Iran-Contra Affair: How It Began and Fell Apart : Obscure Day in November, 1984, Offers Congress Place to Start Tracing Plot

Nov. 19, 1984. The day’s news was sensational: a natural gas explosion that killed more than 250 in a Mexico City shanty town; a meeting between Libyan strongman Moammar Kadafi and terrorist Abu Nidal; the bombing of an abortion clinic in Washington.

Nobody noticed what happened in Hamburg, West Germany. It was there that two retired spies--one American, one Iranian, chatted fatefully about American hostages in Lebanon.

Forty-two months later, no one yet knows with assurance whether that actually was when and how the Iran- contra affair began. The scandal has grown as sprawling as any in U.S. political history. To most, it is even more confusing.

Today, Congress and the public will begin a summer-long effort to unravel the Administration’s secret military aid programs to Iran and to contra rebels in Nicaragua.

Scandal’s Strands Converge

But Nov. 19, 1984, is as good a place as any to start tracing the threads. The scandal’s strands--terrorism, Middle East politics, Central American revolution--converged then. So did many of the government officials and businessmen later identified as key figures in the affair.

--Oliver L. North, the counterterrorism expert at the White House National Security Council, was embarking on an important new task. Congress had banned further U.S. aid to the contras, and North was charged by his boss, Robert C. McFarlane, with keeping the contra army alive until U.S. aid could be restored.

North “was the focal point for the Administration on Central American policy during that time frame,” a top CIA official told the presidential commission headed by former Sen. John Tower (R-Tex.) last winter.

--McFarlane, as President Reagan’s national security adviser, had another headache. That summer, he had asked the CIA for a hard look at the internal political situation in Iran, deemed a strategic nation because of its size, wealth and location between the Soviet Union and Middle East oil fields.

In October, the agency returned a bleak prognosis: When the Ayatollah Ruhollah Khomeini died, a Marxist government would probably assume power in Iran. The United States appeared powerless to influence political events there.

--The previous March, William F. Buckley, the CIA station chief in Beirut, had been kidnaped by pro-Iranian terrorists. The agency was frantic to retrieve him.

Buckley’s capture began tightening the political and emotional screws on Reagan. Cable News Network reporter Jeremy Levin had been kidnaped in Beirut days before, and six more Americans would be taken hostage by the following June.

Into that cast of players stepped a catalyst on that Nov. 19.

He was Manucher Ghorbanifar, once an official of SAVAK, the secret police of Shah Mohammed Reza Pahlavi and now an arms broker and deal-maker passing through Hamburg. He was introduced to ex-CIA officer Theodore Shackley, a consultant and friend of NSC and Pentagon officials who would later surface in the Iran affair.

‘Fantastic’ Contacts

Shackley later told the White House that Ghorbanifar had “fantastic” contacts inside Khomeini’s Iran. He said that Ghorbanifar might be able to free hostages held by pro-Khomeini forces and help repair relations with the regime or its successor. The State Department, told of the news, played down Ghorbanifar’s usefulness; the CIA called him unreliable.

But for much of the next two years, the unreliable Iranian would be the sole channel for U.S. overtures to the ayatollah. Ultimately, he would also be a key to the apparent diversion of millions in Iranian weapons payments to the contras.

His closest counterpart in the United States was North.

From wherever his White House approval came, the charismatic marine, armed with a dual mandate to battle terrorists and Central American communists, was increasingly valuable. At the end, he would be indispensable. Not even John M. Poindexter, who succeeded McFarlane as national security adviser in December, 1985, could follow instinct and dismiss him.

Contra Pipeline Threatened

Congress’ October, 1984, ban on U.S. aid to the contras threatened to wipe out a CIA-controlled supply pipeline for the contras that had been in operation since December, 1981. But there was disagreement over whether the ban, which covered U.S. agencies involved in defense or intelligence, covered the NSC, a part of the White House.

The NSC’s North is reported to have drafted a plan in the spring of 1984 to fund the rebel army privately. Whether the plan was ever implemented, a private network began to emerge that summer, run by ex-CIA and Pentagon officers, some with links to North.

That July, a suburban Washington company bought a Maule short-takeoff-and-landing airplane that soon would be in contra hands. The firm was run by ex-Air Force officials Richard B. Gadd, a private adviser on covert operations for a secret Pentagon intelligence unit, and Richard V. Secord, a private consultant and arms dealer and a retired Air Force general. Both Gadd and Secord would become key operatives in North’s contra-supply operation.

$32 Million From Saudis

North, meanwhile, was raising money. At his urging, one source told The Times, McFarlane persuaded the Saudi royal family to secretly funnel $32 million to private contra bank accounts in the Cayman Islands and elsewhere.

Retired Army Gen. John K. Singlaub raised some $10 million from Taiwan and South Korea. Right-wing activist Carl R. (Spitz) Channell, using a tax-exempt political foundation, raised millions more from conservative Americans.

In January, 1985, ex-CIA agent Felix Rodriguez met with Vice President George Bush, a former CIA director, to offer his services as a military adviser in El Salvador. Rodriguez went there that spring and wound up working for North. Bush and his aides deny knowledge of Rodriguez’s work for North and no evidence to the contrary has surfaced.

Rodriguez was one of a growing army of U.S. workers for the contras that spring, making weapons drops, supplying intelligence data and offering military advice and training to the rebel army. North-run dummy firms sprang up to support them: Udall Research Corp., a Panamanian financier of airstrips and war planes; Lake Resources, a front for an all-purpose Swiss bank account; Albon Values Corp. and Dolmy Business Inc., owners of planes and ships.

