CONTINUING SAGA OF ATTEMPTS TO THWART BNL INVESTIGATION
Henry B. Gonzalez, (TX-20)
(House of Representatives - May 18, 1992)


[Page: H3366]

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, today I will talk about the White House's refusal to reply to the request of the Committee on Banking, Finance and Urban Affairs for BNL, that is, the Italian bank, information, and the continuing saga of the Justice Department's attempt to obstruct or thwart the BNL investigation.

First, I will talk about an amazing fact. Eleven Cabinet officers and Cabinet-level officials, including the Secretary of State, James Baker III, had to obtain a Presidential waiver of conflict-of-interest rules so they could participate in United States policymaking discussions, decisions and actions in response to the Iraqi invasion of Kuwait in August 1990.

Now, this is a strange alchemy, or let us say wave of a magic Presidential wand that takes 11 Cabinet-level Members and says, `Thou herefore are not in conflict of interest, though the facts may show otherwise, and that is the reason I am waving this wand and saying you are now licensed to do the duty which, to begin with, you have taken an oath to uphold.' And obviously if there was no need to issue this rather unprecedented waiver of conflict of interest to 11 Cabinet-level Members, then why issue it?

So I thought that was rather strange, if not one begging for some questions. I will show that the White House conspired to conceal the President's waiver of conflict-of-interest rules from the public domain for a year and a half after Iraq invaded Kuwait.

I am introducing into the Record an internal State Department memo dated August 8, 1990. The memo is addressed to Mr. Robert Kimmitt, the former Under Secretary for Political Affairs at the State Department. Mr. Kimmitt is currently the United States Ambassador to Germany, and he was one of the primary architects of the United States policy toward Iraq. This State Department memorandum indicates that President Bush had to waive conflict-of-interest rules for 11 Cabinet officers and Cabinet-level officials so that they could participate in the formulation of the United States response to the Iraqi invasion of Kuwait in August of 1990.

I think it should be proper for me to read for my colleagues who may be listening in the closed-circuit TV, as many are, and it is dated Washington, DC, August 8, 1990: `Mr. Kimmitt, to Legal Counsel,' and it says, `Bob: Amy Schwartz of Boyden's office,' and that is Boyden Gray, the Legal Counsel or Special Assistant, `informed me the President signed the waiver this afternoon for 11 Cabinet officers and Cabinet-level officials including Secretary

Baker that authorized them to participate in current United States policymaking discussions, decisions, and actions in response to the Iraqi invasion of Kuwait. Schwartz indicates that this will allow Secretary Baker to participate in all foreign policy questions related to the Kuwait crisis, even those directly involving oil production and prices.

In addition, OLC is expected to issue an opinion in the next day or so narrowing from previous interpretations the definition of particular matter, the touchstone for potential conflict analysis.

Here is the last paragraph, and I am quoting:

Because of the breadth and sensitivity of the waiver, the White House is currently unwilling to distribute copies to affected individuals. We are working to reverse this position so that we can provide a copy to the Secretary.

That is the end of the memo.

Now, it was a couple of months later after this crisis had begun to incrementally deepen and the President was hinting, and later confirming the first week in November, or, rather, November 8, that he was going to double the size of the expeditionary force to the Middle East, that Secretary Baker was reported in the press as saying that this conflict was all about jobs, not the invasion of Kuwait or anything, jobs.

So I immediately then under the purview of the jurisdiction of the Committee on Banking, Finance and Urban Affairs, called a hearing of the committee in order to study the economic impact of the developments thus far and the moneys invested thus far or diverted for the purposes announced around August 3 by the President in response to the invasion of Kuwait.

The hearing was called in order to ascertain the economic and financial impact of this involvement on not only our economy but, more specifically, our financial system and the safety and soundness of it. In response to our invitation, we had Chairman Greenspan of the Federal Reserve Board who was very responsive, and came, and answered to our summons and testified that the ongoing difficult recession which was quite apparent by then, and of which he could not testify for sure that it could be defined as such, because there was a chance that a corner could be turned before the end of the year, and that then it would turn out to be one more in a series of recession cycles.

[TIME: 1220]

But actually, he also expressed, the statistics showing, that there was a continuing problem and that there was a question about whether it would level out or not; but he categorically stated, and mind you, the press coverage of that was almost nil, he made a very startling statement. He said that because of this involvement and because of the diversion of America's assets and other investments that it had a direct adverse impact, he said 70 percent to the low economic period at that time, that is, the recession.

It is on the record. We have got it in our printed committee hearings.

So all the while, though, the United States is being told about the national interest imperiled because of the fear that an overweening power, such as Iraq in control of Middle East oil resources, would be and certainly should be considered as dangerous to the national interest; but the Secretary is saying, `Hey, it's very simple. The reason is jobs, economic.'

So what about all this other fol de rol?

In the meanwhile, why should he be specifically targeted for exemption from conflict of interest? Frankly, it was not until I saw that waiver that I realized there was that inherent power in the office of the Presidency. My gosh, if the President has that power, he could have the controlling power of waving a wand and converting fish into fowl, flora into fauna, and an otherwise deeply involved conflict of interest, no conflict of interest.

So I think it demands answers. The breadth of the President's waiver is staggering.

Congress and the public--after all, what are we here for? What are we supposed to be here for, representing who? Those in power in the executive branch, or the people who elected us?

It seems that constantly this is forgotten.

Sitting on the Banking Committee for 30 years and 6 months, I have been absolutely devastated by the continuing and the sustained belief prevalent among many that we are here for the benefit of and at the service and disposition of banking, S&L's, credit unions, or other special segments of our financial industry that this committee has jurisdiction over.

In 1986-87, I was telling these powerful industrial spokesmen for the then S&L industry, `Hey, look, you guys are coming in now and asking for this? I don't know of one instance where this committee and the Congress has not given you everything you have asked for, and look where you are.'

Then I added, `We are not here for your benefit or your aid. We are here for the people's interest.'

I mean, that is what I thought it was. That is what I have always read in my history books that the men who wrote the Constitution and set this very special apparatus and institution known as the U.S. House of Representatives is very individual. I would never dream that I would have

to go to court in order to defend the constitutional privileges and immunities of the U.S. House of Representatives.

I still say and I will continue to battle the cause that no matter what overwhelming vote on the part of my colleagues, 434, cannot waive my right to my constitutional powers and immunities and privileges invested in this House, because they do not belong to me. I am here transitorily, but they belong to the office; that is, to the people who elected me from the 20th District of Texas. That is the issue, and it pains me to see the unawareness of it.

We will still go before the court and insist that we be heard on the merits. We have not up to now on any level, district, appellate, or Supreme Court level, but the day will come that inevitably we will be heard on the merits of the issue; not the procedural, which is the way they have decided it up to now, the fact that an overwhelming majority of the House voted to dispense with the independence and coequality and separateness of this body. If that is not working, forget about our Constitution and our system.

So it goes here in the executive branch where it is an upstart, considered as an upstart if a Member of Congress dare say this.

But wait, by what right do you in the executive branch do this? What is the constitutional authority? There is no answer to that question; rather, just the brute force of power, political power.

Well, we have seen all through history that that may not suffice.

I will send a letter to the President. In fact, I am in the process of doing that today, asking for more specific information:

No. 1, who were the 11 Cabinet officials for whom the President waived conflict of interest rules, and are they still covered by that waiver?

No. 2, what were the conflicts of interest that precluded them from engaging in aspects of Iraqi policy in the first place?

No. 3, why was this information withheld from the public?

There are many additional questions that need to be answered regarding the conflict of interest waivers and how they related to the administration's policy prior to the Iraqi invasion of Kuwait.

Some of the more important questions that need to be addressed as well are:

No. 1, which policymakers had primary responsibility for the United States policy toward Iraq, United States policy toward the Middle East?

No. 2, when the United States Senate voted to confirm these Cabinet officials, did the Senators know that the candidate would have a limited or no role in setting Iraqi policy?

No. 3, did the Senators know that these officials had serious conflicts of interest related to the Middle East?

By asking these questions, I do not maintain

that the President did the wrong thing by granting the waivers, if such is inherently his power, as it seems to be and which is a surprise to me, as I said before; but I am startled by the breadth of the waivers.

There is a problem of perception when the President surrounds himself with Cabinet officials who have serious conflicts of interest regarding one of the most important areas of the U.S. foreign policy.

In addition, it is disturbing that the Secretary of State has to recuse himself from participating in important areas of United States policy toward Iraq and the Middle East.

Mr. Baker and the other Cabinet officials are supposed to be the President's best and brightest advisors, yet many apparently were not directly involved in setting important policies prior to the invasion of Kuwait.

My floor statements on the BNL, the Banca Nazionale del Lavoro, have helped to reveal many of the flaws in United States policy toward Iraq.

I would be interested to know how Mr. Baker's recusal affected our policy and whether or not the President received the best advice on how to deal with an increasingly belligerent Saddam Hussein.

