--- Begin Message ---
-Caveat Lector-
http://www.fas.org/irp/offdocs/walsh/chap_08.htm
Chapter 8
The Enterprise and Its Finances
Secord and Hakim in 1983 founded Stanford Technology Trading Group
International (STTGI).1 Hakim was chairman of the board. Secord was
president. STTGI was wholly controlled by them. In the fall of 1984,
North introduced Secord to contra leader Adolfo Calero to assist
Calero in the purchase of arms, using the proceeds of a contribution
from Saudi Arabia.
1 STTGI is distinct from Stanford Technology Corporation (``STC''),
founded in 1974 by Hakim. Hakim and Secord subsequently formed a
number of shell corporations in Switzerland with related names,
including StanTech Services S.A.; Stanford Technology Corporation
Services, S.A.; and Scitech, S.A.
In 1985 and 1986, weapons sales to the contras and Iran generated an
increasing proportion of STTGI's income; by 1986, the business of
STTGI was the Enterprise. Financial management of all Enterprise
assets was done in Switzerland by Compagnie de Services Fiduciaire
(CSF), controlled by Willard Zucker, an American tax lawyer living in
Geneva.2
2 Zucker had provided Hakim with financial services since the mid-
1970's, when Hakim still lived in Iran. Swiss fiduciaires combine
functions that Americans associate with money managers, bankers and
lawyers. The services CSF provided to the Enterprise included inter-
bank and inter-account transfers, cash disbursements to individuals,
expense payments, investments, currency deals, the establishment of
financial accounts and shell corporations, and bookkeeping.
Secord and Hakim decided very early -- by mid-1985 at the latest --
to conceal the sources of their income through a variety of schemes.
One of their purposes was to avoid the payment of income taxes. In
addition to the protection afforded by Switzerland's strict bank-
secrecy laws, Zucker at the direction of Secord and Hakim erected a
maze of dummy corporations and bank accounts to conceal the true
sources and recipients of funds.3
3 The Enterprise's Swiss corporate accounts were: Energy Resources
International, S.A.; Lake Resources Inc.; Hyde Park Square
Corporation; Albon Values Corporation; Defex, S.A.; Dolmy Business,
Inc.; Gulf Marketing Consultants, Ltd.; Stanford Technology
Corporation Services, S.A.; Stantech Services, S.A.; Toyco, S.A.; and
Udall Research Corporation. The investment accounts were: Richard V.
Secord; C. Tea; Albert Hakim; Korel Assets; Scitech Trading Group,
Inc.; Lake Resources Inc.; B. Button; and A.H. Sub-accounts #1, #2
and #3.
More than $47.6 million flowed from the Iran and contra operations
into the Swiss Enterprise accounts. The receiving accounts were:
Energy Resources International, S.A. ($11.3 million); Lake Resources
Inc. ($31.5 million); and Hyde Park Square Corporation ($4.8
million). (See ``Enterprise Gross Receipts'' chart, next page.)
>From its receipts, the Enterprise transferred to a CIA Swiss account
a total of $12.2 million to be paid to the Department of Defense for
U.S. weapons sold to Iran. The Enterprise also disbursed $17.6
million for weapons purchases for the contras and contra-related
expenses.
Shortly after the Iran/contra matter became public in late November
1986, the Swiss government at the request of the United States froze
the accounts of the Enterprise. At the time, 16 out of 21 corporate
and investment accounts of the Enterprise contained a total of $7.8
million.
The direct U.S. weapons sales to Iran, which began early in 1986,
generated by far the largest revenues for the Enterprise.
Unlike the contra sales transactions, the Enterprise did not buy and
sell the Iran arms as brokers or for its own account. It acted as
agent, a front, for the true owner of the arms, the United States.
The sales were incidental to a presidential direction and a
presidential objective. Sales and delivery to the ultimate purchaser
were at all times subject to the control of the President, acting
through Poindexter and North. As agent, the Enterprise was a service
organization collecting funds for the United
Insert offset folio 468a here.
States and delivering weapons for the United States.
In 1986 the Enterprise received $30.3 million from the sale of this
U.S. Government property to Iran and for replacement TOW missiles to
Israel. Only $12.2 million was returned to the United States. Direct
expenses of the Enterprise were approximately $2.1 million. Thus, the
amount of U.S. Government funds illegally held by the Enterprise as
its own was approximately $16 million.4
4 The compensation of a proprietary or private ``cut-out'' for the
CIA is usually set in advance. This was not done for Secord. Although
technically an agent for the CIA, he operated under the direction of
the national security adviser. Under these circumstances, a claim for
compensation would have been limited to that which was agreed to by a
properly authorized Government officer and which was reasonable for
the services rendered -- not half the proceeds.
