THE IRAN--CONTRA HEARINGS : Did Not Tell Reagan of Funds Diversion, Poindexter Testifies : Sought to Protect President if It Became Public, Ex-Aide Says

Former National Security Adviser John M. Poindexter told Congress on Wednesday that he deliberately chose never to tell President Reagan about the diversion of profits from the Iran arms sales to the Nicaraguan contras in order to protect Reagan from political damage if the secret program ever became public.

Poindexter’s long-awaited testimony before the Iran-contra investigating committees was widely viewed as the final word on whether Reagan knew about the diversion. It ended months of anxious speculation that began last Nov. 25, when the scheme was disclosed by Atty. Gen. Edwin Meese III.

“The buck stops here with me,” declared Poindexter, confidently puffing on his pipe.

“I made the decision. I felt that I had the authority to do it. I thought it was a good idea. I was convinced that the President would in the end think it was a good idea. But I did not want him to be associated with the decision.”

A Dramatic Climax

Poindexter, who had remained silent about the Iran-contra affair since he resigned as national security adviser last Nov. 25, not only provided the dramatic climax to nine weeks of congressional hearings but also helped Reagan over a hurdle that he had to cross if he hoped to put the Iran-contra scandal behind him.

The former national security adviser appeared finally to have accomplished what he called his central purpose in keeping Reagan in the dark--to provide him with “deniability.”

Arthur L. Liman, who as chief counsel for the Senate investigating committee questioned Poindexter for more than five hours Wednesday, said afterward that it is now up to the American people to judge “whether what they are hearing is cover story or what they are hearing is the truth.”

Poindexter, testifying under a guarantee that he would not be prosecuted with information he disclosed at the hearing, also disclosed that he is a target of the criminal investigation of independent counsel Lawrence E. Walsh.

Loyalty to President

The 50-year-old rear admiral expressed a strong continuing loyalty to the White House, the President and his policies. But he did not hew strictly to the official White House account of the Iran-contra affair.

Instead, he contradicted the long-held White House contention that Reagan did not sign a document--known as a “finding”--in December, 1985, giving retroactive approval to the CIA for helping in an earlier Israeli shipment of U.S.-made arms to Iran.

He also explained for the first time why investigators have not found a copy of that finding. Last Nov. 21, he said, just as the Justice Department was commencing an inquiry into the Iran arms sales, Poindexter tore up the finding--with the intention of saving Reagan from political embarrassment.

And he disclosed for the first time that Reagan approved a highly unorthodox nine-point pact with the Iranians, under which the private arms dealers representing the United States pledged to devise a plan to win release of 17 convicted terrorists being held by Kuwait even though it was official U.S. policy not to pressure the Kuwaitis to release them.

While Poindexter’s story closely tracked the testimony of his former aide, Lt. Col. Oliver L. North, there was one discrepancy.

Poindexter said he could not recall receiving any of the five memos that North said he sent him concerning the diversion of Iran arms sale profits to the contras, four of which were destroyed by North. Poindexter said he could not recall even the one memo that survived North’s shredding.

Members of the Iran-contra committees seemed satisfied by Poindexter’s explanation of how the Administration diverted more than $3.5 million in profits from the Iran arms sales to the contras without Reagan’s knowledge. “I think the mega-question has been answered,” said Rep. Henry J. Hyde (R-Ill.), a Reagan loyalist.

Poindexter said the idea of diverting profits from the Iran arms sales to the contras was first proposed to him by North in early February, 1986, after North returned from a trip to London on which he met with Iranian representative Manucher Ghorbanifar. According to North, it was Ghorbanifar who conceived the scheme, which North viewed as “a neat idea.”

‘I Have Found a Way’

Poindexter said North told him: “Admiral, I think we can--I have found a way that we can legally provide some funds to the Democratic resistance (of Nicaragua) through funds that will accrue from the arms sales to the Iranians.”

The proposal struck Poindexter as a good way to provide “bridge financing” to the contras until Congress lifted the existing ban on direct U.S. military assistance, he testified. So he immediately approved it, giving North “broad general authority” to proceed as he pleased.

Poindexter said he saw no need to inform the President of the diversion because it was consistent with Reagan’s existing policy, and he had no doubt the President would agree. He noted Reagan had encouraged donations to the contras from other countries and private U.S. citizens, and the diversion was only a variation of that theme.

‘A Very Clear Policy’

“I still contend that I believe that the President would have approved the decision at the time if I had asked him,” he said. “It clearly was an important decision, but it also was the implementation of a very clear policy.”

At the same time, Poindexter said he realized the diversion scheme was a political hot potato that could burn the Reagan presidency if it ever became known in Congress, where a slim majority of the members had opposed contra aid.

“I was not so naive as to believe that it was not a politically volatile issue,” he said. “I made a very deliberate decision not to ask the President so that I could insulate him from the decision and provide some future deniability for the President if it ever leaked out. Of course, our hope was that it would not leak out.”

Almost Told President

Poindexter said that while he never told anyone about the diversion until he was confronted with the evidence by Meese last Nov. 25, he was sorely tempted to spill the news during a conversation with Reagan about the contras as they flew together aboard Air Force One on the return trip from the Tokyo economic summit in 1986. But he said he resisted the temptation.

“I think the President would have enjoyed knowing about it,” he said.

Likewise, it was political considerations that prompted Poindexter last Nov. 21 to tear up the finding that Reagan had signed in December, 1985, giving retroactive authorization to the CIA to help in the transfer of U.S-made arms from Israel to Iran a month earlier. He said he acted after learning that Justice Department officials were on their way to the White House to begin an inquiry into the Iran initiative.

