Editor’s Note: After publication of this story, former U.S. intelligence officer Edwin Wilson contacted us and disputed the quotes and other comments attributed to him. When asked about Wilson's complaint, author Morgan Strong said he stands by the accuracy of the quotes.

The two men – former CIA officers Thomas Clines and Edwin P. Wilson – said the payments helped secure an exclusive shipping contract for their Egyptian American Transport and Services Co.  (EATSCO).

Clines and Wilson, who were key figures in the shadowy firm, told me in interviews that millions of dollars were given to Mubarak as the bag man for then-President Anwar Sadat.  

“I used to meet with Mubarak at his home in Cairo,” Clines said. “Mubarak was Sadat’s helicopter pilot then. I brought, over a period of time, millions of dollars stuffed into suitcases.

“I would just hand them over to him. He would take his cut and pass the rest to Sadat. That’s how we got that [EATSCO] contract.”

Wilson, a rogue CIA agent who was later convicted of illegally supplying explosives to Muammar Gadhafi’s regime in Libya, told me about meetings in Cairo for afternoon tea involving Mubarak, his wife, Clines, and his girlfriend Shirley Brill.

“We would meet in Mubarak’s house in Cairo,” Wilson said. “It was all very civilized.”

White House Knowledge

Wilson also claimed that President Ronald Reagan’s White House knew of the bribery and how much Mubarak and Sadat walked away with.

Besides helping Sadat and Mubarak build their personal fortunes, the cash from the EATSCO deal strengthened their ties to the U.S. government, according to Wilson.

However, the sweetheart EATSCO contract ran into trouble in the early 1980s when Pentagon investigators found that EATSCO had skimmed some $8 million from U.S. weapons sales.

As a result of the investigation, EATSCO paid over $3 million in penalties. Clines was personally assessed $110,000 for filing false invoices. Hussein Salem, a close friend and associate of Mubarak’s, pleaded guilty and paid a $40,000 fine.

In that same time frame, Wilson was arrested on charges of shipping explosives to Muammar Gadhafi’s regime in Libya.

Though Wilson claimed he was sent to Libya by senior CIA official Ted Shackley to spy on Gadhafi’s terrorist operations, a CIA affidavit was submitted at Wilson’s trial denying any substantive CIA contacts with Wilson after his intelligence career officially ended in 1976.

At the 1983 trial, that affidavit persuaded the jury that the CIA had not authorized Wilson’s assistance to Gadhafi. The ex-CIA officer was convicted and sentenced to 52 years in prison.

However, in 2003, Wilson managed to pry loose an internal memo describing doubts among government lawyers regarding the truthfulness of the affidavit. The lawyers nevertheless had used it to secure Wilson’s conviction.

The discovery of this prosecutorial abuse – after Wilson had been imprisoned for two decades, including much of it in the high-security prison in Marion, Illinois – led a furious U.S. District Judge Lynn N. Hughes to vacate Wilson’s conviction for selling military items to Libya.

“There were, in fact, over 80 contacts, including actions parallel to those in the charges,” Hughes declared. “The government discussed among dozens of its officials and lawyers whether to correct the testimony. No correction was made.”

Iran-Contra

In the 1980s, the EATSCO scandal represented something of a prequel to the Iran-Contra Affair, the worst scandal of Reagan’s presidency.

Several U.S. officials linked to Wilson and Clines – including Shackley and Air Force Maj. Gen. Richard Secord – reemerged in mid-decade as figures in the secret shipment of U.S. missiles to Iran and the clandestine military support for Nicaragua’s Contra rebels.

When the Iran-Contra scandal broke in 1986, Clines was accused of helping Secord carry out the off-the-books operation, which was known as “the Enterprise.” Clines was convicted on four income tax-related charges and was sentenced to 16 months in prison.

In 1993, responding to the final Iran-Contra report by special prosecutor Lawrence Walsh, Clines wrote that he and others had been made “scapegoats” for an operation “conceived and condoned by two presidents,” referring to Reagan and George H.W. Bush.

This history has become relevant again in the aftermath of Mubarak’s forced resignation last month after holding power in Egypt for three decades, following Sadat’s assassination in 1981. Opponents have accused the 82-year-old Mubarak of diverting many millions of dollars from official coffers.

Egyptian prosecutors are now trying to track down Mubarak’s assets, which are estimated to total in the billions of dollars. Last week, the Egyptian Foreign Ministry asked all countries to freeze the assets of Mubarak and his family.

As the Washington Post reported on Tuesday, “Experts in the field said tracking down Mubarak’s millions is not as easy as simply freezing his assets or those of his family. Just finding the assets can be time-consuming because they probably are hidden in shell companies and entities incorporated in countries known as tax havens or secrecy jurisdictions.”

The bribery accusations from Clines and Wilson suggest that another complexity is that some of Mubarak’s money was delivered in secret cash as part of U.S. intelligence-related operations.

Though Wilson said Reagan’s White House possessed documents relating to the sums slipped to Mubarak, those records have never been made public and -- if they still exist -- likely remain highly classified.

Indeed, getting any such records released might require action by President Barack Obama to compel a search of U.S. government archives and to declassify what is found. The information, however, might prove embarrassing, reflecting badly on past policies of the U.S. government.

