SUMMARY

In January 1983, President Reagan issued a directive (NSDD-77) establishing a new mechanism to "strengthen the organization, planning and coordination of the various aspects of public diplomacy . . . relative to national security."

In a memorandum from National Security Advisor William B.  Clark, Jr., dated January 13, 1983, Clark said:

"Our intention is to supplement our commitment of public funds with private funds as well. Some of the public funds would be allocated to private U.S. organizations which could conduct certain programs overseas more easily than the USG. We will develop a scenario for obtaining private funding. Charlie Wick has offered to take the lead."

Building on the scenario laid out in the Clark memorandum, government officials and private organizations began to coordinate their activities on behalf of the Contra cause.  An elaborate system of inter-agency committees was eventually formed and charged with the task of working closely with private groups and individuals involved in fundraising, lobbying campaigns and propagandistic activities aimed at influencing public opinion and governmental action.

One of the key governmental mechanisms that played a central role in the creation and management of the private network involved in the Iran/Contra affair was the Office of Public Diplomacy for Latin America and the Caribbean (S/LPD) in the Department of State.  The office was established in the State Department through the efforts of the NSC staff, despite resistance from Secretary of State George P. Shultz.  [Shultz testimony, Exhibit 67; Memorandum to William Clark from Walt Raymond, 5/18/83; Shultz testimony, Exhibit 69A, Memorandum from Shultz to President, 5/25/83].

Working out of the NSC, the former Director of the Covert Action Staff at the CIA and a specialist in propaganda and disinformation, helped to set up an elaborate system of inter-agency committees, including a working group on Central American Public Diplomacy. The NSC staff also succeeded in having Otto Reich named as the Director of the new Office of Public Diplomacy, which reported directly to the NSC.  Richard R. Miller, former head of public affairs at AID, and Francis D. Gomez, former public affairs specialist at the State Department and USIA, were hired by S/LPD through sole-source, no-bid contracts to carry out a variety of activities on behalf of the Reagan Administration policies in Central America.

Supported by the State Department and White House, Miller and Gomez became the outside managers of Spitz Channell's fundraising and lobbying activities. They also served as the managers of Central American political figures, defectors, Nicaraguan opposition leaders and Sandinista atrocity victims who were made available to the press, the Congress and private groups, to tell the story of the Contra cause. They facilitated the transfer of funds raised by Channell and others to Swiss and off-shore bank accounts at the direction of Oliver North. They became the key link between the State Department and the Reagan White House with the private groups and individuals engaged in a myriad of endeavors aimed at influencing the Congress, the media and public opinion.  They also became the main funnel for private U.S. money going to the Democratic resistance in Nicaragua.

LAUNCHING THE PRIVATE NETWORK

A senior career CIA official, serving as Director of the Covert Action Staff at the CIA from 1978 to 1982, was approached by Donald Gregg, Chief of the Intelligence Directorate at the NSC, and informed that Gregg was recommending to CIA Director Casey and NSC Advisor William Clark that he be assigned to the NSC as Gregg's successor when Gregg departed to join the staff of Vice-President George Bush. The CIA official discussed the transfer with Casey and Clark and received approval for his involvement in setting up the public diplomacy program along with his intelligence responsibilities.  Accordingly, he was transferred from CIA headquarters to the NSC in June of 1982. [Classified Dep. 9/3/87, at 3-9; 9/23/87, at 4-15].

In the early part of 1983, documents obtained by the Select Committees indicate that the Director of the Intelligence Staff of the NSC successfully recommended the establishment of an inter-governmental network to promote and manage a public diploma.cy plan designed to create support for Reagan Administration policies at home and abroad.  Their initial efforts were directed toward involving private groups and individuals in a campaign to influence American and European public opinion on Intermediate Nuclear Force (INF) deployment in Europe.  [Memorandum N39016 from W. Scott Thompson to the Director, 1/25/83; Memorandum N30899 to William Clark, 3/3/83J.

