PROFITS OF WAR -- INSIDE THE SECRET U.S.-ISRAELI ARMS NETWORK

11.  The Second Channel

THE JOINT COMMITTEE'S work had thrived, but the political chaos in Israel in 1984 and the bizarre coalition forged by Labor and Likud to govern the country were to have profound consequences for us -- and for the world. By 1985, with Labor's Shimon Peres as the new prime minister, the foundations for a major political scandal in the United States -- the Iran-Contra affair -- were being laid down.

While pundits looked in vain to Peres to carry out domestic reform or initiate peace talks with the Arabs, one of his most important acts early in his tenure went virtually unnoticed. This was his appointment of a former TV newsman, Amiram Nir, as counterterrorism adviser.

A ruggedly handsome man, Nir was originally a military officer in the tank corps and had lost an eye in a training accident. He now had a glass eye, but, unlike the famous former Defense Minister Moshe Dayan, he didn't wear a patch. After his release from the army, he became a TV reporter specializing in defense matters. He met and married one of the wealthiest women in Israel, Judy Moses, the daughter of the owner of the biggest newspaper chain in Israel, Yediot Ahronot. It seemed, however, that Nir was in competition with his wife, and he tried to prove himself independent of her and her wealth. His public image was good, and he was so charismatic that people hung on his every word when he appeared on television.

As the 1981 elections approached, Nir fully expected Labor to defeat Likud. He resigned from his TV job and went to work for Shimon Peres as a public relations adviser. The Labor Party lost the election, so Nir found himself without a job. He certainly didn't want to work for his wife's newspaper; and if truth be told, his wife's family didn't want him there either. Feeling that he should give Nir something, Peres offered him a position as chief of staff for the chairman of the Labor Party. So Nir ended up working for Peres as a gofer. After the high public profile he'd enjoyed, it wasn't too satisfying, but it was a job.

In 1984, when Peres became prime minister for the agreed two-year period, he appointed Nir as his counterterrorism adviser. Rafi Eitan, who had used the same position to develop his U.S. spy network during the Begin years, continued his spy network from his office at LAKAM, the scientific intelligence agency he now headed. When Nir, in 1984, entered the counterterrorism office, he was faced with starting from scratch because he was going to get no help from Eitan. But Nir found documents relating to the network that Eitan had created in the U.S. -- and to the Joint Committee's arms sales to Iran.

Peres and Nir found themselves in a very tough spot. The Likud-controlled intelligence community would not work with them. Moreover, the Labor Party had no real power over finances. The Finance Ministry was now Likud-run. So was LAKAM, whose huge slush fund had once financed Labor projects but was now controlled by Eitan. And support for the Labor Party among the overseas Jewish communities was virtually nonexistent. If any money was to be collected, it would be for Israel and not for the Labor Party now.

But early in 1985, Shimon Peres, who still had almost two years to run as prime minister, came up with a solution to his dilemma. He saw the profit potential that the Iran arms sales had, and he wanted a piece of the action. So he decided to take away the authority for the arms sales to Iran from the intelligence community and the Joint IDF/MI-Mossad Committee for Iran-Israel Relations and give it to people close to him.

When he found out that there was no way the intelligence community or the deputy prime minister, Yitzhak Shamir, would agree to such an arrangement, Peres came up with a completely new plan: Open a competing arms channel. This way, he believed, he could bring in a fortune for his own people and also kill off the intelligence-community channel, despite its connections with the powerful Robert Gates. The operation, he decided, would be run by Nir.

Nir was ill-prepared for such an assignment. He had no experience in intelligence or business. In way over his head, he set about finding support for the new operation. Among the people he talked to was an American-Israeli businessman, Al Schwimmer, a former Israel Aircraft Industries official who had a number of contacts in the arms world. He had been brought from the United States to Israel by Peres at the height of the Labor Party's power in the late 1960s.

Nir also talked to Yaacov Nimrodi, one of the richest men in Israel. An Iraqi Jew and a former Israeli military attache to Iran, he had established the first official government-run arms channel between Israel and Iran in the early 1960s. In 1967, after the Middle East war, he came back to Tel Aviv and made presentations to the chief of the General Staff of the Israel Defense Forces. He wanted to be military governor of the West Bank, which had just been captured, and work as a bridge for peace between the Palestinians and Israel. Being of Middle Eastern background, he said he understood the Arabs. When the IDF general staff said they were not ready to appoint him, he told them that if he did not get the job he was going to leave the army and become a millionaire. They all laughed about it and told him, "Go and become a millionaire."

