THE IRAN-CONTRA REPORT

Following are key sections of the Congressional Committee Investigating Iran Contra majority report, issued November 18, 1987.
 
EXECUTIVE SUMMARY
 
SUMMARY OF THE FACTS
 
Nicaragua

By December 1981, the United States had begun supporting the Nicaraguan contras, armed opponents of the Sandinista regime.

The Central Intelligence Agency (C.I.A.) was the U.S. Government agency that assisted the contras. In accordance with Presidential decisions, known as findings, and with funds appropriated by Congress, the C.I.A. armed, clothed, fed and supervised the contras. Despite this assistance, the contras failed to win widespread popular support of military victories within
Nicaragua.

Although the President continued to favor support of the contras, opinion polls indicated that a majority of the public was not supportive. Opponents of the Administration's policy feared that
U.S. involvement with the contras would embroil the United States in another Vietnam. Supporters of the policy feared that, without U.S. support for the contras, the Soviets would gain a dangerous toehold in Central America.

Congress prohibited contra aid for the purpose of overthrowing the Sandinista Government in fiscal year 1983, and limited all aid to the contras in fiscal year 1984 to $24 million. Following disclosure in March and April 1984 that the C.I.A. had a role in connection with the mining of the Nicaraguan harbors without adequate notification to Congress, public criticism mounted and the Administration's contra policy lost much of its support within Congress. After further vigorous debate, Congress exercised its constitutional power over appropriations and cut off all funds for the contras' military and paramilitary operations. The statutory provision cutting off funds, known as the Boland Amendment, was part of a fiscal year 1985 omnibus appropriations bill, and was signed into law by the President on
October 12, 1984.

Still, the President felt strongly about the contras, and he ordered his staff, in the words of his national security adviser, to find a way to keep the contras ''body and soul together.'' Thus began the story of how the staff of a White House advisory body, the N.S.C., became an operational entity that secretly ran the contra assistance effort, and later the
Iran initiative. The action officer placed in charge of both operations was Lieut. Col. Oliver L. North.

Denied finding by Congress, the President turned to third countries and private sources. Between June 1984 and the beginning of 1986, the President, his national security adviser, and the N.S.C. staff secretly raised $34 million for the contras from other countries. An additional $2.7 million was provided for the contras during 1985 and 1986 from private contributors, who were addressed by North and occasionally granted photo opportunities with the President. In the middle of this period, Assistant Secretary of State A. Langhorne Motley - from whom these contributions were concealed - gave his assurance to Congress that the Administration was not ''soliciting and/ or encouraging third countries'' to give funds to the contras because, as he conceded, the Boland Amendment prohibited such solicitation.

The first contributions were sent by the donors to bank accounts controlled and used by the contras. However, in July 1985, North took control of the funds and - with the support of two national security advisers (Robert McFarlane and John Poindexter) and, according to North, Director Casey - used those funds to run the covert operation to support the contras.

At the suggestion of Director Casey, North recruited Richard V. Secord, a retired Air Force major general with experience in special operations. Secord set up Swiss bank accounts, and North steered future donations into these accounts. Using these funds, and funds later generated by the
Iran arms sales, Secord and his associate, Albert Hakim, created what they called ''the Enterprise,'' a private organization designed to engage in covert activities on behalf of the United States.

The
Enterprise, functioning largely at North's direction, had its own airplanes, pilots, airfield, operatives, ship, secure communications devices, and secret Swiss bank accounts. For 16 months, it served as the secret arm of the N.S.C. staff, carrying out with private and non-appropriated money, and without the accountability or restrictions imposed by law on t C C.I.,., c covt t corara aid program that Congress thought it had prohibited.

Although the C.I.A. and other agencies involved in intelligence activities knew that the Boland Amendment barred their involvement in covert support for the contras, North's contra support operation received logistical and tactical support from various personnel in the C.I.A. and other agencies. Certain C.I.A. personnel in
Central America gave their assistance. The U.S. Ambassador in Costa Rica, Lewis Tambs, provided his active assistance. North also enlisted the aid of Defense Department personnel in Central America, and obtained secure communications equipment from the National Security Agency. The Assistant Secretary of State with responsibility for the region, Elliott Abrams, professed ignorance of this support. He later stated that he had been ''careful not to ask North lots of questions.''

By Executive Order and National Security Decision Directive issued by President Reagan, all covert operations must be approved by the President personally and in writing. By statute, Congress must be notified about each covert action. The funds used for such actions, like all Government funds, must be strictly accounted for.

The covert action directed by North, however, was not approved by the President in writing. Congress was not notified about it. And the funds to support it were never accounted for. In short, the operation functioned without any of the accountability required of Government activities. It was an evasion of the Constitution's most basic check on executive action - the power of the Congress to grant or deny funding for Government programs.

Moreover, the covert action to support the contras was concealed from Congress and the public. When the press reported in the summer of 1985 that the N.S.C. staff was engaged in raising money and furnishing military support to the contras, the President assured the public that the law was being followed. His national security adviser, Robert C. McFarlane, assured committees of Congress, both in person and in writing, that the N.S.C. staff was obeying both the spirit and the letter of the law, and was neither soliciting money nor co-ordinating military support for the contras.

A year later, McFarlane's successor, Vice Admiral John M. Poindexter, repeated these assurances to Congressional committees. Then, with Poindexter's blessing, North told the House Intelligence Committee he was involved neither in fund-raising for, nor in providing military advice to, the contras.

