Henry B. Gonzalez, (TX-20)
(House of Representatives - July 31, 1992)

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The SPEAKER pro tempore. Under a previous order of the House, the gentleman from Texas [Mr. Gonzalez] is recognized for 60 minutes.

Mr. GONZALEZ. Mr. Speaker, the case involving the Atlanta branch of the large Italian Government-owned bank, Banca Nazionale del Lavoro [BNL], is one of the greatest financial and foreign policy scandals of all time in which former employees of the Atlanta branch of BNL approved over $5 billion in supposedly unauthorized loans to Iraq over the latter half of the 1980's. Most of these loans were not reported to American or Italian banking officials. These loans supported Iraq's efforts to buy food and military technology in this country--to the tune of several billion dollars as I have mentioned before.

The BNL scandal is at the very least a case study in bank regulatory failure.

This is where we came in from the very beginning from the Committee on Banking, Finance and Urban Affairs level.

Along with the BCCI scandal, BNL serves as a powerful warning to us that foreign governments, friends and foes alike, are willing to abuse the U.S. financial system in order to participate in nefarious activities. The laundering of drug money, illicit arms transactions, and financial transactions involving terrorists are all too commonplace in our huge, largely unchecked financial system. Notorious crooks and despots that have stolen the very hope from their people have all used foreign central banks to launder money in the United States.

The BNL scandal raises several concerns within the jurisdiction of the Banking Committee. Foremost is the adequacy of the regulation and supervision of U.S. branches and agencies of foreign banks. Branches and agencies of foreign banks like BNL and BCCI command over three-quarters of a trillion dollars in assets in the United States and over $8 billion of their liabilities are guaranteed by the FDIC, over $8 billion guaranteed by taxpayers.

For years I have been concerned that the supervisory sharing arrangement between the State, Federal, and international bank regulators is inadequate to ensure that international banks are properly supervised.

In 1990 and 1991, I sponsored changes in the law that improved supervision of foreign banks operating in the United States, but then, here again, I repeat what I have said on several occasions. I have more than just a passing interest and certainly not one exclusively since I became chairman of this committee, but it goes back to the fact that I am the prime reason why we got the first international banking act in 1978.

After the 1975 hearings that I arranged to have in my hometown of San Antonio, it took 3 years after those hearings. Those hearings ended in the indictment and conviction of two individuals, but it was the forerunner of what we now call the S&L scandal. It took 3 years to get minimal, weak, and inadequate legislation in 1978.

Since then, I have tried in every single Congress to strengthen those laws.

The committee will continue to pursue foreign and domestic banks that engage in nefarious activities--since that is the only way to make sure they are aware that the Congress does not want and will not tolerate dirty money or dirty tricks in the U.S. financial system.

In the near future, I will begin to look at other banks with close links to Iraq. At this time I can only say that the committee is investigating the preinvasion and postinvasion activities of several United States-based banks that were providing financial services to Iraq from the United States. This inquiry is in its early stages and I will report on our findings as soon as possible.

The BNL and BCCI scandals prove that it is time the United States established a national screening board to monitor more closely foreign bank presence in the United States.

This is an effort that dictates back to the 1970's, incidentally. Every other country does, including Canada, but we do not. Banks are critically important to the operation of our economy, of course, and are critically important to the functioning of this economy.

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Equally important, banks are the key to the clandestine operations of people like Saddam Hussein.

Our Government should have the power to review foreign ownership of U.S. banking and to more closely monitor the activities of foreign banks in the United States. We have a responsibility to stop future BNL's and BCCI's from occurring, although I have said, and I will repeat today, there is nobody who can tell us how many more BNL's and BCCI's are over there and here and have been around, and just need the occasion of time and circumstances to erupt to the surface.

A screening board would be indispensable in order to accomplish this.

Today, I want to show how BNL commercial loans helped Iraq. Much has been written about BNL's CCC guaranteed loans to Iraq and whether or not the commodities sold under the CCC program were diverted to pay for weapons. The diversion investigation in Atlanta is still ongoing.

The topic that has received less attention, but is much more important to determining the United States role in arming Iraq is the over $2 billion in BNL commercial, not agricultural, bank loans to Iraq. These loans were used by the Ministry of Industry and Military Industrialization [MIMI] to fuel the engine of Iraq's ambitious postwar military industrialization program. They were also used to fund Iraq's secret military technology procurement network. As I have mentioned, other banks may have been involved.

BNL has U.S. offices in Atlanta, New York, Chicago, Miami, and Los Angeles. Its North American headquarters is in New York. In addition, BNL has a commercial paper subsidiary, called BNL US Corp., incorporated in Delaware and operating out of New York. BNL has offices throughout Europe and branches in Hong Kong, Singapore, and a representative office in Tokyo. BNL also has subsidiaries in Canada and the Netherlands Antilles.

As the world knows, in July 1989, the Federal Reserve Bank of Atlanta was notified by the FBI of a substantial off-book operation at the Atlanta agency of Banca Nazionale del Lavoro. On August 4, 1989, the Federal Reserve, accompanied in Atlanta by the FBI and U.S. attorney in Atlanta, raided the U.S. operations of BNL.

Based on information gathered from that raid, it was apparent that BNL-Atlanta was conducting massive off-book transactions. The Atlanta office was lending and raising billions that it did not report on its financial statements or in its bank regulatory statements.

The off-book lending began in the mid-1980's. These transactions, kept on a set of secret books, were purportedly established to conceal the excessive Iraqi loans from BNL's headquarters in Rome. The off-book transactions were originally used to finance CCC guaranteed commodity exports to Iraq and to cover shipping costs for those exports. BNL also utilized the United States Export-Import Bank guarantee program to support shipments of industrial goods to Iraq.

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Under the Export-Import Bank [Eximbank] letter of credit program with Iraq, BNL was insured for 51 export transactions with a dollar value of $47 million. Of this amount of $43.8 million has been repaid by Iraq. Eximbank currently owes BNL the remaining $3.2 million because Iraq defaulted on several letters of credit that were funded by BNL and insured by Eximbank. But of course there were many other commercial loans, many more that BNL made for Iraqi purchases.

A great deal is known about BNL's relationship with the CCC program. In total, between 1985 and August, 1989, BNL financed the sale of about $1.9 billion in CCC-guaranteed United States agricultural products to Iraq. `Guaranteed' means taxpayer guarantees. What is not generally known is that BNL did little CCC business after the cease-fire with Iran in August 1988. In fiscal year 1985, BNL had a 20-percent share of the CCC business for Iraq, greater than any other country, and the next one was Mexico, so that gives the Members the extent and the huge size of Iraq's share of that CCC program, based on the guarantees.

