That is why Congress and Presidents have barred the
Central Intelligence Agency since its founding in 1947 from operating
domestically. It also explains why the core questions of the 1980
October Surprise case remain a sensitive mystery even today:
Did disgruntled CIA officers conspire with their
former boss, George H.W. Bush, to exploit the Iranian hostage crisis in
1980 to defeat President Jimmy Carter whose policies had infuriated many
CIA veterans? Did that secret CIA operation change the course of
American politics, paving the way for a quarter century of Republican
On Nov. 4, 1980, after a full year of frustrating
efforts to free the 52 American hostages held in Iran, Carter lost in a
landslide to Ronald Reagan and his running mate, George H.W. Bush. The
hostages were finally freed after Reagan was sworn in on Jan. 20, 1981.
While the full story is still unclear a quarter
century later, the evidence leaves little doubt that former CIA Director
Bush – first as a Republican presidential candidate and then as the
party’s vice presidential nominee – supervised a team of bitter ex-CIA
officers whose careers had suffered under Carter.
These ex-intelligence officers were so angry with
Carter that they cast off their traditional cloak of non-partisanship
and anonymity in 1979 and enlisted in the Republican drive to unseat the
During Bush’s bid for the Republican nomination,
these veterans of CIA covert operations worked as his political foot
soldiers. One joke about Bush’s announcement of his candidacy on May 1,
1979, was that “half the audience was wearing raincoats.”
Bill Colby, Bush’s predecessor as CIA director,
said Bush “had a flood of people from the CIA who joined his supporters.
They were retirees devoted to him for what he had done” in defending the
spy agency in 1976 when the CIA came under heavy criticism for spying on
Americans and other abuses.
Reagan’s foreign policy adviser Richard Allen
described the group working on the Bush campaign as a “plane load of
disgruntled former CIA” officers who were “playing cops and robbers.”
All told, at least two dozen former CIA officials
went to work for their former boss. Among them was the CIA’s director of
security, Robert Gambino, who joined the Bush campaign immediately after
leaving the CIA where he oversaw security investigations of senior
Carter officials and thus knew about potentially damaging personal
Besides the ex-CIA personnel who joined the Bush
campaign, other pro-Bush intelligence officers remained at the CIA while
making clear their political preference. “The seventh floor of Langley
was plastered with ‘Bush for President’ signs,” said senior CIA analyst
George Carver, referring to the floor that housed senior CIA officials.
Carter administration officials also grew concerned
about the deep personal ties between the former CIA officers in Bush’s
campaign and active-duty CIA personnel who continued to hold sensitive
jobs under Carter.
For instance, Gambino, the 25-year CIA veteran who
oversaw personnel security checks, and CIA officer Donald Gregg, who
served as a CIA representative on Carter’s National Security Council,
“are good friends who knew each other from the CIA,” according to an
unpublished part of a report by a House Task Force, which investigated
the October Surprise issue in 1992. [I found
this deleted section – still marked “secret” – in unpublished task force
files in 1994.]
Perhaps most significantly, Bush quietly
enlisted Theodore Shackley, the legendary CIA covert operations
specialist known as the “blond ghost.” During the Cold War, Shackley had
run many of the CIA’s most controversial paramilitary operations, from
Vietnam and Laos to the JMWAVE operations against Fidel Castro’s Cuba.
In those operations, Shackley had supervised
the works of hundreds of CIA officers and developed powerful bonds of
loyalty with many of his subordinates. For instance, Donald Gregg, the
CIA liaison to Carter’s White House, had served under Shackley’s command
When Bush was CIA director in 1976, he
appointed Shackley to a top clandestine job, associate deputy director
for operations, laying the foundation for Shackley’s possible rise to
director and cementing Shackley’s loyalty to Bush. Shackley had a
falling out with Carter’s CIA director, Stansfield Turner, and quit the
agency in 1979.
Shackley believed that Turner had devastated
the CIA by pushing out hundreds of covert officers, many of them
Shackley’s former subordinates. The prospect of George H.W. Bush rising
to be President or Vice President rekindled speculation that Shackley
still might get the top CIA job.
By early 1980, the Republicans also complained
that they were being kept in the dark about progress on the Iran hostage
negotiations. George Cave, then a top CIA specialist on Iran,
told me that the “Democrats never briefed the Republicans” on sensitive
developments, creating suspicions among the Republicans.
So, the Republicans
sought out their own sources of information. Shackley began
monitoring Carter’s progress on the hostage
negotiations through his contacts with Iranians in London and
Hamburg, West Germany.
“Ted, I know, had a couple of contacts in Germany,”
said Cave. “I know he talked to them. I don’t know how far it went. …
Ted was very active on that thing in the winter/spring of 1980.”
Author David Corn also got wind of the
Shackley-Bush connection when he was researching his biography of
Shackley, Blond Ghost.
“Within the spook world the belief spread that
Shackley was close to Bush,” Corn wrote. “Rafael Quintero [an
anti-Castro Cuban with close ties to the CIA] was saying that Shackley
met with Bush every week. He told one associate that should Reagan and
Bush triumph, Shackley was considered a potential DCI,” the abbreviation
for CIA director.
Shackley’s monitoring of hostage developments
for Bush continued at least into the fall of 1980.
According to handwritten notes of Reagan’s
foreign policy adviser Richard Allen, Bush called on Oct. 27, 1980,
after getting an unsettling message from former Texas Gov. John Connally,
the ex-Democrat who had switched to the Republican Party during the
Nixon administration. Connally said his oil contacts in the Middle East
were buzzing with rumors that Carter had achieved the long-elusive
breakthrough on the hostages.
