In the next phase of the story, what began as a largely Israeli undertaking with U.S. support became primarily an American one with Israeli support. By early 1986, the arms sales to Iran were being routed through the same private "enterprise" run by Secord and his business partner, Albert A. Hakim, that was also helping execute the administration's secret program to aid the contras.

The release of the Rev. Weir in September 1985 apparently whetted Reagan's appetite for more secret dealings with Iran. The failure of the November shipment of obsolete Hawk missiles to free more hostages or advance the new relationship with Tehran did not halt the process, but in fact seemed to encourage new efforts.

The evidence suggests that the aborted November shipment was to be quickly followed by another, bigger one -- to get the hostages home by Christmas. Senior CIA officials met to discuss it in early December, and CIA representatives in several countries had already arranged for flight clearances for the arms. Weinberger's staff had prepared papers for him on the availability of the TOWs and Hawks. In his personal notebook, North noted that Secord expected this deal to result in a $41 million deposit in his Swiss account.

The question of what to do next was discussed at a White House meeting on Dec. 7. According to one who was present, the session was "a debate between the president on one side and Shultz and Weinberger on the other." McMahon of the CIA, standing in for Casey, responded when Reagan spoke of using arms to open relations with moderates in Iran. There were no moderates left there, McMahon said: "Khomeini has killed them all."

Shultz later testified that Reagan said at this meeting: "The American people will never forgive me if I fail to get these hostages out over this legal question" -- apparently a reference to the provisions of the Arms Export Control Act.

After the Dec. 7 meeting McFarlane was sent to London to meet with Ghorbanifar on the prospects for continuing to use him as a middleman in future deals. On Dec. 10, McFarlane reported back to Reagan. Casey and Weinberger were present, according to Regan. McFarlane said he told Reagan that unless arms were sold, there would be no progress with the Iranians. He also said he suggested that Ghorbanifar be dropped as the intermediary, and that Weinberger pushed the president to end it all.

Casey's memo to his files after that meeting reported that "the president argued mildly for letting the operation go ahead without any commitments from us except that we should ultimately fill up the Israeli pipeline in any event or the Congress will do it for us . . . . I suspect he would be willing to run the risk and take the heat in the future if this will lead to springing the hostages."

North, who also attended the London sessions with McFarlane, wrote a memo that, on Dec. 9, laid out the need to keep the arms shipments going or risk the lives of the hostages. North described as one possible course of action direct U.S. shipment of weapons, using Secord as the transfer agent -- the means adopted when the program resumed a month later.

In mid-December Ghorbanifar came to Washington with yet another proposed deal. Apparently in hopes of improving his reputation, the CIA persuaded him to take a lie detector test. In a twist to the tale never fully explained, Casey mentioned in a Christmas Eve note to Reagan that Ghorbanifar would be examined by polygraph. He took the test in January and flunked, but the deal he proposed became the basis for the next round of arms sales, and he continued to be a middleman.

The next time top officials discussed the secret program together was Jan. 7, 1986. All participants who testified on that meeting agreed that the president was determined to press on with more arms sales to the Iranians, despite the continuing objections of his secretaries of state and defense.

A new plan for direct shipments to Iran through Secord and Hakim went into effect. It can be traced in the notes North kept at the time. For example, in an entry for 2:15 p.m., Jan. 13, he recorded, "Call from Casey: Secord op {operation} O.K." A day later, at a meeting with Poindexter, North noted, "Call Casey," followed by a list including: "Copp {Secord's code name} to serve as agent for CIA, Israel to pay Copp for purchase of replacements, Copp to buy T's {TOWs} from DoD & move to Is. {Israel} for CIA."

North's notes also show that he understood in detail how the new method for providing arms to Iran would generate profits that would end up in Secord's bank account.

On Jan. 17, Poindexter briefed Reagan on the new intelligence finding and backup documents that had been prepared to cover the new sales. The supporting memo called for all the hostages to be released after the first shipment of 1,000 TOWs. Otherwise, "further transfers would cease."