After all, for decades, Mubarak was Washington’s man in Egypt, even if his loyalty was bought and paid for.

Camp David Connection

Those payments – and that “loyalty” – derived as an unintended consequence from the signing of the peace agreement between Israel and Egypt in March 1979, following the Camp David Accords brokered by President Jimmy Carter the previous year.

That Camp David era began with heady illusions regarding the prospects of a lasting peace in the Middle East, but it also entailed the U.S. government agreeing to provide billions of dollars in aid annually to the two countries.

From 1978 through 2010, Egypt received over $45 billion in military and civilian aid from the United States, with Mubarak and his cronies well positioned to skim off a sizable share.

That money also created an opening for opportunistic U.S. government operatives to blend their official functions with the private activities of friendly businessmen, exploiting a gray area that proved useful to U.S. intelligence and the Reagan administration in conducting off-the-books covert operations.

Since U.S. military assistance to Egypt, such as tanks and aircraft, had to be shipped by sea using American freight carriers, the EATSCO scheme was hatched by a group of U.S. military and intelligence officers in coordination with Sadat and Mubarak, according to Clines and Wilson.

In effect, this mix of public and private interests created a quasi-government which operated just below the surface of Official Washington.

However, after Wilson became a pariah following news reports about his supposedly “rogue” work for Gadhafi – and after federal auditors detected EATSCO’s fraudulent billing – some Reagan administration officials sought to limit the damage by protecting the more important players.

For instance, in 1982, prominent neoconservative Michael Ledeen, then a State Department consultant, approached Lawrence Barcella, the chief prosecutor in the Wilson case and a personal friend of Ledeen’s, with advice that Barcella should steer away from Ted Shackley and Pentagon official Erich von Marbod, according to Peter Maas’s Manhunt, a book on the Wilson case.

“I told Larry that I can’t imagine that Shackley [or von Marbod] would be involved in what you are investigating,” Ledeen later told journalist Robert Parry. “I wasn’t trying to influence what he [Barcella] was doing. This is a community in which people help friends understand things.”

Barcella also saw nothing wrong with the out-of-channel approach.

“He wasn’t telling me to back off,” Barcella told Parry. “He just wanted to add his two-cents worth.” Barcella said the approach was appropriate because Ledeen “wasn’t asking me to do something or not do something.”

However, Shackley and von Marbod were dropped from the Wilson investigation. [For details, see Parry’s Secrecy & Privilege.]

So was Secord, who had been Deputy Assistant Secretary of Defense for the Middle East and was briefly suspended from duty in 1982 because of an alleged link to Wilson and EATSCO. Secord was reinstated, but then retired from the Air Force with full pension and benefits.

The decision to focus the Libya case on Wilson spared the others from the sort of debilitating controversy that might have prevented their usefulness in the later Iran-Contra operation.

Once the CIA filed the false affidavit denying contacts with Wilson – and once Wilson was shipped off to Marion prison – the secret missile sales to Iran were soon on track, generating even more profits for the off-the-books intelligence operations secretly encouraged by Ronald Reagan and George H.W. Bush.

After passing through the government-to-business revolving door, Secord became a key figure in the quasi-official Enterprise and – like others in the operation – began siphoning off funds to support a rich lifestyle.

Secord used some of the Enterprise’s money to buy a private airplane and a Porsche, according to Walsh’s Final Report of the Iran-Contra Affair.

Amassing More Money

But Mubarak may have been the biggest beneficiary from the billions of dollars that sloshed through the U.S.-Egyptian arms-and-money pipeline. Once he was able to build a solid foundation for his fortune, he could sit back and watch his family and allies amass even more money.

After the Egyptian government privatized much of the economy in the 1990s, Mubarak’s family and a couple of dozen other elite families profited enormously from the sales of state-owned businesses.

“The corruption of the Mubarak family was not stealing from the budget, it was transforming political capital into private capital,” said Samer Soliman, professor of political economy at the American University of Cairo.

The New York Times also reported that Mubarak’s youngest son, Gamal, is a principal in Egypt’s largest investment bank. He holds a majority share in a private equity fund company with ties throughout Egypt’s economy, from oil to agriculture to tourism. [NYT, Feb. 12, 2011]

Swiss officials have reportedly begun searching for Mubarak’s hidden assets in Swiss banks. But tracing Mubarak’s money will be a daunting task since most of the transactions were private and tightly held between Mubarak and his close associates.

The National Association for Change, one of the opposition groups that forced Mubarak from power last month, said “We will research everything, all of them: the families of ministers, the family of the president, everyone.”

Though a widespread rumor in Egypt puts Mubarak’s total wealth at $70 billion, the Times reported that U.S. officials called that a wild exaggeration, placing the more likely figure at $2 billion to $3 billion.

However, none of Mubarak’s wealth, even if discovered, can be returned to Egypt unless the new government conducts a criminal investigation and finds Mubarak criminally responsible for its theft.

Only then can the government demand the return of any money he is proven to have stolen.

It now appears that one route for that eventuality might be by calling for a new investigation of the EATSCO scandal. Key figures – Clines, Secord and Wilson – are still alive and could testify at a Mubarak trial.

Morgan Strong is a former professor of Middle Eastern history, and was an adviser to CBS News “60 Minutes” on the Middle East.

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