On the afternoon of Friday, Nov. 21, 1986, CIA Director William J. Casey, meeting in closed session with members of the House Permanent Select Committee on Intelligence, volunteered a startling admission: that the National Security Council staff had been "guiding and active in the private provision of weapons to the contras." In case the members missed the point, Casey came back to it three times during his testimony.
For Casey, a political ally and friend of the president who never shared secrets with Congress without a reason, this was unprecedented. Casey was confirming a damaging allegation about NSC staff activities -- an allegation that NSC aide Oliver L. North had denied to the same committee just three months earlier.
Some congressional investigators now look back on Casey's testimony last Nov. 21 as the start of "the fall-guy plan."
This plan, as North later described it in his testimony to the congressional Iran-contra panels, called for him and his boss, then-national security adviser John M. Poindexter, to take the blame for covert NSC operations if they were exposed in the widening controversy over U.S. arms sales to Iran.
Was the wily CIA director activating the plan by "giving up Ollie North," as one congressional investigator put it? Was Casey hoping to continue the secret contacts with Iran to get more American hostages freed, and thus turn Reagan's worst debacle into an eleventh-hour triumph?
One piece of evidence supports the view that Casey had initiated a disinformation plan. That same afternoon, according to North's White House deputy, Lt. Col. Robert Earl, North told him that " 'it's time for North to be the scapegoat. Ollie has been designated the scapegoat,' or something like that."
The morning after Casey's appearance, Justice Department officials reviewing NSC files found a North memo mentioning the diversion of proceeds to the contras from the Iranian arms sales. Three days later, on Tuesday, Nov. 25, North was fired and Poindexter resigned as a result of this discovery.
Was the so-called "diversion memo" also part of the fall-guy plan? Was it, perhaps, left in North's files to point the finger at him and Poindexter, thereby protecting the president and perhaps other senior officials or other, even more explosive secret policies? Or was the discovery of the document a genuine accident?
Like other riddles of the Iran-contra affair, this one may never be solved. Casey is dead; Poindexter and North, by their own testimony, destroyed key documents; North admitted altering others; they and many of the central participants told contradictory stories to the Iran-contra committees or could not remember important details. In the record of testimony, there is hardly a single event about which all witnesses agree.
For the White House, the best reading of the public record so far is one offered by several members of the committees as they ended their public hearings -- that a "junta" of top administration officials had arrogated to themselves the power to conduct national business of grave importance without informing the president and other senior officers of the government. In many key respects this was the story Poindexter told the committees. Committee members publicly raised more questions about Poindexter's credibility than that of any other witness, but so far they have accepted his story.
Many of the investigators still probing the case have concluded that the true story remains to be told. This article, based on documents, testimony and interviews, will examine the plausibility of the stories told by Casey, Poindexter, North and others by comparing their accounts in light of other facts. For example:
The Cover-Up. In testimony about the first weeks of last November, following the public disclosure of U.S. arms sales to Iran, Poindexter acknowledged withholding information from Congress and other administration officials, North and Poindexter admitted destroying or altering documents, and former national security adviser Robert C. McFarlane confirmed that he changed a key chronology. Casey misled or lied to congressional committees and, according to North, suggested the fall-guy plan.
But if there was a cover-up and fall-guy plan, and it was intended to protect the president, could it have been undertaken without Reagan's knowledge? For example, when Poindexter destroyed a presidential intelligence "finding" signed by Reagan Dec. 5, 1985, that retroactively authorized CIA participation in an earlier Israeli weapons transfer to Iran, how could he be sure the president would not recall signing the paper and ask to see it, or mention it to someone else? Poindexter, if he acted alone on this matter, did so just hours after taking part in a meeting with the president and Attorney General Edwin Meese III at which Reagan had ordered Meese to look into that same Israeli arms transfer.
The Diversion Memo. North's five-page memo to Poindexter in April 1986 seeking the president's approval for an arms-for-hostages deal with Iran became the key document in the Iran-contra affair because of a single, eight-line paragraph. The paragraph mentioned a plan to use $12 million from the proposed arms sale to support the contras.
Poindexter testified that he couldn't recall seeing the memo and that he never told Reagan about the diversion scheme or his approval of it. North called the diversion a "neat idea" that amounted to a sting operation against the Iranians, and testified that he included similar paragraphs in half a dozen memos to Poindexter prior to each shipment of arms to Iran.
Questions remain about the diversion document and the manner of its discovery.
North testified that after days of trying to destroy all damaging material in his files, he must have accidentally put the document among others to be reviewed by Meese's deputies. It was found quickly -- within 1 1/2 hours -- after Justice Department officials began examining North's papers.
Adding considerably to the mystery is the fact that a disk found in the office computer of Fawn Hall, North's secretary, by the FBI last Nov. 28 contained a slightly different version of the memo than the one found on paper. In other words, Hall could have been working on modifying the document -- originally written the previous April -- during North's last hours in the White House.
Moreover, Assistant Attorney General William Bradford Reynolds, the Justice Department official who found the memo in the first place, has said he saw other versions of it that day without the eight-line diversion paragraph. The committees, however, have never received any such copies.
Finally, the paragraph on the use of proceeds for the Nicaraguan contras is at the top of the final page of the memo and, to some investigators, seems to have been added as an afterthought. It appears in the midst of a long discussion about relations with Iran.
The Profits. On May 16, 1986, the balance in the secret Swiss bank account into which the arms sale proceeds flowed reached its high point: $11,556,181. That day, Reagan and his top national security aides met to discuss the contras' financial straits and consider soliciting foreign governments for contributions to the rebels. In the months that followed, the contras remained strapped for funds.
But only a small portion of the $11 million in the account that day ever went to support the contras, according to financial records obtained by the committees. Altogether, less than $4 million of the more than $30 million from arms sales that flowed into that account, known as Lake Resources, went to contra projects.
That raises new questions: Was the diversion of arms sales proceeds to the contras actually one of many diversions -- part of the larger "stand-alone, off-the-shelf" secret intelligence capability North said Casey wanted to create? And did the disclosure of this one diversion conceal other, still secret undertakings financed by the offshore "enterprise" directed by North and retired Air Force major general Richard V. Secord?
The Unraveling. Did the failure to obtain the release of all U.S. hostages held in Lebanon by mid-1986 cause Reagan to approve additional concessions to a new group of Iranian intermediaries -- the so-called "second channel"? Specifically, did the president authorize Poindexter to ask the Kuwaiti foreign minister last October to "do something" about Lebanese terrorists imprisoned in Kuwait whose release was demanded by groups holding U.S. hostages in Beirut?
The End Game. Was part of Casey's strategy after the exposure of the U.S.-Iran dealings to secretly keep the initiative alive? Did this strategy explain his fall-guy plan, his misleading statements to Congress, his attempt to persuade the president to oust Secretary of State George P. Shultz and Undersecretary Michael H. Armacost the weekend before North was fired, and Casey's subsequent success in persuading Reagan to let the CIA play a role at another meeting with the second channel in December, long after the scandal had broken?
The House and Senate Iran-contra committees have begun an exhaustive, computer-aided analysis of hundreds of hours of testimony and thousands of documents, leading to completion of a detailed chronology of the affair and a report due in October.
Since their public hearings ended early last month, the committees have received more government documents, including material from the FBI, and their staffs have been taking new depositions to try to clear up the many conflicts and gaps that remain. Poindexter secretly appeared for more testimony one afternoon last month.
Whether the committees will resolve any of the numerous remaining mysteries, or clear up the implausible statements of numerous key actors, remains to be seen. Almost from beginning to end, the story now on the record seems incomplete, contradictory and often baffling.