THE BANCA NAZIONALE DEL LAVORO SCANDAL:
HIGH-LEVEL POLITICS TRY TO HIDE THE EVIDENCE
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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 floppingup and down in these heavy waters of distress. And our people will no longerbe 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 thatabout present Presidents, I inveigh all against, even before I got to thisCongress, against the President having the power to compel an unwillingAmerican to go outside of the continental United States and risk his lifein an undeclared war, a Presidential.
Our country was made up of people and subsequent influxof people who wanted to get away from the king-made wars.
Why, my colleagues, do you think the makers of the Constitutionplaced inexorably, undividingly, unqualifying the power to declare warin the Congress? That is all I have been saying since even before I cameto 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 onlyBNL employee that approached the Embassy about achieving damage control.A cable from Ambassador Secchia, that is our Ambassador in Rome, AmbassadorSecchia to the State Department, March 19, 1990, states:
Executive Vice President DeVito of BNL called on econofficer March 16 to register concern that BNL might be soon indicted inthe U.S. cor corporate vicarious criminal liability in connection loansby its Atlanta branch to Iraq. DeVito said matter was urgent. The JusticeDepartment he thought has taken the investigation out of the hands of theU.S. Attorney in Atlanta who had regarded BNL as a victim of its own employeesin Atlanta. The Justice Department took a different view partly for politicalreasons.
The DeVito cable went on:
* * * from the current (BNL) managements point of view* * * an indictment would add insult to injury. The Government of Italyhe implied, would be terribly unhappy with such a development. The Governmentcould not stand by idly while the largest bank in Italy--controlled bythe Treasury Ministry--suffer such an indignity.
The unmistakable message of DeVito's conversation withthe Ambassador is that BNL was fully aware that the Justice Departmentwas calling the shots in the BNL case and that BNL would not tolerate beingthe subject of the criminal investigation. Of course, Mr. DeVito knew thata BNL indictment would be damaging to Mr. Andreotti's government and itappears he was sent to Ambassador Secchia to get that message across.
Not surprisingly, according to Mr. Barr, the man sittingin the Attorney General's chair today, an August 10, 1992, Special Prosecutorreport, it was about this time that the Justice Department found a `lackof 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 JusticeDepartment, it is safe to conclude that the U.S. Government got the message.How convenient.
As I mentioned, investigators in the BNL case felt frustratedat not being able to vigorously pursue the Iraqis involved in the BNL case.Attorney General Barr addressed this issue in his August 10 Iraqgate reportwhich states:
The Atlanta prosecutors did not seek any other foreigntravel: they believed that the Iraqis would be evasive and uncooperative* * *
That is contradicted by memoranda that I have insertedin the Record since February showing clearly that the diplomatic officialswanted to protect and keep any Iraqi and even a Jordanian from gettingindicted in the United States. This is quite puzzling, that is, Barr'sstatement here, given that the fact that on March 15, 1990, the JusticeDepartment wrote the State Department asking to interview a half dozenIraqis involved in the BNL scandal. The prosecutors in Atlanta were neverallowed to talk to the Iraqi targets. Could it be that Mr. DeVito's callsfor damage control were heard loud and clear by the State Department andJustice Department? And could it be that the White House didn't want tooffend Saddam Hussein, or embarrass itself, which is more likely?
In past reports I have provided overwhelming evidencethat shows the U.S. Attorney in Atlanta expected to bring the BNL indictmentin early 1990 and that it never materialized after the indictment was sentto the Justice Department in Washington, DC for review. I have quoted fromover a half dozen documents that support that fact.
A February 1990 Federal Reserve memo shows how high levelpolitics influenced events. The memo states:
* * * Entrade is willing to pay a $1 million penaltyprovided no individual from the firm is convicted. The Iraqis are willingto sacrifice one individual to the vagaries of the U.S. criminal judicialsystem.
This memo shows that the BNL case was far enough alongin early 1990 to have negotiations for a plea agreement with Entrade andthe Iraqis related to their role in the BNL case. Regarding the investigationof Entrade for its role in the BNL scandal, the February 1990 Federal Reservememo goes on to state: `A trip to Istanbul was put off at the request ofAttorney General Thornburgh.'
The memo says the reason Thornburgh delayed the investigativetrip of the U.S. Attorney to investigate Entrade was the stinging criticismof the BCCI criminal settlement.
The memo states, and I quote,
The criticism of the BCCI criminal settlement has motivatedthe Attorney General to have the BNL matter reviewed by main Justice inWashington before any settlement is agreed to by the U.S. Attorney.
