It was a series of actions on the part of U.S. federal government officials, which came to light in November 1986. The discoveries had the immediate effect of hurting President Ronald Reagan (1911–2004), whose policy of antiterrorism had been undermined by activities initiated from his own executive office. Following in-depth hearings and investigations into “who knew what, when,” special prosecutor Lawrence Walsh (1912-) submitted his report on January 18, 1994, stating that the dealings with Iran and with the contra rebels in Nicaragua had “violated United States policy and law.”

The tangled string of events involved Reagan’s national security advisers Robert McFarlane (1937-) and Admiral John Poindexter (1936-), Lieutenant Colonel Oliver North (1943-), Poindexter’s military aide, the Iranian government, and Nicaraguan rebels.

The U.S. officials evidently had begun their dealings with both the Iranian government and the Nicaraguan rebels with the goal of freeing seven Americans who were held hostage by Iranian-backed rebels in Lebanon. President Reagan had met with the families of the captives and was naturally concerned about the hostage situation. Under pressure to work to free the hostages, McFarlane, Poindexter, and North arranged to sell an estimated $30 million in spare parts and antiaircraft missiles to Iran (then at war with neighboring Iraq). In return, the Iranian government would put pressure on the terrorist groups to release the Americans.

Profits from the arms sale to Iran were then diverted by Lieutenant North to the contras in Central America who were fighting the dictatorial Nicaraguan government. Congress had already passed laws that prohibited U.S. government aid to the Nicaraguan rebels; the diversion of funds certainly appeared to violate those laws.

The Iran-Contra affair led to North’s dismissal and to Poindexter’s resignation. Both men were prosecuted. Though the hostages were freed, Reagan’s public image was seriously damaged by how the release had been achieved.

During the Iran-Contra hearings in 1987, National Security Commission officials revealed that they had been willing to take the risk of providing arms to Iran in exchange for the safe release of the hostages because they all remembered the U.S. government’s failed attempt in 1980 to rescue hostages held at the American Embassy in Tehran, Iran.

Nevertheless, the deal with Iran had supplied a hostile country with American arms that could then be used against the United States. In 1987 Iran did launch an offensive when it attacked Kuwaiti oil-tankers that were registered as American and laid mines in the Persian Gulf. The United States responded by sending in the navy, which attacked Iranian patrol boats. During this military initiative, the U.S. Navy accidentally shot down a civilian passenger jet, killing everyone on board.