THE UNITED STATES

Threats behind the disclosure

MARCI McDONALD August 3 1987
THE UNITED STATES

Threats behind the disclosure

MARCI McDONALD August 3 1987

Threats behind the disclosure

THE UNITED STATES

For seven months speculation has swirled around what prompted Attorney General Edwin Meese’s stunning revelation last Nov. 25: that profits from secret American arms sales to Iran had been diverted to buy arms for the Nicaraguan contra rebels. Within weeks William Casey, then-director of the Central Intelligence Agency (CIA), told a closed meeting of the Senate intelligence committee that the representative for Canadian investors in the arms deal—later identified by media reports as Monacobased accountant Donald Fraser and Toronto real estate dealer Walter Ernest (Ernie) Miller—had tipped him off about the diversion. The Oct. 7 alert had come through New York businessman Roy Furmark, a friend and former legal client, whom he said was acting as a gobetween. Casey claimed that at first he had not taken seriously Furmark’s warning that the Canadians were threatening to sue in an attempt to re-

cover $13 million they were still owed from a May, 1985, arms shipment.

But partially declassified CIA memos and pages from Lt.-Col. Oliver North’s White House diaries—recently released by the congressional panel investigating the Iran-contra affair—show that Furmark’s warnings in fact sowed panic within the CIA aT i North’s circle of clandestine operatives as early as six weeks before Meese’s announcement. What worried U.S. officials was not the prospect of a lawsuit. The documents warn that unnamed Canadians were threatening to expose the entire Iranian arms sale to key members of Congress by an Oct. 15 deadline. Indeed, perhaps in an effort to provoke administration action, Furmark had described the Canadians to a CIA official as having “a reputation for dealing roughly with those who do not meet their obligations.” Wrote CIA official Charles Allen to Casey: “We could soon have an incredible mess on our hands.”

The Canadian investors warned that they would divulge the deal to Democratic senators Alan Cranston of California, Patrick Leahy of Vermont, and Edward Kennedy of Massachusetts or

Daniel Patrick Moynihan of New York State. Allen’s Oct. 14 memo states that Manucher Ghorbanifar—the Iranian middleman who organized the arms sales to Iran with Saudi billionaire Adnan Khashoggi—had already told Leahy, Cranston and Moynihan. Moynihan’s spokesman denied that the senator had been contacted or knew Furmark, Fraser or Miller. The other senators did not respond to Maclean's inquiries.

The documents depict an administration scrambling to cover up the arms deal by mid-October. An Oct. 13 entry in North’s notebooks show that he was worried about exposure. A week later he reported that Allen went to New York to meet with Furmark. Allen’s memos indicate that Furmark, rather than being a go-between, had been a key player in the Iranian initiative since its inception in January, 1985.

But the CIA memos also paint a picture of the Canadian investors—who Furmark declines to name—and the terms of their deal with Khashoggi. Allen reports that on May 15 Khashoggi got a $19.5-million “signature loan” for a shipment of HAWK missile parts to Iran—$13 million of it from Canadians.

The terms: 20-per-cent interest, to be repaid with the principal in 30 days. All parties were counting on a secret trip to Tehran that month by then-National Security Adviser Robert McFarlane to produce a major payoff: the release of U.S. hostages in Lebanon and a cash repayment for the arms. But neither materialized. Furmark told Allen that Ghorbanifar and Khashoggi had repaid an Arab investor $6.5 million but the Canadians only $1.4 million.

According to Allen, Furmark characterized the Canadians as “entrepreneurs who have investments in oil, gold, mining and real estate.” In fact, Fraser and Miller—with Khashoggi—had bought large blocks of shares earlier that year in two obscure Vancouver resource companies, prompting their stocks to soar. Allen said that Furmark termed the Canadians “aggressive, tough-minded individuals,” and said that unless something were done he was “absolutely certain” they would “talk.” According to Allen, Furmark warned, “We should not underestimate the determination of the Canadians.”

MARCI McDONALD in Washington