This information is in direct conflict with Barr. I justcannot find myself, even though he sits in that position, identifying himas an Attorney General. He has traduced that office. He has traduced hisoath of office. He has betrayed a trust, and I cannot respect that. I respectthe office of Attorney General, because that has been a traditional officesince the first administration in our country, but not Barr.
The Iraqgate report of Barr's claiming the plea agreementwas abandoned because of Entrade's change in plans, and it was in facta 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 otherBNL employees make their statements in court or before our committee. Ihave signed a subpoena to be dated after sentencing.
Meanwhile, we already know that the government of Italyhad 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 togain damage control, and events here in the United States would lead areasonable 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 reportof 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 offon important deals BNL-Atlanta made with Iraq, and agreed to do so--a reportthat says clearly, Rome knew what was happening, and our government isaware of that fact.
But then, it is not in our Government's political interestto let the world know just how much the White House and other agenciesknew about Saddam Hussein's use of BNL loans to aid its military industrializationeffort and the BNL-financed secret military procurement network operatingin Europe and in our country.
Everyone, it seems, wanted damage control. That is whythe Attorney General wanted to stop my committee's investigation even beforeit started in 1990. That is why the White House-led Rostow gang set upsnares and hurdles to stop anyone who asked questions. That is why theWhite House and numerous Government agencies today refuse to turn overBNL-related documents to the committee.
Why not? They cannot say that it is an ongoing nationalsecurity matter, so why? I just ask that question elliptically, becauseI leave it to the judgment of my colleagues.
That is also why the Attorney General spent months andmonths reviewing the BNL indictment, which by the way, was not handed downuntil the day after fighting in the gulf stopped. That same damage controlis what undoubtedly accounts for the stonewalling that continues to thisday. Mr. Barr, a loyal political appointee, is more interested in damagecontrol than in justice. Clearly his masters have much to fear if all thefacts are ever fully disclosed.
What panjandrum in the White House, after all, is willingto acknowledge that it was United States Government policy to provide Iraqwith militarily useful technology--even technology for Iraq nuclear weaponsprogram? Sadly, that is exactly what happened. It is too sorry a tale forthe President and State Department to admit. One can only wonder: how manyother foreign governments have been allowed--or may be allowed today--infact, I know they are. Does anybody among my colleagues think the kindof crime we have in this country, particularly the mere $1 trillion drugmoney laundering, would be possible without the deficiencies and if notwitting 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 apeople, I am sorry and sad to say, have been willing to forsake our inheritancefor a mess of pottage.
The policy toward Iraq was cynical, unprincipled, andhad a tragic outcome, and will continue to have, but the dense curtainof secrecy may forever hide the full extent of this disaster.
It is convenient for all parties to hide the facts. TheWhite House no longer cares about Saddam Hussein, of course, but it surelyis caring about burying its mistakes, and that is exactly what they aredoing.
Mr. Speaker, I append to my statement the documentationwhich 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 IntelligenceAgency Washington, DC
Dear Judge Webster: The Banking Committee is conductingan 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 $4billion in unauthorized loans that were used to purchase agricultural productsand industrial goods. Many of the individuals and beneficiaries of theBNL loans to Iraq are based in foreign countries. The Committee would liketo learn more about the foreign beneficiaries of BNL loans to Iraq arebased in foreign countries. The Committee would like to learn more aboutthe foreign beneficiaries of BNL loans to Iraq, and respectfully asks theCIA 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'sGerman 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 operationsof Banca Nazionale del Lavoro (BNL). As a part of this investigation, theBanking Committee requested any foreign intelligence information this Agencymay 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 reviewsummaries of several raw, unevaluated reports on Iraq and BNL. Some ofthese summaries contain specific information on the Rafidain Bank (item15 in your 20 August letter).
In addition to the information we are providing at thistime, there are other documents, with the security classification TOP SECRETcompartmented information, on the Iraq/BNL connection that we are preparedto provide directly to you and the other Committee members. The TOP SECRETcompartmented documents also can be made available to staff members whenthey have obtained the appropriate clearances.
In response to your request, an extensive search of thefiles and indices of the appropriate CIA offices produced the followingresults that are keyed to your letter.
All portions classified secret
[ALL PORTIONS CLASSIFIED SECRET]
In addition to providing information from our classifiedfiles, we also have included some unclassified material from other opensource publications (TAB B), and from the Foreign Broadcast InformationService (FBIS) that may assist you in this investigation. (TAB C)
In the course of searching our records, we identifieddocuments relating to this matter that were originated by the Defense IntelligenceAgency, the National Security Agency, United States Information Agency,Department of Justice, and the Department of State. We are prepared toprovide these agencies with specific document citations to facilitate theirresponse to the Committee if you with to obtain these documents from them.