The Enterprise and the Contra Arms Sales
In late 1984, Secord and Hakim, at North's request, began selling
weapons and other lethal supplies to the contras. They acted as
brokers, buying weapons from other arms dealers and paying for them
with money provided by Calero, whose funds primarily came from secret
donations by Saudi Arabia.5 Beginning in mid-1985, private and
foreign-country donations to the contras were deposited directly into
the accounts of the Enterprise to supply the contras, effectively
eliminating Calero as a money-handler, with the exception of what
remained in the contra account from the Saudi donations.
5 The Saudis in mid-1984 began donating $1 million a month to the
contras; in 1985, they doubled that amount. In all, the Saudis gave
$32 million for the purpose of resupplying the contras during the
period in which U.S. aid was prohibited by the Boland Amendment.
In 1985 and 1986, there were ten pro-rated profit distributions among
members of the Enterprise for the contra weapons sales. The draws
from these sales between April 1985 and September 1986 amounted to
$4.579 million. The distributions occurred in seven numbered phases,
and three that were unnumbered. (See ``Contra Arms Sales, Pro-Rated
Profit Distributions'' chart, next page.)
Phase I, Contra Arms Sales (November 1984-March 1985)
Secord late in 1984 arranged an initial sale of weapons to the
contras through a Canadian firm, TransWorld Arms (TWA), headed by
Emanuel Weigensberg. TWA's supplier was a Portuguese weapons firm
known as Defex, which arranged for the purchase of a shipload of
weapons from the People's Republic of China. Due to unexpected
delays, the weapons did not arrive in Central America until April
1985.
The contras paid $2.3 million for the weapons. According to
Enterprise books, total profits on the ``Phase I'' contra weapons
sale amounted to $720,400. Weigensberg at TWA received one-third of
this amount ($240,133), as did Thomas Green, the Washington, D.C.,
lawyer who had introduced Secord to TWA. Secord and Hakim split the
remaining amount equally, each receiving $120,066.
Due to delays in delivery of the Phase I shipload of weapons and in
order to eliminate Weigensberg and Green from the profit shares,
Secord recruited two former colleagues, Clines and Rafael Quintero,
to arrange a second purchase of arms. Clines' acquaintance with the
owner of Defex (Portugal) enabled Secord to work directly with that
company. All profits from this and later arms sales were allocated to
Secord, Hakim and Clines. Quintero was paid a monthly salary plus
bonuses for successful arms deliveries.
Phase II of the Contra Arms Sales (January-March 1985)
A second order, Phase II, was filled in two plane loads of arms
purchased from Defex Portugal: one delivered in January and the
second in March 1985. Secord arranged for air transport with the help
of Richard Gadd, an Enterprise sub-contractor who had served under
Secord in the Air Force. Gadd in turn enlisted a Miami air charter
company, Southern Air Transport (SAT), which then subcontracted these
flights to a second carrier.
CSF's books show that the contras paid $1.235 million for the weapons
in these two shipments. Total profits were $310,840. Secord and Hakim
each received 40 percent of the profits (or $124,336 each), and
Clines 20 percent ($62,168).
Phase III of the Contra Arms Sales (March-May 1985)
Secord made plans for a third shipment of arms to the contras in the
spring of 1985. The weap-
Insert offset folio 468b here
ons arrived in Honduras from Portugal in June 1985 on a leased Danish
freighter, the Erria, which the Enterprise purchased a year later.
CSF's books show that the contras paid $6.407 million for the arms.
Total profits were $1.5 million; Secord and Hakim got 40 percent each
($621,936 each), and Clines 20 percent ($310,966).
Summer 1985: Calero's Purchasing Power Is Removed, the Creation of
the ``Defex'' Account to Disguise Profits, and the Lake Account
In late June 1985, North and Secord met in Miami with Calero and
contra military commander Enrique Bermudez to inform them that
private contributors would begin paying the suppliers -- the
Enterprise -- directly for weapons, rather than giving money to the
contras to buy the weapons themselves. In the future, funds raised
from private donors and from third countries were to be deposited
into the accounts of the Enterprise, effectively allowing it to
corner the contra-arms market.
Shortly after the Miami meeting, Secord and Hakim devised a new
system for distribution of the profits. They had the Enterprise's
Swiss fiduciaire CSF in July 1985 create a Liberian shell corporation
named ``Defex S.A.'' The new corporation was intentionally given a
name similar to that of the Portuguese arms company, Defex, to enable
Secord and Hakim to conceal from the contras the high mark-ups of the
Enterprise, by having their financial records suggest that the marked-
up prices they charged for arms were being paid to Defex, the
supplier.
CSF opened the Defex S.A. bank account at Union de Banques Suisse
(UBS) in Fribourg, Switzerland, on July 23, 1985. More than $3
million went through the Defex S.A. bank account between July 1985
and August 1986.
