Barr Defends U.S. Handling of Case Tied to Iraq Loans : Foreign policy: He says the Justice Department did not delay the prosecution of an Atlanta banker linked to Baghdad’s military buildup.

Atty. Gen. William P. Barr on Tuesday defended the Justice Department’s handling of a disputed case involving $5 billion in loans to Iraq, saying that a yearlong delay in bringing charges was the result of professional differences and not foreign policy considerations.

However, in testimony before the Senate Judiciary Committee, Barr acknowledged that the department played a role in last-minute plea negotiations with an Atlanta bank manager at the center of the scandal.

The handling of the case involving the Atlanta branch of Italy’s Banca Nazionale del Lavoro is being examined by the House Judiciary Committee as part of its inquiry into whether an independent counsel is needed to investigate the Bush Administration’s Iraq policy.

Critics have charged that the BNL investigation was delayed to avoid straining ties with Iraq and that broader allegations about the bank’s role in financing Iraq’s military buildup were not pursued aggressively.

In his Senate appearance, Barr said that the House panel was “making a lot of noises” about asking him to review the need for an independent counsel. Apparently anticipating that the committee will make the request, Barr said that he was reluctant to discuss such matters.

But in a sometimes testy exchange with Sen. Patrick J. Leahy (D-Vt.), Barr denied that the indictment was slowed for political reasons. He said that an indictment sought by Atlanta prosecutors in early 1990 was far narrower than the charges returned on Feb. 28, 1991--the day after the cease-fire in the Persian Gulf War.

Justice Department attorneys had helped strengthen and broaden the eventual charges, including adding allegations against Iraqi government officials, Barr said.

“Any suggestion that the department delayed its case . . . is unfounded as far as I can tell,” said Barr.

Leahy also referred to complaints from the federal judge in Atlanta presiding over the case that the Justice Department engineered a plea bargain that kept Christopher P. Drogoul, the former BNL branch manager, from testifying about the extent of the scheme.

Drogoul had vowed to plead guilty to all 347 counts and make a statement implicating others. But the weekend before he was to enter the plea, prosecutors struck a deal in which he pleaded guilty to 60 counts and agreed to cooperate with investigators.

“Does it seem strange for the prosecutors to talk him into pleading guilty to fewer charges?” Leahy asked.

Barr said that the deal resulted in Drogoul’s cooperation in its ongoing investigation of the case. He said that the Justice Department’s only role in the weekend negotiations was to help secure that cooperation.

Prosecutors have said that they are investigating whether some of $2 billion in BNL loans guaranteed by the American government were used by Iraq to buy military equipment as well as examining the bank’s role in Iraq’s worldwide military procurement network. Taxpayers are now repaying those loans, since the Iraqi government defaulted on them after its invasion of Kuwait.

Senate Republicans used Barr’s appearance to criticize the law creating an independent counsel, which is up for review this year. Republicans expressed anger over the recent indictment of former Defense Secretary Caspar W. Weinberger by the Iran-Contra independent counsel.

In response to friendly questions, Barr said that the law provides the special prosecutor with too much discretionary power and an unlimited budget. He said he would like to see a new version with better safeguards.

“It is the power to destroy an individual and, in my view, it should not be exercised upon the subjective decision of an individual,” Barr said.