The Family Jewels (40 page)

This text repeated what the congressional leaders had been told and was very narrowly drawn. For example, Congress had been informed only to the extent of what its leaders had been told just the previous day, and Admiral Poindexter at that briefing had mentioned only about half the weapons that had been shipped, and only one of the presidential findings. He had abstained from any reference at all to an entire shipment of weapons carried out in November 1985, or to participation by Israel in that operation. Nor had congressional committees been told of the single presidential finding—already ten months old—that Poindexter
had
referred to. In his speech Ronald Reagan had affirmatively declared that no laws had been violated and no arms traded for hostages. Both those categorical assertions were false.

Administration officials were unable to make this new version stick. In various press appearances Poindexter and presidential chief of staff Donald T. Regan gave conflicting versions, some also contradicting the president. Poindexter, for example, admitted that the Joint Chiefs of Staff had not been told of the arms deals. Don Regan affirmed that Israel had sent arms to Iran in September 1985. Neither would account for the freeing of a hostage at that time—coincident with the Israeli shipment, on behalf of Washington, which promptly replaced the antitank missiles it had sent with a more modern model. Secretary Shultz pressed for an ironclad statement there would be no more arms sales, only to be stymied by his colleagues. Shultz then went public with his position. By now Mr. Reagan was writing in his diary about the media “harping” on the Iran situation, putting out “pure fiction,” and its “lynch mob attitude.”
²¹
By November 19,
Reagan felt, America had its own Dreyfus Affair and fresh public comment had become unavoidable. He held a news conference that night.

In the opinion of historian Theodore Draper, this encounter with the reporters was “the most disastrous in President Reagan's presidency.”
²²
Mr. Reagan opened with a brief statement that had been extensively reworked by McFarlane and Poindexter, and he had been prepped for the appearance by both of them, Secretary Shultz, and others. He still made a hash of it. Reagan asserted he had a right “under the law” to defer reporting to Congress. He admitted the arms deals—he still insisted there had been only one—had been “a waiver of our own embargo.” The president could not account for how individual hostage releases had coincided with weapons shipments. The journalists were now ahead of the president, repeatedly pushing him on Israel's role while he still stammered vaguely about third countries. Reagan denied that sending weapons to Iran amounted to giving them to the Ayatollah Khomeini, the Iranian leader and America's sworn enemy. Now Mr. Reagan described the Iranian interlocutors as a faction, which can only have weakened their position in Teheran. Finally, Reagan's denials of Israeli participation were so strongly at odds with what had become known that, within the hour, a White House clarification admitted that, indeed, one “third country” had been involved.
²³

After the news conference it was clear the facts were not as President Reagan had presented them a few days earlier, and also that his position on his legal obligations differed substantially from widespread understanding of certain laws and regulations. Congressional investigation became unavoidable. The administration initiated an internal investigation by Attorney General Ed Meese. On November 23, in Oliver North's office, Justice Department officials discovered an April 1986 paper describing a procedure for taking money from the Iran arms deals and sending it to the
contras
. The
“diversion memo” made a season of deep inquiry inevitable. The intelligence oversight committees of both houses of Congress had already held hearings focused on the Nicaraguan rebel angle; now there would be a joint committee to look into all aspects of Iran-Contra for a full year. In due course there would be an independent prosecutor, as there had been a special prosecutor for Watergate.

The Central Intelligence Agency was a convenient scapegoat, from the Reagan administration's perspective, for the excesses of Iran-Contra. A CIA proprietary had carried some of the weapons shipments to Teheran. The McFarlane mission had traveled on another proprietary aircraft, accompanied by a senior CIA officer and equipped with agency communications gear. Money from the arms deals had been funneled through CIA bank accounts. On the Nicaragua side, the CIA station chief in Costa Rica had worked closely with the private benefactors, the involvement of the agency apparatus in Honduras was in question, and CIA had had a prime interest all along in seeing the
contras
through until its covert operation could be ramped up again—which was authorized anew as of October 1, 1986.

