THE BANCA NAZIONALE DEL LAVORO SCANDAL: HIGH-LEVEL POLITICS TRY TO HIDE THE
Henry B. Gonzalez, (TX-20)
(House of Representatives - September 14, 1992)
The SPEAKER pro tempore (Mr. Dooley). Under a previous order of the House, the gentleman from Texas [Mr. Gonzalez] is recognized for 60 minutes.
Mr. GONZALEZ. Mr. Speaker, as we know, President Bush wanted to make a friend of Saddam Hussein, and he vigorously pursued that policy right up until the eve of the Iraqi invasion of Kuwait. We also know that while the public part of that policy was to use the CCC Program, in the Department of Agriculture, to sell food to Iraq, there was another, a secret layer to the policy, and that aspect was to allow Saddam Hussein to operate a clandestine military procurement network in this country.
Mr. Speaker, I have made reference to this distinction before because there was some confusion even reflected by the deputy Secretary of State, then, now the acting Secretary of State, saying that the CCC Program was it. It was not. You had commercial, financial transactions also financed through the Banco Nazionale del Lavoro. And this aspect, the commercial, I brought out in detail, so I will not allude to it in detail other than to say that it was this really secret operation that should be of concern particularly to those great guardians of security, all of the vast apparatus of the intelligence that this country has erected, plus the financial institution regulatory network, which we really do not have in our country, to protect our national interest, should be aware that made it possible, this commercial/financial banking access, to procure such things as a .155 artillery shell casing manufactured by an American corporation but into which some Iraqi interests bought the required percentage in order to have access to blueprints and everything else.
So that when our soldiers went to the sands of Araby with their .155 military artillery shells, they had the same shells fired back at them. It is still going on. This is the reason for my concern. Iraq, actually, in all truth, has been one of the minor plans in this very canny, very astute, very knowledgeable way of working through the crevices and the gaps in our international banking regulatory system in America.
The administration, last summer, was willing to admit that its public policy was a mistake: `Oh, made a mistake.' But they do not take responsibility for the mistake. It used to be, and it still is in other countries, like in England, Great Britain, when the Foreign Secretary Harrington, later an associate of Henry Kissinger & Associates, and still later recently the envoy to Yugoslavia, supposed to be the peace envoy, when Lord Carrington fouled up in the case of the Malvinas, as the Argentines called them, or the Falklands, as the British call it, he resigned. We used to do that in our country. We used to have members of the Cabinet, when they could not stomach something, they quit, and they say, `Look, we don't go along with that.' Not now, not since the ideological compulsion and the takeoff on an ideological basis of our governmental leaders since the President Reagan's advent, and Reagan/Bush, and now Bush. So that they make mistakes and they, `Oh, well, yes, sure, but we will admit now that you brought this out,' and they resisted stoutly bringing anything out, but, `Yes, it was a mistake, in retrospect it looks like a mistake, but at that time it was our policy to see how,' in the words of the President, `we could bring Saddam Hussein and Iraq into the confraternity of the civilized nations.'
You are going to bring that kind of pattern of behavior by a leader of a country and his regime by arming them? It is ridiculous.
So, it still goes to the greatest lengths to prevent anyone from knowing about the secret policy that allowed Iraq to pursue the development of nuclear arms and other aspects and weapons of mass destruction, by means of its clandestine procurement network in Europe and here in the United States. And I say not only Europe, but China, North Korea.
Both the publicly known food policy and the secret weapons procurement network were largely financed through
the Atlanta branch or agency, as they call it, chartered by the State of Georgia, of the BNL, or the Banco Nazionale del Lavoro, government-owned, headquartered in Rome, by the Italian Government. Thus, when BNL-Atlanta offices were raided by the FBI almost exactly a year before the Iraqi invasion of Kuwait, alarm bells sounded all over. As the BNL case unraveled, the Bush administration engaged in a concerted effort to control the political damage. For years, the administration had used the CCC Program as a foundation of United States-Iraq policies and relations. The BNL scandal threatened to halt that program, and the administration was quite fearful of losing the most important tool that it was using to engage the government of Saddam Hussein.
In addition, if anybody learned that our Government was permitting Iraq to operate its secret procurement network, this would severely embarrass Washington as well.
On the Italian side, not only were there billions of dollars in potential losses to worry about at BNL and the Italian taxpayer--that is, the Government-owned bank--lost about almost the same amount of money as the American taxpayers have through its operations. That is in excess of $2 billion of taxpayers' money. Here we have, oh, all of these alarms and outcries about appropriating maybe $4 million for an education program. Here we are blowing away that amount of money with the consequences, that are still yet to be fully measured and only time and the future, of the folly of the expedition into the sands of Araby.
So that on the Italian side, not only was there this lost potential but the scandal also had the potential to damage the Government in Italy politically, if BNL's headquarters in Rome were shown to be part of the conspiracy.
From the very beginning, the Justice Department of the United States of America pursued the theory that BNL-Atlanta was a rogue operation that defrauded BNL/Rome, though they knew very different, very well.
As it happens, this was a politically, very convenient theory. It excuses Federal bank regulators who had a completely passive, in fact I will say criminally negligent, approach to regulating foreign banks and left the job to ill-equipped State regulators. It excuses the government back in Rome, which allowed its branch in Atlanta to carry out a multi-billion-dollar criminal enterprise, and the rogue bank theory also makes it easier for government to deny the true extent of its knowledge about this scandalous affair.
