North Falls for a Hostage Scam

By GEORGE J. CHURCH

It was an urgent call from the White House. National Security Council Aide Oliver North asked Texas Billionaire H. Ross Perot for $200,000 fast to rescue two American hostages in Lebanon. The billionaire immediately dispatched an associate who handed over the money to North in cash.

"Nothing ever materialized," says Perot. But eight months later, in January 1986, North phoned again and asked Perot for $100,000 to fund a new rescue attempt. Perot sent the money by courier to intermediaries of North's in Canada.

Once again, nothing happened. North, it seems, lost Perot's money chasing a will-o'-the-wisp. He had authority, however; North's boss Robert McFarlane says President Reagan approved the first hostage-rescue plan, and Reagan has a dim recollection of some such conversation -- though he insists that he "never thought of that as ransom." Only garbled portions of the story have become public, but Republican Senator Paul Trible of Virginia, who has been looking into the affair, and Government officials involved helped TIME piece together this account:

In early 1985 the CIA was desperate to rescue William Buckley, its station chief in Beirut who had been kidnaped. An interagency group was formed, and two agents of the Drug Enforcement Administration were recruited to contact informants they had developed while tracing Middle Eastern heroin traffic. A longtime informant told them he had located the people holding Buckley and another hostage. The captors would let the two go, he said, for a $200,000 bribe.

The CIA would not put up the money unless it got proof that the informant really was in touch with Buckley's captors. So in May, North raised the $200,000 from Perot. He then described the plan in a June 7, 1985, memo to McFarlane. The $200,000, he indicated, would only be a kind of down payment; eventually $2 million would be needed from "the donor" to rent a yacht to bring the hostages to Cyprus, to set up a safe house for them on the island and, apparently, to pay additional bribes.

Sometime later the informant made a trip to Beirut and came back with a + newspaper on which Buckley's initials were scrawled. The CIA submitted the handwriting to FBI labs for analysis and showed it to Buckley's secretary. Their conclusion: the handwriting was not Buckley's (whoever did the scribbling even got Buckley's middle initial wrong). The DEA agents have told colleagues that they then warned North the whole deal looked like a scam. Trible disputes this; he says the agents pressed ahead with the scheme. In any case, says Trible, North dispatched a messenger to pay Perot's $200,000 to the informant, who was someplace overseas. The money disappeared.

In October 1985, Buckley's captors announced that they had "executed" him. Even that did not discourage North; three months later he talked Perot into forking over an additional $100,000. Perot has no idea what happened to it; all he knows is that in mid-1986 North asked for $1 million more, to be handed over to someone who was supposed to bring five hostages to Cyprus by boat. A Perot courier flew to the island, sat around for a week waiting vainly for the hostages to show up, and returned with the cash. Although Perot was out $300,000, he is taking his loss philosophically. Says he: "I would rather try and fail than not try."

With reporting by Elaine Shannon/Washington