5. IRAQGATE AND THE SILENT DEATH OF THE WATERGATE
Sources: Covert Action Information Bulletin, 1500 Massachusetts Avenue
NW, Ste. 732 Washington, DC 20005, Date: Fall 1992, Title: "Bush
Administration Uses CIA to Stonewall Iraqgate Investigation," Author:
Jack Colhoun; War & Peace Digest, 32 Union Square, E. New York,
NY 10003, Date: August 1992, Title: "BNL-lraqgate Scandal,"
Author: Kevin Sanders; The Paper of Sonoma County (CA), 540 Mendocino
Avenue, Santa Rosa, CA 95401, Date: 10/22/92, Title: "Is Bush a
Felon?," Author: Stephen P. Pizzo; New York Times, 229 W. 43rd
Street, New York, NY 10036, Date: 10/20/92, Title: "The Patsy Prosecutor,"
Author: William Safire
SSU Censored Researcher: Blake Kehler
SYNOPSIS: While some of the disturbing facts behind Iraqgate have started
to appear in the press, the mainstream media all but ignored the story
for more than a year.
Representative Henry B. Gonzales (DTX), chair of the House Bank Committee,
launched his intensive investigation into the scandal in 1990. Since
February 1991, he has been regularly addressing a mostly empty House,
and a loyal C-Span audience, about the role the Bush administration
played in building up Iraq prior to the Gulf War. With the exception
of conservative columnist William Safire, his revelations were basically
ignored by the press.
But even without press attention, the scandal grew. Among Gonzales's
allegations are several involving the Bush administration, which, he
charges, did the following:
o Secretly sold nuclear, biological, chemical and missile-related
weapons materials to Iraq.
o Blocked investigations into the use of the materials.
o Suppressed warnings of the dangers of such sales.
o Deliberately falsified documents on such sales submitted to Congress.
o Interfered illegally to halt investigations into the criminal activities
of the Banca Nazionale del Lavoro (BNL), which was secretly diverting
American agricultural loans to buy weapons for Iraq.
In an attempt to derail Gonzales, the CIA was enlisted to investigate
him for revealing allegedly secret intelligence information. The CIA
As the year 1992 drew to a close, the media seemed unconcerned with
the Bush administration's covert, as well as overt, attempts to kill
the Iraggate investigation. These also involved the demise of the Watergate
Law, which had assured independent investigations of criminal acts by
top officials. The law, which provided for appointment of a special
prosecutor to investigate top level members of the administration, expired
on December 15, 1992.
In September 1992, Senate Republicans killed the legislation that would
have renewed the law. To their everlasting discredit, Senate Democrats
sat silently by in order to avoid an effort to have the law apply to
members of Congress as well as to executive branch officials.
The key figure in the failure to appoint a special prosecutor to the
scandal is Attorney General William P. Barr. CIA director Robert Gates
accused the Justice Department, headed by Barr, of instructing the CIA
to withhold documents critical to the investigation.
Columnist William Safire summarized the intrigue in his October 20
column: "In a last-ditch maneuver to block independent investigation
into Iraqgate, Barr has hired a so-called 'special council.' But the
man lending his good reputation to this subterfuge can be fired by the
very attorney general he is supposed to investigate. Barr's strategy
has been to stall past December 15.... No matter who is inaugurated
in January, no autonomous prosecutor could then be named."
COMMENTS: if there is a single issue future historians will
use to evaluate George Bush's presidency, it probably will be Iraqgate.
The secret sale of military materials to Iraq, the attempted cover-up
of the scandal, the demise of the Watergate Law on December 15,1992,
and the incredible efforts to intimidate a U.S. Congressman make Richard
Nixon's involvement in Watergate pale in comparison.
Yet, while Henry Gonzalez started investigating Iraqgate in 1990, it
was not until late in the election year of 1992 that the mainstream
media started to provide the coverage the issue deserved. The administration
was much quicker to recognize the potential impact of Gonzalez's efforts;
as Congressman Gonzalez tells Project Censored:
"...the Bush administration has tried to thwart this investigation
from the beginning. First they tried to ignore me, but I would not just
'go away.' They then tried to block my investigation by putting together
a concerted effort-which I have called 'The Rostow Gang'-covering all
of the departments that had anything to do with U.S. relations with
Iraq, to try to keep me from having access to administration documents.
However, the investigation continued to progress and the administration
and apologists for the president in Congress have resorted to spurious
charges of so-called 'national security.' The CIA has initiated a 'review'
of my use of government documents in my Special Orders. Such efforts
in Congress have been soundly defeated by a vote of the full House."
Authors of three of the key articles used in this nomination offer
fascinating new insights into the issue and their efforts to get more
media coverage of the scandal. We start with investigative journalist
Stephen Pizzo, who provides an overall look at the Iraqgate issue:
"Like most Americans I had never heard of the Banca Nazionale
del Lavaro (BNL). I first learned of the bank and the role it played
in the secret U.S. funding of Iraq when I reviewed testimony given during
Special Orders by Rep. Henry Gonzalez. I made some inquiries, and by
March 1992 had received about 100 still-classified documents from the
departments of State, Commerce, Agriculture and Justice.
