Investigation Breakdowns Cited in US-Iraq Scandal

NEWLY released findings of a bipartisan congressional inquiry into the United States government's probe of illegally financed Iraqi arms deals may have raised more questions than it answered.

Faulting the Central Intelligence Agency and the Justice Department for a mishandled investigation into the so-called Banco Nazionale del Lavoro (BNL) affair, the Senate Select Committee on Intelligence found "breakdowns in the relationship between intelligence agencies and law enforcement, combined with serious errors in judgment by government officials...."

BNL is the Italian bank whose Atlanta-based branch forwarded $4 billion in fraudulent loans that helped oil Iraq's war machine from 1984 to 1989.

In its 163-page report issued on Friday, the committee unearthed "no direct documentary or testimonial evidence which showed that officials intended to mislead the public or the court." But the report offers disturbing proof that the CIA, acting on advice from the Federal Bureau of Investigation, failed to share with the Justice Department documents that could embarrass the federal government or hurt its prosecution of BNL's Atlanta branch manager, who faces US charges of masterminding the scheme. Withheld information

One example of what was withheld was a December 1990 intelligence report, cited publicly for the first time by the committee's report, that alleged "US, Italian, and Iraqi officials had engaged in unlawful conduct in connection with the BNL-Atlanta loan case."

This and other claims of calculated wrongdoing were rebuffed by CIA Inspector General Frederick Hitz, who also released a report on the BNL investigation on Friday.

He said that though "mistakes were clearly made by agency officials," they were due to "carelessness and a number of instances of poor judgment."

In December, then-Attorney General William Barr, who accepted the recommendation of a special BNL investigator he appointed, rebuked efforts to have an independent counsel pursue charges of government obstruction of justice and coverup.

Mr. Barr's appointed special investigator, retired federal Judge Frederick Lacey, called the Justice Department's action in the BNL case "almost perfect" and attacked those alleging wrongdoing for trying to undermine President Bush during an election year.

Dissenting members of the Senate Select Committee on Intelligence, as well as those who signed onto the committee's report, say that what was unveiled needs further exploration, in addition to many other elements that were not even covered by the committee's inquiry.

A committee member, Sen. Howard Metzenbaum (D) of Ohio, complained that the report "did not cover the role of the Commerce, Agriculture, Defense, and State Departments' possible wrongdoing."

Committee member Sen. Alfonse D'Amato (R) of New York also voted against release of the report because he felt the inquiry was insufficient to produce credible findings.

Sen. John Kerry (D) of Massachusetts, also a member of the Senate Select Committee, notes the BNL report is important "for what it does and does not conclude." `Very poor job'

Mr. Kerry points out that the report asserts that "both the CIA and the Justice Department did not tell the truth to the public about information they had concerning the knowledge of BNL-Rome about BNL-Atlanta's secret financing of Iraqi arms." The senator blames the CIA for a "very poor job" in briefing both Congress and Justice about BNL.

Kerry says that while the committee's findings show "no evidence of conspiracy within either the CIA or the Justice Department pertaining to BNL ... the mistakes were made to appear to have been the consequence of long-standing institutional problems in both agencies."

He also stresses the narrow purview of the Senate Select Committee on Intelligence and lists its critical omissions:

* Whether the White House or others acted improperly in connection with Iraq's loans from the Commodity Credit Corporation guarantee program.

* Whether the administration acted improperly in granting Iraq export licenses on dual technologies prior to the invasion of Kuwait.

* Whether Commerce Department documents were intentionally altered or falsified before being given to Congress, and if so, who was responsible for the alterations.

* Whether the Bush administration improperly withheld documents from Congress pertaining to BNL.

Without a full investigation, Kerry says, "no conclusions should be reached about the propriety of action of higher-level officials in the Bush administration in connection with Iraqi loans."

Committee chairman Sen. Dennis DeConcini (D) of Arizona took the committee's helm this month just as the report was in its final stages.

Mr. DeConcini expresses dissatisfaction with its results and echoes calls for an independent prosecutor to fully examine the alleged government improprieties concerning BNL.

Still outstanding are allegations made by US District Judge Marvin Shoob who presided over the BNL case last fall. He faulted the Bush administration for avoiding scrutiny of BNL because of its desire "to contain criticism of a failed foreign policy" vis-a-vis Iraq in the years directly leading up to the Gulf war.

Congressional leaders were encouraged by President Clinton's campaign calls for a special prosecutor.

"Right now there is no one investigating BNL," says a senior Senate staffer connected with the BNL probe. He and others are eager to see a new attorney general installed who will conduct a serious investigation into the BNL affair.