Stanley M. Moskowitz,
Director of Congressional Affairs.
Enclosures classified secret
[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 AtlantaBranch
Ref: Rome 22019
1. Confidential--Entire Text.
2. Summary: The chairman and the director general ofBanca Nazionale Del Lavoro (BNL) called on ambassador to express theirconcerns about developments in the BNL-Atlanta affair. They suggested thatthe matter should be raised to a political level, and indicated their desireto cooperate fully with USG authorities while at the same time making itfairly 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 couldnot otherwise be helpful with or comment on a matter under criminal investigation.Separately, treasury minister Carli has blocked an effort by oppositionSenators to conduct an investigation into the BNL-Atlanta affair, end summary.
3. The chairman of Banca Nationale Del Lavoro, GiampieroCantoni, and the director general, Paolo Savona, called on the ambassadoron October 19. The meeting was at Cantoni's request, made during the returnflight from the U.S. with President Cossiga. Both Cantoni and Savona hadbeen in the U.S. with President Cossiga's delegation.
4. Contoni expressed concerns about prospective developmentsin the BNL-Atlanta affair. He said BNL's U.S. lawyers were urging him toraise the issue to a `political' level. He said that his U.S. lawyers thoughtthat charges would be filed under the Rico Act and that BNL/or Iraqi assetscould be frozen. Savona was concerned about losing the CCC guarantee onroughly one billion dollars of BNL-Atlanta's three billion dollar exposure.The men alluded to legislation under consideration in congress providingfor USG credits to Iraq being affected by the investigation/charges. Cantonisaid FBI agents remained in the Atlanta branch, or had sealed the books.He also maintained that the ex-Atlanta branch manager Drogoul was availableand 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 concernsof BNL and their willingness to cooperate to Washington, but that he wasunable to comment or otherwise be helpful on a matter under criminal investigation
7. On a separate note, treasury minister Carli respondednegatively on October 24 to a request by opposition Senators to conductan investigation into the BNL-Atlanta affair. Carli said that a numberof investigations by Italian and U.S. officials were underway. He alsonoted that bank secrecy laws impeded the bank of Italy from providing informationto the Senate.
8. Comment: The remarks on the need to raise this toa political level are interesting as the case has already become a politicalissue in Italy. The President has become involved as witnessed by the inclusionof Cantoni and Savona in his party in the U.S. Cantoni and Savona, whilenew to BNL, have close political connections, Cantoni to Craxi and thesocialists, and Savona to Cossiga (a fellow Sardinian) and to Carli, hismentor at the Bank of Italy and later at Confindustria. The treasury isthe majority shareholder of BNL.
BNL is an upstart bank by Italian standards, dating onlyto 1913 and owing its growth to its role as the key bank for the governmentin the 1920s and 30s. It continued to grow in the post-war period, buthas 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 thebank and separate out some functions while at the same time increase thebank's capital. To achieve the latter, he worked out a deal whereby thestate-owned insurance agency INA and the state pension system INPS wouldtake the proceeds from the sale of shares in CREDIOP and invest them inBNL. The result will be a capital increase
Page 02 ROME 22656 02 of 02 2615987.
That will reduce the treasury's ownership from 75 percentto 56 percent. INA is also making a subordinated loan. The capital increasewas approved by the BNL board in mid-October, and is to be presented tothe shareholders (treasury, INA, INPS plus a scattering of other, mostlypublic, institutions) on December 13.
BNL's reputation within the Italian banking communityand even among its own staff has been suffering for some time. The BNL-Atlantaaffair, even if contained, will aggravate BNL's problems. Not least ofthese are loan to Latin American countries. BNL is said to be one of thetwo 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 Nazionaledel Lavoro.
On February 6, I spoke with Ed Willingham, General Counselof the Atlanta Reserve Bank, and among the topics we discussed was currentdevelopments regarding BNL. Obviously, the indictments that were expectedto come down in January did not materialize. A planned trip to Italy bycriminal investigators was put off because of BNL asserted concerns regarding
the Italian press.
A trip to Istanbul was put off at the request of AttorneyGeneral Thornburg. The criticism of the BCCI criminal settlement has motivatedthe Attorney General to have the BNL matter reviewed by main Justice inWashington before any settlement is agreed to by the United States Attorney.
