The Justice Department has announced an investigation of itself, the FBI and the CIA in the alleged cover-up of huge bankloans to Iraq by the Atlanta branch of an Italian bank in 1989. The FBI had already said it was conducting its own investigation of the Justice Department's handling of the affair. Within a couple of days, officials in the Justice Department leaked to the press that they were investigating the 'ethics' of the FBI head, Judge William Sessions.
It turned out that Mr Sessions' alleged 'violations' involved using his office telephone for private calls and similar misdemeanours by his wife.
Mr Sessions is said to be 'in a state of shock' that such trivial allegations should be used by colleagues to discredit him after six years of loyal service to Bush and Reagan administrations.
Senator Bill Bradley, a Democratic member of the Senate intelligence committee, said yesterday that he had no doubt that the Sessions leak was meant to discourage a full FBI investigation of the alleged Iraqgate cover-up. 'It seems to me like (the Bush administration) is unravelling,' he said.
The affair centres on allegedly fraudulent loans of more than dollars 4bn ( pounds 2.35bn) to Baghdad by the Atlanta branch of the Banca Nazionale del Lavoro (BNL).
The Justice Department at first tried to slow and impede the investigation. It then pushed for the prosecution of the local branch manager, Christopher Drogoul, on the grounds that he had acted alone. But classified documents released to the US Congress this month showed that the CIA knew that the Iraqi loans had been approved at high level in Italy. The CIA said it had wanted to put the record straight but had been urged by the Justice Department not to do so.
Democratic members of Congress have alleged that the Bush administration tried to cover up the BNL affair because it was part of a wider web of illegal and clandestine dealings between Washington and Baghdad which helped to re-arm Saddam Hussein after the Iran-Iraq war.
The Attorney-General, William Barr, had for several weeks refused Democratic demands for an independent inquiry. He has now relented in part and appointed a retired judge, Frederick Lacey, to investigate the actions of his own department and the CIA and the leaking of the allegations against Mr Sessions. Mr Barr said he was convinced no one in his own department had acted improperly. He ordered the inquiry to forestall 'trial by allegation, rumour and leak'.
Although falling short of Democratic and media demands for a full-scale and independent inquiry, the decision is said to reflect anxiety among senior Bush administration officials about a criminal investigation of the Iraqgate affair if the White House changes hands next month.
'The first thing a Clinton administration will do is throw open the executive-branch files on Iraq and Iran and anything else they can think of,' said an administration official.