An article on the Iran-contra affair yesterday misidentified Saddam Hussein. He is president of Iraq. (Published 9/7/87)

The repeated failure to win the release of all the hostages by dealing arms to Iran through the Ghorbanifar channel was a source of great frustration inside the administration. From early 1986 onward the United States was looking for another channel into the Khomeini regime. In August, Hakim and Secord succeeded in finding one -- a relative, evidently a nephew, of Hojatoleslam Hashemi Rafsanjani, speaker of Iran's parliament.

The pressure to find the second channel grew out of the failure of the first, and it eventually pushed the Reagan administration still deeper into arms-for-hostages dealings, even raising the possibility of trading the freedom of Americans for 17 convicted Shiite terrorists held in Kuwait -- something the administration was committed never to do.

For Secord and Hakim the second channel offered the prospect of large profits in future business deals with Iran, if someday they became possible. The White House had more immediate incentives: The 1986 congressional elections were drawing near, and during September and October, three more Americans were seized in Beirut.

When the Iran dealings were exposed a month later, the White House would claim that the three were taken by extremists not under Iran's control. But North acknowledged otherwise in a top-secret Oct. 4 memo to Secord. He suggested that at least one and probably two of the new hostages were taken by the pro-Iranian Hezbollah and worried that the Iranians "believed they could bring additional pressure to bear on us to commence further deliveries."

The record of events during this period suggests that Poindexter, North and their private operatives may have been forced by such pressure into making new concessions to the Iranians and their Shiite clients in Lebanon -- concessions that were approved by Reagan, according to Poindexter's testimony.

North, Secord, Hakim and CIA consultant George Cave met representatives of the second channel in Frankfurt in early October. They presented the Iranians a Bible inscribed by Reagan.

According to his handwritten notes, Secord had already promised at an earlier meeting in Brussels that the United States would fight on Iran's side if the Soviets invaded, and would "cooperate to depose {Syrian President Saddam} Hussein." At one point at the Frankfurt meeting, which was secretly taped by the Americans, North said: "We also recognize that Saddam Hussein must go."The Kuwaiti 17

North left before the meeting ended to return to Washington after a C123 flying military supplies to the contras was shot down over Nicaragua. After he left, Hakim and Secord hammered out a nine-point agreement with the Iranians. The most explosive point called for Hakim to "present the plans for the release of the 17 . . . imprisoned in Kuwait."

The reference was to 17 Shiite extremists held in Kuwait in connection with 1983 bombings of the American and French embassies that killed six and injured 80. Most of the 17 belonged to Dawa, an Iranian-backed fundamentalist group. From the time the first American hostage was seized in Beirut in 1984, the Hezbollah in Lebanon had repeatedly insisted on the Shiites' release as a condition for freeing Americans. Some of the 17 are reportedly relatives of some of the kidnapers in Beirut.

In public, the Reagan administration had persistently refused to consider such a deal. But events after the Frankfurt meeting raise questions about that commitment.

On the morning of Oct. 6, during both the Frankfurt discussions and a Washington visit by the Kuwaiti foreign minister, the subject of the Dawa prisoners came up at Poindexter's daily briefing for Reagan, according to handwritten minutes kept by the NSC's Rodney B. McDaniel.

"RR: How get message re Kuwait 17?" the note of the morning briefing reads. McDaniel said he was unable to recall precisely what this meant, but said in an interview he believes the president was referring to a news report.

That same day, Poindexter met with the Kuwaiti foreign minister, and according to both Kuwaiti and U.S. officials, they discussed the Dawa prisoners -- but only to reaffirm the U.S. position against concessions.

However, the Iran-contra committees received a State Department document indicating that Poindexter might have asked the Kuwaitis to make a concession on the Shiites. State Department official Charles Dunbar, who took part with Cave in a December meeting in Frankfurt with the second-channel Iranians, reported: "Poindexter told Cave et al that he personally had asked the Kuwaitis to do something about the Dawa prisoners. Cave believes that Poindexter met with the Kuwaiti foreign minister here {in Washington} in the fall and may have seen him in the region at some point as well. North also met with the Kuwaiti ambassador and perhaps with other foreign ministry officials as well."

