Crisis Envelops Administration Officials : ‘What Did They Know, When Did They Know It?’

WASHINGTON — Like the stain of an oil spill, the Iranian arms-and-hostages deal and the diversion of profits from it to help the Nicaraguan rebels has spread across the Reagan Administration until--directly or indirectly--it now touches almost every senior government official concerned with national security and foreign policy.

And once again the painfully familiar questions are being asked by FBI and congressional investigators: “What did they know, and when did they know it?”

Those questions, etched in America’s psyche by Watergate more than a decade ago, now are being asked about men who hold some of the most critical positions of trust in the nation: top White House officials, the secretaries of state and defense, the attorney general, the President’s national security adviser, the director of the CIA--even President Reagan and Vice President George Bush themselves.

The questions already have figured prominently in the presidentially ordered inquiry by Atty. Gen. Edwin Meese III, an investigation that led last week to the resignation of Vice Adm. John M. Poindexter as Reagan’s national security adviser and the firing of Lt. Col. Oliver L. North from the National Security Council staff.

In the nearly four weeks since the Iranian arms affair began unraveling, and in the week since Meese disclosed that proceeds from arms deals had been funneled to the Nicaraguan contras, some answers have begun to emerge. Here is an account of what has become known about the involvement of key officials, their roles in the growing controversy and the questions that remain.

President Reagan

Last Jan. 17, Reagan secretly signed a national security “finding” that waived the existing embargo and authorized direct U.S. arms shipments to Iran as part of a “secret initiative” that he says was intended to improve relations with Iran, bring a negotiated end to the Iran-Iraq War, reduce terrorism and help free American hostages in Lebanon. The document ordered the CIA to take part but not inform Congress.

At that time, there had already been at least two U.S.-sponsored shipments of arms by Israel in 1985, and Meese said last Tuesday: “The President did not have full details of all of the aspects of the transactions that took place prior to the (Jan. 17) finding.

“The President was informed generally that there had been an Israeli shipment of weapons to Iran some time during the late summer, early fall of 1985,” Meese said. “. . . Our information is that the President knew about it, probably after the fact, and agreed . . . with the general concept of continuing our discussions with the Israelis concerning these matters.”

In the late summer of 1985, an Administration source has informed The Times, Reagan had been told by Robert C. McFarlane, then his national security adviser, that Israel was willing to help the Administration make contact with so-called Iranian moderates who would use their influence with terrorists holding U.S. hostages in Lebanon in return for a “good-faith” arms shipment.

According to this source, Reagan then ruled out any arms-for-hostages swap. The Washington Post quoted other sources as saying that Reagan agreed it was worthwhile to explore the possibility of establishing contacts with the Iranian moderates.

As for the eventual diversion of profits from Iranian arms deals into Swiss bank accounts for use by the contras, Reagan said last Tuesday: “I was not fully informed. . . . “

There was no question, however, that Reagan wholeheartedly supported efforts to keep aid flowing to the contras in the face of a congressional cutoff of federal funding. Last March 22, for instance, he told rebel leaders visiting the White House that they represent “the future of Central America” and vowed that his Administration would “spare no effort and give no ground in supporting the democratic resistance in Nicaragua.”

And last October, Reagan said that while “there is no government connection” to a supply plane shot down in Nicaragua, “we’ve been aware that there are private groups and private citizens that have been trying to help the contras. . . . We’re in a free country where private citizens have a great many freedoms.”

Meese said the President did not know of the Iran arms-contras connection until last Monday, when the attorney general reported to him on the preliminary findings of an inquiry that Reagan had ordered three days before. The President, in announcing the departures of Poindexter and North, said the funds diversion “raises serious questions of propriety.”

“I believe our policy goals toward Iran were well-founded,” Reagan said. “However, the information brought to my attention yesterday (Monday, Nov. 24) convinced me that in one aspect, implementation of that policy was seriously flawed.”

