Bordering on an Outrage : Federal judge upset by Justice Department’s continued inaction on BNL

The long and tangled case of bank loans made to Iraq by the tiny Atlanta branch of Italy’s Banca Nazionale del Lavoro has come to an inconclusive and smelly end, at least for now.

U.S. District Judge Marvin H. Shoob has refused to impose jail sentences on five of the six bank officers involved in the case even though all five had pleaded guilty to felony counts. Why the leniency? Shoob flatly refuses to believe the Justice Department’s contention that BNL headquarters in Rome knew nothing about what its Atlanta branch was up to.

The Justice Department criticized by the judge is the Clinton Administration’s, which inherited the BNL case. Democratic suspicions that the Bush Administration may have suppressed facts to obscure its own role in encouraging loans to Iraq prompted Atty. Gen. Janet Reno to launch an investigation.

Out of that came the conclusion by John Hogan, Reno’s special assistant, that there was no conspiracy by Italian bank officials to cover up as much as $5 billion in illegal loans made to Iraq between 1984 and 1989. Instead the loans, which helped Saddam Hussein amass the arsenal he would eventually turn against Kuwait and the U.S.-led international coalition that came to its rescue, were found by Hogan to have been originated by officers of the Atlanta branch who “were not . . . working at the direction of, with the knowledge of or under the auspices or approval of the bank in Rome.”


Shoob refuses to buy this exoneration of Italian officials of BNL--which is mainly owned by the Italian government--not unreasonably finding “absurd” the contention that a “two-bit branch” office could have loaned billions while keeping its parent organization in ignorance.

Shoob senses “a much wider conspiracy” in the BNL case. He has reason to. Certainly enough has emerged over the past four years to support suspicions that a lot of politically explosive information may have been suppressed. That can happen when governments investigate themselves. It’s why Congress should move speedily to re-enact the lapsed special-prosecutor law. The first order of business under a new law ought to be the BNL case.