In the Spring of 1983, the network began to turn its attention toward beefing up the Administration's capacity to promote American support for the Democratic resistance in Nicaragua and the fledgling democracy in El Salvador.  This effort resulted in the creation of the Office of Public Diplomacy for Latin America and the Caribbean in the Department of State (S/LPD), headed by Otto Reich.

On May 25, 1983, Secretary of State George P. Shultz, in an effort to head off the creation of S/LPD, wrote a memorandum to the President aSking for the establishment of "simple and straight-forward management procedures." [Shultz testimony, Exhibit 69a[handwritten insertion here: "Supra"]].  The memorandum to the President followed a discussion between the President and Shultz earlier in the day.

In the memo Shultz said:

" . . . Therefore, what we discussed was that you will look to me to carry out your policies.  If those policies change, you will tell me. If I am not carrying them out effectively, you will hold me accountable.  But we will set up a structure so that I can be your sole delegate with regard to carrying out your policies.

" . . . What this means is that there will be an Assistant Secretary acceptable to you (and you and I have agreed on Tony Motley) who will report to me and through me to you.  We will use Dick Stone as our negotiator, who, in conjunction with Tony, will also report solely to me and through me to you.  Similarly, there will be an inter-agency committee, but it will be a tool of management and not a decision-making body. I shall resolve any issues and report to you."

The President responded with a memorandum, which stated in part:

"Success in Central America will require the cooperative effort of several Departments and agencies.  No single agency can do it alone nor should it.  Still, it is sensible to look to you, as I do, as the lead Cabinet officer, charged with moving agressively [sic] to develop the options in coordination with Cap, Bill Casey and others and coming to me for decisions.  I believe in Cabinet government.  It works when the Cabinet officers work together.  I look to you and Bill Clark to assure that that happens. [Shultz Testimony, Exhibit 69B].

Attached to the memo was a chart placing the NSC between the Secretary of State and the President for the management of Central American strategy.  Shultz had not only lost the battle to prevent the establishment of the office, he also accepted the NSC-sponsored candidate to run the office, and accepted the fact that Reich would report directly to the NSC and not through the Assistant Secretary of State for Inter-American Affairs.

Almost simultaneously with the creation of S/LPD, Walter Raymond, Jr. was named to a new position as Special Assistant to the President and Director of International Communications at the NSC.  From that time forward, S/LPD reported to Raymond and his working group on Central American Public Diplomacy at the NSC. The group was composed of representatives of USIA, the CIA and DOD, as well as various NSC staffers, including Oliver North.  At least for several months after he assumed this position, Raymond also worked on intelligence matters at the NSC, including drafting a Presidential Finding for Covert Action in Nicaragua in mid-September.  [Memorandum from Walt Raymond to William Clark, 9/12/83; Classified Dep. 9/3/87, 9/23/87, supra].   

Reich relied heavily on Raymond to secure personnel transfers from other government agencies to beef up the limited resources made available to S/LPD by the Department of State.  The NSC also intervened on behalf of S/LPD with top management officials in the State Department to expand Reich's resources within the Department.  Personnel made available to the new office included intelligence specialists from the U.S. Air Force and the U.S. Army. On one occasion, five intelligence experts from the Army's 4th Psychological Operations Group at Fort Bragg, North Carolina, were assigned to work with Reich's fast-growing operation. [8/1/84 Memo from Poindexter to Dam; 3/5/85 Memo from Reich to Warren; 12/16/85 Memo from Reich to Roosevelt; 1/3/86 Memo from Jacobowitz to Reich with attachments; 8/1/86 Memo from Lester to Raymond].

White House documents also indicate that CIA Director Casey had more than a passing interest in the Central American public diplomacy campaign.  In an August 9, 1983 Memorandum entitled "Private Sector Support for Central American program," Raymond told Clark:

"A group of public relations specialists met with Bill Casey a few days ago.  Faith also met them. The group included Bill Greener, the public affairs head at Philip Morris, and two or three others. They 'stated' what needed to be done to generate a nationwide campaign.  Several elements were identified. The first, a fundraising effort under the direction of someone like Walter Wriston. Secondly, an effective communications system inside the Government.  The overall purpose would be to sell a 'new product' — Central America — by generating interest across-the-spectrum."