But the problem with the rogue bank theory is that it seems highly improbable, in fact it is improbable, and I will say, given my knowledge of the workings of the operations of the state-owned institutions in other countries, not only Italy, it is more than just improbable, it is impossible for them not to have had known that an agency or branch, call it what you will, in Atlanta would be involved in more than $6 billion just in transactions involving Iraq without some level of knowledge or assent or consent from higher authority--namely DNL headquarters in Rome. So the critically important question arises, what did the higher levels of BNL know about these massive loans to Iraq? Nothing, as they are maintaining, and as I am fighting the Justice Department, the CIA, or rather they are fighting me, the State Department and the Treasury, because I am trying to save the taxpayers more than $395 million that they are being sued for by the BNL bank on the basis that they had no knowledge of these machinations and conspiracies.
How ridiculous and how just absolutely insidious that men and women in power in our government, sworn under oath to uphold the processes and the Constitution, would be so ready because of their overweaning exercise of usurped power to expose the taxpayers to this continued drain of the resources now that are so desperately needed in our country.
A little over a year ago, I asked the Central Intelligence Agency [CIA] for
any information it had on the BNL scandal. I received a report, still classified--it had not been--and a separate letter from the CIA, also classified, a separate letter.
Late last July, I asked the CIA to provide declassified versions of those documents. We are still waiting.
However, I can say that the analysis in those documents confirms that more senior BNL officials in Rome in fact, knew what its Atlanta office had been doing--that is, financing important Iraqi military procurement, including the Condor II missile project.
A CIA report says:
The reports on Iraq and the BNL scandal in general did not add much to our knowledge of the scandal. Most of the reports repeated information available in the press or contained sources' opinion of speculation about the scandal which, although interesting and useful, was not critical. The exceptions are that BNL financing helped pay for the Condor II missile project, and confirmation of press allegations that more senior BNL officials in Rome had been witting of BNL-Atlanta's activities.
The CIA report reveals that the Iraqis originally had accepted loans signed by an Atlanta BNL official, but that later during the relationship as the loans increased in value, the Iraqis wanted authorization from higher level BNL officials in Rome rather than from Atlanta branch officials. The CIA report states: `BNL agreed to this request and the loans were then signed by bank officers in Rome.'
I cannot report the exact extent of knowledge of these higher level BNL officials, because vital evidence has been denied to me since the Attorney General decided to claim that national security interests require him to prevent the Congress from seeing so-called classified documents. Among that evidence is a number of intercepted communications between the BNL-Atlanta and its Rome headquarters.
A bank committee investigator had an opportunity and an appointment, he thought, to see those documents in May, but the visit was canceled at the behest of Nicholas Rostow, of the infamous Rostow gang that I have referred to before, the so-called legal adviser of President Bush's National Security Council and the Attorney General, who seem to occupy the position of stonewallers in chief.
In any event, it is clear that the BNL case stirred up a huge political storm, since all sides--Iraq, Rome, and Washington, DC had embarrassing secrets that they wanted to keep. Iraq wanted to keep things cozy with Washington--so they were willing, according to one Federal Reserve memo, to sacrifice one person to United States prosecution in early 1990. The Government of Italy wanted `some kind of damage control' according to a cable from the United States Ambassador, dated October 26, 1989--only a few weeks after the FBI raided BNL's Atlanta office. This cable is worth quoting at greater length:
The Chairman and the Director General called on the Ambassador (October 19) to express their concerns about developments in the BNL-Atlanta affair. They suggested that the matter should be raised to a political level and indicated their desire to cooperate fully with the U.S. Government authorities while at the same time making it fairly clear they want to achieve some kind of damage control.
It is also worth noting that the cable was not only sent to the State Department; it was also sent from Rome to the Justice Department in Washington. In fact, all the cables from the U.S. Embassy in Rome that contained references to damage control were routed to the Justice Department in Washington.
A few weeks before the October 26 cable, a snippet of information from a source close to the U.S. Embassy in Baghdad reported that the stress of the BNL scandal might have caused the Italian Ambassador in Iraq to collapse. This same source stated that the suicide of the former Italian military attache to Iraq was tied to the BNL scandal. The cable reporting all this clearly shows one reason why, a few weeks later, our Ambassador in Rome was asked to raise the BNL case to a political level and to suggest some kind of damage control.
Clearly, all sides had compelling political reasons to portray the activities of the Atlanta branch as a rogue operation. But the CIA report, which contradicts the rogue operation theory, raises many critical questions:
When did the CIA obtain this information and who at the CIA was aware of it?
Was this information forwarded to the Justice Department and the U.S. attorney's office in Atlanta? If the answer is yes, has the information been thoroughly investigated?
If the information is authentic, why did the Justice Department stick with the rogue bank theory of prosecution?
Was the White House or State Department aware of this information?
Those questions, though I have herein before answered some and in fact put documentation in since February, still need to be further answered. We must find out whether a corrupt and a failed policy toward Iraq also corrupted the criminal investigation of the BNL. We must find out whether or not the fits and starts in the prosecution of the BNL case has anything to do with our Government's or the Italian Government's desire to achieve `some sort of damage control.'
From the start of the BNL scandal in August 1989, officials from BNL's Rome headquarters repeatedly contacted the U.S. officials and made it clear that they did not want to be the subject of U.S. law enforcement investigations. In light of today's revelation that BNL's management was indeed aware of the Atlanta office loans to Iraq, it is not surprising that top BNL officials were nervous about becoming the subject of a criminal investigation.
Fallout from the scandal did not limit itself to BNL officials. The Atlanta scandal rocked the highest levels of the Italian Government. A November 1989, CIA report states:
The BNL affair, in combination with other scandals, has cast a shadow on Prime Minister Andreotti's three month old government.
Since BNL is owned by the Italian Government, the top officials of the bank are political appointees. Any wrongdoing on the part of the top political appointees of BNL could cause considerable embarrassment for the political party that made the appointments. It is reasonable to assume that avoiding personal liability and embarrassing the political apparatus could be prime motivations for BNL officials in Rome to deny knowledge of the BNL-Atlanta scandal.
