WASHINGTON — Secret CIA dealings with a fugitive Iranian arms dealer, recently disclosed in congressional documents, are expected to be used as a key line of defense by 10 international businessmen accused of plotting to sell Iran $2.5 billion in weapons in 1985 and 1986.
The businessmen were arrested in April of 1986 at the end of a four-month sting operation in which the Iranian weapons dealer, Cyrus Hashemi, now dead, acted as a government informant.
The defendants, who say they expected to obtain U.S. government approval for their transactions, were conducting their negotiations during the same period that the White House was trading arms for hostages.
The federal case, the largest arms conspiracy prosecution ever brought by the Justice Department, was the result of an undercover operation in New York by the Customs Service, which had agreed to drop arms-smuggling charges against Hashemi in exchange for his informant role.
But before making his deal with the Customs Service, according to newly declassified CIA and State Department memos, Hashemi approached then-CIA Director William J. Casey with an arms-for-hostages plan of his own that was strikingly similar to the one that would soon be embraced by the White House as its secret Iran arms initiative.
The Hashemi plan collapsed before it got far enough along to require formal action. However, defense lawyers say the Casey-Hashemi dealings support arguments that their clients had reason to believe they would get U.S. approval for an arms deal with Iran. Lead defendant Samuel L. Evans, an attorney for Hashemi, who died of cancer in the summer of 1986, says he was aware of his CIA contacts at the time.
Casey directed his staff to explore the Hashemi proposal despite concerns within the agency that Hashemi was "a sleazy and slippery character," according to an internal CIA memo whose author was unknown.
The CIA director was "very anxious to move ahead" on the proposal, according to a State Department memo from Richard W. Murphy, then assistant secretary of state for Near East affairs, to Michael Armacost, then undersecretary for political affairs.
In light of new details about what another State Department memo called "the Hashemi escapade," defense attorneys are expected to argue in part that Evans was lured into the undercover arms deal because he knew that Hashemi had been actively trying to arrange an officially authorized sale through the CIA.
CIA officials also acknowledged in one of the now-declassified memos that the CIA's relationship with Hashemi would almost certainly be an issue in the criminal case--noting that it was "relevant to an entrapment defense." That memo, written before the Iran-Contra scandal broke, also warned that care had to be given so that court disclosures about Hashemi did not expose details about U.S. efforts to free American hostages.
A Manhattan federal judge today will set a date for the trial, expected to be early next year. That will end two years of delays that resulted primarily from confusion over whether the case was related to the Iran-Contra scandal. Prosecutors say they are satisfied that the case is unrelated to the White House-sanctioned arms initiative.
Seeks Casey Phone Logs
On Wednesday, however, an attorney for defendant William Northrop filed a motion asking the government to turn over the late CIA director's telephone logs, asserting that Northrop--an American businessman based in Israel--was in frequent contact with Casey, using the code name "Sasha," and had received approval from the CIA chief to pursue arms deals with Hashemi.
"William Northrop has maintained a running dialogue over the telephone with . . . Casey, from approximately 1981 to April of 1986. They spoke on the average of once a month," attorney Michael H. Sporn said in a discovery request filed in District Court in New York.
"Among their many topics of conversations, Mr. Northrop specifically discussed with the former DCI (director of central intelligence) his contacts with Cyrus Hashemi . . . and the propriety of transferring military articles," Sporn told the court. "Mr. Northrop's activities in this case were carried on with the full knowledge and consent of Mr. Casey."
Sporn said the Northrop-Casey contacts were not previously disclosed because of concern that they might embarrass "another country"--a reference to Israel--and because Northrop only recently learned that Casey's telephone logs may exist to confirm his assertions.
Memos Offer New Details
The latest disclosures provide a new detailed look at the complicated network of negotiations that the CIA was pursuing at the time and the frantic atmosphere in which the Iran-Contra scandal originated. Because U.S. officials from various agencies were exploring a number of avenues to obtain the release of American hostages, it remained unclear for months whether the Manhattan case was related in any way to the Iran-Contra affair.