Bush ordered Allen to find out what he could
about Connally’s tip. “Geo Bush,” Allen’s notes began, “JBC [Connally]
-- already made deal. Israelis delivered last wk spare pts. via
Amsterdam. Hostages out this wk. Moderate Arabs upset. French have given
spares to Iraq and know of JC [Carter] deal w/Iran. JBC [Connally]
unsure what we should do. RVA [Allen] to act if true or not.”
In a still “secret” 1992 deposition to the House October Surprise Task
Force, Allen explained the cryptic notes as meaning Connally had heard
that Carter had ransomed the hostages’ freedom with an Israeli shipment
of military spare parts to Iran. Allen said Bush instructed him, Allen,
to get details from Connally. Allen was then to pass on any new details
to two of Bush’s aides.
According to the notes, Bush ordered Allen to
relay the information to “Ted Shacklee [sic] via Jennifer.” Allen said
the Jennifer was Jennifer Fitzgerald, Bush's longtime assistant
including during his year at the CIA. Allen testified that “Shacklee”
was Theodore Shackley, the legendary CIA covert operations specialist.
Though various foreign leaders and
intelligence operatives have alleged that by mid-October 1980, the
Reagan-Bush campaign had struck its own hostage deal with the Iranian
government, there apparently continued to be nervousness among the
Republicans that whatever arrangements they had with Iran might come
The Allen notation, which I discovered among
the House Task Force’s files in late 1994, was the first piece of
documentary evidence to confirm the suspicions that Bush and Shackley
were working together on the Iranian hostage crisis in 1980.
Babe in the Woods
From the beginning of the hostage crisis,
Jimmy Carter never appreciated how much he was surrounded by his
enemies. He was the proverbial babe in the woods.
Out of necessity or naivety, Carter also turned to
people he believed might help resolve the hostage crisis while not
knowing their ties to his enemies.
Frantically looking for emissaries to Iran’s
revolutionary government in late 1979, the Carter administration
accepted the assistance of an Iranian banker named Cyrus Hashemi, who
presented himself as a conduit to the Iranian mullahs.
A worldly businessman in his 40s with one foot in
the West and the other back in Iran, Hashemi seemed a reasonable
candidate. He was well-tailored, well-schooled and well-connected. When
he visited Europe, he stayed at the best hotels; when he crossed the
Atlantic, he took the supersonic Concorde.
Gary Sick, a Middle East expert on Carter’s
National Security Council staff, said Hashemi established himself in
December 1979 as a well-informed Iranian who could help the
administration sort out Iran’s new ruling elite.
“Cyrus Hashemi quickly demonstrated that he had
access to a number of high-level officials in the Iranian revolutionary
government, most notably the governor-general of Khuzistan [Ahmad Madani]
but also individuals within Khomeini’s own family,” Sick wrote in his
book, October Surprise.
Besides helping the Carter administration, however,
Cyrus Hashemi was maintaining personal and business ties to key
Republicans, most notably former U.S. intelligence officer John Shaheen,
a Lebanese-born, New York-based businessman who was a close friend of
William Casey, himself a former spy.
Shaheen and Casey had served together in the World
War II-era Office of Strategic Services, the forerunner to the CIA.
After the war, Shaheen and Casey remained
friends and became business associates.
In the 1970s, Casey, then
a lawyer at the politically well-connected firm of Rogers and Wells,
advised Shaheen on a troubled oil refinery that Shaheen built at the
wind-swept coastal town of Come-by-Chance, Newfoundland, Canada.
Casey traveled with
Shaheen to Kuwait to negotiate a source of oil for the refinery, though
the poorly engineered facility would ultimately fail, never having
produced a drop of gasoline. Shaheen and Casey also kept their hands in
the intelligence business and maintained close ties to the CIA.
According to Cyrus
Hashemi’s older brother, Jamshid, the dealings between Cyrus and Shaheen
dated back to the late 1970s.
“For many years, he
[Cyrus] had been cooperating with Mr. Shaheen,” Jamshid told me in an
interview. “I asked him [Cyrus] in 1979, at the end of 1979. He was very
open about it. He knew that Mr. Shaheen had contacts with the government
of the United States. At that time, I did not know which section or
The Shaheen connection
led Cyrus Hashemi to William Casey even before Casey took over Ronald
Reagan’s presidential campaign, according to Jamshid Hashemi and a 1984
CIA memo that surfaced later.
According to the CIA
memo, former Attorney General Elliot Richardson said in 1984 that Casey
had recruited Shaheen and Cyrus Hashemi in 1979 to sell off property in
New York City belonging to the deposed Shah’s Pahlavi Foundation.
At the time, the radical
Islamic government in Teheran was claiming the property as its own and
the Shah’s family was desperate for the cash.
Shaheen also appears to
have been the first person to put Cyrus Hashemi in touch with the CIA. A
Shaheen friend whom I interviewed told me that Shaheen was the person
who introduced Hashemi to the spy agency, helping to make him and his
bank a conduit for funneling CIA funds to a variety of covert
In Iran, the Hashemi
brothers already were known as politically dexterous businessmen. They
managed to end up on the right side of the Iranian revolution by smartly
throwing their support to the anti-Shah forces and exploiting family and
After the revolution, as
Cyrus Hashemi pursued his banking business outside Iran, older brother
Jamshid Hashemi received an appointment from the new government to
oversee the national radio network. That job, in turn, put him in touch
with other influential Iranians, he said. One was a radical Islamic
cleric, named Mehdi Karrubi.