When one of Secord's planes was shot down over
Nicaragua on October 5, 1986, the President and several Administration spokesmen assured the public that the U.S. Government had no connection with the flight or the captured American crew member, Eugene Hasenfus. Several senior Government officials, including Elliott Abrams, gave similar assurances to Congress.

Two months later, McFarlane told Congressional committees that he had no knowledge of contributions made by a foreign country, Country 2, to the contras when in fact McFarlane and the President had discussed and welcomed $32 million in contributions from that country. In addition, Abrams initially concealed from Congress $32 million in contributions from that country. In addition, Abrams initially concealed from Congress -in testimony given to several committees -that he had successfully solicited a contribution of $10 million from
Brunei.

North conceded at the committees' public hearings that he had participated in making statements to Congress that were ''false,'' ''misleading,'' ''evasive and wrong.'' During the period when the Administration was denying to Congress that it was involved in supporting the contras' war effort, it was engaged in a campaign to alter public opinion and change the vote in Congress on contra aid. Public funds were used to conduct public relations activities; and certain N.S.C. staff members, using the prestige of the White House and the promise of meetings with the President, helped raise private donations both for media campaigns and for weapons to be used by the contras.

Pursuant to a Presidential directive in 1983 the Administration adopted a ''public diplomacy'' program to promote the President's Central American policy. The program was conducted by an office in the State Department known as the Office for Public Diplomacy for
Latin America and the Caribbean (S/LPD). S/LPD's activities were co-ordinated not within the State Department, but by an inter-agency working group established by the N.S.C. The principal N.S.C. staff officer was a former senior C.I.A. official, with experience in covert operations, who had been detailed to the N.S.C. staff for a year with Casey's approval, and who upon retirement from the C.I.A. became a special assistant to the President with responsibility for public diplomacy matters.

S/LPD produced and widely disseminated a variety of pro-contra publications and arranged speeches and press conferences. It also disseminated what one official termed ''white propaganda'': pro-contra newspaper articles by paid consultants who did not disclose their connection to the Administration. Moreover, under a series of sole-source contracts in 1985 and 1986, S/LPD paid more than $400,000 for pro-contra public relations work to International Business Communications (IBC), a company owned by Richard Miller, whose organization was described by one White House representative as a ''White House outside the White House.''

The Administration, like members of Congress, may appeal directly to the people for support of its positions; and Government agencies may legitimately disseminate information and educational materials to the public. However, by law, appropriated funds may not be used to generate propaganda ''designed to influence a member of Congress''; and by law, as interpreted by the Office of the Comptroller General, appropriated funds may not be used by the State Department for ''covert'' propaganda activities. A G.A.O. report concluded that S/LPD's white propaganda activities violated the ban on arranging ''covert propaganda.''

Private funds were also used. North and Miller helped Carl R. (Spitz) Channell raise $10 million, most of which went to Channell's tax-exempt organization, the National Endowment for the Preservation of Liberty (N.E.P.L.). They arranged numerous ''briefings'' at the White House complex on
Central America by Administration officials for groups of potential contributors. Following these briefings, Channell reconvened the groups at the Hay-Adams Hotel, and made a pitch for tax-deductible contributions to N.E.P.L.'s Central America ''public education'' program or, in some individual cases, for weapons. Channell's major contributors were given private briefings by North, and were afforded private visits and photo sessions with the President. On one occasion, President Reagan participated in a briefing.

Using the donated money, Channell ran a series of television advertisements in 1985 and 1986, some of which were directed at television markets covering the home districts of Congressmen considered to be ''swing'' votes on contra aid. One series of advertisements was used to attack Congressman Mike Barnes, a principal opponent of contra aid, and one of the Congressmen to whom Administration officials had denied violating the Boland Amendment in September of 1985. Channell later boasted to North that he had ''participated in a campaign to ensure Congressman Barnes's defeat.''

Of the $10 million raised by North, Channell and Miller, more than $1 million was used for pro-contra publicity. Approximately $2.7 million was sent through I.B.C. and offshore accounts of another Miller-controlled company to Secord's Swiss accounts, or to Calero's account in
Miami. Most of the remainder was spent on salaries and expenses for Channell, Miller and their business associates.

N.E.P.L.'s charter did not contemplate raising funds for a covert war in
Nicaragua, and the Internal Revenue Service never approved such activity when N.E.P.L. was granted exempt status. As a consequence, Channell and Miller have each pleaded guilty to the crime of conspiring to defraud the United States Treasury of revenues ''by subverting and corrupting the lawful purposes of N.E.P.L.'' Channell named North as a co-conspirator.

In private fund-raising, as in the ''white propaganda'' campaign, the goal of supporting the contras was allowed to override sensitivity to law and to accepted norms of behavior.
 
Iran

The N.S.C. staff was already engaged in covert operations through Secord when, in the summer of 1985, the Government of Israel proposed that missiles be sold to Iran in return for the release of seven American hostages held in Lebanon and the prospect of improved relations with Iran. The Secretaries of State and Defense repeatedly opposed such sales to a Government designated by the
United States as a supporter of international terrorism. They called it a straight arms-for-hostages deal that was contrary to U.S. public policy. They also argued that these sales would violate the Arms Export Control Act, as well as the U.S. arms embargo against Iran. The embargo had been imposed after the taking of hostages at the U.S. Embassy in Teheran on November 4, 1979, and was continued because of the Iran-Iraq war.

Nevertheless, in the summer of 1985 the President authorized
Israel to proceed with the sales. The N.S.C. staff conducting the contra covert action also took operational control of implementing the President's decision on arms sales to Iran. The President did not sign a finding for this covert operation, nor did he notify the Congress.

