Irangate Affair
The Irangate Affair
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The Irangate Affair


By: Uri Shitrit

In 1991 I managed one of the most complicated and sensitive cases ever investigated by the National Unit for Fraud Investigations with my colleague, Michael Movshovitz. This affair received the unflattering nickname, “Irangate,” based on the “Watergate” affair that led to President Nixon’s impeachment from the presidency in 1974.

I am astonished anew every time by how the wheel turns. The war in the north against the Hezbollah brought back memories of that investigation I conducted 15 years ago, which I will share with you. As odd as it may sound, the central players from back then are the same players as today. The context is completely different.

About 20 years ago, Iran (run by the Ayatollahs) was in the midst of a bloody war with its Iraqi neighbor. The Iranian government desperately needed Western weaponry in order to retaliate against the Iraqi aggressor. The United States placed a weaponry embargo on Iran after the Humeini revolution in 1979.

The Iranian revolutionaries took over the American Embassy, damaged it down to the foundations, and took the embassy employees (who were not yet able to escape the country) as hostages. A complex American operation that attempted to release the kidnapped hostages failed completely.

The Hezbollah was taking its first steps in Lebanon. Its first significant test as the military branch of Iran passed extremely successfully. The organization succeeded in kidnapping American diplomats from the United States Embassy in Lebanon. The world was amazed. The Americans tried very hard to figure out how to release the hostages. Today, Israel is in the same predicament regarding its own hostages taken in Lebanon.

When governments cannot solve diplomatic and military crises on their own, then businessmen, former governmental employees, and others come into the picture and seek creative solutions to the problem. One such person was the well known businessman, Yaacov Nimrodi. 

Nimrodi began as an informant for the Haganah. Later on he joined the Palmach unit of soldiers disguised as an Arab in order to carry out a military operation or to gather intelligence. After that, he served as an officer in an intelligence unit. In 1955 he was sent to Iran by the Mossad. From 1960-70, he was an IDF attaché in Iran and director of the Ministry of Defense delegation.

After his release from the IDF in 1970, he continued to use his connections in Iran as a private businessman in the field of security and economic exports until the Shah’s power fell as a result of the 1979 revolution. He made his big money by doing business with the Iranians. We are all familiar, till this day, of the results of his business success. 

With a background like that, it is only natural that Iranian entities belonging to the moderate part of the Iranian leadership would turn to Nimrodi in 1985. These entities wanted very much to improve the relationship between Iran and the United States (who was not responding to Iran’s overtures). The Iranians didn’t give up. Supplying weapons for the war against Iraq was their goal.  They knew that the bridge to the American government passed through Israel. 

Nimrodi informed the Prime Minister of the time, Shimon Peres, the Foreign Minister, Itshak Shamir, and the Minister of Defense, Itshak Rabin, of the contacts being made. The green light was given to continue making contact with the Iranians. Nimrodi enlisted Al Schwimmer, one of the founders of the aerial industry and a close friend of Shimon Peres, and David Kamchi, a former deputy director of the Mossad and CEO of the Ministry of Foreign Affairs. The team begun to prepare their business transaction for selling weapons to Iran. 

Nimrodi made an agreement with the Ministry of Defense so that he could purchase weapons from them as a private businessman. His profit from the transaction would be the difference between the purchase price and the price sold to the Iranians. The sales money was deposited in a bank account name “Transeagle.”  The account was held in the Swiss bank, Credit Suisse.

Nimrodi’s team was involved in four weaponry business transactions. The first one began in April 1985, and the last one ended in November of the same year.  In the framework of the first transaction (nicknamed “Cosmos”), weapons and ammunition were supposed to be sold to the Iranians. The transaction didn’t go through.

In the second and third transactions (nicknamed “Cappuccino” and “Cappuccino 2”) tao rockets were sold to the Iranians. In the fourth transaction, it was agreed upon that 80 improved tao rockets would be sold to the Iranians. When the delivery arrived to the Iranian clients, they discovered that the rockets were not improved but rather outdated. The deal was shattered and irreversible damage was caused to the trust that had developed between the two parties.

At this point, the United States came into the picture. The Congress passed a law forbidding the sale of weapons to Iran. The development of the rockets was funded by US grants as well, giving it veto power over the sales. Despite the strong will and public pressure to do everything possible to free the kidnapped hostages in Lebanon, the Congress did not change its mind regarding the embargo placed on Iran. 