!n an August 29, 1983 memorandum from Raymond to Poindexter, Casey's continuing interest in the effort to influence public opinion was shown by the following reference:

"Bill Casey called on August 26 and would like to follow-up on his idea to have a meeting with five or six key public relations specialists.  This is referred to in my earlier memorandum.  I put him off until after Labor Day.

" . . . When I philosophized a bit with Bill Casey (in an effort to get him out of the loop), he was negative about turning the ball over to State, but very positive about someone like Gil Robinson working on the problem from within State."

Casey was obviously concerned that the establishment of S/LPD in  the State Department might put it beyond NSC control.  Casey's 1nvolvement in the public diplomacy effort apparently continued throughout the period under investigation by the Committees.

On March 20, 1985, Oliver North sent a memorandum to National security Advisor Robert McFarlane on the subject, "Timing and the Nicaraguan Resistance Vote." Attached to the memo was a chronological event checklist which outlined efforts "aimed at securing Congressional approval for renewed support to the Nicaraguan Resistance Forces." Responsibility for the various efforts was tasked to a number of individuals in the NSC and Department of State as well as private supporters including former Congressman Dan Kuykendall and State Department contract consultant Frank Gomez.  In the cover memo seeking a decision from Don Regan that would trigger some of the private group efforts, North wrote:

"You should also be aware that Director Casey has sent a personal note to Don Regan on the timing matter.  We are attempting to obtain a copy for your use."

As late as August of 1986, Walt Raymond prepared a memorandum for Poindexter's signature to Bill Casey on the subject of Central American Public Diplomacy. The memo reported on a new structure in the State Department which moved LPD from the Secretary's Office to the Bureau of Inter-American Affairs.  In the cover memo to Poindexter, Raymond indicated his desire to have Peter Dailey, who had been U.S. Ambassador to Ireland and had managed the public diplomacy initiative on INF deployment in Europe, "work closely with Bob Kagan, the Interagency Central American Public Diplomacy coordinator, and to help coordinate private sector activities such as funding that currently cannot be done by either CIA or State." [Memorandum to John Poindexter from Walt Raymond, 8/7/86, with attachments].

On August 22, 1986, Casey responded to the Poindexter memo indicating that he (Casey) had just:

" . . . brought Pete Dailey on board as Counselor to the Director of Central Intelligence. As a CIA employee, naturally, Pete is subject to the legal prohibitions on us relating to activities intending to influence U.S. public opinion or policy. Any advisory role that he plays on the public diplomacy front must, of course, be in accordance with these legal restrictions.

"Similarly, now that Pete has joined us, he obviously can have no role in any private fundraising effort on behalf of the Nicaraguan Resistance."

Curiously, the letter to Poindexter was apparently not sent to Poindexter but to Walt Raymond because, on August 29, 1986, Raymond forwarded the letter to Poindexter with a cover memo which said:

"Bill Casey has sent a brief note to you which puts some caveats around the activities Peter Dailey can undertake. Peter has talked to me, and I do not believe that this will cause him any difficulties in helping us along the lines of our previous exchanges via the PROFS** system."

On August 26, 1986, Raymond sent a PROF note to Poindexter on the subject of "Central America Public Diplomacy." The PROF note said, in part:

"As a follow-up, Peter Dailey invited me to breakfast. I thought the memo was excellent but he did not feel that it totally filled the bill. What he thought was missing was the immediacy of the problem from the American domestic perspective. He believes that we are operating with a relatively narrow window in which to turn around American perceptions re Contras — and particularly Nic — or we will be chewed up by Congress. We discussed the obvious, which is part of our strategy, including such things as: the need to convince people of the key importance of Contras to our national security; the need to glue white hats on our team, etc. The themes are those we have pressed although he believes we could change the dialogue away from Contras to democrats; emphasize the need for a free and open vote, etc.  Nothing really new here. The key difference is that he thinks we should run it more like a political/presidential campaign. We need to strengthen our ability to reach out. Names like Rollins, Nofziger and co. were thrown around as the kinds of resources one needs to tap.