Israel shipped 504 TOW anti-tank missiles to Iran in August and September 1985. Although the Iranians had promised to release most of the American hostages in return, only one, Reverend Benjamin Weir, was freed. The President persisted. In November, he authorized Israel to ship 80 Hawk anti-aircraft missiles in return for all the hostages, with a promise of prompt replenishment by the United States, and 40 more Hawks to be sent directly by the United States to Iran. Eighteen Hawk missiles were actually shipped from Israel in November 1985, but no hostages were released.

In early December 1985, the President signed a retroactive finding purporting to authorize the November Hawk transaction. That finding contained no reference to improved relations with
Iran. It was a straight arms-for-hostages finding. National security adviser Poindexter destroyed this finding a year later because, he testified, its disclosure would have been politically embarrassing to the President.

The November Hawk transaction had additional significance. The
Enterprise received a $1 million advance from the Israelis. North and Secord testified this was for transportation expenses in connection with the 120 Hawk missiles. Since only 18 missiles were shipped, the Enterprise was left with more than $800,000 in spare cash. North directed the Enterprise to retain the money and spend it for the contras. The ''diversion'' had begun.

North realized that the sale of missiles to
Iran could be used to support the contras. He told Israeli Defense Ministry officials on December 6, 1985, one day after the President signed the finding, that he planned to generate profits on future arms sales for activities in Nicaragua.

On
December 7, 1985, the President and his top advisers met again to discuss the arms sales. Secretaries Shultz and Weinberger objected vigorously once more, and Weinberger argued that the sales would be illegal. After a meeting in London with the Iranian interlocutor and the Israelis, McFarlane recommended that the sales be halted. Admiral John Poindexter (the new national security adviser), and Director Casey were of the opposite opinion.

The President decided to go forward with the arms sales to get the hostages back. He signed a finding on
January 6, 1986, authorizing more shipments of missiles for the hostages. When the C.I.A.'s General Counsel pointed out that authorizing Israel to sell its U.S.-manufactured weapons to Iran might violate the Arms Export Control Act, the President, on the legal advice of the Attorney General, decided to authorize direct shipments of the missiles to Iran by the United States and signed a new finding on January 17, 1986. To carry out the sales, the N.S.C. staff turned once again to the Enterprise.

Although North had become skeptical that the sales would lead to the release of all the hostages or a new relationship with
Iran, he believed that the prospect of generating funds for the contras was ''an attractive incentive'' for continuing the arms sales. No matter how many promises the Iranians failed to keep throughout this secret initiative, the arms sales continued to generate funds for the Enterprise, and North and his superior, Poindexter, were consistent advocates for their continuation. What North and Poindexter asserted in their testimony that they did not know, however, was that most of these arms sales profits would remain with the Enterprise and never reach the contras.

In February 1986, the
United States, acting through the Enterprise, sold 1,000 TOW's to the Iranians. The U.S. also provided the Iranians with military intelligence about Iraq. All of the remaining American hostages were supposed to be released upon Iran's receipt of the first 500 TOW's. None was. But the transaction was productive in one respect. The difference between what the Enterprise paid the United States for the missiles and what it received from Iran was more than $6 million. North directed part of this profit for the contras and for other covert operations. Poindexter testified that he authorized this ''diversion.''

The diversion, for the contras and other covert activities, was not an isolated act by the N.S.C. staff. Poindexter saw it was ''implementing'' the President's secret policy that had been in effect since 1984 of using nonappropriated funds following passage of the Boland Amendment.

According to North, C.I.A. Director Casey saw the ''diversion'' as part of a more grandiose plan to use the Enterprise as a ''stand-alone,'' ''off-the-shelf,'' covert capacity that would act throughout the world while evading Congressional review. To Casey, Poindexter, and North, the diversion was an integral pat of selling arms to
Iran and just one of the indended uses of the proceeds.

In May 1986, the President again tried to sell weapons to get the hostages back. This time, the President agreed to ship parts for Hawk missiles but only on condition that all the American hostages in
Lebanon be released first. A mission headed by Robert McFarlane, the former national security adviser, traveled to Teheran with the first installment of the Hawk parts. When the mission arrived, McFarlane learned that the Iranians claimed they had never promised to do anything more than try to obtain the hostages' release. The trip ended amid misunderstanding and failure, although the first installment of Hawk parts was delivered.

The
Enterprise was paid, however, for all of the Hawk parts, and realized more than an $8 million profit, part of which was applied, at North's direction, to the contras. Another portion of the profit was used by North for other covert operations, including the operation of a ship for a secret mission. The idea of an off-the-shelf, stand-alone covert capacity had become operational.

On
July 26, 1986, another American hostage, Father Lawrence Jenco, was released. Despite all the arms sales, he was only the second hostage freed, and the first since September 1985. Even though McFarlane had vowed at the Teheran meeting not to deliver the remainder of the Hawk parts until all the hostages were released, the Administration capitulated again. The balance of the Hawk parts was shipped when Father Jenco was released.

In September and October 1986, the N.S.C. staff began negotiating with a new group of Iranians, the ''second channel,'' that Albert Hakim had opened, in part, through promises of bribes. Although these Iranians allegedly had better contacts with Iranian officials, they, in fact, represented the same principals as did the first channel and had the same arrangement in mind: missiles for hostages. Once again, the Administration insisted on release of all the hostages but settled for less.

