Poindexter, Casey Repeatedly Misled President, Shultz Says : Kept Truth From Him on Hostage Swap

Former National Security Adviser John M. Poindexter and the late CIA Director William J. Casey repeatedly misled President Reagan about the arms-for-hostage swaps they engineered with Iran and hoped that the President would “bail them out” when the politically explosive deals became public, Secretary of State George P. Shultz testified Thursday.

Shultz, in a dramatic first day of testimony before the congressional committees investigating the Iran- contra affair, described a cocoon of deception spun around the President and high Administration officials by some of Reagan’s closest advisers.

It was designed, Shultz said, to shroud the disturbing truth that the deals amounted to no more than exchanging weapons for hostages, a betrayal of Reagan’s often-repeated pledge that he would never bargain with terrorists.

‘Down Into the Dirt’

“When you get down into the dirt of the operational details, it always comes out arms for hostages . . . simply and purely an effort to trade arms for hostages,” Shultz said.

But it was not until last December, more than a month after the operation was exposed, that Shultz was finally able to convince Reagan of how he had been misled, Shultz recalled. Reagan was particularly astonished to see that private businessmen, acting as U.S. agents, had agreed in negotiations with Iran to help pressure Kuwait to release 17 Shia Muslim terrorists.

“He reacted like he’d been kicked in the belly,” Shultz said, noting that the prisoners had been convicted of terrorist acts against Americans.

‘Jaw Set and Eyes Flashed’

“I have never seen him so mad,” the secretary added. “His jaw set and his eyes flashed. . . . I finally felt that the President deeply understands that something is radically wrong here.”

Shultz, an opponent of the arms deals from the time they were proposed in mid-1985, said he had been deceived on numerous occasions as the sales progressed and did not learn that the United States had directly sold weapons to Iran until last November. That was almost nine months after the initial transfer from the United States to Iran had occurred.

Noting that he had once described his knowledge as “fragmentary and sporadic,” Shultz said: “Of course, I now know that was the understatement of the year.”

Poindexter testified earlier this week that once Shultz had been overruled in his objections to the sales, he had pointedly requested not to be informed of their progress.

But Shultz countered: “What I did say to Adm. Poindexter was that I wanted to be informed of the things I needed to know to do my job as secretary of state, but he didn’t need to keep me posted on the details.”

Although Shultz insisted that Reagan was strongly opposed to the idea of exchanging arms for hostages, other witnesses have testified that Reagan repeatedly raised the issue of retrieving the hostages when the arms sales were discussed.

Reagan Concern for Hostages

Shultz himself said Reagan had indicated that the hostages were a primary concern. When Defense Secretary Caspar W. Weinberger pointed out in December, 1985, that the sales posed legal hurdles, Shultz recalled Reagan’s saying: “The American people will never forgive me if I fail to get these hostages out over this legal question.”

Reagan initially insisted publicly that the deals had not been arms-for-hostage swaps but conceded in a speech March 4 that the effort to build a long-term relationship with Iranian factions “deteriorated in its implementation” into just such trades. That admission came only after the presidentially appointed commission headed by former Sen. John Tower (R-Tex.) had reached a similar conclusion.

The secretary’s testimony showed the Iran-contra affair from a new angle--one that differs from the rationale that Poindexter and his former aide, Lt. Col. Oliver L. North, have offered for their actions. Both men told the congressional committees that they were acting to further Reagan’s foreign policy goals and that their actions would have been supported by the President if he had known about them.

Bolsters Reagan Defense

Shultz also put more distance between the President and those who carried out the secret Iran-contra operation in his name. Thus he effectively bolstered the defense of Reagan that developed last week when Poindexter testified that he had never told Reagan about the possibly illegal diversion of Iran arms sale profits to Nicaragua’s rebels.

When the project began to unravel last November, Shultz said, he found himself pitted against Poindexter and Casey “in a battle to try to get what I saw as the facts to the President and see that he understood them. . . . It was a battle royal.”

