TIME: Almanac 1990/1990 Time Magazine Compact Almanac, The (1991)(Time).iso/time/caps/86/86capts.14

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                ▓»▒¡¼Ñ                                            d««Who Was Betrayed?

December 8, 1986

While his aides were out of control, Reagan was out of touch

They were only five words, and rather bland ones at that.  But they
were among the most self-damaging the President of the U.S. could
have uttered.  "I was not fully informed," Ronald Reagan told the
reporters he summoned to a special briefing last Tuesday.  In an
attempt to defend himself from suspicion of complicity in the biggest
scandal to threaten Washington since Watergate, he thus highlighted
the most fundamental flaw in his stewardship of the presidency, one
that could undermine his effectiveness for the remaining two years of
his term.

More immediately shocking, to be sure, were the other matters that
Reagan and Attorney General Edwin Meese went on to disclose.
America's secret sale of arms to Iran, distressing enough to begin
with, had turned into an outright scandal:  much of the money Iran
paid for the weapons had been diverted to the contras in Nicaragua.
There was every indication that laws had been broken.  Heads were
starting to roll:  Reagan had accepted the resignation of National
Security Adviser John Poindexter, the fourth departure from that
critical post in six years, and fired Marine Lieut. Colonel Oliver
North, Poindexter's subordinate in the National Security Council.
Perhaps most startling of all, Reagan and Meese were asking the
nation to believe something that seemed flat-out incredible:  that
Ollie North, a furtive, 43-year-old member of the NSC staff who
operated out of an office across the street from the White House, had
arranged the contra scam without the knowledge of the State
Department, the Defense Department, the CIA, the Joint Chiefs of
Staff, the White House chief of staff or anyone in authority except
his boss, Poindexter, who did nothing to stop him.

It was more than enough to raise dread echoes of the word so often
tossed around in hyperbole, so rarely in earnest:  Watergate.  The
parallels might be exaggerated--this scandal, after all, was
announced by the Administration rather than forced out by the courts-
-but they were there just the same.  Once again there were rumors of
documents being destroyed (by North and Poindexter).  Once again the
White House was resisting demands for a special prosecutor (now
called independent counsel) put forth by Congressmen who did not
trust the Administration to investigate itself.  Once again
congressional hearings were getting ready to launch upon their
unknown and potentially damaging course.  Worst of all, there was a
revival, before last Tuesday's press briefing was over, of the
quietly poisonous question so well remembered from 1973:  "What did
the President know and when did he know it?"

Yet in the end the truly shattering possibility presented itself that
Reagan really did not know what was happening across the street.
Indeed, questions about what he did not know and why he did not know
it seemed fully as unsettling as their echoes from the Watergate era.
That little secret everyone shared about the President--that he is
oblivious to the nuances of his policies, out of touch with the daily
operation of Government and blithely detached from distracting bits
of fact--has begun to seem in the wake of Iceland and Iran and
Nicaragua, to be far more dangerous than bemusing.

In the past few years these tendencies have combined with two others
that were almost bound to cause trouble sooner or later.  One is a
penchant for covert actions that fit in with Reagan's gung-ho
activism.  Finding some legal justification for them was another of
those details that the President left to aides.  The other tendency
was to delegate disproportionate authority to subordinates who took a
can-do approach, and then to let them operate with little
supervision.  In retrospect it seems absurd that so ostensibly minor
a functionary as North would have been entrusted with such delicate
matters as negotiating freedom for American hostages held in Lebanon
and organizing a secret network to supply the contras.  And not only
seems--it was absurd, and it got Reagan right into a dangerous mess.
For almost six years Reagan got away with his approach to the
presidency.  In fact, he managed to convince the public, and even
some of his critics, that it was part and parcel of his magic for
dynamic leadership.  Like his policies or not, it felt right to have
a president who kept his eye on bold initiatives and left the details
to experts.  Certainly mistakes were made, and in the field of
foreign policy in particular the Administration often seemed to be
speaking in a cacophony of quarreling voices that the President could
not or would not harmonize.  But on the whole the results appeared to
be good.