BNL's share of the CCC program peaked at 92 percent in fiscal year 1987. By fiscal year 1989, which began in October 1988, BNL was out of the program altogether.


When the war with Iran ended in 1988, BNL Atlanta was asked to take a big role in Iraq's military industrialization program. While these loans were said to be for rebuilding the Iraqi civilian economy, many went to improve the Iraqi war machine, if not the majority.

Lending under these agreements took the form of four medium-term loan agreements [MTL's] signed with the Central Bank of Iraq [CBI]. These loans had 5 to 7 year maturities and 2 to 5 year grace periods. BNL was able to borrow huge amounts of money to fund these loans because it had the backing of the Italian Government which gave it a topnotch credit rating. The loan agreements are summarized in a table I offer for the Record at the end of this presentation.

We had what is known as MTL notes, one, two, three, four, dated respectively February 22, 1988; October 6, 1988; December 3, 1988; and April 8, 1989, of sums ranging from $200 million to $1.1555 billion.

By the time regulators raided BNL in August 1989, over $1 billion had already been disbursed.

As I will show in charts that, I ask to include in the Record, disbursements from the MTL's took several forms, called option A, option B, and option C. Under option A, BNL confirmed letters of credit issued by the Central Bank of Iraq. This meant that BNL had a major recordkeeping role. Under option A, BNL had to gather ship manifests, bills of lading, ship reliability certificates, ship insurance certifications, and documents showing that the goods arrived in Iraq, all before making direct payment to the exporter. About three-quarters billion dollars was doled out under option A before the recordkeeping function overwhelmed the little BNL office in Atlanta.

Gathering all the documentation needed for A-type transactions was a tremendous burden of the BNL employees. In addition, it was not bright to have mountains of Iraq-related documents piling up in the offices for auditors and bank examiners to see--they were not supposed to be providing that many commercial loans to Iraq.

As I pointed out in the second-to-the-last presentation, I listed the licenses, export licenses, from the Department of Commerce in which only 1 out of 771 or over 800 had any kind of follow-through as to end use. On what? On commercial lending, not the CCC program.

To avoid suspicion and to lessen the paperwork burden, BNL and Iraq devised another and more discreet method to disburse the MTL's called option B.

Option B streamlined the disbursements of money to Iraq and left little evidence for auditors to follow. Under option B, BNL received a telex from CBI, that is, the Central Bank of Iraq, telling them to transfer money into an Iraqi bank account maintained at one of several prominent financial institutions in the United States and Europe. This money was kept in an escrow-type account and used as collateral against disbursements made to the exporter. For example, when Iraq wanted to use BNL loans to buy computers from Hewlett Packard, CBI would send a telex to BNL stating that it wanted to buy Hewlett Packard computers and to send money to a numbered bank account at Bank America in San Francisco.

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After receiving BNL money, Bank of America would pay Hewlett Packard for the computers and the computers would go to Iraq.

Bank of America used the BNL money that had been deposited into the numbered bank account as collateral to make sure it got repaid. When Iraq eventually did repay BNL, Bank of America would get to keep the collateral that had been deposited in the numbered account, and BNL got money directly from Iraq.

In this type of transaction Bank of America would received a fee for gathering all the documents, and a fee for disbursing the money to Hewlett Packard. BNL would get a small fee from Iraq for advising on the transaction and received a small interest rate for the loan to Iraq.


A third and much simpler method was used to disburse over $100 million to Iraq's MIMI, the armaments ministry. In these countries they are indistinguishable. They can be called the Economic Development and Defense Procurement Agency, and as in this case it is very difficult to say where one begins and the other starts or leaves off. Under option C high ranking MIMI officials simply picked up the phone, called BNL-Atlanta and told them to transfer funds, totaling $107 million, into Iraqi accounts at Bank of New York, Chase Manhattan Bank or Manufacturers Hanover Bank. This money is not traceable and Iraq is the only one that knows how this money was spent. Needless to say, $107 million could purchase lots of weapons, make lots of bribes, and even purchase other firms that could be used as front companies.

The sad thing that I said at the outset this day is that entities structured that way are still in operation in the United States of America.

As of January 1990, a total of $1.55 billion had been drawn and committed under these various agreements. After the BNL raid, Iraq still insisted that BNL make good on the remaining loans still outstanding under the agreements. After months of intense negotiations, on January 24, 1990, BNL and Iraq negotiated and agreed that the residual $600 million or so would be utilized for new transactions, two-thirds of which would finance projects for which the suppliers had to be Italian firms and one-third could be used for purchases from other countries.

You might wonder why BNL renegotiated the loans. It's simple. Under international law the contracts signed with BNL were valid.

And remember, the banking agency in Atlanta is an agency of an Italian bank doing business in the United States, but which is owned by the Italian Government. So these negotiations then would be done in Rome. So Iraq threatened not to repay the money it already owed to BNL unless BNL made good under the remaining balance of the loans, which under international law, as I say and repeat, were valid claims.

With earnings from its huge oil reserves--second in the world to Saudi Arabia--Iraq entered the decade of the eighties with hefty cash reserves. But its war with Iran 1980-88, and the drop in oil prices during the eighties changed all that. Wartime weapons purchases coupled with domestic infrastructure expansion served to deplete Iraq's foreign exchange reserves. And in the second-to-the-last previous order I placed in the Record, the documentation showing that during that period of the Iraq-Iran war we, the United States,

together with some of our so-called friends in Europe, and even China, sent 47 billion dollars worth of armaments to Iraq.

Even though Iraq emerged from its war in poor financial condition, there was still some optimism regarding Iraq's industrialization program. Iraq's oil reserves and its educated work force led many experts to believe that if Iraq could manage its economy properly, it could fulfill the promises of the ambitious program. But with oil prices stagnating, and mountains of debt, Iraq was in poor shape to pay for the industrialization program.

In fact, Iraq had accumulated massive debts of some $70 to $80 billion during the 8-year war with Iran. About half of Iraq's external debt, about $35 to $40 billion, was owed to the Western creditors, and this debt had to be repaid in foreign exchange earned from oil exports.

Saddam Hussein reacted to this cash shortage by calling on many foreign countries to reschedule and spread out loans that had been extended to Iraq. Complicating Iraq's debt problems was the unwillingness of most Western banks to lend to Iraq without Government guarantees. However, with the help of the United States, through its CCC and Eximbank programs, and augmented by similar programs administered by several European and Asian countries, Saddam Hussein was able to keep his ambitious industrialization program going full speed.

However, since much of Iraq's oil earnings had to be earmarked for debt servicing, the military industrialization program was in jeopardy of failing. As I have shown in the previous 2 floor statements, priority was given to military-related projects and the CIA, State Department, and White House were well aware that Iraq's top priority was military industrialization. They knew what Iraq wanted to do, and they knew Iraq was using clandestine means to buy military technology.