He surprised them all. As soon as his resignation from the military went into effect, he returned to Tehran. Because of the friendship he developed with the Shah, Nimrodi reached an agreement that any arms coming to Iran from Israel would have to be brokered by him -- with a built-in commission. He also developed other business interests in Iran, and today his wealth is estimated at $2 billion. However, after the Iranian revolution in 1979, he found himself with a lot of money but no interesting work. Nimrodi's allegiances were never really defined. Even though he was a sort of Labor Party man, over the years he had contributed to both parties. And he had a special liking for Ariel Sharon, who had been his military commander when he was a young officer in the IDF.

The main players developing the competing arms channel -- Amiram Nir, Al Schwimmer, and Yaacov Nimrodi -- decided early in 1985 that they needed US. support. Nir, who had found out about Robert McFarlane's special relationship with Rafi Eitan, decided that McFarlane was the man to talk to. He was, after all, national security adviser to the president.

Nir and the others were well aware that the Israeli intelligence community's arms operations from the East Bloc, the U.S., and most of the world were going at full speed. Even the defense minister, Yitzhak Rabin, a Labor Party man, was not trying to impede us because he had no interest in helping Peres.

Still, Nir flew to Washington and met McFarlane. Over a private lunch in a restaurant in the Sheraton Hotel in downtown Washington, Nir told McFarlane to cooperate with his new channel and not the established network -- or else. McFarlane read the message. He was being threatened with exposure.

Having little choice, the president's man put Nir in touch with two other people in the National Security Council. Their names were Oliver North and John Poindexter.

***

Marine Lt. Col. Oliver North and Deputy National Security Adviser Rear Adm. John Poindexter agreed with Robert McFarlane, their boss at the National Security Council, that running a second arms channel was a brilliant idea. And they decided that if they could get it up and running, they'd do all they could to squelch the Israeli Joint Committee operation.

In their initial discussions after meeting Nir in 1985, McFarlane and North agreed that President Reagan was not the man to approach directly about the project. They didn't think much of his ability to comprehend their plans. Instead, they went to the head of the CIA, William J. Casey.

Since his stroke in 1981, Casey had been cut out of the daily workings of the CIA by Vice President Bush and Robert Gates, who by this time was effectively running the CIA. Vice President Bush was in charge of the political oversight of the U.S. intelligence agencies as part of an agreement reached in 1980 between the presidential campaigns of Reagan and Bush to unite. In an effort to regain some of his stature, Casey was now more than willing to go along with a second channel.

So Nir, North, and Poindexter had Casey on their side, but how would Vice President Bush respond? As they anticipated, he turned a blind eye. The CIA-Israeli intelligence network had proved its efficiency and was making money for the CIA budget, and on the face of it an opposition channel might lead to complications. But as we learned later from Nir, who met three times with the vice president, Bush was looking at the wider Middle East picture. By tacitly ignoring the second operation, he was placating Israeli Prime Minister Shimon Peres, who had thought up the idea. It was very important, Bush realized, to maintain a friendship with Peres and his Labor Party if the Americans were to impose their Middle East peace plan.

The U.S. proposal was to convene a conference among Israel, Jordan, Iraq, Egypt, and the Palestinians -- though not the PLO, which was not recognized by Israel -- with the U.S. taking the chair. The Arabs were insisting on an "international conference," which was their way of getting the Soviet Union to join in, too. But this plan, which envisioned some type of solution for the Palestinians in the West Bank, was being thwarted by Shamir and Likud.

Shamir hated the U.S. trying to take territory away from Israel. Under no circumstances would he agree to establish an independent Palestinian state in the West Bank and Gaza Strip. He saw Jordan as the Palestinian state, and he believed King Hussein, who was a close friend of Peres and an ally of the United States, did not represent anyone in Jordan but himself and a few Bedouins, the majority of Jordan's population being Palestinian.

Also, Shamir would not trust anything Saddam Hussein said and certainly would not accept the Iraqi leader as a partner in peace negotiations. Shamir saw Saddam Hussein emerging as the leader of the Arab world and a major threat to Israel's interests.

That view of Saddam Hussein was not unjustified. Since 1981 it had been accepted wisdom in the Reagan administration that Saddam Hussein was the man to fill the vacuum in the Middle East after the ousting of the Shah. The Americans saw him as a strong leader who could protect American interests and the vast oil fields, and even though he was closely connected with the Soviets they felt he could be "pulled over."

