conclusion Drawn

“There was no way we could conclude there was actually diversion of money to the contras,” former Republican Sen. John Tower of Texas, commission chairman, told reporters. “We can’t establish what happened to the money.”

The diversion of funds, which has been a central element of the spreading scandal, is potentially illegal because it would have occurred at a time when the United States was prohibited from providing military aid to the contras and because such a transfer apparently had no authorization.

Tower said the commission was “satisfied” that President Reagan had no knowledge of any diversion. But the report notes that Vice Adm. John M. Poindexter, as national security adviser, “knew that a diversion had occurred” and that his aide, Marine Lt. Col. Oliver L. North, had boasted that “the ayatollah is helping us with the contras.”

According to the report, tracing the money proved “extremely difficult” because key participants--including Poindexter and North--refused to talk to the commission. In addition, the commission was unable to examine records from Swiss bank accounts used in the transactions.

The Justice Department has made at least three requests to the Swiss government for information on Swiss bank accounts and transactions involving about 20 companies and individuals linked to the Iran-contras affair.

In December, Credit Suisse in Geneva, Switzerland’s third largest bank, agreed to freeze several accounts controlled by North or two close associates, retired Air Force Gen. Richard V. Secord and Iranian-born U.S. businessman Albert A. Hakim. But Swiss officials have said that lengthy legal appeals may prohibit release of the actual records for months, if not years.

Atty. Gen. Edwin Meese III announced in November that $10 million to $30 million raised from the Iran arms sales may have been diverted to the contras. Meese told the Tower Commission that Poindexter and North had told him that the diversion had occurred, but neither official could say how much money was involved.

Meese told the commission that, based on his interview with Poindexter, “Ollie North had given him (Poindexter) enough hints that he knew what was going on, but he didn’t want to look further into it.” But Meese said that Poindexter “in fact did generally know that money had gone to the contras as a result of the Iran shipment.”

Robert C. McFarlane, the former national security adviser who led an unsuccessful trip to Tehran to trade HAWK missile spare parts for hostages, informed the commission that North later told him “not to be too downhearted” because “this government” was using some of the arms profits in Central America.

Another witness, Assistant Defense Secretary Richard Armitage, said North told him last November, after the Iran arms sales had been disclosed, that “it’s going to be just fine . . . as soon as everyone knows that . . . the ayatollah is helping us with the contras.”

According to the commission, North prepared an unsigned memorandum on April 4, 1986, entitled, “Release of American Hostages in Beirut.” The memo, later found in North’s office, noted that $12 million in “residual” funds from the arms sales would “be used to purchase critically needed supplies for the Nicaraguan Democratic Resistance Forces.”

But the Tower Commission said there was “no evidence” that North ever showed the memo to other officials, adding that it was “unclear” whether North ever sought or won prior approval to divert money to the contras. And, because of conflicting accounts, the report said that it was “unclear” who first suggested diverting Iran arms profits to the contras.

The commission determined, however, that $22.8 million from five arms sales to Iran remains unaccounted for. The report said that this figure may include costs for the arms deals, including profits of up to 20% to 60% for several of the middlemen.

508 Missiles Transferred

In the first transaction, Israel transferred 508 TOW missiles to Iran in August and September of 1985. According to the report, Israel billed Iran about $3 million more than it later charged the Defense Department to replace the missiles. “Nothing is known by the board about the disposition of those funds,” the report notes.

In four subsequent transactions in 1986, the United States directly overcharged Iran about $19.8 million, the report adds. About $6.3 million is unaccounted for from a shipment of 1,000 TOWs in February, $8.5 million is unaccounted for from the transfer in May of more than 200 kinds of spare parts for HAWK missiles and $5 million remains unaccounted for from the sale of 500 TOWs and HAWK spare parts in October.

In each case, the money was deposited in a Swiss bank account at Credit Suisse held in the name of Lake Resources, a Panamanian shell company controlled by Secord.

All told, the commission found more than $64 million changed hands in the arms deals. The commission was unable to determine whether another $40 million, deposited by Iran in two Swiss banks in November, 1985, was also intended to purchase arms.

Iran’s need for TOW and Hawk missiles was widely known among those involved in international arms dealings, including Manucher Ghorbanifar, an Iranian businessman living in France, and Adnan Khashoggi, a Saudi businessman who the Tower Commission says maintained “a special relationship with key Israeli officials.”

Played Key Roles

Ghorbanifar and Khashoggi played pivotal roles in the arms deals--serving as intermediaries in dealings with the United States, Israel and Tehran--and were directly involved in the financing end of the operation, the report says.

According to flow charts of early arms transactions in the Tower report, Ghorbanifar would give Khashoggi a check from Iran that was postdated in case the deal fell through. Khashoggi would then deposit an equal amount of his own money into an account controlled by Israeli arms merchant Jacob Nimrodi. Nimrodi would then notify Israeli officials, who would deliver the American-made weapons to Iran and later turn to the United States for replacements.

Under this arrangement, middleman Khashoggi was able to convince all parties involved that they would not be cheated because only his money would be at risk if the deal collapsed.