Secord Set Up Network With CIA as Model : Denies That He Tried Later to Sell Out to Agency at a Profit

WASHINGTON — Retired Maj. Gen. Richard V. Secord, the chief middleman in the Iran- contra scandal, acknowledged Thursday that he had used the CIA as the model for his private network to aid Nicaragua’s rebels at a time when the agency itself was barred from providing such assistance. But under a barrage of challenges to his claim that he was operating strictly out of patriotic duty, he denied that he later tried to sell his operation to the CIA for profit.

Sen. David L. Boren (D-Okla.) characterized the retired Air Force major general as an arrogant profiteer who circumvented the law prohibiting CIA support of the contras and operated the U.S. government’s secret arms sales to Iran.

Boren Stuns Secord

Boren stunned Secord by asking: “Did you not wake up some morning and think how did I, as a private individual, start exercising all this responsibility to make foreign policy for the United States of America, in lieu of the Congress, the secretary of state, the President of the United States, members of the National Security Council? Did you not have even a moment of humility about your judgment in substituting yourself for the constitutional processes of this country?”

So bitter did the questioning become that Secord at one point angrily told Senate counsel Arthur L. Liman: “I didn’t come here voluntarily to be badgered.”

Secord also modified his earlier claim that Lt. Col. Oliver L. North, a member of the White House National Security Council staff until he was fired last November, had said he had informed Reagan that profits from the Iran arms sales had been funneled to the contras.

According to Secord’s testimony Wednesday, North had joked with the President “that it was very ironic that some of the ayatollah’s money was being used to support the contras.”

Under questioning Thursday, however, Secord said he was skeptical that North--whom he described as having “a certain melodramatic flair”--had actually made such a comment to the President. “It doesn’t sound like the kind of story that one would hear in the office of the commander-in-chief,” Secord said.

The President on Thursday denied that North had made such a comment to him. Secord, Reagan said, “was misinformed. . . . I’m still waiting to know where did that money go.”

Indictment Predicted

That and other conflicts in Secord’s testimony, which has run for 13 hours and will continue today, prompted Sen. Howell Heflin (D-Ala.) to predict that a jury will ultimately determine whether he has told the truth. “I think that his testimony, in effect today, means that he will be indicted,” Heflin said.

Secord confessed that he aspired to be appointed as the CIA’s chief of covert operations. And he admitted under questioning by Liman that, with the encouragement of top White House officials, he had created a covert operation with all of the earmarks of the U.S. intelligence agency--secret accounts, employees using code names, classified communications equipment and profits generated by the sale of U.S. goods.

But he denied a suggestion by Rep. Louis Stokes (D-Ohio) that he had created a shadow version of the CIA simply to circumvent the will of Congress, which during most of 1985 and 1986 had prohibited the CIA from aiding the contras.

‘Two Governments’

“Doesn’t it look to you like we have two governments?” Stokes asked. “There’s one government run by the United States, which Mr. Reagan is head of, where you cannot utilize appropriated funds for the purposes we’ve already enunciated; and this other government run by you, and you can utilize these funds for whatever purpose you deem necessary?”

Secord replied: “I didn’t see it that way. The President has certain rights in the foreign policy area. I never saw myself as being a foreign policy operative. I believe that the funds that we had were private funds and could be sent to the contra project.”

Boren also questioned the pivotal role that Secord played in opening a channel of communication with Iran, a country with which the United States has not had diplomatic relations since the fall of Shah Mohammed Reza Pahlavi in 1979. He noted that it was Secord who arranged a fateful meeting last year with representatives of the new Iranian government, in Frankfurt, West Germany.

“Do you think it’s strange,” Boren asked, “for a private citizen to be taking an action of such importance for the foreign policy of the United States as purporting to represent this country in the opening of communications with an element in the government of a foreign power?”

Secord acknowledged that it was “strange” but insisted that, as far as he knew, the contacts had the approval of Reagan and Secretary of State George P. Shultz. The chief lesson he learned about his unusual venture, he added, was that “this should have been lawyered.”

Secord Rejected Orders

When Boren challenged him to explain why he had rejected orders he received from the White House in August, 1986, to shut down his airlift to the contras, Secord replied: “I think the results were the right results.”

“So in other words,” Boren concluded, “again we have Mr. Richard Secord, private citizen, substituting his own personal judgment in the conduct of an operation . . . rejecting the request from the National Security Council because Mr. Richard Secord, private citizen, no appointment from the President, felt that was the wrong thing to do.”

Secord, bristling at charges of profiteering, stoutly denied that he intended to take advantage of the many opportunities for profit outlined by Liman that are still open to him as a result of his venture into private covert operations. He acknowledged that he and Albert A. Hakim, his partner, still have about $8 million in a Swiss bank account but insisted that it probably would be needed to pay lingering bills.

