May 6, 1987

Associated Press

Retired Air Force Maj. Gen. Richard V. Secord told joint House-Senate hearings today that Iranians were deliberately overcharged for the U.S.-made weapons they bought.

That was done in part, he said, out of a desire by Lt. Col. Oliver North, former National Security Council aide, to divert funds to the Contra rebels in Nicaragua.

"We were running out of money to support the Contras," Secord said in the second day of testimony before congressional hearings into the Iran-Contra affair.

''Col. North's position was consistent throughout," Secord said. "He wanted me to use all surplus resources to help the Contra forces."

Asked if he realized the weapons were being sold to Iran at a markup, Secord replied that he did.

''There were a number of reasons, and the Contras was one of them," he said. Secord did not say so, but the sales occurred at a time when Congress had banned U.S. government military assistance to the Contra rebels.

At one point in today's testimony, Secord described how Al Schwimmer, an Israeli arms dealer, paid his operation $1 million in November 1985 to finance shipment of five loads of HAWK anti-aircraft missiles to Iran. But only one shipment was made, at a cost of about $200,000, and Schwimmer never asked for the balance to be refunded.

Secord said North then decided to spend the money to aid the Contras, meaning that Israeli money went directly to arm the rebels. "I think it was his (North's) idea," Secord said, adding there was no indication the move had been discussed with the Israelis.

''So Mr. Schwimmer made a 'Contra-bution,"' he cracked.

Secord said top government officials recruited his help in selling U.S.-made weapons -- then in Israeli stocks -- to Iran.

He said he believed Reagan administration officials sought his help as a "commercial cut-out," since neither the United States nor Israel could deal directly with the government in Tehran.

Hostages discussed

He said that in meetings with Iranian middleman Manucher Ghorbanifar, the subject of hostages was always discussed in the context of the arms sales.

At one point, he said former National Security adviser John Poindexter told him that "small amounts of arms could be used as bona fides" with Iranians.

Testifying under oath and without a grant of immunity, Secord bristled when asked if there was any discussion of profiteering.

''I know some people are tossing that word around and I resent it," said Secord, who testified for three hours Tuesday about his efforts to provide arms to the Contras rebels in Nicaragua at a time when Congress had banned direct or indirect U.S. aid to the rebels.

One prominent former official whom Secord named as a supporter of his efforts, ex-CIA Director William J. Casey, died today of pneumonia which developed during his recovery from surgery for a brain tumor. The surgery had forced him to resign from the CIA earlier this year, and investigators had doubted he would be able to testify at the joint hearings.

North is expected to be called as a witness in the congressional hearings, but not until June at the earliest.

Secord's testimony covered arms sales in great detail, including meetings in the White House to discuss the effort and his own work to arrange for the secret shipment of TOW anti- tank missiles from Israeli soil to Tehran.

He described one early meeting in London with former National Security Adviser Robert McFarlane, Israelis and Ghorbanifar about Iran's desire for U.S. missiles.

Code word

He said that Ghorbanifar "came up with formulas, so many Phoenixes (missiles) for so many boxes, which was his code word for hostages.

''It was blatantly arms for hostages," he said, referring to Americans being held in captivity in Lebanon.

He said McFarlane made plain his dislike for what he was hearing, both in the lengthy session and afterwards. "No American official could agree" to such a proposal, Secord said.

But several months later, he noted, Poindexter approached him and asked for his help in selling American arms. He said that President Reagan had by then formally approved the sale of weapons.

The discussion of the Iranian arms sales marked a shift in focus from Tuesday when Secord was questioned extensively about his recruitment by North to help establish a secret supply operation for the Contra rebels.

Using bank records furnished to investigators by Albert Hakim, an Iranian-born businessman who was Secord's business partner, the retired general identified some $3.5 million in proceeds from the secret sale of U.S. arms to Iran that went to help the Nicaraguan Contras, together with another $2 million in money raised from private contributions.

Secord said he met three times with the CIA's Casey, and dealt routinely with CIA officers and U.S. diplomats in Central America while running a "private" resupply operation for the Contras fighting Nicaragua's leftist government.

'Approved it'

''I also understood that this administration knew of my conduct and approved it," he said.

Secord also told how money from the arms sales went to pay the expenses of U.S. Drug Enforcement Administration agents who were working for the release of American hostages in Lebanon.

He told of how some money went to purchase a Danish ship, the Erria, which according to one source was to be used in a classified operation as a base for a transmitter to broadcast disinformation from off the coast of Libya. The ship was never used for that purpose but was later used to transport weapons to the Contras.

Purchase and operation of the ship was to cost about $600,000, according to documents released by the committees, but Secord and Hakim planned to charge the government $1.2 million for undertaking the deal, raising the possibility that a profit motive figured prominently in the deal.

Sen. Daniel Inouye, D-Hawaii, chairman of the Senate committee investigating the Iran-Contra affair, opened today's hearings by noting Casey's death.

''In the coming weeks, as our inquiry unfolds, Mr. Casey's name will be heard frequently in regard to the Iran-Contra affair," Inouye said. "Whatever may be the final judgment of his role in this event, it should not obscure Mr. Casey's distinguished record of commitment to this country."

Sen. Patrick Leahy, D-Vt., former vice chairman of the Senate Intelligence Committee, said Casey "probably knew the most of anybody -- with the possible exception of Oliver North -- and of course that we'll never know, because he didn't really tell us much about it."

Congressional investigators said Casey's passing would not end their efforts to unravel his role was in the Iran-Contra affair.