It is also reasonable to conclude that fear of political disaster could push BNL officials to the point of approaching U.S. officials to achieve `some sort of damage control.' In fact, on numerous occasions BNL officials approached U.S. officials to discuss the BNL scandal.
The scandal forced BNL Chairman Nerio Nesi and Vice Chairman Giacomo Pedde to resign soon after public disclosure of the debacle. Mr. Nesi's replacement was a man named Giampiero Cantoni. Mr. Cantoni had close ties to the Socialist Party and was a close ally of former Prime Minister Craxi. A State Department cable indicates that Cantoni's ties to Craxi were a prerequisite for his selection to replace the discredited Mr. Nesi.
On numerous occasions Mr. Cantoni approached United States Ambassador to Italy, Peter Secchia, about achieving damage control in the BNL investigations. Given the political nature of his appointment, it is not surprising that Mr. Cantoni would approach the U.S. Government to ask for damage control. Mr. Cantoni did not act alone; other BNL officials also approached the United States asking for similar consideration. The United States Government appears to have acquiesced to the Italian requests, and coincidentally, has secrets of its own to keep buried, and, in fact, by now some, if not all, might have been--what do they call it--shredded?
I mentioned earlier Ambassador Secchia's cable of October 26, 1989, in which Mr. Cantoni was portrayed as asking for damage control in the BNL case. Damage control may be just what he got when you consider that less than 10 days after his request, the White House called the Atlanta prosecutor in charge in the BNL case in order to discuss the case. Was this just a coincidence that happened to come less than 10 days after this call? Well, if you believe that, my colleagues, I am sure you believe in the tooth fairy.
Mr. Cantoni's requests for damage control continued well into 1990. Just days before the invasion of Kuwait, a July 25, 1990, cable from Ambassador Secchia to the State Department contains the following passage:
Professor Cantoni, the Chairman of BNL, and the Ambassador had a long discussion at a local event last week in northern Italy. He (Cantoni) expressed once more his concern over the ongoing investigation of the BNL-Atlanta branch's Iraq loans. Cantoni has spoken to the Ambassador on several occasions about his concerns regarding the BNL Atlanta branch affair. Cantoni did not ask for any intervention . . . Yet, he made a pitch for the U.S. government to go slowly before making indictments.
Evidently Mr. Cantoni was not aware that the case had been delayed by the U.S. attorney's office in Atlanta who had reassigned the lead prosecutor to another case for the entire summer of 1990. This reassignment is most mysterious given that the BNL case was the largest, and arguably, the most important case ever at the U.S. attorney's office in Atlanta.
The reassignment of the lead prosecutor is also arguably the most obvious sign that the BNL indictment was delayed for political purposes. At the time of the reassignment in May 1990, United States-Iraq relations were at a critical juncture. An indictment of BNL or an aggressive investigation of the Italians or Iraqis involved in the scandal at that juncture would certainly have complicated United States-Iraq relations.
In fact, I have placed in the Record numerous documents showing exactly that that is what our top level officials were saying, and in fact Secretary Baker himself, and I placed a document in the Record saying, he did not want to have anything disturb the United States-Iraqi relations.
In fact, the indictment was not even redrafted until well after the Iraqi invasion of Kuwait and it was not handed down until late February 1991.
The Justice Department in Washington apparently heard loud and clear Cantoni's repeated appeals for damage control and this could have led to a go-slow approach to the BNL investigation. There are several memos that make it crystal clear that when the Justice Department in Washington, DC, took control of the BNL case inexplicable delays and complications occurred.
Transferring control of the case to Washington enabled Bush administration political appointees at the Justice Department to play a direct role in handling the BNL case. This ultimately led to the BNL indictment being delayed and the quashing of any serious investigation of BNL officials in Rome as well as Iraqis involved in the scandal. In other words, by taking control of the case, the Attorney General was in a position to grant the Italians their wish for damage control. He was also able to accommodate White House and State Department concerns about revelations of the administration's own role and participation.
Another CIA memo demonstrates that the United States had granted the Italians, and themselves, some kind of damage control. Regarding the impact of the BNL scandal on United States-Italian relations, the report states:
Rome appears satisfied to date with cooperation of the U.S. investigating agencies and appreciates the low key manner in which Washington has reacted.
Another memo supporting the assertion that the Justice Department in Washington interfered with the case is a Federal Reserve memo of April 5, 1990, which states:
The resignation of the U.S. Attorney in Atlanta has led to a number of difficulties in that investigation. These difficulties are compounded by what is perceived as interference from the Justice Department in Washington.
Justice corrupting its own self, corrupting and abdicating and frustrating the very oath of office and constitutional responsibilities inherent in those officials and in those positions.
The committee has additional documents providing evidence that political considerations were translated into damage control. Former investigators assigned to the BNL case in Atlanta have voiced frustration at their inability to vigorously pursue the Iraqis, the Turks, and BNL officials in Rome that were involved in the scandal.
A February 6, 1990, Federal Reserve Bank of New York memo shows how politics influenced events.
The Federal Reserve Bank of New York is the No. 1 in our country, the one that really runs the show for our banking system. I want to remind my colleagues that the Federal Reserve Board is not a Federal agency. It is a creature and a hand maiden of the private commercial banking system of the United States, even though the Congress created them, like it did the CIA.
The Congress created the CIA in the 1947 National Security Act, but it has been used as a tool for personal either vindictiveness or political combat by Presidents.
Presidents have taken over, so the CIA, like the Federal Reserve Board, does not think they have any accountability to the Congress. That means the people.
Oh, my colleagues, our Congresses since 1913 have abdicated their grave responsibilities through the years to the point today of no return, where our country is imperiled as it never has been since our founding, as far as its financial and economic freedom, not to speak of the standard of living, is concerned. It is in grievous peril, and my frustration is that there has been heedless regard of some of us that have spoken out for more than 26 years.