The shipment went in two deliveries: 500 TOWs on Feb. 17; another 500 on Feb. 27. No hostages were released. Nonetheless, the arms sales to Iran continued. The congressional investigators never received a clear explanation why. At a White House meeting last Nov. 10, Weinberger told the committees, he asked Poindexter that question and the then-national security adviser responded: "The president approved."

There are numerous unanswered questions about this phase of the story. Why was Secord brought into the renewed operation and what was the understanding about his role? When the first shipments failed to produce hostages, why didn't anyone in the administration raise questions? Who determined that the initiative should continue despite this failure? Who besides North in the government knew from the start about the profits that would be generated?Money

Since the Iran-contra story erupted, the scandal has been dominated by the image of arms profits diverted to the contras, but this is far from the only significant issue involving money. As noted earlier, relatively little money -- less than $4 million -- actually was diverted. Most of the profits generated by the North-Secord-Hakim enterprise stayed in Swiss accounts. They still contain $8 million, now frozen by the Swiss authorities.

Poindexter testified that North came to him with the idea of diverting profits to the contras from Iran arms sales in February 1986, but the story is more complicated than that -- and still shrouded in mystery.

The Secord-Hakim Lake Resources account in the Credit Suisse bank was apparently established early in 1985 to receive money for assistance to the contras, most of it from the contras themselves. Adolfo Calero forwarded $11 million to the account from the $32 million donated secretly by Saudi Arabia to the contras to pay for weapons and other assistance. It was the exhaustion of those Saudi funds late in 1985 that created a need for new sources of support for the contras.

In his testimony North skirted over financial questions. He testified that he did not keep close track of the funds generated by Hakim and Secord, but his notebooks make clear that North was familiar with financial details of the Secord enterprise long before the first direct U.S. arms shipment to Iran in February 1986.

An entry for Sept. 17, 1985, for example, reads "call from Dick," and "check for $180K bounced -- credited $1M," the latter an apparent reference to a Taiwanese contribution that had been solicited earlier and deposited in the Lake Resoures account. The meaning of the bounced-check reference is unclear.

A North computer message dated Nov. 22, 1985, mentioning the Hawk operation, refers to Secord's Lake Resources as "our Swiss Co." As a result of the Hawk shipment, $880,000 ended up in the Lake Resources account. Secord testified that North authorized him to make a "contra-bution" with those funds, and some of the money was then used to buy arms and pay for costs associated with the North-originated, Secord-directed private airlift that was supporting the rebels, according to financial records.

On Nov. 24, 1985, North's notebook carries the entry, "Dick Copp {the Secord code name} spent $750K in {country deleted}." The disbursement does not show up on any of the financial records provided to the committees, however, and North was at a loss to explain the entry.

The next shipment of U.S. arms to Iran was in February; it was financed by an advance payment of $10 million from Ghorbanifar into Secord and Hakim's Lake Resources account. Only $3.7 million went to pay the CIA for the 1,000 TOWs involved, leaving about $6 million in the account. After another shipment in May, the balance in Lake Resources grew to more than $11 million.

But there is no indication that North put pressure on Secord to shift the bulk of the funds to the contras, either directly, or through the purchase of arms and supplies, even when the rebels' financial situation was grim. And while less than $4 million ever went to the contras, a larger portion of the funds went for other purposes: the partners' investment accounts, the costs of a ship that North planned to use to beam propaganda broadcasts to Libya, and $2.1 million for arms that were finally sold to the CIA for $1.2 million rather than being shipped immediately to the contras.

North claimed to be unaware of the huge surpluses building up in the enterprise in spring of 1986. He acknowledged that he knew the funds were to be used not only to support the contras, but also for "those other activities I have described at the time I talked to him {Casey}" -- a reference to covert operations that North testified about in a closed session of the Iran-contra panels.

That raises one of the most intriguing unanswered questions in the investigation: Was support for the contras just a small aspect of Secord's "enterprise," which, all along, was the self-financing, stand-alone, all-purpose covert organization that North said Casey wanted to create?