President Barack Obama approved the $400 million transfer, which he had announced in January as part of the Iran nuclear deal. The money was flown into Iran on wooden pallets stacked with Swiss francs, euros and other currencies as the first installment of a $1.7 billion settlement resolving claims at an international tribunal at The Hague over a failed arms deal under the time of the Shah.
A fifth American man was released by Iran separately.
Details of the cash delivery drew fresh condemnation of the Iran deal from Republicans. They charged that the administration had empowered a major sponsor of terrorism because the nuclear agreement enables Tehran to re-enter the international economy and gives it access long-frozen funds.
In addition, they said the cash delivery amounted to a ransom payment that violates long-standing US practice not to pay for hostages. As such, they argued, it encourages Iran to hold onto its remaining Americans prisoners until they can get more money for them.
"Paying ransom to kidnappers puts Americans even more at risk," said Illinois Republican Sen. Mark Kirk. "While Americans were relieved by Iran's overdue release of illegally imprisoned American hostages, the White House's policy of appeasement has led Iran to illegally seize more American hostages, including Siamak Namazi, his father Baquer Namazi and Reza Shahini."
Republican presidential nominee Donald Trump jumped on the issue, seeking to change the subject after a punishing week of gaffes and reproaches from members of the GOP.
"Iran was in big trouble, they had sanctions, they were dying, we took off the sanctions and made this horrible deal and now they're a power," Trump said Wednesday in Daytona, Florida.
"We paid $400 million for the hostages," Trump said. "Such a bad precedent was set by Obama. We have two more hostages there right? What's are we going to pay for them? What we're doing is insane."
Democratic nominee Hillary Clinton, when asked about the payment by a local Denver, Colorado, television station, said it was "old news."
"It was first reported about seven or eight months ago, as I recall," she told Denver's 9News
. "And, so far as I know, it had nothing to do with any kind of hostage swap or any other tit-for-tat. It was something that was intended to, as I am told, pay back Iran for contracts that were canceled when the Shah fell."
US officials said cash had to be flown in because existing US sanctions ban American dollars from being used in a transaction with Iran and because Iran could not access the global financial system due to international sanctions it was under at the time. The details of the how the transaction occurred were first reported by The Wall Street Journal
. CNN reported in January
that the transfer of funds had been arrangement.
The money was procured from central banks in Switzerland and the Netherlands, official said, and an unmarked cargo plane loaded with Swiss francs, euros and other currencies were flown to Iran.
"They were totally cut off from global banks and there was no other way to get them the money," one senior official with knowledge of the transaction said.
While the cash transaction took place the same day as the release of Washington Post reporter Jason Rezaian and the other Americans, administration officials insist the payment did not constitute ransom and that there were was no quid pro quo for the payment. They said the agreement on the release of the prisoners dovetailed with the resolution of parallel negotiations over the dispute of the failed arms deal.
"It's against the policy of the United States to pay ransom for hostages," White House spokesman Josh Earnest said Wednesday.
He described the payment as a "conscious strategic decision that was made on the part of the Obama administration as we were implementing the deal to prevent Iran from obtaining a nuclear weapon to resolve other longstanding concerns we had with Iran."
"That included securing the release of five American citizens who had been unjustly detained in Iran, and closing out a longstanding financial dispute in a way that saved the American people potentially billions of dollars," he said.
In return for the US citizens' release, the US dropped extradition requests for 14 Iranian citizens and freed seven. Former FBI agent Robert Levinson, who disappeared in Iran in 2007, remains missing.
Earnest cast those using the new details about the palettes of cash as people "flailing to justify their continued opposition to the deal to prevent Iran from obtaining a nuclear weapon."
The $400 million was Iran's to start with, placed into a US-based trust fund to support American military equipment purchases in the 1970s. When the Shah was ousted by a 1979 popular uprising that led to the creation of the Islamic Republic, the US froze the trust fund. Iran has been fighting for a return of the funds through international courts since 1981.
In announcing the agreement, Obama said that paying the $400 million -- plus $1.3 billion in interest -- was saving American taxpayers billions of dollars. The Iranians had been seeking more than $10 billion at arbitration.
"For the United States, this settlement saved us billions of dollars that could have been pursued by Iran," Obama said in January. "There was no benefit to the United States in dragging this out."
As it was making the January cash delivery, the US also imposed new sanctions on Iran over its ballistic missile testing. At the same time, the White House unfroze a larger pool of Iranian assets, estimated at $100 to $150 billion, as part of the nuclear deal, though administration officials cautioned that Iran would only pocket about $50 billion after legal claims.
Legal claims are one of the reasons the payment to Iran was controversial when Obama first announced it. The Clinton administration had agreed in 2000 to pay that $400 million to Americans who had won lawsuits against Iran in US courts.
These families and individuals had sued the Islamic Republic for damages after the deaths of loved ones or for being the victims themselves of Iran-backed kidnappings or terrorist attacks. At the time, US officials told those families the money would come from Iran.
With Obama's announcement, it became apparent that the payments had come from US taxpayers and not from Iran at all.
Stuart Eizenstat, the Clinton administration's deputy Treasury secretary, told Newsweek that Iran had filed a claim with The Hague, limiting the administration's ability to lay claim to the fund.
Critics on Wednesday were further incensed by Iranian claims that the cash amounted to a ransom payment for the four prisoners.
"That sort of ransom payment as part of the Iran deal is an outrage," said Republican Sen. Marco Rubio of Florida.
US officials conceded that the Iranian negotiators involved in the prisoner exchange said they wanted the cash to coincide with the release of the Americans to prove a deliverable for the exchange even as they argued against the characterization of it as a ransom payment.
"As we've made clear, the negotiations over the settlement of an outstanding claim at The Hague Tribunal were completely separate from the discussions about returning our American citizens home," State Department Spokesman John Kirby said, referring to the $1.7 billion payout that the $400 cast installment was part of.
"Not only were (the) two negotiations separate, they were conducted by different teams on each side, including, in the case of the Hague claims, by technical experts involved in these negotiations for many years," he said. "The funds that were transferred to Iran were related solely to the settlement of a long-standing claim at the US-Iran Claims Tribunal at The Hague."
"It's not surprising that Iran would want to call this a ransom for domestic political reasons," another senior US official said. "But that is not the case. The confidence built during the Iran nuclear negotiations helped the negotiations in other areas, so it is true all these things came together at the same time as implementation day of the Iran deal. But this was not a ransom."