Christopher Drogoul

Christopher P. Drogoul managed the Atlanta branch of the Italian state-owned Banca Nazionale del Lavoro, which between 1985 and 1989 extended more than four billion dollars in unreported loans and credits to Iraq, a portion of them backed by the Commodity Credit Corporation of the Department of Agriculture. The FBI and the Federal Reserve raided the branch on August 4, 1989. Drogoul was indicted on February 28, 1991, the day after President George H.W. Bush ordered the ceasefire in the Gulf War. He pleaded guilty, withdrew the plea, pleaded guilty again to three counts, and was sentenced in December 1993 to 37 months. The government's position throughout was that he acted without the knowledge of the bank's headquarters. The first judge assigned to the case concluded otherwise.¹²³

The Indictment

The indictment, No. 1:91-CR-078 in the Northern District of Georgia, charged Drogoul on 347 counts together with two branch officers, Therese Barden and Amedeo DeCarolis; the New York trading company Entrade International and its manager, Yavuz Tezeller; the Iraqi state Rafidain Bank; and four Iraqi officials, among them Safa al-Habobi, who ran Iraq's front companies in London. The government's list of unindicted co-conspirators, filed by Assistant U.S. Attorney Gale McKenzie on September 12, 1991, named an employee of the Central Bank of Iraq and Amir al-Saadi of the Ministry of Industry and Military Industrialization. Attorney General Richard Thornburgh said the defendants had been able "to silently pick the pockets of a major Italian bank of more than $4 billion in loans and credits, almost by the push of a button."¹⁴

Tezeller left for Turkey after the raid and did not return. A Justice Department letter of January 9, 1990, said he could "provide information regarding after sales services (a fancy word for bribes, kickbacks), unearned consulting fees, and other payments to Iraqis as well as kickbacks paid by United States and multinational companies to obtain Iraqi contracts." Entrade was an affiliate of the Turkish conglomerate Enka and had handled 52 guaranteed transactions for Iraq. An Agriculture Department inquiry found no evidence that the commodities in those transactions reached Iraq. Representative Henry Gonzalez, chairman of the House Banking Committee, said on the House floor that the State Department had kept the Atlanta investigators from traveling to Turkey to question Tezeller, and that the Justice Department had discouraged the indictment of the Central Bank of Iraq and of Wafai Dajani, a Jordanian businessman close to King Hussein, on grounds of foreign policy.⁵

Joseph D. Whitley became acting United States attorney in Atlanta on June 1, 1990, and recused himself from the case the same day because his former law firm had represented Matrix Churchill, the Iraqi-owned machine tool company that the branch had financed.⁶

Shoob

Drogoul pleaded guilty to 60 counts in June 1992. At the sentencing hearing before Judge Marvin Shoob he testified that the branch had been "a tool of the U.S. and Italian governments" and that "one has to consider it a foreign policy matter and not a banking matter." On September 14, 1992, Gonzalez announced that the CIA had told his committee it had good evidence that officials of the bank in Rome knew of the Atlanta lending, which contradicted what the agency's general counsel had told the prosecutors. On October 1 Shoob allowed Drogoul to withdraw the plea and removed himself from the case, stating his conclusion "that officials at BNL-Rome were aware of and approved Mr. Drogoul's activities."¹²⁷

Attorney General William Barr declined to seek an independent counsel and on October 16, 1992, appointed a retired federal judge, Frederick Lacey, as special counsel. Lacey reported after 54 days. "I find Judge Shoob's specific charges against the USAO to be inaccurate," he wrote. Of the national security adviser and the deputy secretary of state, both formerly of Kissinger Associates, he wrote: "It is clear that, while at Kissinger Associates, Scowcroft and Eagleburger came into contact with BNL management. I have seen nothing, however, to suggest that they knew of BNL-Atlanta's wrongful loans to Iraq or influenced the prosecution of this matter." The second part of his report was classified top secret. Gonzalez called it "the Lacey Job" and said: "At best Lacey's probe was a whitewash." In December 1992 prosecutors in Venice indicted 59 people, including executives of the bank, for financing arms sales to Iran.⁶⁷

The staff of the Senate Select Committee on Intelligence reported in February 1993 that the intelligence agencies and the Justice Department had coordinated poorly and that the CIA's reasoning for withholding its reports from the prosecutors had "no legal support." It did not find that information had been concealed to protect senior officials.⁸

The Italian Witnesses

Drogoul's lawyer, Bobby Lee Cook, named three officials in Rome, Giacomo Pedde, Teodoro Monaco, and Angelo Florio, as the men who had authorized the loans. The government sought to depose thirteen Italian bank officers in Rome. Seven, including Pedde, Florio, and Nerio Nesi, refused to testify in the United States. The defense told the court of appeals that "the testimony of these thirteen witnesses lies at the very core of the charges in the indictment, and its refutation the heart of the defense." The Eleventh Circuit ordered the depositions on September 2, 1993, six days before the trial date. Drogoul then pleaded guilty to one count of wire fraud and two of making false statements to the Federal Reserve. A Justice Department review filed with the court on August 23 had found that six employees in Atlanta were responsible and that neither Rome nor Washington knew. "The evidence never gets on the books," Gonzalez said, "and the public will never know for certain what the Bush administration did for Saddam Hussein before the war."¹²

Testimony on Kissinger Associates

Drogoul testified under oath to the House Banking Committee on November 9, 1993, with five other former employees of the bank. He said he learned at a business meeting in Italy in 1987 that Henry Kissinger sat on the bank's international advisory board. "As we became involved in the medium-term lending," he said, "it became clear to us that the people at Kissinger and Associates were somehow assisting clients of Iraq in further developing business." He added: "By the time we moved into the 1988 period or early 1989 period, it was fairly clear to me that Kissinger and Associates' people were involved in some way in trying to enhance and develop a relationship between Iraq and the United States. I really shouldn't go farther than that, because the rest is probably speculation."⁹