North Said He Told Reagan of Funds Transfer--Secord

Former White House aide Oliver L. North said he informed President Reagan several times that profits from U.S. arms sales to Iran were being funneled to Nicaragua’s contras during 1985 and 1986, retired Maj. Gen. Richard V. Secord testified Wednesday.

In his second day before Senate and House committees investigating the Iran-contra scandal, Secord also disclosed that the diversion of Iran arms sales profits to the contras had earlier roots than previously revealed. As early as November, 1985, he said, the contras received $800,000 from an Israeli weapons shipment to Iran.

But the 28-year Air Force veteran, who was recruited by North to operate the Iran arms sales and to supply weapons to the contras, insisted that the diversion of funds violated no law. He argued that profits from the Iran arms sales were not the property of the U.S. government, even though they came from the sale of American weapons taken from U.S. stocks with the approval of the President.

Congress Banned Aid

Congress had banned U.S. military aid to the contras for much of 1985 and 1986, and Reagan has repeatedly denied knowing that Iran arms profits were used to buy military hardware for the rebels.

White House spokesman Marlin Fitzwater, calling Secord’s testimony “hearsay,” reiterated Wednesday: “The President has said he was not aware and he was not aware.”

Secord admitted that he had no “direct, firsthand knowledge about what the President knew or didn’t know.” But he said he was led to believe on many occasions by both North and Rear Adm. John M. Poindexter, who as Reagan’s former national security adviser was North’s boss, that the President approved of his operation.

North’s Offhand Remark

“On a few occasions I heard Oliver North, in an offhand and I think humorous vein, remark that in some conversations with the President he had mentioned that it was very ironic that some of the ayatollah’s money was being used to support the contras,” Secord said.

He quickly added: “I did not take it as a joke.”

Secord also said he assumed his conversations about the operation with CIA Director William J. Casey were being relayed to the President. He added that Poindexter specifically told him in January, 1986, “that not only was he (Poindexter) pleased with the work that I had been doing but the President was as well.”

Neither North nor Poindexter has yet testified in the Iran-contra investigation, but the issue of Reagan’s knowledge will be the key question put to them when they appear before the congressional panel next month. Casey, who died Wednesday, was never asked publicly by Congress whether he had told the President about the diversion of funds.

Secord admitted that he never had talked personally to the President, even though he demanded an opportunity to do so last November when the diversion of funds was about to be made public by Atty. Gen. Edwin Meese III.

He also disclosed that he was present in a hotel room on Nov. 25 when North, who had just been fired by the White House, received farewell telephone calls from Reagan and Vice President George Bush.

Revenue for Rebels

There was no indication in Secord’s testimony that the Iran arms sales were conceived originally by the White House as a way to generate revenue for the Nicaraguan rebels, as some investigators have theorized. But Secord’s story suggested that U.S. officials were reluctant to break off dealings with Iran in part because money was going to the contras.

He recalled that his Iran-contra operation was in “some financial jeopardy” last May when a deal to ship spare parts to Tehran fell through after he had already spent much of the $15 million that he received from Iran. To his relief, the deal was later revived.

Secord confessed that he was under constant pressure from North to keep money flowing to the contras, even when he feared the donations might bankrupt the Swiss bank accounts that were used to transfer money from Iran to the contras.

‘Certain Amount of Tension’

“There was always a certain amount of tension on this subject,” he said. “We had to keep sufficient revenues in these accounts to stay fluid so that we could go on to the next operation. I was perfectly willing to send funds to the contra project from the surpluses . . . but never was I able to send as much as Ollie North thought we should.”

He told the committees that $3.5 million was contributed to the contras from profits generated by U.S. arms sales to Iran last year. And on top of that, he disclosed that an initial $800,000 diversion occurred at North’s urging in November, 1985, after a U.S.-authorized Israeli shipment to Iran.

Secord said North told him to give the contras what was left of $1 million that Israeli arms dealer Al Schwimmer had placed in his Swiss bank account to pay to transport the weapons by air to Iran. He said he had spent only $200,000 and thus still had $800,000, which Schwimmer did not ask to be returned to him.

“So Mr. Schwimmer made a ‘contra-bution,’ ” he joked. He added that Schwimmer was never told where the money was being sent.

