IRAN-CONTRA AFFAIR: THE FINAL REPORT : Judgment Basis of Claim Reagan Tolerated Climate for Scandal : Panels Harsh in Criticism of Casey, Meese

A year after the eruption of the Iran-Contra scandal, the harsh judgment of congressional investigators fell heavily upon two of President Reagan’s oldest and closest allies: the late CIA director William J. Casey and Atty. Gen. Edwin Meese III.

Casey, the select House and Senate committees concluded Wednesday, misused the nation’s intelligence processes “to support the policy he was promoting” in Central America. He was, investigators suggested, the guiding hand behind a move to create secret machinery outside the government to carry out “off the shelf” covert operations abroad.

When the scandal broke, investigators concluded, the attorney general--the nation’s top law enforcement officer--so seriously “departed from standard investigative techniques” that his investigation of the entire affair was placed under a cloud.

Not Unexpected

The committee findings regarding Casey and Meese were not unexpected, but they formed the cornerstone of the majority report’s conclusion that President Reagan “created or at least tolerated an environment” in which the scandal took place.

The President’s two old friends from political wars and scores of lesser Administration crises played a far more prominent role in the somber conclusions of the congressional inquiry than they did in the parade of witnesses swept before television cameras during the three-month investigation.

While laying much of the blame for the whole affair on Casey and scorching Meese for his handling of the investigation, the committees dealt less harshly with Lt. Col. Oliver L. North, the chief operative in the fund diversion, and Rear Adm. John M. Poindexter, then the White House national security adviser.

North’s six days on the witness stand made him briefly a matinee idol, but in the end his chief role was to implicate Casey. He played a role somewhat comparable to that of White House counsel John W. Dean III in the Watergate investigation. Ironically, the implied criticism of him came from the committees’ Republican minority, who had been sympathetic to him during his long cross-examination.

The affair, Washington’s biggest political furor since Watergate, erupted a year ago this month with the disclosure that American arms had been secretly sold to Iran and the proceeds illegally diverted to insurgents fighting the Marxist government of Nicaragua.

A minority report signed by six Republican House members and two GOP senators took issue with the findings, saying the majority had implicated Casey by making selective use of uncorroborated testimony from North. The allegations against Meese were characterized as “untrue” and “outrageous.”

Casey, stricken with brain cancer soon after the investigation began, died without ever appearing before the congressional probe, leading critics to contend that the full story can never be known.

Arthur L. Liman, counsel for the Senate Select Committee, acknowledged that investigators had accepted North’s account that “Casey knew and was involved in setting up this whole scheme.” But he disagreed with the contention that Casey’s death foreclosed the possibility of finding the truth.

“If Casey had lived, we not only would not have known more,” Liman told The Times, “we would have known less because Casey would have controlled what everyone said.”

The congressional panels did conclude that in the first days of their inquiry into the affair, before Casey entered the hospital with his terminal illness, he was already taking part in a cover-up.

North Chronicles Role

“The director of the Central Intelligence Agency, William J. Casey, and other government officials showed contempt for the democratic process by withholding information that Congress was seeking and by misrepresenting intelligence to support policies advocated by Casey,” the report concluded.

The basis for the finding that Casey perverted the very intelligence process he was charged with running came as North, granted partial immunity from prosecution, chronicled his own role in the grand scam.

By North’s account, he kept the CIA chief constantly informed of his activities in diverting the arms sale proceeds to the Nicaraguan Contras. It was also Casey who brought retired Air Force Maj. Gen. Richard V. Secord into the operation as a private merchant to provide the anti-government guerrillas with inexpensive small arms.

In the report released Wednesday, the majority of the congressional panel concluded that Casey, among others in the Administration, “came to believe that the CIA could no longer be utilized for daring covert operations. So the National Security Council staff was enlisted to provide assistance in covert operations that the CIA could not or would not furnish.”

The majority also said it believed that Casey personally encouraged and directed North “and promoted the concept of an extra-legal covert organization,” but it noted that North had managed to exculpate himself at the same time his congressional testimony implicated the deceased CIA director.

Liman cited an additional reason to conclude that Casey fully knew about the fund diversion long before it was made public in a dramatic announcement by Meese at the White House.

Testimony before the committee portrayed Casey as “deeply disturbed” when he was told about the diversion in October, 1986, only days before the public disclosure, and indicated that he had forwarded a memorandum about it to Poindexter.

