Banker’s Plea Bargain in Iraq Loan Case Criticized as ‘Whitewash’

The chairman of the House Banking, Finance and Urban Affairs Committee on Friday criticized a Justice Department plea bargain with an ex-banker who loaned $5 billion to Iraq, charging that the deal amounted to “a whitewash” of the so-called Iraqgate scandal.

“It’s the same old stuff and it smells,” said Rep. Henry B. Gonzalez (D-Tex.), whose committee has spent three years investigating the Iraqi loan case. “This Administration has made a decision to wash its hands of anything to do with this matter.”

Atty. Gen. Janet Reno Thursday approved a plea bargain with Christopher P. Drogoul, the former manager of the Atlanta office of Italy’s Banca Nazionale del Lavoro. Drogoul, accused in a 70-count indictment of conspiracy, fraud, money laundering and tax evasion, admitted guilt on three technical charges.

Carl Stern, the chief Justice Department spokesman, said that the plea bargain does not end the investigation. He said investigators are examining such matters as whether U.S. export laws were violated by companies whose sales to Iraq were financed by the Italian bank and whether there was misconduct by any U.S. government officials.

“The probe remains wide open,” said Stern. “Drogoul’s plea does not close the investigation.”

Gonzalez said in an interview that he plans to call again for an independent counsel to investigate the handling of the Iraqi loan case if Congress renews the independent counsel law, which expired last year.

Democrats were rebuffed a year ago in their attempts to have the case examined by an independent counsel as part of allegations that the George Bush Administration had covered up the extent of its assistance to Iraq before the Persian Gulf War.

Drogoul, 44, has maintained that his superiors in Rome and U.S. intelligence officials were aware of his loans to Iraq. U.S. District Judge Marvin H. Shoob in Atlanta said last month that Drogoul and other employees of the Atlanta office charged in the scheme were “pawns and bit players” in a secret prewar effort by the United States and Italy to arm Iraq.

Stern said that prosecutors believe the three counts to which Drogoul pleaded guilty will expose him to as harsh a prison sentence as could have been expected if he were convicted at trial.

“Their assessment was that they could get where they thought they should be with a sentence through these counts,” said Stern.

As part of the deal, prosecutors agreed not to recommend a sentence of more than 63 to 78 months. Robert M. Simels, Drogoul’s lawyer, said prosecutors assured him that they will not seek more than 48 to 57 months. Simels plans to argue for substantially less prison time.

Last year, the government said Drogoul’s crimes warranted a life sentence under federal guidelines. At the time, he faced trial on 347 counts. Earlier this summer, a new indictment was brought reducing the counts to 70 but all of the most serious counts remained.

“It’s total baloney to say this is as tough a potential sentence as he would have faced upon conviction,” said Jake Arbes, one of Drogoul’s former lawyers. “What the government is doing is perpetuating a cover-up. It’s a good deal for Drogoul and for the government. The losers are the American people because we are never going to know what happened.”