To woo Hussein, the U.S. State Department in 1982 took Iraq off its list of "terrorist countries" -- whatever that meant. One year later the weapons trade embargo against Baghdad, imposed in the 1970s because Hussein was said to have provided refuge to Palestinian terrorists, was dropped. President Reagan signed a secret presidential directive (not a finding) to enable export of arms to Iraq. A number of high-level Republicans started visiting Iraq, and in 1984 diplomatic relations between the U.S. and Iraq, which had been cut during the Middle East war of 1967, were resumed. After an exchange of ambassadors, a number of U.S. businessmen began flying to Baghdad, and they helped ensure that Saudi money continued flowing for the war effort against Iran. The Americans also felt it was not wise to end the Iraq-Iran war until they had Hussein completely in their pocket.

In order to give full force to the peace initiative, the U.S. government twisted Saddam Hussein's arm in early 1985, and he publicly announced that under the right circumstances he was willing to join the Camp David process and make peace with Israel. This, he said, would be contingent on Israel stopping its support for Iran and agreeing to the establishment of a Palestinian state.

Peres found this an acceptable framework and continued to support the idea of a peace conference. But Shamir was insistent. He said no. Effectively the leader of half of Israel's government, he was able to block the initiative.

The United States decided to force Likud's hand by turning Iraq into a major threat to Israel. The rationale for this was twofold: first, to make Iraq strong enough to repel the Iranians and keep the "moderate" Western Arab, Saddam Hussein, in power; and second, to create a viable counterweight to Israel in the Middle East, thus forcing Israel to the negotiating table. But in reality, the only way this could be done was to send Saddam Hussein missile technology and chemical weapons and perhaps give a wink and nod to his receiving some nuclear technology.

This U.S. policy started in 1985, but it had to be under cover for the simple reason that Israel had many friends in Congress, and the Jewish community in the United States would never have gone along with it.

Shimon Peres actively tried to further the new U.S. policy, remaining at odds with the other half of the Israeli government, which tried to block it. While publicly mouthing words of peace, Peres had privately agreed to participate in the American doublegame of arming both the Iranians and the Iraqis. He encouraged his close friend and associate, Geneva-based Israeli businessman Bruce Rappaport, to buy military equipment from Israel, such as used M-16 rifles and I22mm shells, and divert it to Iraq.

Rappaport also participated in another very strange deal involving Iraq: The Iraqis were keen to construct an oil pipeline from their oilfields in northern Iraq to the Port of Aqaba in Jordan. They wanted to build it in that area because they were effectively blocked by the Iranians in the Persian Gulf. They might have put the pipeline along the Syrian border, but Syrian President Hafez El Assad was Saddam Hussein's blood enemy due to historical differences, and Syria was, strangely enough, an ally of Iran, which put it in bed with the Likud Party. The Turks had common borders with both Iraq and Iran and wanted to stay neutral, so they wouldn't help the Iraqis either.

That left Jordan's Port of Aqaba as the only effective outlet to the sea. There was, however, one big problem. Aqaba is only about two miles from the Israeli port of Eilat, and any pipeline coming down from Iraq to Aqaba has to be built, at least partially, along the Israeli border. It would be unacceptable to the Israelis, who didn't want Iraq to have an economic boost.

But Saddam Hussein made a smart move. He contracted the pipeline out to the Saudi Bechtel Corporation, a subsidiary of Bechtel, the U.S. conglomerate. This was no coincidence. U.S. Secretary of State George Shultz and Defense Secretary Caspar Weinberger were both former executives of Bechtel. Attorney General Edwin Meese III had been an attorney for Bechtel and was a very close friend of the Saudi ambassador to the United States, Prince Bandar. And George Bush's family, including his brother -- Prescott Bush, Jr., who would later also sell arms to China during the Tienanmen Square protests -- had oil interests in the Middle East.

The Saudi Bechtel Corporation approached Attorney General Meese, who was also a good friend of Bruce Rappaport, although it is not clear how they met. (Israeli intelligence speculated that Adnan Kashoggi, the broker for anything and everything, introduced them.) Saudi Bechtel Corporation's problem was twofold. It could not get war-risk insurance for the pipeline construction because it was too close to Israel. Moreover, it thought it would never have a chance to get both halves of the Israeli government to agree to such a project.