Zucker described the purpose of creating the Defex S.A. account -- to
hide the profits -- in a memo to his assistant Roland Farina on July
8, 1985. Zucker told Farina that Defex Portugal, the Lisbon-based
arms supplier from which the Enterprise (under the name Energy
Resources) purchased the contra weapons, may
. . . seek to approach Energy's customer [the contras] directly,
thereby seeking to cut out Energy, and offer similar merchandise at
significantly lower prices, explaining to the ultimate customer that
Energy has kept for itself a large commission.
To counter this possibility, we have created a LIberian [sic] company
with the name DEFEX. S.A. Energy would like us to pay to the account
of this Liberian Company ``DEFEX'' the spread or commission earned on
the transactions . . . In this manner, we can show debit advices on
the Credit Suisse account of Energy for transfers made to DEFEX, and
those together with all of the other disbursements made, will more or
less equal the amounts received by Energy.
. . . The objective, I repeat, is to have in hand sufficient debit
advices in Energy so that if any questions are asked whether the
entire amount received was expended, we can show payments
approximating the amounts received to DEFEX or for expenses relating
to the shipments.6
6 Memorandum from Zucker to Farina, 7/8/85, AMU 005189.
A further change in the financial structure of the Enterprise in the
summer of 1985 helped disguise the money trail further. Payments from
the contras for the first series of arms sales went into the
Enterprise account named Energy Resources International. In the
summer of 1985, after taking control of all contra supply, Secord and
Hakim created a new receiving account, Lake Resources. In July and
August 1985, they had CSF transfer all funds out of Energy and into
Lake, through the Defex S.A. account and an account of a Zucker-
controlled company named Audifi S.A. After Lake was formed, all
Enterprise receipts were effectively commingled in that account,
regardless of their origin.
Phase IV of the Contra Arms Sales (December 1985)
Secord and Hakim arranged a fourth shipment of arms to the contras in
December 1985. The weapons were purchased by Calero with funds
remaining in his account; transportation and other expenses were
covered by funds from Calero and other sources commingled in the Lake
account.
The weapons were delivered to El Salvador on December 15, 1985. On
December 17, CSF credited Secord's personal account, known as ``Korel
Assets,'' with $100,800 in profits. The same day, Hakim received
$100,800, and Clines received $50,400 in cash.
The February 1986 Distribution
On February 6 and 7, 1986, CSF distributed $165,000 to both Secord's
Korel account and the Hakim account.7 This distribution was
distinctive for several reasons: It did not follow any arms shipment
to Central America, Clines did not share in the distribution, and it
was not assigned a phase number. Most importantly, the distribution
was made literally hours before the Enterprise received the first
payment for a $10 million U.S. weapons shipment to Iran.
7 The financial records provided by Hakim to Congress in 1987
inaccurately showed distributions one year apart (one in February
1985 and a second in February 1986), thus concealing the apparent 50-
50 split between Secord and Hakim.
Secord and Hakim drew out their Lake Resources account apparently in
anticipation of the payment for the Iran shipment, which represented
the start of a lucrative new venture for the Enterprise.
Phases V-VII of the Contra Arms Sales (March-June 1986)
Between February 27 and May 23, 1986, the Enterprise paid Defex
Portugal about $860,000 for contra weapons. Weapons were delivered to
Central America in March, April and May in three shipments. CSF books
show profit distributions between April and June, numbered Phases V
through VII, totaling $550,471. In addition, there was an unnumbered
distribution of $37,277 on June 20, 1986, resulting from the Phase
VII shipment.
The Undelivered Shipment and Distribution (July-September 1986)
In July 1986, the Enterprise paid Defex (Portugal) $2.6 million and
$500,000 to another dealer, Monzer Al Kassar, for contra weapons. In
late July, a shipment of arms left Portugal for Central America
aboard the recently acquired Enterprise freighter, the Erria.8
According to Thomas Parlow, the Erria's Danish shipping agent, the
freighter was carrying arms picked up in Poland and Portugal.9
8 Clines, Hakim and William Haskell, an associate of North, traveled
to Copenhagen in April 1986 to purchase for approximately $320,000
the Erria, which the Enterprise had leased a year earlier for a
weapons shipment to the contras. The ship was purchased by the
Enterprise in the name of Dolmy Business Inc., a Panamanian shell
company. Thomas Parlow became the Erria's Danish shipping agent.
According to Parlow, Hakim would telephone Parlow to direct movement
of the ship, and Parlow would communicate those directions to the
ship's captain. (Parlow, FBI 302, 3/5/87, pp. 2-3.)
9 Ibid., p. 3.
As the Erria was nearing Bermuda, Parlow, acting on instructions from
Hakim, ordered it to slow its speed and await further instructions.