In November 1989 the CIA noted that the $2.155 billion in MTL's for Iraq was the largest single extension of credit to Iraq. What we are now learning is that much of the technology bought with BNL loans was often used, if not totally used, on Iraqi weapons projects.

Deceit played a large part in building the Iraqi war machine. It is quite probable that many of the companies providing technology and know-how to the Iraqi war machine did not realize they were doing so, though I find that hard to believe. But the record shows that our Government had a good idea of what was transpiring, and decided to tolerate it, up to a point. It is useless to try to explain, it is unclear how much was tolerable, but we know that the administration deliberately allowed Iraq to buy technology needed for Iraq's rearmament program. That we know.

In order to clandestinely obtain the most sophisticated technologies, Iraq established a secret network of front companies charged with the mission of finding and exporting Western technology to Iraq.

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No expense was spared including possible bribes and higher-than-normal profits for the producers of the goods exported to Iraq. MIMI funneled the BNL loans to the secret network of front companies, which in turn used the money to purchase United States and European technology for Iraq.

No fewer than 5 Iraqi front companies in the United States, Italy, and the United Kingdom received BNL money. Technology Development Group [TDG], Iraq's primary holding company in the United Kingdom received over 81 million deutsch marks for a hot forging dies project at NASSR which is a military complex near Baghdad, and $2.4 million to ship special materials to Iraq. TDG also got 750,000 British pounds to ship steel to Iraq.

Technology Engineering Group [TEG] received over 1.6 million pounds sterling to send raw materials to Iraq. Matrix-Churchill, Ltd., in London and owning the Cleveland, OH, Matrix-Churchill, received 9 million pounds sterling to ship sophisticated machine tools to Iraq. In another transaction MCL also received 3 million pounds sterling to ship other machine tools.

Matrix-Churchill Corp. [MCC] in Cleveland, OH, was the beneficiary of $14.3 million to ship a glass fiber factory to Iraq. I brought the significance of that out this last Monday.

MCC also received $600,000 in working capital loans from BNL. Finally the Italian front company, European Manufacturing Center [Euromac], received over $50,000 in BNL funds to send small tools to Iraq.

All of these companies were Iraqi-owned fronts with responsibility for obtaining equipment for Iraq's clandestine nuclear, biological, chemical weapons programs and long-range ballistic missile programs. As far back as 1989 the CIA believed the front companies were staffed by Iraqi intelligence agents under the control of Hussein Kamil, the son-in-law of Saddam Hussein, at MIMI--but this was to be tolerated, under the policy of trying to turn Saddam Hussein into a good citizen, as the President has claimed.

Not everything that these front companies shipped to Iraq was for weapons programs, but it does not make much sense that Iraq would set up such an elaborate system of front companies, staff them with intelligence agents, and use scarce financial resources to purchase goods destined for solely civilian purposes, which we know is not a fact. We know that the overwhelming, preponderant use of these funds was for military.

In other words, the network was not responsible for purchasing garden furniture, as we would have been led to believe early in this investigation.

Of course, even some of the civilian goods, such as room air conditioners and air chests, were destined for Iraqi weapons factories. But the key to it all was bank loans. BNL was the linchpin of the Iraqi secret procurement network; it was not the only source of money, but it was absolutely critically important, and indispensible.

Our Government knew a great deal about all this, but decided that as long as the shipments did not explode, or if they fell just short of enabling Iraq to build nuclear weapons, they would be tolerated. The great mystery is why this went on right up until the invasion of Kuwait, in August of 1990. The President has talked about making Iraq into a better world citizen, but that surely does not explain why his administration allowed Saddam Hussein to use this country as a source of materials he needed to build weapons of mass destruction, including materials our Government knew were destined for Saddam's nuclear weapons program.

Trying to explain all this is naturally embarrassing for the administration, of course, it is. And so it is not surprising that the administration has not cooperated fully with our requests for information. They have classified harmless materials, needlessly censored other information, stonewalled information requests, and withheld documents that have clearly fallen within Congressional requests. When that did not work, despite that, as in the case of the prohibitions that the Justice Department demanded of the Federal Reserve Board that they not supply us with our requested subpoena material, well, they simply had the aid and assistance

of our friends in the Italian Senate and the Investigating Committee. I met with the chairman of that committee, two of his colleagues here, and we exchanged information, so we got some of the material that way.

Despite that, though, when they did not succeed in stonewalling us completely or intimidating us, they then attacked, accusing me of leaking documents selectively, leaking by placing them in the Congressional Record for the people to see, for my colleagues to know of. Is that a leak? Well, I have been doing that ever since I came to the Congress and had the first fight with the FAA Administrator, who was an empire builder and had shifted, despite the need for air passenger safety travel, the Air Route Traffic Center in San Antonio. We soon got the documentation showing it was political empire building. That embarrassed him to the point where he then clamped down on his staff, prohibited any one of them speaking to anybody, and said, `That man can't know that much about our operations unless somebody has leaked it.'

Well, that was not true. In many cases, we just added right. We put two and two together and came up with four. This is what we have been doing here in this case. So when this did not work, they then accused me of leaking documents selectively, or to harm national security, but when asked, Secretary Eagleburger could not say how I had damaged national security, when he came before our committee.

And when challenged, the Justice Department responded by saying that harm was not the point--although they had previously claimed my actions were damaging. None of it is true. They have abused classification, because they want to hide the facts and the evidence. The latest harrassment is from the CIA, which claims I have leaked materials that I do not and never have possessed, and have not seen. The CIA has never provided any documentation that would even be more secret, much less top secret, so I feel very complimented when they say, `We have reason to think you must have gotten something top secret.' Of course, they know that and we know it.

The embarrassment to the administration is growing. That is to be regretted; but when we started this, it was 3 years ago. When we tried to get our hearings off the ground exactly 2 years ago this month, the then Attorney General Thornburgh demanded that I not have a hearing; so if we had had compliance with our request, this whole thing would have been brought out. We would have had legislation to have proper at least enhancing of regulatory control, and it would not have happened in this election year. Nobody can say, not truthfully, that I have in any way directly or indirectly played into any kind of a political venture. I do not participate in primaries of any kind; and besides that, knowing full well what was going to happen, I have been scrupulously careful to watch exactly what I say, what I do, and that it has no implications of an out-and-out partisan nature.

Now, the facts are bad. They are embarrassing in retrospect, but if instead of stonewalling and then trying to retaliate by intimidating, just confront the fact and then join hands in defending the continual exposure of our banking system by

strengthening our laws, we would all be better off.

