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CIA chief wants probe of agency action involving Iraq bank loans

CIA Director Robert Gates on Wednesday ordered the agency's inspector general to conduct an investigation into the CIA's misleading and incomplete statements to the Justice Department and a federal judge in Atlanta about a bank fraud case involving billions of dollars in loans to Iraq.

The internal investigation serves as an acknowledgement of a politically embarrassing error by the CIA on an issue that is dogging President Bush's re-election campaign: the administration's embrace of Saddam Hussein in the years before Iraq invaded Kuwait.

The CIA's public admission of error and promise to investigate came only after Sen. David L. Boren, D-Okla., who heads the Senate Intelligence Committee, said Tuesday that the CIA had misled the Justice Department, the Atlanta federal court and Congress.

For months, some Democratic members of the House have charged that the CIA has deliberately concealed information about the case as part of a cover-up, a charge that Bush, the Justice Department and prosecutors in the case have repeatedly denied.

The case involves charges against Christopher Drogoul, a banker accused of extending billions of dollars in loans and credits to Iraq from the Atlanta branch of the Rome-based Banca Nazionale del Lavoro in violation of the bank's regulations.

Drogoul, who headed the Atlanta branch, pleaded guilty to the charges and said he acted alone, and the government's case is based on the premise that he defrauded the Rome bank.

But Drogoul later moved to retract the guilty plea, and intelligence reports and the statements of some bank officials indicate officials in Rome may have approved the fraud.

At issue for the CIA are two questions about its willingness to be forthcoming in the bank case. One is a Sept. 17 letter to the Atlanta prosecutors stating the CIA had no independent secret information about the case when the CIA had received several classified reports about it.

The other is the CIA's disclosure that it recently found new intelligence reports about the activities of the Atlanta bank branch, calling into question its claims that it cooperated fully with the prosecution during its three-year investigation.