Reagan's negligence in promoting ethics among his subordinates made his administration the most scandal-ridden since Watergate. At times, it appeared to replay some of that same history, with televised congressional investigatory hearings and serious talk of impeachment. In contrast to Nixon, however, Reagan was generally a law-abiding president. Yet he did not punish (and he sometimes rewarded) those around him who flagrantly broke the law. As a result, numerous prominent Reagan administration officials were convicted of crimes, some went to jail, and many ended their careers in disrepute. Independent Counsel investigations and prosecutions multiplied throughout his term in office.
The gravest irony of the Reagan administration was that its aversion to big government swelled the coffers of those privileged officials who controlled government. Managerial negligence and deregulation encouraged corruption and lawbreaking. Anti-communist zeal powered unconstitutional militarism. The government did not diminish in size during Reagan's presidency, but instead grew larger than before. And it became less tethered to the law.
The Iran-Contra Affair
The biggest scandal of the Reagan years, and the most significant constitutional crisis since Watergate, was the Iran-Contra affair. In the spring and summer of 1987, millions of Americans watched forty-one days of televised joint hearings from the House Select Committee to Investigate Covert Arms Transactions with Iran and from the Senate Select Committee on Secret Military Assistance to Iran and the Nicaraguan Opposition. The “Iran-Contra Hearings'', as they were called, had all the elements of made-for-television drama: powerful elected representatives, eloquent defenders of constitutional checks and balances, zealous anti-communists, and attractive supporting actors.
The tangled web of illegal activities that connected Washington, Israel, Saudi Arabia, Iran, Panama, Honduras, Nicaragua, and other countries was often hard follow, but the plotline was evident: high-level figures in the Reagan administration, perhaps including the President, had broken numerous laws to pursue deeply held foreign policy goals. The key question was not whether they had acted illegally, but who should be punished and how.
From its first days in office, the Reagan administration prioritized reversing perceived advances by communist regimes, supported by the Soviet Union and Cuba, in Central America. William J. Casey, Reagan's former campaign manager and Director of Central Intelligence, focused immediately on Nicaragua — a small, strategically located country on the Central American isthmus with a pro-Cuban and pro-Soviet government (under the Sandinista Liberation Front) that came to power in 1979 following the overthrow of longtime pro-American dictator Anastasio Somoza. Casey and others in the U.S. government were alarmed by the spread of communist influence, which they ascribed to President Carter's weak policies, and they believed that a Nicaraguan counterrevolutionary paramilitary force, the “Contras,” could lead a region-wide reversal, beginning in this small country.