Why was Hillary Clinton on the board of directors of
Lafarge Corporation, the U.S. Subsidiary of a French
multinational chemicals concern, whose Marblehead,
Ohio, property was used as a transshipment point for a
covert arms export network that supplied Saddam
Hussein?

http://www.gulfweb.org/doc_show.cfm?ID=527

Whatever Happened to IRAQGATE
Author: Kenneth R. Timmerman
Document Dated: November 1, 1996
Date Posted: August 12, 1997

Candidate Bill Clinton vowed to get to the bottom of
the Iraqgate scandal. By Kenneth R. Timmerman Author
of The Death Lobby: How the West Armed Iraq (Hooughton
Miffin) and publisher of Iran Brief, a monthly
newsletter.

The American Spectator November 1996

Whatever Happened to IRAQGATE

As the 1992 presidential race reached its final days,
Bill Clinton promised that, if elected, he would
appoint an independent prosecutor to investigate
allegations by congressional Democrats that the U.S.
government had secretly been aiding the Iraqi weapons
buildup-and perhaps even its nuclear weapons
effort-and then engaging in a cover-up to hide its
handiwork. Repeatedly challenging President Bush for
the Republican "tilt" toward Iraq in the 1980's,
Clinton vowed that no political considerations would
cloud the investigation. The Clinton team took the
issue so seriously that vice-presidential candidate Al
Gore, in a landmark speech, called the Iraq scandal
"worse than Watergate."

The story had all the ingredients for a political
potboiler: official letters from the director of CIA
and the attorney general to the House Banking
Committee Chairman Henry Gonzalez(D-TX), warning him
to drop the investigation of an obscure bank in
Atlanta, Georgia, because of unspecified "national
security" implications; highly publicized allegations
by Gonzalez of a White House cover-up a corporate
whistle blower who claimed her life had been
threatened; and tales of Iraqi agents cozying up to
CIA operatives, and buying up U.S. companies to
establish the covert arms pipeline to Saddam.

The focus of Gonzalez's investigation was a massive
$5.5 billion bank fraud that the Justice Department
pinned on Christopher Drogoul, the lowly Atlanta
branch manager of Italy's state-owned Banca Nazionale
del Lavom (BNL). Benefitting from U.S. government
export credit guarantees, the Atlantic bank lent the
money to companies all over world that were supplying
Saddam Hussein with weapons manufacturing gear and
other goods. In his defense, Drogoul-backed by
Gonzalez-claimed he was merely the instrument of a
secret U.S. policy to aid Saddam Hussein. Rejecting
that notion, the Justice Department indicted Drogoul
on 347 counts of fraud and related charges in 1991.

As the presidential campaign heated up, Gonzalez
bombarded the White House, the State Department, and
the intelligence agencies with subpoenas, obtaining
reams of sensitive diplomatic cables and internal
memos documenting the U.S."tilt" toward Iraq. It was
these documents (as well as Brent Scowcroft's secret
trip to China only weeks after the tianananmen
massacre in June 1988) that prompted Bill Clinton to
charge , during the final days of the campaign, that
President Bush had been "coddling dictators."

Nearly four years and several grand juries later,
however, the Clinton administration has swept its
"Iraqgate" investigation under the rug. The Final
Report, issued by attorney general Janet Reno on
January 17, 1995, and written by Reno deputy John
Hogan, amounts to little more than a whitewash of the
entire affair. In every case it examined, the report
concluded there had been no violation of law. And in a
classified addendum, subsequently rendered public, the
intelligence community and the executive branch were
exonerated of having "illegally armed Iraq," despite
extensive evidence of intelligence community
involvement unearthed by the Gonzalez investigation
and the U.S. Customs Service.

Jack Blum, a Washington attorney who served as an
Iran-contra investigator for the Democrats, and who
has been representing a key witness in one of the
cases that Hogan reviewed, calls the addendum "the
most incredible document I've seen in all my years
doing intelligence and foreign policy issues in this
town." In his introduction to the classified addendum,
Hogan complimented the CIA for its cooperation, yet
seemed to back pedal almost immediately. "The CIA's
ability to retrieve information is limited," he wrote.
"In the course of our work, we learned of "sensitive
compartments" of information not normally retrievable
and of specialized offices that previously were
unknown to the CIA personnel who were assisting us.
"Translated, says Blum, that meant that Hogan "stepped
into a hornets nest, and still can't say whether the
CIA was involved in the buildup of Saddam Hussein's
war machine, or not."

One could easily attribute the reluctance to pursue
the investigation vigorously as simply another case of
Bill Clinton failing to keep his word. And, too,
virtually all the sources consulted for this story
agreed that the desire to conceal a long and uneasy
relationship between the U.S. intelligence community
and Saddam Hussein-a goal that transcends presidential
politics-probably lies at the bottom of the Justice
department's lack of investigatory zeal. Yet with such
an explosive political weapon at their fingertips, why
did Janet Reno and the Clinton administration back
down?

