BNL Scandal Sets Justice, FBI Against Each Other

IT'S a true story with all the plot points of a spy novel. Leaked CIA documents. Allegations of coverup. Secret arms purchases. Personal phone calls made from the office.

Hold it. Did Le Carre ever write about that phone call thing? Just what kind of scandal is this?

In short, a bizarre one. Or maybe a serious one with a bizarre twist. Whatever it is, it's become a big problem for the White House, which is watching parts of the administration squabble over the handling of a bank scandal involving loans worth billions for Iraq made in the late '80s.

Attorney General William Barr on Friday named a special investigator to probe how the CIA and the United States Department of Justice have handled the investigation into the bank in question, the Atlanta branch of the Italian-owned Banca Nazionale del Lavoro (BNL). In doing so, he spurned renewed Democratic calls for a fully independent special prosecutor.

Mr. Barr said a "climate of distrust" was making it impossible for the Justice Department to dispel allegations that it has bungled the BNL investigation, making a special investigation necessary.

That there is political hay to be made on this case in an election year has not escaped the notice of the Democrats. Vice-presidential candidate Sen. Al Gore (D) of Tennessee claims the BNL case involves a bigger coverup than Watergate. On Saturday he said the appointment of a special investigator was "a sham."

The man suspected of making the allegedly illicit phone calls, which may or may not be related to this case, is none other than FBI director William Sessions. Last week, news leaks disclosed that the Justice Department is conducting a preliminary criminal inquiry into a number of Mr. Sessions' practices, including possible use of FBI aircraft for private travel and phone calls from his personal office not related to official business.

Justice officials emphasized that the nature of their internal regulations force them into investigating any credible charge regardless of the seriousness of alleged wrongdoing. Still, the relative triviality of the whole Sessions affair has raised doubts.

The easy-going Sessions has often been the target of FBI officials who feel he's not showing enough leadership. And intra-agency power politics may be a factor. In an interview with her hometown San Antonio newspaper, Sessions' wife said her husband is "waking up out of a stupor, realizing he's been had."

But Democrats in Congress worry that the Sessions case may be part of the larger BNL picture. The investigation of the FBI director comes at a time when he, in turn, has launched a study of whether the Justice Department or the CIA concealed government knowledge of BNL activities from a federal judge in Atlanta overseeing fraud charges in the case.

The respected Sen. David Boren (D) of Oklahoma, chairman of the Senate Intelligence Committee, says he's greatly concerned about the timing of the leak of the Sessions investigation.

The "fact that a Justice Department inquiry begun in June was leaked at this particular time to the media raises serious questions with regard to whether pressure is being brought to bear against the FBI," wrote Senator Boren in a five-page letter to Attorney General Barr.

At the moment, the heart of the BNL investigation is this: Did the Justice Department try to pin the rap for illegal loans to Iraq on the manager of the Atlanta BNL branch? It now appears some US officials have long had serious evidence of involvement by BNL officials in Rome.

If more than a rogue manager were involved, the administration's staunch Italian allies might be embarassed. It would also raise further questions about what the US knew, or should have known, about the affair while it was going on.

The CIA for its part has come clean, stating that a Sept. 17 letter sent to the federal prosecutor in Atlanta didn't portray a true picture. The letter implied the CIA had only press reports of BNL-Rome involvement in the case. Actually the agency possessed several classified reports suggesting the same thing.

Now Justice and the CIA are arguing about who pressured whom to say what about the CIA letter. As yet, neither has proved their case.

US Rep. Henry Gonzalez (D) of Texas, who has been himself digging into the BNL mess for some time, read parts of the CIA report on the subject on the House floor last month. Among the report's assertions: that BNL loans helped finance the Iraqi Condor 2 ballistic missile program.

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