WASHINGTON -- CIA officials have told Congress that, at the urging of the Justice Department, they deliberately withheld information from federal prosecutors in Atlanta about a multibillion dollar bank fraud involving Iraq, government officials said yesterday.
The disclosure contrasts with statements made Tuesday by the the CIA's chief lawyer, who said the misinformation was an honest error.
But in a highly charged closed hearing before the Senate Intelligence Committee on Thursday, CIA lawyers changed their account, according to government officials present. They said CIA officials told the committee that a senior Justice Department official had urged the agency to put out incomplete, misleading information.
Last night, the Justice Department strenuously denied that it had pressed the CIA to withhold information.
The unusual public argument between two major branches of government is certain to fuel accusations from many members of Congress that the Bush administration deliberately concealed information about the case as part of a government-wide cover-up.
President Bush, the Justice Department and prosecutors in the case have repeatedly denied any wrongdoing, and the CIA and the Justice Department repeated those denials yesterday.
But yesterday afternoon, Sen. David L. Boren, D-Okla., chairman of the Intelligence Committee, said it was investigating and would issue subpoenas if needed.
"We have far more questions than we have answers," he said.
At issue is whether the CIA gave federal prosecutors all the information they had to help them in their case against the Atlanta branch of the Banca Nazionale del Lavoro.
The Atlanta-based prosecutors had charged the bank's branch manager, Christopher P. Drogoul, with extending billions of dollars of loans and credits to the Iraqi government in violation of the bank's regulations.
A letter the CIA sent to the Atlanta prosecutors on Sept. 17 stated that the agency had no independent secret information about the bank fraud scheme.
But in fact, the CIA had already received several classified reports about the case, and had even provided a summary of some of them to Rep. Henry B. Gonzalez, D-Texas, who has been leading the House's investigation of the matter.
The CIA and the Justice Department knew that the statement in the letter was incorrect, but because the same erroneous statement had already been made in a classified version on Sept. 4, the decision was made not to change it.
The head of the Justice Department's fraud section, Lawrence Urgenson, strongly denied yesterday that he urged a CIA lawyer, George Jameson, to provide misleading information to prosecutors.
"I did advise him that if he changed the answers he would be naturally expected to explain the changes, but that the decision was up to him and the agency," he said in a telephone interview.
"If anybody swallows the notion that the general counsel for the CIA was intimidated into signing this letter, I have a bridge in Brooklyn I want to sell him. That is absurd, just plain absurd."
Elizabeth Rindskopf, the CIA's chief lawyer, acknowledged yesterday that the agency knew the letter was incomplete and "inartfully crafted." But she said she did not view the delivery of the letter as a deliberate attempt to mislead the prosecutors or the federal judge in the case.
She also said Mr. Urgenson "strongly advised" Mr. Jameson not to change the letter, and that the agency "acquiesced because we didn't know there was anything actively in error."
Ms. Rindskopf continued, "There is something different between being materially misleading and simply making a statement that also says, 'By the way, we also have some classified information.' "
But she said: "We will never do it again. We did not handle ourselves well."
On Wednesday, Robert M. Gates, director of Central Intelligence, announced that he had asked the CIA's inspector general to begin an investigation of the matter and submit a formal report by the end of the year.
Mr. Boren's committee is investigating whether the Justice Department, in collusion with the CIA, concealed information about the bank scheme. The senators want to know whether the Bush administration purposely allowed the loans to go through as part of its policy to help Iraq in the years before its invasion of Kuwait.
The senators also want to know whether the administration submitted to pressure from the Italian government not to pursue FTC evidence of the involvement of Italian officials of the bank, which is almost totally owned by the Italian government.