A former employee of one of the firms exonerated by
the Justice Department report now tells The American
Spectator that the inquiry may have been papered over
for an unsuspected reason. "It wasn't just a
Republican scandal, " says Marianne Gasior, a lawyer
who worker for Kennametal Inc., a
machine-tool-manufacturer located in Latrobe,
Pennsylvania. "Hillary Rodham Clinton was directly
linked to the network that was involved in a
clandestine CIA arms export ring."

Sound incredible? Certainly, the White House thinks
so. When we suggested that it sounded a bit odd for an
Arkansas governor's wife to be invited in 1990 to join
the board of a company that had ties to an alleged
arms export network, spokesman Neel Lattimore
retorted: "Everything The American Spectator says
about Mrs. Clinton is a bit odd, but I'll see if I can
get an answer for you." He never did.

Marianne Gasior maintains that the Lafarge
Corporation, the U.S. Subsidiary of a French
multinational chemicals concern, provided key services
for the covert arms export network that supplied
Saddam Hussein. To prevent exposure of that secret
supply line, and collateral damage to Hillary
Clinton-who joined Lafarge board in 1990, just as the
arms pipeline was being shut down-Gasior alleges that
the justice department was told to bury the
investigation. John Hogan hotly denies this. But
investigators from other U.S. government agencies who
worked on the case say they were "waved off" whenever
they got too close to exposing the direct involvement
of the intelligence community in the arms export
scheme.

Foreword: Allied may in fact be one of the oldest
national security "front" companies operated by the
U.S. government. National Archives documents show that
it was established in 1942, and has frequently changed
names and ballooned in size to correspond to the needs
of the intelligence community. Its most recent
incarnation, according to corporate records reviewed
by TAS, was as Illuminati Equipment Corporation, based
in Cleveland, Ohio. Dun & Bradstreet lists the company
as an "unscheduled air passenger carrier."

Lafarge owns 2,600 acres on Marblehead Peninsula,
along Lake Erie in Ohio, that have been the subject of
intense speculation by local residents for a number of
years. That property has been used on occasion by Camp
Perry for special military training exercises, and it
also houses a munitions plant known as the ordnance
Center." (To add a touch of the bizarre, the National
Rifle Association hosts an annual shooting contest
there, giving rise to tales of men in camouflage
battle fatigues committing unexplained acts of
violence under the cover of darkness).

Gasior claims that Marblehead property was used as a
transshipment point for secret CIA shipments of
weapons components and manufacturing gear in Iraq
during the 1980's, and possibly even after the U.S.
embargo on Iraq went into effect on August 5, 1990.
the equipment included tungsten-carbide armor
penetrators, and specially machined parts needed to
make cluster bombs and other weapons. Munitions items
such as these could not have been shipped to Iraq
legally without a special presidential waiver.

The Iraqis placed their orders through the Technology
Development Group (TDG), a London company run by Sefa
Habobi, a trusted associate of Saddam
Hussein.(Although he was indicted along with Drogoul
in 1991 and remains a fugitive from U.S. justice,
Habobi continues to travel around the world in his
current incarnation as Iraqi oil minister.) TDG farmed
out the orders to Iraqi-owned front companies such as
Matrix Churchill Ltd., Associated Instrument
Distributors of Norcross, Georgia, and Tigris trading
of Pittsburgh, Pennsylvania, who then signed contracts
with willing suppliers and turned to BNL-Atlanta to
pay the bills. Many Iraqi front companies were closed
down by U.S. Customs following Saddam Hussein's August
1990 invasion of Kuwait, although none were formally
indicted.

Equipment for the Iraqis that could not be exported
through normal channels was collected at the Solon,
Ohio, warehouse of Matrix Churchill Corporation from
nearby manufacturers-Kennametal (Where Gasior worked),
Teledyne, and Mannesman-Demag. It was then trucked up
to a long-time U.S. government munitions manufacturer
called ALLIED, which operated a facility on the
Lafarge property on Lake Erie. Allied's Marblehead
plant, referred to in U.S. government archives as the
"Ordnance Center," had at one time functioned as a
steel foundry making armor for U.S. tanks during World
War II.

>From Marblehead the equipment was carried on cargo
ships up the St. Lawrence River to Canada and
eventually to Britain, Gasior alleges, where
Kennametal's U.K. subsidiary relabled some of the
goods as manufactured in the European Community. They
were then exported to Iraq. Kennametal vigorously
denies any wrongdoing, noting that the Justice
Department "completed its investigation years ago...
and concluded there was no evidence that Kennametal
committed any export violations." (The investigation,
of course, was only completed last year.) But a
Lafarge quarry master confirmed that freighters
frequently picked up shipments at Marblehead bound for
Canada. One British Customs document obtained by TAS
shows that Kennametal shipped carbide tool bits to its
Canadian subsidiary, and from there on to Iraq.
Documents obtained by Congressional investigators show
that Kennametal exported large numbers of
tungsten-carbide machine tool bits from its European
subsidiaries to Iraq for the use in weapons
production.