The committee has additional documents providing evidence that political considerations were translated into damage control. I repeat, we know the former investigators have been so frustrated because they were impeded in their obligation to pursue all involved, both Atlanta officials, Turks, Iraqis, and Italians.
A February 6, 1990, Federal Reserve Bank of New York memo shows how politics did and has influenced events.
The memo states, `A planned trip to Italy by criminal investigators was put off because of BNL-asserted concerns regarding the Italian press.'
Now, let me say something for the benefit of my colleagues and fellow Americans. The Italian press, particularly in Rome, has been most indefatigable, and the investigating committee of the Roman Senate and its chairman, Senator Carta, with whom I met here in the United States and some of his colleagues, and they have had as a matter of public revelation what the CIA does not want the American people to know, and has written, though they have not come forth, to charge that somehow, somewhere, in some manner, some nebulous manner, amorphous, shapeless, I have violated the national security.
Well, I stand before the bar of judgment of my colleagues, the representatives of the people. I have placed in the Record--what? What the Congress is not supposed to know? Documents that should not be available to the Congress, even though Supreme Court decision after Supreme Court decision has upheld the absolute and supreme power of the Congress to know?
The question then remains why should they not feel in that secret basement, dark and dank areas of the CIA and the other so-called security agencies, not to believe they can do everything, from mayhem and murder, not just to foreign officials, but here in the United States? Even though their charter, the 1947 Security Act, limits the CIA to offshore, they have involved themselves, going back to the famous plumbers and some of the apparatchiks belonging to the CIA and still belonging to the CIA and responsive to them, plotting such things as around the clock surveillance--of whom? Jack Anderson, the columnist, because he had written something that looked like somebody had leaked.
See, in my case they accuse me of having leaked something. You cannot say I leaked. I put it in the Record.
Now, what I say is, gosh, just think how much I have done in behalf of stimulating the subscription to the Congressional Record. If for nothing else I think we ought to be glad that there is interest in reading the Congressional Record nowadays.
But going back to this other, you had plotters accustomed to having been involved in offshore hit operations for the CIA not finding it easy to dispense with that domestically. So there was even comments then about how are you going to get this guy?
So they had round the clock surveillance, 24-hour surveillance, on Jack Anderson for a month. One of them, one of the kooks that had creeped up, guys like G. Gordon Lilly--Liddy--who used to say look, and he would get a match and would burn his own hand and would not wince.
You had E. Howard Hunt. The only thing I know about E. Howard Hunt was 2 years ago in July, in fact July 14, I go back to my district every weekend, and I came in that Saturday morning. I arrived at the San Antonio Airport, and there was a couple there that used to be in my district and moved to a small town up in what we call the hill country.
They recognized me and said, `Oh, Congressman. How are you? We are so glad to see you.'
I saluted them and addressed them. I was leaving when this individual comes up. I had never met him before, but from his pictures and all I could tell that what he said was true.
He said, `You are Congressman Gonzalez?'
I said, `Well, I am E. Howard Hunt, and you are nothing but a--' and then he used a bad word.
Well, I had two little bags I was carrying, very small, so I just dropped them. I noticed he had a shoulder holster with a pistol. It was obvious.
So I said, `Mister, since you want to use sailors' language, here is what I think of you.' And then I used some choice words.
I said, `Let me tell you something else. You take one step forward closer to me or you make a move for the gun in your shoulder holster, and I will swear to you I will take it from you and in self defense I will kill you with it.'
He looked at me startled, turned around, and walked away. I picked up my bags and walked out of the airport.
That is all I know. Now, was he E. Howard Hunt? Well, he sure looked like him. What was his beef? I do not know. What was he doing in San Antonio? I do not know. Why does he still have a shoulder holster and pistol? I do not know. He is ex-CIA. They say ex, but there ain't no such thing.
Given that, all I can say is that we have reached a point in our country where our people are no longer citizens. Our constituents are not citizens any more. They are subjects, like the subjects of the majesties of the King of England and the others have been. And that is what we were supposed to be all about in America, that we were going to get away from that.
We were going to be citizens, sovereign, and the source of all power, as the Constitution says right in its Preamble: `We, the people of the United States,' not the President, not the Congress, not the judges or the courts, we, the people, in order to establish, do ordain and establish, we, the people.
We have gotten away from that. We have forgotten it, and even our citizens think that, my gosh, here are these men running for the Presidency, `Elect me, I will solve all problems,' as if it was not a tripartite government where the lawmaking, judiciary is coequal, just as sovereign, separate and independent as the executive branch. But there is not anybody, and by the way, I hear some of the minority, ex-administration employers, by their own proclamation, you would think the Presidency is omnipotent.
If we reach that point, we are doomed. We have no Constitution, and once that break is made from our shore mooring, we will be flopping up and down in these heavy waters of distress. And our people will no longer be citizens, as they are not now. They are subjects.
The President is not the President. He is a potentate. He is a Caesar.
Now incidentally, anybody thinks that I am saying that about present Presidents, I inveigh all against, even before I got to this Congress, against the President having the power to compel an unwilling American to go outside of the continental United States and risk his life in an undeclared war, a Presidential.
Our country was made up of people and subsequent influx of people who wanted to get away from the king-made wars.
Why, my colleagues, do you think the makers of the Constitution placed inexorably, undividingly, unqualifying the power to declare war in the Congress? That is all I have been saying since even before I came to this Congress, and I have said that with Presidents in between, Democrat, Republican, what have you.