Anyway, I offer for the Record the exchange of letters that I have had with the CIA in the last 2 days, and my answers, and the release I made pursuant to those letters and such materials that are pertinent.

Meanwhile, both myself and the Foreign Affairs Committee have been asking for and seeking documents from the State Department. This is the State Department. They have asked for delays. They have offered cooperation and then provided partial response, evasive actions, postponed meetings to discuss access to further materials in which we could get together.

We have not asked that we put our hands on and hold the materials. We want to see them because we want to protect the taxpayers.

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The BNL has a claim right now against the Government to pay up to about some $300 million for the guarantees that they were out on Iraq because they say that Rome did not know anything about it. We have good reason to know that they did because our own Government agencies were informing them. But they do not want to give us access to those documents showing that, because they feel embarrassed.

Now, how can we help the national interest and save the taxpayers at least $300 million if, because of fear of embarrassment, that fact is not brought out and our legal authorities, trying to defend the Government, do not have the facts with which to defend it? That is just an example of what we face. So here the State Department now has delayed. We have set up a meeting. They canceled it without explanation. And this disappointing performance is only a part of a wider campaign of obstruction, unworthy of a great country and equally unworthy of a department with a great history.

I hope for cooperation, but with or without it, the truth will emerge.

The documents referred to are as follows:

[Option A]
Iraqi beneficiary                                                                             Exporter                                                                                                            Amount                     Ostensible product description                                                                                                              Likely military use                                                                            
General Automobile and Machinery Corporation, Baghdad                                         General Motors Overseas Distribution Corporation, 3044 W. Grand Blvd., Detroit, Mich. 48202                         $154,000,000               10,000 Oldsmobile Cieras                                                                                                                    Used as reward for Republican guard and Baath party loyalists.                                 
Nasser State Enterprises for Mechanical Industries, Baghdad                                   Matrix Churchill Limited, Fletchamsted Highway, Coventry CV 4 9DA U.K.                                              81,000,000 Deutsche Marks  Not forging dies project                                                                                                                    Cannon/artillery.                                                                              
Technical Corps for Special Projects (TECO), Baghdad, Project 102, Petrochemical Complex 2    Lummus Crest Inc., 1515 Broad Street, Bloomfield, N.J. 07003                                                        $53,827,776                Services and licenses for Ethylene Plant at Petrochemical Complex. Steam cracking furnaces                                                  Ethylene is used in fuel-air explosives and as a chemical weapons precursor.                   
Al Shaheed Factory, Baghdad                                                                   Servaas Incorporated, 1000 Waterway Boulevard, Indianapolis, In. 46202                                              $40,602,000                Copper scrap refining machines, tools, parts and technical documents                                                                        Double production at artillery shell factory.                                                  
State Establishment for Heavy Engineering Equipment, project No. 74                           Techno Export Foreign Trade Co. Ltd., 1 Vachavshe Nam 1, Praha, Czechoslovakia                                      $40,257,800                Technological equipment, materials and services and third countries origin for extension of manufacturing facilities of State Establishment Big Gun or nuclear weapons program.                                                            
Technical Corps for Special Projects (TECO), Project 65/Project 1937, Baghdad                 Biwater Process Plant Chemical & Thermal Engineering Limited, 52 Adderly Road, Wilmslow, Cheshire, SK9 1 NY England 16,894,383 Pounds Sterling Nitrogen Generation Plant Parts, Cryogenic Nitrogen Plant, Resin Factory                                                                    To be used with glass fiber factory to make components for missiles, aircraft, etc.            
State Machinery Trading Company, Baghdad                                                      Centrifugal Casting, Machine Co., 6935 East 12th Street, Tulsa, Oklahoma 74112                                      $26,337,241                Cast ductile iron pipe.                                                                                                                     Artillery, barrels, Big Gun.                                                                   
Nasser State Enterprises for Mechanical Industries                                            SMS Hasenclaver GMBH, Witzeltrasse 55-400, Dusseldorf 1/BR, Germany                                                 33,750,000 Deutsche Marks  Machines and equipment and spare parts for forging lines.                                                                                   Manufacturers of artillery and gun barrels.                                                    
State Machinery Trading Company. Technical Corps for Special Projects (TECO), Project No. 395 Rotec, 333 West Lake Street, Elmhurst, Ill, 60126                                                                   $18,708,365                Upstream and downstream conveyor system for cement. Vibration equipment                                                                     Infrastructure for Condor II ballistic missile program.                                        
State Machinery Trading Company, Baghdad                                                      XYZ Options Inc., Arcadia Drive, Tuscaloosa, Al, 33404                                                              $14,072,625                Carbon determinator induction furnace, Isostatic press, Jig grinder, Tungsten carbide powder                                                Found at Al Athere nuclear weapons plant.                                                      
Technical Corps for Special Projects (TECO), Baghdad, Project 3128                            Matrix-Churchill, 5930 Harper Road, Cleveland, Oh. 44139                                                            $14,100,000                Fiber Glass Project                                                                                                                         With BiWater resin factory has many military uses including bomb casings, aircraft parts, etc. 
State Machinery Trading Company, Baghdad                                                      Gatewood Engineers Ltd., 2 Basset Court, Newport Pagnell, Buckingham Shire, MK16 OJN, United Kingdom                $12,541,000                50 Terex dump trucks                                                                                                                        Bought by Condor II ballistic missile program.                                                 
State Machinery Trading Company, Baghdad                                                      Associated Instrument, P.O. Box 49591, Atlanta, Ga. 30329                                                           $12,161,502                Carbide tools                                                                                                                               Many military uses including artillery shells and barrels.                                     
State Machinery Trading Company, Baghdad                                                      Caterpillar, 100 N.E. Adams St., Peoria, Ill. 61629                                                                 $9,902,605                 Billdozers                                                                                                                                  Bought by ballistic missile program. Used to erect infrastructure.                             

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[Option B]
Exporter                             Amount                     Ostensible product description                                                            Like military use                                                       
CE (Kintex), Bulgaria                $30,750,000                Transfer of know how, technologies and equipment for manufacturing of personal computers. Direct arms purchases.                                                  
Thyssen Rheinstahi Technik, Germany  63,500,000 Deutsche Marks  Rotary forging plant                                                                      Artillery.                                                              
Danieli, Italy                       126,000,000 Deutsche Marks Rolling mill for steel plant                                                              Artillery.                                                              
Comtech Systems, Inc., United States $36,000,000                Mobile satellite tracking system                                                          Track hostile intelligence satellites.                                  
Lummus Crest, United States          $53,000,000                Ethylene plant--PC2                                                                       Ethylene used as fuel for explosives and precursor to chemical weapons. 