In mid-1985, Meese summoned Rappaport and offered a payment to Peres so that he would guarantee the pipeline. The Meese proposal was this: Against a "comfort letter" from Peres stating that Israel would guarantee not to bomb the pipeline, disrupt the construction activities, or disrupt the flow of oil, he would pay Peres $40 million, to be deposited in Switzerland through Rappaport's account, held by Inter-Maritime, Rappaport's umbrella company for his various businesses. The comfort letter was needed for the Overseas Private Investment Corporation, an umbrella insurance company in the U.S., which would issue war-risk insurance at a price.

Shamir, in a very stormy cabinet meeting in 1985, called Peres a traitor and threatened to leave the coalition. The pipeline deal was called off. Some time later, Rafi Eitan found out about the deal and leaked it to the Israeli press. The American press later picked up the story.

Against this background, it is not difficult to understand why George Bush agreed to look the other way as the Nir-North second-channel arms operation got under way. Any hopes of getting a peace conference off the ground lay with Peres, the second channel's sponsor.

The new operation was stepping into a busy arena. The movement of weapons in 1985 was quite fantastic. There were:

1) The original CIA-Joint Committee operations, overseen by Robert Gates and backed by the Likud Party, sending weapons to Iran;

2) The illegal Sharon-Gates sales to the contras;

3) The Soviet and French conventional weapons sales to Iraq;

4) The channeling of unconventional chemical and nuclear weapons systems to Iraq through West Germany, South Africa, and Chile -- all with U.S. support.

5) Now, finally, came the Amiram Nir-Oliver North channel for sales to Iran and sales to the contras.

As they set up the second channel, the Nir people found an Iranian businessman who was also a CIA agent, Manuchehr Ghorbanifar, who had close ties to the prime minister of Iran, Mir Hossein Mousavi. However, the North group still did not have the necessary contacts with top Iranian officials in the Supreme Council and the Supreme Defense Council to carry out the arms sales. Realizing they were going to need all the help they could get, North and Nir also got in touch with Michael Ledeen, a Jewish part-time consultant to the U.S. National Security Council, who was known for his loyalties both to his bosses in the National Security Council and to the Peres people.

With a number of supporters behind them, North and Nir next set about trying to wreck the original channel and destroy Likud's credibility in the United States. According to Nir, they came up with the idea of leaking to the FBI details of the old spy network Rafi Eitan had set up in the United States. The North group was careful not to implicate any high-level Americans involved, but they did reveal that Jonathan Pollard, a junior civilian analyst with the U.S. Navy, was a paid spy for Tel Aviv. Also exposed with the young dupe were Pollard's wife, Anne Henderson-Pollard, who was working with him, and an Israeli Air Force officer, Col. Aviem Sella, a nuclear targeting expert.

The reason no one higher was exposed was obvious. One of the top officials working with Pollard was a man referred to in the subsequent hearings, in which Pollard pled guilty, as Mr. X -- actually Robert McFarlane, who was now playing such an important role in setting up North's second channel. McFarlane, in fact, had been providing computer access codes of intelligence reports to Rafi Eitan in Israel, according to Eitan. Sitting in Tel Aviv, Eitan would request computer access codes for certain items he was interested in. A LAKAM representative in Washington, a woman named Iris, would pass the request to McFarlane. He would then give her back the specified access codes. She would give the codes to Pollard, who was working for the navy. Pollard would call up the information on the computer, print it on paper, then take the papers out of the office for the night. He would photocopy them, give the copies to Iris, then return the originals to the office the next day. The purpose of all the to-ing and fro-ing was to distance McFarlane from Pollard, who, in all likelihood, had no idea himself that McFarlane was a middleman.

In this way, Israel received more than a million pieces of paper -- on reconnaissance satellite data, U.S. aircraft, Soviet aircraft, spare parts listed in secret catalogs (something the Joint Committee was interested in), and just about anything else documented in the U.S. intelligence community. As part of the cooperation agreement the Joint Committee had with the Soviets to sell arms to the Iranians from the East Bloc, we provided some of the Pollard papers to the KGB, but their source was sanitized. This was authorized by Shamir himself. [1]

When the Likud Party and the Israeli intelligence community learned of the second channel's leaking of the Pollard story, they were furious. A decision was made to try to nip the newcomers in the bud.

When damaging information has to be spread, it is rarely done by a direct phone call to a leading official. In this case, in a casual chat between Maj. Gen. Ehud Barak, director of Military Intelligence, and his colleagues in the United States, the word was dropped that McFarlane was working for Rafi Eitan. As expected, the information reached the ears of National Security Agency boss Gen. William Odom. Determined to get to the bottom of the affair, he approached McFarlane's secretary at the National Security Council. Her name was Wilma Hall, and she happened to be the mother of Fawn Hall, Oliver North's secretary.

