Bush Withholds Defense Memo From Congress : Probe: Executive privilege is used to block access to the key document sought by a panel probing a deal between the Pentagon, McDonnell Douglas and General Dynamics.

President Bush has invoked a rarely used presidential power to block Congress from obtaining a key Defense Department memorandum in which senior Pentagon officials arranged for McDonnell Douglas and General Dynamics to defer repaying $1.3 billion to the government.

The deferral, resulting from the Navy’s cancellation of the A-12 attack jet program, has been criticized in Congress as a secret government bailout of the firms, triggering a House investigation into its rationale.

Now, the refusal by the Bush Administration to comply with a congressional subpoena for the documents appears to further escalate the political controversy.

The Defense Department demanded the $1.3 billion from the firms--the nation’s two largest defense contractors--after the jet program was canceled Jan. 7 under punitive terms known as “default.” The firms were more than a year behind schedule and billions of dollars over their contract ceiling.

But in early February, soon after the demand for repayment was issued, it was deferred at the highest levels of government, pending the outcome of a lawsuit by the firms challenging the cancellation. McDonnell, already financially strapped, may have been threatened by bankruptcy without the deferral, senior defense officials later testified in Congress.

The document that justified the decision to defer the repayment was subpoenaed earlier this month by a panel of the House Government Operations Committee, which is investigating the decision.

In a letter last week to Rep. John Conyers Jr. (D-Mich.), committee chairman, Defense Secretary Dick Cheney informed the committee that Bush invoked “executive privilege” and directed Cheney “not to provide the document.”

White House spokeswoman Judy Smith said Bush agreed with Cheney that “frankness and candor that is necessary for the Department of Defense decision making process” would be chilled by the release of the document. The memorandum was prepared and the deferral granted just as the nation was entering the Persian Gulf War, heightening concern about national security.

But the committee is investigating whether the Pentagon had a formal rationale, based on an examination of McDonnell and General Dynamics finances, for granting the deferral, or whether the deferral was simply provided at the firms’ request.

The $1.3 billion represented funds the Navy paid to McDonnell and General Dynamics for goods and services not received. When the A-12 was canceled, the two firms had completed several sets of engineering drawings and were trying to build the first aircraft.

In earlier congressional hearings, the deferral has been criticized as a costly public bailout of the two contractors that was never given a rigorous examination or approved by Congress.

The memorandum reportedly includes a document in which Pentagon officials were seeking to arrange for an additional payment of up to $1 billion to McDonnell Douglas for other programs, in an effort to ease the firm’s financial woes, according to committee sources.

On Jan. 24, McDonnell Chairman John McDonnell wrote a letter to Undersecretary of Defense Donald Yockey asking for a $1-billion “advance payment pool.”

The request was never fulfilled.

The memorandum also reportedly includes comments from Navy officials that indicate no financial analysis was done to justify the repayment deferral, according to committee sources.

White House spokeswoman Judy Smith said Monday that the executive privilege was invoked on Aug. 8, the first time Bush has used the authority under his presidency.

Smith said the Administration has attempted to accommodate the Conyers panel by agreeing to allow Conyers and the panel’s ranking Republican member to “review” the document.

Such a review, however, would not allow them to take detailed or verbatim notes from the memo, she said.

In addition, the Bush Administration released all other documents relating to the A-12 termination and deferral and provided testimony at hearings by senior defense officials, Smith said.

“The subcommittee has not explained why they need the document and they have not justified the need for it,” Smith said.

Executive privilege, which can be invoked only by the President, has a controversial history. President Richard M. Nixon attempted to use the power to prevent the release of Watergate evidence but eventually lost his fight.

The power has often been used to prevent the release of damaging or embarrassing information, though it obviously is intended to protect the confidential dealings of government, experts said.

“It is fair to be skeptical,” said Doug Bandow, a fellow at the conservative Cato Institute. “There is a mixture of legitimate use and illegitimate use.”