Potential Liabilities

He said his potential liabilities include his legal fees, debts for leased planes, a “moral obligation” to pay death benefits to survivors of those who were killed in one of his C-123 supply planes shot down over Nicaragua in October, 1986, and amounts--under dispute--that are owed to a shipping agent for operation of the Danish ship Erria.

However, Thomas C. Green, his attorney, resisted efforts by Sen. Warren B. Rudman (R-N.H.) to get Secord to pledge that he would return whatever sum is left after paying the bills to the U.S. Treasury. Rudman said the committee had estimated that those expenses would total less than $500,000, leaving more than $7 million in the account.

In 1986, when it appeared that Congress was about to lift the ban on CIA support for the contras, Secord said he sought to persuade the CIA to take over his operation, which he valued at $4 million. He said the takeover was rejected after one of his contra airlift cargo planes crashed last October.

‘Were Going to Walk Away’

He strongly denied Liman’s suggestion that he was trying to persuade the CIA to buy his operation, which included the ship, five airplanes and an airstrip in Costa Rica. He said his plan was simply to leave it in CIA hands.

“We were going to walk away from it,” he said.

To the contrary, Liman noted that an option paper prepared in 1986 by Robert C. Dutton, one of Secord’s associates, suggested that the assets be sold to the CIA. He also indicated that Dutton and another associate, Richard B. Gadd, had testified before the committee staff in closed session that Secord intended to make such a sale.

In addition, Boren charged that Secord had intended to return the profits from selling the operation to his own Swiss bank accounts instead of handing them over to the contras, even though the company’s assets were purchased with contributions made to the Nicaraguan rebels. He added that Secord still owed $5 million on the airstrip and suggested that he had intended to pass the liability for that payment to the CIA.

In Secord’s defense, Rep. Michael DeWine (R-Ohio) read from a transcript of Dutton’s earlier deposition in which he seemed uncertain whether the assets were to be sold or given away. Dutton told them: “If the CIA wanted to purchase them, then the idea was to sell them. It was also discussed that it could be given to the CIA.”

Question: “So you are unclear about that?”

Dutton: “That is correct. That was Gen. Secord’s decision.”

Question: “Did he ever talk about a profit he would make from the CIA?”

Dutton: “No.”

Secord Defends Aides

Secord defended the character of his associates even though Hakim had admitted bribing Iranian officials and another, Thomas Clines, had pleaded guilty to overcharging the government on an arms deal with Egypt. He also admitted to having a friendship with former CIA official Edwin P. Wilson, who was convicted of illegally shipping munitions to Libya.

He said he originally had viewed Wilson as “an honorable man” and still thinks that Hakim and Clines are “good friends, good Americans.”

But Secord said he never had any contact with Carl R. (Spitz) Channell or Richard R. Miller, two private fund-raisers who have pleaded guilty to defrauding the Internal Revenue Service by using a tax-exempt organization to collect donations that helped fund his operation.

Presidential Pardon

Although Secord insisted that he himself broke no laws, he admitted that North once told him that he expected to get a presidential pardon if their operation were ever made public.

While Secord was representing the U.S. government in foreign affairs, according to Boren, his government security clearances were revoked last year because he failed to provide financial data. Secord has also refused to give the committee access to his Swiss bank accounts, although Hakim provided Congress with their business records.

Boren said that records of certain transactions, which appeared to be profit-splitting among Secord, Hakim and their associates, indicated that some of the funds found their way into an account that apparently carried Secord’s name. Secord insisted that he had “no specific interest” in the account.

Liman also challenged Secord’s insistence that he had received no personal financial benefit from the arms sales. He noted that while Secord revoked any claim to the profits, the agreement was never committed to writing.

Shell Corporations

In fact, Secord acknowledged that his signature never appeared on any document related to the web of shell corporations and secret bank accounts that he and Hakim operated.

Liman asserted that their secret financial empire also could have provided them and their associates with numerous opportunities to siphon off profits that were accumulating from the U.S. arms sales to Iran. Liman traced complex dealings in a number of areas, including:

--A bank account established by Hakim that holds the $8 million that remains from the roughly $14 million surplus created by the Iran arms sales. Secord said at least several hundred thousand of that amount would be necessary to cover the bills still outstanding from the operation but indicated that he may be willing to turn his share of the remainder over to the federal Treasury.

--What was purported to have been a loan of up to $500,000 to Stanford Technology Trading Group International, the primary company run by Secord and Hakim, from a fiduciary company known as CSF. CSF derived its funding from the same Swiss bank accounts into which funds from the arms sales flowed. Secord said that Stanford Technology paid no interest on the loan, which has been outstanding for two years.

--A lucrative management agreement between Stanford Technology and Udall Research Corp., a firm established to construct a secret airfield in Costa Rica and to purchase arms for the contras. Udall, which was funded with profits from the Iran arms sales, agreed to pay Stanford Technology up to $200,000 a year for the services of its staff director, Robert Dutton. The amount apparently was far greater than the cost to Stanford Technology of Dutton’s salary and expenses.