With Wilma's help, by taping a phone conversation between McFarlane and Eitan, Gen. Odom proved to his own satisfaction at the end of 1985 that McFarlane was an Israeli mole, working for Rafi Eitan. The general, according to Nir as well as Eitan, took up the issue directly with the vice president. Bush was left in no doubt that it would be extremely damaging to the administration were a spy in the White House to be exposed. McFarlane was forced to resign from the National Security Council at the end of 1985, and the issue was put under wraps.

The disgrace did not curtail McFarlane's arrangements with the Nir-Oliver North operation. He simply continued to work out of his home. But Israeli intelligence -- with a little help from the Iranian defense minister -- was determined that the second channel should fail. In 1985 and 1986 there were various factions in the ruling Supreme Council of Iran, and the main divisions came down almost on a personal level. Defense Minister Mohammed Jalali and Speaker of the Majlis Ali Akbar Hashemi Rafsanjani were working with the Israeli Joint Committee; on the other hand, the minister for the Revolutionary Guards Rafiqdoust was aligned with Prime Minister Mir Hossein Mousavi, who tried to open the second channel. Both factions were willing to deal with any country that was selling arms to them in their fight against, as Ayatollah Khomeini called him, "the heretic from the west," Saddam Hussein.

Late in 1985 the Joint Committee made an approach to Rafsanjani, the man ultimately responsible for the purchase of arms for the military. He told us not to worry. Iran would be loyal to the people it had learned to trust.

"Sadly, the prime minister, Mousavi, who is joining hands with the new group, is not from my faction," Rafsanjani told us. "I cannot immediately dismiss this issue. I will have to handle it my way. But I can assure you that there will be no sales to Iran through these new people."

During the first few months of 1986, the Joint Committee learned of furious negotiations to arrange a trip to Tehran by the North group. I was asked to call Rafsanjani and find out what was happening.

"Trust us," he said. "Don't worry. I'll make them look like monkeys."

* * *

By April 1986 the Nir-North operation had not made the hoped-for inroads into the arms trade. Oliver North was furious, and he began an all-out attack on his competition.

According to our informant, North dreamed up a fantastic plot intended to bring about the ruin of just about everyone involved on the Israeli side of the still-active original channel. North's motives were twofold. Not only did he want revenge, but he also wanted to gain kudos by helping to show the world how the U.S. government was quashing the activities of arms dealers by arresting them and sending them to jail. Rumors were flying around at this time suggesting that the U.S. was selling arms to Iran, and North believed that public arrests would divert attention from his country while at the same time earning respect for himself.

North's idea was that the U.S. Customs Service commissioner's strategic unit, which worked out of the World Trade Center in Manhattan, would carry out a sting against the Israelis. The men who would oversee the operation were infamous Customs agents named King and Romeo. And waiting in the wings to prosecute would be the U.S. attorney for the Southern District of New York, Rudolph Giuliani.

One other character was to be brought into play -- Cyrus Hashemi, one of the three brothers who in 1980 had President Carter believing they had enough influence in Iran to bring about the release of the hostages in the U.S. Embassy. After the Reagan administration took office in 1981 and the hostages had been released, U.S. Customs started investigating the Hashemi brothers. Finally, in 1984, they were indicted under the Arms Export Control Act for the illegal sale of weapons to Iran. Cyrus and his brother Jamshid were tipped off and were able to get out of the U.S. before they were apprehended, but their younger brother, Reza, was arrested. In a way, he became a hostage. His elder brothers had to come to terms with the situation and start negotiating. They asked to be represented by Elliot Richardson, who had been Richard Nixon's attorney general until he refused to fire the independent Watergate prosecutor, Archibald Cox.

Richardson, a straightforward lawyer, dropped the Hashemi brothers when they decided to sign an agreement with Customs to become informants against the Iranian exile community in Europe and the United States. He was unwilling to involve himself in agreements that involved the U.S. Customs Service. The Hashemis then hired a lawyer who was willing to do the bidding of Customs.

With Cyrus locked into a deal with Customs, and North on his path of revenge against Israeli intelligence, King and Romeo contacted Hashemi and contrived an illegal frame-up. Cyrus was to be the bait and the trap. He allowed his phone to be tapped and himself to be wired. Next, the Customs men got the Chemical Bank in New York to falsely confirm that Cyrus Hashemi had $1 billion in the bank, in his name.