Now, as I have said, Chairman Cantoni was not the only BNL employee that approached the Embassy about achieving damage control. A cable from Ambassador Secchia, that is our Ambassador in Rome, Ambassador Secchia to the State Department, March 19, 1990, states:
Executive Vice President DeVito of BNL called on econ officer March 16 to register concern that BNL might be soon indicted in the U.S. cor corporate vicarious criminal liability in connection loans by its Atlanta branch to Iraq. DeVito said matter was urgent. The Justice Department he thought has taken the investigation out of the hands of the U.S. Attorney in Atlanta who had regarded BNL as a victim of its own employees in Atlanta. The Justice Department took a different view partly for political reasons.
The DeVito cable went on:
* * * from the current (BNL) managements point of view * * * an indictment would add insult to injury. The Government of Italy he implied, would be terribly unhappy with such a development. The Government could not stand by idly while the largest bank in Italy--controlled by the Treasury Ministry--suffer such an indignity.
The unmistakable message of DeVito's conversation with the Ambassador is that BNL was fully aware that the Justice Department was calling the shots in the BNL case and that BNL would not tolerate being the subject of the criminal investigation. Of course, Mr. DeVito knew that a BNL indictment would be damaging to Mr. Andreotti's government and it appears he was sent to Ambassador Secchia to get that message across.
Not surprisingly, according to Mr. Barr, the man sitting in the Attorney General's chair today, an August 10, 1992, Special Prosecutor report, it was about this time that the Justice Department found a `lack of culpability' by BNL-Rome.
Here is our Attorney General already saying, look, taxpayers, this suit BNL has, let them collect it, because I say they did not know.
This was August 10, last month.
Since BNL-Rome was never vigorously pursued by the Justice Department, it is safe to conclude that the U.S. Government got the message. How convenient.
As I mentioned, investigators in the BNL case felt frustrated at not being able to vigorously pursue the Iraqis involved in the BNL case. Attorney General Barr addressed this issue in his August 10 Iraqgate report which states:
The Atlanta prosecutors did not seek any other foreign travel: they believed that the Iraqis would be evasive and uncooperative * * *
That is contradicted by memoranda that I have inserted in the Record since February showing clearly that the diplomatic officials wanted to protect and keep any Iraqi and even a Jordanian from getting indicted in the United States. This is quite puzzling, that is, Barr's statement here, given that the fact that on March 15, 1990, the Justice Department wrote the State Department asking to interview a half dozen Iraqis involved in the BNL scandal. The prosecutors in Atlanta were never allowed to talk to the Iraqi targets. Could it be that Mr. DeVito's calls for damage control were heard loud and clear by the State Department and Justice Department? And could it be that the White House didn't want to offend Saddam Hussein, or embarrass itself, which is more likely?
In past reports I have provided overwhelming evidence that shows the U.S. Attorney in Atlanta expected to bring the BNL indictment in early 1990 and that it never materialized after the indictment was sent to the Justice Department in Washington, DC for review. I have quoted from over a half dozen documents that support that fact.
A February 1990 Federal Reserve memo shows how high level politics influenced events. The memo states:
* * * Entrade is willing to pay a $1 million penalty provided no individual from the firm is convicted. The Iraqis are willing to sacrifice one individual to the vagaries of the U.S. criminal judicial system.
This memo shows that the BNL case was far enough along in early 1990 to have negotiations for a plea agreement with Entrade and the Iraqis related to their role in the BNL case. Regarding the investigation of Entrade for its role in the BNL scandal, the February 1990 Federal Reserve memo goes on to state: `A trip to Istanbul was put off at the request of Attorney General Thornburgh.'
The memo says the reason Thornburgh delayed the investigative trip of the U.S. Attorney to investigate Entrade was the stinging criticism of the BCCI criminal settlement.
The memo states, and I quote,
The criticism of the BCCI criminal settlement has motivated the Attorney General to have the BNL matter reviewed by main Justice in Washington before any settlement is agreed to by the U.S. Attorney.
This information is in direct conflict with Barr. I just cannot find myself, even though he sits in that position, identifying him as an Attorney General. He has traduced that office. He has traduced his oath of office. He has betrayed a trust, and I cannot respect that. I respect the office of Attorney General, because that has been a traditional office since the first administration in our country, but not Barr.
The Iraqgate report of Barr's claiming the plea agreement was abandoned because of Entrade's change in plans, and it was in fact a political decision, which, of course, the Justice Department denies.
We may never know exactly what has happened in BNL-Atlanta. Much may come out, beginning today, when Christopher Drogoul and the other BNL employees make their statements in court or before our committee. I have signed a subpoena to be dated after sentencing.
Meanwhile, we already know that the government of Italy had plenty of reason not to want all the details of what BNL-Rome knew, to be revealed. We know also that the Italian government worked hard to gain damage control, and events here in the United States would lead a reasonable mind to conclude that they got what they wanted. After all, it was also very much in Washington's interest to keep the details quiet.
And so the Justice Department says in its whitewash report of August 10, that BNL management was more or less careless, but not involved. This is despite the CIA report that says BNL-Rome was asked to sign off on important deals BNL-Atlanta made with Iraq, and agreed to do so--a report that says clearly, Rome knew what was happening, and our government is aware of that fact.
But then, it is not in our Government's political interest to let the world know just how much the White House and other agencies knew about Saddam Hussein's use of BNL loans to aid its military industrialization effort and the BNL-financed secret military procurement network operating in Europe and in our country.
Everyone, it seems, wanted damage control. That is why the Attorney General wanted to stop my committee's investigation even before it started in 1990. That is why the White House-led Rostow gang set up snares and hurdles to stop anyone who asked questions. That is why the White House and numerous Government agencies today refuse to turn over BNL-related documents to the committee.
Why not? They cannot say that it is an ongoing national security matter, so why? I just ask that question elliptically, because I leave it to the judgment of my colleagues.
