However, not everyone in Congress was in favour of the CIA’s involvement, which led to Massachusetts Representative Edward P. Boland’s first Amendment in 1982, which barred ‘the use of funds ‘‘for the purpose of’’ overthrowing the government of Nicaragua or provoking a war between Nicaragua and Honduras’. This left a loophole which was quickly exploited — third-party funds could be solicited, and general aid could still be provided to the Contras. The CIA assisted with covert actions in Nicaragua, destroying fuel tanks and mining the harbour. After their role was revealed by the Wall Street Journal, Representative Boland pushed through a second Amendment in 1984:
During fiscal year 1985, no funds available to the Central Intelligence Agency, the Department of Defense, or any other agency or entity of the United States involved in intelligence activities may be obligated or expended for the purpose or which would have the effect of supporting, directly or indirectly, military or paramilitary operations in Nicaragua by any nation, group, organization, movement or individual.
Although this was designed to stem the flow of support, it failed. Third-party donations could still be obtained, and the NSC could oversee other activities, since technically they didn’t fall under the definition of prohibited agencies in the Amendment. Colonel Oliver North, on loan to the NSC from the Marine Corps, was placed in charge.
Around the same time, clandestine negotiations were going on with Iran. The fundamentalist Islamic regime that seized power in January 1979 had taken American hostages at various times — but also needed support in their war against Iraq, so required some way of dealing with The Great Satan (as they dubbed America). A communications pipeline was opened via the Israelis in July 1985 so that thirteen days after President Reagan vehemently denounced any idea of giving reward to terrorists — like those in Iran — he was informed of a plan to exchange a hundred anti-tank missiles for some of the American hostages being held. (There are multiple contradictory versions of how much he knew about this and exactly when.) The deals began to go through, and profits from the second were channelled to a front company, known as the Enterprise.
This second deal, in November 1985, was the one that caused the CIA major headaches, as Oliver North involved them to assist with some logistical problems. What the CIA knew about the nature of the flight and the contents of the shipment that they were helping to supply became the focal point of the discussions. Most within the CIA were unaware that it involved the transport of weapons (which at that point was technically illegal).
In light of the second flight’s problems, it was decided that the arms would be sent directly from the Enterprise to Iran, and President Reagan signed a Presidential Finding authorising such shipments on 17 January 1986. Shortly afterwards, someone came up with the idea of diverting the profits from the arms sales to the Contras — or at least, whatever proportion of the profits that the private businessmen involved would allow to be passed across. Many believe that the scheme was devised by DCI Casey, others that it was Oliver North’s brainwave — a memo North wrote on 4 April 1986, which he failed to shred during his mass destruction of documents when the Iran-Contra affair became public later that year, spells out specifically that monies would be diverted to the Contras. North certainly maintained that he believed that President Reagan was aware of this plan, and approved it.
When news of the covert shipments leaked in November 1986, the main concern at the CIA was over the November 1985 deal, since it took place before the Presidential Finding that gave the Agency permission to assist with an arms deal. DCI Casey — probably already suffering the effects of the brain tumour that would remove him from power before the end of the year — was uncharacteristically lapse in his preparation for the questions about the Agency’s role in an illegal covert action. This wasn’t helped by Oliver North’s attempts to disassociate the NSC from that shipment, or Casey’s inability to recall whether he specifically knew that there were Hawk missiles in the cases that were dispatched with CIA aid, rather than oil-drilling bits, per the manifest. Many in Washington believed that DCI Casey intended to perjure himself to the Congressional Oversight Committee over this, although this may stem from a draft wording that Casey appended to a document during a meeting the day before the hearing — according to CIA sources, he never approved anything that specifically cleared the NSC or CIA of knowledge.
The CIA’s concern increased when details of the diversion of funds to the Contras became public knowledge a few days later, since William Casey had made no mention of it in his testimony to Congress. There were many calls for his resignation, but in what appeared to be a combative interview with Time in early December (those present suggest that the DCI was in fact quite ill by this point), Casey made it clear he had told Congress all he knew. He knew nothing about diversion of funds, and the CIA had been simply providing support to the NSC. ‘A lot of people are trying to put responsibilities on us that we didn’t have,’ he concluded. This stance was contradicted by a discussion Casey had two months later with reporter Bob Woodward, in which the reporter said Casey admitted that he was aware of the diversion scheme.
The Iran-Contra affair rolled on throughout 1987, with emphasis switching from the role of the CIA to what knowledge President Reagan had of the deal. His National Security Advisor at the relevant time, Admiral Poindexter, claimed that he had shredded a document signed by Reagan authorizing the deal. Oliver North wrote: ‘Ronald Reagan knew of and approved a great deal of what went on with both the Iranian initiative and private efforts on behalf of the contras and he received regular, detailed briefings on both… I have no doubt that he was told about the use of residuals for the Contras, and that he approved it. Enthusiastically.’
As had happened a dozen years earlier in the aftermath of the Watergate scandal and the publicity attached to the release of the incriminating ‘family jewels’, throughout the rest of President Reagan’s time of office the CIA underwent a period of retrenchment in an attempt to restore its battered image. Highly respected former FBI director Judge William H. Webster became DCI, and brought Richard F. Stoltz out of retirement to act as head of covert operations, replacing Clair E. George, who had been forced to resign after the Iran-Contra details became public. All the while, Aldrich Ames was passing information to the KGB from the CIA, while Robert Hanssen was doing similar from the FBI.
The CIA was heavily involved with the resistance to the Soviet occupation of Afghanistan, which was justifying the pessimistic description of it as Russia’s Vietnam. The Agency was operating covertly out of Pakistan’s capital city Islamabad, mandated by President Reagan in 1985, to assist the Afghan resistance to push the Soviets back into Uzbekistan, using the new Stinger missiles. By the following year, even some of the Politburo in Moscow were starting to query the Soviet involvement, particularly after the resistance scored a stunning success, destroying an ammunition dump at Kharga, just outside Kabul, on 26 August 1986, using CIA-provided technical equipment, and then followed it up with an attack on three helicopters at Jalalabad the following month. At a meeting in November, Mikhail Gorbachev made it clear that Soviet troops should be out within two years, and leave behind a regime friendly to Moscow — without letting the Americans enter. Negotiations began in Geneva, while the CIA agents on the ground continued to assist the resistance to maintain pressure on the Soviets.