Vice President George Bush

“No role in it,” the vice president said Saturday when reporters caught up with him while he was jogging and pressed for details of his involvement. Besides a silver sweatsuit, Bush wore a pained expression--and his clipped comment is not likely to be the last word on his part in the mushrooming controversy.

As a former CIA director who headed the Administration’s study of U.S. efforts to combat terrorism, Bush has been described as being at the forefront of national security policy during his six years as vice president.

Aides have acknowledged that Bush, as a member of the National Security Council, attended White House meetings last December and January when the Iranian arms shipments were discussed as part of Reagan’s secret initiative. It is not known whether he attended the meeting at which Reagan decided to sign the pivotal Jan. 17 “finding.”

According to Administration sources, Bush was briefed regularly by North on at least some aspects of the NSC aide’s operations in both the Middle East and Central America, but the vice president’s spokesmen have insisted that he “had no knowledge” of the diversion of funds from the Iranian arms deals to the contras.

Like Reagan, Bush was an active supporter of private efforts to aid the contras. Specifically, he has acknowledged ties to Cuban-born CIA veteran Felix Rodriguez, who helped run the secret rebel airlift operation from an El Salvador military air base.

Bush has said that he met three times with Rodriguez, but he said that they talked only about El Salvador. Sources have said the vice president recommended to Salvadoran officials that they hire Rodriguez as an adviser, and Rodriguez has told associates that he reported frequently on his activities to Donald Gregg, Bush’s national security aide.

Donald T. Regan

Since taking charge of the White House staff in January, 1985, Regan has taken special and public pride in his role as a hands-on overseer of policy machinery. That reputation now looms large as he struggles both to defend the Iranian arms debacle and to explain his contention that he and the President knew nothing of its most scandalous element: the funneling of millions to the Nicaraguan contras.

It is a difficult task. Regan has stated publicly that he was present at every White House session at which the secret Iranian operation was discussed. And a number of officials, in interviews, stress that Regan made a point of being informed of all other NSC policies and operations run by national security adviser Poindexter.

Also, The Times reported last week that Lt. Col. North, the Poindexter aide accused of conducting the National Security Council’s secret operation to divert funds from Iranian arms sales to the contras, has told associates that he briefed Regan in full on the operation from its inception or its early stages. Separately, United Press International quoted an anonymous White House official as claiming that Regan had much the same knowledge.

Regan called those reports “ludicrous.”

George P. Shultz

Starting with the first public disclosure of the Iranian arms shipments Nov. 4, Shultz has portrayed himself as the leading opponent of the plan within the Administration.

Shultz says he attended two “full-scale discussions” of U.S. policy toward Iran last December and January and, at the time, opposed the arms sales. But he has insisted he knew very little about the execution of Iran policy after the second of the meetings on Jan. 7, and a senior State Department official said Shultz was not informed when Reagan signed the Jan. 17 “finding.”

Former national security adviser McFarlane, on the other hand--while acknowledging his role as a point man in the arms-to-Iran program--said he briefed Shultz on the operation “repeatedly and often.” Another former senior official who asked not to be identified by name said Shultz was kept fully informed throughout the program. And Israeli sources said Shultz was kept fully informed, probably by David Kimche, then director general of the Israeli foreign ministry, on Israel’s role in the complex arms trade.

If Shultz knew about the actual arms sales before the story leaked out, there is no evidence to show that he did anything to stop it.

According to the official State Department spokesman, no one in the department from Shultz on down knew anything about the diversion of funds to the Nicaraguan contras.

Lt. Col. Oliver L. North

The man in the eye of the hurricane is a career Marine whose modest job title--deputy director of the National Security Council’s political-military affairs office--belied his sweeping White House role.

North, 43, is a decorated Vietnam veteran--a workaholic whose unbridled zeal for tough anti-Communist policies drew White House attention early in the President’s first term. In August, 1981, North joined the NSC staff, where he was soon involved in planning such bold military strokes as the 1983 Grenada invasion, the 1985 bombing of Libya and the October, 1985, interception of an Egyptian airliner that carried the Middle Eastern kidnapers who had hijacked the cruise ship Achille Lauro. Those jobs, however, were but groundwork for North’s most spectacular role.