That is also why the Attorney General spent months and months reviewing the BNL indictment, which by the way, was not handed down until the day after fighting in the gulf stopped. That same damage control is what undoubtedly accounts for the stonewalling that continues to this day. Mr. Barr, a loyal political appointee, is more interested in damage control than in justice. Clearly his masters have much to fear if all the facts are ever fully disclosed.
What panjandrum in the White House, after all, is willing to acknowledge that it was United States Government policy to provide Iraq with militarily useful technology--even technology for Iraq nuclear weapons program? Sadly, that is exactly what happened. It is too sorry a tale for the President and State Department to admit. One can only wonder: how many other foreign governments have been allowed--or may be allowed today--in fact, I know they are. Does anybody among my colleagues think the kind of crime we have in this country, particularly the mere $1 trillion drug money laundering, would be possible without the deficiencies and if not witting or unwitting collaboration, of banks, regulators, government officials, low- and high-level State, local, and Federal? Of course not.
We get the kind of crime we deserve, because we as a people, I am sorry and sad to say, have been willing to forsake our inheritance for a mess of pottage.
The policy toward Iraq was cynical, unprincipled, and had a tragic outcome, and will continue to have, but the dense curtain of secrecy may forever hide the full extent of this disaster.
It is convenient for all parties to hide the facts. The White House no longer cares about Saddam Hussein, of course, but it surely is caring about burying its mistakes, and that is exactly what they are doing.
Mr. Speaker, I append to my statement the documentation which I mentioned for the references I have made:
COMMITTEE ON BANKING,
Finance and Urban Affairs,
Washington, DC, August 20, 1991.
Hon. William H. Webster,
Director of Central Intelligence, Central Intelligence Agency Washington, DC
Dear Judge Webster: The Banking Committee is conducting an investigation into the operations of the Banca Nazionale del Lavoro (BNL). I ask for your cooperation with the Committee's investigation.
Between 1985 and 1990, BNL provided Iraq with over $4 billion in unauthorized loans that were used to purchase agricultural products and industrial goods. Many of the individuals and beneficiaries of the BNL loans to Iraq are based in foreign countries. The Committee would like to learn more about the foreign beneficiaries of BNL loans to Iraq are based in foreign countries. The Committee would like to learn more about the foreign beneficiaries of BNL loans to Iraq, and respectfully asks the CIA to provide, if available, foreign intelligence information on the following:
1. Wafia Dajani (Jordanian Citizen) and his related companies: Amman Resources, Amman, Jordan; Amman Resources International, Georgetown, Grand Cayman; Araba Holdings, Inc. Panama; Aqaba Packing Co., Amman, Jordan.
2. Technology and Development Group (TDG) London, England.
3. TMG Engineering Limited, London, England.
4. Matrix-Churchill Limited (MCL) Coventry, England.
5. Tigris Trading Company, Baghdad, Iraq.
6. Al-Arabi Trading Company, Ltd.
7. Meed International, Ltd, England.
8. Kintex, Sophia, Bulgaria (aka `Globus' or `Korekom').
9. TechnoExport Foreign Trade Company, Ltd., Czechoslovakia.
10. Bank for Foreign Economic Affairs of the USSR, Moscow, USSR.
11. Exportkhleb, Moscow, USSR.
THE FOLLOWING IRAQI GOVERNMENT ENTITIES AND IRAQI INDIVIDUALS:
12. Ministry of Industry and Military Manufacturing, An Agency of the Republic of Iraq.
13. Nassar State Establishment for Mechanical Industries, An Agency of Republic of Iraq.
14. Central Bank of Iraq, Baghdad, Iraq; Sadik Taha.
15. Rafidain Bank, Baghdad, Iraq.
16. Ali Mutalib Ali, former commercial attache at Iraq's German Embassy.
Thank you for your time and cooperation. With best wishes.
Henry B. Gonzalez,
Central Intelligence Agency,
Washington DC, November 12, 1991.
Hon. Henry B. Gonzalez,
Chairman, Committee on Banking, Finance and Urban Affairs, House of Representatives, Washington, DC.
Dear Mr. Chairman: In a letter dated 20 August 1991, the Banking Committee informed us of its investigation into the operations of Banca Nazionale del Lavoro (BNL). As a part of this investigation, the Banking Committee requested any foreign intelligence information this Agency may have on foreign beneficiaries of BNL loans to Iraq. As you are aware, we also are responding to a separate request from your Committee to review summaries of several raw, unevaluated reports on Iraq and BNL. Some of these summaries contain specific information on the Rafidain Bank (item 15 in your 20 August letter).
In addition to the information we are providing at this time, there are other documents, with the security classification TOP SECRET compartmented information, on the Iraq/BNL connection that we are prepared to provide directly to you and the other Committee members. The TOP SECRET compartmented documents also can be made available to staff members when they have obtained the appropriate clearances.
In response to your request, an extensive search of the files and indices of the appropriate CIA offices produced the following results that are keyed to your letter.
All portions classified secret
In addition to providing information from our classified files, we also have included some unclassified material from other open source publications (TAB B), and from the Foreign Broadcast Information Service (FBIS) that may assist you in this investigation. (TAB C)
In the course of searching our records, we identified documents relating to this matter that were originated by the Defense Intelligence Agency, the National Security Agency, United States Information Agency, Department of Justice, and the Department of State. We are prepared to provide these agencies with specific document citations to facilitate their response to the Committee if you with to obtain these documents from them.
Stanley M. Moskowitz,
Director of Congressional Affairs.
