The Scourge of `Iraqgate'

HENRY B. GONZALEZ must feel secure in his 20th Congressional District in Texas, where he has represented the west side of San Antonio since 1961. He is unopposed for reelection this year, and his constituents consider him above reproach.

"He understands the economy," says one, "he supports education and health care. Y es un hombre honesto, cien porciento honesto."

C-SPAN watchers have come to know Representative Gonzalez, the chairman of the House Banking Committee, as the solitary figure standing in an empty House chamber, railing against the Bush administration's policy toward Iraq before the Gulf war. It didn't seem as though anyone was paying attention.

But they're paying attention now. What some are calling Iraqgate is blossoming into a full-fledged scandal.

Since February, in a series of speeches in the House of Representatives, seemingly talking to no one, Gonzalez has pieced together the account of how an obscure Atlanta branch of the huge state-owned Italian Banca Nazionale del Lavoro (BNL) was used to funnel money to Iraq. Some of that money, in the form of United States-guaranteed loans which must now be repaid by taxpayers, was used by Iraq to purchase war material.

But BNL was more than just a rogue bank. Gonzalez's investigator Dennis Kane, a former accountant for the General Accounting Office, traced the paper trail through the Commerce and Agriculture Departments, into the State Department and finally to the White House.

Gonzalez charges that as secretary of state, James Baker III once met with Saddam Hussein to discuss the bank scandal that the House Banking Committee is investigating, and that President Bush, while serving as vice president, intervened in loan proceedings after a federal agency refused to lend money to Iraq.

Gonzalez is a tireless burrower. He first learned of the BNL bank connection in the Wall Street Journal, where three years ago he read that "$2 billion worth of letters of credit had been issued through an Atlanta bank to Iraq."

Details of the meeting between Mr. Baker and Saddam were discovered in a Federal Reserve workpaper.

He also has an eye for detail. Last February Gonzalez revealed telexes from Iraq to Ohio-based Matrix-Churchill Corp., trying to buy technology for "Project 395," an Iraqi ballistic-missile program. He says the administration knew what Project 395 was and failed to stop the purchase. The congressman also disclosed Customs Service memos linking BNL to a financing scheme for the deal.

The congressman isn't in awe of the great and powerful. He has tracked Acting (formerly Deputy) Secretary of State Lawrence Eagleburger and former Secretary of State Henry Kissinger. "Before assuming his position as deputy secretary of state in 1989, [Eagleburger] served as president of Kissinger Associates, Inc., a political consulting firm organized by Henry Kissinger," Gonzalez said in a speech. BNL was a client of Kissinger Associates, and Mr. Kissinger himself served on BNL's consulting board of dir ectors, earning $10,000 for each meeting he attended in Rome.

From 1986 to 1990 Mr. Eagleburger served on the board of Ljubljanska Banka (LBS), the second largest bank in what was then Yugoslavia. Eagleburger, a former ambassador to Yugoslavia, also helped LBS open a New York branch, according to Gonzalez. And there was a link between the two foreign banks. "BNL fueled a significant amount of LBS's growth in the US with 20 percent to 25 percent of LBS's business from BNL," Gonzalez said, quoting a Federal Reserve memo.

And what about Brent Scowcroft, Bush's national security adviser? Gonzalez has questioned General Scowcroft's stock holdings, which include a number of defense-industry listings.

How, Gonzalez asked, can an appointed official advise the president on national security when that advice can alter the value of the official's stock holdings? "If you have got men who are profiting on their own and have an interest ... whether it is legal or illegal is beside the point, ... it is certainly immoral...," Gonzalez says.

THE Bush administration tried to shut Gonzales up. Former Attorney General Dick Thornburgh warned in a personal letter that Gonzalez's investigation could mean that "culpable parties will elude prosecution." True to form, Gonzalez read the letter into the Congressional Record.

CIA Director Robert Gates once claimed that Gonzalez had revealed information from highly classified and "particularly sensitive CIA documents." But now the agency has started its own reluctant internal investigation into its handling of information related to the BNL affair.

Who is this unusual legislator? His loner status goes back to his early days in Texas politics.

"Henry B. reacts out of principle and doesn't really care about the political fallout," said Andy Hernandez of the Southwest Voter Registration and Education Project, a group seeking to increase Hispanic registration. "He has always been perceived as a fighter, a fighter for principle."

Political brawls are nothing new to Gonzalez. In 1956, in the Texas Senate, he filibustered heroically against attempts to circumvent the Supreme Court's Brown v. Board of Education school-desegregation ruling.

But he's not been predictable. In the 1960s Gonzalez placed himself in the middle of a fratricidal fight among Texas Hispanics. He blasted certain radical-separatist Mexican-American groups as guilty of "tribalism."

More recently Gonzalez has withdrawn from local political fights. "He just doesn't play," says Mr. Hernandez. "Henry B. tends to be a lone ranger. The other side of that coin is that he's independent. No one owns him. He answers to his constituency."

Maury Maverick Jr., a retired San Antonio attorney who once beat Gonzalez in a race for a seat in the state legislature, says: "He won't go into a back room to make deals with anyone. He treats everybody the same, does all his business out in the open. He's the most progressive, bravest congressman we've got."

He's also tough. "He is completely unforgiving," said another source who requested to remain anonymous. "If you cross him once, you cross him forever."

Gonzalez may have steeled his go-it-alone resolve after the Gulf of Tonkin vote during the Vietnam War. Gonzalez was the second to last to vote before the House bell sounded. "I waited to the bell," he recalls, "still debating `Do I have the courage to vote no.' " After the bell sounded Gonzalez was counted among 416 "ayes" in a 416-0 House vote. "I took a solemn oath [after] the Gulf of Tonkin [vote] that I would never do that again as long as I live, no matter how unpopular," he says.

Regardless of who wins the presidential election, the BNL-Iraq loan scandal is not going to disappear. Mr. Kane says a great deal of material remains to be examined, and Gonzalez is committed to the investigation.

Thus Gonzales will remain a player on the Washington scene, but a player by his own unbending rules. "I think Henry B. appears eccentric," Hernandez said, "because we live in such cynical times. The fact that he takes the Constitution as seriously as he does, the fact that he's willing to pursue a question like the Iraq scandal all the way until all of the questions have been satisfactorily answered, all of that makes him eccentric."