I also think the President has an obligation to explain why he thought it was in the best interests of our Nation to conceal the waivers from the public.

The effort to conceal the waivers is captured in a passage from that State Department memo which I just read, that last paragraph, and I am going to repeat it:

[Page: H3367]

Because of the breadth and sensitivity of the waiver, the White House is currently unwilling to distribute copies to affected individuals. We--

Meaning the State Department--
are working to reverse this position so that we can provide a copy to the Secretary of State--

Or Secretary Baker is the word they use.

This passage makes it obvious that the White House did not want anyone to find out about the waivers. The White House did not even want the Secretary of State himself to receive a copy of his own waiver for fear someone would leak the information to the public.

In fact, the memo was kept secret until January of this year, almost a year-and-a-half after the Iraqi invasion of Kuwait.

Whatever the President's motivation for not informing the public in August of 1990 about the waivers, the BNL investigation have taught us that the administration will go to great lengths to conceal the details of the United States-Iraq policy. The conflict of interest waivers are another example in a long list of similar incidents.

The Secretary of State James Baker is not new to this question of conflict of interest. His ethical problems go back to his days as Secretary of the Treasury and they relate to the plan he was credited with creating to handle the lesser developed countries' debt crisis.

In 1985, the Treasury Department devised a plan to deal with the lesser developed countries and their debt crisis, which observers coined `the Baker plan.'

[TIME: 1230]

One of the main pillars of the Baker plan called on the debtor LDC's to remain current on their commercial bank loans. Well, of course. These are all what they call sovereign debts. That is countries owing our private bankers. This has been the name of the game.

I first reported that in August 1979 when I reported in this well of the House to my colleagues that in one year and a half the principal banks in the United States, the first eight or nine, but particularly the first six, top six at that time, have loaned to countries that I knew would not be able to pay and had increased that overhang in a year and a half's time from about 3 billion to over $47 billion. Unfortunately at that time the only one man that took heed of my words was the then Chairman of the Federal Reserve Board, Arthur Burns, who asked me to have breakfast with him, and then, when he told me there was not anything he could do, then I really feared for the country because I knew.

I had been chairman and was chairman of the International Finance Subcommittee, as it was called then, for 10 years, and I was intimately aware of the specific countries, particularly Latin America and their inability to pay the huge sums that these banks were lending out willy-nilly in a manner that a local bank board of directors would not think of doing. These are the biggest bankers at the time.

Well, the rest is history. It is still out there, and of course the U.S. taxpayer has tried for years to unload that, and they have in a way, in a manner of speaking, but that is another subject matter.

I just to point out that at that time the Secretary of the Treasury then, now the Secretary of State, revealed the so-called Baker plan. It was predicated on these debtor nations keeping their U.S. banks, commercial banks. However even those countries could not, and so they have not paid on the principal. They had to roll over, and in many cases they could not even pay the interest. So, they just rolled over interest payments. In return for doing that, they were eligible for financial aid from the IMF, the International Monetary Fund, and the multilateral development banks, like the Inter-American Development Bank and the like.

Well, the Baker plan may not have solved the LDC crisis. It did help U.S. commercial banks collect billions of dollars from cash-strapped debtor nations. Several years after the plan became the main thrust of U.S. policy on the debt crisis, it was revealed that Mr. Baker had a large block of stock in a bank that had over $4 billion in loans to the same LDC's that were most heavily affected by the Baker plan. These revelations occurred about the time Mr. Baker was nominated to be Secretary of State. The adverse publicity came from the fact that Mr. Baker had wanted to keep his bank stock even though some of the decisions he would make as

Secretary of State could affect bank loans to the LDC's. The bad publicity eventually forced Mr. Baker to agree to sell the bank stock, and the storm about that specific conflict of interest blew over. It was generally considered that Mr. Baker had rid himself of this serious conflict.

Today's revelation about Mr. Baker should raise new questions about whether or not he can do his job unencumbered about conflicts of interest. Questions about his effectiveness and suitability are legitimate, given that he is required to rescue himself from important foreign policy decisions. Clearly decisions about oil have everything to do with Middle East policy. It is clear that for more than two decades leaders have been shipping oil all over the Middle East. White House spokesman Marlin Fitzwater tried to explain away Mr. Baker's ethical problems in February of 1989, when he was quoted in a Reuters story as saying, and I quote, `These men have conflicts, financial arrangements, that require complex legal solutions to try to meet the perceptual standard of clean ethics,' end of quote.

Perceptual standard of clean ethics? Why someone either has them or they do not. One cannot be a little pregnant here.

What is interesting to note is that the President originally won high praise for his position on ethics in government. The Reuters story that I just referred to also states, and I quote, `Mr. Bush won praises for stressing ethics in this first week as President indicating that he meant to steer clear of the sleaze factor problem that had plagued the Reagan administration,' end of quote. The story quotes President Bush as saying, and again I quote, `Our actions must always be of the highest integrity. It's not really very complicated. It's a question of knowing right from wrong, avoiding conflicts of interest, bending over backwards to see there is not even a perception of conflict of interest,' end of quote.

That was the first week of the President in August, but look at what Fitzwater has just said. There is certainly a perception of conflict of interest when the President has to waive conflict of interest rules so that eleven Cabinet officers and Cabinet-level

officials can participate in making crucial foreign policy decisions.

This issue certainly deserves more study, but now I will turn to the committee's request for BNL related information from the White House. In the past I have expressed my concerns to President Bush about potential conflicts involving National Security Adviser General Brent Scowcroft and Deputy Secretary of State Lawrence Eagleburger. In a May 2, 1991, letter to the President I detailed my concerns about links between BNL, Mr. Kissinger; Henry Kissinger that is; Scowcroft and Mr. Eagleburger. In previous floor statements I revealed that BNL was a client of Kissinger Associates at the time that BNL's employees in Atlanta were granting billions in unreported loans to Iraq.

In addition, Mr. Kissinger was a paid member of the BNL international advisory board from 1985 until June 1991. Mr. Scowcroft worked on the BNL account while at Kissinger Associates, and he briefed the BNL board on three occasions.

Remember this board sits in Rome. This is an Italian Government-owned bank. This is still to filter through the minds of most of our officials.

There are more BNL-Kissinger Associates links. Several prominent Kissinger Associates clients were doing business with Iraq as a direct result of BNL loans. For example, a Volvo project in Iraq was a beneficiary of millions in BNL loans. The chairman of Volvo serves on Kissinger Associates board of directors.

I have also reported in past floor statements that Mr. Eagleburger had ties to BNL before becoming Deputy Secretary of State. While he was serving as president of Kissinger Associates, Mr. Eagleburger was on the board of LBS, a Yugoslavian bank that had a substantial and even what I would say was an incestuous relationship with the Italian bank.

[Page: H3368]

[TIME: 1240]

BNL was a main engine in the growth of this Yugoslavian LBS operation in the United States. The former head of BNL's U.S. operations, Renato Guadagnini, who took Mr. Eagleburger's slot on the LBS board in 1989, stated that there is no way Mr. Eagleburger could have been unaware of BNL's role in helping LBS get started in the United States.

In addition, BNL had over $6 million in loans to the New York office of a Yugoslavian firm called Impex, that was helping to bring the Yugo automobile into the United States. Mr. Eagleburger assisted in bringing the Yugo into the United States. It is clear that BNL was an important source of funding for several ventures with ties to Mr. Eagleburger, and that his knowledge of BNL would have gone beyond that of BNL being a client of Kissinger Associates.

The many interlocks between BNL, Kissinger Associates, Mr. Scowcroft, and Mr. Eagleburger raise the question of why neither recused himself from the administration's handling of the BNL scandal. I wonder if either were among the Cabinet-level officials that required conflict-of-interest waivers in order for them to participate in making decisions on Middle East policy. If the President cooperates with my request, we should know the facts in the near future.

During the investigation of BNL the Banking Committee has uncovered numerous documents that indicate that the President's staff and the staff of the National Security Council were involved in the National Advisory Council's decision to approve the $1 billion fiscal year 1990 Commodity Credit Corporation Program for Iraq, which has been so costly to the American taxpayers.

BNL was the largest participant in the CCC Program for Iraq. When the BNL offices were raided in Atlanta in August 1989, investigators uncovered massive fraud, placing the entire CCC Program for Iraq in jeopardy. So the White House and NSC, armed with National Security Directive 26, sprang into action in order to save the CCC Program for Iraq.

The committee has documents indicating that many White House and NSC staff were involved in the National Advisory Council's--or NAC--consideration of the fiscal year 1990 CCC Program between the time of the BNL raid in August 1989 and the NAC decision in November 1990. NSC and White House staff were also involved in the U.S. Department of Agriculture's administrative review of the BNL scandal which was released to the public in May 1990. The committee will have a hearing on these topics this May 21, 1992.