Enclosures classified secret
R 2615172 Oct 89
Fm Amembassy Rome
To SecState Wash DC 0695
Treas Dept Wash DC
Info Dept Justice Wash DC
Confidential section 01 of 02 Rome 22656
Please pass Federal Reserve Board and Dir FBI
E.O. 12356: Decl: OADR
Tags: EFIN, ECON, IT
Subject: Banca Nazionale Del Lavoro Concerns re Atlanta Branch
Ref: Rome 22019
1. Confidential--Entire Text.
2. Summary: The chairman and the director general of Banca Nazionale Del Lavoro (BNL) called on ambassador to express their concerns about developments in the BNL-Atlanta affair. They suggested that the matter should be raised to a political level, and indicated their desire to cooperate fully with USG authorities while at the same time making it fairly clear they want to achieve some kind of damage control.
Page 02 Rome 226565 01 of 02 261545Z.
Ambassador said he would pass on their concerns but could not otherwise be helpful with or comment on a matter under criminal investigation. Separately, treasury minister Carli has blocked an effort by opposition Senators to conduct an investigation into the BNL-Atlanta affair, end summary.
3. The chairman of Banca Nationale Del Lavoro, Giampiero Cantoni, and the director general, Paolo Savona, called on the ambassador on October 19. The meeting was at Cantoni's request, made during the return flight from the U.S. with President Cossiga. Both Cantoni and Savona had been in the U.S. with President Cossiga's delegation.
4. Contoni expressed concerns about prospective developments in the BNL-Atlanta affair. He said BNL's U.S. lawyers were urging him to raise the issue to a `political' level. He said that his U.S. lawyers thought that charges would be filed under the Rico Act and that BNL/or Iraqi assets could be frozen. Savona was concerned about losing the CCC guarantee on roughly one billion dollars of BNL-Atlanta's three billion dollar exposure. The men alluded to legislation under consideration in congress providing for USG credits to Iraq being affected by the investigation/charges. Cantoni said FBI agents remained in the Atlanta branch, or had sealed the books. He also maintained that the ex-Atlanta branch manager Drogoul was available and willing to testify to appropriate officials.
5. Cantoni and Savona both made the point that they
Page 03 Rome 22656 01 of 02 2615445Z
Were willing and anxious to cooperate with USG authorities. They also said their U.S. lawyers would be in Rome on October 25.
6. The ambassador said he would pass on the concerns of BNL and their willingness to cooperate to Washington, but that he was unable to comment or otherwise be helpful on a matter under criminal investigation
7. On a separate note, treasury minister Carli responded negatively on October 24 to a request by opposition Senators to conduct an investigation into the BNL-Atlanta affair. Carli said that a number of investigations by Italian and U.S. officials were underway. He also noted that bank secrecy laws impeded the bank of Italy from providing information to the Senate.
8. Comment: The remarks on the need to raise this to a political level are interesting as the case has already become a political issue in Italy. The President has become involved as witnessed by the inclusion of Cantoni and Savona in his party in the U.S. Cantoni and Savona, while new to BNL, have close political connections, Cantoni to Craxi and the socialists, and Savona to Cossiga (a fellow Sardinian) and to Carli, his mentor at the Bank of Italy and later at Confindustria. The treasury is the majority shareholder of BNL.
BNL is an upstart bank by Italian standards, dating only to 1913 and owing its growth to its role as the key bank for the government in the 1920s and 30s. It continued to grow in the post-war period, but has been having problems in the past few years. The recently sacked Chairman, Nerio Nesi, had been engaged in an effort to pare down the staff of the bank and separate out some functions while at the same time increase the bank's capital. To achieve the latter, he worked out a deal whereby the state-owned insurance agency INA and the state pension system INPS would take the proceeds from the sale of shares in CREDIOP and invest them in BNL. The result will be a capital increase
Page 02 ROME 22656 02 of 02 2615987.
That will reduce the treasury's ownership from 75 percent to 56 percent. INA is also making a subordinated loan. The capital increase was approved by the BNL board in mid-October, and is to be presented to the shareholders (treasury, INA, INPS plus a scattering of other, mostly public, institutions) on December 13.
BNL's reputation within the Italian banking community and even among its own staff has been suffering for some time. The BNL-Atlanta affair, even if contained, will aggravate BNL's problems. Not least of these are loan to Latin American countries. BNL is said to be one of the two largest lenders to Mexico and has been active in South America as well.
Federal Reserve Bank of New York,
February 6, 1990.
To: Legal Files,
From: Ernest T. Patrikis.
Subject: Recent Developments Regarding Banca Nazionale del Lavoro.
On February 6, I spoke with Ed Willingham, General Counsel of the Atlanta Reserve Bank, and among the topics we discussed was current developments regarding BNL. Obviously, the indictments that were expected to come down in January did not materialize. A planned trip to Italy by criminal investigators was put off because of BNL asserted concerns regarding the Italian press.
A trip to Istanbul was put off at the request of Attorney General Thornburg. The criticism of the BCCI criminal settlement has motivated the Attorney General to have the BNL matter reviewed by main Justice in Washington before any settlement is agreed to by the United States Attorney.
Ed reported that Entrade in willing to pay a $1 million penalty provided no individual form that firm is convicted. The Iraqis are willing to sacrifice one individual to the vagaries of the United States criminal judicial system. Mr. Dragoul has retained high-powered defense counsel. All in all, Ed believes that we will hear little about this matter until some time late in March.
Federal Reserve Bank of New York,
April 5, 1990.
To: Mr. Corrigan.
From: Thomas C. Baxter, Jr.
I followed up on your suggestion about a possible connection between Banca Nazionale del Lavoro (`BNL') and the nuclear triggers that were seized in London. As you suspected, there is a connection. Apparently, Von Wedel (a former officer of BNL who is now cooperating with the government) says that one of the transactions done with Rafidian Bank at some point referenced nuclear detonators. According to Von Wedel, this reference scared BNL away from this particular transaction, but it is possible that the lesson the Iraqis learned was to be generic in preparing the credit documentation. Thus, it is entirely possible that BNL financed some of this material.
