January 18, 1987
By GEORGE de LAMA, Chicago Tribune Correspondent
Michael Tackett of the Chicago Tribune contributed to this story.
WASHINGTON — Months before Congress cut off support for the Nicaraguan rebels in October 1984, President Reagan approved an ambitious campaign to encourage private American donors and foreign governments to finance the war against Managua`s Sandinista regime.
The goal: Keep the Contras, as the anti-Sandinista rebels are known, alive and viable as a fighting force until the president could persuade Congress to change its mind and restore U.S. military aid.
Reagan lent the full weight of his office to the private supply effort, casting aside a thin veil of secrecy over the administration`s two-year effort to assist the Contras. When Americans wrote to the White House asking how they could contribute to the Contra cause, the president sent out letters over his signature urging them to donate money to private relief groups aiding the rebels.
Reagan attended a fund-raising dinner for the Contras here in April 1985, gave speeches likening the Central American warriors to the U.S. founding fathers and volunteered at one point that “I`m a Contra, too.“
Support for the estimated 15,000 fighters became a top priority within the administration. The campaign, headed by an obscure Marine lieutenant colonel on the National Security Council staff, Oliver North, rose to the top drawer of White House concerns after Congress forbade the government from giving direct or indirect military assistance to the rebels.
Now the extraordinary White House effort to keep the Contras fighting has become the focal point of the worst crisis of Reagan`s presidency. North has been accused of secretly diverting to the rebels at least $10 million from the sale of arms to Iran. While calling North “a national hero,“ Reagan has said he neither knew about nor authorized the diversion of funds, and North was fired from the NSC.
Even before the alleged diversion, the supply effort North oversaw from the White House basement brought millions of dollars in donations from American conservatives, right-wing Latin American military officers, and such far-off potentates as the Sultan of Brunei and King Fahd of Saudi Arabia, according to administration officials and rebel leaders.
Classified U.S. intelligence reports disclose that at least $22 million was raised for the Contras from “private and foreign sources“ over the last year alone, according to well-placed administration officials. This includes the diversion of the proceeds from the arms sales, the sources said.
But this “privatization“ of the Contra war had its hidden costs, administration officials now acknowledge. It meant that officials at the highest levels of the U.S. government were doing business in the shadowy world of international arms dealers, mysterious fund raisers and assorted soldiers of fortune seeking a piece of the action in the name of Reagan`s cause.
Congressional investigators and federal agents working on the three inquiries about the White House role believe that if serious wrongdoing is found it will grow out of the deals in this private gun-running and fund- raising effort.
Much of the attention centers on the money pipeline overseen by North on behalf of the Contras. The handling of the money is shrouded in secrecy and bereft of clear accounting procedures. Nevertheless, it appears that millions of dollars in donations raised for the Contras apparently never reached the rebels. This includes the money diverted from the U.S. arms sales to Iran.
After weeks of closed hearings, Sen. David Durenberger, R-Minn., at the time the chairman of the Senate Intelligence Committee, late last month had to acknowledge, “We still can`t tell whether one nickel of the money ever reached the Contras.“
Congressional and federal investigators are trying to determine whether the funds were diverted to other anti-communist guerrilla movements in Angola or Afghanistan, lost in misplaced airdrops to the Contras, handed out in kickbacks to military officers in Central America or simply skimmed off the top illegally by middlemen.
The Watergate-style investigative committees in both houses of Congress, an independent federal prosecutor and the Justice Department also will be closely examining allegations of criminal acts involving the Contras and their American backers.
Despite initial denials by the White House, it is clear the clandestine supply network set up for the Contras over the last two years was no secret to key administration officials. Even if North chose not to brief White House colleagues on his operations, well placed sources said, the supply effort was monitored, to varying degrees, by the CIA, select members of the NSC staff in Washington and U.S. diplomats and military personnel in Central America.
Aides to Vice President George Bush even acknowledged that his office was told as early as last August that some Contra backers may have been engaging in illegal activities. Although they admit that many administration officials were aware of the secret arms-supply network, Reagan aides insist that North was solely responsible for the diversion of Iran arms funds to the Nicaraguan rebels.
Whether North acted alone is a key question for the investigators.
It was in late 1982, when most Americans still had not heard of the Nicaraguan rebels, that North began to make regular trips to Honduras. There he met with U.S. Embassy and CIA officials and Contra leaders as they began to map out a strategy for overthrowing the Sandinista regime.
Over the next four years, North made at least half a dozen trips a year to the region. By 1984, when official U.S. support was cut, North had become the dominant outside figure in the Contra movement.
Former Contra spokesman Edgar Chamorro said that after the cutoff, North went to Honduras to reassure rebel leaders that the U.S. government would never abandon them. To meet this pledge, he said, North created a secret network of suppliers, arms dealers, middlemen, ex-CIA employees, and anti- Castro Cuban exiles that came to be known as “Ollie`s army.“
Displaying a penchant for secrecy and braggadocio, North repeatedly told associates that he regularly briefed Reagan on the Contra effort and was doing his bidding. In the Defense Department, CIA and the State Department, the notion that North carried the president`s blessing gave the 43-year-old Marine lieutenant colonel power well beyond his military rank.
