THE ORIGINAL OCTOBER SURPRISE

October 25, 2006

Adapted from Robert Parry's Secrecy & Privilege:  Rise of the Bush Dynasty from Watergate to Iraq, by consortiumnews.com

History turned in December 1992 when the truth about what happened in the pivotal 1980 presidential election might finally have been revealed to the American people. Just a month after Bill Clinton defeated George H.W. Bush, the dam that had held back the 12-year-old secrets finally gave way.

An investigative House Task Force was putting the finishing touches on a report intended to debunk the longstanding October Surprise allegations of Republican interference with the Iranian hostage crisis in 1980. The bipartisan Task Force planned to treat the story as a conspiracy theory run wild.

But suddenly the Task Force found itself inundated by a flood of new evidence going the other way, indicating that the long-whispered suspicions of a grotesque Republican dirty trick a dozen years earlier were true.

Task Force chief counsel Lawrence Barcella, who had been onboard for the debunking, was stunned by the late surge of new evidence. He concluded that it couldn’t be ignored and that it justified extending the investigation at least a few more months.

Years later, Barcella told me that he recommended a three-month extension to the Task Force chairman, Rep. Lee Hamilton, but the Indiana Democrat rejected the idea of taking the extra time to check out the new evidence. An extension would have required getting approval from the new Congress being seated in 1993.

Plus, Hamilton, who was about to ascend to the chairmanship of the House International Affairs Committee, had other priorities. He treasured perhaps more than anything his reputation as a respected centrist figure in a capital city torn by partisanship.

Hamilton, with his no-nonsense butch haircut and home-spun eloquence, was a candidate for one of Washington’s highest unofficial honors, the title of Wise Man. Indeed, Hamilton’s passion for bipartisanship had made him the Democrat that the Republicans most wanted to run an investigation into Republican wrongdoing.

When Hamilton was chosen in late 1991 to chair the October Surprise Task Force, Republicans hailed his selection. Hamilton then selected investigators who weren’t inclined to press too hard, even as Hamilton’s GOP counterpart, Rep. Henry Hyde, staffed his side with tough-minded partisans.

At one point, in a gesture of bipartisanship, Hamilton even granted Republicans veto power over the choice of a Democratic staff investigator. Hyde exercised this extraordinary offer by blocking the appointment of House International Affairs Committee chief counsel Spencer Oliver because Oliver suspected the October Surprise allegations might just be true.

Debunking Bias

So, as the investigation proceeded in 1992, there was a powerful inclination inside the Task Force to dismiss the allegations that had dribbled out over the years, depicting a kind of a prequel to the Iran-Contra scandal, which broke in 1986 with disclosures of other secret arms-for-hostages deals between the Reagan administration and Iran’s radical Islamic government.

Despite exposure of the lies that had surrounded the Iran-Contra Affair, Hamilton’s Task Force didn’t want to believe that George H.W. Bush and other Republicans had begun those contacts six years earlier by undercutting President Jimmy Carter’s negotiations to free 52 Americans held hostage in Iran in 1980.

By the early 1990s, the climate in Washington also was extremely hostile to the 1980 October Surprise allegations. They had been denounced by Republicans and attacked by influential journals, such as the neoconservative New Republic. The very idea that then-President Bush would have exploited the national humiliation of that earlier hostage crisis for political gain was unthinkable to many Washington insiders.

Plus, in December 1992, after Clinton had defeated George Bush Sr., the Democrats saw little reason to pursue divisive allegations dating back a dozen years that also would tarnish the legacy of the well-liked Ronald Reagan. It was feared, too, that exposing these old crimes might engender more partisan bitterness and poison the political climate as a new President, Bill Clinton, was taking office.

At that naïve moment – 14 years ago – Democrats felt it made sense to bargain away a few seemingly unimportant historical facts for a chance at better cooperation with Republicans on domestic issues that Clinton held dear, like the budget and health care.

The House October Surprise Task Force, therefore, turned a deaf ear and a blind eye to the late-arriving evidence that tended to corroborate the October Surprise allegations, which had emerged over the years from a variety of intelligence operatives and foreign officials.

But in late 1992, the newly arriving evidence left chief counsel Barcella not entirely comfortable with a definitive conclusion rejecting the October Surprise allegations. On Dec. 8, 1992, he instructed his deputies “to put some language in, as a trap door” in case later disclosures disproved parts of the report or if complaints arose about selective omission of evidence.

“This report does not and could not reflect every single lead that was investigated, every single phone call that was made, every single contact that was established,” Barcella suggested as “trap door” wording. “Similarly, the Task Force did not resolve every single one of the scores of ‘curiosities,’ ‘coincidences,’ sub-allegations or question marks that have been raised over the years and become part of the October Surprise story.”

But some of the information that would arrive during the investigation’s final month would deal not just with “curiosities,” but with central questions behind the mystery of why the American hostages were freed immediately after Reagan and Bush were sworn in on Jan. 20, 1981.

Iranian Testimony

On Dec. 17, 1992, former Iranian President Abolhassan Bani-Sadr sent a letter describing the internal battles of the Iranian government over the Republican intervention in the 1980 hostage crisis. Bani-Sadr recounted how he threatened to expose the secret deal between Reagan-Bush campaign officials and Islamic radicals close to Ayatollah Ruhollah Khomeini if it weren’t stopped.

Bani-Sadr said he first learned of the Republican “secret deal” with Iranian radicals in July 1980 after Reza Passendideh, a nephew of Ayatollah Khomeini, attended a meeting with Iranian financier Cyrus Hashemi and Republican lawyer Stanley Pottinger in Madrid on July 2, 1980.

Though Passendideh was expected to return with a proposal from the Carter administration, Bani-Sadr said Passendideh instead carried a plan “from the Reagan camp.”

“Passendideh told me that if I do not accept this proposal, they [the Republicans] would make the same offer to my [radical Iranian] rivals. He further said that they [the Republicans] have enormous influence in the CIA,” Bani-Sadr wrote. “Lastly, he told me my refusal of their offer would result in my elimination.”

