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Casey denies CIA diverted arms money

Miami Herald Washington Bureau

CIA Director William Casey told lawmakers Wednesday that his agency, while involved in the secret arms dealings with Iran, played no role in diverting profits from the arms sales to the anti-government rebels in Nicaragua.

But Casey, testifying under oath before a closed, five-hour session of the House Foreign Affairs Committee, also provided legislators with new details about the Reagan administration's clandestine dealings with Iran and the CIA's role in the undertaking.

In particular, sources said, Casey:

* Suggested to legislators that a network of middlemen -- including financiers from Canada -- were involved in the clandestine arms shipments.

* Disclosed that it was the CIA's concerns in 1985 about the legality of the arms shipments that spurred President Reagan last Jan. 17 to sign a secret document, called a "finding, " authorizing the transactions.

* Indicated that White House national security aides, not the CIA, were the main proponents of sending arms to Iran as a means of strengthening relations and securing the release of American hostages.

Afterward, legislators said that Casey, while forthcoming in some areas, was either vague or uninformed about key details of the arms transfers to Iran and the diversion of money to the Nicaraguan contras.

"The director of the CIA hears no evil, sees no evil and certainly speaks no evil of anyone else in the administration, " said Rep. Stephen Solarz, D-N.Y.

One of the biggest surprises of the closed-door session, sources said, was Casey's disclosure that a group of Canadian investors was associated with the secret arms shipments -- and reportedly knew more about the transactions than Casey himself.

One source reported that Casey said that a representative of the financiers called him in September complaining that $15 million the group had invested in the arms deal had not been repaid. Casey said the representative of the group threatened to initiate legal action against the U.S. government and unspecified Iranians if the group did not receive its money, the sources said.

Another committee source said the funds were "front money" commonly used in international arms deals. Buyers usually do not want to put up money before they get the equipment, and sellers do not want to deliver without money. So a third party arranges the transaction and collects a commission for bringing the buyer and seller together.

Committee sources said the question of where the $15 million went did not come up during the hearing because it wasn't asked of Casey.

One committee source said that the representative of the Canadian investors who contacted Casey was a former business associate of the CIA director. "Casey said this guy knew more about Iranian arms sales than he did, " the source said.

WHAT CASEY SAID

Lawmakers said Casey was the clearest during his testimony about what he did not know -- that profits from arms sales to Iran were being diverted to the contras. They said Casey told them he first learned about the diversion shortly before Attorney General Edwin Meese announced it on Nov. 25.

"He said he only knew when Meese told him, " said Rep. Gus Yatron, D-Pa. The New York Times, quoting government sources, had reported Wednesday that Casey had been informed of the diversion of profits a month before it was publicly disclosed by Meese.

Sources at the Senate Intelligence Committee -- which took closed-door testimony from Casey on Nov. 21 and has called him to reappear next Tuesday -- indicated Wednesday they have evidence that Casey knew of the diversion before Meese told him.

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