Inside the shadow network. (U.S. covert operations), U.S. News & World
Report, Dec 15, 1986 v101 p26(6).
Title:       Inside the shadow network. (U.S. covert operations)
Authors:     Chaze, William L.
Full Text COPYRIGHT U.S. News and World Report Inc. 1986

INSIDE THE SHADOW NETWORK

It could be called the subcontracting of affairs of state, when wars are waged
and diplomacy is done by private as well as government hands.  The unofficial
players today are a curious mix of the mighty and the obscure--philan-thropists,
retired generals, ex-CIA agents, business tycoons and small-town adventurers. 
Some are moved by patriotic, anti-Communist zeal, others by the dollar.

But all belong to a nether world of free-lancers who have come to play an
increasingly important role in Ronald Reagan's Presidency, often doing what
government itself cannot legally do.  They thrive on secrecy.  Now, with the
discovery of White House aide Oliver North's seeming excesses in the Iranian
fiasco, attention is focusing on a shadow network that helps skirt
accountability --and how the effort apparently spun out of control, jeopardizing
an important pillar of Reagan foreign policy.

The roles of this private army of experts and zealots are many. Their efforts
can be seen on the battlefields of Nicaragua, Afghanistan and Angola.  They can
be seen in the freeing of American hostages in the Mideast, the levering of
Jewish dissidents out of the Soviet Union and in the search for missing POW's in
Southeast Asia.  Their missions take them from Moscow to San Salvador, from
Manila to Pretoria.

The phenomenon is not entirely new.  Presidents going all the way back to George
Washington have often leaned on private citizens to tread where government dared
not go.  But few Presidents have made such heavy use of these sources for covert
operations as Ronald Reagan.  The tendency flows naturally from a Reagan
doctrine conceived to roll back Soviet adventurism around the world and designed
to promote private enterprise as the ultimate answer.

Deep frustration

Thus it became deeply ironic that the private marketplace's inability to churn
out bigger wads of cash for the contras served as the impetus for the scandal
now rattling to White House.  When private fund raising sputtered, North
apparently turned to shadowy, possibly illegal back-channel
methods--circumventing not only committees of Congress, but the State Department
and other pinstriped bureaucracies.

There is another factor, too, in the Reagan administration's growing reliance on
private sources for foreign-policy help.  Unlike most predecessors --Jimmy
Carter being the most obvious exception --he confronts a thicket of
post-Watergate and post-Vietnam laws intended by Congress to curb abuses of
executive-branch power. Reagan's election promised daring things abroad, a
shedding of a debilitating Vietnam syndrome.  With legal curbs blocking the way,
the administration early on began dealing with private emissaries--hands-on
ideologues-- gambling that success would breed success and maybe even recoup
lost Oval Office powers.  "Our problem is that we have a government and a
country that is profoundly divided over what America's objectives in foreign
policy should be, and even over what regimes are the real enemies of what we
believe in,' insists Pat Buchanan, White House communications chief. "That's
just a fact of life that didn't exist in the 1950s, and it complicates
everything we do.'

The Reagan team switched on one such channel in November as word swept through
Manila of a likely move to depose Corazon Aquino. U.S.  News has learned that
former CIA Deputy Director Ray Cline and retired Lt.  Gen.  Robert Schweitzer,
with White House guidance and encouragement, flew to the Philippines to secretly
caution Defense Minister Juan Ponce Enrile against a coup.  In 3 hours of
meetings, say officials, the two made plain that the U.S. could back no move
that might destabilize the Aquino government.  By sending word via unofficial
means, the White House avoided the appearance of meddling in another nation's
affairs.  The move, in short, had the singular virtue of "plausible
deniability.'

Conflicting visions

Nowhere has the trend toward privatization of foreign policy been so apparent as
in Central America.  In Nicaragua, the chance to counter Soviet influence
quickly became the Reagan team's most passionate foreign-policy objective, both
by virtue of obvious strategic concerns and a conservative clamor for roughing
up the Sandinistas.  But there were problems.  What Reagan saw as his shot for a
great triumph was also the source of Congress's greatest fear--the prospect of a
Vietnam-style conflict evolving in the jungles of Central America.

