PART 6

With probes, making his mark

By John Aloysius Farrell, Globe Correspondent, 6/20/2003

ASHINGTON -- On a summer day in 1986, members of the Senate Foreign Relations Committee gathered behind closed doors off the chamber floor to hear the sales pitch of a brash freshman, Senator John F. Kerry of Massachusetts.

Fifteen years earlier, Kerry had appeared before the same committee to denounce the Vietnam War, challenging the senators to answer the question: "How do you ask a man to be the last man to die for a mistake?"

Now, at age 42, Kerry was a senator himself, the US was embroiled in another anti-communist crusade in a distant land, and Kerry was determined to prevent a repeat of Vietnam.

He had spent the spring conducting an unauthorized investigation into reports that the Reagan administration was illegally providing aid to the rebel Nicaraguan Contra armies, which were attempting to overthrow the left-wing government of that Central American nation. At this closed session, he planned to urge the committee to launch an official probe.

On this and related issues, Kerry's relentless drive "came largely from Vietnam veteran syndrome," said former aide and investigator Jack Blum, describing the disillusionment that returning soldiers often felt as a result of that divisive war. "You come home and discover that people who are running the war are just interested in covering their ass; meanwhile, real people are dying real deaths. ... This was a very searing business."

To Kerry's critics -- and they were especially fierce toward a Massachusetts liberal at the height of Reagan's popularity -- the action seemed like another case of Kerry grandstanding. Several committee members were wary of Kerry's reputation for self-promotion; one griped aloud that the senator's staff was already leaking to the press.

The Republican senators who controlled the committee owed their majority status to Reagan's popularity. Privately, they were feeling increasing pressure from a shadowy figure at the White House, a Marine lieutenant colonel named Oliver North, who was orchestrating support for the contras.

But behind the scenes, Kerry had forged an unlikely alliance with Senator Jesse Helms, the hidebound conservative from North Carolina. As the senior Republican on the committee, Helms was the key to Kerry's hopes. And the key to Helms was the drug war.

In the course of their investigation, Kerry and his staff had found evidence that some contras had ties to drug smuggling. If there was one class of villain that Helms deplored as much as the communists, it was drug traffickers.

On matters of political philosophy, Kerry and Helms were polar opposites. Yet each was something of a maverick, contemptuous of the capital's courtiers and willing to rock the clubby Senate. "I spent time with Jesse," Kerry recalls. "I talked to him. Talked his language. Jesse didn't believe the same things I did in many cases, but he was a gentleman. He was a man of his word."

As Kerry finished his presentation, the senior members turned to Helms, taking his temperature on the issue. "Jesse? What do you think about this?" asked Senator Joseph Biden of Delaware, the ranking Democrat on the panel, according to a transcript of the then-secret session. "I know you are a contra supporter."

"I will tell you what I do not support, and John Kerry and I have talked about this: anybody sending drugs into this country," Helms told his colleagues. "I do not care whose side they are on."

Helms was on board. The committee reached a consensus: It would investigate the contras and the contra-drug connection.

As the Iran-contra scandal unfolded, John Kerry would find an outlet for his prosecutorial skills, his thirst for media attention, and his still-simmering outrage over "seeing the government lie, and realizing the consequences" in Vietnam, as he recently put it.

Kerry's sometimes clumsy lurch for the limelight was offset by skill at finding the right people to help his causes.

As Kerry made his early mark in the Senate, however, his personal life was hollow. By the late 1980s, Kerry was broke and coping with a divorce. He was sometimes forced to stay with developer and lobbyist friends -- a lifestyle that would bruise him years later, during a wrenching re-election campaign.

Mysteries in Managua

John Kerry and Oliver North were just three months apart in age. Both served in Vietnam. Both were renowned for their daring, and both won Silver and Bronze Stars. Kerry had three Purple Hearts; North had two.

But while Kerry returned from the war speaking against needless deaths and government lies, North believed that Vietnam was an honorable stand against communist tyranny. North blamed antiwar protesters for forcing the United States to prematurely bring its troops home. The Iran-contra probe would pit these two determined figures against each other.