Now, however, in the suddenly intertwined cases of Iran and the
contras, all the distressing tendencies of the Administration have
combined to produce the kind of blunders that resonate far more than
an error in judgment, however serious.  Errors in judgment can be,
and in Reagan's case regularly have been, forgiven.  But this
disaster throws a pitiless light on the way the President does his
job, confirming the worst fears of both his friends and his critics.
Simultaneously stumbling into the Iran fiasco and allowing a bizarre
scam to fund the contras to take place had an impact powerful enough
to scar Teflon precisely because the events seemed to reveal personal
characteristics that were both fundamental and worrisome.

For that very reason, perhaps, Reagan stubbornly refuses to admit he
made any mistakes.  Yes, he concedes, the diversion of funds to the
contras was "improper"--but then he did not know about it.  He fails
to see he should have made it clear that he would not tolerate any
flouting of the express will of Congress.  And as for secretly
slipping arms to Iran--well, he did it for the worthy motives of
restoring American influence in a strategically vital nation and
securing the release of hostages.  "I think we took the only action
we could have in Iran," he said in an interview with TIME last week.
"I am not going to disavow it.  I do not think it was a mistake."
Even now he seems unable to appreciate that this action shattered his
own vehemently proclaimed principle of never paying ransom to
terrorists, and in the process dented the moral stature and
credibility that is the true source of America's unique clout in
world affairs.

For the same reasons, the blunder is a peculiarly difficult one to
repair.  DIsastrous policies can be reversed, subordinates who get a
President in trouble can be replaced, and those who may have broken
the law can be punished.  What is not readily recoverable, once it
has been lost, is trust.  And Reagan has seriously, if unwittingly,
strained the trust of allies, Congress and the American public in his
Administration's credibility and competence.  it is too early to say
that his Presidency has been crippled, though that could happen if
the dismaying pattern of new revelations and unconvincing
explanations continues much longer.  But it seems almost certain that
whatever comes of the many investigations now in progress, Reagan
will emerge as a diminished President, his aura of invincibility
shattered, his fabled luck vanished, his every policy regarded with
new suspicion.

That had been a strong possibility even before last week's bombshells
about the contra cash diversion.  The sale of arms to Iran had hit a
raw nerve in a public still nursing bitter memories of the violent
anti-Americanism displayed during the hostage crisis of 1979-81, and
the Administration's early explanations of the rationale and
methodology of the shipments convinced hardly anyone.  Briefings of
the Senate and House intelligence committees by Poindexter, CIA
Director William Casey and other officials on Friday, Nov. 21, failed
to dispel congressional feelings that the full story had still not
come out.  The Congressmen did not know that Meese shared their
opinion.  The day before the briefings, Meese called his assistant,
Charles Cooper, into his office for a long review of legal issues
that Congressmen might raise.  The more they studied what the
Administration officials proposed to say, the more Meese became
convinced that they were not entirely sure what they would be talking
about.  Says Meese:  "A lot of people didn't know certain things that
were going on that were being done by others."

Worried that the Administration was about to damage its case, Meese
went to the White House Friday morning, while the briefings were in
session, to lay out his fears to the President.  They were joined by
White House Chief of Staff Donald Regan and Poindexter.  Poindexter's
head may already have been on the block; Regan had been talking,
perhaps inadvertently, about the National Security Adviser's
departure as if it were an accomplished fact.

In any case, the President authorized Meese to conduct an
investigation and report results to him before the next meeting of
the National Security Council at 2 p.m. the following Monday.  It was
a natural move; some of Reagan's retinue of unofficial advisers from
California had begun pressing to have control of the Iran mess turned
over to old Reagan loyalists, of whom Meese is one of the most
trusted.