Poindexter said he destroyed the document because it falsely portrayed the Iran weapons sales as an arms-for-hostages swap. Unlike the President’s final written arms sale authorization, which was signed on Jan. 17, the 1985 finding made no mention of the long-range diplomatic goals of opening a diplomatic channel.

By trading arms for hostages, Reagan would have been violating his own often-repeated pledge never to bargain with terrorists and undermining Administration efforts to persuade U.S. allies to quit providing arms to Iran.

“I thought it was a significant political embarrassment to the President,” he said.

At the White House, spokesman Marlin Fitzwater said Reagan still has no recollection of the 1985 finding, but he might have approved it. “The President deals with hundreds and thousands of pieces of information and documents in a day, in a week and in a year,” he added.

Despite Poindexter’s desire to keep the deal from being viewed as an arms-for-hostages swap, he reinforced that impression by recounting a meeting with Reagan in the White House family quarters on Dec. 7, 1986. At that session, Defense Secretary Caspar W. Weinberger and Secretary of State George P. Shultz argued strenuously against the Iran arms sales.

As the meeting ended, according to Poindexter, the President overruled the objections of his top Cabinet officers and concluded by saying: “I don’t feel that we can leave any stone unturned in getting the hostages back.”

Nor did Poindexter’s testimony contradict the Tower Commission’s portrait of the President as an extremely aloof administrator who seldom inquired about details. The Tower Commission, chaired by former Sen. John Tower (R-Tex.), was appointed by Reagan to investigate the Iran-contra affair and delivered its report in February.

In fact, Poindexter said he could not recall that Reagan ever asked about fund raising for the contras during the entire two-year period when direct U.S. aid was banned.

“We were reporting to him (Reagan) on the status of the contras in general terms and he knew that they were surviving,” he said, “and that was the thing that was important to him.”

Poindexter said the President understood that North “was instrumental in keeping the contras supported, without maybe understanding the details of exactly what he was doing.”

The President also knew that retired Air Force Maj. Gen. Richard V. Secord had been recruited to help in the Iran arms sales, he said, but was not aware of the extent of Secord’s activities in establishing a private supply network for the contras.

“I do have a recollection of talking to the President at one point during the Iranian project, that Gen. Secord was involved as a private individual and that he indeed was a true patriot,” Poindexter told the committees.

He added that he also briefed Reagan about an airstrip that was built in Costa Rica as part of the contra supply operation.

But unlike Reagan, Poindexter said he kept himself fully informed about both the Iran and contra programs. For example, he said, he knew that North had recruited Lewis A. Tambs, then U.S. ambassador to Costa Rica, to help the contras open a “southern front” in Nicaragua.

By portraying North as an aide who dutifully reported his plans to his superiors, Poindexter reinforced North’s testimony and undermined the conflicting assertions of Robert C. McFarlane, whom Poindexter succeeded as national security adviser in December, 1985. On Tuesday, McFarlane testified that North seldom sought approval for his activities.

“During my tenure as national security adviser, I authorized, in general, the actions that I have heard described (by North),” Poindexter said. “And it was my understanding that Mr. McFarlane had authorized the activities that had taken place prior to December of 1985.”

Poindexter was in a good position to know because he had been McFarlane’s deputy.

Although Poindexter did not deny North’s testimony that he had written five memos describing the diversion of Iranian funds to the contras, he said that had no recollection of any of them. “I do not recall any memo that addressed the issue of diversion,” he said.

Nor could he explain why he had no memory of the one memo referring to the diversion that has been found in White House files by investigators. He speculated that he had discarded it as soon as it arrived at his office because he had no intention of giving it to Reagan.

Poindexter also confessed that North never told him that the Erria, a Danish ship purchased by Secord, was intended to be used to broadcast propaganda off the coast of Libya. He said he knew about the ship but assumed it was acquired as part of Secord’s contra-supply operation.

Likewise, he said he was never told that North and the late CIA Director William J. Casey viewed Secord’s operation as the nucleus of a non-governmental “off-the-shelf, full-service” covert operation, as North described it, designed to carry out tasks with private funding that the Administration wanted to keep secret from Congress.

Nevertheless, Poindexter said, he found the idea intriguing.

North was portrayed by Poindexter as a highly competent assistant--probably the most skilled person that he had ever supervised. He said North would have been promoted to the title of special assistant to the President--third highest rank at the White House--had it not been for a desire to keep him and his activites out of the limelight.

Poindexter also sided with North--and against McFarlane--on the issue of whether the White House staff was legally bound by the Boland amendment, which prohibited all U.S. intelligence agencies from providing military assistance to the contras between 1984 and 1986. Poindexter and North said it did not apply; McFarlane said it did.

While defending the legality of their actions, Poindexter confessed he had one regret. He was sorry he had failed to develop a “damage control” plan last November--as Casey had suggested to him--when it became clear to him that the Iran-contra initiative was about to become public knowledge.

By the end of his first day of testimony, committee members agreed that Poindexter had made a persuasive case that--as he said--the buck had stopped with him.

Rep. Jack Brooks (D-Tex.) quipped that the sign saying “The Buck Stops Here” that sits on Reagan’s desk had been moved symbolically “over from the Oval Office to the National Security Council offices,” where Poindexter worked. He added in his heavy Texas drawl: “It’s a little-bitty sign now, and it’s printed in Iranian.”