The plan was for Cyrus to "sting" on tape as many people as possible who were connected with Israeli intelligence arms sales to Iran. He was to tell them that he had a billion dollars of Iranian money to spend and was eager to purchase weapons. All he needed was for his "victim" to talk in positive terms about obtaining arms, and the U.S. authorities would be able to move in and make an arrest. I was to discover later that I was one of his main targets -- along with other members of the committee.

The Israeli intelligence community, through Rafi Eitan's contacts, found out that the Hashemi sting was about to take place. Director of Military Intelligence Ehud Barak decided to throw in the "dumbest" arms-dealing ex-general we could find as bait. That was retired Brig. Gen. Avraham Bar Am. Unwitting, the general made contact with Cyrus Hashemi, who fell for the bait, believing he was delivering an Israeli general to the U.S. Customs Service.

Also working with Gen. Bar Am were two Jerusalem-based businessmen, the Eisenbergs (father and son) and a British lawyer, Samuel M. Evans, who had worked for arms dealer Adnan Kashoggi. Kashoggi, incidentally, was a friend of Prime Minister Peres and had been involved in the Nir-North operation. Evans had fallen out with Kashoggi over money before the sting, so the lawyer started representing Gen. Bar Am and the Eisenbergs for their "arms deal."

John de Laroque was also on Hashemi's hit list, but John knew about the sting, and his job was to talk to Hashemi on the phone to try to find out what was happening.

There were others on Cyrus's list, but they were not real players in the Iran arms sales; they were simply opportunists who had tried to do business with Iran. Cyrus's net had indeed been cast far and wide.

Some of the people Hashemi met and secretly recorded were also captured on videotape by Romeo. Many, uncertain about Cyrus's intentions, checked with the Chemical Bank and found there was a billion dollars in his name. With this assurance, Cyrus's targets told him they were prepared to do business. He proposed to meet them all in April 1986 in New York to sign a deal for the supply of a billion dollars' worth of arms to Iran. He also asked them to supply him with false end-user certificates.

Some of the victims came to New York and were immediately arrested, but others were not willing to sign any deals in the U.S., and Bermuda was finally agreed on as the place. Cyrus was able to lure Gen. Bar Am, the Eisenbergs, and others to Bermuda.

After Cyrus spoke to John de Laroque several times, de Laroque and his "Israeli superior" were invited to meet him and the others in Bermuda. We knew it was a sting, but we decided that I would go to Bermuda with Rafi Eitan (who was traveling under an assumed name because of the Pollard affair) to have a showdown with Hashemi. We flew to Miami, and, out of instinct, I called de Laroque at his home in southern France from the airport.

"Ari, thank God you rang," he said. "I've been calling around everywhere trying to get you. Don't go to Bermuda. You will be arrested."

Grateful for the warning, Rafi flew back to Israel, and I flew to Jamaica, stayed there for three days, and then traveled on to Peru to oversee the movement of weapons that had been removed from the U.S. and parked there.

The group that arrived in Bermuda was immediately arrested on the grounds that they were arms dealers, and had made false representations to the government regarding the purpose of their visit. They were not charged by the Bermuda authorities with any crime, and were held for deportation, not extradition.. When a deportation order was brought against them, and the authorities tried to put them on a plane to New York, a lawyer was able to step in and demand they be allowed to get onto a plane of their choice.

Even though a court hearing was scheduled, they were hustled, against Bermudan law, onto a plane to New York. Upon arrival at Kennedy Airport, they were all arrested by Customs officials, charged with illegal arms sales to Iran, and thrown into the Metropolitan Correctional Center in New York. On the day of their arrest, April 22, 1986, Giuliani and Customs Chief William von Raab gave joint TV interviews telling the world how the Customs Service, together with the Southern District of New York, had been successful in arresting a huge ring of terrorists -- "Merchants of Death" was how they were described -- who were about to sell arms worth a billion dollars to Iran. Yet it was Giuliani, von Raab, Oliver North, and their associates who had created the crime, and now they were supposedly going to bring their captives to justice.

After completing my assignment in Peru, I flew back to Israel and became engaged in urgent discussions about the group who had been entrapped. Even though Gen. Bar Am was bait, we had to get him released and destroy the Nir-North channel.