White House officials vehemently dispute that Reagan had a private relationship with the colonel. They claim that Oval Office logs show North met with Reagan 19 times over the last two years, and never with fewer than five other people present. Moreover, these officials said Reagan explicitly instructed his staff to stay within the bounds of the law in their activities on behalf of the Contras.
But some of his former colleagues said North may nonetheless have believed he was doing what Reagan wanted.
For help in implementing the clandestine supply network, North turned to experienced hands in covert operations. Foremost among these experts was retired Air Force Maj. Gen. Richard Secord, a onetime assistant secretary of defense and ex-chief of the U.S. military mission in Iran who had extensive contacts in the Middle East.
Secord stepped down from his Pentagon post after he was implicated in the federal criminal investigation of ex-CIA agent Edwin Wilson, who was convicted of illegally supplying arms and explosives to Libya. Secord was never charged in the case. Immediately after resigning, he went into the lucrative international-arms and security-consultant business with an Iranian businessman.
According to administration officials and congressional investigators, North and Secord first met in 1981, when they worked together to lobby Congress and arrange the details on a U.S. sale of AWAC surveillance planes to Saudi Arabia. Secord and his Iranian-born associate, Albert Hakim, controlled a security assistance company called Stanford Technologies Inc., with offices in Vienna, Va.; San Jose, Calif., and Geneva, Switzerland. Sources familiar with the investigation said the company played a key role in arranging arms shipments to Iran and in setting up a secret air-supply operation for the Contras.
Published reports said that Secord, through a corporation known as Lake Resources, had access to one of two secret Swiss bank accounts that received deposits from the sale of U.S. arms to Iran. North reportedly had access to the second account. It was from these accounts that money was to flow to the Contras, the sources said.
Although there is no evidence thus far that the cash or its equivalent in supplies ever reached the rebels, sources said Secord was apparently active in supplying the Contras through yet another financial corporation, General Services Fiduciare, with offices in Switzerland and the Bahamas.
Records also show that Secord ordered the purchase of four light planes from Maule Aircraft Co. of Moultrie, Ga., that later were sent to Central America. The planes were ordered by Secord for a Panamanian company and then shipped to Honduras, Maule company officials said. At least one of the planes wound up with the Contras. Federal investigators have seized records of the transaction.
While Secord was moving small, short-range planes to the rebels, he and North reportedly persuaded the Contras to use the services of Southern Air Transport Inc., a Miami-based cargo carrier owned by the CIA between 1960 and 1973. Congressional investigators see Southern Air as a key link between the shipments of arms to Iran, the NSC and the Contra supply effort. Well placed sources confirm it made deliveries of arms to Israel destined for Iran, and its other connections emerged through interviews with company officials.
William Langton, president of the airline, has confirmed that Southern Air advanced a loan to a Daytona Beach broker to purchase the C-123 cargo plane that was shot down in Nicaragua last Oct. 5. Eugene Hasenfus, a cargo handler on this ill-fated flight, has said he and two other Americans were dropping arms to the Contras on a supply mission that originated at the Ilopango air base in El Salvador. He was sentenced to 30 years in prison by a Nicaraguan court and then released last month.
Langton said the purchaser of the plane did not have sufficient money to pay for it at the time, and that the airline agreed to put up the funds. He would not disclose the identity of the purchaser. Southern Air also had a contract to service the plane and airline officials admit the carrier paid for Hasenfus`s commercial airline ticket to Central America.
An airline with a reputation for secrecy and efficiency in flying to the world`s trouble spots, Southern Air has increased its revenues dramatically in 1986, with much of its business coming from U.S. government contracts.
Southern Air flew five State Department-financed supply missions to the Contras in 1986, delivering “humanitarian“ assistance to the rebels. It also flew several other cargo loads into Honduras and El Salvador, and four secret missions on behalf of the White House NSC, according to airline spokesman William Kress.
But knowledgeable administration sources said the airline was used in a U.S. ruse to save the Contras the cost of moving some military supplies. Southern Air was engaged to fly nonlethal supplies to Central America for the State Department, a public contract let by State Department officials. Once in Central America at State Department expense, the planes were then sometimes used to ferry weapons from El Salvador to the Contras in Nicaragua before the aircraft returned to the United States.
“That way we picked up all the transit costs“ for flying from the United States to Central America, one administration official said. This left the Contras` backers responsible for the less expensive costs of flights within the region.
Coordinating the flights from his suburban Virginia office was Richard Gadd, an associate of Secord and friend of North, according to administration officials. Gadd was contracted by the State Department to deliver more than a dozen “humanitarian“ aid shipments to the Contras, the officials said.
Last summer, Gadd`s clandestine role as coordinator of Contra arms- resupply flights was taken over by retired Air Force Col. Robert Dutton, a business associate of Secord who played a role in arranging U.S. arms shipments to Iran. Gadd and Dutton have refused to comment on the air-supply scheme.