The current and former White House and National Security Council staff involved in the decision to win approval for the CCC Program for Iraq and/or the administrative review of the BNL scandal include the following:

Gen. Brent Scowcroft, national security adviser;

C. Boyden Gray, Counsel to the President;

John P. Schmitz, Deputy Counsel to the President;

Richard N. Haass, Senior Director, North East and South Asian Affairs, NSC;

Clayton Yeutter, special assistant to the President and former Secretary of Agriculture;

Stephen I. Danzansky, director, Office of Cabinet Affairs;

C. Nicholas Rostow, legal advisor, NSC;

Ms. Sandra Charles, Director, North East and South Asian Affairs, NSC;

Edith E. Holiday, former General Counsel, Treasury Department and the current Secretary of the Cabinet; and

Timothy E. Deal, Senior Director, International Economic Affairs, NSC.

I have written to the President asking that he make some of these staff persons available for interview, but I have received no reply. I have also asked that several of these staff persons be made available for testimony to the committee. Again, I have received no reply.

I have asked for White House and NSC documents related to the BNL scandal, the CCC program for Iraq, and the U.S. Department of Agriculture administrative review, but again I have received not a word from the President.

The Banking Committee has a legitimate right to know the role the White House and the National Security Council played in the handling of the BNL scandal. That is a bank that cost the taxpayers two billion-plus dollars. Should the committee not be concerned?

We have a right to know the decision to approve the CCC program for Iraq and the USDA administrative review of the BNL scandal.

Some of the questions the Banking Committee would like to have answered are these:

First, did White House staff place undue pressure on the USDA to approve the CCC program for Iraq?

Did the White House staff intervene to stop the BNL indictment in early 1990?

Did White House staff influence in any way the USDA administrative review of the BNL scandal?

This is just a small sample of the critical questions that need to be answered. To date, the committee has received absolutely no cooperation from the White House. In fact, just recently the NSC told the Treasury Department to withhold a document from the committee. That memo in question contains notes taken by a Treasury Department employee at a crucial interagency meeting in April, 1990, related to Iraq. Given no other choice, today the committee must subpoena the memo from the Treasury Department. And that is the majority of the committee, under the rules.

On May 15, 1992, I received a letter from Attorney General William P. Barr--that was last Friday, late in the afternoon--threatening to withhold classified documents related to the Banking Committee's investigation of BNL. I am disappointed at the Justice Department's tactics. But that is not the first time. The Justice Department has tried to obstruct the Banking Committee's investigation of BNL ad initio, as they say in law, from the beginning. In fact, the attorney general predecessor, Thornburgh, was incensed when I insisted on going on with the first hearings in 1990 and did everything he could to

try to keep me from having those hearings. That is all a matter of record. I put that in the record, so I need not repeat it. This is nothing new. What is new is the amazing chutzpah of this clone of Thornburgh's.

The Justice Department has tried to thwart the committee's investigation because the BNL scandal is closely linked to the embarrassing policy toward Iraq, and also because as more details of the scandal are released, it is apparent that the Justice Department's handling of the BNL investigation and subsequent prosecution is suspect at the very least.

Before I get into more detail about the Justice Department's handling of the BNL case, I would like to set the record straight about my floor statements and the spurious claims made by the attorney general.

First, the statements that I have made on the floor of the House of Representatives and the supporting documents I have placed in the Record all relate to past policies, not ongoing policies or operations, and have nothing to do with so-called national security. The statements and documents are meant to reveal important details about the past implications of the Italian bank's scandal and the past United States policy toward Iraq, and our extreme concern is that until we address the required legislative reforms among our regulatory agencies to oversee this huge amount of money still in the United States, unregulated, unrecorded, and with such vast implications, what I say in fact is that the BNL and the BCCI just happen to be symptoms and are just two cases that through happenstance happened to get some publicity, but I can assure my colleagues there is nobody in or out of the regulatory agency who can tell us--and I certainly will not--that there are not many more BNL's and BCCI's right now as I am talking to you.

[Page: H3369]

[TIME: 1250]

That is what we are seeking to do, to perfect our laws. We are the only country that does not have screening boards for the acquisition of assets in our country. Even Canada has. But that is for us to get there, and that is what we are trying to do. Our purpose is legislative, and these other things that will come up. We are referring them to the proper committees.

Second, none of the statements that I have made and none of the documents I have placed in the Congressional Record compromise, in any fashion whatsoever, the national security of the United States or Intelligence sources and methods. The Banking Committee has a good working relationship with the U.S. intelligence community and the Attorney General's claim that I have harmed the national interest by placing classified documents in the Congressional Record is ludicrous. I have challenged him to show otherwise.

As a matter of fact, for the first time in its history, the Banking Committee had the Director of the CIA testify before us just Friday before last as a witness, for the first time. The Director himself commented that this was the first time that the Director came to the Banking Committee. I certainly heard nothing at any time directly or indirectly to indicate that any susceptibility on my part to the revelation of really security information would be the case.

The Banking Committee's BNL investigation, including my floor statements and Banking Committee hearings, are clearly within the oversight and legislative responsibilities assigned to this committee by the House of Representatives and its rules.

I had hoped that the seriousness of the BNL issue and the far reaching implications of the failed policy toward Iraq would have generated bipartisan support to lay out the facts for the American people. The Attorney General's letter indicates otherwise.

The threat to withhold documents from the committee has all the earmarks of a classic effort to obstruct a proper and legitimate investigation by the legislative branch and to withhold facts needed by the Congress and the public to evaluate critical executive branch decisions. The Attorney General's letter suggests that the Bush administration has moved from foot dragging to outright obstruction of the committee's BNL investigation.

From the start, as I said earlier, the administration has been reluctant to cooperate with the committee. In fact, even former Attorney General Richard Thornburgh lobbied, as I said in the case referring to me, but he went further and even lobbied members of the committee to compel me to drop the BNL investigation, which, of course, I have not.

The Justice Department has played a major role in delaying and obstructing the committee's access to key BNL documents. On numerous occasions the Justice Department actually took physical control of documents that the committee has requested from other agencies. This delayed the committee's access to these documents for weeks and sometimes months as was the case in the committee's request for documents from the Federal Reserve and the Customs Service.

The Justice Department has redacted or withheld hundreds of third agency documents requested by the Banking Committee. Often times the redactions hide embarrassing information and have no bearing whatsoever on the prosecution of the BNL case.

For example, a confidential source provided the committee with a document that had been redacted at the request of the Justice Department. The Justice Department claimed that the document contained information, that if it were released, would be harmful to its efforts to prosecute the BNL case in Atlanta. In fact, the redactions concealed the fact that the Justice Department had planned to make a BNL indictment in early 1990. That information had nothing to do with the prosecution of the BNL case.

It concealed the embarrassing fact that the BNL indictments were delayed on orders, as the case in Miami, where now the then Federal district attorney says that William Barr, at that time the Deputy Attorney General, now the Attorney General, ordered him to cease and desist from pursuing or prosecuting BCCI. He comments and says that was very strange and unprecedented. Of course it was.

But this is a man that is now the Attorney General. His big failure, as revealed in the letter he delivered to me Friday, is to confuse me with a poorly low echelon district attorney that he can order and intimidate. He forgets that I am a Member of the Congress, and not a lower echelon official of the administration that he can willy-nilly intimidate or compel to submit to his orders. His letter is just the agency's latest attempt to thwart the committee's investigation.

Clearly the Justice Department would like the BNL investigation to go away so as to minimize attention to its handling of the BNL scandal and the former Attorney General's role in misleading the Congress.

In September 1990 former Attorney General Richard Thornburgh joined the effort to mislead the Congress and the American public about the administration's Iraq policy.

Thornburgh repeatedly tried to have the Banking Committee investigation curtailed under the false pretense that it would harm--what? The prosecution. As soon as I announced that the Banking Committee would hold hearings, the former Attorney General tried to dissuade me, as I said earlier, with the results that you know of today.

I am going to read through part of that letter he sent to me in that year. In the pertinent part of the September 26, 1990, Thornburgh letter, he states:

[Page: H3370]

The purpose of this letter is to express my profound disappointment in your decision to ignore the strong objections of this department in the Banca Nazionale del Lavoro matter. As you should be aware, this is a sensitive case with national security concerns.

Of course the BNL case did not involve national security concerns. To prove this point, I will introduce into the Record a December 18, 1990, State Department letter to the Justice Department which states:

With respect to the national security aspects of the [BNL] investigation, we have determined that the State Department does not have any concerns it wishes to raise at this juncture.

So the State Department, the Agency primarily responsible for national security matters, did not think that the BNL case involved national security concerns, yet Mr. Thornburgh, the top political appointee of the Justice Department, apparently failed to get the signal. Mr. Thornburgh's efforts fit perfectly into the pattern of administration efforts aimed at thwarting congressional investigations of Iran policy and the preinvasion pattern of obstructing justice insofar as the BNL case is concerned.