"The documents told a fascinating story, but maybe more so to
me than to the handful of other journalists who also had them. During
research in 1987 for our book, lnside-Job: The Looting of America's
Savings and Loans, my co-authors and I had found tantalizing evidence
that some failed thrifts and banks had been bilked by covert operators
to fund off-the-shelf operations during the 1980s. Many of these federally
insured institutions later failed, leaving the taxpayers stuck with
the tab. But like most alleged covert operations, there remained little
solid proof of direct government involvement.
"For me the BNL documents represented the first solid evidence
that the Reagan/Bush administrations had consciously misused banks to
fund covert operations that would not have been favored by the American
public or Congress. On that level alone, the story was an important
one, particularly considering the mess left behind by failed thrifts
and the tenuous condition of America's banks. If our own government
shared responsibility for those losses along with the likes of Charles
Keating, that was a hell of a story.
"But on another level the story raised questions similar to, and
even more serious than Watergate. If the executive branch had engaged
in such secret funding, the constitutional and legal questions raised
by such a fact were enormous. First and most obvious were the legal
questions. Consciously defrauding a federally insured bank by lying
about the proposed use of the funds and/or borrowing money with no intention
of repaying it is bank fraud a federal felony. In the case of BNL, the
loan fraud was compounded by the perversion of two federal loan-guarantee
programs -- $5.5 billion in all.
"Second, circumventing Congress, which has the constitutional
duty to advise and consent, raises constitutional questions that make
Watergate look like a minor matter. Either the constitution specifies
clear separation of powers or it doesn't.
"When all the above are taken into consideration, it is remarkable
that this story did not create a media firestorm. Why didn't it?
"There were several factors conspiring to keep this story in check.
First of all, it involved banking. Journalists continue to shy away
from considering banking as a serious or interesting 'beat.' We found
this true in the mid-1980s as the S&L industry was being consumed
in a financial holocaust -- ignored by the press until too late. BNL
was a bank -- it made loans -- and agricultural loans at that.
"Second, the story emerged at the beginning of the presidential
election year. This hurt the story in two ways. First the election year
'soap opera' -- Gennifer Flowers, Bush's mistress, Clinton's draft records,
etc. -- was a major distraction. But also the story itself held enormous
political implications, which intimidated major papers. If the story
had been handled in a manner consistent with its importance, it would
have run on the front pages of major papers and would have supplied
enough grist for weeks of follow-up pieces. But that concerned some
editors. One of the few papers to run BNL stories during the election
was the Los Angeles Times. Reporter Douglas Frantz had received some
of the same documents I had and was running stories on BNL. But he complained
in October, on National Public Radio, that his editors often buried
his stories inside the paper because they feared that putting them on
the front page could raise the story to such a level of importance that
they could have an effect on the election, and they did not want to
be accused of doing that.
"Ironically, the Clinton/Gore campaign also censored efforts to
raise Iraqgate during the campaign. When I inter-viewed an official
with the Democratic Party opposition research team, he told me that
both Clinton and Gore had been fully briefed on the affair but that
the campaign managers had decided that 'the matter is just too complicated
to inject into a campaign. The public just won't get it and it will
muddy our message about the economy.' The only mention it got was through
Gore, who brushed it aside as 'a foreign policy blunder.'
"In fact, the documents show that the BNL operation was a conscious,
well thought-out and executed plan to secretly finance Iraq's military.
The facts imply that the choice of BNL as the bank that would be used
for the scheme can be traced to BNL's involvement with Kissinger Associates
(KA) and former KA employees Scowcroft and Eagleburger. The matter may
indeed have been a 'blunder' in that the administration did not foresee
that Saddam Hussein would use U.S. financed weapons to invade Kuwait.
But it was not accident as Gore's statement implied.
"The biggest problem with the reporting on BNL was that no one
took the time to simply tell the story from beginning to end, putting
its many players into their proper roles. Stories would break from time
to time on the affair, but they tended to deal with a specific event,
item or incident. But without an overall 'holistic' understanding of
the story, readers were without mooring and had no way of judging or
weighing the importance of the matter.
"I wrote my story ["Is Bush a Felon?"] the way I did
because, unlike the Clinton/Gore campaign handlers, l did not think
it was too complicated for the American public to understand. I believed
the public would come to the same conclusions I had if they simply had
the same opportunity to judge them in the light cast by the original
documents. After that they would be able to judge later developments
for themselves as the case unfolded.
"The 'lraggate' case poses fundamental constitutional, moral and
legal questions which, if left unexplored in the after-math of the election,
will also go unanswered. In a democracy, such unanswered questions represent
nothing less than a toolbox for tyrants.
