THE “SHADOW C.I.A.” AND THE REVENGE OF THE SPOOKS: THE OCTOBER (1980) SURPRISE: Part One

In 1980, Ronald Reagan’s Republican operatives worked with the shadow C.I.A. as well as agents within the Langley based agency and with Iran to frustrate President Jimmy Carter’s efforts to secure the release of 52 hostages. At the very least, they violated laws prohibiting private diplomacy.

Most of the plotters had backgrounds in national security work and believed that Carter had weakened the C.I.A. and was not following a sufficiently strong foreign policy. Neo-Conservatives and some conservatives were embracing the idea that the Soviet Union was using terrorism across the globe to attack the West, and they were angry that Carter did not seem to accept their theory. Once in power, Bill Casey, one of the key figures in this October Surprise, would plant false information in the press to make Lybia look even worse than it really was in order to strengthen the Reagan administration’s anti-terrorism offensive.

The idea that the Soviet Union was promoting terrorism throughout the world developed among some of the right-wing old guard in the C.I.A. in the late 1970s and was forcefully propounded in Claire Sterling’s The Terror Network, the contents of which became an article of faith for right-wingers, including, Reagan, Haig, and Casey. There was very little evidence to support the claim, other than evidence that the Soviets were probably behind the effort to kill John Paul II.

When Director of Intelligence Robert Gates instructed subordinates to flesh out this charge in 1985, there was little evidence to support it, but eventually it developed that his guess was correct. An unbiased observer could claim that the US sponsored more terrorism than the Soviets in the 1980s and probably build a very strong case.

Beginning in 1979, the Department of State began listing states that were involved in sponsoring terrorism. The listing began as part of a serious effort to deal with terrorism. Soon it became the centerpiece of a program to claim that the nation’s enemies, including the Soviets were involved sponsoring terrorism. Claims of about communist state-sponsored terrorism frightened people and were useful in obtaining larger and larger military appropriations. 1

Fifty two Americans were seized by Iranian militants in November, 1979 and were being held as hostages through the 1980 American political campaign. . In the 1980 race for the White House, Republicans heard that the Carter administration might trade plane parts for hostages in Iran. The parts were necessary because Iraq had invaded Iran. F.B.I. wiretaps were to show that Cyrus Hashemi, who was supposed to be helping Carter deal with the Iranians was actually helping the Republicans block Carter and make their own deal. The deal saw large amounts of BCCI money sent into Hashemi’s bank , First Gulf Bank and Trust, sometimes flown into Paris . The F.B.I. followed these transactions because it was looking for drug and arms transactions. When the Reagan administration took power, the wire taps were ended and Hashemi was warned of the activities of US enforcement agencies that concerned him.

Thirteen years later, his older brother Jamshid testified before a Congressional Committee about this, but investigators were blocked from pursuing the matter. The investigators who were Senate employees were even barred by Bob Dole, Mitch McConnell, and Jesse Helms from leaving the District of Columbia to pursue leads. The House side of the investigation was run by a Democrat who had a record of cooperating with Republicans on touchy matters.

Republicans immediately and continuously denounced the possible Carter deal with the Iranians as treasonous. They alerted friendly military officers to keep close tabs on military airports for signs this could occur. Meanwhile, the Republicans secretly negotiated with representatives of a enemy foreign power. Active and former C.I.A. officers and assets played major roles in the deal with Iran. They detested Jimmy Carter for his attempts to reform the agency and were determined to keep him from being reelected. Former C.I.A. men manned round the clock an office at the GOP campaign’s Arlington Operations Center in order to keep tract of developments in Iran.


Years later, in a November 7 interview on the MacNeil-Lehrer News Hour, former Reagan national security advisor Richard Allen inadvertently revealed that the Reaganites had made a deal with Iran to hold the hostages until after the election. He said that Cynthia Dwyer, a journalist, was retained by the Iranians to make sure that the Republicans carried out their end of the deal. No one asked him “what deal” and to this day it most mainline commentators deny there was a deal. Allen was also to refer to all the former C.I.A. men working in the Bush operation as” a plane load of disgruntled C.I.A." officers "playing cops and robbers." Robert McFarlane also has acknowledged that the October Surprise deal did occur. Mc Farlane eventually told German reporter Martin Kilian that an an Iranian first alerted Senator John Tower that his country was interested in a deal to exchange the hostages. Tower later led an investigation of the Iran/Contra scandal.

McFarlane was then working for Tower and seems to have been the first person to raise the possibility of the Republicans making a separated deal with the Iranians, Outbidding Carter. McFarlane attended the first Washington meeting with an Iranian emissary. Also present were Richard Allen and Lawrence Silverman, a former C.I.A. man, who would later be appointed a federal judge and was to claim that Lawrence Walsh’s investigation of Iran/Contra and Oliver North was unconstitutional.

The talkative McFarlane later told a Greek journalist that the October Surprise involved the promised shipment of $5 billion worth of arms to Iran, and that $1.3 billion worth had been sent by 1986. In 1988, CBS had a documentary on the October Surprise prepared for airing on Sixty Minutes, but it was never shown 2

Republican campaign manager William Casey, a former C.I.A. hand, Edwin Meese, and others successfully negotiated a deal with representatives of the Iranian government to assure that the hostages would not be released while Jimmy Carter was president. Casey had the help of many active and former C.I.A. personnel who resented Carter’s reforms at the agency. Robert Gates, executive assistant to Stansfield Turner leaked word that Carter was negotiating with the Iranians and the Republicans information, and Carter was certain that NSC member Donald Gregg also fed national security information to the Republicans. “Eyes Only” and “ Top Secret” documents from the US embassy in Tehran were found in Reagan’s campaign files. The Gipper simply said he had no idea how they got there.

Some years later, Reagan’s Second Attorney General Richard Thornburgh blocked a Freedom of Information Request to obtain F.B.I. tapes of the conversations of Iranian banker and arms dealer Cyrus Hashemi. Among the tapes were two telephone calls from a Houston lawyer who said he represented vice presidential candidate George H.W. Bush. The first call was about a $3,000,000 payment to Hashemi and the last was about a large payment that was to be made in 1981. They are called the “Pottinger Tapes,” and reveal that a active C.I.A. official was explaining how arms would be shipped to Iran without detection by the Carter government. In 1995, a sworn deposition from senior C.I.A. agent senior C.I.A. officer Charles Cogan was found among discarded papers of the committee that hastily looked into the October Surprise. Cogan told of a meeting at Langley in 1981 at which high ranking Republican visitors bragged about disrupting Jimmy Carter’e efforts to secure the release of the hostages.