In fact, the Justice Department continues to refuse the Banking Committee access to thousands of BNL related documents claiming that they are subject to grand jury secrecy rules. Just as Mr. Thornburgh tried to falsely use national security to thwart the committee's investigation of BNL, I have to wonder if the Justice Department is not abusing the grand jury secrecy rules to hide embarrassing documents that reveal additional details of the Bush administration's close alliance with Saddam Hussein.

It is bad enough that the State and Agriculture Departments repeatedly misled the Congress and the American public about the United States policy toward Iraq. The Justice Department role in obstructing the Banking Committee's investigation of BNL is the ultimate hypocrisy. One would think that the Justice Department has a special obligation to protect the integrity of our Government. In the matter of the failed United States policy toward Iraq and in the BNL case, I think a more appropriate name for the Thornburgh-led Department was the `Obstruction of Justice' Department.

The prime motivation for the Justice Department's actions may be that they are hiding improprieties in the handling of the BNL case. I will now show that the BNL indictment, expected in early 1990, was delayed for over a year. If that is not obstruction, I would like to know what it is.

Recent stories in the Los Angeles Times and the New York Times indicate that the State Department intervened to stop the planned BNL indictment in early 1990. Previous press reports in 1990 had indicated that the State Department intervened to delay the indictment of BNL because of the further damage the indictment would have caused to rapidly deteriorating United States-Iraq relations.

The committee has over a dozen documents indicating that the U.S. Attorney's office in Atlanta--USA-Atlanta--was prepared to bring the BNL indictments in early 1990, yet the indictments did not occur until over a year later, on February 28, 1991, just hours after the President ordered a cease fire in the Persian Gulf war.

In other words the indictment was announced when it was more politically palatable to do so.

[TIME: 1300]

Following are quotes from documents that indicate the BNL indictment was expected in early 1990:

A January 9, 1990, letter from the USA-Atlanta to the Federal Reserve stated:

* * * anticipated indictments early next month * * *

A January 25, 1990, USDA inspector general memo on BNL states:

Our investigation and a related grand jury investigation (in Atlanta) is likely to result in criminal indictments in the near future.

A January 28, 1990, Treasury Department memo states:

The Assistant U.S. Attorney [AUSA] now expects to bring initial indictments in the case in February, 1990. USDA understands that USA-Atlanta has requested but not yet received permission from the Justice Department to ask Iraqi officials for information.

A February 1990 State Department cable to the Embassy in Baghdad states:

We would prefer to decide on the second tranche, ----

That is, the second half of that $1,500,000,000 of the CCC guarantees.
after the Atlanta indictments have been announced, which is expected to happen some time this month.

Additional Federal Reserve, State, Agriculture, and Treasury Department memos indicate that indictments were ready in early 1990. But by April 1990 it was apparent the BNL indictment was being delayed. A USDA memo dated April 2, 1990 states:

USDA has withheld approval of the second allocation for the past several weeks pending announcement of indictments by an Atlanta grand jury. It is expected that indictments will be announced in the near future. However, this has been an expectation for the past four weeks.

Many of the criminal investigators assigned to the BNL case in Atlanta felt that the Justice Department in Washington, DC stopped the BNL indictment. A recent New York Times article stated:

In a series of interviews, law enforcement officials and lawyers * * * said that in late 1989 and early 1990 the Government actually wrote an indictment, though it was not presented to a grand jury. These officials said the indictment passed along to Justice Department officials in Washington, and that they did not know what became of it.

Got lost here in the Potomac somewhere.

A Federal Reserve memorandum echoes those allegations. The April 5, 1990 memo states:

The resignation of the United States Attorney in Atlanta had led to a number of difficulties in that investigation. These difficulties have been compounded by what is perceived as interference from the Justice Department in Washington.

Let me repeat that: interference from the Justice Department in Washington. Another Federal Reserve memo states that the Justice Department in Washington was taking control of the BNL case because `Attorney General Thornburgh did not want to be criticized for another BCCI.' The Justice Department had been severely criticized for its maladroit handling of the BCCI settlment and apparently did not want the same to occur with BNL.

But remember we now have the Federal attorney in Miami clearly stating that William Barr, at that time the second man in Justice, ordering him to cease and desist and not to proceed with not only the investigation, but the prosecution of BCCI.

Could it have been that the BNL indictment was delayed to ensure cozy relations with Iraq? A Justice Department spokesperson denied that foreign policy considerations played a role in delaying the BNL indictment. Based on the committee's investigation of the CCC and Eximbank Programs, it is likely that foreign policy consideration played a key role in the delay of the BNL indictment.

The fact that the President had to issue conflict of interest waivers to permit 11 Cabinet officials to participate in setting policy after Iraq invaded Kuwait raised serious questions about the effectiveness of the Cabinet encumbered by a myriad of conflicts of interests, apparently.

The Justice Department has again attempted to obstruct the Banking Committee's investigation of BNL. This time they chose to threaten to withhold information from the Banking Committee.

I will not give into political pressures any more than I have in the past. I will continue to fight to report to my colleagues and to tell the whole Iraq and BNL stories, as I committed myself to doing the moment I was elected chairman of this committee and as I had done before in the various subcommittees that I chaired.

The Congress and the public have the right to know the truth about the failed United States policy toward Iraq and how the BNL scandal affected that policy.

I will tell my colleagues why it is necessary: because I cannot assure my colleagues that these same mistakes are not occurring in other areas, such as Iran and China, for one or two. That is just two where I fear we have a repetition of the same basic errors in judgment, policy judgment.

The Justice Department will not intimidate. We still have untrammelled one of the three basic constitutional powers inherent in a body like the U.S. House of Representatives, and that is the right to know, the right to investigate within the rules that our House has very carefully contained after having experiences that have sort of cast such aspersions on the procedures then extant and which I have, as chairman, followed rigorously at all times.

We have adhered strictly to the rules. We have not proceeded under rules X and XI, investigatory in this case, as yet. Up to now we have invited witnesses. They have been forthcoming, like the Director of the CIA. In fact, on the 21st, 3 days, we have received acceptance by Deputy Secretary Eagleburger to come before the committee, which I think is great because it will be the best chance we have. We are not swearing them in. We are not exercising and resorting to rule XI in which, when we have an investigatory effort under X and XI, we do swear in and provide all the manifold, multiple protections afforded witnesses appearing.

We respect the rights of witnesses as well as the rights of the Congress and the committee. So the record is there, and I do not have to offer any kind of apology or an explanation. I think that I would have to have a lot of nerve not to continue, and that is not an act of heroism or anything like that. It is just an act of doing the duty

that when I took the oath of office I assumed I would do and have attempted to the best of my ability to do. That duty, under oath, is to defend and protect the Constitution against all enemies, foreign and domestic and without any mental reservation and to well and faithfully serve.

I have attempted to do that by being here when the House is in session. In the 30 years and 7 months since my election to this body, my record of presence is 99.9 percent. In the last several Congresses, it has been 100 percent in all recorded voting instances. That is what I think is necessary.

I have rejected Presidential invitations of several Presidents in the past to accompany them because the House is in session, votes were expected, and as I said, that is my primary duty. I was elected to be a Member of a legislative body.

I am very proud of my legislative record. It is something that gives me satisfaction of an oath subscribed and adhered to. And that is all. I think that is the only real reward one should expect.

It is my hope that the White House will abandon its tired strategy of attempting to escape accountability by hiding behind the privileges of some of these offices. Those privileges were not created to allow the President or his staff to escape accountability for actions any more than in our case, in our respective jurisdictions, as limited by the Constitution. We do not have unrestrained and untrammeled jurisdiction, either, as well as the courts.

The committee's requests for White House information are legitimate requests. There does not appear to be anything stopping the President from complying with these requests unless there is something to hide.

Mr. Speaker, I include for the Record copies of correspondence to which I referred:

[Page: H3371]

Department of State,
Washington, DC, August 8, 1990.

Mr. Kimmitt,
Legal Counsel.

Bob: Amy Schwartz of Boyden's office informed me that the President signed a waiver this afternoon for eleven Cabinet officers and cabinet level officials, including Secretary Baker, that authorized them to participate in `current United States policymaking, discussions, decisions, and actions in response to the Iraqi invasion of Kuwait.' Schwartz indicates that this will allow the Secretary Baker to participate in all foreign policy questions related to the Kuwait crisis, even those directly involving oil production and prices. In addition, OLC is expected to issue an opinion in the next day or so narrowing from previous interpretations the definition of `particular matter', the touchstone for potential conflict analysis.

Because of the breadth and sensitivity of the waiver, the White House is currently unwilling to distribute copies to affected individuals. We are working to reverse this position so that we can provide a copy to the Secretary.

--

Washington, DC,
January 13, 1989.

Judge Abraham D. Sofaer,
Legal Adviser, Department of State, Washington, DC.

Dear Judge Sofaer: This is to advise you that, if I am nominated, confirmed and appointed as Secretary of State, I will either recuse myself from participation in, or seek a waiver under 18 U.S.C. 208(b) allowing my participation in, any particular matter involving a company or other entity (or any of its parents or subsidiaries) in which I, my spouse or minor child has a financial interest.