"With the change of administrations there is the danger that the
press will now have a new reason to ignore the BNL affair. Looking back
at the prior two administrations' misdeeds will be difficult at a time
when a fresh administration is making sweeping changes. But if the press
fails to fully expose the BNL affair -- including the subsequent cover-up
by the White House and Department of Justice -- that will allow high-ranking
officials to escape responsibility for their actions. And, regardless
of who is in the White House, if democracy is not about individual responsibility
then it is about nothing at all."
Kevin Sanders investigated the "Chicago Connection" of the
BNL-Iraggate scandal for the War & Peace Digest, published by the
War & Peace Foundation in New York:
"Although the BNL-Iraqgate story is now gaining intense international
attention, the Chicago connection -- the pivotal nexus of the whole
scandal -- remains completely unreported in mainstream media at this
"A full disclosure of the role played by the BNL bank of Chicago
in secret international money transfers would link together holistically
and coherently many unexplained elements in the Iraqgate, Inslaw, October
Surprise and BCCI scandals, all of which seem to intersect in the Chicago
branch of BNL.
"The vast, interlocking conspiracies that would probably be uncovered
by an open investigation of the BNL bank would reveal hundreds of prominent
political figures in several countries to be involved in criminal activities,
ranging from treason to assassination. Many key figures of the Reagan-Bush
years would be revealed in a particularly harsh light, since Reagan-Bush
enterprises involving illegal arms deals including October Surprise
and Iraggate were financed through BNL bank transactions.
"Plato was once asked what he would ask to see if he were suddenly
to be thrust into a future culture he knew nothing about but wished
to understand. He replied, 'That which is forbidden.' When the Chicago
court refused to let Gonzalez see the documents on the Chicago branch
of BNL, it immediately sparked my interest. What was being hidden and
why? What would the forbidden knowledge reveal? These questions have
still not yet been asked either by mainstream media or by government
"As Plato said, 'Ask the right questions and the universe will
reveal all its secrets."'
For his article in the Covert Action Information Bulletin, Jack Colhoun
focused on the CIA connection and compared those implications with the
Watergate CIA connection:
"The subject of my nominated article the political implications
of President George Bush's use of the CIA to stonewall Representative
Henry Gonzalez's House Banking Committee investigation of the Iraqgate
scandal -- did not receive comment in the mass media last year.
"The public would greatly benefit from a wider public airing of
my subject, because Bush broke a critical taboo of American politics
when he involved the CIA in a domestic political controversy. The implications
of CIA intervention in American politics is chilling, especially since
Bush is the first former CIA director to serve as president.
"The CIA has not proved its case that Gonzalez's public investigation
of the Iraqgate scandal has jeopardized U.S. national security interests.
But it was revealed during the pre-trial hearing of Christopher Drougal,
the manager of the Banca Nazionale del Lavoro-Atlanta branch, that the
Agency withheld material evidence from U.S. District Judge Marvin Shoob,
who presided over the hearing. The CIA withheld documents that indicated
the CIA was aware that BNL-Atlanta was the financial cornerstone of
an Iraqi arms technology procurement network in the United States.
"The CIA's withholding of evidence in the Drougal hearing was
a great embarrassment for the Bush administration. The Justice Department
suffered a major setback in its case against Drougal. But the mass media
failed to draw the connection between the CIA's meddling in the BNL-Atlanta
case to the CIA's effort to taint the Gonzalez investigation. The mass
media have yet to explore the political implications of the CIA's intervention
in the Iraqgate scandal.
"And the media have also failed to point out the relevance of
the Watergate scandal to Iraqgate. A few days after it was disclosed
in August 1974 that President Richard Nixon pressed the CIA to obstruct
the FBI's investigation of the Watergate scandal, Nixon resigned. The
public release of the so-called 'smoking gun' tape of Nixon instructing
H.R. Haldeman, White House chief of staff, what to tell CIA Director
Richard Helms sparked a firestorm of controversy because the CIA is
barred by law from political operations in the United States."
Colhoun concludes that while George Bush and his administration were
the chief beneficiaries of the mass media's failure to cover the CIA
involvement in Iraqgate, the democratic process in the United States
is the big loser.
As these three investigative authors reveal, Iraqgate deserved far
more coverage than it received in 1992; further, the lack of coverage
was not solely a function of the media's failure. In this case, the
Clinton/Gore campaign also attempted to thwart further exposure of the
scandal by hoping it would simply go away.
Finally, even at this writing, the Bush administration cover-up of
the Iraqgate scandal is ongoing and deserves the harsh glare of the
media's spotlight. Iraqgate, one of our top ten Censored stories of
1992, should also be one of the top ten biggest news stories of 1993.
As Henry Gonzalez says, "The struggle for truth is never-ending,
but it is essential if we are to have a chance at any semblance of representative
or responsible government."
It is past time for the mainstream media to join authors like Pizzo,
Sanders and Colhoun in the struggle for the truth about the Iraqgate
issue and the cover-up.