Ed reported that Entrade in willing to pay a $1 millionpenalty provided no individual form that firm is convicted. The Iraqisare willing to sacrifice one individual to the vagaries of the United Statescriminal judicial system. Mr. Dragoul has retained high-powered defensecounsel. All in all, Ed believes that we will hear little about this matteruntil 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 connectionbetween Banca Nazionale del Lavoro (`BNL') and the nuclear triggers thatwere 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 pointreferenced nuclear detonators. According to Von Wedel, this reference scaredBNL away from this particular transaction, but it is possible that thelesson 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 conductingthe criminal investigation in Atlanta are looking into these connections,with a view to developing additional criminal charges. The resignationof the United States Attorney in Atlanta has led to a number of difficultiesin that investigation. These difficulties have been compounded by whatis perceived an interference from the Justice Department in Washington.
The press has also made a connection between BNL andthe detonators. Attached you will find copies of two Financial Times articlesdoing 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 forthe Northern District of Georgia is investigating the activities of theAtlanta office of the Banca Nazionale del Lavoro (BNL), an Italian concern.That investigation includes extensions of credit made by BNL to Iraq duringthe period from January, 1986 to August, 1989. The Government of Iraq isaware of the investigation and has offered on a number of occasions tocooperate with the United States. The investigation is now at a point wherethe U.S. Attorney's Office wishes to accept the Iraqi offer and inviteIraq to have certain named individuals come to the United States for interviews.
Therefore, we request that the United States extend inan appropriate fashion, both in Washington and Baghdad, an invitation toIraq to have the persons named on the attached list travel to the UnitedStates to meet with the U.S. authorities conducting the investigation.
In issuing this invitation you may tell Iraq that theinvestigation 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 personsinvited will need to allow for a minimum of three days in the United Statesin connection with the U.S. Attorney's investigation. Further, the UnitedStates offers its assurances that for such time as these individuals arein the United States as our guests and cooperating with the U.S. Attorney'sOffice, that Office will not serve process upon them or otherwise seekto assert jurisdiction over them. In addition, and pursuant to our standardpractice, the United States is prepared to make and pay for the travelarrangements and per diem of each of the persons invited.
Finally, the Commodity Credit Corporation (CCC) and theDepartment of Agriculture (USDA) are considering a request by Iraq to extend$500 million in export credit guarantees under CCC's GSM-102 program forthe remainder of fiscal year 1990. The USDA and CCC also need to meet withthe persons named above in connection with their own investigation intoalleged irregularities concerning extensions of credit by BNL to Iraq forcommodity purchases under the GSM-102 program during the period from 1985to 1988 in order to complete the processing of the Iraqi application. Therefore,and in order to accommodate all concerned, we propose that the USDA andCCC meetings with the Iraqis also be scheduled for the time while theyare in the United States. In issuing the invitation for them to meet separatelywith the USDA and CCC, you may wish to inform them that the U.S. Attorney'sOffice is unable under our law to share the information it has developedwith 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 meat 786-3500.
Drew C. Arena,
List of Invitees
Abdul Hussein Sahib, Director General, State Companyfor Foodstuffs Trading.
Harith Al-Barazanehi, Director General, State Enterprisefor Tobacco and Cigarettes.
Zuhair Daoud, Director General, State Company of GrainTrading and Processing.
Sadik H. Taha, Director General for Agreements and Loans,Central Bank of Iraq.
Ahmed Al-Dulaimi, Under Secretary, Ministry of Industryand 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 ComplexMinistry of Industry, President, Chairman of TDG, President of Matrix-Churchill(England).
U.S. DEPARTMENT OF JUSTICE, U.S. ATTORNEY, NORTHERN DISTRICTOF 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 youroffice has been providing essential assistance to this office in the BNL-Atlantacriminal investigation since late July 1989. In fact, without Mr. Kennedy'sexpertise this major case could not have progressed with the speed anddepth accomplished to date. We certainly appreciate his efforts as wellas those of yourself, Madeline Marsten and Ed Willingham.
Prior to anticipated indictment early next month, werequest additional assistance from Mr. Kennedy, which involves a trip toRome and Istanbul to interview essential non-grand jury witnesses. Travelmay commence as early as January 19, 1990.
The stop in Rome is necessary to speak with a numberof BNL-Rome employees, officers, and directors at whom Chistopher Drogouland other key subjects have leveled charges of complicity in their BNL-Atlantascheme. A Rome setting is required for immediate access to all relevantrecords which may assist in defeating these spurious claims by subjectsof 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.