3 Britons Cleared in Iraq Arms Sale Case : Gulf War: Testimony in London indicates the British government gave tacit approval, fueling speculation U.S. may have had similar policies.

Three British business executives were cleared Monday of charges that they illegally sold arms-making equipment to Iraq, ending a trial that had raised new questions about the support of Saddam Hussein’s regime by Western governments before the Persian Gulf War.

The charges were thrown out by a judge after two weeks of testimony indicated that the British government had given tacit approval to the exports from 1987 to 1990 so it could continue receiving secret intelligence on Iraq’s war-making potential.

The dismissal fueled speculation in the United States over whether the Bush Administration also allowed Iraq to receive weapons technology and other benefits as part of its prewar efforts to appease Baghdad.

Several influential Senate Democrats are discussing the possible creation of a select committee to coordinate congressional investigations of the Administration’s prewar dealings with Iraq and allegations of a postwar cover-up, according to sources.

Senate Majority Leader George J. Mitchell (D-Me.) talked Monday with senior Democrats about establishing an investigative committee, the sources said. The committee would be similar to panels that investigated Watergate and the Iran-Contra scandal, consolidating inquiries by the Senate Agriculture, Intelligence and Banking, Housing and Urban Affairs committees.

Sen. David L. Boren (D-Okla.), chairman of the Intelligence Committee, and Banking Chairman Donald W. Riegle Jr. (D-Mich.) were mentioned as candidates to lead the broad inquiry.

Concerns about what the Bush Administration knew about Iraq’s military buildup were heightened by testimony in the London trial of three former executives of Matrix Churchill Corp., an Iraqi-owned company in Coventry, England, that sold millions of dollars worth of sophisticated machinery to Baghdad.

Bobby Lee Cook, the lawyer for a former banker charged in a separate case in Atlanta with providing $5 billion in secret loans to Iraq, said that Monday’s dismissal indicated that both the British and U.S. governments were aware of Iraq’s arms-acquisition effort and turned their heads.

“It is illustrative of the fact that England and America knew exactly what was going on with reference to the shipment of arms and technology to Iraq and that the policies of our government and the United Kingdom were operating in tandem,” said Cook.

His client, Christopher P. Drogoul, a former official of Italian-owned Banca Nazionale del Lavoro in Atlanta, withdrew his guilty plea in connection with the loans after claiming that he was allowed to make the loans because they fit with the Bush Administration’s pro-Iraq policy.

The defendants in the British case--Paul Henderson, Trevor Abraham and Peter Allen--said that the British government knew the company’s machinery was being used by Iraq to manufacture artillery shells and other weapons.

British intelligence agents testified that Matrix Churchill was allowed to sell machinery to Iraq to keep intelligence information flowing from two company employees who provided data on Iraq’s attempts to acquire Western military technology. One agent said that he presumed the information was passed along to other Western intelligence agencies, including the CIA.

A former British sub-Cabinet minister, Alan Clark, acknowledged that the government was aware of the Matrix Churchill shipments and allowed them to continue so that it would continue to receive intelligence information.

Clark, who served at the Department of Trade and Industry, said that his job was to maximize exports despite anti-weapons restrictions, which he found “tiresome and intrusive.”

A Matrix Churchill subsidiary in Solon, Ohio, arranged for Iraq to purchase millions of dollars worth of technology used in Iraqi weapons projects. The Ohio operation was not shut down until September, 1990, a month after Iraq’s invasion of Kuwait and well after U.S. and British intelligence reports about the role of Matrix Churchill in Iraq’s arms network.

After the dismissal of the case in London by Judge Brian Smedley, the Labor Party opposition called on Michael Heseltine, the head of Britain’s Department of Trade and Industry, to make a full disclosure of the department’s “complicity” in arms deals with Iraq.

Tuohy reported from London and Frantz from Washington.