Clines then directed the ship to work its way slowly back to
Portugal.10 When it arrived in Portugal it could not obtain
permission to enter the port. In this mid- to late-August 1986
period, Secord ordered Clines to try to sell the cargo or dump it at
sea, according to Parlow. The vessel headed for Spain, where it
remained anchored for two weeks.
10 The ship apparently was ordered back to Europe because it was to
be used in an impending U.S.-Israeli venture involving Iran.
As the Erria made its circuitous journey, the CIA through a series of
commercial entities arranged to buy the weapons aboard. According to
CIA officials, they did not learn the identity of either the owner of
the ship or its cargo until January 1987, when a newspaper article
named the Secord-Hakim Enterprise as the owner of the ship and the
weapons.
The CIA paid $2.1 million for the arms shipment, including shipping
and handling costs.11 According to the private arms dealer who bought
the arms for the CIA, he paid $1.6 million for the weapons. Of that,
the Enterprise received $1.2 million, and the remainder went to
Parlow or Defex, who worked together to re-sell the weapons.
11 CIA Inspector General's Report, July 1987, p. 38.
The Enterprise paid $3.1 million to arms suppliers for this shipment,
but sold it to the CIA for only $1.2 million. In a conventional
business, this would have represented an enormous loss. The
Enterprise partners, however, split more than $861,000 in claimed
profits on the transaction. Because the money originally used to
purchase the weapons came from commingled funds in Enterprise
accounts -- including U.S. funds generated by the sale of arms to
Iran and funds donated to the contras -- Secord, Hakim and Clines, in
effect, allocated to themselves funds that either rightfully belonged
to the United States or the contras. In addition, the CIA helped
cushion the blow of any loss the Enterprise might have felt by paying
for the arms at a reduced price. Independent Counsel obtained no
evidence that these arms ever reached the contras.
The Finances of the Contra-Resupply Operation
In addition to selling arms to the contras, the Enterprise in the
late summer of 1985 began assembling a full-service resupply
operation in Central America that would air-drop weapons and other
goods to contra forces in the field. In December 1985, North
instructed Secord to establish an operating fund of $150,000 for
Richard Gadd, whom Secord had hired to manage the resupply
operation.12 In response, the Enterprise wire-transferred $100,000 to
Gadd for start-up costs.13
12 Gadd, FBI 302, 7/14/87-7/15/87, p. 13.
13 Ibid.
The resupply operation, known as ``Project Democracy,'' was organized
and fully running by the spring of 1986. Enterprise expenditures on
this effort flowed principally to four commercial entities:
1. Eagle Aviation Service and Technology (EAST). This company was run
by Gadd, who was experienced in Government contracts involving covert
activity. EAST received $550,007 from the Enterprise for contra-
related expenses, including work on the construction of a secret
airstrip in Costa Rica, payments for communications specialists, a
demolitions expert and some pilots and crews.
2. Amalgamated Commercial Enterprises, Inc. (ACE). This Panamanian
corporation was set up by Southern Air Transport at Gadd's request to
serve as a financial ``cut-out'' -- or extra layer of concealment for
the true owners of the contra-resupply operation -- for billing
purposes. After its creation in late 1985, ACE received and disbursed
$1,540,956 in Enterprise funds for the operation. This included
payments for two C-7 and one C-123 airplanes, for services provided
by Corporate Air Services (see below); and for Southern Air Transport
expenses not directly reimbursed by the Swiss Enterprise accounts.
3. Southern Air Transport (SAT). This Miami air-charter company was
used by the Enterprise in both the contra and Iran operations. In
1985 and 1986, it received $1,935,596 for contra-related services,
including the purchase of a C-123 cargo plane, repair and maintenance
of aircraft, sale of spare parts and the supply of cash advances to
the resupply operation in Central America. In addition, the
Enterprise paid SAT $200,000 for a Jetstar aircraft used by Secord
and others for contra-related travel.
4. Corporate Air Services (CAS). Gadd employed this Pennsylvania
company owned by Edward T. de Garay as the on-site manager of the
resupply operation. CAS received from the Enterprise Swiss accounts
and through ACE $457,769 for salaries and other expenses.
Summer-Fall 1986: The Enterprise Tries to Sell Its Contra-Resupply
Operation to the CIA
As Congress in the summer of 1986 moved toward lifting the ban on
U.S. military aid to the contras and toward final approval of a $100
million funding bill, the Enterprise envisioned another possible
business opportunity: CIA assumption of its resupply operation in
Central America. As a result, North, Secord and other members of the
Enterprise readied the resupply network for possible sale to the CIA.
Secord in the spring of 1986 asked Robert Dutton, who had replaced
Gadd as manager of the resupply operation, to prepare a description
of Enterprise assets; North later asked Dutton to add a price list.14
Dutton's memo describes how extensive the operation had grown by mid-
1986.