Congressional investigations are a set piece, an American ritual: John and Robert Kennedy taking on Teamsters boss Jimmy Hoffa; Richard Nixon chasing Alger Hiss over allegations of communist influence at the State Department; the televised Watergate hearings that led to Nixon's resignation.

The format suited Kerry. He was a restless former prosecutor with a taste for televised acclaim and an ambitious politician consigned to the shadow of a law-passing, back-slapping seatmate, Edward Kennedy. "He is, by nature, an investigative figure," says Kennedy, summing up Kerry's primary role in the Senate. "You can investigate and then legislate. He's investigated."

The Cold War was reaching its final stages when Kerry entered the Senate in 1985. Reagan had been re-elected in a thunderous landslide in November of 1984 and was using his administration to help the contra armies destabilize the Sandinista government of Nicaragua as part of a global strategy to give the tottering communist empire a final shove.

Reagan had carried Massachusetts that fall, but the contra cause was unpopular in the state. House Speaker Thomas "Tip" O'Neill Jr., a Democrat from Cambridge, feared the United States would be drawn into another Vietnam in the jungles of Central America, and he worked with Congressman Edward Boland, an old Democratic pal from Springfield, to attach a series of "Boland amendments" to appropriation bills, banning or limiting US aid to the contras.

At first, Kerry's audacity cost him. Within weeks of taking office in 1985, he was off to Nicaragua, accompanied by reporters on a 36-hour, self-appointed fact-finding mission with another freshman, Democratic Senator Tom Harkin of Iowa. Congressional Democrats had accused the White House of exaggerating the communist threat posed by the Sandinista regime. So the two senators were publicly castigated when -- just days after meeting with Daniel Ortega and other leaders of the regime -- the Sandinistas climbed aboard a plane to Moscow to cement their Soviet ties.

Secretary of State George Shultz declared that Kerry and Harkin had been "used" by the Nicaraguans, and he ridiculed them for their naivete in "dealing with the communists." Kerry was called "silly" in the Boston press.

During this time, North was an obscure White House aide, a man with a ramrod-straight disposition, short cropped hair, patriotic zeal, and unflagging allegiance to President Reagan. North had secretly begun to organize a complex scheme to raise money from wealthy conservatives, foreign nations, and eventually from the proceeds of secret arms sales to circumvent the Boland amendments and keep the contras in the field.

Word that something was afoot began to seep into Kerry's Capitol Hill office, which had become a magnet for tips from left-leaning journalists, activists, and conspiracy theorists drawn to the senator's antiwar history and his criticisms of Reagan's Central American policy.

Kerry worried that a repeat of Vietnam -- with a White House misleading the public -- was in the making. "A central part of my campaign had been the notion that I would bring to the Senate the experience of the Vietnam period, which cautioned me against the kind of illegal activities we were hearing about, and the things that were going on," Kerry recalls. "Literally, I did do an ad hoc investigation."

The Vietnam skipper who once beached his boat to kill an enemy guerrilla assembled a combative and single-minded crew inside the Russell Senate Office Building. Kerry's scrappy staff had minimal Washington experience and, like Kerry, little desire to fit in with the normally genteel style of the US Senate. In his choice of aides, like the senators he sought out as partners, Kerry was eclectic.

"John formed nonconventional alliances," says former chief of staff Frances Zwenig. "You can't pigeonhole him. He likes feisty people who are fighters like him."

Another former chief of staff, Ronald Rosenblith, offers a telling description of his own personality: "I piss people off sometimes. I annoy people. All I know how to do is tell the truth."

In late 1985, an intriguing report came to Kerry's staff from John Mattes, a public defender in Miami whose sister was a Massachusetts peace advocate. Mattes had a client who claimed to know all about the contras' secret supply network. Kerry's staff interviewed Mattes and his client and traveled to Costa Rica to quiz other young men who allegedly had been working in a US-sanctioned contra supply network.

"It was like a detective story at that point," recalls Jonathan Winer, who was Kerry's counsel. The clues pointed to "violations of US law by the Reagan administration, including this guy Ollie North, who I didn't know anything about."

On hearing some of the wilder allegations brought to him by his staff -- tales of mercenaries and smugglers and assassination plots -- Kerry recalls that he would grimace and complain: "This is cockamamie. It cannot be true."

