Barr names special counsel in BNL case, his resignation still demanded

WASHINGTON -- Attorney General William Barr, reversing himself in the face of allegations that the CIA and the Justice Department blunted an investigation of an Atlanta bank that loaned billions of dollars to Iraq, announced appointment Friday of a special department counsel to investigate the case.

Barr said he has no reason to believe any Justice Department official acted improperly in the affair of the Banca Nazionale de Lavoro (BNL) case, but the chairman of the House Banking Committee said the attorney general himself is tainted and should resign.


Barr appointed retired U.S. District Judge Frederick Lacey of New Jersey as an independent counsel under Justice Department regulations, not under the independent counsel statute demanded by Rep. Henry Gonzalez, D-Texas.

The independent counsel statute would give Lacey unqualified independence from the attorney general, who can dismiss him for cause under the department statute.


'This committee has spent countless hours dismantling the Justice Department's stonewalling of the BNL investigation,' Gonzalez said. 'Now at long last, Mr. Barr has his back up against the wall. The evidence that the department has delayed the investigation of the BNL- Iraq case is so overwhelming that Mr. Barr no longer has anywhere to hide.'

'I wish Judge Lacey well, but a truly independent counsel would not have to report to the agency he is investigating,' Gonzalez said. 'Attorney General Barr clearly wants to control the investigation. But clearly there is a question of possible widespread criminal conduct within the Justice Department.

'True to form, Attorney General Barr is still hiding behind the same old stonewall. He should appoint a genuinely independent counsel and take the honorable step of resigning.'

Sen. David Boren, D-Okla., head of the Senate Intelligence Committee, Gonzalez and other congressional Democrats have demanded that an independent counsel investigate the billions in illicit loans that BNL's branch in Atlanta made to arm Iraq's war machine.

The headquarters of BNL, almost totally owned by the Italian government, is located in Rome. The Justice Department contends that the CIA failed to provide key documents about the investigation of BNL. Boren says the FBI, which is part of the Justice Department, was aware of virtually all of its key classified reports on the matter.


The CIA has acknowledged it gave misleading information to U.S. District Judge Marvin Shoob, handling the BNL case in Atlanta, about its knowledge of BNL, and it is alleged that Justice Department officials encouraged a lack of cooperation. Shoob says that information regarding BNL loans to Iraq may have been withheld from local prosecutors.

Barr said in August, however, that there was not a shred of evidence that any Justice Department employee acted improperly in the investigation of BNL. But he reversed himself after learning that the CIA had knowledge of the case that was not disclosed to Shoob.

'In the current politically charged environment, nothing could be worse than to have this matter tried in the press based on allegation, rumor, and leaks,' Barr said.

'I think it is a climate of distrust, but also a climate of unusual political charges because it's an election year, and a climate of media sensationalism.

'We are prepared to let the chips fall where they may.'

Lacey, 72, has been praised for his record in fighting corruption in the Teamsters, and served as a court-appointed trustee of the union after leaving the bench. He said he would be independent, and follow the investigation wherever it takes him.


'I will have access to every file and document and access to every individual who worked on the matter or has knowledge about it,' he said.

If there is any stonewall, Lacey said it will fall or he will leave.

'I can submit my resignation,' he said. 'With the press out there, it will be enough of a threat to get what I need.'

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