September 18, 2000

       Iran-Contra & Wen Ho Lee
            By Robert Parry

         Over the last few years, Republicans have trumpeted
         suspicions that Democratic fund-raising abuses in 1996
         somehow helped communist China steal nuclear secrets
         jeopardizing U.S. national security. Leading conservatives
         accused President Clinton and Vice President Gore of
         “appeasement” and possibly treason.

         The extreme Republican rhetoric, which rose in the months after President
         Clinton survived impeachment over the Monica Lewinsky case in 1999, set
         the stage for the harsh nine-month imprisonment of Los Alamos nuclear
         physicist Wen Ho Lee, who was released on Sept. 13 after a plea bargain
         and an extraordinary apology from a federal judge.

         Yet, ignored amid the dark suspicions about the Clinton-Gore administration
         and the embarrassing collapse of the Lee case was another startling set of
         facts pointing in a very different direction: to illegal U.S.-Chinese intelligence
         collaboration implicating the Reagan-Bush administration.

         Little-noticed evidence from the Iran-contra files reveals that it was the
         Reagan-Bush administration that opened the door to sharing sensitive
         national security secrets with communist China in the 1980s.

         This clandestine relationship evolved from China’s agreement to supply
         sophisticated weapons to the Nicaraguan contras beginning in 1984, a deal
         with the White House that entrusted China with one of the government’s
         most sensitive intelligence secrets, the existence of Oliver North’s contra
         supply network.

         In the years after that secretly brokered deal, the Republican administration
         permitted trips in which U.S. nuclear scientists, including physicist Wen Ho
         Lee, visited China in scientific exchange programs. Those visits
         corresponded with China’s rapid development of sophisticated nuclear
         weapons, culminating in the apparent compromise of sensitive U.S. nuclear
         secrets by 1988.

         Seven years later, in 1995, a purported Chinese defector walked into the U.S.
         Embassy in Taiwan and turned over a document. Dated 1988, the document
         contained detailed information about U.S.-designed nuclear warheads.

         The document showed that Chinese intelligence possessed the secrets of
         the W-88 miniaturized nuclear bomb by the last year of Ronald Reagan’s
         presidency. China’s first test of a light warhead similar to the W-88 was
         conducted in 1992, the last year of George H.W. Bush’s presidency.

         In other words, the secrets of the W-88 – the central concern about Chinese
         nuclear espionage – had been compromised before the Clinton-Gore
         administration began. Logic would dictate then that any serious investigation
         into how Chinese intelligence maneuvered into a position to glean U.S.
         nuclear secrets should focus on the Reagan-Bush years when the secrets
         were lost, not the Clinton-Gore years.

         China’s Missile Shipment

         An examination of the Reagan-Bush time frame – and particularly the
         Iran-contra files – reveal how Chinese military intelligence ingratiated itself
         with the U.S. government. In 1984, the Reagan-Bush administration was
         desperately seeking a source of anti-aircraft missiles that could be smuggled
         to the Nicaraguan contras, a CIA-backed operation that was seeking to
         overthrow the leftist Sandinista government of Nicaragua.

         By late 1984, the U.S. Congress had prohibited additional U.S. military
         support for the contras, who had developed an unsavory reputation for
         rampaging through Nicaraguan villages, raping, torturing and murdering as
         they went. One contra director acknowledged the practice of staging public
         executions of Nicaraguan government functionaries. [For details, see Robert
         Parry’s Lost History.]

         Despite this congressional contra-aid ban, the White House was determined
         to secure surface-to-air missiles that the contras could use to shoot down
         Soviet-made attack helicopters that had become an effective weapon in the
         Nicaraguan government’s arsenal. Operatives working secretly with Oliver
         North, a Marine officer assigned to the National Security Council staff, settled
         on China as a source for SA-7 missiles.

         In testimony at his 1989 Iran-contra trial, North called the securing of these
         weapons a “very sensitive delivery.” For the Chinese missile deal, North said
         he received help from the CIA in arranging false end-user certificates from
         the right-wing government of Guatemala. North testified that he “had made
         arrangements with the Guatemalan government, using the people [CIA]
         director [William] Casey had given me.”

         But China was opposed to the Guatemalan government, which was then
         engaged in a scorched-earth war against leftist guerrillas. Because the
         Guatemalan army had massacred tens of thousands of Indians – including
         the annihilation of entire villages considered sympathetic to the guerrillas –
         China was not willing to sell missiles to Guatemala.