But he gave his people plenty of running room. Kerry enjoyed the trust of Senator Richard Lugar, the respected Republican who chaired the Senate Foreign Relations Committee, with whom he worked during a trip to monitor the 1986 Philippine elections.

"He understood that I was ambitious and serious about the work that we were doing, an enormous agenda, and in fairness, he regularly participated," Lugar says. "He was not one of the dissident types. I did not see in him someone who was out there going after President Reagan, out after a Republican president."

But North, who declined repeated requests for an interview, did see Kerry as a threat to Reagan. His notebooks, later obtained by Congress, were peppered with notations of concern about Kerry, his staff, and their freelance investigation. On April 18, 1986, North wrote: "Sen. Kerry trying to get evidence linking RR [Ronald Reagan] to La Penca," the location of an attempted assassination attempt against a contra leader by hardliners in the movement.

`In early 1986, people like North were deathly afraid of what Kerry was after," says Tom Blanton, the executive director of the National Security Archive, a research organization in Washington. "There was this pervasive sense of the potential of turning over too many rocks. Worms and insects kept crawling out."

Before long, Kerry encountered resistance. Congressional investigators would later detail how the government intimidated Kerry's witnesses, including a mysterious figure named Jack Terrell, who claimed to have been a contra adviser operating under the nom de guerre "Colonel Flaco."

Terrell told Kerry and a handful of investigative reporters that North's supply network had been used to smuggle arms and drugs.

IN MONTH TK, Kerry's staff interviewed Terrell in New Orleans, brought him to Washington, installed him in a safe house, and obtained funding from a liberal think tank, the International Center for Development Policy. In a memo to Reagan, later obtained by the Iran-contra committee, North warned that "Terrell's accusations are at the center of Senator Kerry's investigation." North labeled Terrell a possible Nicaraguan spy, potential presidential assassin, and a "terrorist threat."

The Secret Service was alerted, and the FBI placed Terrell under surveillance. Agents tailed him, combed his telephone records, searched his garbage, and pressured him into taking a polygraph test. They ultimately determined he was no threat to the president, but his eagerness waned and he never testified.

Elsewhere, Republican staffers on the Foreign Relations committee leaked details of Kerry's probe to the administration. An assistant US attorney in Florida, who was also investigating the allegations, was told by his superiors that "politics" forbade him from taking the case to a grand jury. The Washington Times, a paper known for its conservative ties, published stories containing allegations that Kerry's office was inducing witnesses to commit perjury. At North's insistence, the FBI began to compile information on the Kerry investigation.

A crash, a tip and probe widens

Kerry's ad-hoc investigation came at a personal and professional cost. The long hours were taking time from his two young daughters, who were living with their mother in Massachusetts, and he was in danger of being marginalized in the Senate.

"He was up against a wall financially, politically, and emotionally," recalls Blum. "He wanted to be in this business, and he took the risk to be in it. But it is tough. What seemed like a simplistic route to political glory. . . He began to understand there was more to it."

Despite Kerry's work, and that of House investigators, North's covert enterprise thrived. But on Oct. 5, 1986, a C-123 aircraft was shot down in Nicaragua. Documents found in the wreckage connected the plane to a CIA proprietary airline, Southern Air Transport. A surviving crew member, Eugene Hasenfus, said he was involved in an effort to arm the contras.

To Kerry's investigators, the operation smelled like a covert CIA plot. Suspicions about North's involvement intensified. By now the full committee, at Kerry's urging, had launched its investigation, and Kerry used an Oct. 10, 1986, hearing to interrogate Assistant Secretary of State Elliott Abrams about whether the Reagan administration had involved foreign governments in arming the contras.

Elliott Abrams: "I can say that while I have been assistant secretary, which is about 15 months, we have not received a dime from a foreign government, not a dime, from any foreign government."

Senator Kerry: " `We' being who?"

Abrams: "The United States."

Senator Kerry: "How about the contras?"

Abrams: "I don't know. But not that I am aware of and not through us. The thing is, I think I would know about it because if they went to a foreign government, a foreign government would want credit for helping the contras and they would come to us to say you want us to do this, do you, and I would know about that."