The administration was thus compelled to pin its hopes on a small band of
Honduras-based guerrillas, the contras.  But in 1982, Congress began imposing
limits on covert aid to the rebels. Compounding the problem was the reluctance
of the Pentagon to "donate' weapons to the contras from its own stocks for which
it would not be reimbursed.  In late 1983, for example, the CIA--having
exhausted its available funds for covert aid--asked the Defense Department to
secretly provide $100 million in weapons to the contras.  Code-named "Elephant
Herd,' the CIA tally was dubbed the "Christmas List' at the Pentagon and later
whittled down to $12 million in arms, which were turned over to the CIA for
shipment to the contras.

In 1984, following the CIA's mining of Nicaragua's harbors, Congress shut off
funding for military aid entirely and prohibited any "direct or indirect' help
by U.S. government officials.  The action surprised no one at the White House,
which had been preparing for the development by nurturing private contra
sponsors.  "The handwriting was on the wall in 1982,' says a former senior
administration official.  "We knew we had to do something to keep a pipeline to
the contras.'

Private support

Oliver North, acting with National Security Adviser Robert McFarlane's apparent
blessings, was the point man delegated to keep the money flowing.  By 1984,
millions in U.S. money and goods were again moving south, this time out of the
pockets of private groups that continue to operate today.

Two of the most active support groups are the World Anti-Communist League and
its U.S. chapter, the United States Council for World Freedom.  The League was
founded by retired Army Maj.  Gen.  John K. Singlaub, who was fired by Carter as
chief of staff of U.S. forces in South Korea in 1977 for criticizing the
President.  Adolfo Calero, chief of the main contra faction, said last year that
various private groups in the U.S. had provided $10 million through mid-1985,
and that a big share came through Singlaub's groups. Estimates of private
contributions to the contras go as high as $25 million.  The aid, far less than
the rebels got from Washington, was enough to keep the movement from collapsing
entirely.

Even more important to the resupply effort is another retired general, Maj. 
Gen.  Richard Secord, who accompanied McFarlane on his Iran mission.  Secord's
main contribution to the contra cause has been weapons.  U.S.  News has learned
that his involvement began as early as 1982, when Secord was in charge of a
secret operation--authorized by the Pentagon--in which Israel shipped tons of
weapons captured during its invasion of Lebanon to a CIA arms depot in San
Antonio.  From Texas, the guns were shipped to the contras.  In mid-1983, the
general left active duty and went into private business.  One deal included
arranging for the purchase of aircraft for the contras.  Reports say he also
helped raise large amounts of money for the rebels from the Saudis and other
sources. His expertise, says one admirer, is that he is an "expediter.  He can
move things from one place to another almost immediately, and that's the heart
of special operations.'

Starting in 1983, Secord and associates created a private network under National
Security Council staff guidance to undertake the legal supply of humanitarian
aid as well as possibly illegal stocks of weapons to the contras.  The need
arose when Congress banned all CIA involvement in the guerrilla war, including
activity by its so-called proprietary companies--those owned and operated by the
agency.  Intelligence officials and documents reveal that by late 1985 the
biggest part of the resupply was being carried out by Secord and two retired Air
Force colonels, Richard Gadd and Robert Dutton, with whom he served in the
service's special-operations division.

The arms-laden C-123 that crashed in October in Nicaragua was serviced by
Southern Air Transport, a Miami-based air-cargo carrier that was a CIA
proprietary firm until 1973.  Military sources say that the Pennsylvania
company, Corporate Air Services, that paid surviving crew member Eugene Hasenfus
is linked to Gadd.  Secord and Dutton are affiliated with Stanford Technology
Trading, one of several companies based in the Virginia suburbs of Washington
connected to companies in Switzerland that have funneled profits from weapons
sales to Iran to the contras.  One covert-missions planner says North turned to
Secord because "the CIA and NSC have no capability to do things in a secure
fashion.  You want to do something quietly, then you can't tell bureaucracies. 
Here's a guy who can go to key people in foreign countries and get things done.
As a private citizen, he has no obligation to tell anyone.'