         To resolve this problem, the White House brought the Chinese communists
         in on what was then one of the most sensitive secrets of the U.S.
         government: the missiles were not going to Guatemala, but rather into a
         clandestine pipeline arranged by the White House to funnel military supplies
         to the contras in defiance of U.S. law. This was a secret so sensitive that not
         even the U.S. Congress could be informed, but it was to be shared with
         communist China.

         In fall 1984, North enlisted Gaston J. Sigur, the NSC’s expert on East Asia, to
         make the arrangements for a meeting with a communist Chinese
         representative, according to Sigur’s testimony at North’s 1989 trial. “I
         arranged a luncheon and brought together Colonel North and this individual
         from the Chinese embassy” responsible for military affairs, Sigur testified.

         “At lunch, they sat and they discussed the situation in Central America,”
         Sigur said. “Colonel North raised the issue of the need for weaponry by the
         contras, and the possibility of a Chinese sale of weapons, either to the
         contras or, as I recall, I think it was more to countries in the region but clear
         for the use of the contras.”

         North described the same meeting in his autobiography, Under Fire. To avoid
         coming under suspicion of being a Chinese spy, North said he first told the
         FBI that the meeting had been sanctioned by national security adviser Robert
         C. McFarlane. Then, North went ahead with the meeting to gain the help of
         communist China.

          “Back in Washington, I met with a Chinese military officer assigned to their
         embassy to encourage their cooperation,” North wrote. “We enjoyed a fine
         lunch at the exclusive Cosmos Club in downtown Washington.”

         North said the Chinese officials saw the deal, in which China supplied SA-7
         missiles, as a way to “stick it to the Soviets,” China’s chief rival in the
         communist world. North said the Chinese communists also saw the
         collaboration as a way to develop “better relations with the United States.”

         Possession of this knowledge – one of the Reagan administration’s most
         politically dangerous secrets – put Beijing in position to leverage U.S. policy
         in the future.

         With China’s assistance on the missile deal secured, the shipment went
         forward, although with additional delays. Contra leader Adolfo Calero began
         calling the ship carrying the missiles “the slow boat from China.”

         North noted that CIA officers in the field soon got wind of the weapons
         transfer. “So many cables were coming in that [CIA director] Casey ordered
         his stations to stop reporting on this shipment,” North wrote.

         When the missiles finally reached Guatemala, the Guatemalan army was so
         nervous about them falling into the hands of leftist guerrillas that the army
         gave the missiles a military escort across the country.

         The shipment hit another snag when it reached Honduras. The Honduran
         government balked at distributing the missiles to the contras in their
         Honduran base camps near the Nicaraguan border.

         “When they [the missiles] were delivered to Honduras, it was, as I
         remember, right on the heels of a vote in which the Congress had voted
         down again the president’s request for [contra] aid, and the Honduran
         government seized” the shipment, North testified at his trial.

         “I wrote a memo to the national security adviser [McFarlane] and asked him
         to have the president call the president of Honduras … and ask him to
         release that supply of weapons because the resistance [the contras]
         desperately needed it,” North said.

         Reagan agreed, but his personal intervention prompted a subtle demand
         from Honduran president Roberto Suazo for a quid pro quo arrangement in
         which Honduras would receive increased U.S. aid in exchange. The
         diplomatic minuet dancing around this sensitive quid pro quo issue
         apparently drew in Vice President Bush during a visit to Honduras as
         Reagan’s personal intermediary.

         Eventually, Honduran authorities agreed to deliver the Chinese missiles to
         the contras. In the following months, the Reagan-Bush administration
         increased aid levels to Honduras.

         As Iran-contra special prosecutor Lawrence Walsh later wrote in his book
         Firewall, “quid pro quo exchanges had been commonly discussed at
         policy-making levels and had been almost routinely carried out.”

         Also in connection with third-country contra assistance, Reagan promised to
         back trade legislation sought by El Salvador, where North’s resupply
         operation was based, and the president granted concessions to Guatemala
         and Panama, two other countries helping out the contra cause, Walsh wrote.

         Bush’s role in the quid pro quos remained one of the last unanswered
         questions of the Iran-contra scandal.

         After his election defeat in 1992, Bush pardoned six Iran-contra defendants
         effectively shutting down Walsh’s investigation. In early 1993, Bush also
         ducked Walsh’s request for an interview that would have questioned Bush
         about his personal involvement in various parts of the scandal.