This testimony, and similar statements to a House committee, would result in Abrams pleading guilty to charges of withholding information from Congress. (He was pardoned by President George H. W. Bush in 1992, and now serves in the Bush White House.) Then, in early November 1986, a Lebanese newspaper broke the news of US arms sales to Iran. A few weeks later, the White House disclosed that funds from the sale had been diverted to supply the contras.

Suddenly, Kerry's theories didn't seem so far-fetched. He hoped this would be his moment to help lead the investigation into this extraordinary episode. The Iran-contra scandal was the top story in town, and there was worried talk in the halls of Congress that the United States might suffer another failed presidency.

But when congressional leaders chose the members of the elite Iran-contra committee, Kerry was left off. Those selected were consensus-politicians, not bomb-throwers.

The feeling among a disappointed Kerry and his staff was that the committee members were chosen to put a lid on things. "He was told early on they were not going to put him on it," Winer recalls. "He was too junior and too controversial . . .. They were concerned about the survival of the republic."

Even some Democrats "thought John was a little hotter than they would like," says Rosenblith.

As a consolation prize, the Democratic leadership gave Kerry chairmanship of the Subcommittee on Terrorism, Narcotics, and International Operations and a charter to dig into the contra-drug connection. While disappointed, Kerry stuck with his investigation and the subcommittee published a report in 1989 that concluded the CIA and other US agencies had turned a blind eye to drug trafficking occurring on the fringes of the contra network. In many cases, traffickers were using the same airplanes, airfields, and other resources that the contras were using.

To the disappointment of the conspiracy theorists, Kerry and his team found no evidence the United States ran or sanctioned a contra drug ring.

During the investigation, an Oregon businessman claiming CIA ties, Richard Brenneke, whose testimony was taken by Kerry's committee, made the sensational and undocumented charge that Vice President George H. W. Bush's office had sanctioned a contra-drug smuggling operation. Bush challenged Kerry to "show some evidence and stop leaking out information that is not true."

Kerry denied he was the source of the leak, and the committee dropped the Brenneke angle.

Republican senators were suspicious of Kerry's motives. The Kerry investigation -- done in the midst of the 1988 presidential campaign pitting Vice President Bush against Massachusetts Governor Michael Dukakis -- was "being conducted as if it were a division of the Dukakis campaign," recalls Senator Mitch McConnell of Kentucky, who served as ranking Republican on the subcommittee. The probe "deteriorated into a biased partisan agenda" that, to McConnell, was primarily aimed at cooking up allegations to tarnish Bush's reputation and presidential hopes.

Ultimately, the subcommittee's findings on the scope of the contra-drug connection were validated by two subsequent federal investigations. Inspectors General at the CIA and the Justice Department found that these agencies had done little or nothing in response to hundreds of allegations that elements of the contras and their supply networks were involved with drugs.

"Kerry's proven conclusion was that the government, especially the CIA, looked the other way," says Blanton. "The Kerry committee findings hold up."

Drugs to money-laundering

By the late 1980s, Kerry was running his senatorial staff the way he helped run the Middlesex District Attorney's Office a decade earlier: concentrating on investigations, depositions, and testimony. But now, instead of local crooks and criminals, he had aides probing the global netherworld of drugs, spies, and money-laundering.

In an off-shoot of the contra-drug investigation, Kerry examined reports that Panamanian dictator Manuel Noriega was involved in drug trafficking. The probe led to information that Noriega was shipping money out of Panama with the help of a bank called BCCI -- which prompted yet another Kerry investigation.

BCCI was an international bank of Middle East origins whose employees asked few questions of their wealthy and powerful customers, making it a favorite of arms merchants, drug dealers, despots such as Noriega, and intelligence agencies. At the CIA, which sometimes used the bank to launder its own activities, it was known as the "Bank of Crooks and Criminals."

Kerry's investigation, launched in 1988, helped to close the bank three years later, but not without upsetting some in Washington's Democratic establishment. Prominent BCCI friends included former Defense Secretary Clark Clifford, former President Jimmy Carter, and his budget director, Bert Lance. When news broke that Clifford's Washington bank was a shell for BCCI -- and how the silver-haired Democrat had handsomely profited in the scheme -- some of Kerry's Senate colleagues grew icy.