Bani-Sadr said he resisted the threats and sought an immediate release of the American hostages, but it was clear to him that the wily Khomeini was playing both sides of the U.S. political street.

This secret Republican plan to block release of the hostages until after the U.S. elections remained a point of tension between Bani-Sadr and Khomeini, according to Bani-Sadr’s letter. Bani-Sadr said his trump card was a threat to tell the Iranian people about the secret deal that the Khomeini forces had struck with the Republicans.

“On Sept. 8, 1980, I invited the people of Teheran to gather in Martyrs Square so that I can tell them the truth,” Bani-Sadr wrote. “Khomeini insisted that I must not do so at this time. ... Two days later, again, I decided to expose everything. Ahmad Khomeini [the ayatollah’s son] came to see me and told me, ‘Imam [Khomeini] absolutely promises’” to reopen talks with Carter if Bani-Sadr would relent and not go public.

Bani-Sadr said the dispute led Khomeini to pass on a new hostage proposal to the U.S. government through his son-in-law, Sadegh Tabatabai. Though Tabatabai did deliver a new peace plan to U.S. officials in West Germany, the initiative unraveled when Iraq’s Saddam Hussein invaded Iran in mid-September 1980.

Meanwhile, high-level contacts between Republicans and Khomeini representatives allegedly continued, often using Israeli and European intelligence operatives as the intermediaries. On the outs with Khomeini, Bani-Sadr saw his political position deteriorate and he was soon forced to flee into exile.

Bani-Sadr’s detailed account meshed with previous statements made by two other senior Iranian officials, former Defense Minister Ahmad Madani and the former acting Foreign Minister Sadegh Ghotbzadeh.

Madani had lost to Bani-Sadr in the 1980 presidential race despite covert CIA assistance funneled to his campaign through Cyrus Hashemi. Madani also discovered that Hashemi was double-dealing with the Republicans.

In an interview with PBS Frontline in the early 1990s, Madani said Hashemi brought up the name of Reagan’s campaign chief William Casey in connection with these back-channel negotiations over the U.S. hostages. Madani said Hashemi had urged Madani to meet with Casey, earning a rebuke from Madani that “we are not here to play politics.”

Ghotbzadeh made his comments about the Republican interference contemporaneously to the events, telling Agence France Press on Sept. 6, 1980, that he had information that Reagan was “trying to block a solution” to the hostage impasse. (Ghotbzadeh was later executed by Iranian hardliners.)

Despite Bani-Sadr’s claims of first-hand knowledge and these corroborating statements by two other senior Iranian officials, the House Task Force dismissed Bani-Sadr’s account as “hearsay” that lacked probative value.

French Account

Soon, however, there was more evidence to explain away. On Dec. 18, 1992, a day after Bani-Sadr’s letter, David Andelman, the biographer of French intelligence chief Alexandre deMarenches, gave sworn testimony to the Task Force about the Republican-Iranian contacts.

Andelman, an ex-New York Times and CBS News correspondent, said that while he ghost-wrote deMarenches’s biography, the arch-conservative spymaster admitted arranging meetings between Republicans and Iranians about the hostage issue in the summer and fall of 1980, with one meeting held in Paris in October.

Andelman said deMarenches ordered that the secret meetings be kept out of his memoirs because the story could otherwise damage the reputation of his friends, William Casey and George H.W. Bush. At the time of Andelman’s work on the book, Bush was running for re-election as President of the United States.

Andelman’s testimony corroborated longstanding claims from a variety of international intelligence operatives about a Paris meeting involving Casey and Bush. But the Task Force brushed this testimony aside, too, paradoxically terming it “credible” but then claiming it was “insufficiently probative.”

The Task Force’s reasoning went that Andelman could not “rule out the possibility that deMarenches had told him he was aware of and involved in the Casey meetings because he, deMarenches, could not risk telling his biographer he had no knowledge of these allegations.”

Yet, besides corroborative testimony from intelligence operatives, including Israeli intelligence officer Ari Ben-Menashe, the Task Force was aware of contemporaneous knowledge of the alleged Bush-to-Paris trip by Chicago Tribune reporter John Maclean.

Maclean, the son of author Norman Maclean who wrote A River Runs Through It, said a well-placed Republican source told him in mid-October 1980 about Bush’s secret trip to Paris to meet with Iranians on the U.S. hostage issue.

Maclean passed on that information to David Henderson, a State Department Foreign Service officer. Henderson recalled the date as Oct. 18, 1980, when the two met at Henderson’s Washington home to discuss another matter, the Carter administration’s handling of Cuban refugees who had been arriving in the Mariel boat lift.

For his part, Maclean never wrote about the Bush-to-Paris leak because, he told me later, a Reagan-Bush campaign spokesman subsequently denied it. As the years passed, the memory of the leak faded for both Henderson and Maclean, until the October Surprise allegations bubbled to the surface again in the early 1990s.

Henderson mentioned the meeting in a 1991 letter to a U.S. senator that was forwarded to me while I was working for PBS Frontline. In the letter, Henderson recalled the conversation about Bush’s trip to Paris but not the name of the reporter.

A Frontline producer searched some newspaper archives to find a story about Henderson and the Mariel boat lift as a way to identify Maclean as the journalist who had interviewed Henderson.

Though not eager to become part of the October Surprise story in 1991, Maclean confirmed that he had received the Republican leak. He also agreed with Henderson’s recollection that their conversation occurred on or about Oct. 18, 1980. But Maclean still declined to identify his source.

The significance of the Maclean-Henderson conversation was that it was a piece of information locked in a kind of historical amber, untainted by subsequent claims by intelligence operatives whose credibility had been challenged.

One could not accuse Maclean of concocting the Bush-to-Paris allegation for some ulterior motive, since he hadn’t used it in 1980, nor had he volunteered it a decade later. He only confirmed it when approached by Frontline and even then wasn’t particularly eager to talk about it.