If I am nominated, confirmed and appointed, I will provide the Deputy Secretary, the Executive Secretary and other appropriate officials with a list of entities subject to my recusal commitment and instruct them in writing to handle all official matters concerning such entities. I will update this list each year at the time that I complete my annual Executive Personnel Financial Disclosure Report, and more frequently if changes in my financial holdings so warrant.

Sincerely,
James A. Baker III

--

--

The Secretary of State,
Washington, January 25, 1989.
Memorandum for: Under Secretary for Political Affairs, Under Secretary for Management, Legal Adviser, Assistant Secretary for Economic and Business Affairs, Executive Secretary.
From: Secretary Baker.
Subject: Recusal from participation.

This is to notify each of you that I am recusing myself, and will decline to participate in, any particular matter in which my former firm, Andrews & Kurth, is a formal party or in which it has a direct and specific financial interest, such as representing a party in such a particular matter. No such matter should be presented to me for decision, approval or disapproval, recommendation, advice, or other official action. All such matters should be directed to the Under Secretary for Political Affairs, or his delegate, who has full authority to act without referring the matter to me.

In addition, I will recuse myself from any particular matter in which I, my wife, or my dependent daughter has a financial interest. I have attached a list of companies and other entities in which one of us currently holds a financial interest. Again, all such matters should be directed to the Under Secretary for Political Affairs or his delegate.

Finally, I will recuse myself from participation, on a case by case basis, in any particular matter in which, in my judgment, it is desirable for me to do so in order to avoid the possible appearance of impropriety, despite the lack of any actual conflict of interest.

Once a Deputy Secretary has taken office, all matters on which I am recused shall thereafter be directed to the Deputy Secretary or his delegate.

I believe that this general policy, to which I am committed, will avoid not only the occurrence of any actual conflict of interest, but even the appearance of any conflict between my duties as an officer of the United States Government and my personal financial interests.

Attachment: as stated.

--

--

[Page: H3372]

Holdings of James A. Baker III, and His Immediate Family, January 25, 1989

CORPORATIONS, INCLUDING AFFILIATES AND SUBSIDIARIES

Amoco.

Chemical New York Corporation and National Loan Bank.

Commonwealth Edison.

Exxon Corporation.

Houston Industries, Inc.

MCorp.

Salomon, Inc.

Schlumberger, Ltd.

Texaco, Inc.

Texas American Bancshares, Inc.

Time, Inc.

United Technologies Corp.

Wainoco.

LIMITED PARTNERSHIPS, CLOSELY HELD CORPORATIONS, OTHER ENTITIES

Frio County Ranch.

Garrett Ranch, Inc.

Property Capital Trust SBI.

Residential Resources Mortgage Investments Corp.

Trinity Petroleum Trust.

Sublette County Ranch.

Wilson Industries.

Bonnie Sue (Texas and Louisiana Limited Partnership).

Lady Thelma (Texas and Louisiana Limited Partnership).

Alice Jean (Texas and Louisiana Limited Partnership).

Hollywood 1004-7, 3009-14, 3003-6, 3007-8, 1008-14 and 3015 (Texas and Louisiana Limited Partnerships).

Hollywood Chem. 107 and 108 (Texas and Louisiana Limited Partnership).

Hollywood LPG No. 2 (Texas and Louisiana Limited Partnership).

Lana Louise (Texas and Louisiana Limited Partnership).

Petro-Quest Associates 1980-1 (Pennsylvania Limited Partnership).

Hope Nos. 1, 2, 3 and 4 wells, Lewis County, West Virginia.

Claude Owens lease, Pecos County, Texas.

--

--

COMMITTEE ON BANKING,

Finance and Urban Affairs,
Washington, DC, May 15, 1992.

Hon. William P. Barr,
Attorney General, Department of Justice, Washington, DC.

Dear Attorney General Barr: I am surprised and disappointed by your letter of May 15, 1992, threatening to withhold documents related to the Bush Administration's policy toward Saddam Hussein which aided the military buildup of Iraq. I had hoped that the seriousness of this issue and the far reaching implications of the failed policy towards Iraq would have generated bi-partisan support to lay out the facts for the American people. Your letter indicates otherwise.

Let me restate the obvious facts:

1. The statements that I have made on the floor of the House of Representatives and the supporting documents I have placed in the Congressional Record all discuss past policies, not ongoing policies or operations;

2. None of the statements and none of the documents compromise, in any fashion whatsoever, the national security of intelligence sources and methods;

3. The Banking Committee's investigation, including my floor oversight and legislative responsibilities assigned to this Committee by the House of Representatives.

With all due respect, Mr. Attorney General, your threat to withhold documents from the Committee has all the earmarks of a classic effort to obstruct a proper and legitimate investigation by the Legislative branch and to withhold facts needed by the Congress and the public to evaluate critical Executive branch policy decisions. From the start, the Administration has been reluctant to cooperate with the Committee. In fact, even former Attorney General Thornburgh lobbied to have the Committee drop its BNL investigation. Now your letter suggests that the Bush Administration plans to move from foot dragging to outright obstruction.

Your letter makes a vague and unsubstantiated statement about `harm to the national security.' Such a claim requires specifics. I demand to know which documents and statements have harmed the national security. I also want specifics on your rationale for withholding future information from the Congress and the American people. You should not hide behind generalities about `national security.'

Rest assured that I am not discouraged and will not give up the fight to bring to light the Bush Administration's policy towards Iraq--a flawed and tragic policy that ignored applicable laws and ultimately led to the loss of countless human lives and serious economic consequences. Clearly, there is justification to review the Administration's policy toward Iraq.

I look forward to your reply.

Sincerely,

Henry B. Gonzalez,
Chairman.

--

--

OFFICE OF THE

Attorney General,
Washington, DC, May 15, 1992.

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

Dear Mr. Chairman: The Administration has been providing you significant quantities of classified information that you have requested. We would like to continue to respond positively to your requests. However, your recent disclosures of classified information on the floor of the House of Representatives and in the Congressional Record have raised serious concerns.

Public disclosure of classified information harms the national security. The departments and agencies are precluded by executive order from disseminating classified information `outside the executive branch except under conditions that ensure that the information will be given protection equivalent to that afforded within the executive branch.' (E.O. 12356, Section 4.1(c), 47 Fed. Reg. 14874, 14881 (1982).) Therefore, in light of your recent disclosures, the executive branch will not provide any more classified information to you until specific assurances are received from you that classified information provided to you and the Committee will receive the same security protection provided by the executive branch; that is, protection from unauthorized disclosure, with access provided only to persons with appropriate security clearances.

If you wish to receive further classified information on the basis of such assurances it will be provided expeditiously as in the past. With those assurances, we remain committed to providing your committee with the information it needs to perform its legislative responsibilities. Please let us know your wishes in this regard.

Sincerely,

William P. Barr,
Attorney General.

--

--

DEPARTMENT OF JUSTICE,

Federal Bureau of Investigation,
Washington, DC, October 5, 1990.

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

Dear Mr. Chairman: The purpose of this letter is to express my concern with the Banc˙AE9a Nazionale del Lavoro (BNL) matter. I have been informed that your Committee plans to hold an open meeting on Tuesday, October 9, 1990, on the BNL investigation with the intention of voting on issuing subpoenas for documents and individuals. I also understand that you intend to hold a hearing on these matters on October 16, 1990.

Mr. Chairman, you should be aware of the existence of an ongoing criminal investigation into these matters and the likely negative impact that the Committee's actions could have on this investigation. Among my concerns are the possibility of grand jury information being inadvertently disclosed in your proceedings or other statements or evidence being disclosed prior to the anticipated trial. I am similarly concerned that the Committee's actions may prevent both further cooperation by witnesses and in fact may pose a serious threat to witness security or jeopardize successful prosecution.

I regret that we did not have the opportunity to discuss these matters today. I hope that we can work together to prevent serious damage to a very sensitive and important case.

Sincerely,

William S. Sessions,
Director.

--

--

COMMITTEE ON BANKING,

Finance and Urban Affairs,
Washington, DC, September 28, 1990.

Hon. Richard L. Thornburgh,
Attorney General,
Washington, DC.

Dear Mr. Attorney General: The purpose of this letter is to respond to your letter of September 26, 1990, and to express my distress over your apparent lack of understanding of the investigative and legislative functions of the Congress.

On September 21, 1990, I agreed to allow my staff to meet with your staff to discuss the Justice Department's concerns related to the Banking Committee's investigation of the Atlanta Agency of Banca Nazionale Del Lavoro (BNL). During, and subsequent to this meeting, your staff was unable to comply with my request for specific justification for suspending this most important inquiry.