Secord said that three subsequent arms transactions between Iran and the United States in 1986 generated a total surplus of about $14 million, much of which was used for purposes other than the contras. The financial arrangements of these three transactions were described by Secord this way:

--The Iranians paid $10 million for a shipment of 1,000 TOW anti-tank missiles in February, 1986. After paying expenses of $850,000 plus $3.7 million to the CIA for the weapons and $822,000 to replenish Israeli TOW stocks that had been used for an earlier shipment to Iran, Secord had a $4.6-million surplus--including $2 million invested in a certificate of deposit as insurance for the Israeli cargo plane that had carried the missiles to Iran.

--Secord received $15 million from the Iranians for two shipments of spare parts in May and at the same time got $1.5 million from Israel for replenishing its supply of TOW missiles. After paying $6.5 million to the U.S. government for the weapons and $1.7 million to cover expenses, he had $8.3 million left--including another $2 million invested in a second certificate of deposit to insure a second plane.

Shipped 500 Missiles

--The Iranians paid $3.6 million for a shipment of 500 TOW missiles in October, 1986, and Secord had about $1.3 million in surplus after covering $220,000 in expenses and paying $2 million to the U.S. government for the missiles.

Financial records obtained by the committee show that Secord made three cash disbursements--one of $5,000 and two of $3,000 each--to North in October, 1986.

It was the first suggestion that North had received any of the money. But Secord insisted that North merely gave it to Drug Enforcement Administration agents who were helping him determine the location of American hostages being held in Lebanon.

Under repeated questioning by House committee counsel John Nields, Secord clung to his contention that the money earned through arms sales to Iran was entirely his to dispose of and not the property of the U.S. government. The issue is important because direct U.S. military aid to the contras was prohibited during that period and the diversion of funds might be considered illegal if the money were viewed as government funds.

Neutrality Act Cited

Secord said he had received a legal opinion from a Washington law firm indicating that what he was doing in Central America was legal. He said he was particularly concerned about the Neutrality Act, which prohibits U.S. citizens from waging a private war against countries that, like Nicaragua, have diplomatic relations with the United States.

Copies of the legal opinion were distributed to those who worked for him in Central America. “I wanted to make sure that everybody knew that we were conducting a lawful operation and that we would have to assiduously comply with the law,” Secord said.

He insisted that no funds appropriated by Congress were spent to supply the contras and scoffed at the suggestion that the salaries of North and other government officials who helped him were appropriated funds covered by the ban on aid to the contras. He added that he often thought that U.S. officials were “drawing back” from his operation just to assure that they would not be accused of violating the law.

‘A Commercial Cutout’

While Secord worked closely with North, he said his role was that of “a commercial cutout”--similar to that of a government contractor who is permitted to make a profit and spend it as he pleases. At the same time, he stressed that he himself never profited personally from the deals, although his firm provided him with a $6,000-a-month salary.

In November of last year, when the Iran arms sales had become public but the contra diversion was still secret, Secord said North asked him to review a chronology of the arms sales that had been altered by North and other White House officials to conceal Reagan’s prior approval of Israeli arms sales to Iran in 1985.

McFarlane’s Draft

Secord said North told him that Robert C. McFarlane, who had resigned as Reagan’s national security adviser in December, 1985, had drafted that section of the chronology.

“And I said: ‘Fine. Thank you very much,’ ” Secord recalled. “ ‘I’ll get out of you guys’ hair. See you later.’ And I left.”

Manucher Ghorbanifar, an Iranian businessman who acted as a contact between U.S. and Iranian officials, frequently suggested in his negotiations with Reagan Administration officials that his country would be willing to intervene to free American hostages in Lebanon in exchange for the weapons.

Arms for Hostages

Secord insisted, however, that the arms sales were not initially intended to secure the release of Americans held hostage by Iranian-linked terrorists in Lebanon. Not until July 26, 1986, when Father Lawrence Jenco was freed and the United States responded by releasing a shipment of HAWK spare parts to Iran, was there a clear-cut arms-for-hostages deal, he said.

In fact, Secord said, he did not understand why McFarlane expected to obtain the release of American hostages when he went to Tehran at the request of the White House in May, 1986. McFarlane has indicated that he went expecting to win the release of all American hostages.

“As far as I know there was no Iranian agreement to produce all of the hostages at the meeting,” Secord said. “I don’t know how this expectation got into McFarlane’s head.”

Secord, who unlike Poindexter and Albert A. Hakim did not receive limited immunity from prosecution in exchange for his testimony, has only recently begun cooperating with congressional investigators.