Mr. SMILJANICH: When did you first discover that the President had signed a Finding on January 17 allowing this matter to go forward?

Mr. REGAN: Sometime in October of 1986. Bill Casey called me to ask if I had a copy of the Finding of January. I asked my staff to see if we had a copy in our files. We had none. I went back to him and said no, I don't have one, ask John Poindexter. I said how come you don't have one. He said we don't have one in our files, and he said that's why I'm trying to find one. So I didn't realize that the thing had been signed or where it was until late October of '86.

Mr. SMILJANICH: So you are saying that in late October of 1986, after this operation had been going forward for 8, 9, 10 months, neither you nor Director Casey had specific knowledge that the President had signed a Finding dated January 17?

Mr. REGAN: I think both of us—although I shouldn't characterize what he was thinking, but I will say that I was thinking that all along I just assumed that he probably had signed it. I just didn't see it.

Mr. SMILJANICH: And you couldn't locate a copy and the Director of Central Intelligence couldn't locate a copy?

Mr. REGAN: That is correct.

Mr. SMILJANICH: You finally did determine who had the only copy of that Finding; is that right?

Mr. REGAN: Yes.

Mr. SMILJANICH: Who did you call?

Mr. REGAN: I asked Poindexter about it the next day. I said did Casey call you about that Finding. He said yes. I said where the hell has it been—excuse my language. That is normal for me. Excuse me. And he said I have the only copy, it's in my safe, he said it's with me.

Mr. SMILJANICH: Moving back to the January-February timeframe, in late February, you were—you and the President were aware that 1,000 TOW missiles had been shipped to Iran from the United States?

Mr. REGAN: Yes.

Mr. SMILJANICH: The President knew of and approved those shipments?

Mr. REGAN: Yes.

Mr. SMILJANICH: And under the plan that had been discussed with the senior advisers in January, upon the shipment of this first 1,000 TOW missiles all of the American hostages held in Lebanon were supposed to be released; isn't that correct?

Mr. REGAN: Yes.

Mr. SMILJANICH: When no hostages were released after shipment of those TOW missiles, what did you recommend the President do about the fact that the Iranians had broken their word?

Mr. REGAN: I told him I thought we ought to break it off, that we have been snookered again, how many times do we put up with this rug merchant type of stuff—or words to that effect.

Mr. SMILJANICH: What did the—what was the President's attitude or decision?

Mr. REGAN: I think he shared my view that we had been had.

Mr. SMILJANICH: Did he instruct anyone to terminate their activities?

Mr. REGAN: No. There was a pause then and I sort of lost track of what was going on. At that point we were deep in the middle of the tax bill and the budget battle, and I sort of lost track of, you know, what was going on. I wasn't paying that much attention to it.

Mr. SMILJANICH: Well, it popped back up during the Tokyo summit in May of 1986 when Secretary Shultz came to you and was very concerned about something. Do you recall that?

Mr. REGAN: Yes.

Mr. SMILJANICH: And what do you recall him telling you at that time?

Mr. REGAN: Has the man's name been mentioned in open hearing? It has? He told me that Ambassador Price had called him to alert him to the fact that Tiny Rowlands, a British business person, was inquiring about whether or not we were engaged in shipping arms to Iran, that he was being offered a—I suppose you'd say a share in the underwriting of this, and wanted to know was this indeed U.S. policy. And when I heard the name Rowlands involved in this, I was really concerned.

Mr. SMILJANICH: You knew of Mr. Rowlands?

Mr. REGAN: By reputation.

Mr. SMILJANICH: What was your concern at that time?

Mr. REGAN: Well, you know, what kind of a deal is this? Here we. are going to outsiders, to a "British merchant banker," or entrepreneur, as part of the Iranian arms sales? I couldn't follow what was going on. So I told him, I said you better get a hold of Poindexter and find out what is going on there. So he said he would. So that's the last I heard of that one.

Mr. SMILJANICH: Well, Secretary Shultz has testified that it was his recollection that when he gave you this information in Tokyo, first of all that you were alarmed. Would it be fair to say you were alarmed at this information?

Mr. REGAN: Concerned, yes.

Mr. SMILJANICH: It was Secretary Shultz's recollection that you stated to him that you would attempt to bring it to the President's attention.

Mr. REGAN: I don't recall that. I'm not sure that I thought that of sufficient importance to involve the President.

Mr. SMILJANICH: Well, if you were alarmed and you felt that this matter was possibly now in the hands of some people that you didn't particularly trust, why didn't you feel that this was something that—particularly given the fact that after the February shipment, when no hostages were released, you felt that this matter ought to be terminated? Why didn't you bring it to the President's attention at that point?

Mr. REGAN: Well, having—knowing that the Secretary of State was aware of this information, having made my concerns known to the Secretary of State, and he in turn reflecting those views to the National Security Adviser, I felt that those were two very competent people who could handle the situation and would. There was no need for me to be going either around them or bringing something directly to the President that was really in their purview. I was trying to keep channels, if you will, or keep these things in channels.

Mr. SMILJANICH: Did you ever talk to the President about this matter? I mean around that timeframe.

Mr. REGAN: Around that time, no.

Mr. SMILJANICH: Did you check back with Secretary Shultz at any point to see whether he had been satisfied by Admiral Poindexter's—

Mr. REGAN: No. Again, you've got to remember we were at an economic summit. I was concerned that the President was being briefed, had enough information, going over with him some of the fine points of what the heads of government were discussing. So I put this sort of thing out of my mind.

Mr. SMILJANICH: Now, in late May of 1986, the President—after Mr. McFarlane's trip to Tehran, the President turned down a proposition that had been made to Mr. McFarlane for the delivery of two hostages for the HAWK spare parts that were being shipped through Israel. The President and Mr. McFarlane had insisted that all the hostages be released before any more parts would be delivered; isn't that correct?

Mr. REGAN: That's right.

Mr. SMILJANICH: All right. By November of 1986 the President had authorized the delivery of all of the HAWK parts, 500 additional TOW missiles and two pallets of medicine, all in return for those same two hostages. Why did our negotiating position collapse so completely during that timeframe?

Mr. REGAN: I cannot offer you an explanation of that. I don't know.

Mr. SMILJANICH: Well, as someone who came to government service from a phenomenal career on Wall Street, it must have occurred to you that the United States was being hustled?

Mr. REGAN: It was a bait and switch.

Mr. SMILJANICH: Did you so advise the President?

Mr. REGAN: Yes.

Mr. SMILJANICH: And what did the President say about why he was allowing this thing to continue?

Mr. REGAN: Well, I think he assumed that there are many times when a political leader has to deal with unsavory characters in order to accomplish an end, and I think he was under the impression, well, if we can get to the top there, someplace toward the top in Iran, perhaps, you know, we can deal with them, but we have to work our way up the ladder.