State of Denial

Despite the mounting evidence that the Republicans indeed had made secret contacts with Iranian radicals in 1980, the House Task Force kept refusing to rethink its conclusions or to extend its investigation.

For its debunking, the Task Force relied on supposed alibis for Casey and Bush, but the investigators knew how shaky and uncorroborated those alibis were.

Meanwhile, the incriminating evidence kept on coming.

On Dec. 21, 1992, former CIA officer Charles Cogan recounted a remark in early 1981 from banker David Rockefeller’s aide Joseph Reed to then-CIA Director William Casey about their success in blocking Carter’s “October Surprise.”

Reed had been Rockefeller’s point man in helping the Shah of Iran after his 1979 ouster, which led the Khomeini regime to seek the withdrawal of billions of dollars from the Shah’s accounts at Rockefeller’s Chase Manhattan Bank.

Ironically, the Iranian hostage crisis worked to the bank’s advantage because the U.S. government – as retaliation for the hostage-taking – froze those accounts. If the crisis were resolved quickly and the money suddenly unfrozen, Chase Manhattan’s financial viability would be put in doubt.

After Reagan and Bush took office – and the Chase accounts remained frozen – Reed was appointed ambassador to Morocco, which led him to visit Casey at CIA headquarters, as Cogan lingered at the door to Casey’s office.

“Joseph Reed said, ‘we’ and then the verb [and then] something about Carter’s October Surprise,” Cogan testified in a “secret” deposition. “The implication was we did something about Carter’s October Surprise.”

Task Force investigators understood the full quote to have been, “We fucked Carter’s October Surprise,” a claim that was at the heart of what the Task Force was assigned to investigate. But the Task Force left Cogan’s recollection out of its report altogether.

The pattern of the Task Force’s selective judgments began to grate on some of the Democratic congressmen assigned to the investigation.

Though the October Surprise allegations supposedly were a myth, the information developed by the Task Force staff was kept under tight security. Congressmen were only allowed to review the evidence in a secure room under guard.

The restrictions meant that many members were forced to rely on the Task Force staff that had been assembled largely by excluding anyone who thought the allegations might actually be true.

On Jan. 3, 1993, Congressman Mervyn Dymally, a California Democrat and Task Force member, submitted a dissent to the impending Task Force debunking of the October Surprise allegations. Dymally’s dissent complained about selective handling of evidence to clear the Reagan-Bush campaign.

Dymally, who was retiring from Congress, cited the investigation’s reliance on shaky circumstantial data for exonerating the Republicans and the uncritical acceptance of accounts from Casey’s associates.

In reviewing the Task Force report, Dymally’s staff aide, Marwan Burgan, quickly spotted some of the report’s absurd alibis, including the claim that because someone wrote down Casey’s home phone number on one day that proved Casey was home, or that because a plane flew from San Francisco directly to London on another important date that Casey must have been onboard.

Sources who saw Dymally’s dissent said it argued that “just because phones ring and planes fly doesn’t mean that someone is there to answer the phone or is on the plane.” But Dymally’s reasonable observations were fiercely opposed by Barcella, who enlisted Task Force chairman, Lee Hamilton, to pressure Dymally into withdrawing the dissent.

Dymally told me that the day his dissent was submitted, he received a call from Hamilton warning him that if the dissent was not withdrawn, “I will have to come down hard on you.”

The next day, Hamilton, who was becoming chairman of the House International Affairs Committee, fired the staff of the Africa subcommittee that Dymally had headed. The firings were billed as routine, and Hamilton told me that “the two things came along at the same time, but they were not connected in my mind.”

Hamilton said his warning to Dymally referred to a toughly worded response that Hamilton would have fired off at Dymally if the dissent had stood. However, hoping to salvage the jobs of some of his staff, Dymally agreed to withdraw the dissent.

Russian Complication

So the House Task Force’s report was shipped off to the printers with its conclusion that there was “no credible evidence” of Republican double-dealing with Iran over the 52 U.S. hostages in 1980.

The report was scheduled for release on Jan. 13, 1993, just one week before George H.W. Bush’s Presidency officially would come to an end. But there was still one more surprise for the October Surprise Task Force.

On Jan. 11, 1993, Hamilton received a response to a query he had sent to the Russian government on Oct. 21, 1992, requesting any information that Moscow might have about the October Surprise case.

The Russian response came from Sergey V. Stepashin, chairman of the Supreme Soviet’s Committee on Defense and Security Issues, a job roughly equivalent to chairman of the Senate Intelligence Committee.

In what might have been an unprecedented act of cooperation between the two longtime enemies, Stepashin provided a summary of what Russian intelligence files showed about the October Surprise charges and other secret U.S. dealings with Iran.

In the 1980s, after all, the Soviet KGB was not without its own sources on a topic as important to Moscow as developments in neighboring Iran. The KGB had penetrated or maintained close relations with many of the intelligence services linked to the October Surprise allegations, including those of France, Spain, Germany, Iran and Israel.

History had shown, too, that the KGB had spies inside the CIA and other U.S. intelligence agencies. So, Soviet intelligence certainly was in a position to know a great deal about what had or had not happened in 1980.

The Supreme Soviet’s response was delivered to the U.S. Embassy in Moscow by Nikolay Kuznetsov, secretary of the subcommittee on state security. Kuznetsov apologized for the “lengthy preparation of the response.” It was quickly translated by the U.S. embassy and forwarded to Hamilton.

To the shock of the Task Force, the six-page Russian report stated, as fact, that Casey, Bush, CIA officials and other Republicans had met secretly with Iranian officials in Europe during the 1980 presidential campaign.

The Russians depicted the hostage negotiations that year as a two-way competition between the Carter White House and the Reagan-Bush campaign to outbid one another for Iran’s cooperation on the hostages.

The Russians asserted that the Reagan-Bush team indeed had disrupted Carter’s hostage negotiations, the exact opposite of the Task Force’s conclusion.