Finance and Urban Affairs,
Washington, DC, July 30, 1992.

Chairman Henry B. Gonzalez of the House Banking, Finance and Urban Affairs Committee charged today that the intelligence community is being enlisted to help the Bush Administration deflect attention from failed policies involving Iraq.

Mr. Gonzalez said he had received two recent letters from the Central Intelligence Agency complaining about public disclosure of the intelligence community's knowledge of Iraq's ambitious military industrialization program. The letters were written to Mr. Gonzalez by Robert M. Gates, Director of Central Intelligence, and Admiral W. O. Studeman, Acting Director of Central Intelligence.

`These letters have all the appearance of warmed over versions of earlier complaints from Attorney General William P. Barr,' Mr. Gonzalez said. `Like the Attorney General, Mr. Gates is fully aware that my public statements and revelations have been carefully handled and have not in any manner breached the security of ongoing intelligence efforts.'

Mr. Gonzalez said he was `extremely disappointed that the Central Intelligence Agency was allowing itself to be used to build a smokescreen around the President's flawed policies. The CIA should be above involving itself in the political problems of the Administration. The American people deserve a full explanation and exposition of the pre-war policies and the CIA should not leave the impression it is willing to help cover up the facts.'

(Letters attached.)

Finance and Urban Affairs,
Washington, DC, July 30, 1992.

Hon. W.O. Studeman,
Admiral, U.S. Navy, Acting Director of Central Intelligence,
Central Intelligence Agency, Washington, DC.

Dear Admiral Studeman: This letter is in response to your letter dated July 28, 1992 that was received by the Banking Committee on July 30, 1992. First, I want to make it clear that information contained in my statements on the House Floor, traceable to intelligence reports or otherwise, have in no way harmed the national security or revealed sensitive sources and methods.

As you are aware, because the Banking Committee does not have a Sensitive Compartmented Information Facility (SCIF), the Committee has not been permitted to retain any information above the SECRET level, and therefore, the Committee does not have information about the SECRET level. Your insinuation that I have revealed TOP SECRET, compartmentalized information is inflammatory and without merit. In fact, I have taken great pains to ensure that all information that I have placed in the Congressional Record is of the broadest nature and readily available from public sources.

To set the record straight, the CIA has not adequately cooperated with the Banking Committee since Attorney General Barr's letter of May 15, 1992. This letter has been used by the intelligence community, and numerous other government agencies, to forbid Banking Committee investigators from reviewing or discussing classified information. In fact, since May 15, 1992, on several occasions the intelligence community has prohibited Committee investigators from reviewing or even discussing classified information. As I told Director Gates, the CIA's position is to refuse to discuss or provide the Committee with access to classified information, yet, at the same time, I am being criticized for not discussing classified information with the CIA.

No one has shown that I have harmed the national security or compromised sources and methods, which leads me to conclude that the classification issue is being used as a convenient device to avoid substantive discussion of the issues at hand.

Rest assured Admiral Studeman, I stand ready to work with the intelligence community under mutually beneficial circumstances.

Thank you for your time and consideration of this request.


Henry B. Gonzalez,



Central Intelligence Agency,
Washington, DC., July 28, 1992.

Hon. Henry Gonzalez,
Chairman, Committee on Banking, Finance and Urban Affairs,
House of Representatives, Washington, DC.

Dear Mr. Chairman: As Director Gates' response to your letter of 7 July indicates, we have been making every effort to cooperate with your requests for access to intelligence information. We have appropriately declassified intelligence reports available for you to use in public statements. We are prepared to work with you to continue reviewing our reports to determine what may be made available to the public.

We fully respect your obligation to discharge the oversight responsibilities assigned to your Committee. I hope that you understand our obligation to protect intelligence sources and methods through careful review of information before it is released to the public.

We have reviewed your statements published in the Congressional Records of 21 and 27 July. We have determined that portions of your statements were drawn from classified intelligence documents, some of which are Top Secret, compartmented, and particularly sensitive. I have asked the Office of Security of the Central Intelligence Agency to undertake a review of your statements in order to determine the impact of the disclosures of intelligence information on intelligence sources and methods.

Very respectfully,

Admiral, U.S. Navy, Acting Director
of Central Intelligence.



Finance and Urban Affairs,
Washington, DC, July 28, 1992.

Hon. Robert M. Gates,
Director of Central Intelligence, Central Intelligence Agency, Washington, DC.

Dear Director Gates: This letter is in response to your letter dated July 24, 1992 that was received by the Banking Committee on July, 27, 1992. Frankly, I am perplexed by several statements in your letter and would like to set the record straight about several points contained in your letter.

First, information contained in my statements on the House Floor, whether traceable to intelligence reports or not, has in no way harmed the national security or revealed sensitive sources and methods. As you are aware, because the Banking Committee does not have a SCIF, we were not permitted to retain any information above the SECRET level. Therefore the Committee does not have information above the SECRET level. Your insinuation that I have revealed TOP SECRET compartmentalized information is inflammatory and without merit. In fact, I have taken great pains to ensure that all information that I have placed in the Congressional Record is of the broadest nature and readily available from public sources.

I can understand your discomfort at my revealing that the CIA and other executive branch agencies had early and acute knowledge of Iraq's military industrialization program, Iraq's weapons manufacturing establishments and Iraq's technology procurement network. You must also understand that the Committee could not effectively execute its oversight function without revealing, in the broadest context possible, that the CIA and other executive branch agencies knew of Iraq's military industrializations plans, were aware that U.S. technology was being sent to Iraqi weapons factories and were aware of Iraq's clandestine procurement activities. Many of these facts are available from public sources.

Since May 15, 1992, the Central Intelligence Agency, the National Security Council, National Security Agency, Defense Intelligence Agency, the State Department, the Department of Defense, the Treasury Department, the Commerce Department and the U.S. Customs Service, invoking the Attorney General's letter of May 15, 1992, have all refused to discuss classified information with the Banking Committee or to provide the Committee with classified documents. In effect, the CIA is criticizing me for not discussing classified matters, while at the same time, the CIA refuses to discuss classifed matters with me.

I do appreciate your verifying that the CIA did not begin assisting prosecutors in Atlanta, until `late summer 1990.' Of course `late summer 1990' means after Iraq's August 2, 1990 invasion of Kuwait. I stand by my assertion that the intelligence community was not forthcoming with information related to BNL, Matrix-Churchill Corporation and Iraq until after the invasion of Kuwait.