"What are you doing to my friend Clark Clifford?" more than one Democratic senator asked Kerry. Kerry's aides recall how Jacqueline Kennedy Onassis and Pamela Harriman, a prominent party fund-raiser, called on the senator, urging him to not to pursue Clifford.

Kerry and his staff were under intense pressure, and Foreign Relations chairman Claiborne Pell, the Democrat from Rhode Island, began to request that Kerry's investigation end. Blum brought the evidence against BCCI to the Justice Department, but was rebuffed. With Kerry's blessing, he left the staff and took the case to New York District Attorney Robert Morgenthau, who filed the indictments leading to the bank's collapse in the summer of 1991.

When he finally got the 84-year-old Clifford to the witness table during a Senate hearing that fall, Kerry seemed conflicted, pulling his punches and allowing the elderly statesman to claim a loss of memory. During a recess, his aides urged him on. "He's an old man. He couldn't remember. I'm not going to humiliate an old man," Kerry barked, in an exchange recalled by David McKean, a cousin of Kerry and member of his staff, who later wrote a book on Clifford.

Years later, Kerry says he was "shocked . . .(and) surprised" but "resigned that you had to go in and let the chips fall where they may" when he discovered that Clifford and other prominent Democrats had become involved with BCCI.

He defends his decision to treat Clifford courteously: "There was a balance of what I thought was decency. I am one of those kids who grew up watching Joseph Welch respond to Joe McCarthy and I remember his line about decency." (In 1954, Welch, an attorney for the US Army, replied to Senator Joseph McCarthy's latest red-baiting accusations with the words: "Have you no sense of decency, sir, at long last? Have you left no sense of decency?")

"I thought we had proven the points we needed," Kerry says of the Clifford inquiry. "We had got the testimony that was essential. And I didn't see any reason to cross the line of what I considered to be necessary."

An unsettled private life

Kerry's personal life, meanwhile, was becoming increasingly tumultuous. He had separated from his first wife, Julia Thorne, in 1982, and the divorce became final in 1988. For much of their marriage, Julia, who came from a wealthy Long Island family, had provided significant financial contributions. The divorce left Kerry strapped for cash and looking for ways to meet child-support payments, campaign debts, and tuition costs.

He took out a $473,000 loan to purchase a home in Washington, thinking his daughters would be staying with him for periods of time. It was "a huge mistake," he says, as he found himself returning to Boston most weekends to maintain his ties to his children and the state. He sold the D.C. home and bought a Boston condo but "lost his shirt" when he sold it a few years later, as he told the Globe in 1996. "He was broke," Blum says.

To make ends meet, Kerry collected speaking fees, averaging about $1,400 apiece and $26,000 a year total during his first five years in the Senate. Most of the honoraria were from think tanks and schools; some were paid by trade associations such as the Massachusetts Bankers Association or corporations such as Goldman Sachs and Chevron, which had legislative interests before Congress.

Kerry pocketed another $21,000 in a low-risk real estate deal in 1986, arranged by his campaign treasurer, developer Wesley Finch. In a business brochure the next year, Finch boasted about his relationship with Kerry, stating he "works closely with the senator and his colleagues on tax and economic issues that come to the floor of the United States Senate."

Finch had cut in his friends, Kerry and his then-Senate aide, Ronald Rosenblith, on an investment in condominium units in Salem and Clinton. One of the units was already under a purchase-and-sales agreement by the time Finch brought in Kerry and Rosenblith as partners, the Globe reported in 1996, although all three said Finch never informed them of that. The Globe calculated their profit at 31 percent in about six months.

Kerry has long maintained he never used his influence on Finch's behalf, but he did acknowledge he was stung by the press reports on the deal and soured on investments after that. "I thought it was legitimate," Kerry said of the deal. But "I found that the inquiries made me profoundly uncomfortable, and I never invested again in the 11 years after that . . . I have never since invested one penny in anything" as exotic.

Kerry acknowledges money "was tight" for him in those days. "I was spending all I had," he says. Regarding honoraria, which Congress banned in 1991, Kerry says: "I did not take honoraria from anyone who had anything in front of my committee."

Kerry also signed on as chairman of the Democratic Senatorial Campaign Committee, the fund-raising arm for Senate Democrats, for the 1987-1988 cycle. This would help him tap the network of national Democratic donors.