That, Liman said, “was not the reaction of a Bill Casey who was unaware of what was happening.” If he had only then heard of the diversion, Liman added, “Casey would have hauled Oliver North in and gotten to the bottom of it in five minutes.”

As for Meese, the committees went so far as to suggest that the attorney general had broken the law by authorizing special agents of the Drug Enforcement Administration to use private funds supplied by North in a failed effort to ransom American hostages.

Meese testified that he was unaware of any “plan to use private funds to ransom people in foreign countries,” which would have violated a constitutional prohibition against funding government operations with money not appropriated by Congress. His assertion was contradicted by both North and former national security adviser Robert C. McFarlane, according to the panel.

Disputes Assertion

Meese’s Justice Department quickly disputed the committees’ assertion. “The insinuation in the committees’ report is just wrong,” said Terry Eastland, the attorney general’s chief spokesman. “The attorney general’s telephone calls to Ross Perot (the Texas multimillionaire who provided the funds at North’s request) did not include any reference to this DEA operation.” Eastland declined, however, to say what Meese and Perot did talk about.

The panel’s most severe criticism of the attorney general grew, however, from his handling of the investigation in the days immediately after the arms sales to Iran were disclosed by a magazine published in Beirut.

“The attorney general saw Director Casey hours after the attorney general learned of the diversion memorandum,” the report said, “yet he testified that he never asked Casey about the diversion.

“He waited two days to speak to Poindexter, North’s superior, and then did not ask him what the President knew. He waited too long to seal North’s offices. These lapses placed a cloud over the attorney general’s investigation.”

The cloud has followed Meese from the day he launched his investigation, which immediately produced Poindexter’s resignation and North’s dismissal from the National Security Council staff. As the final congressional report on the matter was being circulated Wednesday, Meese made his second appearance before a federal grand jury probing the scandal.

Debate Meese’s Role

On Capitol Hill, members of the investigating committees continued to debate Meese’s role, even after the committees had issued the formal report.

“If anyone in the Administration deserves kudos, it’s Ed Meese,” said Sen. Orrin G. Hatch (R-Utah), who signed the minority report. After all, Hatch said, it was Meese and his staff who uncovered the memorandum in North’s office disclosing the diversion of the arms sale proceeds to the Nicaraguan Contras.

However, New Hampshire Republican Warren B. Rudman, one of three Republican senators who signed the majority report, said there was no evidence of corruption or political motivation but “there is a cloud over the attorney general.”

“That cloud is a cloud that deals with competence and professionalism,” he said.

THE COMMITTEES’ MAJOR RECOMMENDATIONS

Major recommendations of the Iran-Contra committees’ 15 Democrats and three of the 11 Republican members:

Require presidential approval of all covert operations in a signed, written “finding” before the operation begins. In emergencies, the signing could be delayed for up to 48 hours.

Affirm that a finding cannot be used by the President or any member of the executive branch to authorize an action contrary to U.S. law.

Require that Congress be given “timely notice” of a covert operation--in most cases before it has begun but in “certain rare instances” within 48 hours after the presidential finding.

Require a presidential finding for a covert action conducted by any government agency--not just the CIA, as currently provided.

Require that a finding specify each government agency authorized to participate in a covert action. Any third party, including a foreign government, would also have to be identified.

Enact legislation prohibiting the members and staff of the White House National Security Council from engaging in covert actions.

Require a strict accounting of all government funds managed by private citizens during a covert action.

Require that each finding expire after one year unless the President certifies it is still in the national interest.

Negotiate treaties that give Congress, not just the Justice Department, access to the records of foreign banks used by U.S. citizens to conceal financial transactions.

Develop consistent methods of dealing with leaks of classified information by government officials.

Adopt as presidential policy that the President’s national security adviser not be an active military officer.

Major recommendations of the committees’ minority report filed by eight of the Republican members:

Merge the House and Senate intelligence committees into a joint committee, thus cutting the number of potential leakers of classified information.

Require members and staff of Congress’ intelligence committees to take a secrecy oath carrying stiff penalties for violations.

Strengthen penalties against federal employees, news reporters and others who disclose classified information.

Permit the President to notify only four members of Congress, not the currently required eight, on “extremely sensitive” matters.