Meanwhile, Cyrus Hashemi’s First Gulf Bank & Trust Co. was emerging as a
bank which handled clandestine money transfers for the new Iranian
“It was ordered that all
these monies be transferred to an account of my brother, into his bank,
which was done,” Jamshid Hashemi said. “The order of the transfer was
from Admiral [Ahmad] Madani [who served as Iran’s defense minister]. We
went to the admiral with the telex and then we went to the war room of
the navy in Teheran and we faxed it ... so he [Cyrus] could take over
all the money, in late 1979, $30 to $35 million, to the account of the
According to Jamshid
Hashemi, the attorney advising Cyrus Hashemi and John Shaheen about
these transactions was William Casey.
Casey “was the man who
was actually putting all these things together for both of them,”
Jamshid Hashemi said. “Casey was the adviser.”
Exploiting his American contacts with the CIA,
Cyrus Hashemi also arranged covert U.S. funding for Madani’s
In late 1979, Jamshid
Hashemi said he received a call from his brother, summoning him from
Iran to London and then to the United States. It was during the London
stopover that Jamshid Hashemi said he met John Shaheen.
Shaheen “came and took my
passport,” Jamshid Hashemi said. “The next day I have my passport [back]
with a piece of paper with a signature giving me a multiple entry visa
into the United States. ... In those days for an Iranian to get a visa
within a few hours, it would have been a miracle.”
But after arriving in the United States on Jan. 1, 1980, Jamshid soon
figured out that Shaheen’s links to the CIA explained the miracle.
The CIA gave the Hashemi
brothers $500,000 to deliver to the struggling Madani campaign. But only
a small amount reached Iran – about $100,000 – and Madani lost badly to
Abolhassan Bani-Sadr in the election.
After the CIA demanded an
accounting of the money, the Hashemis returned $290,000 to the agency.
Though the Madani campaign strategy had failed, it had opened – or at
least widened – channels for the Hashemi brothers to the U.S. government
and the CIA.
Soon, Cyrus Hashemi had
entrenched himself as a middleman for contacts between the Carter
administration and the Iranian government.
On Jan. 21, 1980, George H.W. Bush stunned the
Republican presidential field by beating Ronald Reagan in the Iowa
caucuses. In the glow of victory, Bush saw his face on the cover of
Newsweek and claimed to possess the “Big Mo,” a preppyish phrase for
momentum. Bush next took aim at New Hampshire, next door to Maine where
his family vacationed in the summer.
But Bush’s Big Mo would last only long enough to
force one historic change in the Reagan campaign. Reagan decided to fire
John Sears as head of the campaign. Foreign policy adviser Richard Allen
was among the Reagan loyalists who recommended Bill Casey, a crafty old
spymaster who had worked for Richard Nixon and had bounced around the
tough world of Long Island politics.
On Feb. 26, the day of the New Hampshire primary,
which Reagan would win, the former California governor replaced Sears
“I feel very strongly that this country is in
trouble, that it needs to be turned around and I have felt for over a
year that Governor Reagan is the only man in America who’s ever turned a
government around,” Casey said in accepting the job.
Years later, Casey’s widow, Sophia, gave me an
unpublished paper containing Casey’s personal reflections on the
campaign. Though the report focused on campaign mechanics, it also
revealed Casey’s dread at the prospect of four more years of Jimmy
Carter in the White House.
“Everyone [in Reagan’s camp] agreed that Jimmy
Carter had to be removed from office in order to save the nation from
economic ruin and international humiliation,” Casey wrote. He also
recognized the pivotal role played by the Iranian hostage crisis in
highlighting Carter’s shortcomings. “The Iranian hostage crisis was the
focal point of the failure of Carter’s foreign policy,” Casey wrote.
After his appointment, Casey went to work building
a staunchly conservative organization that soon was rolling up victories
for Ronald Reagan. But Casey also didn’t forget what he viewed as the
single-most important variable of the campaign: the 52 hostages whose
continuing plight was growing into a national obsession.
Casey, the old OSS veteran, wanted to know all he
could about Carter’s progress toward resolving the crisis. “Over the
ensuing months, Casey and the Republican campaign systematically
constructed an elaborate and sophisticated intelligence organization
targeted on their own government,” wrote former NSC official Gary Sick
in his book, October Surprise.
By early spring 1980,
Reagan was rolling toward victory in the Republican race, though Bush
hung on as the representative of the party’s more moderate wing.
In the background, the
Iran-hostage stand-off continued to loom as a political wild card. The
crisis threatened Carter’s reelection chances if it lingered but offered
hope for a rebound if the hostages returned home at a timely moment.
In the tradition of the best spy tradecraft, Casey
wanted to have sources right in the middle of the action – and as it
turned out, one of Casey’s longtime friends, John Shaheen, was already
in tight with Cyrus Hashemi, one of President Carter’s intermediaries to
the Iranian government.
A Shaheen associate told me that Casey and Shaheen,
the two old OSS guys, often discussed the hostage crisis in the context
of their experience in the intelligence world. Sometimes their
conversations turned to batting around their own ideas for how to
resolve the standoff and how to show up Carter, the Shaheen associate
Shaheen also was in touch with Arab leaders in
Europe and sounded them out, too, about ways for resolving the Iranian
impasse, the associate said.
“Shaheen,” the associate said, “loved this
clandestine stuff. He ate it up. These guys [Casey and Shaheen] were
real patriots. They would have been involved in it under the table, over
the table and on the side of the table. But they would have done it.”
Jamshid Hashemi said Casey’s obsession with the
hostage issue led the Reagan campaign chief to approach the Hashemi
brothers directly. Jamshid Hashemi said that in March 1980, he was in
his room at the Mayflower Hotel in Washington when Casey and another
Shaheen associate, Roy Furmark, arrived.
“The door was opened and
Mr. Casey came in,” Jamshid said. “He wanted to talk to me. I didn’t
know who he was or what he was. So I called my brother on the phone. I
said, ‘there’s a gentleman here by the name of Mr. Casey who wants to
talk to me.’ I remember that my brother asked me to pass him the phone
and he talked with Mr. Casey.”
