WASHINGTON — President Reagan, while pledging publicly never to yield to terrorists' demands, personally approved an unsuccessful scheme to ransom at least two Americans being held hostage in Lebanon in 1985 with $2 million provided by Texas tycoon H. Ross Perot, former National Security Adviser Robert C. McFarlane said Monday.
In addition, McFarlane told Senate and House committees that the President apparently solicited money for the Nicaraguan contras from King Fahd of Saudi Arabia at a time when Congress had banned U.S. aid to the rebels.
McFarlane also testified that Reagan contacted the leader of a Central American country--identified by sources as Honduras--to arrange the release in 1985 of a seized arms shipment intended for the contras.
New Details of Reagan Role
McFarlane's first day of testimony at the hearings provided many new details of the President's role in the Iran-contra scandal. It reinforced the view expressed earlier by many members of the committees that Reagan was far more involved than he has admitted in efforts to assist the contras during 1985 and 1986, when "direct or indirect" U.S. military assistance was barred by Congress.
While the President never authorized anything illegal, McFarlane said, he generally directed his White House staff to sustain the contras--"to help them hold body and soul together"--after U.S. aid was cut off by Congress late in 1984.
"The President had made clear that he wanted a job done," McFarlane said.
At the White House, spokesman Marlin Fitzwater responded by saying: "Let no one believe that the President was involved in asking the staff or anyone else to provide illegal support for the freedom fighters. But similarly, let no one believe that the President has ever backed away from his belief that the people of Nicaragua deserve a chance for democracy."
McFarlane, who stepped down as Reagan's national security adviser in December, 1985, said he had no first-hand knowledge of whether the President also approved the diversion of an estimated $3.5 million from the Iranian arms sales to the contras the following year. He quoted his former White House aide, Lt. Col. Oliver L. North, as saying that the diversion had been approved, although North did not say by whom.
Vice President George Bush was informed of Saudi Arabia's contributions to the contras, according to McFarlane, but Secretary of State George P. Shultz, Defense Secretary Caspar W. Weinberger and the late CIA Director William J. Casey did not inquire further when he told them that an alternative means of support for the contras had been arranged.
Until Monday, there was never any indication that the plan devised by North to ransom American hostages in Lebanon for $1 million each had presidential approval. The scheme appeared to contradict Reagan's stated policy against dealing with terrorists and came at a time when Reagan also was trying to win release of the hostages by shipping arms to Iran.
On June 19, 1985, even as the ransom plan was being pursued by McFarlane, North and others at the White House, Reagan told a news conference: "America will never make concessions to terrorists. . . . To do so would only invite more terrorism."
But McFarlane explained that at the time it was approved by the President, the ransom was not viewed as a shift in U.S. policy. "It involved no government funds, but it did involve bribes of guards and people in the chain from the immediate housing of the prisoners to their ultimate escape from Lebanon," he said.
Committee counsel Arthur L. Liman produced a memo dated June 7, 1985, in which North told McFarlane that the travel arrangements and operational costs of the ransom mission were to be paid for "from funds normally available to the Nicaraguan resistance."
This refers to a $50,000 contribution that North solicited from contra leader Adolfo Calero to pay the expenses of Drug Enforcement Administration agents who were assigned--with the approval of Atty. Gen. Edwin Meese III--to carry out the ransom scheme. McFarlane said he was unaware of Calero's contribution and thought it was being financed solely by Perot.
McFarlane also testified that he personally broke the news to the President when Saudi Arabia agreed to give $1 million a month to the contras shortly after the contras' direct U.S. assistance was cut off late in 1984. He said the Saudis agreed to his request to donate the money "as a humanitarian gesture," although there was no restriction against spending it on arms.
He said Reagan received news of the donation on a "note card" that he handed directly to the President during a staff meeting in the Oval Office. He said he used the note card to keep other White House aides in the room from being told about the contribution. Reagan expressed his "satisfaction and pleasure" on the note card when he returned it, he said.