New evidence from Saudi Arabian billionaire Adnan Khashoggi and a mysterious Iranian gunrunner, plus testimony of nearly a dozen other witnesses, have begun to fill in the arms-and-money trail from Iran to Central America.
Though the congressional investigators delving into President Reagan`s Iran initiative complain they have been stymied by resistance from White House witnesses and difficulty in obtaining documents, they are forming a clearer picture of how money from Iran ended up in the coffers of the contra rebels.
Sorting the details of the intricate financial arrangements is seen by congressional sleuths as a vital step toward understanding the White House role in the covert diplomacy, clandestine arms deliveries and possible criminal conduct of these operations.
Based on congressional investigations, documents and interviews, it appears that:
— Khashoggi and a business associate, mysterious Iranian expatriate Manucher Ghorbanifar, played a far larger role than previously realized in arranging and financing the U.S.-Iranian arms deals.
— About $10 million to $12 million generated by the Iranian arms sales this year was diverted by White House officials for the contras, less than the original estimates of up to $30 million made by Atty. Gen. Edwin Meese, according to some government sources.
— The clandestine U.S.-Iranian connection was in trouble even before hard-line officials in Tehran blew the cover on the secret deals last month.
Congressional investigators remain unsure of exactly how many secret Swiss bank accounts were used to facilitate the covert arms sales, and they are uncertain how much money actually was spent on military equipment for the contras once U.S. and foreign middlemen deducted their fees.
”There is a strong smell of profiteering in all of this,” said one congressman involved in one of the many inquiries now underway on Capitol Hill.
After two weeks of closed-door hearings, congressional intelligence sources say that the numerous inquiries still have not produced a complete picture of how the operation worked.
The arms deals between the U.S. and Iran began in the summer of 1985, according to government sources, documents and television interviews with two of the middlemen.
Robert McFarlane, then the President`s national security adviser, and others in the administration had expressed an interest in opening channels to Iran and in seeking Tehran`s help in freeing Americans held by their pro-Iranian kidnapers in Lebanon, particularly Beirut CIA station chief William Buckley.
Although McFarlane didn`t know it at the time, there were others interested in forging some ties between the Americans and Tehran. One was Khashoggi, a renowned international arms dealer; another was Ghorbanifar, also an arms dealer who claims to have close contacts with Iran`s prime minister.
By Khashoggi`s account in an ABC-TV interview last week, Ghorbanifar was in the market for arms to help his country in its six-year war with neighboring Iraq. They discussed the situation over lunch in Hamburg, West Germany, in July, 1985, and Khashoggi brought up the idea of dealing with the Americans.
Khashoggi said Ghorbanifar indicated that Iran, a nation whose army was heavily dependent on American weapons sold to the late Shah of Iran in the mid-1970s, was willing to deal with the U.S. under the right circumstances.
So Khashoggi, who insists he was not acting on behalf of the Saudi government, said he privately sought help from Israel, America`s strongest ally in the Middle East, to pave the way for the renewed ties.
Although the Israeli government says it only did what Washington asked, Khashoggi told ABC News that it was he and the Israelis who persuaded McFarlane to explore the Iranian overture. The first meeting was held between representatives of Iran and the U.S. in late July.
The U.S. officials asked Iran to demonstrate the seriousness of its intentions by helping secure the release of American hostages being held in Lebanon. Iran countered by asking the U.S. to demonstrate its commitment with arms. Within weeks, Khashoggi said, things started happening.
At first, he said, the seven years of hostility between the two nations plagued the proposed dealings. Iran would not pay in advance for U.S. arms because it didn`t trust the Americans, and the U.S. wouldn`t forward any arms without payment from Iran because it felt the same way.
So, Khashoggi, Ghorbanifar and Israel were used as middlemen in an accommodation that initially satisfied all parties, according to government intelligence sources.
McFarlane told Congress last week that Reagan gave his okay for the deal to proceed. But the White House has disputed McFarlane`s account.
The first shipment involved only 100 TOW missiles, according to several sources. Khashoggi said he got the deal started by following Ghorbanifar`s instructions and placing $1 million in a numbered Swiss bank account. Once the money was in the account, intelligence sources said, the missiles were sent to Iran from Israel`s stock.