Even more to the point were the knowledge and actions of senior CIA officials, particularly Director of Central Intelligence William J. Casey. The spy chieftain had his finger in every pie. It was Casey who had originally suggested soliciting money for the
contras
from other countries. He had advocated this at the National Security Planning Group, President Reagan's NSC unit for managing the Nicaragua program. Bill Casey had recruited Oliver North as principal action officer for the private benefactor operation. The director interceded with Ed Meese to use his influence as a senior official to induce the Marine Corps to extend Lieutenant Colonel North's assignment to the NSC staff so the latter could do this
work. Casey and North had had two dozen one-on-one meetings during Iran-Contra, and, according to the spy chief's daybook, they spoke on the phone 165 times.

Director Casey took North to a meeting of CIA station chiefs active in Central America and introduced him to the players. Casey met with the private benefactors too. On another occasion he passed a willing donor along to North to be solicited by the White House–connected
contra
fund-raising apparatus. When Congress became restive at signs something was going on with the
contras
, Casey stage-managed an event, more like a séance, where he gave North phony orders not to operate in Central America. In the face of allegations the CIA had given the
contras
some $50 million during the 1984–1986 period, in September 1986 Director Casey sent the Senate Intelligence Committee an official reply that maintained the agency had scrupulously followed restrictions and had not provided any assistance whatsoever that was not authorized by Congress. He did not mention that he had prodded CIA lawyers to identify ways the agency could help the
contras
while adhering to the letter of the law.

The spy chief commissioned the original paper pointing out the potential for an Iran arms ploy and circulated it in the White House. Casey then pressed for a fresh NSC policy paper based on the CIA opinion. He watched with favor as the Israelis executed the first Iranian deal in August–September 1985. Director Casey sanctioned without a presidential finding the use of the CIA proprietary for the November Israeli arms shipment, facilitated by a subordinate CIA officer. The CIA prepared a draft presidential finding only after that episode—and after Casey's deputy insisted that one was necessary. Incidentally that document—never found—described the Iran initiative as a straight arms-for-hostages trade, and it was supposed to apply retroactively. In January 1986 Casey personally outlined two methods by which the United States could sell arms directly. The spy chieftain furnished support,
including NSA monitoring, for Oliver North's contacts with Iranian intermediaries, and sent CIA officers along on the trips. The arms sales yielded a surplus of roughly $18 million. The private benefactors took much of that as profit, but they passed along a couple of million plus several more weapons shipments to the Nicaraguan rebels.

When the Iranian side began to unravel, it was Bill Casey who sounded the alarm, warning North to begin destroying documents, and meeting with Poindexter to find a way to prevent revelation. Even then, during the final month before Iran-Contra broke into the open, Casey had backed another North negotiating mission to a new Iranian channel. The mission carried a Bible personally inscribed by Ronald Reagan. When the president finally decided to give a speech on the Iran affair, Casey huddled with Poindexter and others to massage the text, right up to the morning before Mr. Reagan spoke. When Secretary Shultz went public with objections to Iran arms sales, the CIA director wrote President Reagan a letter demanding he be fired: “You need a new pitcher!”
²⁴
The diversion memo was discovered the next day. According to Donald T. Regan, who made an unprecedented visit to Langley late that afternoon to inform the CIA chief privately, Director Casey evinced no surprise at this development.