In October, after a meeting in
London, North left Hakim to negotiate with the Iranians. Hakim made no secret of his desire to make large profits for himself and General Secord in the $15 billion-a-year Iranian market if relations with the United States could be restored. Thus, he had every incentive to make an agreement, whatever concessions might be required.

As an unofficial ''ambassador'' selected by North and Secord, Hakim produced a remarkable nine-point plan, subsequently approve by North and Poindexter, under which the United States would receive ''one and one half'' hostages (later reduced to one). Under the plan, the
United States agreed not only to sell the Iranians 500 more TOW's, but Secord and Hakim promised to develop a plan to induce the Kuwaiti Government to release the Daawa prisoners. (Seventeen Kuwaiti prisoners, connected to Al Dawa, an Iranian revolutionary group, had been convicted and imprisoned for their part in the December 12, 1983, attacks in Kuwait on the U.S. Embassy, a U.S. civilian compound, the French Embassy, and several Kuwaiti Government facilities.) The plan to obtain the release of the Daawa prisoners did not succeed, but the TOW missiles were sold for use by the Iranian Revolutionary Guard. Following the transfer of these TOW's, a third hostage, David Jacobsen, was released on November 2, 1986, and more profit was generated for the Enterprise.

Poindexter testified that the President approved the nine-point plan. But other testimony raises questions about this assertion. Regardless of what Poindexter may have told the President, Secretary Shultz testified that when he informed the President on
December 14, 1986, that the nine-point plan included a promise about the release of the Dawa prisoners in Kuwait, the President reacted with shock, ''like he had been kicked in the belly.''

During the negotiations with the second channel, North and Secord told the Iranians that the President agreed with their position that
Iraq's President, Saddam Hussein, had to be removed and further agreed that the United States would defend Iran against Soviet aggression. They did not clear this with the President and their representations were flatly contrary to U.S. policy.
 
                               .    .    .

By permitting private parties to conduct the arms sales, the Administration risked losing control of an important foreign policy initiative. Private citizens - whose motivations of personal gain could conflict with the interests of this conuntry - handled sensitive diplomatic negotiations, and purported to commit the United States to positions that were anathema to the President's public policy and wholly unknown to the Secretary of State.
 
The Coverup

The sale of arms to
Iran was a ''significant anticipated intelligence activity.'' By law, such an activity must be reported to Congress ''in a timely fashion'' pursuant to Section 501 of the National Security Act. If the proposal to sell arms to Iran had been reported, the Senate and House Intelligence Committees would likely have joined Secretaries Shultz and Weinberger in objecting to this initiative. But Poindexter recommended -and the President decided - not to report the Iran initiative to Congress.
 
                               .    .    .

According to North, a ''fall guy'' plan was proposed by Casey in which North and, if necessary, Poindexter, would take the responsibility for the covert contra support operation and the diversion. On
Saturday November 22, 1986, in the midst of these efforts to conceal what had happened, Poindexter had a two and one half hour lunch with Casey. Yet Poindexter could not recall anything that was discussed.

North testified that he assured Poindexter that he had destroyed all documents relating to the diversion. The diversion nevertheless was discovered on
November 22, 1986, when a Justice Department official, assisting the Attorney General's fact-finding inquiry, found a ''diversion memorandum'' that had escaped the shredder.

Prior to the discovery of the diversion memorandum, each interview by the Attorney General's fact finding team had been conducted in the presence of two witnesses, and careful notes were taken in accordance with standard professional practices. After discovery of the diversion memorandum -which itself gave rise to and inference of serious wrongdoing - the Attorney General departed from these standard practices. A series of important interviews - Poindexter, McFarlane, Casey, Regan and Bush - was conducted by the Attorney General alone, and no notes were made.

The Attorney General then announced at his November 25 press conference that the diversion had occurred and that the President did not know of it. But he made several incorrect statements about his own investigation. He stated that the President had not known of the Israeli pre-finding shipments, and he stated that the proceeds of the arms sales had been sent directly from the Israelis to the contras. These statements were both mistaken and inconsistent with information that had been received during the Attorney General's fact-finding inquiry.

Poindexter testified to these committees that the President did not know of the diversion. North testified that while he assumed the President had authorized each diversion, Poindexter told him on
November 21, 1986, that the President had never been told of the diversion.

In light of the destruction of material evidence by Poindexter and North and the death of Casey, all of the facts may never be known. The committees connot even be sure whether they heard the whole truth or whether Casey's ''fall guy'' plan was carried out at the public hearings. But enough is clear to demonstrate beyond doubt that fundamental processes of governance were disregarded and the rule of law was subverted.
 
FINDINGS AND CONCLUSIONS
 
                               .    .    .
 
Dishonesty and Secrecy

The Iran-Contra affair was characterized by pervasive dishonesty and inordinate secrecy.

North admitted that he and other officials lied repeatedly to Congress and to the American people about the contra covert action and
Iran arms sales, and that he altered and destroyed official documents. North's testimony demonstrates that he also lied to members of the executive branch, including the Attorney General, and officials of the State Department, C.I.A. and N.S.C.

Secrecy became an obsession. Congress was never informed of the
Iran or the contra covert actions, notwithstanding the requirement in the law that Congress be notified of all covert actions in a ''timely fashion.''