As described by the Russians, the Carter administration offered the Iranians supplies of arms and unfreezing of assets for a pre-election release of the hostages. One important meeting occurred in Athens in July 1980 with Pentagon representatives agreeing “in principle” to deliver “a significant quantity of spare parts for F-4 and F-5 aircraft and also M-60 tanks ... via Turkey,” the Russian report said.

The Iranians “discussed a possible step-by-step normalization of Iranian-American relations [and] the provision of support for President Carter in the election campaign via the release of American hostages.”

But the Republicans were making their own overtures to the Iranians, also in Europe, the Russian report said. “William Casey, in 1980, met three times with representatives of the Iranian leadership,” the report said. “The meetings took place in Madrid and Paris.”

At the Paris meeting in October 1980, “R[obert] Gates, at that time a staffer of the National Security Council in the administration of Jimmy Carter and former CIA Director George Bush also took part,” the Russian report said. “In Madrid and Paris, the representatives of Ronald Reagan and the Iranian leadership discussed the question of possibly delaying the release of 52 hostages from the staff of the U.S. Embassy in Teheran.”

Both the Reagan-Bush Republicans and the Carter Democrats “started from the proposition that Imam Khomeini, having announced a policy of ‘neither the West nor the East,’ and cursing the ‘American devil,’ imperialism and Zionism, was forced to acquire American weapons, spares and military supplies by any and all possible means,” the Russian report said. The Republicans just won the bidding war.

”After the victory of R. Reagan in the election, in early 1981, a secret agreement was reached in London in accord with which Iran released the American hostages, and the U.S. continued to supply arms, spares and military supplies for the Iranian army,” the Russian report continued.

The deliveries were carried out by Israel, often through private arms dealers, the Russian report said. Spares for F-14 fighters and other military equipment went to Iran from Israel in March-April 1981 and the arms pipeline kept flowing into the mid-1980s.

”Through the Israeli conduit, Iran in 1983 bought surface-to-surface missiles of the ‘Lance’ class plus artillery of a total value of $135 million,” the Russian report said. “In July 1983, a group of specialists from the firm, Lockheed, went to Iran on English passports to repair the navigation systems and other electronic components on American-produced planes.”

In 1985, the weapons tap opened wider, into the Iran-Contra shipments.

The matter-of-fact Russian report was stunning. It also matched other information the Task Force had. The Task Force had discovered that the Israelis, for example, had shipped U.S. military spares to Iran in 1981, with the secret acquiescence of senior Reagan-Bush administration officials.

After receiving the Russian report, a U.S. Embassy political officer went back to the Russians seeking more details. But the Russians would state only that the data came from the Committee on Defense and Security Issues.

The embassy political officer then speculated that Moscow’s report might have been “based largely on material that has previously appeared in the Western media.” But there was no serious follow-up by the House Task Force or the U.S. government – even though Moscow, the communist enemy in the 1980s, claimed to possess incriminating evidence about two CIA directors (Casey and Gates) and two U.S. Presidents (Reagan and Bush).

Though the Russian claims about Carter’s negotiations with Iran might cause embarrassment for Democrats, Carter, as President, possessed the constitutional authority to negotiate with a foreign power. The Republicans did not.

Hamilton's Quandary

The Task Force faced its own quandary about what to do with the explosive Russian report, which – if accurate – made the Task Force report, which was then at the printers, not worth the paper it was being printed on.

Reputations, including Hamilton’s, could have been severely damaged. During his days as House Intelligence Committee chairman in the mid-1980s, Hamilton had come under criticism for dismissing early evidence about Oliver North’s secret contra-supply operations and getting blindsided by the covert military shipments to Iran in 1985-86.

When the Iran-Contra scandal finally broke in late 1986, Hamilton was named chairman of the investigative committee and quickly bought into White House cover stories that were later shattered by Iran-Contra special prosecutor Lawrence Walsh.

If Hamilton had to renounce his own October Surprise report, he might have been left with a tattered reputation as the Republicans’ favorite chump. He might not have built a glittering post-congressional career as a well-regarded senior statesman invited to sit on important panels like the 9/11 Commission and now a task force with former Secretary of State James Baker to recommend future strategy in the Iraq War.

So, in January 1993, the decision was made to bury the Russian report.

“We got the stuff from the Russians just a few days before” the Task Force’s own report was set for release, Barcella told me in an interview in 2004. “We weren’t going to be able to look into it, whether it was new information, disinformation or whatever it was.”

When I asked him why the Task Force didn’t just release the Russian report along with the Task Force report, Barcella responded that the Russian report was classified, precluding its disclosure to the public. There was no interest in pressing for its declassification, though Hamilton would have been in a strong position to do so.

So the extraordinary Russian report was simply boxed up and filed away with other unpublished information that the Task Force had collected in its year-long investigation. Barcella said he envisioned the Task Force material ending up in some vast warehouse, “like in the movie ‘Raiders of the Lost Ark.’”

Actually, the Russian report found an even less elegant resting place. In late 1994, I discovered the documents, including the Russian report, in boxes that had been piled up in a former Ladies Room in an obscure office off the Rayburn House Office Building’s parking garage.

[To examine the key “Ladies Room” documents, click here.]

On March 23, 1979, late on a Friday afternoon, Chase Manhattan Bank Chairman David Rockefeller and his longtime aide Joseph Verner Reed arrived at a town house in the exclusive Beekham Place neighborhood on New York’s East Side. They were met inside by a small, intense and deeply worried woman who had seen her life turned upside down in the last two months.

Iran’s Princess Ashraf, the strong-willed twin sister of the Iran’s long-time ruler, had gone from wielding immense behind-the-scenes clout in the ancient nation of Persia to living in exile – albeit a luxurious one. With hostile Islamic fundamentalists running her homeland, Ashraf also was troubled by the plight of her ailing brother, the ousted Shah of Iran, who had fled into exile, first to Egypt and then Morocco.