One Administration admirer explained North’s value succinctly: “He produces. If a memo to the President needs to be drawn up, he can do it and do it first. If there’s an important need to meet with Poindexter . . . Ollie gets it done. That’s because he’s not a bureaucrat.”

That can-do ability led North to get two other top White House assignments in late 1984: building a network of private support for the contras after Congress barred all U.S. military aid and helping quell international terrorism.

Sometime in 1985, North and McFarlane--using weapons for Iran’s costly and long-running war with Iraq as a lure--secretly began courting “moderates” in the Muslim fundamentalist regime of the Ayatollah Ruhollah Khomeini, apparently seeking a U.S. foothold with Khomeini’s possible successors and freedom for American hostages. Along the way, sources say North signaled White House approval for at least one arms shipment by Israel in August, 1985, even though the President at that point had rejected such a move. Last January, Reagan assented to secret U.S. arms shipments to Iran and ordered the CIA to organize the secret transfers with the NSC. North, the White House point man for the operation, maintained a private conduit to McFarlane’s and later to Poindexter’s office--outside the normal NSC communications system--to keep higher-ups advised of progress.

Then in late 1985 or early 1986, sources say, North hit upon what one called a “brilliant, if twisted” idea: He would finance the contras’ war with profits from the sale of overpriced arms to Iran. “It was Ollie’s idea,” one source said. “He tried to do the driving.”

Via a still-uncharted network of intermediaries in Israel and elsewhere, Iran was charged millions more than the Pentagon price for Hawk anti-aircraft missiles, TOW anti-tank missiles and other weaponry; the excess was skimmed off, and the $10 million to $30 million that remained after commissions to arms merchants and others was placed in Swiss bank accounts for the contras.

North plotted the arms-for-hostages swaps in meetings in Europe and elsewhere, and was on the May, 1986, mission to Tehran with McFarlane during which American representatives met Iranian moderates face to face. The arms-and-hostages deal led to the release of three U.S. hostages held by terrorists in Lebanon, but three more Americans were kidnaped last summer.

North’s key role in the arms sales was exposed in early November, and Administration officials stoutly defended the Iranian overtures as a calculated gamble that simply went awry. But when an internal autopsy of the affair by Meese turned up the Iran-contras link last week, Reagan fired North--then telephoned thanks for his services and later called him “a national hero.”

Only later was the President told that North was believed to have shredded documents the weekend before he was fired--documents that might have blueprinted the scope of Administration involvement in the cash-skimming operation.

North is reliably reported to have told others that all his actions, including the cash-skimming operation, were approved by Poindexter, McFarlane and Regan. Poindexter and McFarlane have admitted some early knowledge of the contras deal, but Regan has denied knowing about it.

Edwin Meese III

At last Tuesday’s White House briefing, Meese was asked about legal opinions he had given on the Iran arms shipments. “The only legal opinion that was involved had to do with the routine concurrence, with the (President’s national security) finding of January 1986,” Meese replied. “That’s the only legal advice that was asked for or that was given.”

A Justice Department official said Sunday that what Meese, who is also a member of the NSC, concurred in was actually legal advice from the CIA’s general counsel that a delay in notifying Congress was permitted because lives were at stake. “He first learned of it (arms shipments to Iran) at that (January) meeting,” said the Justice Department spokesman, Patrick S. Korten, who said he did not know the exact date.

A Justice Department official said Meese discovered that Iranian arms proceeds had been funneled to the contras only three days before he announced it on national television. On Nov. 20, Meese and Asst. Atty. Gen. Charles J. Cooper were reviewing legal issues involved in congressional testimony by Administration officials on the Iran situation.

