Discredited Iraqi ally regroups

A year ago, he was the man who could be president of the new Iraq. For decades, Ahmed Chalabi had crafted and pursued a vision - an exile's dream - of ousting Saddam Hussein with Washington's help.

Now, Mr. Chalabi has fallen far from the graces of his American backers. His home and office in Baghdad were raided by coalition forces, and he is excluded from Iraq's transitional government.

But sources in Iraq and elsewhere are reluctant to write the political obituary of Chalabi just yet. An inveterate political survivor, he is on the move still, seeking to build ties to Iraq's Shiite religious establishment and, according to some of his former allies in the US government, to Iran.

"The one thing you can say for sure about Chalabi is that you can never count him out,'' says Ghassan Attiya, a former Iraqi exile and one-time supporter of the Iraqi National Congress, the political party Chalabi led. "He's an incredi- ble political survivor ... an incredible charmer."

The story of how Chalabi charmed his way to the top and became the Iraq guru to key advisers around President Bush goes a long way to explaining why the administration both overestimated Mr. Hussein's weapons of mass destruction programs and underestimated the difficulties of occupation.

Indeed, a template for the experience that US officials now say they've undergone with Chalabi can be found in the 500-year-old words of Machiavelli. "How dangerous a thing it is to believe" exiles, he wrote. "Such is their extreme desire to return home, that they naturally believe many things that are false."

To be sure, Chalabi isn't a Svengali who single-handedly deceived the US into imagining postinvasion Iraq would be easy. Instead, a cadre of high-level Americans - Vice President Dick Cheney; Richard Perle, former adviser to Secretary of Defense Donald Rumsfeld; and Undersecretary of Defense for Policy Douglas Feith - were inclined to believe what he had to say, despite the objections of many colleagues.

It was a seductive vision. A post-Hussein Iraq, Chalabi promised, would quickly normalize relations with Israel and build an oil pipeline to the Israeli port of Haifa. A new Iraq would strike a major blow against terrorism and the postwar environment would be stable, with US forces embraced by grateful Iraqis. Chalabi assured his audience that his support crossed ethnic and sectarian lines.

Chalabi's Iraqi National Congress provided invaluable intelligence to the US before and after the first Gulf War. More recently, the Pentagon says the INC's information has helped save US soldiers' lives. And Chalabi denies passing secrets to Iran.

Yet many critics felt his dream of a new Iraq was without any grounding in reality. "We've known all along that anything coming from Chalabi should be treated with extreme skepticism, particularly this stuff about being showered with flowers,'' says a senior State Department official. "But we were overruled by people at Defense who think we were just looking for excuses not to go to war."

Chalabi's vision for an independent Iraq started to come apart soon after marines escorted him and a US-trained militia loyal to him into southern Iraq. They'd been told to expect thousands of Iraqis to flock to the banner of the man the US expected to install as an interim prime minister. But instead, they found that no one had ever heard of him. In the months that followed, with the failure of US searchers to find significant chemical or biological weapons that Chalabi promised would be there, his star fell further. Though given a seat on the US-appointed Governing Council, he spent much of his time abroad.

All this led to the cancellation of his monthly $340,000 check from the Defense Department for intelligence assistance in April. On May 20, US-backed forces raided his home and offices in Iraq as part of a corruption investigation.

Chalabi became the focus of intense American interest while getting his doctorate in math at the University of Chicago in the 1960s. There, he came to know Albert Wohlstetter, the mathematician and cold-war strategist who influenced a generation of conservative thinkers. Many of Wohlstetter's disciples, including Mr. Perle and Deputy Defense Secretary Paul Wolfowitz, became Washington's chief cheerleaders for invading Iraq.

After getting his degree, Chalabi moved to Beirut, Lebanon, where his brother Jawad was running the Middle East Banking Corp., or Mebco. After a few years, Chalabi decided to help expand the family banking empire, moving to Jordan to found Petra Bank in 1978.

In the 1980s, Petra flourished, introducing computer banking systems to Jordan. Chalabi also excelled at currying favor, growing particularly close to Jordan's then Crown Prince Hasan bin Talal, the brother of Jordan's deceased King Hussein. "In those days, Chalabi was almost like the uncrowned king of Jordan,'' says Jamal Dmour, a military-court prosecutor who helped investigate Petra and is now a member of parliament.

His position was cemented, at least in part, by strategic lending to influential figures. In particular, Jordanian officials say Chalabi lent about $30 million to Prince Hasan, and his relationships with key officials enabled the bank to keep operating for years despite warning signs, according to Mr. Dmour.

But in late 1989, with a banking crisis looming, Mohammed Said Nabulsi, the former Jordanian central bank governor who coordinated the bailout of Petra after its 1989 collapse, made a strong case to the late King Hussein to put the bank under government supervision. Chalabi fled two days after the order was given to allow government officials to review the bank's records. What they found there stunned them.

"The scale of fraud at Petra Bank was enormous,'' says Mr. Nabulsi, who is now an investment banker. "It was like a tiny Enron."

After two years of investigations, Chalabi was convicted on embezzlement and fraud charges, and sentenced in 1992 by a military court to 22 years.

Last week in Baghdad a Chalabi spokesman, Mithal al-Alusi, gave reporters a document he claimed cleared Chalabi of all charges at Petra Bank. Mr. Alusi said the letter, not on official letterhead or bearing any sort of seal, nor carrying Chalabi's name, proved his prosecution was improper. "We thank God this dirty plot has been disclosed which was intended to hurt relations between Jordan and Iraq," Mr. Alusi said.

The failure of Chalabi's banking interests didn't hurt him for long.

Armed with Washington contacts provided by Perle and what some people call a preternatural charm, Chalabi convinced the US that he was the man to lead an exile opposition to Hussein after the 1991 Gulf War.

CIA aid flowed to the nascent Iraqi National Congress, to the tune of $100 million, which set up training camps and propaganda operations in Northern Iraq, which a US-imposed no-fly zone kept largely autonomous.

While the CIA relationship soured in 1995, mostly because case officers felt he couldn't deliver on his promises but also over concern about Chalabi's contacts with Iran, he was by now a well-known figure to the US government. Congress guaranteed his INC money in 1998 and with the presidency of Mr. Bush, Chalabi's most fervent supporters were back in government.

Chalabi's backers have frequently said that they believe Chalabi's version of events, and some still do.

Perle, who's out of government at the moment but was the principal broker between Chalabi and the US, says criticism of Chalabi is the product of an irrational dislike of him on the part of the State Department and the CIA.

Danielle Pletka of the American Enterprise Institute, a Washington think tank where Perle is a resident scholar and Mr. Cheney used to sit on the board, dismissed the corruption conviction against Chalabi in a written commentary earlier this month.

"Throughout the 1990s, Chalabi was regularly accused of malfeasance by his enemies,'' she wrote. The conviction in Jordan "has never been documented."

Still, the man whose British-installed Hashemite family, which was exiled in 1958 by a nationalist coup, may be using his falling out with the United States to gain credibility in Iraq as an independent.

"What the Americans have done earned me a medal from the Iraqi people," he said in an interview with Al Arabiya television in Dubai. "It invalidated everything that had been said about me being with the Americans."

People close to Chalabi say he's trying to build a new power base, primarily among Shiite religious figures and politicians, as his key to survival in the emerging Iraqi political order.