Meese chose a select team of three assistants, including Charles
Cooper, who assembled and read documents Friday night.  On Saturday
they began their questioning.  The Attorney General called on
Secretary of State George Shultz at home and talked with Secretary of
Defense Caspar Weinberger and CIA Director Casey as well.  Other
investigators questioned Poindexter and his predecessor, Robert
McFarlane, who had begun the contacts with Iran.  Meese's assistants
pored over North's papers in his office from early Saturday morning
until late into the evening, then summoned North to Meese's office in
the Justice Department on Sunday for a session that lasted all
afternoon.

When the questioning began, nobody except North, Poindexter and
McFarlane knew of the trail that would lead from Iran to the contras,
or so goes the official story to date.  On Saturday, however, Meese's
team came across some puzzling and alarming evidence, in the form of
"intercepts," hinting that Iran had paid more for U.S. weapons
shipped through Israel than the $12 million the U.S. had received for
the arms.  "Intercepts" is intelligence-community jargon for
transcripts of telephone or cable messages that have been wiretapped.
Says Meese:  "There was talk in the field that there were
deficiencies in the amount of money involved, and we found some
documents that hinted at this happening."

On Monday Meese went to the White House early to brief the President
and late in the day interviewed Vice President George Bush.  Bush
later told TIME he is convinced the "President is telling the full
and total truth".  That afternoon the NSC met as scheduled, but the
problems that had surfaced in Meese's inquiry were not discussed in
detail.

The President had other matters to worry about.  He had to cope with
an open rebellion by the State Department, the most astonishing
example yet of how deeply his Iran policy had split his own
Administration.  The previous week, Shultz had won Reagan's grudging
announcement that there would be no more arms sales to Iran, but the
Secretary was not satisfied.  Just before the NSC met, he dispatched
Deputy Secretary of State John Whitehead to testify at a hearing of
the House Foreign Affairs Committee.  Whitehead directly contradicted
Reagan's repeated assertions that U.S. contacts with Tehran had
caused IRan to moderate its support of terrorism.  Said Whitehead:
"I don't like to differ with my President, but I believe there is
still some continuing evidence of Iranian involvement in terrorism."
One U.S. official considered Whitehead's testimony "tantamount to a
declaration of war."

If so, Shultz won the war.  At the NSC meeting Reagan agreed to give
the Secretary of State full control of future Iranian policy.  It was
more a symbolic than a practical victory.  Since arms sales have been
ended and Shultz is not eager to resume diplomatic contacts with
Tehran, even supposing Ayatullah Ruhollah Khomeini would allow any,
there is no longer much of an Iranian policy to be in charge of.  The
State Department nonetheless exultantly trumpeted its triumph and
announced that Shultz now planned to stay in office until the "end of
the Administration."  Well, maybe:  the Secretary is still under fire
at a displeased WHite House for this rebellion.  Speculation
continues that the Secretary will quietly depart in another few
months after the uproar dies down.

Following the NSC meeting, events moved quickly toward the climax
almost nobody in Washington had anticipated.  Late Monday afternoon
Meese personally questioned Poindexter for the first time and got the
impression that the National Security Adviser was ready to quit.
Poindexter, who is a Vice Admiral, promptly confirmed that desire by
immediately offering his resignation to Reagan, who accepted it the
next morning; he told the President he wanted to return to active
duty in the Navy.  Nobody made any attempt to dissuade him.
According to one insider, Reagan was far more angry with Poindexter
than the President would let on in public.  North was "relieved of
his duties," as Reagan put it, sometime Tuesday morning.  Although he
had tendered his resignation beforehand, he found out about his ate
officially only when Reagan and Meese went on television.

At a special meeting Tuesday morning, Meese laid his findings before
the NSC.  The advisers agreed that the Administration had to disclose
immediately what the Attorney General had discovered.  Reagan had
asked Meese to conduct the press briefing that was scheduled for noon
that day.  "I was not being apprised of a great opportunity," joked
Meese, but his manner belied his words.  He spoke with verve and at
times appeared to be enjoying playing again the prosecutor he once
was.