In spring 1980, Jamshid
Hashemi asserted that he met Donald Gregg, the CIA officer serving on
Carter’s NSC staff. Jamshid said he encountered Gregg at Cyrus Hashemi’s
bank in Manhattan, and Cyrus introduced Gregg as “the man from the White
The alleged involvement
of Gregg is another highly controversial part of the October Surprise
mystery. A tall man with a trim build and an easy-going manner, Gregg
had known George H.W. Bush since 1967 when Bush was a first-term U.S.
Gregg also briefed Bush
when he was U.S. envoy to China. Gregg served, too, as the CIA’s liaison
to the Pike Committee investigation when Bush was CIA director.
“Although Gregg was
uniformly regarded as a competent professional, there was a dimension to
his background that was entirely unknown to his colleagues at the White
House, and that was his acquaintance with one of the Republican
frontrunners, George Bush,” Sick wrote in October Surprise.
investigations, Gregg denied participation in any October Surprise
operations. But Gregg’s alibis proved shaky and he was judged deceptive
in his denial when questioned about the October Surprise by an FBI
polygrapher working for Lawrence Walsh’s Iran-Contra investigation in
Gregg flunked the “lie
detector” test when he gave a negative answer to the question: “Were you
ever involved in a plan to delay the release of the hostages in Iran
until after the 1980 Presidential election?” [See the Final Report of
the Independent Counsel for Iran/Contra Matters, Vol. I, 501]
Less than two months
after Casey had taken command of the Reagan campaign, an internal
structure for monitoring Carter’s progress in Iran was in place.
On April 20, 1980, the
Reagan campaign carved out from a larger body of Republican foreign
policy experts a subgroup known as the Iran Working Group,
congressional investigators later discovered. The foreign policy
operation was run by Richard Allen, Fred Ikle and Laurence Silberman.
Back on the campaign
trail, Reagan’s robust conservatism was helping him pile up delegates as
he gained control of the Republican primaries.
Bush managed to pull out
some wins in Massachusetts, Connecticut, Pennsylvania and Michigan, but
was dealt a crushing blow when he lost his home state of Texas on May 3.
The path to the GOP nomination was now clear for Reagan.
As the Republican
nominating battle drew to a close, Cyrus Hashemi and John Shaheen busied
themselves more with business than politics as they tried to stave off
Shaheen’s financial ruin. Because of his failing Come-by-Chance
refinery, Canadian courts had frozen Shaheen’s bank accounts.
In a bid to avert
disaster, Shaheen sent a personal assistant to London with a power of
attorney to arrange a desperately needed loan, according to a close
Shaheen associate whom I interviewed. Shaheen told the assistant to
contact Cyrus Hashemi, who took the assistant to the London offices of
the Bank of Credit and Commerce International and Marine Midland Bank,
seeking a $3 million bail-out.
Cyrus negotiated the loan
for Shaheen on his second try, at Marine Midland. Since Shaheen’s
accounts were frozen, the money apparently was funneled through a
Bermuda-based front company called Mid Ocean. FBI documents showed a
$2.5 million deposit from “Mid Ocean” into Cyrus’s First Gulf bank in
summer 1980, possibly the Marine Midland loan minus $500,000 for
Shaheen’s reliance on
Cyrus Hashemi for the infusion of cash also made clear that the two men
were not just casual business associates. Shaheen counted on Hashemi to
toss a $3 million life preserver that kept Shaheen’s head above water.
Yet even as their financial predicament worsened, the pair continued to
plunge into the Iranian negotiations.
In July – four months
after Jamshid Hashemi said William Casey approached the Iranian brothers
in Washington – Cyrus Hashemi began a series of trips to Madrid on the
hostage crisis. Ostensibly, the meetings were part of his initiative on
behalf of the Carter administration, seeking inroads to the Iranian
regime. But in Teheran, word spread that Cyrus Hashemi’s real goal was
to strike a deal on behalf of the Republicans.
Abolhassan Bani-Sadr said he first learned of the Republican “secret
deal” with the Iranian radicals in July after Reza Passendideh, a nephew
of Ayatollah Ruhollah Khomeini, attended a meeting with Cyrus Hashemi
and Republican lawyer Stanley Pottinger in Madrid on July 2, 1980.
Passendideh carried a plan back to Teheran “from the Reagan camp,”
according to a letter that Bani-Sadr sent to the House October Surprise
Task Force on Dec. 17, 1992.
“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
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.
On July 14, 1980, the
Republican National Convention opened in Detroit. After a brief
flirtation with the possibility of enlisting former President Gerald
Ford as the vice presidential nominee, Reagan settled on George H.W.
After accepting the No. 2
spot, Bush began merging his CIA-heavy campaign apparatus with Reagan’s.
The united Reagan-Bush
campaign created a strategy group, known as the “October Surprise
Group,” to prepare for “any last-minute foreign policy or
defense-related event, including the release of the hostages, that might
favorably impact President Carter in the November election,” according a
draft report of the House October Surprise Task Force.
“Originally referred to
as the ‘Gang of Ten,’” the draft report said the “October Surprise
Group” consisted of Richard V. Allen, Charles M. Kupperman, Thomas H.
Moorer, Eugene V. Rostow, William R. Van Cleave, Fred C. Ikle, John R.
Lehman Jr., Robert G. Neumann, Laurence Silberman and Seymour Weiss.
While that part of the
draft made it into the Task Force’s final report in January 1993,
another part was deleted, saying: “According to members of the ‘October
Surprise’ group, the following individuals also participated in meetings
although they were not considered ‘members’ of the group: Michael Ledeen,
Richard Stillwell, William Middendorf, Richard Perle, General Louis Walt
and Admiral James Holloway.”
