The American political scandal which has become known as the Iran-Contra Affair occurred in 1985 and 1986. First of all, high-ranking members of the Reagan administration secretly sold weapons to Iran, in itself a severe violation of US laws. Then, they gave the profits from the $30 million worth of weapons to the Nicaraguan Contra rebels, thus violating another ruling of Congress. Lieutenant Colonel Oliver North, who was the military aide to the National Security Council, was the chief negotiator of these operations and reported first to National Security Advisor Robert C. McFarlane and then to his successor, Vice Admiral John M. Poindexter. The sales to Iran were initially made at Israel's suggestion in order to improve their relationship with Iran and to free some American hostages who were being held by pro-Iranian terrorists in Lebanon. North was the man who set up the entire network for distributing this support to the Contras in the form of ships, airplanes and bank accounts.

Everything might have come off secretly except for the fact that a Lebanese magazine mentioned that the US had sold some arms to Iran. An investigation ensued and Attorney General Edwin Meese announced that the US had in fact sent millions of dollars to the Contras from the sales, thus violating Congress' 1984 Boland Ammendment which expressly prohibited supporting the Contras. Even more investigations followed by the Tower Commission and the Congressional Joint Investigative Committee and they collected 0.3 million documents as well as much more live evidence. In November of 1987, the committee reported that Ronald Reagan was in fact ultimately responsible for his administration's actions but that there was no evidence that he had known what has going on. The administrators responsible for the affair where convicted, but these decisions were subsequently reversed. When George Bush became president, he issued pardons to many who had been associated with the affair. The final report came in 1994 from independent prosecutor Lawrence E. Walsh who concluded that there was no evidence that Ronald Reagan had broken the law, but based on circumstantial evidence it was likely that Reagan had participated in or known about the operation.