The essence of his report was stark and startling.  The U.S. had
provided $12 million in weapons and spare parts to Israeli
representatives.  They then resold the arms to Iran for a much higher
price, and the money was paid into Swiss bank accounts.  The CIA
received the original $12 million and repaid it to the Pentagon.  But
anywhere from $10 million to $30 million went into numbered accounts
that Meese said were "under the control of representatives" of the
contras.  Presumably, the money was used to purchase weapons that the
rebels need to wage their guerrilla war against the Marxist
Sandinista government of Nicaragua.  North was, according to Meese,
the "only person in the United States Government" who knew precisely
of the money transfer.  Poindexter knew vaguely about the
transactions, and McFarlane learned something about them while
pursuing diplomatic contacts with Iran as a special presidential
emissary after he had resigned from the NSC.  But neither seems to
have told anybody in the Administration's chain of command.  Later in
the week, Meese added that "one or more consultants" to the
Government, whom he would not name or further identify, also appear
to have been involved.

The immediate result of Meese's revelations was a spate of denials.
In Jerusalem, the three top officials of the Israel government--Prime
Minister Yitzhak Shamir, Foreign Minister Shimon Peres and Defense
Minister Yitzhak Rabin--met in a crisis session and drafted a
statement.  For the first time, the government admitted what everyone
knew:  Israel had "helped in the transfer of defensive weapons and
spare parts from the U.S. to Iran."  But the Israelis flatly denied
funneling any money to the contras.  According to the statement, "The
payment for this equipment was made directly by an Iranian
representative to a Swiss bank, in accordance with instructions from
the American representatives."

More surprising, Adolfo Calero, one of the three directors of the
contras' umbrella organization, vehemently insisted that neither he
nor any colleague that he knew of had got the cash, or received arms
that would have cost anything like $10 million (let alone $30
million).  His statements caused some private grumbling among
delegates to a contra meeting in Costa Rica; some appeared to suspect
that the money might have gone into someone's pockets.

At week's end the mystery of who did get the money from the slush
fund was developing into one of the most intriguing aspects of the
entire affair.  A whole complex array of questions awaited answers:
Who, exactly, negotiated the price Iran paid for its U.S. weapons?
Who might have set up the Swiss bank accounts and really controlled
those accounts?  What happened to the money that supposedly flowed
through the accounts?  Was it connected in any way to the arms that a
network of private donors assisted by North had supposedly bought for
the contras and had flown to them from an air base in El Salvador?

Another controversy was developing over the destruction of documents.
North's office was not sealed until after he was fired, and he is
said to have fed some papers into a pulverizing machine before that
happened.  Administration officials contended that copies of any
official documents would still exist in Government files, and doubted
North's personal papers would have shown much; North was not a man to
leave a "paper trail."  They added that if Poindexter destroyed any
documents, they were only the kind that NSC staffers routinely
pulverize every night.  The Senate Intelligence Committee nonetheless
seemed concerned that something important might have been lost.  It
directed a letter to the White House on Friday, urging that Reagan
ensure that all documents that might aid investigators be saved.

The scandal over the division of funds to the contras was itself a
diversion, at least for the moment, from the boiling debate about the
wisdom and legality of shipping arms to Iran as part of a murky
effort to free American hostages.  But it is not a diversion that can
give the Administration any relief, given the devastation that could
come from revelations about the contra slush fund.  Nor is it likely
that the search for the culprits who mishandled the fund will
completely distract attention from more basic questions about
allowing NSC officials to operate covert arms schemes that run
counter to stated U.S. policy.

Meese was the first to admit that he did not yet have the answers to
the almost innumerable questions raised by the Iran-contras scandal.
The Attorney General pledged to continue his investigation until he
did, and Reagan backed him with an order to all Government
departments to answer any questions Meese and his probers might pose.
The President also appointed a panel--made up of former Senator John
Tower of Texas, former Secretary of State Edmund Muskie and former
National Security Adviser Brent Scowcroft--to investigate the
structure of the NSC and its role in coordinating and carrying out
foreign policy.

