U.S. Begins Iran Leak Inquiry

The Justice Department has launched an investigation to determine who may have leaked sensitive intelligence information to controversial Iraqi official Ahmad Chalabi, potentially causing widespread damage to U.S. surveillance efforts, government officials said Wednesday.

The FBI said it had initiated an “intelligence” investigation, and Chalabi offered to let agents question him about allegations that he compromised a major American spying operation by revealing to Iran that U.S. intelligence was covertly monitoring top secret Iranian communications between Baghdad and Tehran.

Ultimately, investigators are expected to try to determine who in Washington, or among the civilian and military handlers who were assigned to work with Chalabi and his aides in Iraq, divulged details of the highly classified U.S. operation.

Chalabi, a onetime Bush administration favorite, has denied any wrongdoing.

Reports citing secret intercepts of another country’s intelligence traffic typically are given the highest level of classification and are shown to only a handful of U.S. officials. Transcripts would be stamped as a top-secret National Security Agency product, with a code word to indicate they were encrypted signals that had been intercepted and decoded.

These are considered among the most valuable of intelligence products, and federal law even provides for the death penalty in some cases in which “communications intelligence or cryptographic information” has been disclosed.

“The number of people who could have leaked this is small, in the dozens or less,” said Flynt Leverett, a former CIA officer and former Middle East director for President Bush’s National Security Council. “If this is true, someone in this administration did this. It really cries out for accountability.”

Leverett said a successful code-breaking operation “can be a real gold mine. If you can tap into a foreign intelligence service, you get access not only into their intelligence, but into their diplomatic initiatives, into their internal deliberations, into almost anything.”

Meanwhile, intelligence experts warned that exposure of the eavesdropping could prompt other governments targeted by the NSA to switch to new communications equipment that is harder to bug and new computer encryption software that is more difficult to decode.

“This is a very serious breach,” said a U.S. official familiar with the case.

“Not all the damage that can be done has been done,” the official said.

A former senior intelligence official agreed. “A lot of adversary services, a lot of targets the U.S. collects against, are going to be reassessing right now and saying, ‘Just how good is our encryption against American capabilities?’ ” the ex-official said. “It’s going to make life harder for our intelligence agencies.”

Condoleezza Rice, the White House national security advisor, told lawmakers in closed-door meetings on Capitol Hill that the CIA would conduct an inquiry and seek to assess the damage.

“It’s my understanding they’re looking into every aspect of how it occurred, who is responsible, and what the implications are,” Sen. Mark Dayton (D-Minn.) told reporters.

Rep. Deborah Pryce (R-Ohio) said Rice told them, “There is still much to be learned.”

Other officials said U.S. intercepts of Iranian communications tipped off American intelligence that Chalabi, a member of the Iraqi Governing Council, had met with the head of Iran’s spy service in Baghdad about six weeks ago and apparently disclosed that U.S. operatives were reading the Iranian Embassy’s intelligence traffic.

Investigators have yet to determine any possible motive Chalabi may have had, one official said. “To curry favor, to cozy up to the neighbors, to play both sides against the middle, who knows?” the official said.

In Tehran, an Iranian official denied that Chalabi had disclosed that Washington had broken its secret codes, calling the story “basically a lie,” according to Reuters. Officials at the CIA and the NSA, which breaks codes and intercepts communications, declined to comment. The White House and State Department also declined to comment.

Officials declined to say how the NSA had broken Iran’s code. James Bamford, an expert on the NSA and author of the forthcoming book, “A Pretext for War,” said NSA eavesdroppers might have bugged equipment inside the Iranian Embassy to steal the top secret communications before they could be encrypted.

“If you are able to defeat the system before it gets encrypted, you get everything,” he said. “If you bug the keyboard of the computer, and catch the information before it’s encrypted and gets into the mainframe, or bug the monitor that produces the letters pre-encryption, that would be the easiest way.”

Bamford said commercial encryption programs are especially vulnerable to the NSA.