The fact is that six known Iraqi front companies and many other notorious firms assisting Iraq's weapons programs were the beneficiaries of BNL loans. The fact is that 10 government agencies, including offices within the DOD that work closely with the CIA, were all in Atlanta investigating various aspects of the BNL's relationship with Iraq. Numerous press reports linked BNL-Atlanta to Iraq's procurement network, Iraq's military industrialization and weapons programs. While I will certainly accept hard evidence to the contrary, I find it difficult to conclude that CIA information on these topics, which was plentiful well before `late summer 1990,' was not purposely withheld from prosecutors in Atlanta.

I am willing to investigate this issue in more detail. In order to facilitate consideration of this question, I respectfully ask that you provide the Committee with a copy of CIA's policy on sharing information with other government agencies, particularly law enforcement agencies and banking regulators. Also, please provide copies of all documentation supporting your assertion as well as any distribution lists associated with germane CIA documents on Iraq, BNL and Matrix-Churchill that were created prior to the Iraqi invasion of Kuwait. The Banking Committee will be happy to report to you on its findings related to this point.

I must also express my disappointment in learning, from a New York Times article, of the existence of a National Intelligence Review on Iraq, dated November, 1989, that contained information on BNL and Iraq's procurement networks. As you are aware, the Committee had asked the CIA for access to any reports containing information on BNL and Iraq's procurement networks. For some reason that report was never brought to the attention of Committee investigators.

Your assistance in furnishing the information requested herein will be greatly appreciated.

Thank you for your time and consideration of this request.


Henry B. Gonzalez,



Central Intelligence Agency,
Washington, DC, July 24, 1992.

Hon. Henry Gonzalez,
Chairman, Committee on Banking, Finance and Urban Affairs, House of Representatives, Washington, DC.

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Dear Mr. Chairman: In response to your letter of 7 July, we have reviewed the memorandum entitled `Iraq-Italy: Repercussions of the BNL-Atlanta Scandal' to determine whether it can be declassified. We have determined that nearly all of the document can be declassified, although we have had to make some very limited exclusions to protect sensitive intelligence sources and methods. The sanitized document is enclosed. We have done this as part of a continuing effort to cooperate with your committee.

We also have determined that your statement in the Congressional Record on 7 July 1992 included information from a TOP SECRET compartmented and particularly sensitive document dated 4 September 1989 to which we gave your staff access. Because of the sources and methods underlying that information, I will ask for a damage assessment to determine the impact of the disclosure.

I regret that you chose to discuss information from classified documents without attempting to determine if we could work out a way to satisfy both our need to protect intelligence sources and methods, as well as your need to make public information concerning the development of US policy toward Iraq.

I must also take strong exception to your statement in the Record that, `The lack of CIA cooperation with the prosecutors in Atlanta was a calculated administration effort to conceal the true nature of the BNL scandal and to hide the level of Iraqi Government complicity in the scandal.' In fact, the CIA has cooperated completely with the prosecutors in Atlanta. We received and responded to several Department of Justice requests for information beginning in late summer 1990 providing, among other things, Directorate of Intelligence finished intelligence reports; raw intelligence reports; copies of articles from the foreign press; and Foreign Broadcast Information Service reports. We also provided special briefings for senior Department of Justice attorneys and have provided additional, responsive information as it has become available. Although we are unable to determine the value of CIA information to the prosecutor, the facts will show that we have been completely responsive to all requests we have received.

This Agency's consistent policy has been to cooperate, when requested to do so, with all Department of Justice prosecutions. If evidence to the contrary has come to light during the course of your investigation, I ask that you provide me with facts sufficient to permit inquiry into whether a violation of Agency policy has occurred. If no such evidence exists, I urge that the record be promptly corrected.


Robert M. Gates,
Director of Central Intelligence.


Directorate of Intelligence, November 6, 1989



The revelation that a US branch of an Italian bank, Banca Nazionale del Lavoro (BNL), granted more than $3 billion in unauthorized letters of credit to Iraq has had wide-ranging repercussions for Iraq and Italy. For Iraq, public disclosure that is used some of the credits to acquire military-related technology has impeded procurement efforts, and the suspension of BNL credits has slowed civilian reconstruction and development projects. For Italy, the BNL scandal has cast at least a temporary shadow on Prime Minister Andreotti's new government, raised questions about public-sector enterprises, and reopened the issue of privatization.

The affair is unlikely to have a major impact on Iraqi military procurement efforts, but cash-short Baghdad probably will have to postpone plans for some civilian projects. The loss of BNL financing and, more important, any reduction in US agricultural credit guarantees because of negative publicity about the scandal probably would damage US-Iraqi commercial ties. For Iraq's part, however, the strain in political relations is likely to be short-lived, particularly if Baghdad believes US credit guarantees will be forthcoming. Iraq is eager to maintain good ties to the United States, an attitude intensified by improved relations between Iran and the USSR.

BNL-Atlanta Financing for Iraq

The Atlanta, Georgia branch of the state-owned Banca Nazionale del Lavoro (BNL)--Italy's largest bank--extended $3.2 billion in 2,500 unauthorized letters of credit for Iraq between February 1988 and July 1989. U.S. and Italian authorities have been investigating the scandal since July for violations of banking regulations and tax and customs laws.

Fragmentary reporting indicates BNL-Atlanta disbursed $1.85 billion of the $3.2 billion, including at least $800 million in letters of credit guaranteed by the US Commodity Credit Corporation (CCC). BNL headquarters agreed to release another $550 million in early October, ------ after Iraq threatened to suspend payment to Italian firms if the bank failed to honor its commitments.

BNL-Atlanta's unusual activities included:

Exceeding the branch's allowable debt of $500,000 per customer.

Charging Baghdad an average 0.2-percent commission instead of the usual 15 percent for a poor credit risk.

Financing the letters of credit by borrowing from other banks for 90 to 180 days but allowing Iraq up to five years to repay.

BNL's North American headquarters in New York and the bank's directors in Rome publicly denied knowing about the letters of credit, although a BNL official in Chicago claims he notified New York and Rome several times about the unusual activity in Atlanta, according to press reports. Press reports also indicate a BNL branch in Udine, Italy referred customers exporting to Iraq to the Atlanta branch. Iraqi officials have generally denied knowledge of any wrongdoing, arguing that Baghdad is a victim in the scandal.

Iraq used some BNL credits--at least $600 million, according to British press--to buy military and dual-use technology through various front companies and legitimate firms in Western Europe. ------

British press says that BNL-Atlanta also financed Iraqi military purchases from Kintex, the Bulgarian armament company.

Impact on Iraq

The suspension of credits from BNL--by far Baghdad's largest source of credits--and disclosure in the British press that Iraq used the credits to acquire military-related technology has almost certainly complicated Baghdad's procurement efforts. We believe that increased Western scrutiny of these activities has at least temporarily impaired Baghdad's ability to acquire such technology. Press coverage and London's
opposition to Iraq's control of a company possessing sensitive technology, for example, led SRC Composites to divest its advanced composites factory, according to press reports. Some other firms in the networks have gone out of business.