14 Undated Dutton outline of the resupply operation; attached list of
assets and expenditures dated 7/21/86, 00001-15.
In describing the organizational structure, Dutton stated that
``Benefactor Company,'' or ``B.C. Washington'' had operational
control of all assets in support of the resupply operation, or
``Project Democracy.'' He stated that all contracts and payments went
through Amalgamated Commercial Enterprises (ACE), which acted as the
broker for SAT in Miami, which provided aircraft and maintenance and
other support.
Dutton valued the resupply operation's assets at $4.089 million,
which included, among other items, two C-123 cargo jets; two C-7
planes; a Maule aircraft; 15 a secret Santa Elena, Costa Rica,
airstrip; the Santa Elena property; spare parts; and munitions and
supplies.
15 In 1985 and 1986, the Enterprise purchased four Maule aircraft,
but apparently was offering only one as part of its resupply-
operation package.
Dutton described Project Democracy's operating locations: Washington,
``the hub for all operational project information;'' ``Cincinnati,''
the code name for Ilopango air base in El Salvador, where aircraft
were based and four houses maintained in the city for about 18
employees; ``The Farm,'' the air base at Aguacate, Honduras, used as
a ``launch and recovery site for support missions;'' ``The
Plantation,'' the secret Santa Elena, Costa Rica, airstrip for
refueling and emergency landing; and ``Maintenance Support Miami,''
where a support crew worked closely with SAT for procurement and
delivery of required items. Dutton listed 25 salaried employees of
the resupply operation, including managers, flight crews and others.
Dutton proposed two options for transferring the assets of the
resupply operation to the CIA: (1) sale of the assets for less than
the estimated value of $4 million; or (2) leasing the assets to the
CIA for $311,500 per month plus add-ons. Dutton stated that the first
option was preferable.
But the CIA was not eager to associate itself with the Enterprise
resupply network, whose illicit operation had been concealed from
Congress despite repeated inquiries. North in a computer message to
Poindexter on July 15, 1986, complained about the CIA's reluctance to
purchase the resupply network's assets: ``It would simply be
ludicrous for this to simply disappear just because CIA does not want
to be `tainted' with picking up the assets and then have them spend
$8-10M of the $100M to replace it -- weeks or months later.'' 16 In
July 1986, North, at a meeting with Abrams and Fiers, described the
Enterprise assets in Central America.
16 PROFs Note from North to Poindexter, 7/15/86, AKW 018917.
North asked Poindexter to speak to Casey about the matter; Poindexter
agreed to talk to Casey, adding that he (Poindexter) had told CIA
Deputy Director Robert M. Gates that ``the private effort should be
phased out.'' 17 According to Alan Fiers, chief of the CIA's Central
American task force in 1986, Fiers advised against CIA assumption of
the operation's assets.18
17 PROFs Note from Poindexter to North, 7/26/86, AKW 021732.
Poindexter told Congress he believes he told Gates ``that these
assets are available and you ought to look at them, or something to
that effect.'' (Poindexter, Select Committees Deposition, 5/2/87, pp.
208-9.)
18 Fiers, Grand Jury, 8/14/91, p. 77.
Dismantling the Operation
The Nicaraguan shootdown of the contra-resupply plane carrying
American survivor Eugene Hasenfus on October 5, 1986, settled
irrevocably the question of CIA assumption of Enterprise assets. With
a $100 million contra-funding bill awaiting final approval in
Congress, the agency could not associate itself in any way with the
Enterprise operation. CIA officials had publicly and in closed
congressional testimony disavowed any involvement with it.
ral Juan Rafael Bustillo, the Salvadoran military chief at Ilopango
air base, ordered the resupply crews out of the country. The planes
were flown to Aguacate air base and the Hondurans later took
possession of them.19 Luis Posada, whose alias was Ramon Medina and
who handled expenses for the pilots and crews, cleaned out the houses
where resupply personnel had stayed, retrieved documents and
delivered them to Quintero, who then gave them to Dutton.20 Posada
also terminated the operation's leases, paid the bills and disposed
of radio equipment, cars and other goods.21 The Salvadoran Air Force
took possession of the operation's warehouse of parts and supplies at
Ilopango.22
19 Ibid., p. 5.
20 Dutton, who received immunity from prosecution, provided these
documents to OIC.
21 Posada, FBI 302, 2/3/92, pp.25-26.
22 Ibid., p. 26.
North's notebooks reflect a series of conversations with Secord and
others about obtaining a lawyer for Hasenfus, who was imprisoned and
facing trial in Nicaragua, as well as discussions about death
benefits and funeral arrangements for the pilots killed in the
crash.23 William Haskell, North's friend who performed a variety of
Enterprise-related duties on his behalf, and resupply manager Edward
de Garay went to Panama to obtain a lawyer for Hasenfus, who was
imprisoned and facing trial in Nicaragua; their mission was not a
success.24
23 North's Notes, dated October 8-10, 13-15, 1986, AMX001574-93. At
Secord and Hakim's request, Zucker hired a Swiss lawyer for Hasenfus.