Poindexter said that Donald Regan, the President's chief of staff, was not told of the N.S.C. staff's fundraising activities because he might reveal it to the press. Secretary Shultz objected to third-country solicitation in 1984 shortly before the Boland Amendment was adopted; accordingly, he was not told that, in the same time period, the national security adviser had accepted an $8 million contribution from Country 2 even though the State Department had prime responsibility for dealings with that country. Nor was the Secretary of State told by the President in February 1985 that the same country had pledged another $24 million - even though the President briefed the Secretary of State on his meeting with the head of state at which the pledge was made. Poindexter asked North to keep secrets from Casey; Casey, North and Poindexter agreed to keep secrets from Shultz.

Poindexter and North cited fear of leaks as a justification for these practices. But the need to prevent public disclosure cannot justify the deception practiced upon members of Congress and executive branch officials by those who knew of the arms sales to
Iran and of the contra support network. The State and Defense Departments deal each day with the most sensitive matters affecting millions of lives here and abroad. The Congressional Intelligence Committees receive the most highly classified information, including information on covert activities. Yet, according to North and Poindexter, even the senior officials of these bodies could not be entrusted with the N.S.C. staff's secrets because they might leak.
 
                               .    .    .

Poindexter told the Secretary of State in May 1986 that the
Iran initiative was over, at the very time the McFarlane mission to Teheran was being launched. Poindexter also concealed from Cabinet officials the remarkable nine-point agreement negotiated by Hakim with the second channel. North assured the F.B.I. liaison to the N.S.C. as late as November 1986 that the United States was not bargaining for the release of hostages but seizing terrorists to exchange for hostages -a complete fabrication. The lies, omissions, shredding, attempts to rewrite history - all continued, even after the President authorized the Attorney General to find out the facts.

It was not operational security that motivated such conduct - not when our own Government was the victim. Rather, the N.S.C. staff feared, correctly, that any disclosure to Congress or the Cabinet of the arms-for-hostages and arms-for-profit activities would produce a storm of outrage.

As with
Iran, Congress was misled about the N.S.C. staff's support for the contras during the period of the Boland Amendment, although the roles of the N.S.C. staff was no secret to others. North testified that his operation was well-known to the press in the Soviet Union, Cuba and Nicaragua. It was not a secret from Nicaragua's neighbors, with whom the N.S.C. staff communicated throughout the period. It was not a secret from the third countries - including a totalitarian state -from whom the N.S.C. staff sought arms or funds. It was not a secret from the private resupply network which North recruited and supervised. According to North, even Ghorbanifar knew.

The Administration never sought to hide its desire to assist the contras so long as such aid was authorized by statute. On the contrary, it wanted the Sandinistas to know that the
United States supported the contras. After enactment of the Boland Amendment, the Administration repeatedly and publicly called upon Congress to resume U.S. assistance. Only the N.S.C. staff's contra support activities were kept under wraps. The committees believe these actions were concealed in order to prevent Congress from learning that the Boland Amendment was being circumvented.

It was stated on several occasions that the confusion, secrecy and deception surrounding the aid program for the Nicaraguan freedom fighters was produced in part by Congress's shifting positions on contra aid.

But Congress's inconsistency mirrored the chameleon-like nature of the rationale offered for granting assistance in the first instance. Initially, Congress was told that our purpose was simply to interdict the flow of weapons from Nicaragua into El Salvador. Then Congress was told that our purpose was to harass the Sandinistas to prevent them from consolidating their power and exporting their revolution. Eventually, Congress was told that our purpose was to eliminate all foreign forces from Nicaragua, to reduce the size of the Sandinista armed forces, and to restore the democratic reforms pledged by the Sandinistas during the overthrow of the Somoza regime.

Congress had cast a skeptical eye upon each rationale proffered by the Administration. It suspected that the Administration's true purpose was identical to that of the Contras - the overthrow of the Sandinista regime itself. Ultimately Congress yielded to domestic political pressure to discontinue assistance to the contras, but Congress was unwilling to bear responsibility for the loss of Central America to communist military and political forces. So Congress compromised, providing in 1985 humanitarian aid to the contras; and the N.S.C. staff provided what Congress prohibited: lethal support for the contras.

Compromise is no excuse for violation of law and deceiving Congress. A law is no less a law because it is passed by a slender majority, or because Congress is open-minded about its reconsideration in the future.
 
Privatization

The N.S.C. staff turned to private parties and third countries to do the Government's business. Funds denied by Congress were obtained by the Administration from third countries and private citizens. Activities normally conducted by the professional intelligence services - which are accountable to Congress - were turned over to Secord and Hakim.

The solicitation of foreign funds by an Administration to pursue foreign policy goals rejected by Congress is dangerous and improper. Such solicitations, when done secretly and without Congressional authorization, create a risk that the foreign country will expect and demand something in return. McFarlane testified that ''any responsible official has an obligation to acknowledge that every country in the world will see benefit to itself by ingratiating itself to the United States.'' North, in fact, proposed rewarding a Central American country with foreign assistance funds for facilitating arms shipments to the contras. And Secord, who had once been in charge of the U.S. Air Force's foreign military sales, said ''where there is a quid, there is a quo.''
 
                               .    .    .
 
Disdain for Law

In the Iran-contra affair, officials viewed the law not as setting boundaries for their actions, but raising impediments to their goals. When the goals and the law collided, the law gave way:

*  The covert program of support for the contras evaded the Constitution's most significant check on executive power: The President can spend funds on a program only if he can convince Congress to appropriate the money.

When Congress enacted the Boland Amendment, cutting off funds for the war in Nicaragua, Administration officials raised funds for the contras from other sources -foreign governments, the Iran arms sales and private individuals; and the N.S.C. staff controlled the expenditures of these funds through power over the Enterprise. Conducting the covert program in Nicaragua with funding from the sale of U.S. Government property and contributions raised by Government officials was a flagrant violation of the appropriations clause of the Constitution.

