NSC to Get Claim for Erria’s Losses : North’s ‘Navy’ Sold in Bid to Cover Debts

A little Danish ship that once served as “Ollie North’s navy” was sold at auction here Monday in an effort to recover unpaid operating costs incurred by agents of Lt. Col. Oliver L. North, the former White House aide under indictment in the Iran-Contra scandal.

But the selling price of $240,000 fell well short of covering the bad debts run up during the freighter’s many futile voyages, and American taxpayers are almost certain to be billed for the difference.

The 150-foot Erria was sold by Dolmy Business Inc., a Panamanian shell company once controlled by Richard V. Secord and Albert A. Hakim. Secord and Hakim were indicted with North last month for their roles in diverting Iran arms-sale profits to Nicaragua’s rebels.

Put Back Up for Sale

The buyer was Queen Shipping, the Copenhagen-based company that operated the Erria for Secord and Hakim after they purchased it in April, 1986. Queen Shipping’s president, Svend Andersen, promptly put the ship back up for sale and suggested that he might rename it the Ollie.

For half of 1986, Secord and Hakim, operating at North’s direction, made the Erria the flagship of what North described to Congress last summer as an “off-the-shelf, self-sustaining” intelligence operation free of congressional oversight. They used the freighter for a variety of unsuccessful missions, including running arms to the Contras and picking up American hostages from Lebanon.

A Danish court had ordered Dolmy to pay Queen Shipping $400,000 to cover unpaid operating expenses. But Dolmy’s Swiss bank accounts have been frozen by authorities in Switzerland during the criminal investigation of the Iran-Contra scandal in the United States, and so the court ordered the auction to raise money to meet Queen Shipping’s claims.

Firm to File Claim

The handful of bidders who shared a packed courtroom here with a crowd of Danish journalists--and one polite protester with a pirate flag--failed to offer a price near the $400,000. Queen Shipping said it will file a formal claim for the difference within three weeks with the White House National Security Council, where North worked.

“The amount may be peanuts to the United States government,” said Peter Schaumburg-Mueller, Queen Shipping’s attorney. “But it is a lot of money to a small shipping company.”

Even before the auction, Queen Shipping had filed a request for reimbursement of its $400,000 in operating expenses with the NSC, which forwarded it to the Justice Department. The NSC and Justice Department officials confirmed that a claim had been received but declined further comment.

Official Missions

Officials of Queen Shipping said Secord and Hakim had led them to understand that the Erria was sailing on official missions ordered out of the White House, where “someone should write a check” to cover the costs of salaries, fuel and maintenance.

“If the U.S. was blessing this operation, then the U.S. owes us the money,” Tom Parlow, a former executive of Queen Shipping, had said in an earlier interview.

Queen Shipping’s claim for reimbursement from the United States may set the stage for an interesting legal battle over who was responsible for the ship’s secret operations.

North directed the ship’s movements from his office in the White House complex under the guidance of his boss, former National Security Adviser John M. Poindexter. Sources also have said that top CIA officials knew of and assisted the Erria’s missions to rescue U.S. hostages and perform other secret activities.

No Official Backing

But in practice, the Erria had no official backing from the U.S. government and none of its adventures underwent the presidential approval procedure to which normal CIA covert operations are subjected.

The ship’s crew took its directions from Queen Shipping officials, who in turn reported to Thomas G. Clines, a former CIA official who was a financial partner with Secord and Hakim in the sale of weapons to the Contras. Clines virtually ran the Erria’s daily operations, according to sources, and appeared at several of the ship’s ports of call to personally oversee its missions.

North originally sought the Erria to serve as a privately operated, CIA-linked radio listening post off the Libyan coast. The listening post scheme was rejected, apparently by the CIA, but the little freighter found other assignments.

Scheme Falls Apart

It bobbed about the globe to haul arms to the Contras during the period when Congress had banned direct U.S. aid, a scheme that fell apart when Congress approved direct aid as of October, 1986. The Erria also made two futile voyages to Cyprus to pick up American hostages who never came.

In the eight months before the Iran-Contra scandal ended its undercover sea duty, the Erria cost North’s clandestine network nearly $760,000 in purchasing and operating expenses. Hakim paid the bills from Swiss bank accounts that held profits from the secret sale of U.S. weapons to Iran.

But Hakim never paid Queen Shipping for the Erria’s last mission. When the Iran arms sales became public in November, 1986, the Erria was anchored off Bandar Abbas, Iran, its hull stuffed with crates of Soviet rifles and ammunition. The voyage was part of a plan by North and senior CIA officials to swap the arms to Iranian militants for several Soviet tanks captured in Iran’s war with Iraq.

Accounts Frozen

When the deal fell through, the Erria crew returned to Denmark. The ship arrived in January, 1987, and its crewmen discovered that their “official” White House backers had been fired or transferred to menial jobs and their Swiss bank accounts frozen at the Justice Department’s request.

To purchase the Erria, Queen Shipping will pay 1.45 million Danish kroners--about $240,000--and collect the same amount toward reimbursement of its expenses. Instead of being owed $400,000, it will own a ship and be owed about $160,000.

The reluctant new owners immediately issued a “for sale” notice.

‘Ollie’s Disco’

“Maybe some crazy American would like to buy the ship for a night club--put it on the Potomac and call it Ollie’s Disco,” Andersen said.

He added that he was considering selling the ship’s name to another Danish shipping firm with a fleet of vessels named, as is the Erria, after Danish islands.

“Maybe I could get some money for it,” Andersen said. “Of course, then I would need a new name for my ship. Maybe I should call it the Ollie.”

William C. Rempel reported from Korsor and Michael Wines from Washington.