Iraqgate feud breaks into open

A BITTER public feud between the Justice Department and the CIA, over the latter's involvement in huge improper loans to Iraq by a US branch of a big Italian bank in the late Eighties, has reinforced suspicions of a Bush administration cover-up of its misguided pre-Gulf war policy towards the regime of President Saddam Hussein.

In extraordinary developments culminating this weekend, two of the most powerful agencies in the US government have accused each other of withholding information from federal prosecutors investigating the alleged fraud, carried out from the Atlanta branch of Banca Nazionale del Lavoro (BNL).

The loans, which were never properly recorded in the bank's books, reportedly totalled between dollars 3bn and dollars 5bn (pounds 1.77bn-pounds 2.9bn). They are widely believed to have helped President Saddam to build up his military machine before the Gulf war.

The renewed headlines made by the affair have arrived at the worst possible moment for President Bush, threatening to tarnish further his proudest foreign policy achievement - and on the very eve of last night's first presidential debate, which offers probably his last chance to reverse his dismal standings in the polls before the 3 November election.

The issue has already been seized upon by his Democratic opponents. Al Gore, the candidate for Vice President, who last week gave a scathing speech on the administration's pre-1990 dealings with Iraq, yesterday declared that more than bad judgement was involved. 'It is a seemingly blatant disregard of the law by those responsible for enforcing it.'

The tangled tale of the BNL Iraq loans, which stretches from Atlanta to Washington to the corridors of political power in Italy, is a central strand in what has become known as 'Iraqgate', the mistaken attempts of the Bush adminstration to win President Saddam round by financial and political inducements until almost the eve of the invasion of Kuwait in August 1990. The irregular loans from BNL were first discovered a year earlier.

Acting on a tip-off, FBI agents raided the bank's offices, seizing thousands of documents and closing down the operation. Until lately, it was maintained that the entire scheme had been carried out singlehandedly by Christopher Drogoul, the head of the branch, unbeknown to his superiors in Rome. In June he struck a plea-bargain deal with prosecutors, admitting guilt in 60 of 347 counts of conspiracy and fraud. In the past three weeks, however, even as the Attorney General, William Barr, refused a request from Congress for an independent special council to examine 'Iraqgate', that version has all but unravelled.

First came word of a classified letter from the CIA indicating that the agency knew that BNL officials in Rome were aware of the loans, but withheld the information from the federal judge trying the Drogoul case. Then CIA officials, in leaked testimony to the Senate Intelligence Committee, admitted that they had deliberately concealed evidence from the judge but claimed they had been urged to do so by the Justice Department. The department in turn has denied those allegations.

It has also emerged that the Italian government last year lobbied the administration strenuously for a planned extension of the investigation into Italy to be called off. Ten days ago, the plea- bargain agreement with Mr Drogoul was scrapped, and a full-scale trial will be held next year. The original Atlanta judge withdrew from the case, saying that prosecutors 'may have been blocked by agencies with political agendas from developing a full picture of the affair'.

Now the CIA has said it is conducting a full internal investigation, while the FBI is probing the Justice Department's role.

(Photograph omitted)

Suggested Topics
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
people
Life and Style
President Obama, one of the more enthusiastic users of the fist bump
science
Arts and Entertainment
Peter Griffin holds forth in The Simpsons Family Guy crossover episode
tv
Life and Style
Upright, everything’s all right (to a point): remaining on one’s feet has its health benefits – though in moderation
HealthIf sitting is bad for your health, what happens when you stay on your feet for a whole month?
News
Kristen Stewart and Rupert Sanders were pictured embracing in 2012
people
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

HSE Manger - Solar

£40000 - £45000 Per Annum: The Green Recruitment Company: Job Title: HSE Mana...

Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)

£350 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...

Recruitment Resourcer

£18000 - £22000 Per Annum: Clearwater People Solutions Ltd: Recruitment Resour...

2nd line support - Derbyshire - 6 months

competitive: Progressive Recruitment: 2nd line support - Derbyshire - 6 months...

Day In a Page

A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

A new Russian revolution

Cracks start to appear in Putin’s Kremlin power bloc
Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

Apartheid’s sadistic killer that his country cannot forgive

The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

Standing my ground

If sitting is bad for your health, what happens when you stay on your feet for a whole month?
Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

Greene prays for chance to rebuild after injury agony

Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
Israel-Gaza conflict: Secret report helps Israelis to hide facts

Patrick Cockburn: Secret report helps Israel to hide facts

The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
The man who dared to go on holiday

The man who dared to go on holiday

New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

The Guest List 2014

Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on
It's the best of British art... but not all is on display

It's the best of British art... but not all is on display

Voted for by the British public, the artworks on Art Everywhere posters may be the only place where they can be seen
Critic claims 'I was the inspiration for Blanche DuBois'

Critic claims 'I was the inspiration for Blanche DuBois'

Blanche Marvin reveals how Tennessee Williams used her name and an off-the-cuff remark to create an iconic character
Sometimes it's hard to be a literary novelist

Sometimes it's hard to be a literary novelist

Websites offering your ebooks for nothing is only the latest disrespect the modern writer is subjected to, says DJ Taylor
Edinburgh Fringe 2014: The comedy highlights, from Bridget Christie to Jack Dee

Edinburgh Fringe 2014

The comedy highlights, from Bridget Christie to Jack Dee
Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

The woman stepping down as chair of the Heritage Lottery Fund is worried