***

The next month, the North group's long-sought meeting in Tehran was finally go. North, McFarlane, Nir, and others arrived in Tehran from Tel Aviv on May 25, 1986. According to Rafsanjani's account, they were disguised as Irish technicians, wearing jumpsuits and toting a Bible and a cake. They were flying with 97 U.S.-made TOW missiles and a pallet of Hawk missile spare parts on their chartered aircraft, which was registered in France. They were all detained, and, after about a day -- during which no substantive discussions took place -- the "Irishmen" were thrown out of Iran, but not before the military equipment was removed from the plane. As Rafsanjani, supported by Defense Minister Jalali, had promised, they had been made to look like "monkeys." [2]

There was more to come that would completely kill off the North-Nir group's aspirations. At first they had high hopes of getting the ball rolling because, on direct orders from Prime Minister Peres, 160 U.S.-made advanced Hawk surface-to-air missiles were to be shipped to Tehran. As these were direct prime ministerial orders, the intelligence community and the Defense Ministry could not refuse. But there were other plans afoot.

Crates of outdated Hawk 1 missiles instead of the advanced Hawks ordered by the Iranian prime minister were assembled, and an Israeli Air Force logistics officer was given a large box containing plastic stickers. On the orders of the intelligence network, he set to work. The crates of missiles were then loaded onto the chartered ship, and it sailed away to Bandar Abbas.

In Iran there was mayhem in the Prime Minister's Office when the crates were unloaded. Not only were the missiles completely out of date, but each one carried a large sticker in the shape of the Star of David. The Iranians working with the Nir-North group refused to accept them, then found out that they had even lost their money because the letter of credit had already been released.

While this incident effectively killed off the Iran end of the second channel, North also ran into problems with his plans for supplying the contras. His attempts to get his own line into Central America got off to a bad start when Amiram Nir arranged a meeting for him with Defense Minister Rabin. Unfortunately for North, Rabin had no sympathy for Prime Minister Peres and his people, and unceremoniously and disrespectfully threw North out of his office when the contras were mentioned.

Every move North tried to make in setting up his second channel was thwarted. There was, for another example, the case of a mysterious $10 million contribution made to his group by the man reputed to be the richest person in the world -- the Sultan of Brunei. The money was wired to Peres associate Bruce Rappaport, who was North's banker. Our committee had someone in Nir's camp, and when we leaked the story, North denied it, claiming it was a bank error and the money had simply gone to the wrong account. This was a lie, but of course by now a number of people knew that the Sultan was supporting Oliver North.

***

Battle lines had been drawn. North had interfered; he had been stopped; both sides had taken revenge. Now Likud loyalists who had been targeted by North were ready to escalate the battle.

The Joint Committee decided to make the Oliver North operation public in the United States. We did not envisage the ensuing scandal; our purpose was only to bring about the release of the captured people and to destroy North. Of course, those who had been arrested and were not connected to Israeli intelligence would also reap the benefits of anything we were about to do.

My first move was to call a Middle East correspondent of Time magazine, Raji Samghabadi. Of Iranian origin, he had been hired in the early 1970s by Keyhan International, an English-language daily newspaper in Tehran. While working there, he had also been a secret member of the pro-Soviet party, Tudeh. He was very unhappy working for Keyhan International because all the media in Tehran were blatantly controlled by the Shah's secret police, the SAVAK. In the late 1970s, he was hired as a stringer for Time by the magazine's Tehran correspondent at the time, Bruce van Voorst, who had been a CIA officer working in Addis Ababa and then Tehran.

Not long after Raji was hired, the revolution occurred in Iran, and he was arrested by the Mullahs for being a CIA spy and a Tudeh member. Given the two organizations' politics, this was something of a contradiction. Some days later, through connections he had in high places, he was released and got out of Tehran as fast as he could. He resurfaced in New York, where Time obtained for him political asylum status and a green card, enabling him to work in the U.S. Later he became an American citizen, and Time, happy with his work, hired him as a Middle East correspondent.

I had met Samghabadi in 1985, through a woman I knew from my school days and with whom he was now having an affair. He was a very attractive man with a lot of fire in him. Married with two children, he had fallen in love with Rosie Nimrodi (a distant relative of Yaacov Nimrodi), an Iraqi Jew who was working in New York for the Council on Economic Priorities, a think tank. Samghabadi eventually left his wife for Rosie, but they never got married.