But Kress conceded it was possible that Southern Air pilots might fly a mission to an authorized location, filed on its official Department of Transportation logs, and pick up another revenue flight while at a remote location. “If they fly down there with a load of X, they may try to get some revenue flights,“ Kress said.
Because he could not be everywhere at once, North used a former Senate Republican aide and ex-State Department consultant, Robert Owen, to serve as his chief liaison with the Contras. Owen, a young Stanford University graduate, was North`s “eyes and ears“ in Central America, monitoring “whether the equipment was getting down there and distributed the way it should be“ and reporting Contra leaders` gripes back to the NSC, according to one knowledgeable source.
Owen reportedly had close ties to John Hull, an American rancher living in northern Costa Rica, who is under investigation for his alleged role in gun- smuggling to the Contras. Hull, who has bragged of working for the CIA, has acknowleged providing use of the private airstrip on his ranch to the Contras and their backers.
Another key figure linking the Contra aid network to the White House is a Cuban exile named Felix Rodgriguez, a veteran of the ill-fated Bay of Pigs invasion in 1961 and former CIA employee. Rodgriguez was recommended for his job as adviser to the Salvadoran air force by Bush`s national security adviser, Donald Gregg, who knew the Cuban exile from their days together during the Vietnam war.
Known as Max Gomez — a symbolic nom de guerre immediately recognizable to Latin Americans; it is a play on Maximo Gomez, the famed Dominican-born general who led Cuba`s first war of independence against Spain — Rodriguez served as the Contras` liaison with the Salvadoran air force. From his post at San Salvador`s Ilopango air base, Rodriguez oversaw rebel air-supply missions, including Hasenfus`s final mission.
An associate of Rodriguez believed to have played a vital role in the supply effort was another Cuban exile who went by the cover name of Ramon Medina. Administration officials identified Medina as Luis Carriles Posada, a former CIA contract employee who was implicated in the 1976 bombing of a Cubana Airlines jetliner that exploded while on a flight from Barbados to Havana.
Posada mysteriously escaped from a Venezuelan prison in 1984, and is officially an international fugitive. But he was often seen in El Salvador over the last year, and his real identity was common knowledge to other members of the Contra supply operation, informed sources said.
Gregg has publicly admitted introducing Rodriguez to Bush, and the vice president has met with him on three separate occasions. Bush said their conversations focused on the Salvadoran civil war and denied that they ever discussed aid to the Contras. Both Gregg and Bush have denied ever meeting Medina.
But Bush`s office confirmed that Gregg and Rodgriguez discussed the Cuban`s “concerns about“ the Contra supply effort in a meeting in Washington last August. According to one Bush aide, Rodriguez told Gregg of his suspicions that some of the money collected abroad for Contra aid “was being ripped off.“
Gregg considered the charges alarming enough to convene a meeting in his office of key administration officials, including two NSC staff members, the U.S. ambassador to El Salvador, Edwin Corr, and a CIA official. It is unclear what was decided at this meeting, if anything. The vice president`s office insists that Bush and Gregg had no role in “directing, coordinating or approving“ arms supplies to the Contras.
But two months later, Rodriguez hurriedly placed two calls to Col. Sam Watson, Gregg`s deputy, to report concerns that an old airplane that had taken off from El Salvador was late in returning and may have encountered trouble.
That was how aides to the vice president became the first U.S. officials to know that the cargo plane carrying Hasenfus and arms to the Contras had been shot down over Nicaragua. More than any other single event, the downing of the Hasenfus flight focused attention on the Contra supply effort and raised questions about the Reagan administration`s role in coordinating the secret network.
The plane`s wreckage, thoroughly searched by Sandinista troops, contained intriguing bits of evidence. An identification card issued by Southern Air Transport was found on the body of the dead pilot, William Cooper. Also unearthed was a Swiss banker`s business card with a handwritten number that appeared to represent a secret bank account.
Within hours of the crash, White House officials were asking the CIA whether Hasenfus or any other crew member of the ill-fated flight was working for U.S. intelligence. Agency officials responded that they were not. North, however, did not wait for an answer. Administration officials said he immediately flew to El Salvador, where he went to work ensuring that embarassing details of the operation did not leak. And he began to make arrangements for benefits to be sent to the families of the dead pilots.
Intelligence reports flowing from the CIA to the White House raise serious questions about whether Reagan or others actually knew about the diversion of money to buy arms for the Contras. These detailed reports showed a substantial increase in deliveries of arms last summer, particularly along the so-called “southern front“ near Nicaragua`s border with Costa Rica, despite the unaccounted millions of dollars, the officials said. Hasenfus`s plane was shot down in this region.
In addition, El Salvador`s national telephone company released records that showed numerous calls were placed earlier this year to North`s NSC office in Washington from the safehouse in San Salvador used by Hasenfus, Cooper and their colleagues. Calls also were placed to a CIA agent in Costa Rica and to Secord`s offices in Virginia, the records showed. The Salvadoran telephone company, ANTEL, is controlled by military intelligence officers in that nation, informed sources said.
“If the Salvadorans knew all about it, with their intelligence services, then you can bet the CIA and the NSA had to know about it, too,“ one administration official said. “If they didn`t know, then they were just incompetent.“