Specifically, the Justice Department failed to reveal how interviewing employees from the Federal Reserve Board, the Federal Reserve Bank of Atlanta, the Department of Banking and Finance of the State of Georgia, and current and former employees of BNL would, as your letter states, `significantly diminish the Justice Department's ability to successfully prosecute this matter.' In addition, the Justice Department failed to demonstrate how the Banking Committee's investigation would jeopardize the personal security of witnesses or inhibit their cooperating with the Justice Department's investigation of BNL.

As Chairman of the Banking Committee, I am concerned that the regulation and examination of the U.S. branches and agencies of foreign banks (see the International Banking Act 92 Stat. 607) is inadequate. These entities command over $500 billion in assets in the U.S., and a significant portion of their liabilities are guaranteed by the Federal Deposit Insurance Corporation (FDIC). The magnitude of the BNL fiasco (i.e., $2.8 billion in unauthorized loans to Iraq), while not directly posing a risk to the FDIC, certainly raises the question of the adequacy of state and federal regulation and oversight of these entities. Rest assured, in
order to ensure the U.S. branches and agencies of foreign banks do not pose an undue risk to the already beleaguered FDIC, the Banking Committee will continue to investigate the adequacy of the regulation and examination of these entities. The BNL case provides a clear case of a regulatory breakdown that needs to be understood and addressed.

With regard to the Banking Committee's legislative interest in BNL, the Federal Reserve has notified me that the BNL investigation uncovered a loophole in the criminal code that will probably allow former employees of BNL to escape Federal prosecution for fraud, theft, embezzlement, misapplication of funds, and bribery. You can be sure that I will continue to work to correct this over decade long Justice Department oversight. I have been given permission by the Rules Committee, and I intend to offer, a Floor amendment to the crime bill that will close this loophole in the criminal code.

I hope this letter has served to properly inform you as to the Banking Committee's legislative and investigative interests in BNL. I trust the Justice Department will provide its full cooperation.

Sincerely,

Henry B. Gonzalez,
Chairman.

--

OFFICE OF THE

Attorney General,
Washington, DC, September 26, 1990.

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

[Page: H3373]

Dear Mr. Chairman: The purpose of this letter is to express my profound disappointment in your decision to ignore the strong objections of this Department in the Banca Nazionale del Lavoro (BNL) matter. I am similarly distressed by your refusal last evening to discuss the matter with me.

Your intention to schedule a hearing for October 9th on the investigation of unauthorized loans to Iraq by BNL and the request to interview both the Assistant United States Attorney and the government witnesses in the case raises the prospect that culpable parties will elude prosecution. Your staff is fully aware of the existence of our ongoing criminal investigation and the likely impact that these actions will produce on our efforts.

As you should be aware, this is a sensitive case with national security concerns. The United States Attorney in Atlanta advises me that both witness security and the willingness of witnesses to continue to cooperate with the investigation and prosecutions will be jeopardized by your Congressional staff interviews and hearing.

Mr. Chairman, a decision to proceed with these interviews and the hearing at this time significantly diminishes the Department's ability to successfully prosecute this matter. Accordingly, we again request that your staff work with the Department to find alternatives that allow both the legislative and the law enforcement processes to function.

Sincerely,

Dick Thornburg,
Attorney General.

--

--

COMMITTEE ON BANKING,

Finance and Urban Affairs,
Washington, DC, October 1, 1991.

Gen. Brent Scowcroft, USAF, (Ret.),
Assistant to the President for National Security, Washington, DC.

Dear General Scowcroft: On November 5, 1990, the President signed into law the `Iraq Sanctions Act of 1990,' as part of Public law 101-513. The Iraq Sanctions Act contained a provision requiring the President to conduct a study and report on the sale, export, and third party transfer or development of nuclear, biological, chemical and ballistic missile technology to or with Iraq. I understand that a finished report is now available and I would like to obtain a copy of the classified and unclassified versions of the report.

This report will be helpful in completing the Committee's investigation of the over $4 billion in unauthorized loans to Iraq granted by the Atlanta agency of Banca Nazionale del Lavoro (BNL).

Thank you for your time and consideration of this request. I look forward to receiving the classified and unclassified versions of this report.

With best wishes.

Sincerely,

Henry B. Gonzalez,
Chairman.

--

The White House,
Washington, November 1, 1991.

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

Dear Mr. Chairman: Thank you for your letter of October 1, 1991, regarding the President's report to the Congress on the international export to Iraq of nuclear, biological, chemical, and ballistic missile technology, submitted last month to Congress under P.L. 101-513.

While the normal procedure would be for you to obtain these reports from the cognizant Committee chairs, as a courtesy we will transmit a copy of the report to facilitate your investigation. As most of the report is classified, please have your staff contact Nancy Menan of my staff to make the appropriate arrangements for the transmittal of the report.

Sincerely,
Brent Scowcroft.

--

--

COMMITTEE ON BANKING,

Finance and Urban Affairs,
Washington, DC, January 31, 1992.

Hon. George Bush,
The President of the United States,
Washington, DC.

Dear Mr. President: On November 5, 1990, you signed into law the `Iraq Sanctions Act of 1990' as part of Public Law 101-513. The Iraq Sanctions Act contained a provision requiring you to conduct a study and report on the sale, export, and third party transfer or development of nuclear, biological, chemical and ballistic missile technology to or with Iraq. Pursuant to that Act, you issued a report to Congress in the Fall of 1991 concluding that U.S. firms did not contribute directly to Iraq's conventional and nonconventional weapons capabilities. The report to Congress is clearly inaccurate. In fact, numerous U.S. companies provided critical support to Iraqi weapons programs, including missiles.

Over the past year, the Committee on Banking, Finance and Urban Affairs has been conducting an extensive investigation of the activities of the Atlanta branch of the Italian government-owned Banca Nazionale del Lavoro (BNL). The Atlanta branch of BNL loaned over $2 billion to an Iraqi military technology procurement network that was operating in the U.S. and Europe. The Committee has clear evidence showing that dozens of U.S. firms played a critical role in Iraqi weapons programs. The Committee has learned that responsible agencies have not thoroughly reviewed thousands of relevant documents because of inadequate resources.

For example, documents I am transmitting with this letter indicate that numerous BNL-financed U.S. firms were directly involved in the development of a ballistic missile known as the Condor II. The code name that the Iraqi government assigned to the Condor II missile program was `Project 395.' The Committee has evidence revealing that over a dozen U.S. firms were directly involved in Project 395. The equipment and technology supplied by U.S. firms involved in Project 395 were used to construct part of the infrastructure (e.g. buildings, utilities, fortifications, etc.) necessary for Iraq to mass produce the Condor II missile.

The Committee also has evidence indicating that U.S. firms were involved in several other Iraqi missile programs code named Project 144 and Project 1728. These programs both involved the production of a modified Scud missile. Several U.S. companies supplied materials for these projects These are the same Scud missiles used during the Gulf War to attack both American troops stationed in Saudi Arabia and civilians living in Israel.

The Iraqi organization responsible for Project 395 and the Scud modification projects is called the Technical Corps for Special Projects (TECO). The Commerce Department approved numerous export licenses for U.S. and foreign firms even though TECO was listed as the end-user. Moreover, these licenses were issued despite the fact that the Commerce and State Departments had ample knowledge of TECO and its activities at the time these licenses were approved. The Committee has grave concerns about the export licensing process and is investigating how the Commerce Department could have approved such licenses to Iraq.

Various agencies within the Administration unfortunately have hampered the Committee's investigation of BNL and its role in funding Iraqi weapons of mass destruction. On November 13, 1991, I wrote to the Secretary of State, the Honorable James Baker, asking him to provide the Committee with information on American companies involved in Iraqi weapons programs which was compiled by the United Nations (U.N.) and the International Atomic Energy Agency (IAEA) after the cease fire with Iraq. To date, the Secretary of State has refused to supply the Committee with this data. In fact, Secretary Baker has refused to ask these organizations for this information.

In addition, the Iraqi technology procurement network in the United States has not been fully identified by the Treasury Department. At least one U.S. company, Tigris Trading, Inc., located in Pittsburgh, Pennsylvania, is owned by an Iraqi national, Safa Al-Habobi, who has been indicted for his role in financing the Iraqi war machine with the use of BNL loans. It is common knowledge that Al-Habobi was a major figure in the Iraqi military technology procurement network.

The Committee also has evidence indicating that there may be at least a half dozen additional Iraqi-controlled companies that have not been properly identified. These companies may still be operating as part of the secret Iraqi procurement network. At a minimum, these companies either wittingly, or unwittingly, offered the Iraqi government an ownership interest in their business.

Mr. President, in light of the findings of the Banking Committee, and the ever growing threat of countries like Iraq who are seeking to covertly develop weapons of mass destruction, I trust that you will do everything within your power to learn the full truth about the U.S. role in helping Iraq develop conventional and nonconventional weapons capability. The American people have a right to know the truth.

I also respectfully request that you instruct the appropriate agencies to be forthcoming in assisting the Committee with its investigation.