Deleted from the final report also was a section
describing how the ex-CIA personnel who had worked for Bush’s campaign
became the nucleus of the Republican intelligence operation that
monitored Carter’s Iran-hostage negotiations for the Reagan-Bush team.
“The Reagan-Bush campaign maintained a 24-hour
Operations Center, which monitored press wires and reports, gave daily
press briefings and maintained telephone and telefax contact with the
candidate’s plane,” the draft report read. “Many of the staff members
were former CIA employees who had previously worked on the Bush campaign
or were otherwise loyal to George Bush.”
polls showed Reagan leading Carter, Reagan’s campaign chief Casey
remained fixated on the Iran-hostage crisis.
Since March, Jamshid
Hashemi said he had given the Mayflower Hotel meeting little thought.
But in summer 1980, Jamshid said his brother, Cyrus, confided that his
role in the hostage negotiations had taken another turn.
“I was asked by my
brother, since he thought the Republicans had the possibility of winning
the election, that we should not play only in the hands of the
Democrats,” Jamshid Hashemi told me. He quoted his brother as saying “it
was the wish of Mr. Casey to meet with someone from Iran.”
“That's when I started
getting on this work of inviting both Mehdi [Karrubi, a politically
powerful Iranian cleric], to come directly, and Hassan [Karrubi, the
cleric’s brother], to come indirectly to Madrid,” Jamshid Hashemi said.
At Madrid’s Plaza Hotel,
Jamshid Hashemi said the Iranians met with Casey and another American
whom Hashemi identified as Donald Gregg, the CIA officer working on
“What was specifically
asked was when these hostages should be released, and it was the wish of
Mr. Casey that they be released after the Inauguration,” Jamshid Hashemi
said. “Then the Reagan administration would feel favorably towards Iran
and release the FMS [foreign military sales] funds and the frozen assets
and return to Iran what had already been purchased.”
The FMS sales referred to
$150 million in military hardware that had been bought by the Shah but
held back by Carter after Khomeini took power and the hostages were
seized. Casey’s offer also included F-14 spare parts, which were crucial
to the maintenance of Iran’s high-tech air force, Jamshid Hashemi said.
After the July meeting
with Casey, Jamshid Hashemi said, cleric Mehdi Karrubi returned to
Teheran, where he consulted Ayatollah Ruhollah Khomeini and the
ayatollah’s senior advisers. Two to three weeks later, Karrubi called
and asked that a second meeting with Casey be arranged, Jamshid Hashemi
New arrangements were
made for a meeting in mid-August again in Madrid, he said. Karrubi
“confirmed” that Khomeini’s government had agreed to release the
hostages only after Reagan gained power. “Karrubi expressed acceptance
of the proposal by Mr. Casey,” Jamshid Hashemi said. “The hostages would
be released after Carter’s defeat.”
After the Madrid
meetings, Jamshid Hashemi said his brother, Cyrus, began organizing
military shipments – mostly artillery shells and aircraft tires – from
Eilat, in Israel, to Bandar Abbas, an Iranian port. Jamshid Hashemi
valued the military supplies in the tens of millions of dollars.
After Labor Day 1980, with the start of the
general election campaign, Jimmy Carter began to show new signs of
political life. Carter had survived a Democratic primary challenge from
liberal Massachusetts Sen. Edward Kennedy and was benefiting from a
uniting of Democrats after their national convention.
There also were widespread public doubts about
Ronald Reagan, who was viewed by many as an extremist who might
unnecessarily heat up the Cold War. Carter began to slowly close the gap
on the former California governor. But the Iranian hostage crisis
hovered over his campaign like an accursed spirit.
Though little noticed in Washington, political
battles also were breaking out inside the Iranian leadership. Iran’s
acting Foreign Minister Sadegh Ghotbzadeh told Agence France Presse
on Sept. 6 that he had information that Reagan was “trying to block a
solution” to the hostage impasse.
The secret Republican plan to delay release of
the hostages until after the U.S. elections also had become a point of
tension between Iranian President Bani-Sadr and Ayatollah Khomeini,
according to Bani-Sadr’s account sent to the House October Surprise Task
Force in 1992.
Bani-Sadr said he managed to force Khomeini to
reopen talks with Carter’s representatives. Bani-Sadr said Khomeini
relented and agreed to pass on a new hostage proposal to Carter
officials through his son-in-law, Sadegh Tabatabai.
The Tabatabai initiative surprised the Carter negotiation team, which
had pretty much given up hope that the Iranians would agree to any
serious talks. NSC official Gary Sick described the proposal for
settling the hostage impasse as “a set of conditions for ending the
crisis that were really much gentler than anything Iran had offered
The sudden shift in the Iranian position
coincided with a renewed concern among Republicans that Carter might
actually pull off his October Surprise of a hostage release. A flurry of
meetings ensued involving Iranian emissaries and representatives of the
Republican October Surprise monitoring operation.
On Sept. 16, Casey was focusing again on the
crisis in the region. At 3 p.m., he met with senior Reagan-Bush campaign
officials Edwin Meese, Bill Timmons and Richard Allen about the “Persian
Gulf Project,” according to an unpublished section of the House Task
Force report and Allen’s notes. Two other participants at the meeting,
according to Allen’s notes, were Michael Ledeen and Noel Koch.
That same day, Iran’s acting foreign minister
Ghotbzadeh again was quoted as citing Republican interference on the
hostages. “Reagan, supported by [former Secretary of State Henry]
Kissinger and others, has no intention of resolving the problem,”
Ghotbzadeh said. “They will do everything in their power to block it.”
While the Republicans were busy in Washington,
Carter’s emissaries in West Germany were hammering out the framework for
a hostage-release settlement with Tabatabai.