"Later, in talking to Ollie and Bob Kagan, we focussed on what is missing and that is a well-funded, independent outside group — remember the Committee for the Present Danger — that could mobilize people.  Peter suggested 10 or 12 very prominent bipartisan Americans. Added to this would need to be a key action officer and a 501-c-3 tax-exempt structure.  It is totally understanding that such a structure is needed and also totally understanding why, for discreet political reasons, it was not included in the memo to Bill Casey. I told Pete he was right but we need 'a horse' and money!"

As late as November 10, 1986, Raymond sent another PROF note to poindexter on the subJect of "Cent Am Private Sector Initiative," which stated:

"There have been several meetings following up on the effort to get a major, bipartisan group formed · to help promote an 'educational' program in the U.S. which would help provide understanding (and support) for our Centam policy, particularly vis-a-vis Nicaragua.

"Although Pete Dailey, Bill Casey and Clif White have all been involved in general discussion of what needs to be done, we are going to have to be sure that Pete and Bill are not involved. Pete is getting very nervous on this item. Hence, Clif is now taking the lead. The current focus is to get a bipartisan co-chairmanship, a six man (roughly) EXCOM, a staff director and a large bipartisan advisory council. Current names being tossed around for the co-chair include Jack Gavin, Bill Rogers, Dean Rusk and Mark White.  Pete (and Ollie) favor going with Gavin.  Clif is also talking to several key democratic activist types for their recommendations. Jim Woolsey's name has come up in that context. Clif has the list of several effective operators who have just finished the fall campaign (plus some soon-to-be ex-staffers on the Hill) who might be a good EXDIR. Dave Miller has also been helpful, particularly in terms of getting the 501-c-3 status and access to fresh faces in the political consultant field.  Clif has (or will) be seeking names from Mitch Daniels too.

"The problem with all of this is that to make it work it really has to be one step removed from our office and, as a result, we have to rely on others to get the job done. Will keep you posted."

From early 1983 until November of 1986, the NSC staff, with the backing of Bill Casey and support from National Security Advisors Bill Clark, Bud McFarlane and John poindexter, and with continuing help from Oliver North, created an inter-governmental structure the purposes and activities of which were masked from Congress and public view. The NSC and S/LPD, operating under the cover of the State Department, hired outside consultants and gave encouragement, support and direction to groups of private citizens outside the government. These groups raised money for Contra weapons, lobbied the Congress, ran sophisticated media campaigns in targeted Congressional districts, and worked with S/LPD to influence American public opinion through manipulation of the American press.¹ In the latter half of 1986, Raymond was attempting to set up a private group with more prestige and greater clout than the Rich Miller/Spitz Channell network that had been quickly assembled and utilized to work on the 1986 Contra aid vote in the Congress.  [Prof note dated 11/10/86 from Raymond to Poindexter re: CentAm Private Sector Initiative]. 

While donations from other countries and profits from the Iran arms sales provided most of the money for lethal assistance to the Contras after the Boland Amendment, a network of private foundations and organizations, including those associated with Carl R. "Spitz" Channell and Richard R. Miller, also played an essential role. Channell's principal organization, the tax-exempt National Endowment for the Preservation of Liberty (NEPL), used White House briefings and private meetings with the President to raise more than $10,000,000 from private contributors, almost all for the Contra cause. Over half of this total came from two elderly widows — Barbara Newington and Ellen Garwood — who made the bulk of their contributions after receiving private and emotional presentations by Oliver North on the Contras' cause and military needs. One dozen contributors accounted for ninety percent of NEPL's funds in 1985 and 1986. [Channell Financial Documents].

Richard Miller's principal organization, International Business Communication (IBC), was a partnership between Miller and Frank Gomez, which began to work on behalf of the Contras  under a State Department contract that began in early 1984.  From early 1984 until the summer of 1985, IBC's principal Source of income was derived from a series of State Department sole-source, no-bid contracts pushed through the bureaucracy by the principal officials of S/LPD.  (IBC Cash Analyses; GAO Report, B229069, 9/30/87; State I.G. Report No. 7PP-008, 7/87; Frank Gomez Dep. 9/11/87, at 177-178].