(Kuwaiti officials in Washington said North never met with the Kuwaiti ambassador.)

North made a comment in his testimony that seemed to imply his willingness to trade for the Dawa 17: "The fact is if those people were going to come to be released anyway . . . then there ought to be some benefit derived from that for us . . . . And it will happen as sure as I'm sitting here."

Earl, North's deputy, testified that after the president's news conference last Nov. 19, the second channel asked about "promises" made regarding the Dawa prisoners.

Poindexter testified that his "best recollection" was that he cleared the nine points, which included the initiative on the Dawa prisoners, with the president at some point during the 1986 congressional campaign -- prior to last Nov. 4.

Shultz testified that when he informed the president on Dec. 14 that the Dawa prisoners had become a subject of negotiation, Reagan responded as if he had been "kicked in the belly." By this reaction, Shultz said, he judged that if the president had ever been shown the nine points, it must have been on a casual, "Here's this thing, check here," basis.

The contradictions between the various participants' stories were not pursued by the congressional committees in their public hearings.The 'Cover-Up'

As the Iran-contra story developed, it became clear that the White House had much more to hide than a secret trip by McFarlane to Tehran -- the startling fact revealed in the Beirut magazine Al Shiraa last Nov. 3 that ignited the scandal. Within weeks, what began with misleading public statements escalated into wholesale destruction of documents and other evidence.

The Reagan administration first began making misleading public statements about events subsequently described by the phrase "Iran-contra affair" early last October, right after an old cargo plane flown by Americans and delivering arms to the contras was shot down over Nicaragua. One member of the crew, Eugene Hasenfus, survived; two other Americans were killed.

The plane was part of Secord's secret resupply operation orchestrated by North -- that is, part of the NSC's "off-the-shelf" covert action capability. This was well-known to a small number of officials, none of whom admitted the fact publicly.

Alan D. Fiers, chief of the CIA's Central American task force, testified to the committees on why he sat silently before the House intelligence committee while his superiors misled the panel about the Hasenfus flight by claiming the U.S. government had no role in it. "So long as others who knew the details as much as I, {and} who knew more than I, were keeping their silence on this, I was going to keep my silence," Fiers said.

The administration made additional and more sweeping misstatements in early November of last year, after the first stories appeared reporting secret U.S. arms sales to Iran. Reagan and his advisers held a key meeting Nov. 10 to discuss the exposure of the U.S.-Iranian dealings. Notes of the meeting taken by then-chief of staff Regan and NSC deputy director Alton G. Keel show Reagan leading a discussion of how to portray the Iranian dealings so as to reveal no "specifics" while stressing "we won't pay any money or give anything to terrorists."

"We must say something, but not much," Regan's notes quote the president as saying.

Even at that meeting, according to the notes made by participants, the full extent of the secret dealings was hidden from senior officials. Poindexter, briefing the group, did not mention the November 1985 Hawk shipment and understated the number of TOWs sold to Iran.

The White House statement issued after the meeting did not refer to arms sales and made two assertions that some investigators believe set the stage for a series of misleading statements that soon followed. It said no U.S. laws had been violated and emphasized that the policy of no concessions to terrorists remained intact. Neither contention was accurate, as the piecemeal disclosure of operational details eventually made clear.

Reagan, who initially said the first reports of the Iran dealings were unfounded, made misstatements in a Nov. 13 speech and again at a Nov. 19 news conference.

During this period North and Poindexter, with assistance from McFarlane, were working to produce a chronology of what had occurred. It was to be used by the president at his Nov. 19 news conference, and later to help prepare testimony for Congress. Early versions of the chronology, based in part on documents provided by the CIA, told an essentially accurate story, but as additional drafts were written the true story began to disappear. The old oil-drilling-equipment cover story for the November 1985 Hawk shipment to Iran became a critical element in the chronology being prepared in the White House.