“I was very optimistic at the time,” Tabatabai
said in an interview with me a decade later. “Mr. Carter had accepted
the conditions set by the Iranians. I sent an encrypted message to the
Imam [Khomeini], saying I would be back the next day.”
A settlement of the hostage crisis seemed to
be in the offing. But Tabatabai’s return was delayed by the outbreak of
the Iran-Iraq War on Sept. 22. Tabatabai had to wait two weeks before he
could return to Iran.
With little more than a month to go before the
U.S. election, Republicans and Iranian representatives continued to meet
in Washington. Indeed, one of the first public references to secret
Republican-Iranian contacts was to a meeting at the L’Enfant Plaza Hotel
supposedly in late September or early October.
Three Republicans – Allen, Silberman and
Robert McFarlane, an aide to Sen. John Tower – have acknowledged a
session with an Iranian emissary at the hotel. But none of them claimed
to remember the person’s name, his nationality or his position – not
even McFarlane who purportedly arranged the meeting.
In early October, Israeli intelligence officer
Ari Ben-Menashe said he learned from superiors in Israel that Carter’s
hostage negotiations had fallen through because of Republican
opposition, according to his memoirs, Profits of War.
The Republicans wanted the Iranians to release
the hostages only after the Nov. 4 election, Ben-Menashe wrote, with the
final details to be arranged in Paris between a delegation of
Republicans, led by George H.W. Bush, and a delegation of Iranians, led
by cleric Mehdi Karrubi.
Also present, Ben-Menashe wrote, would be
about a half dozen Israeli representatives, including David Kimche, and
several CIA officials, including Donald Gregg and Robert Gates, an
ambitious young man who was considered close to Bush. At the time, Gates
was serving as an executive assistant to CIA Director Stansfield Turner.
In retrospect, some of Carter’s negotiators
felt they should have been much more attentive to the possibility of
Republican sabotage. “Looking back, the Carter administration appears to
have been far too trusting and particularly blind to the intrigue
swirling around it,” said former NSC official Gary Sick.
By October 1980, however,
Carter was clawing his way back into the presidential race, with the
possibility that an Iranian hostage settlement still could change the
dynamic of the campaign.
Sensing the political
danger, the Republicans opened the final full month of the campaign by
trying to make Carter’s hostage negotiations look like a cynical ploy to
influence the election’s outcome.
On Oct. 2, Republican
vice-presidential candidate George H.W. Bush brought up the issue with a
group of reporters: “One thing that’s at the back of everybody’s mind
is, ‘What can Carter do that is so sensational and so flamboyant, if you
will, on his side to pull off an October Surprise?’ And everybody kind
of speculates about it, but there’s not a darn thing we can do about it,
nor is there any strategy we can do except possibly have it discounted.”
With Bush’s comments,
Carter’s supposed “October Surprise” was publicly injected into the
campaign. But there was “a darn thing” or two that the Republicans could
do – and were doing – to prepare themselves for the possibility of a
last-minute hostage release, including gathering their own intelligence
about the Iranian developments.
Little scraps of news and
rumors about the hostages were rushed to the campaign hierarchy. Richard
Allen recalled one urgent memo he wrote when he was told by a journalist
that Secretary of State Edmund Muskie had floated the possibility of a
swap of military spare parts for the hostages.
Like a scene in a spy
novel, Allen coded the journalist as “ABC” and Muskie as “XYZ” and
compiled a quick memo on the hot news. “I breathlessly sent this out to
the campaign, to [campaign director William] Casey, to [pollster
Richard] Wirthlin, to [senior adviser Edwin] Meese, I think [to] the
President and maybe [to] George Bush.”
The big October Surprise
question, however, has always been whether the Reagan-Bush campaign
sealed the deal for a post-election hostage release with direct meetings
in Paris between senior Iranians and senior Republicans, including vice
presidential candidate George H.W. Bush.
The idea of Bush slipping
away during the final weeks of the campaign for a secret trip to Paris
has always been the most explosive part of the October Surprise story
and, for many, the most implausible.
The secret trip would
have required the cooperation of at least a few Secret Service agents
who would have had to file inaccurate reports on the candidate’s
whereabouts and activities. The trip also would have carried a high
political risk if exposed, though the senior George Bush’s experience at
the CIA had taught him a lot about how to contain embarrassing
disclosures especially when a national security claim could be asserted.
If a flat denial didn’t
work, perhaps he could have tried a patriotic cover story about trying
to get the hostages home when Carter couldn’t. But often the most
effective tactic is simply to deny, deny, deny.
Ben-Menashe said he was
in Paris as part of a six-member Israeli delegation that was
coordinating the arms deliveries to Iran. He said the key meeting
occurred at the Ritz Hotel in Paris.
“We walked past the
vigilant eyes of the French security men to be confronted by two U.S.
Secret Service types,” Ben-Menashe wrote in Profits of War.
“After checking off our names on their list, they directed us to a
guarded elevator at the side of the lobby. Stepping out of the elevator,
we found ourselves in a small foyer where soft drinks and fruits had
been laid out.”
Ben-Menashe said he
recognized several Americans already there, including Robert Gates,
Robert McFarlane, Donald Gregg and George Cave, the CIA expert on Iran.
“Ten minutes later,
[cleric Mehdi] Karrubi, in a Western suit and collarless white shirt
with no tie, walked with an aide through the assembled group, bade
everyone a good day, and went straight into the conference room,” Ben-Menashe
“A few minutes later
George Bush, with the wispy-haired William Casey in front of him,
stepped out of the elevator. He smiled, said hello to everyone, and,
like Karrubi, hurried into the conference room. It was a very
well-staged entrance. My last view of George Bush was of his back as he
walked deeper into the room – and then the doors were closed.”
