Former White House chief of staff Donald T. Regan testified yesterday that he and President Reagan had detailed knowledge of Israel's shipment of U.S.-made arms to Iran in November 1985, including plans for a "cover story" to call the cargo "oil drilling equipment" if the operation was exposed.
Responding to questions clearly and without hesitation in his first day of testimony before the Iran-contra congressional committees, Regan provided an account that differed dramatically from the president's statements to the Tower review board, the presidential commission appointed to explore the causes of the Iran-contra affair.
Reagan told the three-member board on Jan. 16 that he objected to the shipment and, as a result, it was returned to Israel, according to the board's report. On Feb. 11, he revised his statements, telling the board that he and Regan "cannot remember any meeting or conversation in general about a Hawk shipment."
Under questioning yesterday by Terry A. Smiljanich, associate counsel of the Senate Iran-contra panel, Regan described in detail how then-national security adviser Robert C. McFarlane took the president aside during the Nov. 19-21, 1985, U.S.-Soviet summit in Geneva and told him of the "convoluted arrangement" involved in the Israeli shipment of U.S.-made Hawk missiles, which might lead to the release of American hostages.
Smiljanich asked, "You and the president understood that Hawks were involved in that November 1985 shipment?" Regan replied, "Certainly." Smiljanich continued, "But that oil drilling equipment was a cover story?" Regan said, "Sure."
When the secret initiative was revealed in November 1986, the cover story was revived by several White House officials who apparently hoped to conceal U.S. involvement and perhaps keep the initiative alive. That provoked a bitter behind-the-scenes fight by Secretary of State George P. Shultz to force the administration not to use the false account to brief Congress. Then-CIA Director William J. Casey used a modified version of the cover story, however, in testimony before the House and Senate intelligence committees on Nov. 21.
Shultz's intervention eventually led to a four-day fact-finding inquiry by Attorney General Edwin Meese III that turned up evidence in National Security Council files that proceeds from 1986 U.S.-Iran arms transactions had been secretly diverted to the Nicaraguan contras.
When Meese announced the diversion at a nationally televised news conference Nov. 25, he said the shipment the previous November "did not involve" the United States, that the president had "incomplete information" on it, and only "learned later" the details.
Regan's appearance before the panels was marked by his frequent quips about his tenure in government, which ended with his forced resignation last February. He drew praise from the committee members, who spoke of his "candor" and "wit."
He described how he grew disenchanted with the Iran arms sales, saying he frequently told Reagan that the initiative should be halted, that the administration was being "snookered" by "rug merchants" who used a "bait and switch" ploy in trying to get more arms.
In other testimony yesterday, the former chief of staff said:He had no knowledge of the diversion and described Reagan as shocked when he learned of the scheme from Meese. "This guy, I know, was an actor . . . . But I'd give him an Academy Award if he knew anything about this . . . . He couldn't have known," Regan said. He told Casey of the diversion on the night of Nov. 24, stopping by Casey's office. Casey, who he believed had no knowledge of the diversion scheme, warned that making a public announcement about the diversion could "blow the whole Iranian thing and possibly blow the lives of these hostages." Fired National Security Council aide Lt. Col. Oliver L. North has testified that he told Casey, who died earlier this year, about the diversion. Poindexter had made a number of misleading statements about the history of the Iran initiative when, in the presence of the president, he briefed Cabinet members and senior aides at a Nov. 10 meeting in the Oval Office. First Lady Nancy Reagan had called Regan in his limousine on the evening of Nov. 24, soon after the president had learned of the diversion, and said she was "very upset at the news." In his deposition, which was read yesterday, Regan quoted her as saying "there would have to be a housecleaning of people who had let Ronnie down." Yesterday Regan testified that he had told her he would recommend that Poindexter be relieved. Although he was generally aware of the Iran arms initiative and attended several meetings about it, Regan said he knew little of the "operational details" and nothing about the private network of covert agents used by North. A story appearing last Sunday in The Washington Post, which said in part that the president had "actively led initial efforts last November to conceal essential details of the secret arms-for-hostages program and keep it alive after the first disclosures," was "not accurate at all."
Regan made a series of comments, most of them negative, concerning the Iranian initiative.
He described the hostages as the "bait" used by the Iranians to get arms. He added, however, that the initiative was also driven by the president's desire to "make contact with Iran." He said repeatedly in his testimony that Reagan was driven by a desire to open relations with Iran and by a concern for the American hostages.
After the Israeli shipment, top administration officials met on Dec. 7, 1985, to discuss future steps in pursuing the initiative. Regan said he opposed going forward because efforts through the Israelis had been largely unproductive. "Cut your losses," said Regan, employing a term from his days on Wall Street.
However, in January, he said he supported pursuing the initiative because Poindexter had said there was a new opportunity with "new contacts."
