5. Iraqgate and the Silent Death of the Watergate Law

by Project Censored
Published: Updated:

Sources: Covert Action Information Bulletin, 1500 Massachusetts Avenue NW, Ste. 732 Washington, DC 20005, Date: Fall 1992, Title: “Bush Administration Uses CIA to Stonewall Iraqgate Investigation,” Author: Jack Colhoun; War & Peace Digest, 32 Union Square, E. New York, NY 10003, Date: August 1992, Title: “BNL-lraqgate Scandal,” Author: Kevin Sanders; The Paper of Sonoma County (CA), 540 Mendocino Avenue, Santa Rosa, CA 95401, Date: 10/22/92, Title: “Is Bush a Felon?,” Author: Stephen P. Pizzo; New York Times, 229 W. 43rd Street, New York, NY 10036, Date: 10/20/92, Title: “The Patsy Prosecutor,” Author: William Safire

SSU Censored Researcher: Blake Kehler

SYNOPSIS: While some of the disturbing facts behind Iraqgate have started to ap­pear in the press, the mainstream media all but ignored the story for more than a year.

Representative Henry B. Gonzales (D­TX), chair of the House Bank Committee, launched his intensive investigation into the scandal in 1990. Since February 1991, he has been regularly addressing a mostly empty House, and a loyal C-Span audience, about the role the Bush administra­tion played in building up Iraq prior to the Gulf War. With the exception of conserva­tive columnist William Safire, his revela­tions were basically ignored by the press.

But even without press attention, the scandal grew. Among Gonzales’s allega­tions are several involving the Bush ad­ministration, which, he charges, did the following:

-Secretly sold nuclear, biological, chemical and missile-related weapons materials to Iraq.

-Blocked investigations into the use of the materials.

-Suppressed warnings of the dangers of such sales.

-Deliberately falsified documents on such sales submitted to Congress.

-Interfered illegally to halt investiga­tions into the criminal activities of the Banca Nazionale del Lavoro (BNL), which was secretly diverting American agricul­tural loans to buy weapons for Iraq.

In an attempt to derail Gonzales, the CIA was enlisted to investigate him for revealing allegedly secret intelligence in­formation. The CIA effort failed.

As the year 1992 drew to a close, the media seemed unconcerned with the Bush administration’s covert, as well as overt, attempts to kill the Iraqgate investigation. These also involved the demise of the Watergate Law, which had assured inde­pendent investigations of criminal acts by top officials. The law, which provided for appointment of a special prosecutor to investigate top level members of the ad­ministration, expired on December 15, 1992.

In September 1992, Senate Republi­cans killed the legislation that would have renewed the law. To their everlasting dis­credit, Senate Democrats sat silently by in order to avoid an effort to have the law apply to members of Congress as well as to executive branch officials.

The key figure in the failure to appoint a special prosecutor to the scandal is At­torney General William P. Barr. CIA direc­tor Robert Gates accused the Justice De­partment, headed by Barr, of instructing the CIA to withhold documents critical to the investigation.

Columnist William Safire summarized the intrigue in his October 20 column: “In a last-ditch maneuver to block indepen­dent investigation into Iraqgate, Barr has hired a so-called ‘special council.’ But the man lending his good reputation to this subterfuge can be fired by the very attor­ney general he is supposed to investigate. Barr’s strategy has been to stall past De­cember 15…. No matter who is inaugu­rated in January, no autonomous prosecu­tor could then be named.”

COMMENTS: if there is a single issue fu­ture historians will use to evaluate George Bush’s presidency, it probably will be Iraqgate. The secret sale of military mate­rials to Iraq, the attempted cover-up of the scandal, the demise of the Watergate Law on December 15,1992, and the incredible efforts to intimidate a U.S. Congressman make Richard Nixon’s involvement in Watergate pale in comparison.

Yet, while Henry Gonzalez started in­vestigating Iraqgate in 1990, it was not until late in the election year of 1992 that the mainstream media started to provide the coverage the issue deserved. The admin­istration was much quicker to recognize the potential impact of Gonzalez’s efforts; as Congressman Gonzalez tells Project Censored:

“…the Bush administration has tried to thwart this investigation from the begin­ning. First they tried to ignore me, but I would not just ‘go away.’ They then tried to block my investigation by putting together a concerted effort-which 1 have called ‘The Rostow Gang’-covering all of the departments that had anything to do with U.S. relations with Iraq, to try to keep me from having access to administration docu­ments. However, the investigation contin­ued to progress and the administration and apologists for the president in Con­gress have resorted to spurious charges of so-called ‘national security.’ The CIA has initiated a ‘review’ of my use of govern­ment documents in my Special Orders. Such efforts in Congress have been soundly defeated by a vote of the full House.”