The administration also was making heavy use of a former Indiana farmer named
John Hull, owner of a Costa Rican farm near the Nicaraguan border.  Hull has
reportedly served as a liaison to the rebels, who use his airstrip.  By some
accounts--denied by Hull and the White House--he received $10,000 a month from
the NSC in 1984-85.  He denies any CIA connections and says that he helps only
wounded contras and refugees.

Prime operators

Today, there are basically three types of commercial operations still assisting
on covert missions, whether in Central America or elsewhere:  The proprietaries,
created and run by the federal government solely for clandestine work;
consultants--known as Beltway spy bandits--who have long-term contracts with the
government intelligence agencies, and free-lance consultants hired for a single
quick job.  Intelligence sources say at least a dozen "private' American
companies have been involved in covert electronic surveillance of both the
Sandinistas and Salvadoran rebels.

The resupply effort mounted at the behest of the Reaganites also relies on
dozens of groups and individuals drawn to the cause by a mixture of humanitarian
concerns, the promise of adventure and conservative ideology.

Civilian Materi[el Assistance is the 5,000-member creation of Thomas V. Posey, a
former Marine who fought in Vietnam.  By several accounts, CMA supplies arms and
military training of contra forces and helped organize the rebels' southern
front in Costa Rica. Posey's Central American role began when an American
official in Honduras arranged for him to meet a rebel contact.  In 1984, two
members of Posey's group were killed when Nicaraguan troops downed their
helicopter.  Posey says his organization now focuses on humanitarian aid. 
Robert K. Brown, editor and publisher of Soldier of Fortune magazine --a
publication that caters mostly to armchair adventures--has sent uniforms and
other battlefield gear.

Other American aid to the region has been more benign.  The Connecticut-based
Americares Foundation, for instance, has provided $30 million in medical aid to
Honduras, El Salvador and Guatemala, parceled out by the Knights of Malta, a
Roman Catholic organization. Another group formed by State Representative Woody
Jenkins of Louisiana, called Friends of the Americas, has raised $1.5 million
for Nicaraguan refugees, including the beleaguered Miskito Indians. Bert
Hurlbut, a Texas businessman, says he has raised "well over $500,000 for freedom
fighters all over the world'--including the contras.

Varied sponsors

The privatizing of foreign policy, while most glaring in Central America, is by
no means limited to that part of the world, nor is it always sanctioned.  Acting
on its own, for example, millionaire businessman Lewis Lehrman's Citizens for
America group held a 1985 "freedom fighter' conference in Angola that flagged
U.S. support for Jonas Savimbi, the contras and the guerrillas in Afghanistan.
Armand Hammer, the globe-trotting industrialist, played his trade card with the
Soviet Union to win the release of Jewish dissident David Goldfarb at a
sensitive moment in U.S.-Soviet relations last October.  Texas billionaire H.
Ross Perot not only rescued his own employes from an Iranian jail in 1979 but,
at Oliver North's instigation, offered a $2 million ransom for hostages held in
Lebanon; the trade never occurred.  James "Bo' Gritz, a former Green Beret in
Vietnam, conducted at least two privately financed missions in quest of missing
American POW's.  One of his principal backers is believed to be tough-guy actor
Clint Eastwood.

Private arms dealers, too, have carved out an aggressive role for themselves. 
Today they both counsel governments and act, in effect, as diplomats for hire. 
Two Israeli dealers cut the arms sale to Iran that preceded the 1985 release of
American hostage Benjamim Weir from Lebanon.  They were part of a covert deal
brokered in part by Saudi billionaire Adnan Khashoggi, himself an arms dealer
with ties to North and McFarlane.  Washington has on at least one occasion
turned to Lebanese arms merchant Sarkis Soghanalian, who in 1984 was beckoned
when Washington decided to improve relations with Iraq by sending the Arab
nation 45 unarmed helicopters.  He is now under indictment for shipping arms to
Nicaraguan rebels --a machine-gun-equipped Bell combat helicopter.  His lawyer
says Soghanalian was acting with at least tacit encouragement from the
administration.  The claim is denied by federal prosecutors.