*  In addition, the covert program of support for the contras was an evasion of the letter and spirit of the Boland Amendment. The President made it clear that while he opposed restrictions on military or paramilitary assistance to the contras, he recognized that compliance with the law was not optional. ''[W]hat I might personally wish or what our Government might wish still would not justify us violating the law of the land,'' he said in 1983.

A year later, members of the N.S.C. staff were devising ways to continue support and direction of contra activities during the period of the Boland Amendment. What was previously done by the C.I.A. - and now prohibited by the Boland Amendment - would be done instead by the N.S.C. staff.

The President set the stage by welcoming a huge donation for the contras from a foreign government - a contribution clearly intended to keep the contras in the field while U.S. aid was barred. The N.S.C. staff thereafter solicited other foreign governments for military aid, facilitated the efforts of U.S. fund-raisers to provide lethal assistance to the contras and ultimately developed and directed a private network that conducted, in North's words, a ''full-service covert operation'' in support of the contras.

This could not have been more contrary to the intent of the Boland legislation.

Numerous other laws were disregarded:

*  North's full-service covert operation was a ''significant anticipated intelligence activity'' required to be disclosed to the intelligence committees of Congress under Section 501 of the National Security Act. No such disclosure was made.

*  By executive order, a covert operation requires a personal determination by the President before it can be conducted by an agency other than the C.I.A. It requires a written finding before any agency can carry it out. In the case of North's full-service covert operation in support of the contras, there was no such personal determination and no such finding. In fact, the President disclaims any knowledge of this covert action.

*  False statements to Congress are felonies if made with knowledge and intent. Several Administration officials gave statements denying N.S.C. staff activities in support of the contras which North later described in his testimony as ''false'' and ''misleading, evasive and wrong.''

*  The application of proceeds from U.S. arms sales for the benefit of the contra war effort violated the Boland Amendment's ban on U.S. military aid to the contras, and constituted a misappropriation of Government funds derived from the transfer of U.S. property.

*  The U.S. Government's approval of the pre-finding 1985 sales by Israel of arms to the Government of Iran was inconsistent with the Government's obligations under the Arms Export Control Act.

*  The testimony to Congress in November 1986 that the U.S. Government had no contemporaneous knowledge of the Israeli shipments, and the shredding of documents relating to the shipments while a Congressional inquiry into those shipments was pending, obstructed Congressional investigations.

*  The Administration did not make, and clearly intended never to make, disclosure to the intelligence committees of the finding -later destroyed - approving the November 1985 Hawk shipment, nor did it disclose the covert action to which the finding related.

The committees make no determination as to whether any particular individual involved in the Iran-contra affair acted with criminal intent or was guilty of any crime. That is a matter for the independent counsel and the courts. But the committees reject any notion that worthy ends justify violations of law by Government officials; and the committees condemn without reservation the making of false statements to Congress and the withholding, shredding and alteration of documents relevant to a pending inquiry.

Administration officials have, if anything, an even greater responsibility than private citizens to comply with the law. There is no place in Government for lawbreakers.
 
                               .    .    .
 
Who Was Responsible

Who was responsible for the Iran-contra affair? Part of our mandate was to answer that question, not in a legal sense (which is the responsibility of the independent counsel), but in order to reaffirm that those who serve the Government are accountable for their actions. Based on our investigation, we reach the following conclusions.

At the operational level, the central figure in the Iran-contra affair was Lieutenant Colonel North, who coordinated all of the activities and was involved in all aspects of the secret operations. North, however, did not act alone.

North's conduct had the express approval of Admiral John Poindexter, first as deputy national security adviser, and then as national security adviser. North also had at least the tacit support of Robert McFarlane, who served as national security adviser until December 1985.

In addition, for reasons cited earlier, we believe that the late Director of Central Intelligence, William Casey, encouraged North, gave him direction and promoted the concept of an extralegal covert organization. Casey, for the most part, insulated C.I.A. career employees from knowledge of what he and N.S.C. staff were doing. Casey's passion for covert operations - dating back to his World War II intelligence days - was well known. His close relationship with North was attested to by several witnesses. Further, it was Casey who brought Richard Secord into the secret operation, and it was Secord who, with Albert Hakim, organized the Enterprise. These facts provide strong reasons to believe that Casey was involved both with the diversion and with the plans for an ''off-the-shelf'' covert capacity.

The committees are mindful, however, of the fact that the evidence concerning Casey's role comes almost solely from North; that this evidence, albeit under oath, was used by North to exculpate himself; and that Casey could not respond. Although North told the committees that Casey knew of the diversion from the start, he told a different story to the Attorney General in November 1986, as did Casey himself. Only one other witness, Lieut. Col. Robert Earl, testified that he had been told by North during Casey's lifetime that Casey knew of the diversion.

The Attorney General recognized on November 21, 1986, the need for an inquiry. His staff was responsible for finding the diversion memorandum, which the Attorney Gerneral promptly made public. But as described earlier, his fact-finding inquiry departed from standard investigative techniques. The Attorney General saw Director Casey hours after the Attorney General learned of the diversion memorandum, yet he testified that he never asked Casey about the diversion. He waited two days to speak to Poindexter, North's superior, and then did not ask him what the President knew. He waited too long to seal North's offices. These lapses placed a cloud over the Attorney General's investigation.

