In November 1985, there was another round of negotiations, where the Israelis proposed to ship Iran 500 HAWK surface-to-air missiles in exchange for the release of all remaining American hostages being held in Lebanon. General Colin Powell attempted to procure the missiles, but realized that the deal would require Congressional notification as its overall value exceeded $14 million. McFarlane responded to Powell that the President had decided to conduct the sale anyway. Israel sent an initial shipment of 18 missiles to Iran in late November, 1985, but the Iranians didn't approve of the missiles, and further shipments were halted. Negotiations continued with the Israelis and Iranians over the next few months.

In December 1985, President Reagan signed a secret presidential "finding" describing the deal as "arms-for-hostages."

In January of 1986, the Administration approved a plan proposed by McFarlane employee Michael Ledeen, whereby an intermediary, rather than Israel, would sell arms to Iran in exchange for the release of the hostages, with proceeds made available to the Contras. At first, the Iranians had refused the weapons from Manucher Ghorbanifar, the Iranian intermediary, when both Oliver North and Ghorbanifar created a 370% markup (WALSH, Lawrence E. "Firewall"). With the marked-up income of $10 million from the $3.7 million before, and the Iranian backed militants capturing new hostages when they released old ones, this was the end of the arms-for-hostages deal. In February, 1,000 TOW missiles were shipped to Iran. From May to November, there were additional shipments of miscellaneous weapons and parts.

Funding the Contras

Proceeds from the arms sales were made available, in an arrangement instituted by Colonel Oliver North, aide to the U.S. National Security Advisor John Poindexter, to purchase arms for the Nicaraguan Contras (from Spanish contrarrevolucionario, trans. "counter-revolutionary"). The Contras were waging an insurgency against the Marxist Sandanista government, but, under the Boland Amendment, the U.S. Congress barred American funding to the Contras. Thus, the Reagan administration illegally provided covert financial assistance to the Contras in order to circumvent Congress, made possible by the North's diversion of profits from weapons sales to Iran. In addition, the Contras received weapons and training from the Central Intelligence Agency.

The economy of Nicaragua deteriorated under the continuing contra attacks on the country's infrastructure and the inability of the government to obtain financing from Western institutions such as the World Bank due to U.S. opposition. The devastation of Hurricane Joan in 1988, called by then-US Ambassador to Honduras John Negroponte "a contra victory," was another serious blow. In the 1990 elections, President Daniel Ortega lost to former Sandanista Violeta Chamorro, who ran with open US support on an anti-Sandanista coalition platform.

Discovery and scandal

The Lebanese magazine Ash-Shiraa exposed the arrangement on 3 November 1986. This was the first public reporting of the weapons-for-hostages deal. The operation was discovered only after an airlift of guns was downed over Nicaragua. The scandal was compounded when on November 21, Oliver North and his secretary Fawn Hall shredded pertinent documents. US Attorney General Edwin Meese on November 25 admitted that profits from weapons sales to Iran were made available to assist the anti-communist Contra rebels in Nicaragua.

On November 26 President Reagan, faced with mounting pressure from Congressional Democrats and the media, announced that as of December 1 former Senator John Tower, former Secretary of State Edmund Muskie, and former National Security Adviser Brent Scowcroft would serve as members of a Special Review Board looking into the matter; this Presidential Commission became known as the Tower Commission. At this point, President Reagan said he had not been informed of the operation. The Tower Commission, implicated North, Poindexter, and Weinberger, amongst others. It did not determine that the President had knowledge, although it argued that the President ought to have had better control of the National Security Council staff.

The U.S. Congress then on 18 November 1987 issued its final report on the affair, which stated that the President bore "ultimate responsibility" for wrongdoing by his aides and his administration exhibited "secrecy, deception, and disdain for the law." Oliver North and John Poindexter were indicted on multiple charges on March 16, 1988. North, indicted on nine counts, was initially convicted of three minor counts although the conviction was later vacated upon appeal on the grounds that North's Fifth Amendment rights may have been violated by indirect use of his testimony to Congress which had been given under a grant of immunity. Poindexter was convicted on several felony counts of lying to Congress, obstruction of justice, conspiracy, and altering and destroying documents pertinent to the investigation. His convictions were also overturned on appeal on similar grounds as North's. The Independent Counsel chose not to re-try North or Poindexter.

On June 27, 1986, the International Court of Justice (or World Court) ruled in favor of Nicaragua in the case of Nicaragua v. United States . The U.S. refused to acknowledge the court's jurisdiction, and subsequently vetoed a United Nations Security Council Resolution calling on all states to obey international law. The United Nations General Assembly passed a resolution in order to pressure the U.S. to pay the fine.

The Sandinistas lost power in February 1990 after losing much of their initial popularity due to economic woes and the continuining aid provided by the US government to anti-Sandinista elements. -

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