Zucker said the Swiss lawyer was unable to contact Nicaraguan
officials and did not continue with the case. (Zucker, FBI 302, 5/16-
18/88, pp. 4-5.)
24 Gadd, FBI 302, 7/6/87-7/7/87, pp. 22-23; Haskell, FBI 302, 7/6/87,
p. 11.
In December 1986, John Piowaty, an air-support manager for the
resupply operation, at Dutton's request carried $6,000 in cash from
Southern Air Transport in Miami to Sally Hasenfus, Eugene Hasenfus's
wife.25 This amount represented two months' salary for Hasenfus, who
was released from jail and allowed to return to the United States in
December 1986.
25 Piowaty, FBI 302, 6/22/87.
North testified that Abrams asked him to ``raise the money to pay''
for the retrieval of the bodies of pilots Wallace Sawyer and William
Cooper from Nicaragua.26 According to Piowaty, Dutton told him that
the families of the pilots who were killed in the shootdown would
each receive $60,000 in benefits. The families, however, never
received such payments.27 The Enterprise did arrange to have
delivered $3,000 in cash to a Magnolia, Arkansas, funeral home for
Sawyer's burial costs.28
26 North, Select Committees Testimony, 7/8/87, pp. 167-68.
27 Piowaty, FBI 302, 6/22/87, p. 4.
28 McAlister, FBI 302, 5/4/87, pp. 1-3. Independent Counsel obtained
no evidence indicating that a similar payment was made for Cooper's
funeral.
The Enterprise attempted to establish a defense fund for Hasenfus
from allocations intended for the contras. In early October 1986,
before the shootdown, Secord and Hakim at North's request had three
checks issued to pay outstanding contra grocery bills. These checks
were made payable to Aquiles Marin, a contra representative, and sent
to Rafael Quintero in Miami. Only one check for $75,000 went to the
contras. Following the shootdown, Secord told Quintero to set aside a
second $75,000 check and a third $50,000 check to establish a defense
fund. Quintero endorsed the $75,000 check, forging Marin's signature,
and mailed it with the unendorsed $50,000 check to the Banque
Intercommerciale de Gestion in the Bahamas; Quintero instructed the
bank to use the $75,000 check for a defense fund and to hold the
$50,000 check for him (Quintero).29
29 Quintero, FBI 302, 9/1/87.
The Enterprise and the Sale of U.S. Arms to Iran
The 1985 Israeli Sales
Private arms dealers in 1984 began suggesting to U.S. officials that
if weapons were sold to Iran, Iranians could gain the release of
Americans held hostage by terrorists in Lebanon. Manucher
Ghorbanifar, an Iranian exile and former CIA informant who had been
discredited by the agency as a fabricator, was a driving force behind
these proposals.
By August 1985, Israel had obtained, through National Security
Adviser Robert C. McFarlane, President Reagan's approval to sell U.S.
arms to Iran and to replenish Israeli weapons stocks.
In 1985, there were two Israeli sales of U.S. weapons to Iran: 504
TOW missiles in August and September 1985, and 18 HAWK missiles in
November 1985. The Israelis relied on international financier Adnan
Khashoggi to raise ``bridge financing'' for the deals, because the
Iranians would not pay for the weapons until they were delivered, and
Israel would not ship the weapons before Iran paid for them.
Although no U.S. funds were involved in the November 1985 HAWKs
transaction, the Enterprise derived a windfall. As described
elsewhere in this report, the HAWK shipment encountered logistical
difficulties, resulting in the direct involvement of North and
Secord. North told the Israelis to transfer $1 million to the
Enterprise's Lake Resources account in Geneva to pay for airlifting
the missiles to Iran; they did so on November 20, 1985.30 The
Israelis thought the million-dollar request was reasonable based on
an anticipated four flights to ship 80 HAWKs at $250,000 per
flight.31
30 Israeli Financial Chronology, 4/26/87, AOW 0000182, as released in
Select Committees Report, p. 179.
31 Ibid.
After the first 18 HAWKs were delivered to Iran, the Iranians
rejected them. The rest of the shipment was cancelled. The Enterprise
had spent only $127,700, on the single shipment. The difference --
approximately $870,000 -- remained in the Lake Resources account
commingled with funds from other sources; it was used for aid to the
contras and other purposes.32
32 Secord testified before Congress that the Israelis did not ask for
their money back. He said he discussed the matter with North in
December 1986, and North told him they could use the money ``for
whatever purpose we wanted. We actually expended it on the Contra
project.'' (Secord, Select Committees Testimony, 5/5/87, p. 95.)