Ben-Menashe said the
Paris meetings served to finalize a previously outlined agreement
calling for release of the 52 hostages in exchange for $52 million,
guarantees of arms sales for Iran, and unfreezing of Iranian monies in
The timing, however, was
changed, Ben-Menashe said, to coincide with Reagan’s expected
Inauguration on Jan. 20, 1981.
“It was such a secret
arrangement that all hotel records of the Americans’ and the Israelis’
visits to Paris – I cannot speak for the Iranians – were swept away two
days after we left town,” Ben-Menashe wrote.
under oath before Congress about seeing Bush and other Republicans in
Paris in October 1980. Gates, McFarlane, Gregg, Cave, Karrubi and Bush
have all denied participating in the meeting, although their alibis were
either shaky or were never checked out by the House Task Force in 1992.
My own resistance to the
October Surprise tales came, in part, from my middle-American
background. I simply had trouble picturing the various players taking
secret, night-time flights across the Atlantic to meet with foreign
leaders in luxury hotels surrounded by security agents.
The “James Bond factor”
made the story seem more like a pulp novel or an escapist movie than a
real historic event. But in covering intelligence operations since the
early 1980s, I also had come to grips with the fact that people who
joined that clandestine world thrive on risks that the average person –
or politician – would aver.
Many critics of the
October Surprise story have insisted that it is impossible to conceive
of George H.W. Bush, the former CIA director, arranging for a secret
flight to Paris while under Secret Service protection in mid-October
These critics have argued
that this story must have been concocted for political reasons after the
Iran-Contra scandal broke in late 1986 when a “conspiracy fever” gripped
But whatever the larger
truth, the suspicion that the October Surprise allegations were invented
after the Iran-Contra scandal has turned out to be wrong. The
story of George H.W. Bush’s alleged trip to Paris was circulating among
Republicans in mid-October 1980.
David Henderson, then a
State Department Foreign Service officer, recalled the date as Oct. 18,
1980, when Chicago Tribune correspondent John Maclean arrived at
Henderson’s house in Washington for in interview about Henderson’s
criticism of the Carter administration’s handling of Cuban refugees from
the Mariel boat lift.
But Maclean, the son of
author Norman Maclean who wrote A River Runs Through It, had
something else on his mind, Henderson recalled. Maclean had just been
told by a well-placed Republican source that vice presidential candidate
George H.W. Bush was flying to Paris for a clandestine meeting with a
delegation of Iranians about the 52 American hostages.
Henderson wasn’t sure
whether Maclean was looking for some confirmation or whether he was
simply sharing an interesting tidbit of news. Henderson had not
previously heard of the Bush trip and wondered out loud if it might be
part of a bipartisan effort to finally resolve the long-running hostage
Maclean never wrote about
the leak he had received from his well-placed Republican source because,
he said, a campaign spokesman subsequently denied it.
As the years passed, the
memory of that Bush-to-Paris leak faded for both Henderson and Maclean,
until the October Surprise allegations surfaced again in the early
operatives were claiming that Bush had undertaken a secret mission to
Paris in mid-October 1980 to give the Iranian government an assurance
from one of the two Republicans on the presidential ticket that the
promises of future military and other assistance would be kept.
Henderson mentioned the
meeting in a 1991 letter to a U.S. senator, a copy of which was
forwarded to me while I working at the Public Broadcasting Service’s
Frontline program. In the letter, Henderson recalled the
conversation about Bush’s trip to Paris but not the name of the
Chicago Tribune reporter.
A producer at
Frontline then searched some newspaper archives to find the 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 allegations of a
Paris meeting also received support from several other sources,
including pilot Heinrich Rupp, who said he flew Casey from Washington’s
National Airport to Paris on a flight
that left very late on a rainy night in mid-October.
Rupp said that after
arriving at LeBourget airport outside Paris, he saw a man resembling
Bush on the tarmac. The night of Oct. 18 indeed was rainy in the
Washington area. Also, sign-in sheets at the Reagan-Bush headquarters in
Arlington, Virginia, placed Casey within a five-minute drive of National
Airport late that evening.
The sign-in sheets showed
Casey stopping in at the campaign headquarters at about 11:30 p.m. for a
ten-minute visit to the Operations Center, which was staffed by CIA
veterans monitoring developments in Iran.
There were other bits and
pieces of corroboration about the Paris meetings. As early as 1987,
Iran’s ex-President Bani-Sadr had made similar claims about a Paris
A French arms dealer,
Nicholas Ignatiew, told me in 1990 that he had checked with his
government contacts and was told that Republicans did meet with Iranians
in Paris in mid-October 1980.
A well-connected French
investigative reporter Claude Angeli said his sources inside the French
secret service confirmed that the service provided “cover” for a meeting
between Republicans and Iranians in France on the weekend of October
18-19. German journalist Martin Kilian had received a similar account
from a top aide to the fiercely anti-communist chief of French
intelligence, Alexandre deMarenches.
During the final weeks of
the House Task Force investigation in 1992, another witness came
forward: the biographer for deMarenches, the legendary leader of
France’s Service de Documentation Exterieure et de Contre-Espionage (SDECE).
The biographer, David
Andelman, an ex-New York Times and CBS News correspondent,
testified that while working with deMarenches on the book, the spymaster
said he had helped the Reagan-Bush campaign arrange meetings with
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 reputations of his friends, William
Casey and George H.W. Bush.
DeMarenches “thought the
world of Casey and Bush, and never wanted anything to come out that
would hurt Bush’s chances for reelection [in 1992] or Casey’s legacy,”
Andelman told me in an interview.