Under the plan approved by the president in January, arms shipments were to stop after 1,000 TOW antitank missiles had been delivered, if all the U.S. hostages had not come out.
After the first deliveries in February failed to bring home any hostages, Regan testified, he told the president, "I thought we ought to break it off . . . . we've been snookered again, and how many times do we put up with this rug merchant type of stuff?"
The president, said Regan, shared his view. But when Regan was asked whether the president instructed him to end the dealings, he replied, "There was a pause then, and I sought of lost track of what was going on."
Last November, Regan, in talks with reporters, said the president raised the issue of the hostages almost every day and records made public yesterday showed that hostages were frequently discussed at the morning national security briefings that Regan attended.
The most significant testimony yesterday came in Regan's description of the November 1985 shipment involving Israel, which has become the focal point for the Iran-contra panels and for the independent counsel looking into the affair.
On Nov. 10, 1986, the White House issued a statement declaring "no U.S. laws have been or will be violated," and adding, "our policy of not making concessions to terrorists remains intact."
However, the November 1985 Hawk shipment undermined both of those statements.
McFarlane has testified that Israeli Foreign Minister Yitzhak Rabin told him in advance of the Israeli plan to sell at least 80 U.S. Hawk missiles to Iran and that the shipment might lead to the release of U.S. hostages held in Lebanon. Israel hoped that the United States would then "replenish" its Hawk stocks, Regan quoted McFarlane as saying.
The cover story was developed, North said in his testimony, partly in an effort to protect Israel.
Subsequently, according to testimony, McFarlane, his then-deputy John M. Poindexter, North and Central Intelligence Agency and State Department officials provided assistance to the Israelis, and the weapons finally were shipped on Nov. 25 by a CIA-owned airline.
On Dec. 5, 1985, the president signed an intelligence "finding" that belatedly authorized the CIA's involvement, stating that the operation was an arms-for-hostages deal. However, the after-the-fact order left major legal questions about whether the shipment and the U.S. role had violated the U.S. Arms Export Control Act and the National Security Act.
In the days after the U.S. dealings with Iran first leaked out in November 1986, threatening to embroil the administration in its worst crisis, Reagan and his top advisers made no mention of the November 1985 Hawk shipments.
A presidential speech on Nov. 13, and news conference on Nov. 19 also omitted any reference to the shipment, as did news briefings given by Poindexter. Between Nov. 17 and Nov. 20, an NSC chronology being prepared by North at the direction of Poindexter, and with the assistance of McFarlane, was altered to reflect the original cover story. It said that in November 1985 the Israelis were "going to try oil drilling equipment as an incentive" for the Iranians to open a high-level dialogue. This version said the U.S. government did not learn until January 1986 that 18 Hawks missiles had been shipped.
On Nov. 20, however, testimony being prepared for Casey's appearance the following day before the congressional intelligence committees triggered the fight with State Department officials. The testimony, which was to state that no one in the U.S. government knew of the Hawk shipments at the time they were undertaken, was challenged by Shultz, whose aide had notes of a conversation with McFarlane in Geneva referring to the Hawks.
As a result of this fight, Casey's testimony was changed slightly to eliminate the false reference that no one in the U.S. government knew of the Hawk cargo at the time of the shipment. Poindexter, in his briefing, told the Senate intelligence committee on Nov. 21, that it was possible some in the U.S. government knew arms were involved.
However, Casey left in his testimony the key element of the cover story. He said that when a plane leased with the assistance of the CIA reached Tel Aviv, the pilots "were told the cargo was spare parts for the oil fields, and was to go to Tabriz" in Iran.
Meese was alerted to the Casey-Shultz disagreement on the night of Nov. 20 and hurried back from a speech at West Point to propose to the president on the same day Casey testified that he undertake a fact-finding inquiry to "clear up discrepancies."
Regan testified yesterday that Meese, when he met with him and Reagan to propose the inquiry, did not ask if they had any knowledge about the Hawk shipments. That afternoon, Meese interviewed McFarlane, and according to notes of that meeting, McFarlane stuck with the cover story.
According to the notes, McFarlane told Meese he had no recollection of a Hawk shipment. After leaving Meese's office, McFarlane quickly dashed off a computer message to Poindexter, in which he reported the interview and said: "The only blind spot on my part concerned a shipment in November '85 which still doesn't ring a bell with me."
Earlier on that same day, Nov. 21, Poindexter destroyed the intelligence finding that the president signed on Dec. 5, 1985, according to Poindexter's testimony.
North's contemporaneous notes from that period reflect that Reagan had directed the operation "to proceed." North told Poindexter on Nov. 21 that he was prepared to destroy them, but he did not. Those notes and a draft copy of the finding are the only documentation of what the White House knew of the Hawk shipment.