Under the deal, Khashoggi was to be reimbursed by Ghorbanifar when the weapons arrived in Iran. The $1 million from the Swiss account then would be passed on to Israel so it could replace its 100 TOWs by acquiring new ones from the U.S.
Whether Israel actually would acquire the weapons or receive a paper credit in its U.S. foreign military sales account is not clear.
Investigators also don`t know how much the different parties to the transactions made in commissions. Ghorbanifar and Khashoggi said they did not make money acting as middlemen in the sales, but congressional investigators are skeptical.
They do not know whether or how much the prices of weapons may have been marked up to provide commissions for middlemen.
Khashoggi said he then put up $4 million for a second shipment of TOWs, apparently 400, delivered Sept. 14, 1985.
U.S. officials believed that the arms would lead to the release of at least two of the American hostages, but only one–Rev. Benjamin Weir–was freed. Again, Khashoggi said, he was repaid his $4 million once the arms reached their destination.
Checks and other financial documents obtained by The Tribune appear to confirm this part of Khashoggi`s account.
But soon this arrangment began to sour.
A third arms shipment in November was rejected by Tehran because the equipment was considered obsolete. There also was a dispute between U.S. and Israeli government officials about how much credit Israel would be given for the missiles that it had provided Iran from its stores.
In Washington, the whole arrangement was being strongly opposed by Secretary of State George Shultz, and McFarlane himself had second thoughts about doing business with Ghorbanifar. The President halted the operation.
But in January, 1986, Reagan, at the urging of CIA Director William Casey, approved the resumption of deals with the Iranians, with the CIA formally ordered to facilitate the dealings without notifying Congress as required by law. This time the Israeli middlemen were cut out and the weapons to be sold were to be taken directly from U.S. stocks.
But Khashoggi retained his role as banker. To help finance another, far larger arms shipment in February, he said he raised $10 million from some Canadian investors. He said he placed the money in another Swiss bank account under the name of a company called Lake Resources, which investigators believe was controlled by National Security Council aide Marine Lt. Col. Oliver North and an associate closely linked to the contras, retired Air Force Maj. Gen. Richard Secord. North was dismissed from the White House last month when the fund diversion became public.
Government and congressional intelligence sources say that this time the arms were shipped from the U.S. to Israel and then shipped on to Iran.
Once they arrived, Khashoggi said, Ghorbanifar repaid the $10 million plus 10 percent, or $1 million in interest for a loan that lasted less than two months.
In May, Khashoggi said, he and his investors put up $15 million for another arms sale. This time, however, at least three things occurred that spelled disaster for the covert arrangement.
The first problem was that some of the weapons that had arrived in Iran were considered defective. Congressional sources also think that the U.S. had jacked up the price of the weapons to the Iranians in hopes of creating a slush fund for the contras.
But the main difficulty was that pro-Iranian Moslem radicals in Lebanon still refused to release the remaining Americans.
This spurred the U.S. officials to renew their doubts about the whole arrangement, according to McFarlane`s testimony. He had made a secret trip to Tehran May 28, expecting that the remaining hostages would be freed by then. McFarlane said he was told by North during that trip that some money was being used to support the contras.
The result, according to Khashoggi, was that he and his investors placed $15 million in the Lake Resources account, but the Iranians paid Ghorbanifar only $5 million for the weapons. The Iranians claimed they should receive more weapons and some sort of credit for those that didn`t work properly.
Khashoggi said this left him about $10 million in the hole. The disagreement continued for weeks, and Khashoggi`s investors began to complain, according to government sources.
At this point, the sources said, Khashoggi, under pressure from his angry investors, learned that some of the money he had placed in the Lake Resources account had been used to repay the U.S. government for weapons.
He and Ghorbanifar said they then became suspicious that the remainder of the funds in that account had been diverted to the contras.
By some accounts, there was another shipment of American arms in August, following the July 26 release of hostage Rev. Lawrence Jenco.
Khashoggi`s role in that is unclear, and he claimed last week that he still was owed $10 million by Iran for the earlier shipments.
In October, an associate of Khashoggi`s, obscure New York oil executive Roy Furmark, informed Casey that the Canadian investors hadn`t been repaid by Khashoggi and were about to file suit exposing the operation. Casey alerted Adm. John Poindexter, who by then had replaced McFarlane as the President`s national security adviser, Casey told a congressional hearing last week.