Because of the commingling of funds in the Lake Resources account,
however, it is not possible to directly tie the Israeli deposit to an
expenditure of funds on the contras.
Direct U.S. Arms Sales to Iran: The Enterprise as U.S. Agent
In January 1986, the Reagan Administration decided to sell weapons
directly from U.S. stocks to Iran, eliminating Israel as an
intermediary and employing Secord as an agent to make the sales and
transport the arms, masking official U.S. involvement. President
Reagan authorized the direct sales in a January 17, 1986, covert-
action Finding. Under the Finding, Secord, acting as an agent of the
CIA, would sell arms to brokers representing the Iranians, who then
would sell them to Iran. Secord would obtain payment in advance from
the Iranians and deposit in a CIA account the amount the CIA was to
pay the Department of Defense for the weapons. The CIA would purchase
the weapons from the Department of Defense at cost under the Economy
Act; 33 Secord would deliver them to Iran.
33 The Economy Act permitted sales at cost between Government
agencies.
Ghorbanifar, as broker for Iran, borrowed funds for the weapons
payments from Khashoggi, who loaned millions of dollars to
Ghorbanifar in ``bridge financing'' for the deals. Ghorbanifar repaid
Khashoggi with a 20 percent commission after being paid by the
Iranians.
The Reagan Administration's 1986 decision to sell weapons directly to
Iran eliminated the Israeli arms dealers from the initiative. Amiram
Nir, an Israeli counter-terrorism official, became the Israeli
representative in the negotiations. At North's request, he gave
Ghorbanifar the number of the Lake Resources account, into which
deposits for the arms purchases were to be made.34
34 Allen, Grand Jury, 1/4/88, pp. 46-47; Secord, Grand Jury, 5/14/87,
p. 339.
February 1986: 1,000 TOW Missiles
In January 1986, North and Secord negotiated on behalf of the United
States the sale of 4,000 TOW missiles to Iran. Ghorbanifar agreed to
pay $10,000 for each TOW. The terms and conditions negotiated by
North and Secord required an initial sale of 1,000 TOW missiles for
$10 million, and subsequent sales of an additional 3,000 TOW missiles
for $30 million. North falsely informed DoD and the CIA that Secord
would receive only $6,000 per TOW, or a total of $6 million. The
Defense Department established its price as $3,700 per TOW missile
for its sale to the CIA and the price to be paid to the CIA by
Secord.
Between February 7 and February 18, 1986, Khashoggi deposited $10
million into the Enterprise's Lake Resources account.35 On February
10-11, 1986, $3.7 million was transferred from Lake to a CIA account
for the weapons. Between February 17 and 27, 1986, 1,000 TOWs were
shipped to Iran. In addition, 17 HAWK missiles from the failed
November 1985 shipment were returned from Iran to Israel.
35 Khashoggi transferred $5 million from his own Bank of Credit and
Commerce account in Monte Carlo to Lake Resources, and he raised the
remaining $5 million from two investors: He borrowed $2.5 million
from a wealthy woman in Monte Carlo and $2.5 million from Galliot
Lines S.A., owned by Syrian banker Oussama Lababidi. (Khashoggi, FBI
302, 5/8/87, p. 8.)
The Enterprise's direct expenses in connection with the
transportation of the weapons were about $716,000, leaving a surplus
of $5.6 million. The plan to sell 3,000 more TOW missiles on the same
terms to Iran did not materialize.36
36 As originally contemplated by North and Secord, the Enterprise
would have drawn off roughly $22 million after expenses, if 4,000
TOWs had been sold. This calculation is arrived at by quadrupling the
surplus of $5.6 million on the 1,000 TOW deal.
Iran paid higher prices for the weapons than those already inflated
by the Enterprise, because Ghorbanifar added large commissions of his
own. Khashoggi said his commission was split with Ghorbanifar; Roy
Furmark, who had introduced Khashoggi to Ghorbanifar; and Triad
International Marketing, a Khashoggi business.37
37 Ibid., p. 11. Ghorbanifar described a similar split. (Ghorbanifar,
OIC Deposition, 12/9/87, p. 142.)
Further complicating the matter, Israel had expected to pay for the
replacement of TOWs it sent to Iran in 1985 from Enterprise mark-ups
on the 1,000 TOWs sold to Iran in February 1986. According to the
Israelis, however, North claimed the proceeds were less than
anticipated and would not cover the cost of the replenishment.38
38 Israeli Financial Chronology, 4/26/87, p. 20, AOW 0000190, as
released in Select Committees Report, p. 224.
