Rome Bankers Involved in Iraq Loans, CIA Report Says : Probe: Document raises new questions about Justice Department’s investigation into the $5-billion scheme.

The CIA concluded by early 1990 that officials at the Rome headquarters of Italy’s Banca Nazionale del Lavoro were involved in a scheme to provide billions of dollars in secret financing for Iraq’s military machine, according to an intelligence document provided to The Times on Monday.

“Managers at BNL headquarters in Rome were involved in the scandal,” wrote a senior CIA official. The conclusion was part of a summary of new information on the scandal sent to the Agriculture Department on Jan. 31, 1990.

The document--provided to The Times by an Administration official--is the strongest evidence yet that the CIA conclusion on a central element in the loan scandal contradicted Justice Department findings. It underscores questions about the thoroughness of the department’s criminal investigation into the loan scheme.

The Justice Department decided early that bank officials in Rome did not know about the $5 billion in Iraqi loans provided by its Atlanta office. The decision restricted the three-year federal investigation and led to charges against only six of BNL’s Atlanta employees in February, 1991.

The federal judge who presided in the Atlanta case and congressional Democrats have contended that the inquiry was hampered by officials in Washington to conceal the extent of the Bush Administration’s assistance to Iraq and to avoid embarrassing the Italian government, which owns BNL.

The case became a major issue in the last weeks of the presidential campaign, with the White House repeatedly denying that it engaged in an attempted cover-up and Atty. Gen. William P. Barr defending the Justice Department’s handling of the inquiry.

Last month, Barr bowed to congressional pressure and appointed a retired federal judge to lead a new investigation of the BNL case.

The disclosure of the CIA’s conclusion is the latest twist in the saga of who knew what when in connection with the politically charged bank fraud.

In September, federal prosecutors in Atlanta told U.S. District Judge Marvin H. Shoob that the CIA had only press reports indicating BNL officials in Rome knew about the Iraqi loans when they were made between 1985 and 1989.

The Senate Intelligence Committee then discovered that the agency had found stronger, classified information indicating that the bank officials in Rome knew of the loans.

CIA lawyers told the committee that the Justice Department had pressured the agency not to provide the new material to Shoob, according to Sen. David L. Boren (D-Okla.), the committee chairman.

The new disclosure shows that the CIA had gone even further, deciding by early 1990 that unidentified officials in Rome not only knew of the scandal but were involved. Involvement of those officials would raise doubts about many charges brought by U.S. prosecutors against the Atlanta BNL employees.

The conclusion was contained in a letter written by Jack Duggan, a senior analyst in the CIA’s Office of Near Eastern and South Asian Affairs. It was attached to a longer analysis of the BNL scandal, which remains secret.

The letter and report went to David Kunkel, a supervisor in the Agriculture Department’s Commodity Credit Corp., which guaranteed nearly $2 billion of the loans to Iraq from BNL.

Along with addressing the involvement of officials in Rome, the letter said the CIA had uncovered no evidence that Iraq had misused loans guaranteed by the Agriculture Department.

The Agriculture Department concluded a few months later that Iraqi abuses were relatively minor. Evidence that Iraq traded U.S. goods for arms is still under investigation.

House Banking, Finance and Urban Affairs Committee Chairman Henry B. Gonzalez (D-Tex.) disclosed the existence of the CIA document Monday in a letter to Agriculture Secretary Edward R. Madigan. An Administration official then provided a copy to The Times.

Gonzalez complained that the CIA letter and report contradicted claims by Agriculture Department officials, made to his investigators, that the department never received classified material on the BNL scandal.

Alan Raul, the department’s general counsel, would say only that the department had referred the committee’s investigators to intelligence agencies in their search for reports on BNL and Iraq.

A senior Administration official said the CIA documents received limited distribution within the Agriculture Department and were turned over to the Justice Department in September. He suggested that the documents were unknown to the officials who told the congressional investigators that the department had no classified material.