Here Comes the Prosecutor

By Ed Magnuson

When the brown, 690-page congressional report on the Iran-contra fiasco finally thumped onto desks in Washington last week, one of the officials most keenly interested in the scandal vowed not to pick it up. Independent Counsel Lawrence Walsh cannot use any testimony that witnesses gave to the House and Senate committees under grants of immunity. Walsh and his staff of 28 lawyers, 20 FBI agents and six IRS investigators must build their own criminal cases against any lawbreakers. Nonetheless, the tightly reasoned, judiciously stated majority report, signed by all of the committees' 15 Democrats as well as by three Republican Senators, contains ample reasons why Walsh and his crew are likely to push hard for indictments of several participants in the Iran-contra affair.

In one of the report's most notable conclusions, the bipartisan majority declares flatly that the profits generated by the sale of U.S. arms to Iran were the rightful property of the Federal Government, not of the so-called enterprise operated by retired Major General Richard Secord and his Iranian- born partner, Albert Hakim. Diverting those profits to the Nicaraguan contras "constituted a misappropriation of government funds," the report claims. If Walsh and a federal grand jury concur, Secord and Hakim may face indictments. So, too, may former National Security Adviser John Poindexter, who approved the diversion, and former-NSC Staffer Oliver North, who directed the enterprise.

Secord and Hakim benefited more from the arms sales than the contras did, according to the report. Of the $16 million in Iran arms profits, the contras received just $3.8 million. Secord, who testified that he sold weapons to the contras with a profit markup of 20%, actually took profits that averaged 38% and sometimes reached 56%. When Contra Leader Adolfo Calero discovered he could buy weapons far more cheaply through a European arms dealer, North made sure that none of the Iran arms proceeds went directly to Calero. Instead they went to Secord, who continued to sell to Calero at inflated prices.

Similarly, the report relates how the private fund raisers Carl Channell and Richard Miller collected some $10 million for contra support but spent only $4.5 million on the rebel forces. The rest of the money went into lavish offices, fancy limousines and high salaries. The two have pleaded guilty to tax fraud for claiming that their operations were entitled to an IRS exemption.

Walsh has been presenting witnesses to a grand jury at a stepped-up pace of three times a week. One of the witnesses last week was Attorney General Edwin Meese, who is sharply criticized in the report for failing to seek advice before telling the President that he could legally sell arms to Iran without informing Congress. Meese testified that he relied on an opinion written in 1981 by former Attorney General William French Smith. But the report points out that Smith had advised that Congress would have to be notified once arms shipments were under way. Said the report: "There is only one reason to have an attorney general on the NSC: to give the President independent and sound advice. That did not happen in the Iran affair and the President was poorly served."

Meese is also accused of "departing from standard investigative techniques" in quizzing other Administration officials about how the arms- for-hostages deals had begun. At first Meese's aides accompanied him and took careful notes. But once the investigators discovered the celebrated memo in North's files that called attention to the diversion of funds to the contras, Meese went alone to interview Poindexter, former National Security Adviser Robert McFarlane and then CIA Director William Casey. He took no notes.

Despite the Administration's claim that it was dealing with "moderates" in Iran, the report reveals that some U.S. arms went directly to the Revolutionary Guards, Iran's most radical faction. And when North and Poindexter tried to open a "second channel," they wound up dealing with some of the same principals. One of the Iranians may have helped plan the kidnap- murder of William Buckley, the CIA operative in Lebanon whose capture especially angered Reagan and Casey.

As expected, the majority report is severe on Reagan, charging that he failed to "take care that the laws be faithfully executed." That falls short of accusing him of an impeachable offense. While taking no stand on whether the President did or did not know about the diversion, the report contends, "If the President did not know what his national security advisers were doing, he should have."

A minority report, signed by all six House Republicans and Republican Senators Orrin Hatch and James McClure, insists that the majority's conclusions were "hysterical" and that the President and his staff made "mistakes in judgment, and nothing more." Republican Senator Warren Rudman, who agreed with the majority, dismissed the highly partisan minority paper as "pathetic." Indeed, the profiteering, shredding of documents and widespread lying, and a secret policy that eroded the President's credibility while accomplishing none of its objectives, clearly was something more than a mere matter of poor judgment.

With reporting by Hays Gorey and Elaine Shannon/Washington