May-August 1986: HAWK Parts to Iran; Israeli TOWs Replenished
In the spring of 1986, North negotiated on behalf of the United
States a sale of 240 HAWK missile spare parts to Iran. He also
negotiated with representatives of Israel for the purchase of 508
U.S.-made TOW missiles to replace those shipped by Israel in August
and September of 1985. In combination, these transactions resulted in
$16.685 million being deposited by Iranian and Israeli
representatives into the Enterprise's Lake Resources account in
Geneva.
The CIA charged the Enterprise $3,469 for each of the 508 TOW
missiles sold for replenishment to the Israelis, plus shipping and
handling costs. This cost was passed on to the Israelis. For the HAWK
spare parts for Iran, the CIA charged $4.337 million, plus shipping
and handling. North, however, had multiplied this true cost by a
factor of 3.7 in setting the price to be paid by Ghorbanifar.
On May 14-16, 1986, a total of $15 million in bridge financing was
deposited into the Lake Resources account by Khashoggi, acting on
behalf of Ghorbanifar. On May 15-16, 1986, Israel deposited a total
of $1.685 million in the Lake account.39 Of the total $16.685 million
deposited, only $6.5 million was paid to the United States for the
Iranian and Israeli weapons purchases. The expenses involved in these
shipments were about $1 million, resulting in a surplus of $9.2
million for the Enterprise.
39 Although the Israelis expected the replenishment to be paid from
mark-ups on the Iran weapons sales, they finally agreed to pay this
amount after Nir was informed that sufficient funds were not being
generated. (Israeli Financial Chronology, 4/26/87, pp. 26-67, AOW
0000196-97, as released in Select Committees Report, pp. 224-341.)
Khashoggi and Ghorbanifar Encounter Financial Problems; a ``Second
Channel'' into Iran Is Pursued
In raising the $15 million bridge financing for the HAWKs spare
parts, Khashoggi in April 1986 asked British entrepreneur Tiny
Rowlands to invest. After Rowlands declined, Khashoggi turned to
Oussama Lababidi who, using the name ``Kremdale Corporation,'' put up
$5 million. The remaining $10 million came from Vertex International
in the Cayman Islands, backed by investors Ernie Walter Miller and
Donald Fraser of Canada. Khashoggi said he created a company
``Trivert International,'' to handle the Vertex loan.40
40 Khashoggi, FBI 302, 5/8/87, p. 10, and 11/4/87, p. 5. According to
bank records obtained by Independent Counsel, on May 14, 1986, a $10
million payment was made into Lake Resources by Trivert International
by order of W.E. Miller. On May 16, 1986, Lake Resources received $5
million from Garnet Overseas at BCCI; Garnet received the funds from
Khashoggi's account and Khashoggi's account received the funds from
Ray Trading. Because Ghorbanifar only repaid $8 million, the
investors lost $7 million of their initial investment. Ghorbanifar
received from Iran only $4 million; it is unclear where he obtained
the other $4 million to partially repay the investors.
------------------------ Yahoo! Groups Sponsor ---------------------~-->
<FONT COLOR="#000099">Kwick Pick opens locked car doors,
front doors, drawers, briefcases,
padlocks, and more. On sale now!
</FONT><A HREF="http://us.click.yahoo.com/ehaLqB/Fg5DAA/Ey.GAA/xYTolB/TM";><B>Click
Here!</B></A>
---------------------------------------------------------------------~->
Please let us stay on topic and be civil.
To unsubscribe please go to http://groups.yahoo.com/group/cia-drugs
-Home Page- www.cia-drugs.org
OM
Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
<A HREF="http://www.ctrl.org/";>www.ctrl.org</A>
DECLARATION & DISCLAIMER
==========
CTRL is a discussion & informational exchange list. Proselytizing propagandic
screeds are unwelcomed. Substance—not soap-boxing—please! These are
sordid matters and 'conspiracy theory'—with its many half-truths, mis-
directions and outright frauds—is used politically by different groups with
major and minor effects spread throughout the spectrum of time and thought.
That being said, CTRLgives no endorsement to the validity of posts, and
always suggests to readers; be wary of what you read. CTRL gives no
credence to Holocaust denial and nazi's need not apply.
Let us please be civil and as always, Caveat Lector.
========================================================================
Archives Available at:
http://peach.ease.lsoft.com/archives/ctrl.html
<A HREF="http://peach.ease.lsoft.com/archives/ctrl.html";>Archives of
[EMAIL PROTECTED]</A>
http:[EMAIL PROTECTED]/
<A HREF="http:[EMAIL PROTECTED]/";>ctrl</A>
========================================================================
To subscribe to Conspiracy Theory Research List[CTRL] send email:
SUBSCRIBE CTRL [to:] [EMAIL PROTECTED]
To UNsubscribe to Conspiracy Theory Research List[CTRL] send email:
SIGNOFF CTRL [to:] [EMAIL PROTECTED]
Om
--- End Message ---