I feel certain that you will want to submit a new report to Congress that reflects the true role played by U.S. companies and Federal agencies in permitting the transfer of technology and know-how to Saddam Hussein's war machine.

Thank you for your time and consideration. I look forward to working with you to curb the international proliferation of technology and know-how necessary to build weapons of mass destruction.

With best wishes.

Sincerely,

Henry B. Gonzalez,
Chairman.

--

Department of State,
Washington, DC, March 20, 1992.

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

[Page: H3374]

Dear Mr. Chairman: This letter is in response to your letter to the President of January 31, 1992 outlining the Banking Committee's investigation of the activities of the Atlanta branch of Banco Nazionale del Lavoro with respect to Iraq.

The Department of State has been very concerned that goods and services of Western companies may have been used in Iraqi production of weapons of mass destruction (WMD). Following an interim reply on December 11, 1991 to your letter of November 13, 1991, the State Department notified you on February 5 that it had requested from the UN Special Commission on Iraq (UNSCOM) and the International Atomic Energy Agency (IAEA) the lists of U.S. company names they compiled from their inspection activities in Iraq.

On February 26, 1992, the Department of State transmitted to you a confidential preliminary list of U.S. company names released by UNSCOM. We assured you then that as more comprehensive lists are received they would be forwarded to the Committee. As we informed you earlier, the IAEA has no list of U.S. company names beyond the one name they released (along with 12 foreign company names) in December.

I want to emphasize that a company's inclusion on the list provided by UNSCOM does not imply that it conducted illegal trade in support of Iraq. Such judgments can only be reached following thorough investigations conducted by appropriate agencies.

The State Department has also shared the UNSCOM list of names with the Departments of Justice and Commerce and the U.S. Customs Service, who may conduct such investigations as they deem appropriate into the possibilities of U.S. companies conducting illegal trade in support of Iraq. The U.S. government would, of course, seek, if warranted, to prosecute any such companies or individuals.

Sincerely,
JANET G. MULLINS,

Assistant Secretary, Legislative Affairs.

--

--

COMMITTEE ON BANKING,

Finance and Urban Affairs,
Washington, DC, April 16, 1992.

Stephen I. Danzansky,
Chief of Staff/Counsellor to the Secretary, Department of Education, Washington, DC.

Dear Mr. Danzansky: The Committee on Banking, Finance and Urban Affairs will hold a hearing on the National Advisory Council on International Monetary and Financial Policy (NAC) and its role in approving the $1 billion FY 1990 U.S. Department of Agriculture (USDA) Commodity Credit Corporation (CCC) program for Iraq.

As the former Director, Office of Cabinet Affairs, and as a former Deputy Assistant to the President, the Committee respectfully requests that you testify at this hearing on May 21, 1992, at 9:30 a.m. in Room 2128, Rayburn House Office Building.

The Committee would like you to address the following questions in your written testimony:

1. Please explain why the White House was involved in the NAC's consideration of the $1 billion FY 1990 CCC program for Iraq.

2. Pursuant to what authority did the White House become involved in the decision to grant Iraq $1 billion in CCC credits for FY 1990?

3. Please explain the White House's role in the USDA's internal consideration of the FY 1990 CCC program for Iraq.

4. How did foreign policy concerns affect the White House's position concerning the FY 1990 CCC program for Iraq?

5. Please explain how Iraq's creditworthiness and human rights record affected the White House's position concerning the FY 1990 CCC program for Iraq.

6. What influence did the BNL scandal have on the White House's position concerning the FY 1990 $1 billion CCC program for Iraq?

Please feel free to submit any further comments that you may have on the above topics. Banking Committee rules require that your written testimony be made available to Members of the Committee twenty-four hours in advance of a hearing. Accordingly, please deliver 200 copies of your written testimony to Room 2129 Rayburn House Office Building by 9:30 a.m., May 20, 1992.

Thank you for your time and consideration of this request. The Committee looks forward to your testimony.

With best wishes.

Sincerely,

Henry B. Gonzalez,
Chairman.

--

--

COMMITTEE ON BANKING,

Finance and Urban Affairs,
Washington, DC, April 29, 1992.

Gen. Brent Scowcroft, USAF (Ret.),
Assistant to the President for National Security Affairs, National Security Council, Washington, DC.

Dear General Scowcroft: The Committee on Banking, Finance and Urban Affairs is conducting an investigation of the Atlanta branch of Banca Nazionale del Lavoro (BNL) and its role in funding Iraq's acquisition of weapons of mass destruction. The Committee respectfully asks for your assistance with this investigation.

Specifically, the Committee is investigating BNL's role in funding the Iraq-related activities of Mr. Carlos Cardoen and Mr. Gerald Bull and their associated companies. Accordingly, please provide the Committee with all information in the possession of the National Security Council concerning Mr. Cardoen, Mr. Bull and their associated companies.

Please have your staff contact Mr. Dennis Kane or Mr. Abiud Amaro, of my staff, to discuss this request. They can be reached during business hours at (202) 225-4247.

Thank you for your time and consideration. The Committee looks forward to your cooperation.

With best wishes.

Sincerely,

Henry B. Gonzalez,
Chairman.

--

--

COMMITTEE ON BANKING,

Finance and Urban Affairs,
Washington, DC, April 29, 1992.

Hon. George Bush,
President of the United States,
Washington, DC.

Dear Mr. President: The Committee on Banking, Finance and Urban Affairs is conducting an investigation of over $4 billion in unauthorized loans to Iraq granted by the Atlanta office of the Banca Nazionale del Lavoro (BNL). The Committee respectfully asks for your assistance with this investigation.

During its BNL investigation, the Committee has obtained documents indicating that various White House and National Security Counsel staff including National Security Advisor, General Brent Scowcroft; Mr. C. Boyden Gray, Counsel to the President; Mr. John P. Schmitz, Deputy Counsel to the President; Mr. Richard N. Haass, Senior Director, North East and South Asian Affairs, NSC; Mr. Clayton Yeutter, Special Assistant to the President; Mr. Stephen I. Danzansky, Director, Office of Cabinet Affairs; Mr. C. Nicholas Rostow, Legal Advisor, NSC; Ms. Sandra Charles, Director, North East and South Asian Affairs, NSC; Ms. Edith E. Holiday, Secretary of the Cabinet; and Mr. Timothy E. Deal, Senior Director, International Economic Affairs were involved in the decision to grant $1 billion in Commodity Credit Corporation (CCC) credits to Iraq for FY 1990 and/or the handling of the U.S. Department of Agriculture's (USDA's) administrative review of the CCC program and BNL loans to Iraq.

The Committee would like to better understand the role the White House and NSC played in the USDA administrative review of the BNL scandal and the decision to approve CCC credits for Iraq.

1. All documents in the possession of the White House and NSC, including memorandums, letters, cable traffic, telexes, facsimiles, computer print-outs, executive agency documents, classified documents, etc., related to the USDA's administrative review of BNL loans to Iraq;

2. All documents in the possession of the White House and NSC, including memorandums, letters, cable traffic, telexes, facsimiles, executive agency documents, computer print-outs, classified documents, etc., related to the $1 billion FY 1990 CCC program for Iraq;

3. All documents in the possession of the White House and NSC, including memorandums, letters, cable traffic, telexes, facsimiles, executive agency documents, computer print-outs, classified documents, etc., related to BNL.

In addition, the Banking Committee would appreciate your assistance in making certain of the above named individuals, currently with the White House and NSC staffs, available for interview by Committee investigators.

Thank you for your time and consideration of this request. The Committee looks forward to your cooperation.

With best wishes.

Sincerely,

Henry B. Gonzalez,
Chairman.

--

--

Washington, DC, April 30, 1992.

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

[Page: H3375]

Dear Mr. Chairman: This will acknowledge receipt of your letter dated April 16, 1992, requesting that I testify before the Committee on May 21, 1992, concerning the National Advisory Council on International Monetary and Financial Policy and its role in approving a FY 1990 USDA Commodity Credit Corporation program for Iraq.

Despite my somewhat limited knowledge of and involvement in this matter, I am obliged to consult with White House officials concerning my appearance before your committee because the events to which your letter referred occurred while I was serving as a member of the White House staff as a commissioned officer and Deputy Assistant to the President.

Immediately upon receipt thereof, I forwarded a copy of your letter-request to the White House, and I expect that the appropriate office will soon be in touch with you or your staff.

Respectfully,
Stephen I. Danzansky.

--

--

COMMITTEE ON BANKING,

Finance and Urban Affairs,
Washington, DC, May 1, 1992.

Mr. Richard N. Haass,
Senior Director for Near East and South Asian Affairs, National Security Council, Washington, DC.

Dear Mr. Haass: The Committee on Banking, Finance and Urban Affairs will hold a hearing on the National Advisory Council on International Monetary and Financial Policy (NAC) and its role in approving the FY 1990 $1 billion U.S. Department of Agriculture (USDA) Commodity Credit Corporation (CCC) program for Iraq.