         One of the interview topics was to have been “Bush’s knowledge of or
         involvement with Central American or other countries in exchange for their
         support of the contras,” according to Walsh’s final report on the Iran-contra
         affair. [See Vol. 1, p. 480.] One of those “other countries” could have been
         communist China, where Bush had served as the chief U.S. diplomatic
         representative in 1974 and 1975.

         With the quid pro quo questions blocked by Bush’s mass Iran-contra
         pardons and his refusal to be interviewed, no additional light was shed on
         what communist China got out of the missile sale to the contras, what
         China’s “better relations with the United States,” as Oliver North put it, had
         won for the People’s Republic.

       Page 2: Nuclear Secrets

         In the years that followed, U.S. nuclear scientists held a
         number of meetings with their Chinese counterparts to discuss
         areas of mutual interest.

         While the Americans were under restrictions about what information could
         be shared, it has never been clarified exactly why these meetings were held
         in the first place – why the risk was taken that some U.S. scientist might
         willfully or accidentally divulge nuclear secrets.

         These scientific contacts in the 1980s sowed the seeds of the Wen Ho Lee

         In 1995, after the Chinese agent delivered the so-called “walk-in” document
         indicating that U.S. nuclear secrets had been compromised by 1988,
         investigators for the U.S. Energy Department began focusing on U.S.
         scientists who had traveled to China during the 1980s. The investigators
         developed a list of a dozen names, including a lead suspect, Wen Ho Lee, a
         Taiwanese-born naturalized U.S. citizen.

         As The Washington Post reported, “Lee was at the top of the list because he
         had traveled to China in 1986 and 1988, and because he and his wife, Sylvia,
         had taken an active role in greeting visiting Chinese scientists” who toured
         nuclear labs in the United States. [WP, Sept. 17, 2000]

         By 1998, amid the impeachment drive to oust President Clinton, Republicans
         on Capitol Hill got wind of these investigations.

         The Republicans eagerly sought to link the espionage suspicions to
         allegations of improper Chinese donations to the 1996 Clinton-Gore
         reelection campaign. Democratic fund-raiser Johnny Chung had been
         accused of funneling a $30,000 donation from a Chinese military intelligence
         front to the campaign.

         By early 1999, word was spreading about a Los Alamos espionage suspect
         with an Asian name. In March 1999, “Chinagate” exploded as a scandal with
         front-page stories by Jeff Gerth and James Risen of The New York Times
         about possible Chinese espionage at the Los Alamos nuclear lab.

         Soon, Wen Ho Lee was identified as the chief suspect and was fired for
         transferring sensitive classified material to his personal office computer.

         On May 25, 1999, a select House committee headed by Rep. Christopher
         Cox, R-Calif., released an 872-page report in three glossy, bound volumes.
         The report described how the Chinese government supposedly stole nuclear
         secrets while the Clinton administration dragged its feet on investigating.

         The Cox report did what it could to implicate the Democrats and absolve the
         Republicans. A chronological chart about the alleged espionage covered two
         pages [p. 74-75] and packed all the boxes describing evidence of espionage
         into the years of the Carter and Clinton administrations.

         Nothing sinister appeared in the 12-year swath of the Reagan-Bush years,
         other than a 1988 test of a neutron bomb built from secrets that the report
         said were believed stolen in the “late 1970s,” the Carter years.

         Only a careful reading of the text inside the boxes revealed that the principal
         security breaches under review, particularly the stolen secrets of the W-88
         miniaturized nuclear bomb, occurred “sometime between 1984 and 1992,”
         the Reagan-Bush years. The first test of the lighter warhead occurred in
         1992, the last year of the Bush administration.

         The illogic of blaming secrets apparently lost during a Republican
         administration in the 1980s on Democratic fund-raising in 1996 didn’t stop
         the stampede of media pundits who latched onto the Republican allegations.
         In spring 1999, “Chinagate” filled a void in Clinton scandals left by Clinton’s
         impeachment acquittal in the Senate.

         Dan Quayle, the former vice president who then was testing the waters for a
         presidential run, accused the Clinton-Gore administration of “appeasement”
         of China in “espionage involving our most critical secrets.” [NYT, Sept. 16,

         Other conservatives saw a new opening for fund-raising. Larry Klayman’s
         Judicial Watch sent out a solicitation letter seeking $5.2 million for a special
         “Chinagate Task Force” that would “hold Bill Clinton, Al Gore and the
         Democratic Party Leadership fully accountable for election fraud, bribery and
         possibly treason. … Chinagate involves actions by President Clinton and
         Vice President Gore which have put all Americans at risk from China’s
         nuclear arsenal.”