When they discovered gaps in the information held by various White House officials, Meese won Reagan’s approval to assemble a small team of about four trusted Justice Department officials--all highly conservative political appointees with little or no experience in criminal law--to make inquiries. Working through the weekend, the investigators “discussed” the matter with, among others, the President, Shultz, Weinberger, Regan, CIA Director William J. Casey, Poindexter, North and McFarlane, according to the Justice Department official.

The team, reviewing records of the Iranian arms sale, came upon the link to the contras on Saturday. Meese presented that information to Reagan on Monday, one day before Poindexter resigned and North was fired.

Caspar W. Weinberger

Like Shultz, Reagan’s defense chief was an early opponent of arms sales to Iran. But Weinberger, described by one aide as “a good soldier,” apparently later played a role in the arms transfers and, since the disclosures, has expressed his support of the President.

According to several Pentagon sources, Weinberger first made his opposition known in July, 1985, when an NSC staff memo reached his desk raising the possibility of shipping unspecified military equipment to Iran as part of a U.S. effort to improve relations with Tehran. Sources said Weinberger wrote in the margin of the memo, “This is almost too absurd for comment.”

Later, in meetings at the White House, Weinberger joined Shultz in urging that the proposal be killed, the sources said, and for a while thought he had succeeded. But, according to Newsweek magazine, Weinberger told aides in September, 1985, to secretly prepare to ship U.S. arms to Israel to replace materiel being sent to Iran by the Israelis, indicating that he was complying with a presidential order. The Pentagon denied Newsweek’s account.

Still later, after Reagan signed the Jan. 17 order formally waiving the Iran arms embargo, Weinberger is said by sources to have “facilitated” the transfer of missiles and spare parts from Pentagon stockpiles to the CIA for direct shipment to Iran. While he has avoided public comment on the controversy, Weinberger’s aides have insisted he knew nothing about the transfer of part of the proceeds to aid the contras.

Robert C. McFarlane

Reagan’s former national security adviser is, like North, a Marine from Texas who prefers action to pencil pushing. His two-year tenure in the top NSC job was marked by military forays including the Navy’s 1983 shelling of Lebanon and the Grenada invasion.

Unlike North, however, McFarlane also considered himself a shaper of world political strategy, and it is in that vein that he is said to have promoted and then spearheaded the secret overtures to Iran. But his exact role remains shadowy at best, for McFarlane disclaims responsibility for--and comment on--much of the disastrous venture, even though it was born and carried out under his direction.

He is said to have first seriously considered plans for a secret U.S. initiative directed at Iranian moderates in mid-1985, six months before quitting his post as national security adviser last December. One account suggests that his interest in Iran was stirred by the former director general of the Israeli foreign service, David Kimche, who carried a message from Iranian moderates. Another says the Iran operation was conceived by McFarlane, North and North’s NSC boss, Howard Teicher, in 1985 discussions with terrorism experts, Israeli government officials, Iranian intermediaries and other U.S. officials.

One news account citing McFarlane and sources “familiar” with his thinking casts McFarlane as consistently opposed to secret arms trading with the Iranians. But others say a blueprint for an Iranian initiative--including secret arms shipments--was presented to Reagan, with McFarlane’s backing, in July, 1985.

Reagan rejected that proposal. Israeli government officials, speaking anonymously, claim that McFarlane or his office nevertheless gave approval for at least two shipments of U.S.-made weapons that were sent to Iran in August and November, 1985.

McFarlane has effectively disavowed any link to the Iran arms-for-hostages dealings between the crucial months of September, 1985, and April, 1986--well after his December, 1985, resignation from the top NSC post. Two news accounts, apparently based on interviews with McFarlane, claim that he was asked in March or April by his White House successor, Poindexter, to fly secretly to Tehran with North, Teicher and others for talks with Iranian moderates. The trip was undertaken in late May, 1986.

White House officials have said little about how much McFarlane knew of the Iran arms deals and the cash-skimming operation that benefited the contras. Meese said McFarlane was told of the contras link by North last May, during the Tehran trip. McFarlane, in a prepared statement, said he never mentioned the revelation to others in the U.S. government because he assumed that North had told them about it. But North is said to have told associates that McFarlane knew of and approved all aspects of the Iranian dealings.