But no amount of Administration self-investigation is likely to
satisfy Congress.  In a letter to Meese that put on the record what
many other legislators had demanded, a House Judiciary Subcommittee
requested the appointment of a Watergate-style independent counsel.
Subcommittee Chairman John Conyers, a Michigan Democrat, bluntly
challenged the Attorney General's ability to conduct an impartial
probe, citing among other things "your closeness to the President."
The White House is so far resisting calls for such a special
prosecutor.  But as more information emerges each day, it becomes
less likely that the affair can be concluded simply through Meese's
probe.

In the meantime, congressional committees are rushing to schedule
hearings, many of which will focus on the possible involvement of
other Government officials or agencies in the Iran-contras scam.
First up:  the Senate Intelligence Committee, which was scheduled to
hold hearings Monday to investigate what might have been known by
Casey and the CIA, which keeps close tabs on the contras and set up a
Swiss bank account to receive money paid by Iran for U.S. arms.  Says
Vice Chairman Patrick Leahy, a Vermont Democrat:  "I don't see how
the money could be transferred, the logistics could be handled the
arrangements could be made, without the help of some people in the
CIA."  He added ominously, "There's no question that lies have been
told by Administration officials."  At the closed-door session,
witnesses will be required to testify under oath.

The House Foreign Affairs Committee is already investigating legal
aspects of the arms shipments, and its members can expect to be
joined soon by many other congressional probers.  They will be mining
a rich lode:  the list of laws that might have been broken by the
arms shipments to Iran, the diversion of funds to the contras, or
both, is a long one.

First is the Boland Amendment, which forbade any use of federal funds
to aid the contras from 1984 until this October, when it expired.
Meese contends that "provisions had been made by Congress to permit
the U.S. to seek funding from third countries," such as Israel, but
he appears to be simply wrong.  The amendment was rewritten last year
to include an explicit prohibition against U.S. solicitation of
third-country financing, and that ban was in effect throughout the
time Iranian money supposedly was being funneled to the Nicaraguan
rebels.

Next, at least three arms-export laws include bans against the
exports of U.S. arms to countries that support terrorism--and the
Reagan Administration has formally identified Iran as such a country.
The laws do provide waivers that allow the President to skirt them in
the event of a crisis, but they generally stipulate that the White
House notify Congress, which it did not do.  More generally, the
Intelligence Oversight Act requires prior notice of covert operations
to the House and Senate intelligence committees.

Finally, some legislators are raising the question of whether North
and possibly others could be prosecuted under laws banning the
spending of money on secret missions that are not authorized by
Congress.  The CIA is exempted from one of these statutes, but other
federal bodies, notably the NSC, are not.  Unlike the Boland
Amendment and the Intelligence Oversight Act, the laws against
unauthorized transfers of funds provide criminal penalties against
violators.

One potential casualty of the revelation last week is the goal that
the bizarre scheme was intended to further:  keeping alive the contra
struggle, which after five years of stop-and-go funding has yet to
seriously threaten the existence of the Sandinista regime in
Nicaragua.  The President's fervent support for the contra cause is
the most visible manifestation of what has been called the Reagan
Doctrine, America's attempt to counter the spread of Communism by
fostering insurgencies to undermine Moscow-backed regimes.  After a
long struggle, Reagan squeezed out a narrow victory this May by
persuading Congress to authorize renewed, open military aid to the
contras, who will be provided with $100 million during the current
fiscal year.