Hired agents

In this administration, there has been a marked increase in the use of former
intelligence professionals to carry out covert missions in support of
foreign-policy goals.  This has been especially evident in Central America,
where scores of former agents--many of them cashiered by then CIA Director
Stansfield Turner during the late 1970s--have been rehired on contract to act as
emissaries and give military advice.  Some of the new contract arrangements, say
intelligence sources, plainly skirt accountability requirements mandated by
Congress.  "The CIA is a little bit like the Mafia or church in that you don't
ever really leave it,' says David Wise, author of several books about the spy
trade.

In Washington, many of the old espionage hands pressed back into service
congregate at a hotel bar called Gambits near the Pentagon. There they swap war
stories about the old days and, more important, information about new contracts
and opportunities.  "The place is awash with spooks, ex-spooks, antispooks, KGB
guys,' says one Defense Department operative.  "It's like the old Mad Magazine's
"Spy vs.  Spy.''

There is plenty of historical antecedent for what has happened in the Reagan
Presidency.  The use of furtive back-channel contacts to circumvent the regular

foreign-policy bureaucracy became close to an art form during Henry Kissinger's
tenure as Secretary of State and National Security Adviser.  The Reagan White
House wasted no time in following suit.  Soon after the President took office,
in fact, then Secretary of State Alexander Haig secretly encouraged Mideast
expert John Edwin Mroz, a private citizen, to open a controversial series of
contacts with Palestinian leader Yassir Arafat.

Defenders of this trend hold that it is a necessary prerogative of any
President.  Pat Buchanan, for one, points out that Franklin D. Roosevelt used
well-heeled New York friends to get secret aid to wartime Britain in the days
before Pearl Harbor legitimized direct support.  Another President, Woodrow
Wilson, preferred to send his own personal agent to Europe rather than the
pacifist Secretary of State William Jennings Bryan.  Each President has had his
own way around the competing bureaucracies.  For Dwight Eisenhower, it was the
elevation of the CIA; for Lyndon Johnson, it was extraordinary use of the
Pentagon.  For Ronald Reagan, it has mostly been his National Security Council
staff.

Reagan loyalists argue that the decision to go outside regular channels, even if
it means occasional subterfuge, was thrust upon the White House by leaks from
congressional committees.  Says Assistant Secretary of State Elliott Abrams: 
"How the hell do you conduct diplomacy when they leak like sieves?  The last two
times I testified in the House in secret hearings, I had a leak the same day. 
That is what promotes efforts to use more-secure means of conducting government.
But is it a great idea?  No, it is not a great idea.'

Pulling in the reins

Like many others who serve the President, Abrams holds that business would be
done much differently if a single congressional panel rode herd over all
intelligence, whether it be facts about rebel activities in Central America or
details of U.S. spying abroad.  But leaks come from the White House as well--and
in any event, the odds of a streamlined reporting process in the aftermath of
the Iran scandal must be rated slim to none.  The pendulum, much to Reagan's
chagrin, is almost certain to swing in the opposite direction, toward even
stronger surveillance by lawmakers.  The President who so badly wished to
reverse the post-Watergate trend toward more checks and balances on the Oval
Office may have served mostly to reinforce it.

Photo: Casey and Weinberger:  Not seeing eye to eye

Photo: Tom Posey with his men, left, helped channel private aid to finance
contra operations in Nicaragua led by Enrique Bermudez, above, seen here at base
camp in Honduras

Photo: American volunteers with contras near Honduras-Nicaragua border

Photo: Swiss banks, including Union Bank in Zurich, handled millions of dollars
in Iranian arms payments.  Upwards of $30 million was diverted to contras

Photo: Florida-based charter airline airdropped arms to U.S.-backed guerrillas
in Nicaragua, including some weapons bought with diverted Iranian funds

Photo: American Eugene Hasenfus was captured when his chartered plane was shot
down by Sandinistas.  Sentenced to prison for role in secret supply chain,
Hasenfus awaits promised pardon.