         Eventually, more tempered assessments emerged. A panel of intelligence
         officials reviewed the evidence and came away with far less certainty about
         the significance of Chinese espionage than the Cox committee believed.

         The Chinese advances “have been made on the basis of classified and
         unclassified information derived from espionage contact with U.S. and other
         countries’ scientists, conferences and publications, unauthorized media
         disclosures, declassified U.S. weapons information, and Chinese indigenous
         development,” the panel reported.

         The intelligence experts could not decide which sources had been most
         important or what the Chinese had gained from the various strategies.

         In June 1999, a study by the President’s Foreign Intelligence Advisory Board
         – chaired by former Sen. Warren Rudman, R-N.H. – concluded that the
         spying probably was less than “widely publicized.” Rudman’s panel also
         found that the W-88 secrets were in the hands of other federal agencies by
         1983, so the leak could have come from elsewhere than Los Alamos.

         The board also judged that suspicions had unfairly settled on Wen Ho Lee
         because of his Chinese heritage.

         Finally, on Sept. 7, 1999, The New York Times, which had stoked the
         “Chinagate” scandal six months earlier, retreated from its overheated
         coverage. The new article by William J. Broad noted that the evidence was
         much more tenuous than the Cox report had represented.

         “A review of the dispute, based on months of interviews and disclosures of
         weapons and intelligence secrets, suggests that the congressional report
         went beyond the evidence in asserting that stolen secrets were the main
         reason for China’s breakthrough,” Broad wrote.

         Though the intense spy fever had broken, its consequences had not played
         out. The Justice Department obtained a 59-count indictment against Wen Ho
         Lee for mishandling classified material and arranged to have him held in
         solitary confinement with his cell light on at all times. The 60-year-old
         scientist was allowed out of his cell for one hour a day and allowed to shuffle
         with leg shackles around a prison courtyard.

         After nine months of incarceration, a key FBI witness against Lee
         acknowledged overstating some of the evidence and infuriated U.S. District
         Judge James A. Parker. At a court hearing on Sept. 13, Parker accepted
         Lee’s plea bargain to a single count of mishandling classified material and
         freed the scientist.

         The judge said he had been “led astray” by the U.S. government and
         apologized to Lee for the “demeaning, unnecessarily punitive conditions”
         under which Lee was held.

         Parker allowed Lee to go free with no additional prison time. Still, federal
         prosecutors said they will compel Lee to make a full explanation of why he
         downloaded the classified data. After the plea bargain, some of Lee’s
         associates offered a fairly innocuous explanation. They said Lee felt he
         needed the data so he could continue to do unclassified work if he lost his
         job at Los Alamos, The Washington Post reported. [WP, Sept. 17, 2000]

         Remaining Questions

         Still, the larger suspicions of “Chinagate” remain a backdrop of the 2000
         election, with President Bush’s son seeking to reclaim the White House for
         the Republicans. Though not alluding directly to the espionage allegations,
         Texas Gov. George W. Bush’s campaign has run ads showing Vice
         President Gore meeting with saffron-robed Buddhist monks in 1996, an
         allusion to the Chinese fund-raising issue that sparked the “Chinagate”

         Given the likely role of former President Bush in his son’s administration,
         another question that begs answering is why the Reagan-Bush
         administrations allowed exchanges between Chinese and U.S. nuclear
         scientists in the 1980s and whether those arrangements were linked to
         China’s secret support for the contras.

         Was President Reagan’s willingness to scratch the back of governments
         that lent a hand to the contras a factor in the cozy, albeit secret, U.S.-China
         relationship? Was there a U.S.-China quid pro quo – as there apparently was
         for other countries – and, if so, what did the quid pro quo entail?

         While those questions might never be answered, there can be no doubt that
         the Reagan-Bush administration did share at least one very sensitive secret
         with the communist Chinese: that the White House was defying U.S. law in
         1984 by arranging military shipments to the contras.

         That secret stayed hidden from the American people and from the U.S.
         Congress until the Iran-contra scandal was finally exposed two years later.


         In the 1980s, Robert Parry broke many of the Iran-contra stories for The
         Associated Press and Newsweek.

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