Andelman said that when
he again raised the issue of Bush’s alleged participation in the Paris
meetings during a 1992 book promotion tour, deMarenches refused to
discuss it, responding: “I don’t want to hurt my friend, George Bush.”
The Weapons Flow
While the Republicans have long denied the
claims of a Paris meeting and an October Surprise deal, there is no
doubt that military hardware was soon heading to Iran and that some of
the principals in the hostage intrigue were active in the shipments.
Back in New York, with the FBI listening in,
Cyrus Hashemi began work with Republicans lining up arms shipments to
Iran, including parts for helicopter gun ships and night-vision goggles
The FBI wiretap summary also contained
references to Cyrus Hashemi facing accusations at home that he had been
duplicitous about the hostage issue. On Oct. 22, 1980, the FBI bugs
caught Hashemi’s wife, Houma, scolding her husband for his denials that
he had discussed the hostages with a prominent Iranian. “It is not
possible to be a double agent and have two faces,” Houma warned Cyrus.
On Oct. 23, the FBI listened in on John
Shaheen using one of the bugged phones in Hashemi’s Manhattan office to
brief a European associate, Dick Gaedecke, on the latest hostage
On Oct. 24, an FBI agent wrote down another
cryptic note from the wiretaps indicating that Cyrus Hashemi may have
had ties to Ronald Reagan himself. Using Cyrus Hashemi's initials, the
FBI’s notation read: “CH-banking business about Reagan overseas corp.”
Meanwhile, back in
Europe, a French-Israeli arms shipment to Iran was under way. Iranian
arms merchant Ahmed Heidari said he had approached deMarenches in
September 1980 to seek help getting weapons for the Iranian military,
which was then battling the Iraqi army in Khuzistan province.
Heidari said deMarenches
put him in touch with a French middleman, Yves deLoreilhe, who
facilitated the arms shipment. The flight left France on Oct. 23,
stopped in Tel Aviv to load 250 tires for U.S.-built F-4 fighters,
returned to France to add spare parts for M-60 tanks, before going to
Teheran on Oct. 24. When Carter learned of the shipment, he protested to
Israeli Prime Minister Menachem Begin.
On Nov. 4, 1980, one year
to the day after the Iranian militants seized the U.S. Embassy in
Teheran, Ronald Reagan routed Jimmy Carter in the U.S. presidential
elections. Reagan carried 44 states for a total of 489 electoral votes,
with Carter claiming only six states and the District of Columbia for 49
After the election –
because the FBI had picked up evidence of Cyrus Hashemi’s arms dealing
with Iran – the Carter administration finally froze the shady Iranian
banker out of the hostage talks. But Hashemi kept his hand in, still
moving money to key players.
On Jan. 15, 1981, Hashemi
met with Iranian Revolutionary Guard officials in London and opened an
account for them with 1.87 million pounds (roughly equal to $3 million),
according to the FBI wiretaps.
The money apparently was
to finance more arms sales, but also had the look of a possible payoff
to Khomeini’s hard-line military backers.
On Jan. 19, 1981, the last day of the Carter Presidency, Cyrus Hashemi
was back on one of the bugged phones, describing to a cohort “the
banking arrangements being made to free the American hostages in Iran.”
Hashemi was also moving ahead with military shipments to Iran, amid
concern that there might be more competition ahead.
“How should we proceed
with our friend over there?” the associate asked Hashemi. “I'm just a
little bit nervous that everyone is trying to move in on the action
As the Inauguration
neared, Republicans talked tough, making clear that Ronald Reagan
wouldn’t stand for the humiliation that the nation endured for 444 days
under Jimmy Carter. The Reagan-Bush team intimated that Reagan would
deal harshly with Iran if it didn’t surrender the hostages.
A joke making the rounds
of Washington went: “What’s three feet deep and glows in the dark?
Teheran ten minutes after Ronald Reagan becomes President.”
On Inauguration Day, Jan.
20, 1981, just as Reagan was beginning his inaugural address, word came
from Iran that the hostages were freed. The American people were
The coincidence in timing
between the hostage release and Reagan’s taking office immediately
boosted the new President’s image as a tough guy who wouldn’t let the
United States be pushed around.
President Reagan named
his campaign chief, William Casey, to head the CIA. Donald Gregg became
Vice President Bush’s national security adviser. Richard Allen became
Reagan’s NSC adviser, followed later by Robert McFarlane. Though
relatively young, Robert Gates quickly climbed the CIA’s career ladder
to become deputy director and later CIA director under President George
In the mid-1980s, many of
the same October Surprise actors became figures in the Iran-Contra
scandal when that secret arms-for-hostages scheme with Iran was revealed
in late 1986, despite White House denials and a determined cover-up.
According to the official
Iran-Contra investigations, that plot to sell U.S. weapons to Iran for
its help in freeing American hostages then held in Lebanon involved
Cyrus Hashemi, John Shaheen, Theodore Shackley, William Casey, Donald
Gregg, Robert Gates, Robert McFarlane, George Cave, Ronald Reagan and
George H.W. Bush.
But a political firewall
was quickly built between the Iran-Contra Affair and the October
Surprise case. No aggressive investigation was ever conducted into
whether the origins of the Iran-Contra scandal traced back to the 1980
election and whether CIA operatives, working with George H.W. Bush, had
used their covert skills to alter the course of American political
[To examine the some of
the long-hidden Task Force documents, click
here. To obtain a copy of Secrecy & Privilege, click
Robert Parry broke many of the Iran-Contra
stories in the 1980s for the Associated Press and Newsweek. His latest book, Secrecy & Privilege: Rise of the Bush Dynasty from
Watergate to Iraq, can be ordered at
secrecyandprivilege.com. It's also available at
Amazon.com, as is his 1999 book, Lost History: Contras, Cocaine,
the Press & 'Project Truth.'