Now, she was turning for help to the man who ran one of the leading U.S. banks, one which had made a fortune serving as the Shah’s banker for a quarter century and handling billions of dollars in Iran’s assets. Ashraf’s message was straightforward. She wanted Rockefeller to intercede with Jimmy Carter and ask the President to relent on his decision against granting the Shah refuge in the United States.

A distressed Ashraf said her brother had been given a one-week deadline to leave his current place of refuge, Morocco. “My brother has nowhere to go,” Ashraf pleaded, “and no one else to turn to.” [See David Rockefeller, Memoirs]

Spurned Appeals

Carter had been resisting appeals to let the Shah enter the United States, fearing that admitting him would endanger the personnel at the U.S. Embassy in Teheran and other U.S. interests. In mid-February 1979, Iranian radicals had overrun the embassy and briefly held the staff hostage before the Iranian government intervened to secure release of the Americans.

Carter feared a repeat of the crisis. Already the United States was deeply unpopular with the Islamic revolution because of the CIA’s history of meddling in Iranian affairs. The U.S. spy agency had helped organize the overthrow of an elected nationalist government in 1953 and arranged the restoration of the Shah and the Pahlavi family to the Peacock Throne. In the quarter century that followed, the Shah kept his opponents at bay through the coercive powers of his secret police, known as the SAVAK.

As the Islamic Revolution gained strength in January 1979, however, the Shah’s security forces could no longer keep order. The Shah – suffering from terminal cancer – scooped up a small pile of Iranian soil, boarded his jet, sat down at the controls and flew the plane out of Iran to Egypt.

A few days later, Ayatollah Ruhollah Khomeini, an ascetic religious leader who had been forced into exile by the Shah, returned to a tumultuous welcome from crowds estimated at a million strong, shouting “Death to the Shah.” The new Iranian government began demanding that the Shah be returned to stand trial for human rights crimes and that he surrender his fortune, salted away in overseas accounts.

The new Iranian government also wanted Chase Manhattan to return Iranian assets, which Rockefeller put at more than $1 billion in 1978, although some estimates ran much higher. The withdrawal might have created a liquidity crisis for the bank which already was coping with financial troubles.

Ashraf’s personal appeal put Rockefeller in what he described, with understatement, as “an awkward position,” according to his autobiography Memoirs.

“There was nothing in my previous relationship with the Shah that made me feel a strong obligation to him,” wrote the scion of the Rockefeller oil and banking fortune who had long prided himself in straddling the worlds of high finance and public policy. “He had never been a friend to whom I owed a personal debt, and neither was his relationship with the bank one that would justify my taking personal risks on his behalf. Indeed, there might be severe repercussions for Chase if the Iranian authorities determined that I was being too helpful to the Shah and his family.”

Later on March 23, after leaving Ashraf’s residence, Rockefeller attended a dinner with Happy Rockefeller, the widow of his brother Nelson who had died two months earlier. Also at the dinner was former Secretary of State Henry Kissinger, a long-time associate of the Rockefeller family.

Discussing the Shah’s plight, Happy Rockefeller described her late husband’s close friendship with the Shah, which had included a weekend stay with the Shah and his wife in Teheran in 1977. Happy said that when Nelson learned that the Shah would be forced to leave Iran, Nelson offered to pick out a new home for the Shah in the United States.

The dinner conversation also turned to what the participants saw as the dangerous precedent that President Carter was setting by turning his back on a prominent U.S. ally. What message of American timidity was being sent to other pro-U.S. leaders in the Middle East?

‘Flying Dutchman’

The dinner led to a public campaign by Rockefeller – along with Kissinger and former Chase Manhattan Bank Chairman John McCloy – to find a suitable home in exile for the Shah. Country after country had closed their doors to the Shah as he began a humiliating odyssey as what Kissinger would call a modern-day “Flying Dutchman,” wandering in search of a safe harbor.

Rockefeller assigned his aide, Joseph Reed, “to help [the Shah] in any way he could,” including serving as the Shah’s liaison to the U.S. government. McCloy, one of the so-called Wise Men of the post-World War II era, was representing Chase Manhattan as an attorney with Milbank, Tweed, Hadley and McCloy. One of his duties was to devise a financial strategy for staving off Iran’s withdrawal of assets from the bank.

Rockefeller also pressed the Shah’s case personally with Carter when the opportunity presented itself. On April 9, 1979, at the end of an Oval Office meeting on another topic, Rockefeller handed Carter a one-page memo describing the views of many foreign leaders disturbed by recent U.S. foreign policy actions, including Carter’s treatment of the Shah.

“With virtually no exceptions, the heads of state and other government leaders I saw expressed concern about United States foreign policy which they perceived to be vacillating and lacking in an understandable global approach,” Rockefeller’s memo read. “They have questions about the dependability of the United States as a friend.” An irritated Carter abruptly ended the meeting.

Temporary Havens

Despite the mounting pressure from influential quarters, Carter continued to rebuff appeals to let the Shah into the United States. So the Shah’s influential friends began looking for alternative locations, asking other nations to shelter the ex-Iranian ruler.

Finally, arrangements were made for the Shah to fly to the Bahamas and – when the Bahamian government turned out to be more interested in money than humanitarianism – to Mexico.

“With the Shah safely settled in Mexico, I had hopes that the need for my direct involvement on his behalf had ended,” Rockefeller wrote in Memoirs. “Henry [Kissinger] continued to publicly criticize the Carter administration for its overall management of the Iranian crisis and other aspects of its foreign policy, and Jack McCloy bombarded [Carter’s Secretary of State] Cyrus Vance with letters demanding the Shah’s admission to the United States.”

When the Shah’s medical condition took a turn for the worse in October, Carter relented and agreed to let the Shah fly to New York for emergency treatment. Celebrating Carter’s reversal, Rockefeller’s aide Joseph Reed wrote in a memo, “our ‘mission impossible’ is completed. … My applause is like thunder.”