It might well have been enshrined as the definitive story had not the State Department balked. Abraham D. Sofaer, the department's legal adviser, knowing that Shultz had contemporaneous notes of his November 1985, conversation with McFarlane in which the Hawk shipment was accurately described, protested vehemently. So, evidently, did Shultz to Reagan. This dispute led to the Meese "inquiry" that began Nov. 21.

Nov. 21 was a big day. Poindexter briefed members of the House and Senate intelligence committees at the White House, and Casey testified to both behind closed doors on Capitol Hill. Despite the uproar provoked by Shultz and Sofaer, both told versions of the oil-equipment cover story in describing the November 1985 shipment. It was during his testimony to the House panel that day that Casey let drop the damaging revelation of NSC involvement in secret efforts to support the contras described at the beginning of this article.

It was also on Nov. 21 that Poindexter -- after participating in the meeting at which he, Reagan, Regan and Meese agreed that Meese should explore the conflicting accounts of what really happened in November 1985 -- destroyed a critical document bearing on that question, the intelligence "finding" that retroactively authorized CIA participation in that month's arms shipment.

Poindexter also discussed the Hawk deliveries with North and, he testified, was left with the impression that North would destroy his notebook entries relating to the transactions. If the finding and North's notes had both been destroyed, the White House would have no documentation at all of the arms shipment that Meese had just begun to investigate.

On the afternoon of Nov. 21 North altered top-secret documents and shredded others, according to Fawn Hall. (He did not, however, destroy his notebooks, which are now in the committees' hands.)

Meese's first interview that afternoon was with McFarlane, who gave the cover story, according to Assistant Attorney General Charles Cooper's handwritten notes. "At summit in Geneva learned that Isr. {Israel} had shipped oil equipment," Cooper recorded McFarlane as saying. (McFarlane dropped the cover story when he testified before the Iran-contra committees.)

"M remembers no mention in all this of arms," Cooper further reported.

After the two-hour session, McFarlane quickly did two things, according to testimony and documents.

He called Shultz's office and, according to Sofaer, "asked to see him about the possibility of some notes that he, the secretary, had kept."

Sofaer advised Shultz not to see McFarlane, citing concern that such a meeting "could create an appearance he is coordinating his position with you."

McFarlane also sent Poindexter a computer message reporting that he had "spent a couple of hours with Ed Meese today going over the record with him. The only blind spot on my part concerned a shipment in November '85 which still doesn't ring a bell with me." McFarlane advised Poindexter that Meese had given him the impression that the legal problems arising from Israel's transfer of U.S. arms to Iran -- at first blush a violation of the Arms Export Control Act -- might be covered if the president had made a "mental finding," or authorization.

That message has raised a question among some committee investigators as to whether McFarlane was, in fact, conveying a signal from Meese on how to deal with the legal situation. Meese testified, however, that he recalls no such discussion about a "mental finding."Finding the Diversion Memo

The record of events of last Nov. 21-25 leaves numerous unanswered questions, many of them baffling. For example, the story of the discovery of the famous diversion memorandum:

By arrangement, two Justice Department officials, Assistant Attorney General William Bradford Reynolds and Meese aide John Richardson, went to the NSC's offices on Saturday morning, Nov. 22, to look at documents. Although by his own account North had spent days trying to sanitize his files by removing any revealing documents on the affair, Reynolds found the diversion memo quickly -- within 30 or 90 minutes after starting his review in an anteroom of North's office, depending on which of two sets of Justice Department notes is accurate.

The Justice Department group had met with Meese from 10 to 10:30 a.m. that morning (Casey called Meese just before the meeting), and it was close to noon before the team was cleared through White House security, looked over the setup and began examining papers.

They then left to meet Meese for lunch at the Old Ebbitt Grill -- at 12:30 p.m., according to one set of notes, at 1:45 p.m., according to another.

According to Assistant Attorney General Cooper, Reynolds saw other documents during his initial review that he believes were the same as the April memo, except that they omitted the paragraph referring to the use of proceeds for the Nicaraguan rebels.

Politically explosive as these documents were, Reynolds made no copies at the time and apparently took no notes on their content.

