During a press conference, U.S. Attorney General Edwin Meese disclosed that profits from the sell of arms to Iran, which were intended to secure the release of American hostages held by Hezbollah, had been illegally diverted to fund the Contras in Nicaragua. This operation was conducted in secret, defying congressional prohibitions against funding the armed opposition in Nicaragua. The Contra rebels, who were fighting against the Sandinista government, viewed themselves as essential to U.S. interests in combating communism in Central America.

Following the announcement, multiple investigations were initiated, including congressional hearings and an independent counsel investigation. The revelation exposed significant ethical and legal breaches within the Reagan administration, leading to substantial public outcry and calls for accountability. The contradictions of U.S. foreign policy during this period reflected broader tensions in Cold War geopolitics, where strategic interests often superseded legal frameworks.

The Iran-Contra affair ultimately revealed a systemic flaw within the U.S. government’s approach to foreign policy, involving clandestine dealings that bypassed democratic checks and balances. The implications led to a reevaluation of presidential power and congressional oversight in foreign affairs, placing added scrutiny on the executive branch's ability to act unilaterally in sensitive geopolitical situations.