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Such aid was not supposed to conflict with U.S. nuclear nonproliferation policies, but that did not prevent U.S. firms from shipping "dual-use" equipment (exports that have both civilian and military applications) to Baghdad. Between 1985 and the invasion of Kuwait five years later, the U.S. government approved 771 licenses for dual-use items destined for Iraq, ranging from heavy-duty trucks to radar and communications equipment. Iraq was denied obvious weapon components but could obtain items like computers. And when Henry M. Rowan, chairman of Inductotherm Industries Inc., warned Washington that an Iraqi order to his company might have nuclear military applications, he was told not to worry and to go ahead with the deal. "Prior to Aug. 2, 1990," says a senior Administration official with some hyperbole, "Iraq was treated just like the United Kingdom or any other country."
Aug. 2, 1990, of course, was the day on which Iraq invaded Kuwait, the day Saddam became, in Bush's words, "another Hitler," the day the U.S. began moving inexorably toward Desert Storm. It was also the day on which the previous decade's history of U.S.-Iraq relations began to be seen by some in the administration as a potential liability. Indeed, the policy had begun to unravel even before that date. In late July 1989, two employees in B.N.L.'s Atlanta office contacted the U.S. Attorney's office in Atlanta. Mela Maggi and Jean Ivey had an interesting tale to tell: they said B.N.L.'s branch manager, Christopher Drogoul, had made, according to their estimates, more than $1 billion worth of unauthorized loans to Iraq.
B.N.L., founded in 1913, was once the seventh largest bank in the world, with 54% of its stock currently owned by the Italian government. Its stately headquarters building at No. 119 Via Veneto stands directly opposite the U.S. embassy in Rome. A billion-dollar scandal at a bank that large (the actual amount turned out to be at least four times greater) could have major international repercussions.
FBI agents and U.S. bank examiners raided B.N.L.-Atlanta at the close of business on Aug. 4, 1989, and Bank of Italy officials secured B.N.L.'s Rome headquarters. While the investigation was under way, other banks continued granting credits to Iraq, backed by the Agriculture Department's Commodity Credit Corp., primarily for the purchase of U.S. rice. It was also during this period that evidence of high-level interest in the B.N.L. case and its potential effects on U.S.-Iraq policy began to emerge. At one point, for instance, Jay Bybee, an assistant to White House counsel C. Boyden Gray, made an unusual -- and on the face of it, improper -- telephone call to Assistant U.S. Attorney Gale McKenzie in Atlanta to ask "what was going on" with the case. Justice Department officials deny this phone call had any effect. "We're career prosecutors," says Gerrilyn Brill, chief assistant U.S. Attorney in Atlanta. "We're interested in making cases. Nobody made any improper suggestions. Nobody would have put up with that." In any case, on Feb. 28, 1991, a 347-count indictment charged Drogoul and four Iraqi officials with conspiracy, money laundering and defrauding both B.N.L. and U.S. bank regulators.