At any rate, I have been assured that those conducting the criminal investigation in Atlanta are looking into these connections, with a view to developing additional criminal charges. The resignation of the United States Attorney in Atlanta has led to a number of difficulties in that investigation. These difficulties have been compounded by what is perceived an interference from the Justice Department in Washington.
The press has also made a connection between BNL and the detonators. Attached you will find copies of two Financial Times articles doing just that.
Office of International Affairs,
Washington, DC, March 15, 1990.
Re request for meeting with Iraqis.
Deputy Legal Adviser, U.S. Department of State, Washington, DC 20520
Dear Mr. Young: The United States Attorney's Office for the Northern District of Georgia is investigating the activities of the Atlanta office of the Banca Nazionale del Lavoro (BNL), an Italian concern. That investigation includes extensions of credit made by BNL to Iraq during the period from January, 1986 to August, 1989. The Government of Iraq is aware of the investigation and has offered on a number of occasions to cooperate with the United States. The investigation is now at a point where the U.S. Attorney's Office wishes to accept the Iraqi offer and invite Iraq to have certain named individuals come to the United States for interviews.
Therefore, we request that the United States extend in an appropriate fashion, both in Washington and Baghdad, an invitation to Iraq to have the persons named on the attached list travel to the United States to meet with the U.S. authorities conducting the investigation.
In issuing this invitation you may tell Iraq that the investigation is for possible violations of U.S. law, including, 18 U.S.C. 371, 1001, 1341, 1343, and 2314.
We would like to begin the meetings on March 26, 1990, or as soon thereafter as can be arranged. We expect that each of the persons invited will need to allow for a minimum of three days in the United States in connection with the U.S. Attorney's investigation. Further, the United States offers its assurances that for such time as these individuals are in the United States as our guests and cooperating with the U.S. Attorney's Office, that Office will not serve process upon them or otherwise seek to assert jurisdiction over them. In addition, and pursuant to our standard practice, the United States is prepared to make and pay for the travel arrangements and per diem of each of the persons invited.
Finally, the Commodity Credit Corporation (CCC) and the Department of Agriculture (USDA) are considering a request by Iraq to extend $500 million in export credit guarantees under CCC's GSM-102 program for the remainder of fiscal year 1990. The USDA and CCC also need to meet with the persons named above in connection with their own investigation into alleged irregularities concerning extensions of credit by BNL to Iraq for commodity purchases under the GSM-102 program during the period from 1985 to 1988 in order to complete the processing of the Iraqi application. Therefore, and in order to accommodate all concerned, we propose that the USDA and CCC meetings with the Iraqis also be scheduled for the time while they are in the United States. In issuing the invitation for them to meet separately with the USDA and CCC, you may wish to inform them that the U.S. Attorney's Office is unable under our law to share the information it has developed with the USDA and the CCC, thus making it impossible to satisfy all U.S. interests in one meeting alone.
If you need further information, feel free to call me at 786-3500.
Drew C. Arena,
List of Invitees
Abdul Hussein Sahib, Director General, State Company for Foodstuffs Trading.
Harith Al-Barazanehi, Director General, State Enterprise for Tobacco and Cigarettes.
Zuhair Daoud, Director General, State Company of Grain Trading and Processing.
Sadik H. Taha, Director General for Agreements and Loans, Central Bank of Iraq.
Ahmed Al-Dulaimi, Under Secretary, Ministry of Industry and Military Manufacturing.
Raja Hassan Ali, Director General, Economic Department, Ministry of Industry.
Dr. Fadel Jawad Kadhum, Legal Adviser.
Dr. Safa Al-Habobi, Director General, Al-Nassar Complex Ministry of Industry, President, Chairman of TDG, President of Matrix-Churchill (England).
U.S. DEPARTMENT OF JUSTICE, U.S. ATTORNEY, NORTHERN DISTRICT OF GEORGIA, ATLANTA, GA, JANUARY 9, 1990.
Re: Assistance of Robert Kennedy.
Mr. Zane Kelly,
Federal Reserve Bank, Atlanta, GA
Dear Mr. Kelly: As you are aware Mr. Kennedy of your office has been providing essential assistance to this office in the BNL-Atlanta criminal investigation since late July 1989. In fact, without Mr. Kennedy's expertise this major case could not have progressed with the speed and depth accomplished to date. We certainly appreciate his efforts as well as those of yourself, Madeline Marsten and Ed Willingham.
Prior to anticipated indictment early next month, we request additional assistance from Mr. Kennedy, which involves a trip to Rome and Istanbul to interview essential non-grand jury witnesses. Travel may commence as early as January 19, 1990.
The stop in Rome is necessary to speak with a number of BNL-Rome employees, officers, and directors at whom Chistopher Drogoul and other key subjects have leveled charges of complicity in their BNL-Atlanta scheme. A Rome setting is required for immediate access to all relevant records which may assist in defeating these spurious claims by subjects of our criminal investigation.
The Istanbul portion of the trip is necessary to interview Yavus Tezeller, a Turkish national who has essential knowledge and records regarding kickbacks to BNL-Atlanta's First Vice President, Christopher Drogoul, and his father Pierre Drogoul. Tezeller's attorneys also indicate he can provide information regarding `after sale services,' unearned consulting fees, and other payments to the Iraqis, as well as kickbacks paid by United States and multinational companies to obtain Iraqi contracts. This is especially important information in light of the prevailing rumors regarding the Paris Club's intent to reschedule Iraqi debt, including a substantial portion of the $1.7 billion guaranteed by the CCC. Other Entrado and Enka officials with their relevant documents should also be available for interview.
Thank you again for the support of your office in this most important investigation.
ROBERT L. BARR, JR.,
Assistant U.S. Attorney.
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