The Committee has documents showing that the Near East and South Asian Affairs section of the National Security Council (NSC) was involved in the decision to approve the FY 1990 $1 billion CCC program for Iraq as well as the Department of Agriculture's administrative review of the BNL scandal. The Committee respectfully requests that you notify regarding these topics on May 21, 1992, at 9:30 a.m. in Room 2128, Rayburn House Office Building.

The Committee would like you to address the following questions in your written testimony:

1. Under what authority did the NSC staff become involved in the decision to grant CCC credits to Iraq?

2. Under what authority did the NSC staff become involved in the decision to grant CCC credits to Iraq?

3. Please explain the NSC's rationale for supporting a $1 billion FY 1990 CCC program for Iraq.

4. What role did National Security Directive 26 (NSD-26) play in the NSC's decision to support the FY 1990 CCC program for Iraq?

5. How did creditworthiness concerns affect the NSC's decision to support the FY 1990 CCC program for Iraq?

6. How did Iraq's human rights record affect the NSC's decision to support the FY 1990 CCC program for Iraq?

7. What influence did the Banca Nazionale del Lavoro (BNL) scandal have on the NSC's position related to the FY 1990 CCC program for Iraq?

8. Please explain the NSC's involvement in the USDA administrative review of the BNL scandal.

Please feel free to add any additional comments that you may have on the above topics.

Banking Committee rules require your written testimony to be made available to Members of the Committee twenty-four hours in advance of a hearing. Accordingly, please deliver 200 copies of your written testimony to Room 2129 Rayburn House Office Building by 9:30 a.m., May 20, 1992.

Thank you for your time and consideration of this request. The Committee looks forward to your testimony.

With best wishes.

Sincerely,

Henry B. Gonzalez,
Chairman.

--

--

COMMITTEE ON BANKING,

Finance and Urban Affairs,
Washington, DC, May 4, 1992.

Hon. C. Nicholas Rostow,
Special Assistant to the President, National Security Affairs, National Security Council, Washington, DC.

Dear Mr. Rostow: The Committee on Banking, Finance and Urban Affairs will hold a hearing on the need for and function of the lawyers group established by the White House related to the congressional investigations of pre-invasion Iraq policy. As a member of that group (see attached memo), you are invited to testify on May 29, 1992, at 9:30 a.m. in Room 2128, Rayburn House Office Building.

Please address the following questions in your testimony.

1. Why did the NSC join this group? Who at the NSC authorized such participation?

2. Please provide a list of all meetings held by the lawyers group referred to in the attached April 8, 1991 National Security Council (NSC) memo that you or any NSC representative attended. Please include the topic on each meeting and those persons attending each meeting. In addition, please provide the Committee with all notes, memorandums, meeting minutes, letters, etc., originated as a result of each meeting.

3. Has the NSC ever received any communication from the White House, the State Department, or any other department asking the NSC to withhold information form Congressional Committees investigating the Administration's Iraq policy? If so, please explain and provide documents, if available.

4. Did the State Department or White House ever review and/or clear information that was submitted by the NSC to Congressional Committees in response to information requests concerning Iraq or BNL? Please explain.

Banking Committee rules require your written testimony to be made available to Members of the Committee forty-eight hours in advance of a hearing. Accordingly, please deliver 200 copies of your written testimony to Room 2129 Rayburn House Office Building by 9:30 a.m., May 27, 1992.

Thank you for your time and consideration of this request. The Committee looks forward to your testimony.

With best wishes,

Sincerely,

Henry B. Gonzalez,
Chairman.

--

--

COMMITTEE ON BANKING,

Finance and Urban Affairs,
Washington, DC, May 4, 1992.

Hon. C. Boyden Gray,
Counsel to the President, Executive Office of the President, Washington, DC.

Dear Mr. Gray: The Committee on Banking, Finance and Urban Affairs will hold a hearing on the need for and function of the lawyers group established by the White House related to the congressional investigations of pre-invasion Iraq policy. As a member of that group (see attached memo), you are invited to testify on May 29, 1992, at 9:30 a.m. in Room 2128, Rayburn House Office Building.

Please address the following questions in your testimony:

1. Why did the Executive Office of the President join this group? Who at the Executive Office of the President authorized such participation?

2. Please provide a list of all meetings held by the lawyers group referred to in the attached April 8, 1991 National Security Council (NSC) memo that you or any Executive Office of the President representative attended. Please include the topic of each meeting and those persons attending each meeting. In addition, please provide the Committee with all notes, memorandums, meeting minutes, letters, etc., originated as a result of each meeting.

3. Has the Executive Office of the President ever received any communication from the White House, the State Department, the NSC or any other department asking the Executive Office of the President to withhold information from Congressional Committees investigating the Administration's Iraq policy? If so, please explain and provide documents, if available.

4. Did the State Department, White House or NSC ever review and/or clear information that was submitted by the Executive Office of the President to Congressional Committees in response to information requests concerning Iraq or BNL? Please explain.

Banking Committee rules require your written testimony to be made available to Members of the Committee forty-eight hours in advance of a hearing. Accordingly, please deliver 200 copies of your written testimony to Room 2129 Rayburn House Office Building by 9:30 a.m., May 27, 1992.

Thank you for your time and consideration of this request. The Committee looks forward to your testimony.

With best wishes.

Sincerely,

Henry B. Gonzalez,
Chairman.

--

--

The White House,
Washington, DC, May 4, 1992.

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

Dear Mr. Chairman: I am writing in connection with your recent letter to Stephen Danzansky, Chief of Staff to the Secretary of Education, requesting that he testify before your committee on May 21, 1992.

In your letter, you request that Mr. Danzansky testify about matters occurring during his tenure as Deputy Assistant to the President and Director of the Office of Cabinet Affairs. Due to longstanding tradition, and in accordance with the doctrine of separation of powers, members of the President's personal staff, who participate in the deliberative process through which Executive policy is developed, traditionally have not testified before Congress.

Thank you for your understanding in this matter.

With best regards,

Sincerely,
NICHOLAS E. CALIO,

Assistant to the President
for Legislative Affairs.

COMMITTEE ON BANKING,

Finance and Urban Affairs,
Washington, DC, May 15, 1992.

Mr. Stephen I. Danzansky,
Chief of Staff/Counselor to the Secretary, Department of Education, Washington, DC.

[Page: H3376]

Dear Mr. Danzansky: I am in receipt of your letter of April 30, 1992 and the White House letter of May 4, 1992 related to the Banking Committee's request that you testify at a hearing on May 21, 1992. I am writing to inform you that the Banking Committee expects you to appear at the May 21 hearing.

The purpose of the May 21, 1992 hearing is to determine the role that various persons in the executive branch played in the decision to approve the $1 billion FY 1990 Commodity Credit Corporation (CCC) program for Iraq. The Banking Committee has obtained numerous documents indicating that you were involved in the Department of Agriculture's (USDA) decision to approve the $1 billion FY 1990 CCC program for Iraq. Now that Iraq has defaulted on its CCC debts, the decision to approve the FY 1990 CCC program for Iraq will cost U.S. taxpayers approximately $500 million.

The fact that the President's personal staff was directly involved in making program decisions at an executive branch agency raises a myriad of policy questions. For example, was pressure inappropriately applied on the USDA by you or others acting in the name of the President in order to win approval for the CCC program for Iraq? These and other questions will be addressed at the May 21, 1992 hearing.

The May 4, 1992 White House letter states that longstanding tradition and the doctrine of separation of powers have traditionally precluded persons such as yourself, a former Deputy Assistant to the President and Director of the Office of Cabinet Affairs, from testifying before the Congress. These attempts to block our inquiry by raising a form of executive privilege does not absolve you from your responsibility to testify before the Banking Committee.

There is ample precedent of Congressional rejection of a claim of executive privilege resulting in the testimony of a White House aide before Congress. In April of 1972, Peter M. Flanigan, a Presidential assistant, testified before the Senate Judiciary Committee related to the ITT antitrust scandal. His appearance was required by the Committee in spite of claims of executive privilege raised on Mr. Flanigan's behalf by Presidential counsel, John W. Dean III. More recently, Robert McFarlane testified before the House Intelligence Committee in 1985 regarding the Administration's violations of the Boland amendment. Mr. McFarlane's claim of executive privilege also was rejected by the Committee.

Clearly the White House attempt to block your appearance before the Banking Committee is an effort to conceal from the American public the Administration's faulty policy towards Iraq. Spurious claims of executive privilege should not deny the American people a public examination of that failed and tragic policy.

Accordingly, the Banking Committee insists that you appear at the May 21, 1992 hearing on the USDA's decision to approve the $1 billion FY 1990 CCC program for Iraq. Your input is essential in order to understand the U.S. policy towards Iraq and the reasons behind the Administration's decision to approve the FY 1990 CCC program for Iraq.

Sincerely,

Henry B. Gonzalez,
Chairman.

[TIME: 1310]

The SPEAKER pro tempore. 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.]

END