John M. Poindexter

McFarlane’s successor in December, 1985, was portrayed initially as a bookish admiral who would do his bosses’ bidding and make no bold policy strokes of his own. Whether that portrait was accurate is now a signal issue in the unfolding scandal.

Poindexter was second-in-command at the National Security Council when McFarlane left in December, 1985, reportedly amid differences with Regan over control of the national security agenda. When Poindexter succeeded McFarlane, a government official says, “unfettered NSC access to the President ceased.”

What remains unanswered is when Poindexter learned of key elements of the Iran undertaking and what he told--or concealed from--the President or Regan.

Poindexter is reported to have sat in on some 1985 discussions of proposals to establish a beachhead with Iranian moderates, and at least part of the Iran arms policy appears to have been in place and operating by the time he replaced McFarlane.

Poindexter had been national security adviser for several weeks when he attended a January meeting in the White House that led Reagan to involve the United States directly in covert arms shipments to Tehran. And he is reported to have voted with the majority--over the sole objection of Defense Secretary Caspar W. Weinberger--to urge that Reagan sign a secret directive lifting the U.S. arms embargo against Iran and ordering the CIA to aid in the arms shipments without telling Congress, as it is normally required by law to do. Shultz, who also opposed the idea, had been excluded from the decision meeting.

White House officials, including Poindexter himself, maintain in background briefings with reporters that he was fully aware of the covert arms shipments after Reagan signed the January “finding.”

But not until last Tuesday, when the cash-skimming operation was revealed, was it disclosed--by Meese--that Poindexter was “generally” aware of the Iran-contras link but “did not look into it further.”

That was enough to push the admiral into resigning his post last Tuesday. Since then, no one has explained what Poindexter’s “general” knowledge of the cash-skimming operation included, when that knowledge was acquired or what if anything Poindexter did about it.

North is said to have told associates that Poindexter knew of and approved the operation from its beginning.

William J. Casey

Casey and the CIA were in the thick of the secret operation to sell arms to Iran. Meese described the CIA as “the agent” for the U.S. government in most of the deal: The CIA bought the weapons from the Pentagon, arranged to ship them to Iran and took payment through its own Swiss bank accounts.

Casey and his agency have flatly and repeatedly denied taking part in--or even knowing about--the other part of the scheme, skimming arms profits for the contras. And Meese said last week that “to the best of our knowledge, no one in the CIA knew about it.”

Two issues are involved: How could the CIA have been so intimately involved in the arms transfers without noticing that Iran was paying far more for the weapons than the United States was receiving? And why did the agency fail to investigate fully the source of the contras’ new funding--which Administration sources say CIA operatives discovered but did not investigate when a substantially expanded air cargo system was put in place at a time when Congress had halted U.S. military aid?

Casey briefed the House and Senate intelligence committees on these issues Nov. 21 and told them the CIA had set up Swiss bank accounts to receive the about $12 million that the United States charged Iran for the weapons. But he told the committees that he was unable to give them a full accounting of the money trail. The House Intelligence Committee demanded a full accounting, and four days later Meese announced that he had discovered where the profits went.

Casey also told the committees that a retired CIA officer, George Cave, was recalled by the agency to oversee the arms-and-hostages operation and was aboard the aircraft that took McFarlane to Tehran in May. And Casey said the CIA directly managed five arms shipments to Iran: one in 1985, before President Reagan authorized the deal, and four in 1986, after Reagan approved the plan. But he insisted that neither he nor anyone else in the agency knew where the money had gone.

Sources say the CIA held back from pursuing the money trail for two reasons: A full inquiry might violate restrictions against CIA surveillance of U.S. citizens, and there was little enthusiasm for investigating an effort so closely in accord with the President’s expressed feelings.

Times staff writers Norman Kempster, Ronald J. Ostrow and Gaylord Shaw also contributed to this article.