In May 1986, I met Raji on more than one occasion and gave him in detail the full Oliver North-Nir story. He was astonished. It was the scoop of the year -- of the decade. He agreed that the level of proof I had given him was more than enough to get the story printed in Time. In the meantime, Rosie introduced me to another journalist, Newsday's Middle East correspondent based in Cairo, Timothy Phelps. He visited me several times at an apartment in Jerusalem, where I gave him details about the Oliver North story. Rosie Nimrodi had typed notes of the North story from me as well. And she gave them out to other journalists, including a New York Times reporter, Stephen Engelberg, who expressed interest. However, Military Intelligence Director Ehud Barak's office told me to avoid him, so I did. I still do not know why Barak decided not to leak the story to the New York Times.

I was, of course, trying to get out this information on instructions from the Joint Committee. We were hoping that after the story exploded in the U.S., Giuliani would release our people. But one day Samghabadi called me with bad news: "Sorry, Ari," he said, "Time is not going to print the story. It's been vetoed by the editor-in-chief, Henry Grunwald himself. The reasons must be clear to you." He laughed. "People say the media in the U.S. is not controlled."

Newsday did not print the story either.

Determined to destroy the Customs Service's case against those trapped in the Bermuda sting, we decided to target the government's chief witness, Cyrus Hashemi. Since pulling off the sting, the Iranian had been traveling back and forth between his apartments in Manhattan and London.

I flew to London and, using a number provided by John de Laroque, called Hashemi's apartment. He agreed to meet me in Lindy's, a busy cafe in Regent Street. I had chosen the location because it would be difficult to tape in the noisy atmosphere.

We ordered coffee. I didn't pull punches. I might be accused of interfering with witnesses, but I felt it was justified after the way the lives of the accused had been disrupted.

"Mr. Hashemi," I said, "if you testify against these people in a U.S. court, the Israeli and the world's press will come down heavily on you. You'll be seen as the rat that you are. Your name will go down in history for the dirty tricks you have  pulled."

"You can't frighten me," he said. But I could see he was frightened.

I threw one more punch. "If you testify, you are going to wish you had never been born. And don't think your American friends are going to protect you once they've finished with you."

Having dealt out the heavy warning, I followed it up with a softener. "If, on the other hand, you don't testify, and you stay here in England, my government will look after you financially."

It was a very worried and confused Cyrus Hashemi who made his way back to his apartment. He did not realize that from that point on, he was placed under surveillance and his phones were tapped by Mossad in London.

My flight to London had not been in vain. Cyrus called the office of the U.S. attorney for the Southern District of New York and told them that he didn't care what they were going to do to him, he wasn't going to testify.

By a strange coincidence, several days later Mr. Hashemi was found dead in his London apartment. But because he had been under Israeli surveillance, we knew who had been the last person to leave Cyrus's apartment before he was found dead -- Joe King, one of the Customs officers working out of the strategic unit based in the World Trade Center in Manhattan. Cyrus Hashemi's death was explained as a sudden case of virulent leukemia.

A very fast autopsy had taken place -- in the presence of a U.S. Customs official. The only thing that was unusual, according to Israeli intelligence reports, was the discovery on Cyrus's elbow joint of needle punctures.

Also in the possession of Mossad's London branch were tapes of Cyrus's phone calls to the Southern District of New York, including conversations with Assistant U.S. Attorney Robert Hamel. It was clear from these recordings that Cyrus had had a falling out with his controllers. We were left with the conclusion that someone had decided it was better for Cyrus to become the victim of a mysterious death than for him to be at the center of a public scandal by announcing that he was not going to testify.

Leukemia, of course, develops over years and is not a sudden disease. And Cyrus had appeared in the best of health -- only a few days before his death he had played an active game of tennis in London.

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1.  The Americans and others claimed later that I had passed to the Soviets some of the papers stolen by Pollard, but the truth of the matter was that Yitzhak Shamir himself directly authorized that some Israeli intelligence gleaned from the United States as early as 1984 and 1985 be handed to the Soviet Union on request as a way of improving the atmosphere between Israel and the East Bloc. The Americans were eventually satisfied that the spy had been found with the arrest in late 1987 of Shabtai Kalmanowitch, an Israeli businessman who had migrated to Israel from Riga as a young man. Kalmanowitch was convicted of espionage by an Israeli court.

2.  In later investigations, members of the U.S. delegation described varying versions of the visit. Most versions described it as lasting two or three days; some said the meetings were not at the airport, but at a hotel. They all agreed, however, that Hajjat El-Islam Rafsanjani was exceedingly uncooperative. None of these reports mentions the TOW missiles. Some of them say the plane was not French, but from St. Lucia Airways. The MI/ERD records report what I have stated.

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