Kerry's current wife, Teresa Heinz, calls the late 1980s his "gypsy period." For months at a time he had no fixed address and crashed instead with his daughters when Julia was away or with Julia's brother David.

Sometimes, he stayed with a girlfriend who had been his former law partner, Roanne Sragow, now a district court judge in Massachusetts. (She declined to be interviewed.) Or he stayed with a Vietnam buddy or on a per diem basis in condos owned by wealthy contributors: developers Finch and Edward W. Callan, and lobbyist and campaign fund-raiser Robert Farmer. Eventually, he rented a one-room apartment in Washington and an apartment in Boston.

During this period, Kerry was linked romantically with several Hollywood starlets, including Morgan Fairchild, and his dating life became fodder for gossip columnists in Boston and Washington. Kerry declined to discuss this period of his social life, other than to make this reference to the 2000 presidential campaign, in which then-candidate George W. Bush confessed only to unnamed youthful indiscretions.

"If George Bush can run around and say `When I was young and irresponsible, I was young and irresponsible,' " says Kerry. "I can say when I was young and single, I was young and single."

A new campaign

As Kerry prepared for his reelection campaign in 1990, he found that the tables were sometimes turned -- the senator who loved investigations became the subject of informal inquiry. Reporters queried candidates in the race about drug use, and Kerry was forced to admit that he had smoked marijuana after he returned from Vietnam. "About 20 years ago, I tried marijuana. I didn't like it. I have never used or tried any drug since," Kerry said through a spokesman at the time.

Republicans and the media also raised questions about his dealings with wealthy donors. The most prominent inquiry focused on one of Kerry's major fund-raisers, a savings and loan executive named David Paul, who emerged as a principal figure in the savings and loan scandals of the time and who had ties to BCCI.

Paul's CenTrust Savings Bank of Miami failed in 1990 and cost taxpayers an estimated $2 billion, according to a report prepared by the Republican staff of the Senate Judiciary Committee. The investigation found that Paul "spent millions of dollars of insured deposits on such lavish personal perquisites as an art collection, the leasing of an airplane frequently used for personal and political purposes, operating expenses of a $7 million yacht owned by another Paul business interest, the purchase of a sailboat, Persian rugs, Baccarat crystal, foreign linens, and other expensive furnishings."

The Republican investigators also found there was "an interlocking relationship" between CenTrust and BCCI in the person of Ghaith R. Pharaon, a Saudi investor in both banks, who paid to fly six French chefs to a lavish 1988 dinner party at Paul's Florida home, attended by Kerry and other legislators. Kerry was among those politicians who flew on Paul's jet, and the Democratic Senatorial Campaign Committee, which Kerry chaired, leased Paul's yacht for fund-raisers.

When their relationship became known, Kerry acknowledged that Paul had asked for special consideration of a banking amendment CenTrust needed. Paul had contacted Kerry and other key lawmakers in 1989, seeking to weaken a portion of the savings and loan bailout bill. Specifically, he wanted to dilute the part of the bill that restricted institutions' use of "good will" assets rather than capital, as reserves against losses.

Kerry wrote Paul a friendly letter, inviting him to Washington "so that we can sit down and perhaps follow up." But, the senator said, he ultimately opposed Paul's request, which failed to win support in Congress.

Blum, the former Kerry aide, says the senator "came to understand he was being compromised." Blum stresses that Kerry in the end "got out of there."

Still, the matter became fodder in the reelection campaign, with Republican hopeful Jim Rappaport asking: "How could John Kerry possibly have appointed David Paul to a senior position in the Democratic Party?" Despite Rappaport's self-financed campaign and the nation's anti-incumbent mood, Kerry's performance during his first Senate term proved sufficiently popular to secure a healthy 57 percent of the state's vote.

Kerry was on his way to a second term, where Vietnam -- a war that he questioned, then fought for, and then opposed -- would continue to define his senatorial career, just as it had in the 1980s.

"Vietnam is a lesson," Kerry says. "It is history to me. It can guide me, but it doesn't run me. You have to move on and I moved on long ago. But the lessons are valuable. I love the lessons."

Michael Kranish and Brian Mooney of the Globe staff contributed to this report.