When the Shah arrived in New York on October 23, 1979, Reed checked the Shah into New York Hospital under a pseudonym, “David Newsome,” a play on the name of Carter’s undersecretary of state for political affairs, David Newsom.

Embassy Crisis

The arrival of the Shah in New York led to renewed demands from Iran’s new government that the Shah be returned to stand trial.

In Teheran, students and other radicals gathered at the university, called by their leaders to what was described as an important meeting, according to one of the participants whom I interviewed years later.

The students gathered in a classroom which had three blackboards turned toward the wall. A speaker told the students that they were about to undertake a mission supported by Ayatollah Khomeini, Iran’s spiritual leader and the de facto head of the government.

“They said it would be dangerous and that anyone who didn’t want to take part could leave now,” the Iranian told me. “But no one left. Then, they turned around the blackboards. There were three buildings drawn on the blackboards. They were the buildings of the U.S. embassy.”

The Iranian said the target of the raid was not the embassy personnel, but rather the embassy’s intelligence documents.

“We had believed that the U.S. government had been manipulating affairs inside Iran and we wanted to prove it,” he said. “We thought if we could get into the embassy, we could get the documents that would prove this. We hadn’t thought about the hostages. We all went to the embassy. We had wire cutters to cut through the fence. We started climbing over the fences. We had expected more resistance. When we got inside, we saw the Americans running and we chased them.”

Marine guards set off tear gas in a futile attempt to control the mob, but held their fire to avoid bloodshed. Other embassy personnel hastily shredded classified documents, although there wasn’t time to destroy many of the secret papers. The militant students found themselves in control not only of the embassy and hundreds of sensitive U.S. cables, but dozens of American hostages as well.

An international crisis had begun, a hinge that would swing open unexpected doors for both American and Iranian history.

Hidden Compartments

David Rockefeller denied that his campaign to gain the Shah’s admittance to the United States had provoked the crisis, arguing that he was simply filling a vacuum created when the Carter administration balked at doing the right thing.

“Despite the insistence of journalists and revisionist historians, there was never a ‘Rockefeller-Kissinger behind-the-scenes campaign’ that placed ‘relentless pressure’ on the Carter administration to have the Shah admitted to the United States regardless of the consequences,” Rockefeller wrote in Memoirs. “In fact, it would be more accurate to say that for many months we were the unwilling surrogates for a government that had failed to accept its full responsibilities.”

But within the Iranian hostage crisis, there would be hidden compartments within hidden compartments, as influential groups around the world acted in what they perceived to be their personal or their national interests.

Rockefeller was just one of many powerful people who felt that Jimmy Carter deserved to lose his job. With the hostage crisis started, a countdown of 365 days began toward the 1980 elections. Though he may have been only dimly aware of his predicament, Carter faced a remarkable coalition of enemies both inside and outside the United States.

In the Persian Gulf, the Saudi royal family and other Arab oil sheiks blamed Carter for forsaking the Shah and feared their own playboy life styles might be next on the list for the Islamic fundamentalists. The Israeli government saw Carter as too cozy with the Palestinians and too eager to cut a peace deal that would force Israel to surrender land won in the 1967 war.

European anti-communists believed Carter was too soft on the Soviet Union and was risking the security of Europe. Dictators in the Third World – from the Philippines and South Korea to Argentina and El Salvador – were bristling at Carter’s human rights lectures.

Inside the United States, the Carter administration had made enemies at the CIA by purging many of the Old Boys who saw themselves as protectors of America’s deepest national interests. Many CIA veterans, including some still within the government, were disgruntled. And, of course, the Republicans were determined to win back the White House, which many felt had been unjustly taken from their control after Richard Nixon’s landslide victory in 1972.

This subterranean struggle between Carter, trying desperately to free the hostages before the 1980 election, and those who stood to benefit by thwarting him became known popularly as the “October Surprise” controversy.

The nickname referred to the possibility that Carter might have ensured his reelection by arranging the hostage return the month before the presidential election as an October Surprise, although the term came ultimately to refer to clandestine efforts to stop Carter from pulling off his October Surprise.

CIA Old Boys

When the hostage crisis wasn’t resolved in the first few weeks and months, the attention of many disgruntled CIA Old Boys also turned toward the American humiliation in Iran, which they found doubly hard to take since it had been the site of the agency’s first major victory, the restoration of the Shah to the Peacock Throne.

A number of veterans from that operation of 1953 were still alive in 1980. Archibald Roosevelt was one of the Old Boys from the Iranian operation. He had moved on to become an adviser to David Rockefeller at Chase Manhattan Bank.

Another was Miles Copeland, who had served the CIA as an intermediary to Arab leaders, including Egyptian President Gamal Abdul Nasser. In his autobiography, The Game Player, Copeland claimed that he and his CIA chums prepared their own Iranian hostage rescue plan in March 1980.

When I interviewed Copeland in 1990 at his thatched-roofed cottage outside Oxford in the English countryside, he said he had been a strong supporter of George H.W. Bush in 1980. He even had founded an informal support group called “Spooks for Bush.”

Sitting among photos of his children who included the drummer for the rock group, The Police, and the manager for the rock star, Sting, Copeland explained that he and his CIA colleagues considered Carter a dangerous idealist.

“Let me say first that we liked President Carter,” Copeland told me “He read, unlike President Reagan later, he read everything. He knew what he was about. He understood the situation throughout the Middle East, even these tenuous, difficult problems such as Arabs and Israel.

“But the way we saw Washington at that time was that the struggle was really not between the Left and the Right, the liberals and the conservatives, as between the Utopians and the realists, the pragmatists. Carter was a Utopian. He believed, honestly, that you must do the right thing and take your chance on the consequences. He told me that. He literally believed that.”

Copeland’s deep Southern accent spit out the words with a mixture of amazement and disgust. To Copeland and his CIA friends, Carter deserved respect for a first-rate intellect but contempt for his idealism.