There is no evidence that the Vice President was aware of the diversion. The Vice President attended several meetings on the Iran initiative, but none of the participants could recall his views.

The Vice President said he did not know of the contra resupply operation. His national security adviser, Donald Gregg, was told in early August 1987 by a former colleague that North was running the contra resupply operation, and that ex-associates of Edwin Wilson - a well-known ex-C.I.A. official convicted of selling arms to Libya and plotting the murder of his prosecutors - were involved in the operation. Gregg testified that he did not consider these facts worthy of the Vice President's attention and did not report them to him, even after the Hasenfus airplane was shot down and the Administration had denied any connection with it.

The central remaining question is the role of the President in the Iran-contra affair. On this critical point, the shredding of documents by Poindexter, North and others, and the death of Casey, leave the record incomplete.

As it stands, the President has publicly stated that he did not know of the diversion. Poindexter testified that he shielded the President from knowledge of the diversion. North said that he never told the President, but assumed that the President knew. Poindexter told North on November 21, 1986, that he had not informed the President of the diversion. Secord testified that North told him he had talked with the President about the diversion, but North testified that he had fabricated this story to bolster Secord's morale.

Nevertheless, the ultimate responsibility for the events in the Iran-contra affair must rest with the President. If the President did not know what his national security advisers were doing, he should have. It is his responsibility to communicate unambiguously to his subordinates that they must keep him advised of important actions they take for the Administration. The Constitution requires the President to ''take care that the laws be faithfully executed.'' This charge encompasses a responsibility to leave the members of his Administration in no doubt that the rule of law governs.

Members of the N.S.C. staff appeared to believe that their actions were consistent with the President's desires. It was the President's policy - not an isolated decision by North or Poindexter - to sell arms secretly to Iran and to maintain the contras ''body and soul,'' the Boland Amendment notwithstanding. To the N.S.C. staff, implementation of these policies became the overriding concern.

Several of the President's advisers pursued a covert action to support the contras in disregard of the Boland Amendment and of several statutes and executive orders requiring Congressional notification. Several of these same advisers lied, shredded documents and covered up their actions. These facts have been on the public record for months. The actions of those individuals do not comport with the notion of a country guided by the rule of law. But the President has yet to condemn their conduct.

The President himself told the public that the U.S. Government had no connection to the Hasenfus airplane. He told the public that early reports of arms sales for hostages had ''no foundation.'' He told the public that the United States had not traded arms for hostages. He told the public that the United States had not condoned the arms sales by Israel to Iran, when in fact he had approved them and signed a finding, later destroyed by Poindexter, recording his approval. All of these statements by the President were wrong. Thus, the question whether the President knew of the diversion is not conclusive on the issue of his responsibility. The President created or at least tolerated an environment where those who did know of the diversion believed with certainty that they were carrying out the President's policies.

This same environment enabled a secretary who shredded, smuggled and altered documents to tell the committees that ''sometimes you have to go above the written law''; and it enabled Admiral Poindexter to testify that ''frankly, we were willing to take some risks with the law.'' It was in such an environment that former officials of the N.S.C. staff and their private agents could lecture the committees that a ''rightful cause'' justifies any means, that lying to Congress and other officials in the executive branch itself is acceptable when the ends are just, and that Congress is to blame for passing laws that run counter to Administration policy. What may aptly be called the ''cabal of the zealots'' was in charge.

In a constitutional democracy, it is not true, as one official maintained, that ''When you take the king's shilling, you do the king's bidding.'' The idea of monarchy was rejected here 200 years ago and since then, the law -not any official or ideology - has been paramount. For not instilling this precept in his stff, for failing to take care that the law reigned supreme, the President bears the responsibility.

Fifty years ago Supreme Court Justice Louis Brandeis observed: ''Our Government is the potent, the omnipresent teacher. For good or for ill, it teaches the whole people by its example. Crime is contagious. If the Government becomes a lawbreaker, it breeds contempt for law, it invites every man to become a law unto himself, it invites anarchy.''

The Iran-contra affair resulted from a failure to heed this message.
 
CONCLUSIONS AND RECOMMENDATIONS
 
Findings: Timely Notice

The committees recommend that Section 501 of the National Security Act be amended to require that Congress be notified prior to the commencement of a covert action except in certain rare instances and in no event later than 48 hours after a finding is approved. This recommendation is designed to assure timely notification to Congress of covert operations.
 
                               .    .    .
 
Written Findings

The committees recommend legislation requiring that all covert-action findings be in writing and personally signed by the President. Similarly, the committees recommend legislation that requires that the finding be signed prior to the commencement of the covert action, unless the press ot time prevents it, in which case it must be signed within 48 hours of approval by the President.
 
                               .    .    .
 
Disclosures of Written Findings to Congress

The committees recommended legislation requiring that copies of all signed written findings be sent to the Congressional intelligence committees.
 
                               .    .    .
 
Findings: Agencies Covered

The committees recommend that a finding by the President should be required before a covert action is commenced by any department, agency, or entity of the United States Government regardless of what source of funds is used.
 
                               .    .    .
 
Findings: Identifying Participants

The committees recommend legislation requiring that each finding should specify each and every department, agency, or entity of the United States Government authorized to fund or otherwise participate in any way in any covert action and whether any third party, including any foreign country, will be used in carrying out or providing funds for the covert action. The Congress should be informed of the identities of such third parties in an appropriate fashion.
 
                               .    .    .
 
Findings: The Attorney General

The committees recommend that the Attorney General be provided with a copy of all proposed findings for purposes of legal review.
 
