Defense Links Bush’s Iraq Policy to Bank Loans

President Bush’s name was raised for the first time Wednesday in the sentencing hearing for a former banker who engineered $5 billion in illicit loans that helped build Iraq’s war machine.

Bush’s prewar policy toward Baghdad has hung like a storm cloud over events leading up to the hearing in federal court here. But on Wednesday, the defense lawyer described Bush’s secret 1989 order mandating closer ties to Iraq as part of a deliberate U.S. foreign policy. That policy, said lawyer Bobby Lee Cook, allowed the loan scheme to thrive and had the effect of restricting the federal investigation into it.

During a day of withering cross-examination of the senior federal investigator on the case, Cook also exposed what appeared to be substantial flaws in the government’s three-year BNL investigation.

Cook’s client, Christopher P. Drogoul, 43, was the Atlanta branch manager for Banca Nazionale del Lavoro, which is owned by the Italian government. He pleaded guilty in June to conspiracy, money laundering and fraud in connection with the massive loans to Iraq.

Claiming that Drogoul broke his agreement to cooperate with them, prosecutors refused to support a lighter sentence and are seeking a harsh prison term for the ex-banker.

The severity of the potential prison term--and the limitations on the federal judge’s ability to reduce the sentence without support from the government--has led to speculation that Cook may ask the court for permission to withdraw the plea and take the case to trial.

The government claims that Drogoul executed the scheme without the knowledge of his superiors at BNL headquarters in Rome. Cook’s task in winning any lighter sentence hinges on convincing U.S. District Judge Marvin H. Shoob not only that BNL officials in Rome knew but that the U.S. government countenanced the scheme as part of its pro-Iraq tilt.

In scathing questioning of federal investigator Arthur J. Wade, Cook elicited information that seemed to raise doubts in the judge’s mind about the thoroughness of the federal investigation and Wade’s own qualifications.

Wade acknowledged that no investigator had examined the minutes of the meetings of the BNL board of directors to see whether the members were aware of Drogoul’s lending, that he did not know the names of any of the directors and that a planned trip to Rome and Turkey to interview people in the case was blocked by the Justice Department in Washington.

“As far as you know as you sit on the stand today, not one American official who is interested in the investigation of this case has set one foot in BNL’s offices in Rome, right or wrong?” Cook demanded.

“That’s correct,” replied Wade.

Cook sketched a variety of policy considerations that he claimed hampered the BNL investigation. He also questioned Wade about Bush’s National Security Directive 26, the Oct. 2, 1989, order mandating closer ties with Baghdad and about a meeting Bush had while vice president in which he promised the Iraqi ambassador that sales of high-tech goods would be increased.

Wade defended the investigation, saying that it had not been affected by political considerations. With Cook’s challenges at a pitch, acting U.S. Atty. Gerrilyn G. Brill rose to her feet and objected.

“The government is not on trial here,” she said indignantly. “Mr. Drogoul had pleaded guilty.”

But Shoob several times indicated that the government’s conduct of the case is indeed on trial.