The loss of BNL financing has almost certainly slowed civilian reconstruction and development in Iraq. Many US and West European firms supplying goods and services to projects in Iraq were being paid through BNL ------ ------ Many of these firms have probably suspended business with Iraq until alternate methods of payment--cash, other loans, or barter--are arranged. Financially strapped Baghdad, however, is unable to meet demands by some of these firms for payment in cash, especially for expensive purchases. ------ reporting indicates Iraq has nearly exhausted available credit lines and barter opportunities.

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Iraqi procurement networks

Baghdad has created complex procurement networks of holding companies in Western Europe to acquire technology for its chemical, biological, nuclear, and ballistic missile development programs. According to British press ------ one such network begins in Baghdad with the Al-Arabi Trading Company, which controls the London-based Technology and Development Group, Ltd. (TDG) and another UK firm, TMG Engineering. TDG and its Brussels-based partner, Space Research Corporation, own the Ulster-registered firm Canira Technical Corporation, Ltd. Canira in March established SRC Composites, which acquired access to advanced composite and carbon fiber technology used in aircraft and missile production. In 1987 TMG gained control of Matrix-Churchill, Ltd., the United Kingdom's leading producer of computer-controlled machine tools that can be used in the production of sophisticated armaments.

We believe Iraqi intelligence is directly involved in the activities of many holding companies funnelling technology to Iraq. ------.

Effect on US-Iraqi relations

For Iraq, any reduction in bilateral commercial ties because of the BNL scandal takes on political significance, which Baghdad--ever paranoid--tends to exaggerate. The fallout from the scandal has strained US-Iraqi relations. Baghdad is seriously concerned that the affair is adversely affecting its economic ties to the United States--the backbone of the bilateral relationship. Iraq is particularly upset that the CCC offered significantly less credit guarantees for FY 1990 than Baghdad requested because of negative publicity about the scandal. Iraq fears that any large reduction in CCC credit guarantees would make it more costly and difficult to import agricultural goods and damage its international credit rating.

Several US firms have already been affected by the scandal. ------ press reporting indicate BNL was financing at least $1 billion in sales to Iraq by US firms, including agricultural goods, an automobile plant, an ethylene plant, industrial
machinery, construction materials, and irrigation equipment. Some US suppliers are worried that they will not receive payment on letters of credit that they have not yet submitted to BNL-Atlanta. Many US firms are trying to arrange other means of payment to avoid losing lucrative contracts.

The scandal has contributed to Iraq's perception that the United States is trying to hamstring Baghdad's efforts to promote better political ties. A senior Iraqi official told his US counterpart in early October that Baghdad was unhappy that Washington's decision on CCC credits is linked to the scandal, with which he maintained Iraq had no part. The official indicated this was not a sign that the United States wants to improve relations.

Baghdad is eager to resolve the BNL crisis because harmonious bilateral relations are important to its strategic planning. Iraq believes that the Iranians have not abandoned plans to oust the regime in Baghdad and wants to assure that the superpowers would back Iraq or at least remain neutral during any future hostilities. The Iraqis seek to prevent Washington from favoring Iran so much that Baghdad's interests are threatened. In Iraq's view, the superpowers regard Iran to be of greater importance in the region, and Baghdad is therefore trying to enhance Iraq's political and economic importance to the United States.

Impact on Italy

The BNL affair--in combination with other scandals--has cast a shadow on Prime Minister Andreotti's three-month-old government. Partly to divert attention from the BNL affair, the Socialists and some Christian Democrats are playing up other scandals, including renewed allegations that the Italian military covered up evidence concerning the 1980 crash of an Italian airliner north of Sicily. None of the governing political parties or their factions, however, appears now to believe it can strengthen its relative positions by exploiting the issue.

The scandal has also spotlighted the cost of Italy's longstanding and entrenched spoils system in the state-owned enterprises. Traditionally, appointments to key positions in public-sector companies have been allocated as a measure of party and even factional influence. Under this system, the president and several directors of BNL are members of the Italian Socialist Party, while the executive director usually comes from the Christian Democratic Party. Several backbenchers in parliament quickly denounced the spoils system for not allowing the most competent people to fill public-sector jobs. The attacks, however, have been discounted as political sour grapes, and the system shows no signs of collapse.

In light of the BNL affair, Treasury Minister Carli has renewed his efforts--against admittedly long odds--to enlist support for privatizing state-owned banks and other public-sector corporations. Carli believes the breakdown in supervision at BNL is all too typical of the quality of Italian public-sector banking. In his opinion, privatization would force Italian banks to narrow the current 6-percentage-point spread between interest paid to depositors and that charged to borrowers--a prerequisite if Italian banks are to do well after the EC dismantles capital controls next year.

The discovery of BNL's exposure in Iraq forced the bank to seek funds to boost its capital, which the Bank of Italy already considered too low. If Iraq defaulted, BNL technically would have been bankrupt because the amount of its loans to Iraq exceeded
the bank's capital. In that event, the Bank of Italy and the Treasury Ministry would have been compelled to bail out the bank. Rome was stymied in finding a Socialist-controlled institution to recapitalize the bank by itself, and the government in October finally cobbled together a $1.7 billion package from the Treasury, a state-owned insurance company, and the Social Security Fund, thus maintaining a Socialist majority on the BNL board of directors.

We believe the revelations of BNL's dealings with Iraq--along with other recent scandals--stand in counterpoint to growing Italian self-confidence on the international stage in recent years. After more than three decades of international diffidence, we believe Italian leaders have been pursuing a diplomatic profile more commensurate with their country's international economic role. Italians have felt particular pride because:

Italian troops in the Beirut peacekeeping forces had fulfilled their mission as defined by Rome.

The Italian decision to accept U.S. cruise missiles played a decisive role in swinging West Germany behind deployment.

Their country's GDP had surpassed that of the United Kingdom and possibly France.

In the opinion of almost all Italian press commentators, the BNL affair had a negative impact on Italy's credibility throughout the West. We believe, however, that the setback to Rome's international standing has been substantially less than that portrayed in the Italian press, and we expect the scandal will gradually fade from public view within Italy and will have little lasting impact on the country's perception of its international role.


We believe Iraq will work hard to establish new military procurement networks to replace those disclosed by the press and by the U.S. and Italian investigations as part of the fallout from the BNL affair. Baghdad highly values these networks to obtain technology that might otherwise be denied to it if the end user or purpose were revealed. Because of renewed Iraqi efforts and the likely existence of other networks that remain undetected, we do not believe that Iraq's covert procurement efforts will be set back seriously.

