Tramp Ship Gives Clues to Iran, Contra Links : Freighter Hauled Arms to Nicaraguan Rebels and Apparently Carried Ransom for Hostages

A small freighter that delivered U.S. guns to Nicaraguan rebels at a time when Congress had banned government aid to the contras later took part in an abortive attempt by Lt. Col. Oliver L. North to free American hostages in Lebanon with $1 million in ransom, government and maritime sources said Thursday.

The ship, which carried a cargo of weapons to the rebels in 1985, was bought in 1986 by a firm with ties to dummy companies involved in the Reagan Administration’s secret arms sales to Iran, the sources said.

A month later, the same ship was apparently used to transport a courier with the $1-million ransom from Cyprus to a point off the coast of Lebanon. There, the money would have been turned over to pro-Iranian terrorists in exchange for the freedom of the American hostages, but the swap ultimately fell through.

The vessel docked in Cyprus on the same day that North--then a member of the National Security Council staff--and other U.S. emissaries arrived in Tehran with a planeload of weapons to bargain for the hostages’ release.

Many details of the history and activities of the Erria, a Danish-flag vessel, remain unknown. There is no clear indication in the records, for example, about whether the vessel made any further arms deliveries to the Caribbean after it was purchased last April 28 by a newly formed company with links to the Iranian arms sales.

Nor is there evidence that money used to pay for the ship came specifically from Iranian weapons sales.

Nonetheless, evidence obtained from port and shipping records gathered by The Times from sources in Denmark, Honduras, Panama and this country suggest that the little steamer, which shuttled back and forth among ports in Europe, Central America, the Middle East and Africa, became an instrument in the tangled dealings between Reagan Administration officials and the contras and Iran.

As a result, what is known of the Erria’s activities over the last two years offers new glimpses into the linkage between arms shipments to the contras and the Iranian arms sales. Both secret operations were overseen by North, who was fired from the White House staff after officials learned that he had apparently diverted funds from the Iranian deal to buy more guns for the contras.

In particular, the Erria appears to have been part of what sources have described to The Times as a plan begun in mid-1986 by North and other figures in the Iran-contras scheme that involved an oceangoing ship and arms deliveries.

This still-shadowy plan was jokingly dubbed Project Democracy, knowledgeable sources have told The Times.

‘Wild and Woolly Things’

“Project Democracy had cash, a vessel, facilities; it ran operations, delivered weapons,” one source said: “It did all kinds of wild and woolly things, maybe legal if they were done by the private sector.”

The Project Democracy venture was “an Ollie operation (from) start to finish,” the source said, speaking on condition that he not be named.

Congressional sources have said that they have some knowledge of Project Democracy’s role in the Iran-contras scheme, but one said Thursday that the Erria purchase had not been disclosed to investigators.

The 299-ton freighter, small by oceangoing standards, has spent much of its life plying European coastal waters, but records show that, from June 2 to June 4, 1985, it made a stop at a Honduras Caribbean port. It was then owned by a private citizen of Denmark.

According to Honduran officials, documents filed during that visit stated that the vessel carried U.S. weapons. And contra sources were quoted in contemporaneous news accounts as saying the Erria unloaded a three months’ supply of weapons for the anti-Sandinista rebels. Among the weapons were Soviet-, West German- and U.S.-made rifles, mortars, machine guns and anti-aircraft guns.

Stopped in Poland

Immediately prior to the Honduras trip, the Erria had called at ports in communist Poland, West Germany and Portugal, where sources said it probably picked up its cargo of war materiel.

It could not be determined who chartered and paid for that 1985 shipment, which occurred at a time when Congress had prohibited all U.S. government aid--military or non-military--to the contra forces.

Congress had not specifically banned donations to the rebels by private U.S. citizens, but the legality of private arms shipments would have been in doubt if they had originated within the United States because of possible violations of this country’s arms export control laws.

The Danish freighter resumed an apparently aimless pattern of voyages through European and North African ports for the next 11 months before being purchased last April 28 by a newly formed company, one of three now known to have links to either the Iran dealings or the contras.

The company, Dolmy Business Inc., is based in Panama. Its officers and precise address could not be learned, but reliable maritime sources say the company’s forwarding address is that of Compagnie des Services Fiduciaires, a firm in Geneva, Switzerland, with a long-disclosed role in the Iran arms sales.

CSF, as it is called, has links to a number of companies in the Iran-contras scheme. They include Lake Resources Inc., the Oliver North-controlled firm through which the Iranian arms profits apparently were channeled, and Stanford Technology Corp., a firm whose principals include retired Air Force Maj. Gen. Richard V. Secord and Albert A. Hakim, two North associates named by the Justice Department as key figures in the Iran-contras scheme.

Set Up Swiss Account

CSF officers helped set up Lake Resources and the Swiss bank account it used to process money from the Iran arms sales, ransom donations and third-party gifts of private aid for the contras, such as the $10 million reportedly given last August by the sultan of Brunei.

Branches of CSF in the Caribbean and Bermuda have variously been reported to have bought airplanes that were delivered to the contras and to have laundered millions of dollars of aid for the anti-Sandinista rebels.

Authoritative government sources say Dolmy Business Inc. did not operate the Erria but, instead, leased it to a Panamanian company with ties to the contras, Udall Research Corp.

Udall Research shares officers or incorporators with some branches of Stanford Technology, CSF and Lake Resources. Last year, Udall constructed a 7,000-foot runway in Costa Rica that sources say was used in airlift supply operations to the contras.

It was after the ship was purchased by Dolmy Business Inc. that its registry was changed.

Registered in Panama

The Danish government allows only domestically owned ships to fly under its flag and, in May, it ordered Dolmy to change the Erria’s registry. The ship later was registered in Panama.

Last May 28, the Erria docked in the Greek Cypriot port of Larnaca.

That was the day North, along with former National Security Adviser Robert C. McFarlane, White House aide Howard Teicher and others were arriving in Tehran for meetings they expected would end with the release of American hostages in Lebanon.

On the scene in Cyprus, sources have told The Times, was another North associate, ex-CIA officer and arms dealer Thomas Clines of Middleburg, Va. Clines, former CIA director of training for covert operations, left the agency in 1978 after allegations linked him to Edwin P. Wilson, another ex-CIA officer now in prison for selling explosives to Libya.

One reliable government source told The Times that Clines was a figure in North’s Project Democracy operation, although his precise role remains unclear. His whereabouts were not known on Thursday.

The Erria remained in Cyprus until June 5, several days after the Tehran negotiations collapsed, and then returned to Portugal and Denmark. From then until the end of the year, it traveled an irregular European and African route, maritime sources say.

Ship Vanished for Weeks

The Erria disappeared from public view for at least three weeks--and possibly longer--last July, sources say. This was immediately after the ship had made a series of stops in Poland, West Germany and Portugal that were virtually identical to the route it followed before its 1985 journey to Honduras.

One reliable maritime source said it appeared highly unlikely that the 50-meter vessel could make a transatlantic trip such as the one to Honduras in only three weeks, although it could have traveled to some intermediate transshipment point.

The vessel made another stop in Cyprus last Oct. 5, as U.S. and Iranian negotiators were again arranging an arms deal that North believed would free three remaining U.S. hostages held in Lebanon by pro-Iranian forces.

When those arms were delivered in late October, and when the Iran-contras scandal unfolded in early November, the ship was in Oman, across the Strait of Hormuz from Iran. But its exact location and the length of its stay were not known.

Staff writers William C. Rempel in Los Angeles, Marjorie Miller in Tegucigalpa, Honduras, Tyler Marshall in London and Charles Wallace in Larnaca, Cyprus, contributed to this story.