Poindexter and Casey continued to try to persuade Reagan that he should portray the sales as primarily a diplomatic initiative, aimed at building a long-term relationship with Iranian factions that stand to gain control when the Ayatollah Ruhollah Khomeini dies.

“People kept trying to sell him on that when . . . he wasn’t being given, I felt, the right kind of information,” Shultz said.

A Conflict of Interest

Those who were misinforming Reagan, Shultz said, “had a conflict of interest with the President. And they were trying to use his undoubted skills as a communicator to have him give a speech and give a press conference and say these things, and in doing so, he would bail them out.”

On one occasion last November, Shultz said, Poindexter told Reagan a “cock-and-bull story” claiming that North had learned of 1985 Israeli shipments of U.S.-made arms to Iran only when he “stumbled onto an arms warehouse” in Europe in late 1985. In fact, Shultz said, he knew the effort had begun with a trip to Israel by National Security Council consultant Michael A. Ledeen in May, 1985.

Shultz learned of that trip, he said, only when Samuel W. Lewis, then the U.S. ambassador to Israel, complained that Ledeen had not alerted the embassy that he would be in Israel talking to government officials on behalf of the Administration.

In his testimony, the secretary painted a dramatically different portrait of Reagan from those offered by previous witnesses. Shultz described a President who would not want his subordinates to put his policies above a strict interpretation of the law.

‘Totally Unacceptable’

Shultz denied any suggestion that the President would have backed the plan hatched by North and Casey to create an “off-the-shelf,” non-governmental covert operation using private funds to carry out secret missions around the world. North had suggested in his testimony that the operation would have operated with Reagan’s approval.

“President Reagan wouldn’t touch this with a 10-foot pole,” he said. “It’s totally unacceptable . . . because it is totally outside of the system of government that we live and must live by. You cannot spend funds that the Congress doesn’t either authorize you to obtain or appropriate. That is what the Constitution says and we have to stick by it.”

He also ridiculed the NSC staff for the lopsided deal that the agency had negotiated with the Iranians for the release of U.S. hostages in Lebanon. “You look at the structure of this deal,” he said. “It’s pathetic that anybody would agree to anything like that. . . . It’s crazy. And people say you can’t trust the State Department to negotiate a tough deal.”

Most members of the committee seemed to support Shultz’s criticism of Poindexter and North.

‘Power and Majesty’

“This is no way for a great power to conduct its affairs,” said Sen. Paul S. Sarbanes (D-Md.) “ . . . Doing business this way demeans the power and the majesty of the United States.”

Sen. Warren B. Rudman (R-N.H.) even suggested that Shultz--not North or Poindexter--should be singled out as the most popular Iran-contra figure by the American people.

“I do not believe that heroes are people who deceive their President,” Rudman told Shultz. “The real heroes are the people who speak up to their President. . . . You are such a hero.”

The most conservative Republicans seemed uncomfortable with the tone of Shultz’s testimony, however. Rep. William S. Broomfield (R-Mich.) strongly supported Poindexter and North even after hearing Shultz criticize them.

Good Will Runs His Way

But with the good will of the committee clearly running his way, Shultz also took the opportunity to defend Assistant Secretary of State Elliott Abrams, who has been widely condemned by members of Congress since he admitted lying to the Senate Intelligence Committee about his efforts to solicit money for the contras from the Asian island nation of Brunei. He characterized Abrams as a talented public servant who deserves a second chance.

“He made a mistake,” Shultz said. “He knows it. He is full of remorse about it. . . . He has a rebuilding job to do as a result of what took place.”

He then drew a distinction between Abrams’ attitude and that of other witnesses, particularly Poindexter, who have expressed no regrets about their role in the Iran-contra affair.

“This is a guy who tells you he made a mistake--tells you he’s sorry,” he said. “He does not intend to do it again.”

Shultz Was Misled

The secretary claimed he was misled about NSC-sponsored efforts to raise funds for the Nicaraguan rebels. In 1984, Shultz had argued it would be politically unwise and possibly illegal for the U.S. government to ask other countries to provide financial aid to the contras during the period when Congress had banned U.S. support.