“Most of the things that were done [by the United States] about Iran had been on a basis of stark realism, with possibly the exception of letting the Shah down,” Copeland said. “There are plenty of forces in the country we could have marshaled. … We could have sabotaged [the revolution, but] we had to establish what the Quakers call ‘the spirit of the meeting’ in the country, where everybody was thinking just one way. The Iranians were really like sheep, as they are now.”

Altar of Ideals

But Carter, troubled by the Shah’s human rights record, delayed taking decisive action and missed the moment of opportunity, Copeland said. Infuriating the CIA’s Old Boys, Carter had sacrificed an ally on the altar of idealism.

“Carter really believed in all the principles that we talk about in the West,” Copeland said, shaking his mane of white hair. “As smart as Carter is, he did believe in Mom, apple pie and the corner drug store. And those things that are good in America are good everywhere else.”

Veterans of the CIA and Republicans from the Nixon-Ford administrations judged that Carter simply didn’t measure up to the demands of a harsh world.

“There were many of us – myself along with Henry Kissinger, David Rockefeller, Archie Roosevelt in the CIA at the time – we believed very strongly that we were showing a kind of weakness, which people in Iran and elsewhere in the world hold in great contempt,” Copeland said. “The fact that we’re being pushed around, and being afraid of the Ayatollah Khomeini, so we were going to let a friend down, which was horrifying to us. That’s the sort of thing that was frightening to our friends in Saudi Arabia, in Egypt and other places.”

But Carter also bent to the moral suasions of the Shah’s friends, who argued on humanitarian grounds that the ailing Shah deserved admission to the United States for medical treatment. “Carter, I say, was not a stupid man,” Copeland said. Carter had even a greater flaw: “He was a principled man.”

So, Carter decided that the moral act was to allow the Shah to enter the United States for treatment, leading to the result Carter had feared: the seizure of the U.S. Embassy.

Frozen Assets

As the crisis dragged on, the Carter administration cranked up the pressure on the Iranians. Along with diplomatic initiatives, Iran’s assets were frozen, a move that ironically helped David Rockefeller’s Chase Manhattan Bank by preventing the Iranians from cleaning out their funds from the bank’s vaults.

In Memoirs, Rockefeller wrote that the Iranian “government did reduce the balances they maintained with us during the second half of 1979, but in reality they had simply returned to their historic level of about $500 million,” Rockefeller wrote. “Carter’s ‘freeze’ of official Iranian assets protected our position, but no one at Chase played a role in convincing the administration to institute it.”

In the weeks that followed the embassy seizure, Copeland said he and his friends turned their attention to figuring a way out of the mess.

“There was very little sympathy for the hostages,” Copeland said. “We all have served abroad, served in embassies like that. We got additional pay for danger. I think, for Syria, I got fifty percent extra in salary. So it’s a chance you take. When you join the army, you take a chance of getting in a war and getting shot. If you’re in the diplomatic service, you take a chance on having some horror like this descend on you.

“But on the other hand, we did think that there were things we could do to get them out, other than simply letting the Iranians, the students, and the Iranian administration know that they were beating us,” Copeland said. “We let them know what an advantage they had. That we could have gotten them out is something that all of us old professionals of the covert action school, we said from the beginning, ‘Why don’t they let us do it?’”

According to The Game Player, Copeland met his old friend, ex-CIA counter-intelligence chief James Angleton, for lunch. The famed spy hunter “brought to lunch a Mossad chap who confided that his service had identified at least half of the ‘students,’ even to the extent of having their home addresses in Teheran,” Copeland wrote. “He gave me a rundown on what sort of kids they were. Most of them, he said, were just that, kids.”

Periphery Strategy

The Israeli government was another deeply interested player in the Iran crisis. For decades, Israel had cultivated covert ties with the Shah’s regime as part of a Periphery Strategy of forming alliances with non-Arab states in the region to prevent Israel’s Arab enemies from focusing all their might against Israel.

Though losing an ally when the Shah fell and offended by the anti-Israeli rhetoric from the Khomeini regime, Israel had gone about quietly rebuilding relations with the Iranian government. One of the young Israeli intelligence agents assigned to this task was an Iranian-born Jew named Ari Ben-Menashe, who had immigrated to Israel as a teen-ager and was valuable because he spoke fluent Farsi and still had friends in Iran, some of whom were rising within the new revolutionary bureaucracy.

In his own 1992 memoirs, Profits of War, Ben-Menashe said the view of Israel’s Likud leaders, including Prime Minister Menachem Begin, was one of contempt for Jimmy Carter in the late 1970s.

“Begin loathed Carter for the peace agreement forced upon him at Camp David,” Ben-Menashe wrote. “As Begin saw it, the agreement took away Sinai from Israel, did not create a comprehensive peace, and left the Palestinian issue hanging on Israel’s back.”

After the Shah fell, Begin grew even more dissatisfied with Carter’s handling of the crisis and alarmed over the growing likelihood of an Iraqi attack on Iran’s oil-rich Khuzistan province. Israel saw Iraq’s Saddam Hussein as a far greater threat to Israel than Iran’s Khomeini. Ben-Menashe wrote that Begin, recognizing the realpolitik needs of Israel, authorized shipments to Iran of small arms and some spare parts, via South Africa, as early as September 1979.

After the U.S. hostages were taken in November 1979, the Israelis came to agree with Copeland’s hard-headed skepticism about Carter’s handling of the hostage issue, Ben-Menashe wrote. Even though Copeland was generally regarded as a CIA “Arabist” who had opposed Israeli interests in the past, he was admired for his analytical skills, Ben-Menashe wrote.

“A meeting between Miles Copeland and Israeli intelligence officers was held at a Georgetown house in Washington, D.C.,” Ben-Menashe wrote. “The Israelis were happy to deal with any initiative but Carter’s. David Kimche, chief of Tevel, the foreign relations unit of Mossad, was the senior Israeli at the meeting. … The Israelis and the Copeland group came up with a two-pronged plan to use quiet diplomacy with the Iranians and to draw up a scheme for military action against Iran that would not jeopardize the lives of the hostages.”