Instead he described the diversion paragraph to Meese at lunch, where the potential political impact sank in, according to Cooper's testimony.

Several blocks away in the White House complex, at about the same time, Casey invited himself to join Poindexter for a sandwich lunch. North also joined them for a while. North, according to his own testimony, had just destroyed some documents. The lunch appeared to have lasted two hours, by Poindexter's calendar, but the NSC adviser could recall virtually nothing about it. He remembered only that Casey had reviewed with him the testimony he gave a day earlier to the intelligence committees -- testimony that included the revelations described at the beginning of this article.

Back at the Old Ebbitt, Meese decided that Reynolds and Richardson should return to the NSC to make copies and ask North to call the attorney general to set up an interview.

North called Meese at 3:40 p.m.

Six minutes later, Casey called Meese and, according to the attorney general, suggested the two of them meet at Casey's home that evening, which they did.

At North's NSC suite, the Justice Department officials made copies only of the version of the April memo containing the explosive paragraph, later explaining that it contained the most information. Any other versions, if they existed, have not been given to the congressional committees.

A number of copies of the April memo survived. One version was found on a disk in Fawn Hall's computer; the FBI later found at least two copies on the premises, and North's attorney, Brendan V. Sullivan Jr., reportedly returned to the White House several copies that North had taken home with him.Meese Interviews North

When Meese and North talked Saturday afternoon, North asked to postpone his interview with the attorney general until Sunday afternoon -- after church. According to notes a Meese deputy made of that interview, North misled the attorney general on at least two points. He claimed to know nothing about a retroactive intelligence finding authorizing U.S. participation in a Hawk shipment the previous November, and claimed that the Israelis decided how much money from the arms sales was to go to the contras. After leaving Meese that day, North testified, he returned to his office and shredded still more documents.

The next morning, Monday, Nov. 24, Meese placed a call to Assistant Attorney General William F. Weld, head of the Justice Department's Criminal Division, who had not been part of the weekend inquiry.

"I just want you to know with respect to this Iran matter that the fact that the Criminal Division is not involved is not negligence or a product of sloppiness, and you should not be concerned that matters are, you know, falling between the cracks. This is being done that way on purpose," Weld quoted Meese as saying.

During the day Meese met privately with the president, Regan, Vice President Bush and Poindexter, but took no notes. Meese's handwritten phone logs show he also had conversations with Poindexter, McFarlane, Bush and Regan. Early the next morning, he again saw Casey at the director's house. Meese testified he could not remember the contents of any of the conversations.

North had told Meese that Poindexter was involved in the diversion scheme, but Meese later testified he had only a brief conversation with Poindexter, in which he elicited the information that no one else at the White House knew about the diversion. Meese testified that he assumed this included the president, and therefore did not put the direct question to Poindexter or, later, to the president: Had Reagan approved diverting funds to the contras?

On Nov. 25, Poindexter resigned -- without explaining to any of his colleagues what had happened, he testified -- and Meese, announcing the diversion at a news conference, said, "There's no question whatsoever, or no implication that anything that was done was administration policy or directed by top administration officials." Meese declared that North was the only official who "knew precisely" what had occurred.

Poindexter and North were taking the fall -- but apparently not the way they had expected. For Meese also announced that the "legal matter" of whether North had violated the law had to be looked at, setting the stage for a full-blown probe of possible criminal conduct by North and others.

However, that night, after the dramatic news conference, Meese told Weld that the criminal investigation was still "on hold until the next day." Why he delayed it remains unclear. That next day, Nov. 26, Casey and Meese talked three times on the phone. According to Rep. Peter W. Rodino Jr. (D-N.J.), the Justice Department initially omitted references to those calls from the Meese phone logs provided to the congressional committees.

One more mystery involving the events of those days deserves note. On Thanksgiving Day, Nov. 27, the Los Angeles Times reported that North had shredded documents relevant to the affair. The White House denied this at the time. So did then-FBI Director William H. Webster a week later. Subsequent revelations demonstrated that the story was correct. So someone close enough to North to know of his shredding leaked that information to the Times. Who? Why?