Authors of three of the key articles used in this nomination offer fascinating new insights into the issue and their efforts to get more media coverage of the scandal. We start with investigative journalist Stephen Pizzo, who provides an overall look at the Iraqgate issue:

“Like most Americans I had never heard of the Banca Nazionale del Lavaro (BNL). I first learned of the bank and the role it played in the secret U.S. funding of Iraq when I reviewed testimony given dur­ing Special Orders by Rep. Henry Gonzalez. I made some inquiries, and by March 1992 had received about 100 still-classified docu­ments from the departments of State, Com­merce, Agriculture and Justice.

“The documents told a fascinating story, but maybe more so to me than to the handful of other journalists who also had them. During research in 1987 for our book, lnsideJob: The Looting of America’s Savings and Loans, my co-authors and I had found tantalizing evidence that some failed thrifts and banks had been bilked by covert operators to fund off-the-shelf op­erations during the 1980s. Many of these federally insured institutions later failed, leaving the taxpayers stuck with the tab. But like most alleged covert operations, there remained little solid proof of direct government involvement.

“For me the BNL documents repre­sented the first solid evidence that the Reagan/Bush administrations had con­sciously misused banks to fund covert operations that would not have been fa­vored by the American public or Con­gress. On that level alone, the story was an important one, particularly considering the mess left behind by failed thrifts and the tenuous condition of America’s banks. If our own government shared responsibil­ity for those losses along with the likes of Charles Keating, that was a hell of a story.

“But on another level the story raised questions similar to, and even more seri­ous than Watergate. If the executive branch had engaged in such secret funding, the constitutional and legal questions raised by such a fact were enormous. First and most obvious were the legal questions. Consciously defrauding a federally insured bank by lying about the proposed use of the funds and/or borrowing money with no intention of repaying it is bank fraud­ a federal felony. In the case of BNL, the loan fraud was compounded by the per­version of two federal loan-guarantee pro­grams-$5.5 billion in all.

“Second, circumventing Congress, which has the constitutional duty to advise and consent, raises constitutional ques­tions that make Watergate look like a mi­nor matter. Either the constitution speci­fies clear separation of powers or it doesn’t.

“When all the above are taken into consideration, it is remarkable that this story did not create a media firestorm. Why didn’t it?

“There were several factors conspir­ing to keep this story in check. First of all, it involved banking. Journalists continue to shy away from considering banking as a serious or interesting ‘beat.’ We found this true in the mid-1980s as the S&L industry was being consumed in a financial holo­caust-ignored by the press until too late. BNL was a bank-it made loans-and agri­cultural loans at that.

“Second, the story emerged at the beginning of the presidential election year. This hurt the story in two ways. First the election year ‘soap opera’ — Gennifer Flowers, Bush’s mistress, Clinton’s draft records, etc. — was a major distraction. But also the story itself held enormous political impli­cations, which intimidated major papers. If the story had been handled in a manner consistent with its importance, it would have run on the front pages of major pa­pers and would have supplied enough grist for weeks of follow-up pieces. But that concerned some editors. One of the few papers to run BNL stories during the elec­tion was the Los Angeles Times. Reporter Douglas Frantz had received some of the same documents I had and was running stories on BNL. But he complained in October, on National Public Radio, that his editors often buried his stories inside the paper because they feared that putting them on the front page could raise the story to such a level of importance that they could have an effect on the election, and they did not want to be accused of doing that.

“Ironically, the Clinton/Gore cam­paign also censored efforts to raise Iraqgate during the campaign. When I interviewed an official with the Democratic Party oppo­sition research team, he told me that both Clinton and Gore had been fully briefed on the affair but that the campaign managers had decided that ‘the matter is just too complicated to inject into a campaign. The public just won’t get it and it will muddy our message about the economy.’ The only mention it got was through Gore, who brushed it aside as ‘a foreign policy blunder.’

“In fact, the documents show that the BNL operation was a conscious, well thought-out and executed plan to secretly finance Iraq’s military. The facts imply that the choice of BNL as the bank that would be used for the scheme can be traced to BNL’s involvement with Kissinger Associ­ates (KA) and former KA employees Scowcroft and Eagleburger. The matter may indeed have been a ‘blunder’ in that the administration did not foresee that Saddam Hussein would use U.S. financed weapons to invade Kuwait. But it was not accident as Gore’s statement implied.

“The biggest problem with the report­ing on BNL was that no one took the time to simply tell the story from beginning to end, putting its many players into their proper roles. Stories would break from time to time on the affair, but they tended to deal with a specific event, item or inci­dent. But without an overall ‘holistic’ un­derstanding of the story, readers were with­out mooring and had no way of judging or weighing the importance of the matter.

“I wrote my story [“Is Bush a Felon?”] the way I did because, unlike the Clinton/ Gore campaign handlers, l did not think it was too complicated for the American public to understand. I believed the public would come to the same conclusions I had if they simply had the same opportu­nity to judge them in the light cast by the original documents. After that they would be able to judge later developments for themselves as the case unfolded.

“The ‘lraggate’ case poses fundamen­tal constitutional, moral and legal ques­tions which, if left unexplored in the after­math of the election, will also go unan­swered. In a democracy, such unanswered questions represent nothing less than a toolbox for tyrants.