In late February 1980, Seyeed Mehdi Kashani, an Iranian emissary, arrived in Israel to discuss Iran’s growing desperation for aircraft spare parts, Ben-Menashe wrote. Kashani, whom Ben-Menashe had known from their school days in Teheran, also revealed that the Copeland initiative was making inroads inside Iran and that approaches from some Republican emissaries had already been received, Ben-Menashe wrote.

“Kashani said that the secret ex-CIA-Miles-Copeland group was aware that any deal cut with the Iranians would have to include the Israelis because they would have to be used as a third party to sell military equipment to Iran,” according to Ben-Menashe. In March, the following month, the Israelis made their first direct military shipment to Iran, 300 tires for Iran’s F-4 fighter jets, Ben-Menashe wrote.

Rescue Plans

In the 1990 interview at his house in the English countryside, Copeland told me that he and other CIA old-timers developed their own hostage-rescue plan. Copeland said the plan – which included cultivating political allies within Iran and using disinformation tactics to augment a military assault – was hammered out on March 22, 1980, in a meeting at his Georgetown apartment.

Copeland said he was aided by Steven Meade, the ex-chief of the CIA’s Escape and Evasion Unit; Kermit Roosevelt, who had overseen the 1953 coup in Iran; and Archibald Roosevelt, the adviser to David Rockefeller.

“Essentially, the idea was to have some Iranians dressed in Iranian military uniform and police uniform go to the embassy, address the students and say, ‘Hey, you’re doing a marvelous job here. But now we’ll relieve you of it, because we understand that there’s going to be a military force flown in from outside. And they’re going to hit you, and we’re going to scatter these [hostages] around town. Thanks very much.”

Copeland’s Iranians would then move the hostages to the edge of Teheran where they would be loaded onto American helicopters to be flown out of the country.

To Copeland’s chagrin, his plan fell on deaf ears in the Carter administration, which was developing its own rescue plan that would rely more on U.S. military force with only modest help from Iranian assets in Teheran. So, Copeland said he distributed his plan outside the administration, to leading Republicans, giving sharper focus to their contempt for Carter’s bungled Iranian strategy.

“Officially, the plan went only to people in the government and was top secret and all that,” Copeland said. “But as so often happens in government, one wants support, and when it was not being handled by the Carter administration as though it was top secret, it was handled as though it was nothing. … Yes, I sent copies to everybody who I thought would be a good ally. …

“Now I’m not at liberty to say what reaction, if any, ex-President Nixon took, but he certainly had a copy of this. We sent one to Henry Kissinger, and I had, at the time, a secretary who had just worked for Henry Kissinger, and Peter Rodman, who was still working for him and was a close personal friend of mine, and so we had these informal relationships where the little closed circle of people who were, a, looking forward to a Republican President within a short while and, b, who were absolutely trustworthy and who understood all these inner workings of the international game board.”

By April 1980, Carter’s patience was wearing thin, both with the Iranians and some U.S. allies. After discovering that the Israelis had made a secret shipment of 300 tires to Iran, Carter complained to Prime Minister Begin.

“There had been a rather tense discussion between President Carter and Prime Minister Begin in the spring of 1980 in which the President made clear that the Israelis had to stop that, and that we knew that they were doing it, and that we would not allow it to continue, at least not allow it to continue privately and without the knowledge of the American people,” Carter’s press secretary Jody Powell told me. “And it stopped” – at least temporarily.

Questioned by congressional investigators a dozen years later, Carter said he felt that by April 1980, “Israel cast their lot with Reagan,” according to notes I found among the unpublished documents in the files of a House Task Force, which had examined the October Surprise controversy. Carter traced the Israeli opposition to his reelection to a “lingering concern [among] Jewish leaders that I was too friendly with Arabs.”

Carter’s National Security Adviser Zbigniew Brzezinski also recognized the Israeli hostility. In an interview, Brzezinski told me that the Carter White House was well aware that the Begin government had “an obvious preference for a Reagan victory.”

Desert One

Encircled by growing legions of enemies, the Carter administration put the finishing touches on its own hostage-rescue operation in April. Code named “Eagle Claw,” the assault involved a force of U.S. helicopters that would swoop down on Teheran, coordinate with some agents on the ground and extract the hostages.

Carter ordered the operation to proceed on April 24, but mechanical problems forced the helicopters to turn back. At a staging area called Desert One, one of the helicopters collided with a refueling plane, causing an explosion that killed eight American crewmen.

Their charred bodies were then displayed by the Iranian government, adding to the fury and humiliation of the United States. After the Desert One fiasco, the Iranians dispersed the hostages to a variety of locations, effectively shutting the door on another rescue attempt, at least one that would have any chance of returning the hostages as a group.

By summer 1980, Copeland told me, the Republicans in his circle considered a second hostage-rescue attempt not only unfeasible, but unnecessary. They were talking confidently about the hostages being freed after a Republican victory in November, the old CIA man said.

“There was no discussion of a Kissinger or Nixon plan to rescue these people, because Nixon, like everybody else, knew that all we had to do was wait until the election came, and they were going to get out,” Copeland said. “That was sort of an open secret among people in the intelligence community, that that would happen. … The intelligence community certainly had some understanding with somebody in Iran in authority, in a way that they would hardly confide in me.”

Copeland said his CIA friends had been told by contacts in Iran that the mullahs would do nothing to help Carter or his reelection.

“At that time, we had word back, because you always have informed relations with the devil,” Copeland said. “But we had word that, ‘Don’t worry.’ As long as Carter wouldn’t get credit for getting these people out, as soon as Reagan came in, the Iranians would be happy enough to wash their hands of this and move into a new era of Iranian-American relations, whatever that turned out to be.”

In the interview, Copeland declined to give more details, beyond his assurance that “the CIA within the CIA,” his term for the true protectors of U.S. national security, had an understanding with the Iranians about the hostages. (Copeland died on January 14, 1991, before I could interview him again.)

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