When Shultz learned through Ambassador Lewis that NSC aide Howard Teicher had asked Israel to contribute, former National Security Adviser Robert C. McFarlane assured him that Teicher had been there “on his own hook.” Teicher, however, told the ambassador that “he was there under instructions.”

Over the next year, Saudi Arabia contributed $31 million to the rebels at U.S. request--something Shultz said he did not learn until a year after the fact.

Two years later, in a changing political climate and after the law against U.S. aid to the rebels had been relaxed, Shultz supported the idea of asking other countries to contribute and even suggested approaching the Sultan of Brunei, he said.

Unaware of Secord Control

However, Shultz did not know, he testified, that the $10 million in humanitarian aid that he had helped obtain was to be directed into an account controlled by retired Air Force Maj. Gen. Richard V. Secord and Iranian-American Albert A. Hakim. Shultz said he was unaware that the two business partners were running, at North’s behest, a secret network supplying weapons to the contras.

Nor, he said, did he know that Lewis A. Tambs, then U.S. ambassador to Costa Rica, had been recruited by North to help open a new front for the contras in southern Nicaragua. Tambs assisted in construction of an airstrip in Costa Rica--an action that Shultz described as “totally out of line.”

Shultz again denied that he had known the extent of North’s activities on behalf of the contras. Asked to explain North’s testimony that the secretary once had heartily congratulated him for those efforts, Shultz said that his praise extended only to North’s efforts to boost the morale of rebel leaders.

He said he did not recall referring to North as a “loose cannon,” as Abrams has testified. “There was talk around about erratic behavior on his part, but I had no particular knowledge about it and didn’t want to pass judgment,” Shultz said.

Shultz Opposed Arms Sales

But most of the questions for Shultz concerned the Iran arms sales. The secretary testified that once he made his vigorous opposition to the Iran arms sales known, Poindexter and other Administration officials repeatedly withheld important information from him.

They did not tell him, for example, that President Reagan had signed several versions of a “finding”--the written authorization needed before such covert operations may proceed legally.

Even though Shultz met with Poindexter in February, 1986, to discuss the “terms of reference” to be used by McFarlane in a trip to Iran, Poindexter did not tell him that in the previous weeks the United States had shipped 1,000 TOW anti-tank missiles to Iran, Shultz added.

McFarlane later made the trip, Shultz said, at a time when the secretary thought “it was off.”

Talk in London

Through U.S. Ambassador to Britain Charles H. Price II, Shultz heard during the Tokyo economic summit in May, 1986, that there was talk in London of a forthcoming U.S.-backed arms sale to Iran. He told of confronting Poindexter and quoted Poindexter as assuring him: “This is not our deal. . . . It’s nothing that we have (anything) to do with.”

Documents produced by the committee showed that Poindexter warned North via computer message the following day: “Do not let anybody know that you are in London or that you are going there. Do not have any contact with the embassy.”

In another computer message, Poindexter dismissed North’s suggestion that he call a “quiet meeting” to inform Shultz and Defense Secretary Caspar W. Weinberger, who had led internal Administration opposition to the sales.

A few weeks later, Shultz said, he was assured by Poindexter that those who were trying to arrange the sales had been told to “stand down.” Therefore, he said, he was not aware that the release of hostage Lawrence M. Jenco in July, 1986, was linked to arms sales.

Warning by Two Officials

In mid-1986, according to memos obtained by the committees, Shultz was warned by two other State Department officials that there were indications the arms deals had sprung back to life. While Shultz recalled seeing one of the warnings, he said, “my understanding was the whole thing had been stood down. . . . I had been given a pretty firm assurance.”

Shultz strongly denied Poindexter’s testimony that the President was informed about the pledge of Secord and Hakim to seek release of 17 pro-Iranian terrorists imprisoned by Kuwait. And he added: “I’m sure of it.”