“With the change of administrations there is the danger that the press will now have a new reason to ignore the BNL affair. Looking back at the prior two administra­tions’ misdeeds will be difficult at a time when a fresh administration is making sweeping changes. But if the press fails to fully expose the BNL affair-including the subsequent cover-up by the White House and Department of Justice-that will allow high-ranking officials to escape responsi­bility for their actions. And, regardless of who is in the White House, if democracy is not about individual responsibility then it is about nothing at all.”

Kevin Sanders investigated the “Chi­cago Connection” of the BNL-Iraqgate scan­dal for the War & Peace Digest, published by the War & Peace Foundation in New York:

“Although the BNL-Iraqgate story is now gaining intense international atten­tion, the Chicago connection-the pivotal nexus of the whole scandal — remains com­pletely unreported in mainstream media at this time.

“A full disclosure of the role played by the BNL bank of Chicago in secret interna­tional money transfers would link together holistically and coherently many unex­plained elements in the Iraqgate, Inslaw, October Surprise and BCCI scandals, all of which seem to intersect in the Chicago branch of BNL.

“The vast, interlocking conspiracies that would probably be uncovered by an open investigation of the BNL bank would reveal hundreds of prominent political fig­ures in several countries to be involved in criminal activities, ranging from treason to assassination. Many key figures of the Reagan-Bush years would be revealed in a particularly harsh light, since Reagan-Bush enterprises involving illegal arms deals­ including October Surprise and Iraqgate ­were financed through BNL bank transac­tions.

“Plato was once asked what he would ask to see if he were suddenly to be thrust into a future culture he knew nothing about but wished to understand. He replied, `That which is forbidden.’ When the Chicago court refused to let Gonzalez see the docu­ments on the Chicago branch of BNL, it immediately sparked my interest. What was being hidden and why? What would the forbidden knowledge reveal? These questions have still not yet been asked either by mainstream media or by govern­ment investigations.

“As Plato said, `Ask the right ques­tions and the universe will reveal all its secrets.”‘

For his article in the Covert Action Information Bulletin, Jack Colhoun fo­cused on the CIA connection and com­pared those implications with the Watergate CIA connection:

“The subject of my nominated article ­the political implications of President George Bush’s use of the CIA to stonewall Representative Henry Gonzalez’s House Banking Committee investigation of the Iraqgate scandal-did not receive com­ment in the mass media last year.

“The public would greatly benefit from a wider public airing of my subject, be­cause Bush broke a critical taboo of Ameri­can politics when he involved the CIA in a domestic political controversy. The impli­cations of CIA intervention in American politics is chilling, especially since Bush is the first former CIA director to serve as president.

“The CIA has not proved its case that Gonzalez’s public investigation of the Iraqgate scandal has jeopardized U.S. na­tional security interests. But it was revealed during the pre-trial hearing of Christopher Drougal, the manager of the Banca Nazionale del Lavoro-Atlanta branch, that the Agency withheld material evidence from U.S. District Judge Marvin Shoob, who presided over the hearing. The CIA withheld documents that indicated the CIA was aware that BNL-Atlanta was the finan­cial cornerstone of an Iraqi arms technol­ogy procurement network in the United States.

“The CIA’s withholding of evidence in the Drougal hearing was a great embar­rassment for the Bush administration. The Justice Department suffered a major set­back in its case against Drougal. But the mass media failed to draw the connection between the CIA’s meddling in the BNL-­Atlanta case to the CIA’s effort to taint the Gonzalez investigation. The mass media have yet to explore the political implica­tions of the CIA’s intervention in the Iraqgate scandal.

“And the media have also failed to point out the relevance of the Watergate scandal to Iraqgate. A few days after it was disclosed in August 1974 that President Richard Nixon pressed the CIA to obstruct the FBI’s investigation of the Watergate scandal, Nixon resigned. The public re­lease of the so-called `smoking gun’ tape of Nixon instructing H.R. Haldeman, White House chief of staff, what to tell CIA Direc­tor Richard Helms sparked a firestorm of controversy because the CIA is barred by law from political operations in the United States.”

Colhoun concludes that while George Bush and his administration were the chief beneficiaries of the mass media’s failure to cover the CIA involvement in Iraqgate, the democratic process in the United States is the big loser.

As these three investigative authors reveal, Iraqgate deserved far more cover­age than it received in 1992; further, the lack of coverage was not solely a function of the media’s failure. In this case, the Clinton/Gore campaign also attempted to thwart further exposure of the scandal by hoping it would simply go away.

Finally, even at this writing, the Bush administration cover-up of the Iraqgate scandal is ongoing and deserves the harsh glare of the media’s spotlight. Iraqgate, one of our top ten Censored stories of 1992, should also be one of the top ten biggest news stories of 1993.

As Henry Gonzalez says, “The struggle for truth is never-ending, but it is essential if we are to have a chance at any sem­blance of representative or responsible government.”

It is past time for the mainstream me­dia to join authors like Pizzo, Sanders and Colhoun in the struggle for the truth about the Iraqgate issue and the cover-up.