Copyright © 1994 The Telegraph plc. All Rights Reserved. Reproduced with permission.
The Electronic Telegraph   Sunday 27 March 1994   World News
[World News]

Shadow of Iran-Contra affair falls on Clinton
By Ambrose Evans-Pritchard

WHITE HOUSE SCANDAL: As a new book piles pressure on the President, Sunday Telegraph relevations put him in the American media spotlight
After Whitewater, the ex-Governor of Arkansas now faces charges that he was a stooge for the CIA. Report by Ambrose Evans-Pritchard from Washington and Little Rock

WITH the moral authority of the Clinton administration already sunk by Whitewater and the attendant cover-up, the outlines of a much bigger scandal are beginning to emerge.

The fresh allegations are contained in a book, Compromised: Clinton, Bush, and the CIA. Written by a former undercover agent of US intelligence, Terry Reed, it describes how he moved to Arkansas in the mid-1980s to help set up the headquarters of President Reagan's covert campaign to train and supply the Nicaraguan Contra rebels. It alleges that the Arkansas political elite was heavily involved in the operation, and that Governor Bill Clinton himself played a role that he would rather forget.

The tell-tale memoirs of disenchanted intelligence agents have to be treated with extreme caution. Mr Reed is a bitter man. He feels that he was hung out to dry by his superiors when the Iran-Contra affair blew up in Washington, and was subsequently the victim of gross injustice.

But his story cannot be dismissed out of hand. It is written jointly with John Cummings, a hard-boiled, Irish-American investigative reporter with a knack for getting to the bottom of things. The book is consistent with what is known already about the Nicaraguan operation from the congressional Iran-Contra hearings in 1987 and from the six-year investigation by the special prosecutor, Lawrence Walsh.

If the book comes to be accepted as broadly true, President Clinton may be walking the plank within months.

It describes a "black operation" that took place outside the usual channels of the CIA. At the time, Democrats in Congress had prohibited the CIA from using appropriated funds to support the rebellion against the Soviet-backed Sandinistas. But the legislation had been drafted in such a way as to leave the door open for a freelance arrangement, using off-shore funds and recruiting agents not on the Agency payroll.

Over time, this practice compromised secrecy and invited amateurism: slipshod methods were used; money leaked all over the place; and law-enforcement agencies were not always kept adequately at bay. Far more has come to light than would normally be the case in a fully-fledged CIA operation.

As Mr Reed tells the story, he was running his own machine tool business in Oklahoma in 1982 when he was introduced to a man flashing CIA credentials. They reminisced about the Vietnam War, where Reed had served as an analyst for Air Force Intelligence - well documented in the book - and had been responsible for picking drop-sites in the secret air war against Laos. The relationship bloomed. Years later, Mr Reed discovered that his "handler" was Oliver North, the former National Security Council aide who masterminded the Iran-Contra hostage deal.

Mr Reed was soon drawn into Col North's efforts to support the Contras. He helped set up a remote airfield near Mena, in northwest Arkansas, where two batches of Nicaraguan pilots were taught how to make air-drops to supply guerrillas in Nicaragua. This operation, code-named "Jade Bridge", ran from early 1984 to the autumn of 1985.

Mr Reed's account squares with the findings of Russell Welch, an Arkansas state trooper based at Mena, who headed an investigation into suspected drug trafficking in the Mena area. In an interview with The Sunday Telegraph, Mr Welch said that he had studied the book and found it broadly credible. "I'm certain that there was some type of military activity going on at the airstrip at that time."

Mr Welch also said that he had found a picture of Mr Reed in his police case file. It was taken at Mena. He said that the county sheriff had told him to leave Mr Reed alone, saying he "worked for the CIA".

Some time later, Mr Reed alleges that he was drawn into a second operation, "Centaur Rose", which was designed to ferry large amounts of weaponry from Arkansas to Central America. Much of the material came in the form of unnumbered parts from National Guard arsenals, which were shipped by waterway to assembly points in Arkansas. But in order to maintain CIA "deniability", the traceable parts were manufactured at a network of plants around the state.