Even before last week's revelations, the President faced a hard and
uncertain fight to get the funding renewed when the new Congress
meets in January.  Now Capitol Hill resounds with predictions that
angry legislators will cut off aid again as a kind of punishment to
North and those in the Administration who failed to monitor his
activities.  Says Minnesota Senator David Durenberger, a Republican
and reluctant contra supporter:  "It's going to be a cold day in
Washington before any more money goes to Nicaragua.  Ollie may have
killed off his Nicaraguan program."  Such a reaction has little
logic.  There are valid arguments for and against helping the anti-
Sandinista guerrillas, but the issue should be debated on its merits
rather than being made a kind of extralegal, and ineffective, penalty
against the NSC.

In other areas, the Administration--and the country--might have to
pay a heavy price for this latest and most serous blow to the
credibility and competence of U.S. foreign policy.  The prestige of
the President has been seriously weakened, his staff is in disarray,
and the Administration seems less able than ever to speak with a
coherent voice on matters ranging from arms control to antiterrorism.
Reagan's ability to project a sound foreign policy was badly hurt by
revelations that he deceived the American people, Congress and the
world about his stance against dealing for hostages and sending arms
to Iran.  The latest disclosures that he was likewise deceived by
members of his own staff, who zealously pursued his desire to help
the contras despite the wishes of Congress, will make it even tougher
for his pronouncements to be greeted as believable.

One American official who deals with the Soviets on arms control is
picking up disquieting signals that the Kremlin now considers Reagan
to be so weak politically that it will rethink what concessions it
might offer in order to get a deal.  Says he:  "Coming on the heels
of the loss of the Senate, the Iran business seems to have raised
basic questions in Moscow about how they should deal with Reagan,
whether they need to bargain with him seriously or whether they can
just wait for the next President."  Reagan's decision last week to
abandon the unratified SALT II ceilings on strategic weapons is
likely to make Moscow even more standoffish.

In the Middle East, U.S. policy, to the extent that the Reagan
Administration still has one, seems likely to be paralyzed as well.
Moderate Arab nations friendly to the U.S. feel betrayed by the
Administration's arms sales to Iran, a nation they fear because of
its potential--and unconcealed desire--to stir up Islamic
fundamentalist revolution outside its own borders.  Says one veteran
Arab diplomat in Cairo:  "This Reaganite crisis will incapacitate the
Administration.   I am very much afraid we will have to wait tow
years [that is, until Reagan's successor is elected] before the U.S.
can play a major role in the region."

In the U.S., the fear is not of incapacitation but of that dreadful
"W" word:  Watergate.  However, it comes to the same thing.  All over
Washington last week there was a sickening feeling of "here we go
again," a dread of another orgy of public self-flagellation, of
deepening public suspicion that might undermine all governmental
authority.  Nor was that foreboding confined to the Administration's
allies.  Journalists could sense among those Congressmen most
determined to investigate the Iran-contra scandal an unspoken fear of
where the investigations might lead, a kind of silent prayer that it
would not once again be straight into the Oval Office.

There is still time to avoid the worst consequences, though only if
the Administration pushed its own investigations hard enough and fast
enough to convince its critics that it has at last provided a full
and convincing explanation of its activities, and one that does not
spare the highest officials.  "I think one iron rule in situations
like this is, whatever must happen ultimately should happen
immediately," said Henry Kissinger last week.  "Anybody who
eventually has to go should be fired now.  Any fact that needs to be
disclosed should be put out now, or as quickly as possible, because
otherwise...the bleeding will not end."

Pursuing such a course is not, as some might claim, a self-
destructive obsession that represents an inherent flaw in a
democracy.  The strength of the nation, not its weakness, comes from
the fact that it has a government of laws, run by officials who can
be held accountable.  This moral principle, more than even its
arsenal of nuclear missiles, accounts for the fundamental strength
the U.S. exerts in its dealings with people around the world.  That
is why any operation--whether it be the convert shipment of arms to
Iran or the secret diversion of funds to the contras--that is run in
a manner designed to skirt legal accountability represents such a
deep danger.

--By George J. Church.
  Reported by Ricardo Chavira, Michael Duffy and Hugh Sidey/Washington