It's one of those scandals that simmer along for a while, then suddenly bursts into flames. The manager of a U.S. branch of Italy's largest bank has confessed to making $5 billion in illegal loans in the late 1980s, mostly to Iraq. Much of that money, ostensibly to finance purchases of U.S. farm products, was used to buy weapons instead. The banker plea bargained and stood ready for sentencing in the largest bank fraud in U.S. history. Seems simple enough. But it is anything but simple, and increasingly it spreads the familiar stench of Washington cover-up.
These loans, by the Atlanta branch of the Banca Nazionale del Lavoro, were made at the time the Bush administration was secretly tilting to Saddam Hussein's regime in a misguided and ultimately disastrous attempt to offset Iran's power in the Persian Gulf area. It was a classic case of the discredited "he may be a thug, but at least he's our thug" sort of policy-making so common during the Cold War. Although BNL is controlled by the Italian government, there is no suggestion yet that the loans were made at Washington's behest. What is becoming increasingly clear is that the Bush administration is manipulating the truth to hush up the full story about the loans.
From the start, the U.S. attorney in Atlanta has maintained that the chicanery was confined to the branch and that BNL officials in Rome were ignorant of the loans. It is generally agreed that the operations of BNL's branches in this country were sloppily run, but that is hardly an adequate explanation for a branch making $5 billion in unsupervised loans. The Justice Department maintained it had no information to the contrary -- a claim belied by the recent discovery of some documents. Now the Central Intelligence Agency admits it misled Congress when it said it had no evidence of complicity by BNL's headquarters. And it appears that the Justice Department induced the CIA to withhold that information from the Atlanta court. Both agencies deny they did anything improper, in an unseemly example of bureaucratic blame-shifting.
At the very least this distasteful spectacle again batters the credibility of two federal agencies where integrity is critical. There is evidence that the Italian government frantically tried to contain the fallout from the case and of previous meddling in its prosecution by both the White House and the Justice Department. All of this suggests strongly that the Bush administration is trying to bury another of its mistakes, and that it has twisted a criminal prosecution in the process. As part of its blunder in courting Saddam for years, right up to his invasion of Kuwait, did the administration wink at the covert loans? Did it know all along that it was not BNL in Rome that was the victim of fraud, but the American people? The legal shenanigans initially postponed answers to these questions conveniently until after the November election. It's time for the truth and nothing but the truth right now.