These were mostly factories which were engaged in civilian work, but did some moonlighting for the CIA. Mr Reed provided the machine tool expertise needed to upgrade their facilities for precision production. All the companies were registered in the Arkansas industrial directory. The operation continued until early 1986.

It was an expensive undertaking. As far as Mr Reed could tell, funding for the factories was tossed out of CIA aircraft at 1,000 ft in duffle bags containing $100 notes. Some of the money allegedly landed on a ranch owned by Seth Ward, father-in-law and business associate of Webb Hubbell, the Clinton confidant who resigned recently from his post as de facto chief of the US Justice Department.

Mr Reed says that he only witnessed this on one occasion, but he was led to believe that the airdrops ran at about $40 million a month. The origin of the deliveries is unknown. His contacts told him that the money disappeared into Arkansas's arcane bond system, where it was mixed with legitimate money and resurfaced in the form of business and development loans.

Mr Reed alleges that the Arkansas political elite was involved in the whole scheme. He claims to have attended a secret meeting at an ammunition bunker at Camp Robinson, Arkansas, in March 1986, in which Governor Clinton had an ugly dispute with a top official of the CIA over the terms of the "deal".

The CIA man, identified by name, had come to explain that the Contra operation was going to be closed down in Arkansas. The reason given, Mr Reed alleges, was that the Clinton circle had been helping itself to CIA money, had been trying to muscle in on CIA weapons contracts, and could not be trusted to uphold security.

"This has turned into a feeding frenzy by your good ole boy sharks, and you've had a hand in it too, Mr Clinton," the Agency man allegedly said. "Our deal with you was to launder our money through your bond business . . . 10 per cent of the profits, not 10 per cent of the gross. No one agreed for you to start loaning out our money out to your friends through your ADFA {the Arkansas Finance Development Authority} . . . We didn't count on Arkansas becoming more difficult to deal with than most banana republics."

According to Mr Reed, Governor Clinton begged the Agency not to cut him off without the patronage needed to run his political machine. Eventually, other funny money did make its way into the Arkansas bond system. It passed through the ADFA, a bank set up by Mr Clinton in 1985 under the control of his appointees, with no legislative oversight. There is no list of buyers for the $720 million of loans authorised by the agency, and the origin of the money has always been a mystery. But piecing together the puzzle, Mr Reed and Mr Cummings believe that it came from the Bank of Credit and Commerce International, the Middle Eastern bank which collapsed with massive international debts.

The Sunday Telegraph has been able to interview only one of the alleged participants at this Camp Robinson meeting: Felix Rodriguez, the agent said to have cut off the hands of Che Guevara in Bolivia. He said that the story was pure fiction, and called Mr Reed a "madman". Sources in the intelligence community, however, have had mixed reactions to the book. Some confirm that it is substantially true.

Mr Reed's overall account is full of minute detail. Parts have been independently verified. He has named a large number of people, most of whom are private citizens and could therefore sue under American law if they are the victims of libel.

Most important, many assertions have been made under oath in court testimony or depositions.

Mr Reed is now fighting a federal suit of his own against the Arkansas State Police, accusing the former chief of Governor Clinton's security detail, Buddy Young, of manufacturing criminal indictments against him and his wife, violating the civil rights of the Reeds, and of perjuring himself in testimony.

The case goes to court in May.

The allegations cast Mr Clinton in a bad light. He may lose many friends on the Left, for there can be no doubt that he allowed his state to become the base of operations for the Contras, even as he denounced President Reagan's Contra policy in public.

But he will gain no new friends on the Right, for his dealings will only confirm a reputation of relentless opportunism.

Worst of all, though, Mr Reed's story has opened up a whole new set of questions about money-laundering in Arkansas in the 1980s.

Suspicions are rampant. Within a month, a thousand reporters will be combing through the books of ADFA, amazed that such a scandal could have been overlooked in the presidential campaign two years ago.


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