Use of Iran Funds for Arms Scheme Alleged

Retired Maj. Gen. Richard V. Secord and his partner, working with a shadowy former Army colonel who later helped them sell arms to the CIA, last year tapped an Iran- contra bank account in Switzerland to invest at least $60,000 in a venture to sell submachine guns to the contras and others, reliable sources said Friday.

The gun venture, which at one time anticipated a $1-million profit, was among $350,000 in business spinoffs that Secord and his partner, Albert A. Hakim, planned to finance with seed money from the Iran-contra operations, Secord indicated to the House and Senate panels investigating the scandal.

Jointly Controlled Accounts

Secord and Hakim jointly controlled Swiss bank accounts that financed the secret sales of weapons to Nicaragua’s contra rebels and the Iranian government in 1985 and 1986.

In testimony Friday, Secord said the two men considered using the Swiss money for investments in timber, pharmaceuticals, cattle feed and wheat byproducts. The men sank $50,000 into a cattle feed company, but whether money was placed in the other ventures was not made clear.

Secord called the ventures “normal” U.S. businesses aimed at making profits for their owners. But most or all of the ventures failed or were scrapped before investments were made.

He said Hakim put up the $350,000, although he insisted that none of it came from profits from the Iran arms sales. Instead, he contended, Hakim used a “profit account” that held money he had earned on 1985 and 1986 arms sales to Nicaragua rebels. To a large extent, however, revenue from Iran and contra arms sales were commingled.

Secord said his own contribution to the ventures was to have been as a marketing expert.

Some lawmakers greeted the explanations with sarcasm and disbelief.

“You’ve wrapped yourself and these activities in the American flag in an attempt to justify what you have done,” Sen. Paul S. Trible Jr. (R-Va.) lectured Secord. “Many people on this committee find it hard to believe that a man who prides himself so much on being in command . . . could know so little.”

‘Out-and-Out’ Profiteers

Trible called Hakim and other associates in the Iran-contra scandal “out-and-out profiteers and worse” and said that Secord has tarred his reputation by working with them.

The weapons investment joined Secord, Hakim and a third private investor in a longstanding proposal by retired Army Col. James P. Atwood to make and sell lightweight SM-90 submachine guns. Atwood’s Savannah, Ga., firm, Combat Military Ordnance Ltd., held federal manufacturing and export licenses for submachine guns.

The hand-held SM-90 is a popular weapon among arms smugglers and drug runners, according to federal law enforcement sources. At one point in 1985, before Secord and Hakim became involved, Combat Military Ordnance hoped to produce 500,000 of the pistol-sized weapons annually.

In testimony Thursday, Secord said the two men did not intend to sell the submachine guns to the Nicaraguan rebels. “No military outfit would ever use them,” he said. “They’re too cheap.”

But marketing proposals for the venture, released Friday by the Iran-contra panels, stated that investors planned to sell the guns to the contras as well as to Saudi Arabia and other Persian Gulf states.

$1-Million Profit Seen

A marketing consultant estimated that the investors could reap a $1-million profit in their first year of operation.

Bank documents cited by the Iran-contra panels show that Hakim transferred $350,000 last May and June from Swiss accounts used in the Iran-contra operations to another account in the name of Tri-American Arms. According to other documents, Tri-American was a venture by Secord, a private businessman identified as Larry Royer, and a business consultant, Dan Marostica, to invest in a public weapons firm, American Arms.

American Arms held interests in four unnamed subsidiaries, one of which, documents stated, had manufacturing rights for the submachine guns.

On Friday, Secord stated that $60,000 of the money was spent to produce 2,000 components for the submachine guns, only for those parts to be seized by federal agents for reasons not explained.

At least another $80,000 was transferred to a Virginia company owned by the two men, Stanford Technology Trading Group Inc., and $50,000 was sunk into a maker of cattle feed, Secord testified. What happened to the rest of the money is not clear.

Major Arms Trades Told

Atwood, who lives on a private island outside Savannah, makes “a lot of major arms trades,” largely to Central and Latin America, federal law enforcement sources said. Those and other sources said that he also has a clandestine business relationship with the CIA.

Last October, the Los Angeles Times previously reported, Atwood was a middleman in the CIA’s secret $1.2-million purchase of a shipload of East Bloc guns and ammunition from Secord and Hakim. The weapons were carried aboard the Erria, a freighter controlled by North.

Arms Deal Investigated

That arms deal is under investigation by independent counsel Lawrence E. Walsh.

Atwood refused comment Thursday when asked about Secord and Hakim’s role in the weapons-making deal. Earlier, however, he said that he had been asked by the congressional panels to provide evidence on his involvement in the Iran-contra affair.

Records in a federal tax case in Savannah indicate that Atwood had sought since at least 1982 to make and sell the weapons, but there is no evidence that he succeeded. Combat Military Ordnance’s export license for submachine guns expired in December and was not renewed, the State Department said. A Treasury Department license to make the weapons expires this year.

Ex-Intelligence Officer

Atwood, a former Marine, FBI employee and Army intelligence officer, has a lengthy record of activity in the arms business and in Central America, but those are the least known of his activities.

In the 1950s and 1960s, he assembled and wrote a book about what he billed as the world’s largest collection of Nazi swords and knives. He later bought an island in a Savannah stream, a freighter, a cruise ship and a curious variety of fire-sale goods that he and partners sought to sell south of the border.

Court records in Savannah show that the ventures ranged from selling salt-damaged British sports cars in Guatemala and Colombia to establishing Guatemalan-based factories for manufacturing pocket knives and prefabricated houses.

At one time, Atwood said in a deposition, he tried to sell a load of canned hams in Guatemala, but the cargo was seized and destroyed by authorities.

In the late 1970s, Atwood and others met at the request of senior Guatemalan officials to discuss a short-lived plan to establish casino gambling there.

Atwood also is an officer in a New Jersey firm, Marian ULV Airspray Inc., which is reported to hold contracts for mosquito-control spraying in Guatemala and Honduras.

Michael Wines reported from Washington and William C. Rempel from Savannah, Ga.