Gates Was Kept ‘Out of Loop’ by Casey, Aide Says : Intelligence: Official tells panel that the former CIA director sought to limit the number of people outside White House who knew about the arms sale.

Former CIA Director William J. Casey ordered a senior agency official not to tell the CIA’s deputy director, Robert M. Gates, about arms sales to Iran during the early phases of the arms-for-hostages dealings, the senior official testified Tuesday.

Appearing at Senate Intelligence Committee hearings on Gates’ nomination to become CIA director, Charles Allen said that Casey, acting at the behest of National Security Council aide Lt. Col. Oliver L. North, concealed the arms sales from Gates during 1985 in an effort to restrict the number of people outside the White House who knew about the project.

Allen’s testimony appears to support Gates’ contention that he was “out of the loop” on the Iran-Contra scandal, at least at the beginning. It also is an unusually clear public example of the lengths to which Casey and North went to keep arms sale activities hidden even from other government officials with the highest of security clearances.

At the same time, however, Allen and another senior CIA official, Deputy Director Richard Kerr, repeated earlier testimony that in the fall of 1986, they had warned Gates that money from the arms sales was being diverted to help supply Nicaragua’s Contras. Gates contends that he had only sketchy information about the scandal before it became public later that year.

Questions about Gates’ truthfulness on that subject prevented him from becoming CIA director after Casey’s death in 1987. This time around, however, with the confirmation hearings almost completed, interest in that issue appears to have faded, and opponents of the nomination seem to have been unable to build a winning case against Gates.

“Everyone was worried at the start of these hearings that someone would turn up something that would kill the nomination by tying Gates to Iran-Contra,” one committee source said. “But now that it’s clear this is not going to happen, members are inclined to let Iran-Contra lie and get through these hearings as quickly as possible.”

Allen’s testimony, for example, raised questions about previous statements by Gates, but elicited no indication that the committee’s support for the nominee had been shaken.

Most of the testimony concerned a meeting between the two men on Oct. 1, 1986, in which Allen, who was the CIA’s chief contact with North, first told Gates that he believed North was aiding the Contras with the profits obtained from the sale of arms to Iran. According to Allen, he relayed his suspicions about the diversion to Gates in considerable detail, and Gates appeared to be “stunned” by the news.

Gates testified at the start of the confirmation hearings last week that he first learned of “speculation” that a diversion was taking place when Allen confided his suspicions to him at the Oct. 1 meeting. He said, however, that he dismissed Allen’s evidence as “extraordinarily flimsy” and did not regard it as cause for further alarm because there was “no suspicion at that point that Lt. Col. North or anybody else” at the White House was involved.

Allen’s account of the meeting conflicted with Gates’ recollection of it on several important points. Allen testified that he laid out the evidence he had of a diversion in much greater detail than Gates says he remembers, and that he warned specifically that North was involved.

“Mr. Gates may call it speculation . . . but I call it an analytic judgment,” Allen said of his conclusions at the time.

Gates, he said, reacted with surprise at the meeting and appeared to be “stunned that the White House would commingle two activities (the arms sales to Iran and the secret support for the Contras) in such a way.” North, Allen quoted Gates as telling him, “has gone too far this time.”

The discrepancies, however, raised only a mild response from Intelligence Committee Chairman David L. Boren (D-Okla.). “There’s a conflict in testimony there,” Boren said. But, he added, the conflict is only one of many “ambiguities” that the committee may never be able to resolve.

Kerr, for his part, supported Gates’ version of events in part by denigrating Allen. Kerr testified that Allen had briefed him in mid-August of 1986 about his concerns that arms sale proceeds were being diverted to the Contras. Kerr then briefly mentioned Allen’s statements to Gates, he said--a conversation Gates has said he does not recall.

Asked why he did not press the matter more, Kerr replied that “Charlie (Allen) can be excitable at times.”

“Having worked with Charlie over the years, and I have a lot of respect for Charlie in many ways, I would--I am always careful about the information he provides and judgments about that,” Kerr said. Allen currently serves as the CIA’s chief intelligence officer in charge of producing warnings about possible threats to national security.

The committee is scheduled today to explore allegations that during the Ronald Reagan Administration, Gates ordered intelligence analysts to slant their assessments to correspond with the Administration’s policy biases.

It also will consider still highly classified allegations--raised only elliptically in open session--that Gates may have engaged in illegal covert activities as part of the oversight he exercised in supplying Iraq with intelligence information about Iran in the late 1980s as part of the U.S. effort to help it win its eight-year war with Iran.