John Poindexter (the National Security Advisor) and his assistant, Oliver North, thought differently from Congress. They wanted to give President Reagan peace of mind. In a  blunt bypassing of the decision made in Congress, they begun to make secret contacts in order to release the hostages in return for selling US produced weapons to Iran.

They knew about the weaponry business transactions between the Nimrodi team and the Iranians, authorized by the Israeli Cabinet.  Their efforts were fruitful.  With the help of Israeli mediation, the kidnapped American priest Benjamin Weir was released in August 1985. 

In November, 1985, the Americans were expecting an additional release of hostages in return for the sale of Hawk Rockets to the Iranians. In 1986, after the business transaction relating to the unimproved rockets erupted, Oliver North continued to make deals with the Iranians regarding weapons and spare parts.

It was later discovered that North used the funds received from the transactions with the Iranians to fund a group of rebels in Nicaragua called the “Contras”.  This group was rebelling against the Sandinista regime, then in power in Nicaragua.

The United States was accusing the Sandinista regime (which was supported by Cuba and the USSR), at the time, of supporting a group of communist rebels that were trying to depose the regime in El Salvador (that was supported by the US). The CIA trained the “Contras” rebels and Oliver North purchased weapons for them by using the funds received from the Iranian transactions. 

The whole “Contras” affair blew up in the Americans’ face in November 1986. The Lebanese newspaper, A-Sharah, published a story revealing that the United States was selling weapons to Iran in return for the release of hostages. A few weeks later it was discovered that a plane was shot down in Nicaragua, which contained a delivery of weapons to the Contras. The only survivor of the crash told his captors that he had been sent by the CIA.

President Reagan could not handle the public pressure to expose the truth about this scandal.  Under his order, an investigation committee was established in order to determine what had happened.  The Congress and Senate investigated the affair as well.

Israel’s name was brought into the affair also. Israel was forced to reveal its involvement in business transactions with Iran to the Americans. In Israel a team was established to collect materials and testimonies, and it prepared a detailed report.  Israel formally confirmed its involvement in the weaponry transactions, but denied its connection to the “Contras” rebels.

The Israeli investigative team, directed by Major-General Raphael Vardi, suspected that the Ministry of Defense did not receive the full financial amount (totallying two million dollars) from Nimrodi that was received from the Iranians in the sales transactions. The report was submitted to the Attorney General at the time, Dorit Beinish.  Via the Jerusalem County Attorney at the time, Uzi Hason, an investigation team that was established ad hoc was required to investigate the suspicion attributed to Nimrodi.

The investigation was so secretive and departmentalized, that only the Inspector General, the director of the Investigation Division, the director of the unit, and we, the investigators, knew about it. There were no leaks back then, as there are today.  We kept our secret. We successfully fooled photographers and reporters who constantly stood outside the unit officers, looking for another scoop. They didn’t get what they were looking for from the investigators.

Who wasn’t interrogated regarding this affair? Beginning from Prime Minister Shimon Peres, to all the directors of security forces, to the Ministry of Foreign Affairs and officers in the field of intelligence services. After eight months of investigations the main suspect, Yaacov Nimrodi, was interrogated as well.

Nimrodi came to the interrogation well prepared. He had an answer supported by documentation for every question. Statements from the bank in Switzerland through which the funds were managed were presented to him. He couldn’t argue with the facts in these documents. We, the investigators, could neither confirm nor refute the suspicion that Nimrodi had hidden information from the Swiss bank statements. Even if we wanted to formally check this, we couldn’t.

Those days, Swiss bank secrecy meant something. There was no legal way to break the wall of bank secrecy and check Nimrodi’s account.

At a meeting summarizing the findings of the investigation, held in the offices of Attorney General Dorit Beinish, all the evidence collected throughout the exhaustive and prolonged investigation was presented. We presented the limitations affecting us with regards to the Swiss bank accounts.  With no choice, and to the chagrin of the Attorney General, it was decided that the case would be closed due to lack of evidence.

Nimrodi, of course, celebrated the final result of those investigations which saved him from receiving an indictment. A week after the decision was made, he gave a television interview to Channel One and told his version of the story. In this manner the general public became aware of the “Irangate” affair and its results.  Approximately two years ago, Nimrodi published a comprehensive book accompanied by many appendixes about the affair. The book is titled “The Hope and the Failure”. The public can judge who failed and who is hopeful.