Possible Interference in Iraq Loan Probe Cited

The federal investigation of a massive loan scheme that helped build Iraq’s military arsenal may have been hampered by high-level officials in Washington to avoid criticism of the Bush Administration’s policy toward Baghdad, an Atlanta judge said Monday.

U.S. District Judge Marvin H. Shoob said that evidence at a three-week sentencing hearing for the bank manager accused of masterminding the loan deal indicates that there were a series of unusual interventions by Bush Administration officials with local prosecutors in Atlanta who were investigating the case.

Citing possible intervention and the withholding of evidence by unnamed Administration officials, he renewed his call for an independent counsel to investigate the handling of the case.

The judge’s criticism echoed charges by Democratic congressmen, who have contended that the Administration limited the investigation in its early stages to avoid disrupting relations with Iraq and later to cover up the extent of the Administration’s pre-Gulf War dealings with Iraqi leader Saddam Hussein.

Shoob’s order was issued as he dismissed a guilty plea by Christopher P. Drogoul, the former Atlanta branch manager of Italy’s government-owned Banca Nazionale del Lavoro, and set the stage for a trial in the case sometime next year.

Drogoul pleaded guilty in a plea agreement with the government last June to engineering $5 billion in loans to Iraq before the Gulf War. He repudiated the agreement last week on the witness stand and claimed that senior officials at BNL’s Rome headquarters knew of and approved the loans.

In reaching much the same conclusions as Drogoul, Shoob said that the evidence--including still-secret CIA files--showed that senior BNL officials were aware of the loans to Iraq. But Shoob contended that prosecutors and investigators did not follow the trail to Rome and elsewhere.

“Primarily, the court concludes that prosecutors failed to investigate seriously whether BNL-Rome knew of defendant Drogoul’s activities,” wrote Shoob. “This failure, coupled with or provoked by the involvement of other departments of the United States government, indicates an effort to absolve BNL-Rome of complicity in the Atlanta branch loans to Iraq.”