Italian Bank Wants U.S. to Pay Off Loans to Iraq

An Italian bank whose Atlanta office gave $4 billion in loans to Iraq in the 1980s wants some of the money back but has run into opposition from the federal government.

The U.S. Department of Agriculture, which guaranteed $900 million in loans made by Banca Nazionale del Lavoro, is refusing to pay the bank the $350 million still outstanding until it gets assurances that the loans are legal.

Rep. Henry B. Gonzalez (D-Tex.), chairman of the House Banking Committee, wants payment to the bank blocked because he believes some of the money helped finance Iraq’s weapons buildup before the Persian Gulf War. The Agriculture Department backed the loans under a program to help U.S. exporters finance trade with foreign countries.

Chief officials of the bank’s Atlanta branch were indicted on charges they fraudulently arranged loans without approval of the main office in Rome. Two former employees pleaded guilty.

The Atlanta office was closed following a raid by the FBI in 1989. Former branch manager Christopher P. Drogoul is expected to go on trial in June on charges of defrauding the bank.

The Italian government-owned Banca Nazionale said it is due the loan money. The United States has paid $1.1 billion to other banks making U.S. government-backed loans to Iraq that became unpayable because of the war.