An enduring mystery of Iran-Contra is whether Casey had approved North's diversion scheme. There is a fair likelihood that he did, though the only substantiation of that is the NSC staffer's own testimony, and North's representations seemed questionable in certain other respects. Within the CIA a senior analyst had developed suspicions of a diversion based on discrepancies in pricing, and Casey was told this in early October. Deputy Director of Central Intelligence Robert M. Gates, who participated in this conversation, relates that Casey seemed surprised then. In a closely reasoned analysis contrasting the paucity of proof for Casey's knowledge of the diversion with inferential plus some real evidence against
that hypothesis, Gates concludes the CIA chief probably did not know of the diversion.
²⁵

Nevertheless, the spy chieftain became a natural target for Iran-Contra investigators, beginning with his appearances before both the House and Senate intelligence committees on November 21, 1986. The basic CIA cover-up of the Iran side of this affair resides in that testimony. Casey concealed the U.S. involvement in the 1985 Israeli arms shipments; failed to disclose the so-called “retroactive” finding, the CIA's primary role in it, and the arms-for-hostages terms of the approval; failed to disclose the extent to which Congress had been left uninformed; hid the money diversion; and misled the legislators on the extent of NSC staff involvement. Casey's testimony also overstated the degree of accountability and control afforded by CIA bank accounts, suggesting that the Iranians were paying the United States directly and not through Swiss banks; stated that the U.S. had obliged the Israelis to take back a shipment of antiaircraft missiles rather than admit the Iranians had refused to accept them; misrepresented the results of the McFarlane mission to Teheran; and retailed what became an Iran-Contra chestnut—that the CIA believed the November 1985 shipment had consisted of oil-drilling equipment, not weapons.

The chief of staff to both Casey and Gates at the time was James McCullough, who would retire after thirty-four years of service on both the clandestine and analytical sides of the agency. His unit had the primary responsibility for compiling Casey's testimony. It was a time of pandemonium and confusion, McCullough recalls, with the director exhausted and soon to succumb to the brain tumor that would kill him. The staff director attributes much of the misguided testimony to Casey's poor health and distraction, barely allowing that the CIA chief might have been purposeful in his actions.
²⁶
Robert Gates had the office next door to the director and, of course, worked intimately with Casey. He did not see the boss
the same way. “In contrast to allegations later made by others,” Gates writes, “I had seen no particular change in Casey's behavior in the preceding weeks or months that might suggest he was ill.”
²⁷

The idea that Director Casey had compartmented Iran-Contra as his private, off-the-shelf covert operation barely intrudes into McCullough's version of events. Bob Gates, who agrees with the chief of staff that there was no private covert operation, ironically informs us that Casey's style throughout the Nicaragua operation had been to rely upon this kind of close-to-the-vest activity, and concedes that “Casey probably also was instrumental in moving operational management of the
contras
from CIA in the summer of 1984 to the NSC, to North. And there seems little doubt that he advised and helped North during the period CIA was proscribed from involvement.”
²⁸
Colleague David Gries, present at the same meetings as the head of the agency's congressional liaison staff, is on the point where, reflecting on McCullough's account, he notes that “vertical compartmentation is a sure prescription for trouble whenever officers are called to account for actions.”
²⁹

In any case, that exact thing happened in preparing Bill Casey's congressional testimony. McCullough returned from a vacation to be put on this task, problematical because he knew nothing. To get up to speed, the chief of staff attended a briefing given by Clair George, deputy director for operations, for the congressional aides before whose committees Casey would be appearing. There was enough there already for the congressional staffs to warn of tough hearings, but afterwards McCullough found George's assistants apoplectic that their boss had completely omitted the Israeli arms shipments. That marked the start of a nightmare. From the beginning, accounting for the Israeli arms shipments and the lack of a presidential finding to cover them was an insuperable obstacle for Langley. The CIA's struggle to craft a chronology
for the November 1985 shipment went on interminably and led to major disputes with the State Department. Its legal experts saw the draft and concluded that Casey was about to perjure himself, leading to one revision. The same text worried Oliver North as implicating him, and he intervened to obtain a different emendation, also a falsehood. Knowledge of the initiative, as well as the celebrated “oil-drilling equipment,” were both at issue. Casey made changes to a draft opening statement reviewed at the White House, but never incorporated them in his testimony. Meanwhile, word of the controversy became a factor in Edwin Meese's decision for a Justice Department inquiry, forcing the scandal into the open once the diversion memo emerged.