Flights to Supply Points

Energy Resources International, a firm apparently owned by Secord and Iranian-American financier Albert A. Hakim, bought and delivered nearly a dozen arms shipments to the contras in 1985 and 1986. Southern Air Transport, a military-transport airline sometimes used by Secord and Gadd, made increasingly frequent flights to contra supply points in Honduras, El Salvador and even Nicaragua itself.

When Ghorbanifar’s Iran overtures began to bear fruit that summer, the covert operations network vital to a successful hostage-ransom program did not have to be assembled. It was up and running in Switzerland and Central America and North controlled it.

The White House had mulled over its Iran options all spring, writing policy papers that raised and rejected the idea of courting the ayatollah with badly needed supplies for his war with Iraq. On one such paper, Defense Secretary Caspar W. Weinberger scrawled the word “absurd.”

Casey Likes Plan

But McFarlane and CIA Director William J. Casey liked the idea. So did Israel, which saw strategic value in a war that kept two Mideast enemies occupied and created a market for Israeli weapons as well. That summer, working through McFarlane and NSC consultant Michael A. Ledeen, a strong Israeli supporter, Jerusalem offered its services as a secret go-between in trial arms shipments to Tehran.

In August, 1985, the White House agreed to one shipment of spare U.S. weapons from Israeli stocks--a scheme that allowed the Americans to say truthfully that they had shipped no weapons to Khomeini.

A planeload of TOW anti-tank missiles touched down in Iran in early September. Hours later, hostage Benjamin Weir came out of Lebanon.

A bitter, faithless and only occasionally successful series of arms-for-hostage swaps would continue, off and on, for more than a year. The President would give the CIA official responsibility for the swaps in January, 1986, dropping the fiction that the shipments were Israeli rather than American. But North remained the day-to-day manager, and he relied on his own network of trusted aides.

Division of Labor

Secord and Southern Air Transport handled much of the logistics and secret weapons deliveries. Hakim and Lake Resources managed cash flow. A third shadowy figure--ex-CIA official, arms dealer and Hakim associate Thomas C. Clines--came aboard to run hostage-release matters and other operations, such as a 1986 plan to broadcast propaganda to Libya from North’s ship, the Erria.

Ghorbanifar and billionaire arms dealer Adnan Khashoggi, a business associate of convenience, brokered the deals, with Khashoggi putting up his own earnest money until arms were delivered or hostages released.

All told, the Iranians netted more than 2,000 TOW missiles, radar repair kits for antiaircraft missile batteries guarding key oil terminals and top-secret intelligence on Iraq’s military.

The United States secured the freedom of three Americans held hostage in Lebanon: Weir, the Rev. Lawrence M. Jenco and David P. Jacobsen.

One more party gained as well: The Nicaraguan rebels netted millions of dollars for their privately financed war, which by mid-1986 was desperately short of cash. Iran was overcharged for shipments of U.S. arms. In theory, when Iran paid up, the Pentagon was reimbursed for the weapons’ true cost, and the extra millions were sent to the rebels.

Financial Backers Complain

In practice, Iran balked at the overcharges. The middlemen who pledged their money as security--Khashoggi and his financial backers--were left the losers. By last autumn, they were complaining bitterly to CIA Director Casey, threatening to expose the secret swaps unless they were paid off.

The threats came too late. Already linked by blood and money, the Iran and contra operations collapsed simultaneously of their own weight.

On Oct. 6, 1986, as North was in Germany negotiating the final arms-for-hostage swap, Robert M. Gates, Casey’s top aide, was telling his boss of growing suspicions that millions from the arms sales had been funneled to the contras.

At the same time, Rodriguez called a Bush aide with word that a secret contra-supply plane had been shot down inside Nicaragua. Eugene Hasenfus, sole survivor of the crash, exposed enough of the supply network under Nicaraguan pressure to forever blow its cover.

Leaflets Expose Swap

Inside Iran, a militant faction opposed to the U.S. overtures circulated leaflets that week exposing the arms-for-hostages swap. The allegations found their way to an obscure Syrian newspaper, then to a Lebanese magazine, then to the world press.

It rapidly became apparent that Reagan either was lying or was ignorant of the dimensions of his Administration’s most sensitive foreign policy secret. The President assured the public that arms had not been swapped for hostages, that less than a planeload of arms went to Iran anyway, and that the arms had no strategic value--all statements that would prove to have been false or misleading.

As he spoke, some of his senior aides were working to destroy evidence of political or legal misdeeds.

White House Chief of Staff Donald T. Regan ordered an official chronology of the Iran affair. North, McFarlane and others wrote a history that omitted word of the diverted millions and pretended that Reagan had never approved the initial arms shipments.

Poindexter blandly reported the doctored history to the press and to the House and Senate intelligence panels in mid-November. A few yards from his office, North and a secretary were shredding stacks of papers on the Iran and contra affairs and rewriting NSC files to disguise key parts of the rebel operation.

North Asks for Time

Atty. Gen. Edwin Meese III, a former criminal prosecutor, also would draw criticism. He set up an interview with North but did not secure potential evidence, which North proceeded to destroy. He delayed the interview when North asked for time to attend church; instead, North met secretly with McFarlane and Secord’s lawyer.

Days before summoning the FBI into the case, the attorney general met privately with Poindexter and several times with Casey. No notes were taken, and Meese’s recall of some sessions is unclear. He later said that he suspected no criminal wrongdoing at the time.

Meese quickly uncovered, and then made public, evidence that North had diverted money from the arms sales to the contras. That boosted the scandal from a widely judged case of political and legal idiocy to something else, potentially much more serious.

That is how it began. Beginning today, the nation may learn how it ends.