“Sometimes they have backdoors built in,” he said. “Sometimes they break in. And sometimes, people buy programs off the shelf and never change the original settings. It’s like a combination lock. If you know the settings, you can open the lock.”

Beyond that, the NSA commands an armada of super-sophisticated computers and legions of linguists to de-encrypt, translate and analyze telephone conversations, e-mail, radio messages and other intercepted communications from around the world. Based at Ft. Meade, Md., the NSA is the nation’s largest intelligence agency in terms of personnel.

Authorities have not charged anybody in the case. Chalabi offered Wednesday through his U.S. lawyers to cooperate with the Justice Department inquiry into the suspected leaks.

“Dr. Chalabi is willing and ready to come to Washington, D.C., to be interviewed fully by law enforcement agents on this subject and to answer all questions on this subject fully and without reservation,” lawyers Collette C. Goodman and John J.E. Markham II wrote in a letter to Atty. Gen. John Ashcroft and FBI Director Robert S. Mueller III.

“Not only is he willing to answer all questions about his conduct in this regard, but he is willing to assist in any way with any legitimate investigation being conducted by law enforcement,” they added.

An FBI spokesman, Bill Carter, declined to comment on the letter and on the investigation.

But Markham said via telephone from Boston that investigators had not approached his client. Markham questioned the seriousness of the inquiry. “We find it ridiculous that the government is supposedly concerned about such a highly sensitive matter, and they are leaking it in the newspaper like it is a retail outlet advertisement.”

In theory, a government official who leaked U.S. secrets to Chalabi or his aides could be prosecuted for violating laws covering the handling of classified information and possibly even for espionage if the official intended the disclosure to hurt the United States or to help a foreign power.

Making a legal case against Chalabi could be more difficult, some experts said. In general, courts have deemed espionage to be a “political crime” that may not be covered by extradition treaties.

Chalabi could be prosecuted for passing classified information that he received from a U.S. government mole -- but only if he were authorized by the U.S. government to have it in the first place. Markham said he did not believe his client had any U.S. security clearance.

Entifahd Qanbar, a spokesman for Chalabi and the Iraqi National Congress in Washington, blamed the scandal on “a smear campaign by the CIA. It is unsubstantiated. It is unattributed. It is unfounded. It’s not true.”

Haider Musawi, an INC spokesman in Baghdad, said Chalabi had not been warned or told of possible charges being filed against him. “I haven’t heard of anything,” Musawi said.

Qanbar said Chalabi’s popularity in Iraq “is soaring” as a result of the raid two weeks ago on his home and office by Iraqi police backed by U.S. troops. Polls have consistently shown that Chalabi, who had hoped to be ruler of postwar Iraq, was inordinately unpopular.

“Before the raid, people may have been suspicious of Dr. Chalabi,” Qanbar said. “But after the raid they could see he was truly working for the Iraqi people.”

Qanbar said Chalabi’s Iraqi National Congress operated openly in Tehran from an office “funded by the U.S. government. This was no secret. It was important for us to have a presence in the place that had the most Iraqi refugees in the world.”

According to a May 7 report by the Congressional Research Service, the investigative arm of Congress, the State Department agreed in August 2002 to give the INC $8 million to run its offices in Washington, London, Tehran, Damascus, Prague and Cairo, as well as to operate its Al Mutamar newspaper and satellite TV broadcasts from London into Iraq.

The Defense Department gave an additional $4 million to the INC at the time for intelligence collection.

The Pentagon continued supporting the INC’s intelligence gathering efforts until last month, when officials announced that they had eliminated the group’s $340,000 monthly stipend.

The Iraqi judge who ordered the raids of Chalabi’s home and offices two weeks ago said in a recent interview that allegations of Chalabi passing along classified information to Iran or spying for Iran were not part of his investigation and not part of the jurisdiction of Iraqi criminal courts.

Times staff writers Richard Simon in Washington and Monte Morin and Edmund Sanders in Baghdad contributed to this report.