The drying up of this major financial source--at least for the next several years--will probably force Iraq to scale back ambitious civilian reconstruction and development plans. Baghdad probably formulated some economic plans under the assumption that BNL-Atlanta would continue to issue letters of credit on its behalf. Iraq will be unable, however, to replace BNL financing any time soon. Most commercial banks and foreign governments are likely to remain unwilling to grant or guarantee significant new credits to Baghdad until it repays more of its $45 billion non-Arab foreign debt--a low priority to Iraq. Furthermore, Iraq has over extended its barter commitments and will probably be reluctant to engage in many more such deals.

The BNL affair will probably have only a minimal impact on Italian-Iraqi relations. The scandal is unlikely to cause more than short-term political friction unless BNL fails to disburse the remaining letters of credit. Even then, Baghdad would probably employ economic--not political--means to punish Rome. Continued Iraqi threats to suspend payment to Italian firms if Rome fails to release the promised BNL credits will almost certainly be effective against the Italians, who have already agreed to release some of the undisbursed credits and have backed down in the past in the face of threats from other countries.

We have detected no sign of flagging Italian interest in Iraq, although we expect that Italian banks will scrutinize export financing and other credits for Baghdad more carefully. The Italians are maintaining existing levels of oil imports from Iraq while still trying to boost exports. Italian-Iraqi relations will continue to be strained, however, by the dispute over the delivery of Italian warships to Iraq, which is unlikely to be resolved any time soon because of Iraqi demands for additional financing for the ships and Iranian threats of retaliation against Italy if the ships are delivered.

Implications for the United States

The BNL scandal is likely to lead to a reduction of US-Iraqi commercial relations, particularly if CCC credit guarantees are decreased. Any loss of CCC credits probably would reduce Iraqi's food imports from the United States because Baghdad prefers to buy on credit. Iraq probably would turn to Australia and EC countries--which lost sales when the United States became Iraq's top Western agricultural supplier in 1983--as well as traditional suppliers Turkey and Brazil. Many of these suppliers are already trying to profit from the BNL scandal by boosting agricultural sales to Iraq at US expense. Furthermore, the banks's continued refusal to disburse remaining credits probably would prevent some US firms from implementing contracts with Iraq.

The strain in US-Iraqi political relations caused by the BNL scandal will probably be short-lived, particularly if Baghdad believes additional US credits will be forthcoming after the dust of the investigation settles. Iraq is eager to maintain good ties to the United States, an attitude intensified by improved relations between Iran and the USSR that make Baghdad uneasy. Iraq probably also believes that strained political relations would complicate its efforts to acquire US technology and credits in the future. We anticipate that Iraq will work hard to overcome the current frictions by offering commercial opportunities to the United States and lobbying US business and government officials.

Although the BNL affair embarrassed the Italian Government and banking sector, we do not believe it will not have a major impact on Italian relations with the United States. Rome appears satisfied to date with the cooperation of the US investigating agencies and appreciates the low-key manner in which Washington has reacted. BNL will probably close its Atlanta office and may suffer a loss of business in financing exports for US companies.




Finance and Urban Affairs,
Washington, DC, July 30, 1992.

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Chairman Henry B. Gonzalez of the House Banking, Finance and Urban Affairs Committee charged today that the intelligence community is being enlisted to help the Bush Administration deflect attention from failed policies involving Iraq.

Mr. Gonzalez said he had received two recent letters from the Central Intelligence Agency complaining about public disclosure of the intelligence community's knowledge of Iraq's ambitious military industrialization program. The letters were written to Mr. Gonzalez by Robert M. Gates, Director of Central Intelligence, and Admiral W. O. Studeman, Acting Director of Central Intelligence.

`These letters have all the appearance of warmed over versions of earlier complaints from Attorney General William P. Barr,' Mr. Gonzalez said. `Like the Attorney General, Mr. Gates is fully aware that my public statements and revelations have been carefully handled and have not in any manner breached the security of ongoing intelligence efforts.'

Mr. Gonzalez said he was `extremely disappointed that the Central Intelligence Agency was allowing itself to be used to build a smokescreen around the President's flawed policies. The CIA should be above involving itself in the political problems of the Administration. The American people deserve a full explanation and exposition of the pre-war policies and the CIA should not leave the impression it is willing to help cover up the facts.'

(Letter attached.)

Finance and Urban Affairs,
Washington, DC July 30, 1992.

Mr. Robert Gates,
Director, Central Intelligence Agency, Washington, DC.

Dear Mr. Gates: The Committee on Banking, Finance and Urban Affairs has been investigating the Atlanta branch of the Italian government-owned Banca Nazionale del Lavoro (BNL) and its unauthorized loans to the government of Iraq of more than $4 billion. The Committee has in its possession a copy of the following documents:

1. A seven page memorandum entitled `Iraq: No End in Sight to Debt Burden' dated April 12, 1990; and

2. A four page letter from Mr. Stanley M. Moskowitz, Director of Congressional Affairs, to me dated November 12, 1991.

The Committee believes that it is important that the American people be informed of the contents of these documents.

The Committee respectfully requests that the Agency furnish the Committee with declassified copies of these documents.

The Committee appreciates your cooperation in ensuring that the classification review is completed and furnished to the Committee by Thursday, August 6, 1992. If you have any questions, please contact Ms. Debra Carr or Mr. Dennis Kane of the Committee staff at 225-4247.


Henry B. Gonzalez,

The SPEAKER pro tempore (Mr. Moran). Under a previous order of the House, the gentleman from Indiana [Mr. Burton] is recognized for 60 minutes.

[Mr. BURTON of Indiana addressed the House. His remarks will appear hereafter in the Extensions of Remarks.]

The SPEAKER pro tempore. Under a previous order of the House, the gentleman from New York [Mr. Owens] is recognized for 60 minutes.

[Mr. OWENS of New York addressed the House. His remarks will appear hereafter in the Extensions of Remarks.]

The SPEAKER pro tempore. Under a previous order of the House, the gentleman from Georgia [Mr. Gingrich] is recognized for 60 minutes.

[Mr. GINGRICH addressed the House. His remarks will appear hereafter in the Extensions of Remarks.]

The SPEAKER pro tempore. Under a previous order of the House, the gentleman from Wisconsin [Mr. Obey] is recognized for 60 minutes.

[Mr. OBEY addressed the House. His remarks will appear hereafter in the Extensions of Remarks.]

The SPEAKER pro tempore. Under a previous order of the House, the gentleman from California [Mr. Dreier] is recognized for 60 minutes.

[Mr. DREIER of California addressed the House. His remarks will appear hereafter in the Extensions of Remarks.]