                               .    .    .
 
Findings: Presidential Reporting

The committees recommend that consistent with the concepts of accountability inherent in the finding process, the obligation to report covert-action findings should be placed on the President.
 
                               .    .    .
 
Recertification of Findings

The committees recommend that each finding shall cease to be operative after one year unless the President certifies that the finding is still in the national interest. The executive branch and the intelligence committees should conduct frequent periodic reviews of all covert operations.
 
Covert Actions Carried Out by Other Countries

The committees believe that the definition of covert action should be changed so that it includes a request by an agency of the United States to a foreign country or a private citizen to conduct a covert action on behalf of the United States.
 
Reporting Covert Arms Transfers

The committees recommend that the law regulating the reporting of covert arms transfers be changed to require notice to Congress on any covert shipment of arms where the transfer is valued at more than $1 million.
 
                               .    .    .
 
N.S.C. Operational Activities

The committees recommend that the members and staff of the N.S.C. not engage in covert actions.
 
                               .    .    .
 
N.S.C. Reporting to Congress

The committees recommend legislation requiring that the President report to Congress periodically on the organization, size, function and procedures of the N.S.C. staff.
                  .    .    .
Particular attention should be paid to the number and tenure of uniformed military personnel assigned to the N.S.C.
 
Privatization

The committees recommend a strict accounting of all U.S. Government funds managed by private citizens during the course of a covert action.
                               .    .    .
Preservation of Presidential Documents

The committees recommend that the Presidential Records Act be reviewed to determine how it can be made more effective. Possible improvements include the establishment of a system of consultation with the Archivist of the United States to ensure complete compliance with the act, the creation of a program of education of affected staff as to the act's provisions, and the attachment of criminal penalties for violations of the act.

During the Iran-contra hearings, Oliver North, John Poindexter, Fawn Hall and others admitted to having altered and destroyed key documents relating to their activities. Such actions constitute violations of the Presidential Records Act, which was intended to ensure the preservation of documents of historical value that were generated by the Chief Executive and his immediate staff.
 
C.I.A. Inspector General and General Counsel

The Committees recommend that a system be developed so that the C.I.A. has an independent statutory Inspector General confirmed by the Senate, like the Inspectors General of other agencies, and that the general counsel of the C.I.A. be confirmed by the Senate.

The C.I.A.'s internal investigation of the Iran-Contra Affair - conducted by the Office of the Inspector General - paralleled those of the Intelligence Committees and then the Iran Committees. It contributed to, and cooperated with, the Tower Board. Yet, the Office of the Inspector General appears not to have had the manpower, resources or tenacity to acquire key facts uncovered by the other investigations.
 
                               .    .    .
 
Foreign Bank Records Treaties

The committees recommend that treaties be negotiated with foreign countries whose banks are used to conceal financial transactions by U.S. citizens, and that these treaties covering foreign bank records specify that Congress, not just the Department of Justice, has the right to request, to receive, and to utilize such records.
 
                               .    .    .
 
Findings Cannot Supersede Law

The committees recommend legislation affirming what the committees believe to be the existing law: that a finding cannot be used by the President or any member of the executive branch to authorize an action inconsistent with, or contrary to, any statute of the United States.
 
Improving Consistency in Dealing with Security Breaches

The committees recommend that consistent methods of dealing with leaks of classified information by government officials be developed.
 
                               .    .    .
 
Review of Congressional Contempt Statutes

The committees recommend that the Congressional contempt statutes be reviewed by the appropriate committees. There is a need, in Congressional investigations, for a swift and sure method of compelling compliance with Congressional orders for production of documents and the obtaining of testimony. These investigations raised questions about the adequacy of existing statutes.
 
                               .    .    .
 
National Security Adviser

The committees recommend that Presidents adopt as a matter of policy the principle that the national security adviser to the President of Unites States should not be an active military officer and that there should be a limit placed on the tour of military officers assigned to the staff of the National Security Council.
 
                               .    .    .
 
Review of Other Laws

The committees suggest that appropriate standing committees review certain laws for possible changes:

a. Should restrictions on sales of arms to certain countries under the Arms Export Control Act (''AECA'') and other statutes governing overt sales be made applicable to covert sales?

b. Should the Hostage Act be repealed or amended?

c. Should enforcement or monitoring provisions be added to the AECA so that we better control retransfers of U.S.-manufactured arms by countries to whom we sell them?
 
Recommendations for Congress

a. The committees recommend that the oversight capabilities of the Intelligence Committees be strengthened by acquisition of an audit staff.

b. The committees recommend that the appropriate oversight committees conduct review of sole-source contract for potential abuse.

c. The committees recommend that uniform procedures be developed to ensure that classified information is handled in a secure manner and that such procedures should include clear and strengthened sanctions for unauthorized disclosure of national security secrets or classified information which shall be strictly enforced.
 
THE COUNTRIES HAVE NUMBERS

Congressional investigators used numbers to identify countries that might be embarrassed by public disclosure of their secret dealings with the United States. According to officials familiar with the report, these are the countries in question:
 
*  Country 1 is Israel.
*  Country 2 is Saudi Arabia.
*  Country 3 is Taiwan.
*  Country 4 is China.
*  Country 5 is South Korea.
*  Country 6 is South Africa.
*  Country 15 is Portugal.
*  Country 16 is believed to be Turkey.

The report does not mention Countries 7 through 13, although those designations were used at various points in the public hearings. Country 14 has not been identified.