The first State Department contract for IBC began in February 1984, shortly after S/LPD had begun its work. Miller and Gomez were introduced to Oliver North in mid-1984 by State Department officials from s/LPD.  From that period forward, Miller and Gomez worked closely with North as well as the Office of Public Diplomacy in carrying out a variety of assignments related to the promotion of the Contra cause.

In the Spring of 1985, White House Deputy Political Director John Roberts sent Spitz Channell and his Deputy, Dan Conrad, to meet with Miller and Gomez, who, Roberts believed, could best advise them how to utilize their fundraising services on behalf of the Contra cause. [House Select Committee Interview of John Roberts, 7/14/87].  Miller and Gomez assisted Channell in his fundraising efforts and advised Channell on the disbursement of the proceeds for various projects including lobbying, television ads, newspaper ads and grassroots activities designed to influence Congressional votes on aid to the Contras.

Of the $10,000,000 that was raised, nearly two million dollars was spent for public relations, political advertising and lobbying.   Much of the rest was retained by Miller and Channell for salaries, fees and expenses incurred by their organizations. The NEPL money that was spent for direct and indirect assistance to the Contras was disbursed, primarily by Miller, at the direction of North.  Approximately $1.7 million was "washed" by Channell through Miller's domestic and Cayman Island entities — lnternational Business Communications (IBC) and I.C., Inc. — to the Enterprise, where it was co-mingled with funds from third country contributions and the Iranian arms sale. Another one million dollars was passed at the direction of North through Miller's entities to accounts controlled by Adolfo Calero. Approximately $500,000 was distributed at North's request to other persons and entities engaged in activities relating to the Contras, including Rob Owen, Dan Kuykendall, Thomas Dowling, the Washington UNO Office and some unidentified entities. [Canceled travelers checks, originally purchased by Calero contain the signatures of Owen, Kuykendall and Dowling; also Robert Owen Testimony, 9/14/87, at 337-343; I.C., Inc. Accounts].

Channell and Miller made elaborate efforts to conceal the nature of their fundraising activities and North's role.  Certain funds received by NEPL for Contra assistance were allocated on Channell's books to a project denominated "TOYS," a euphemism for weapons.  NEPL and IBC employees were instructed to refer to North by a code name, "Green." Funds were transferred to the Contras, not directly — which would be traceable — but through Miller's anonymous off-shore entity, I.C., Inc.

North misrepresented to several White House officials the nature of the network's fundraising activities.  For instance, the President apparently was led to believe that the funds were being raised for political advertising; the President's Chief of Staff, Donald Regan, was deliberately kept in the dark by North and Poindexter; and North misrepresented to Congress and White House personnel the nature of his involvement in the activities of NEPL and lBC.  As a result, the Miller/Channell network was able to operate successfully until the latter part of 1986, when increased government aid to the Contras and public disclosure of both the Iranian arms sales and the Contra resupply network made further assistance efforts unnecessary and unwise.

By using a tax-exempt organization to funnel money to the Contras — for arms and other purposes — Channell and Miller provided tax deductions to donors.  As a result, the United States Government effectively subsidized a portion of contributions intended for lethal aid to the Contras.  In the spring of 1986, Channell and Miller pled guilty to criminal tax charges of conspiring to defraud "the United States Treasury of revenues to which it was entitled by subverting and corrupting the lawful purpose of NEPL by using NEPL . . . to solicit contributions to purchase military and other non-humanitarian aid for the Contras." At his plea hearing, Channell identified Miller and North as his co-conspirators.

** The IBM Professional Office System (PROFS) is a licensed program designed to provide a comprehensive and easy-to-use set of office system and principal-support functions for business professionals. PROFS is a trademark of the IBM Corp The PROFS program is designed to operate in the Virtual Machine (VM) environment on IBM S-370 main frame computers. In particular, PROFS systems on multiple IBM 9370 computers have gained wide acceptance in departmental applications. For more information on the PROFS system, the reader is referred to "Using the Professional Office System, Version 2, Release 2", IBM Publication No. SH20-6797-01, Second Edition (June 1986).