What Was the Iran/Contra Affair?
The Iran-contra scandal of the 1980’s, first brought to light in November 1986, is a complicated mess of scandal, arms dealings, hostage deals, and illegal acts. The original purpose of the arms sales was to improve United States-Iran relations. However, when American hostages were taken throughout the 1980’s, members of President Reagan’s staff negotiated implicit deals with Iranian groups, which resulted in the U.S. selling arms in return for the release of hostages. Later, the deal was modified so that the U.S. sold arms directly to Iran at a high markup, with no guarantee of hostages being released, and the markup funding the contras in Nicaragua.
The Iran-Contra affair was a controversial political scandal that dealt with senior US figures who had been facilitating the sale of arms to Iran, that was under an arms embargo, to secure the release of the hostages and to fund the Nicaraguan anticommunist rebel contras. While these two scandals were unconnected the contras would not have been able to be funded without the cash flow that the Iranian weapons money created. The operation began as a way to improve U.S. -Iranian relations during a time of extreme turmoil between the countries. The plan was to ship weapons to Israel who would in turn give them to a relatively moderate politically influential group of Iranians. Israel would in turn be resupplied and receive a payment from them. In return for the arms the Iranian recipients had promised to do everything in their power to have the 6 U.S. hostages, who were being held captive by the Lebanese Shia Islamist group Hezbollah. The plan eventually was broken down to a direct arms-for-hostages scheme that came to light in November of 1986 during the Reagan-Bush administration. Although November of 1986 is when the scandal came to light the origins came about seven years earlier in November of 1979 when nearly 500 Iranian students took over the American embassy taking 52 Americans hostage for 444 days. This was important because it was an earmark of one of the first major conflicts with the country of Iran. Then in early 1980 the Israeli government proposed a deal to secretly sell arms to Iran as a means to gain diplomatic ground and a way to get the 52 hostages released, however President Carter angrily declines. The Israeli government then went on with the plan by themselves secretly supplying weapons to Iran shortly after. With the change in presidency from Carter to Reagan the US geared up to begin the shipment of arms to Iran through Israel. This however was illegal due to the Arms export act, which requires written permission from the U.S. for a nation, in this case Israel to transfer U.S. made arms to a third party.
This was a scandal of President Reagan administration. It started in 1985 and came to limelight in 1986. In this scandal, some of the key figures were Ronald Reagan, Oliver North, Robert McFarlane, John Poindexter, Contras, and Caspar Weinberger among other influential persons in Reagan administration. This case started as an effort to “free seven American hostages in Iran under the custody of the Army of the Guardians of the Islamic Revolution” (Shenon and Engelberg, 1987). The US supplied weapons to Israel, and then Israel sent the same weapons to Iran. The Iranian receivers then facilitated the release of hostages. People referred to this scandal as arms-for-hostages scheme. In 1985, Oliver North devised various ways to ensure that parts of the proceeds went to Contras in Nicaragua (Shenon and Engelberg, 1987).Reagan supported Contras. However, there were disputes whether Reagan allowed diversion of monies from arms sales to fund Contras. Human Rights Watch indicated that Contras engaged in a systematic abuse of human rights. The Boland Amendment made funding to Contra illegal. Consequently, Reagan administration engaged in secret deals with Iran and secretly trained and armed Contras. There were 14 indictments of administration officials. There were also 11 convictions. However, the Court dismissed some of these convictions on appeals. Finally, George Bush pardoned all indicted or convicted officials before leaving office. Bush was the Vice President during the Affair. Therefore, there was no imprisonment because of the scandal. This is not a typical way of handling frauds. In other words, there was no justice served in this case. Key policies to combat corporate scandals are in corporate governance principles of the company. However, it was clear that the CEO, who also served as the chairperson of the board, had power over directors of the board. Based increasing cases of financial scandals in large organizations, it is imperative for organizations to bring into line their corporate governance principles with the Sarbanes-Oxley Act of 2002 and Dodd-Frank Act of 2010. These Acts protect shareholders against uncontrolled excesses and embezzlement of funds by CEOs and other senior executives. The Acts strive to create independent boards, which are not prone to external interference. There are also SEC requirements and NASDAQ provisions as policies to combat corporate fraud.
As can be seen, some people blamed Reagan’s hands-off administrative style as a contributing factor in Iran-Contra. For, while Reagan concerned himself with big-picture strategy in domestic and foreign policy, he assigned others responsibility for carrying out the details. But this administrative approach seemed to lead to serious—some said impeachable—consequences in the Iran-Contra affair. Reagan earned another nickname, the “Teflon president,” since scandals never seemed to stick to him and his popularity with the public remained unchanged.
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Shenon, P. and Engelberg, S. (1987). Eight Important Days in November: Unraveling the Iran-Contra Affair. Retrieved from https://www.nytimes.com/1987/07/05/world/eight-important-days-in-november-unraveling-the-iran-contra-affair.html
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