Report that defended U.S. aid to Iraq was flawed


WASHINGTON -- A Department of Agriculture report used in recent months by the Bush administration to defend its prewar assistance to Iraq was known to be flawed and incomplete before it was released in 1990, according to internal documents and interviews.

A senior federal investigator cited the deficiencies when he tried to delay release of the report, which stemmed from an inquiry into allegations that Iraq had misused U.S.-backed loans.

Records show that the official complained that the report represented an incomplete and "rosy" picture of Iraq's abuse of the loan program, which included paying bribes to U.S. exporters and possibly trading food for arms. Releasing the report could embarrass the administration, he warned.

But the Department of Agriculture, after pressure from President Bush's national security adviser, released the report essentially unchanged. It said that the department's internal auditors had uncovered no evidence that Iraq had traded goods bought with U.S. loans for weapons, and the United States did not suspend its aid to Iraq.

"The administration's investigation of Iraqi abuses was a whitewash at best," said Sen. Patrick J. Leahy, D-Vt., chairman of the Senate Agriculture Committee, which has been investigating the Iraqi loan guarantees. "At worst, it was an unsuccessful effort to hide a foreign policy failure."

Concerns about the accuracy of the Department of Agriculture report come in the wake of recent questions about the thoroughness of a simultaneous criminal investigation into a massive loan scheme involving Iraq and the Atlanta branch of Italy's Banca Nazionale del Lavoro.

The criticism has centered on the apparent failure by U.S. government prosecutors to pursue key evidence and the withholding of intelligence files, possibly to avoid disclosing the extent of administration aid to Iraq.

The BNL case has become a major issue in the final weeks of the presidential campaign, with Democrats accusing the administration of a coverup and administration officials denying that there was an effort to conceal information. Attorney General William P. Barr has appointed an outside investigator to examine the BNL matter.

Dissatisfied with the appointment, all eight Democrats on the Senate Judiciary Committee, asked Mr. Barr yesterday for an independent counsel -- who would not report to the Justice Department -- to investigate the government's handling of the BNL inquiry. The House Judiciary Committee made a similar request Friday.

A Department of Agriculture spokeswoman would not comment yesterday on the 1990 Iraqi report or the criticisms of it.

The Department of Agriculture inquiry that led to the report was initiated in response to evidence uncovered in the BNL investigation. The two sets of investigators even collided later when they tried to interview the same Iraqi officials.

When FBI agents raided the Italian bank's Atlanta branch in August 1989, they found evidence of $5 billion in illegal loans to Iraq. Nearly $2 billion had been guaranteed by the Agriculture Department through its Commodity Credit Corp. to promote U.S. farm exports.

Investigators discovered indications early that food bought with the loans may have been traded by Iraq for military goods. They also uncovered evidence that Iraq had demanded bribes from U.S. exporters participating in the program.

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