Never once, according to Gasior, did these shipments
attract the attention of U.S. border controls. "It was
all a CIA operation,"Gasior asserts. "It's certainly
true that we never inspected exports from Marblehead,"
says former Customs Special Agent who worked the area
in the late 1980's. The manufacturing facility at the
Lafarge property on Marblehead "was on the state
Department's list of licensed munitions exporters. We
were warned off of our investigation because of U.S.
government-i.e.-, CIA-involvement. We used to get word
to Customs that the CIA had lines into Main Justice,
and so we were always careful to make sure we weren't
stepping on somebody's toes. "Clearly, there was
something going on." Other Customs agents who still
work for the government have told TAS similar stories
of investigations they were forced to drop because of
high-level CIA involvement in the Justice Department.

Asked whether Marblehead and Allied were CIA fronts
for clandestine weapons shipments overseas, former CIA
Director Robert Gates says, "I hear a distant bell
tinkling." But he claims he doubts that CIA
involvement alone would have deterred an investigation
by the Justice Department. "In the day and age, fear
of exposing an on-going intelligence operation
wouldn't stop the FBI or the Justice Department from
an investigation." Said one former senior CIA officer
when asked about Allied, "I know nothing about CIA
proprietaries-except those I was personally involved
in-but I've forgotten their names." Gasior, however,
believes the investigation was squashed because of
Hillary Rodham Clinton's involvement with Lafarge,
both as a member of the Board of Directors from
1990-1992-for which the soon -to-be-first lady earned
$31,000 per year plus expenses-and possibly earlier,
when sources say she did legal work for the company
through the Rose Law Firm in Little Rock. Evidence of
her ties to Lafarge appears on the billing records
from the Rose Law Firm that mysteriously "reappeared"
two years after congressional investigators had
subpoenaed them. They are now under scrutiny by
Independent Counsel Kenneth Starr, sources told TAS
Starr's office wouldn't confirm or deny that it was
investigating the First Lady's ties to Lafarge, and
the White House has repeatedly refused to answer
questions about this matter.

But Gasior claims John Hogan-the Reno deputy who wrote
the final Iraqgate Report-told her in August 1995 that
Kennametal case had been referred to Starr, "because
anything involving the First Lady or Vincent Foster
has to be referred to the Office of the Independent
Counsel." Hogan told TAS it would be "inappropriate
for me to comment." He did note, however, that the
investigator who had worked the Kennametal case for
him was subsequently detailed to Starr's operation.
That investigator also refused to comment, "because
that would indicate it has been referred here."

Gasior claims that Senate investigator Jack Klum-who
represented her when she testified on Kennametal
before Hogan's task force in 1993 and 1994-phoned
then-White House Counsel Abner Mikva in August 1995,
and then warned Gasior not to talk to Kenneth Starr or
congressional Republicans, "or else I would get hurt.
"Gasior says that her car was broken into that weekend
in Washington, D.C., and documents stolen, and that
when she returned to her home in a small rural
community after Mikva's warning she found an 18 wheel
truck in her driveway discharging a stream of diesel
fuel in what may have been an arson attempt. Asked
about Gasior's allegations, Mikva told TAS, "I have no
knowledge of any of this. I don't know any of these
people. Gasior? Jack Blum? I'm not even sure I know
him." But Blum says the two were in frequent contact,
and acknowledges that he told Gasior to drop the
case-not for reasons of safety, but to "get on with
her life." Asked about Kennametal and Lafarge, Mikva
quipped; "I've heard of a Madame Lafarge, but that's
about it."

One thing is certain: If Kenneth Starr isn't
investigating Hillary Clinton's ties to Lafarge,
somebody is going to an awful lot of trouble to make
sure the story of her involvement is consistent. When
asked how she came to join the Lafarge board, a
company spokesperson said Mrs. Clinton was recommended
by Lafarge board member Edward H. Tuck, who had worked
with her on a report on the state-run child-care
system in France while she was president of the
French-American Foundation. Tuck repeated the same
story almost word for word. He added that the company
"regretted" Mrs. Clinton's decision to resign from the
board, because of the "valuable contributions" she had
made as a director, and her "active involvement" in
Lafarge. A Business Week reporter who queried the
White House was told the same story, including the bit
about child care.

Tuck, who is now with the New York law firm Shearman &
Sterling, declined to be more specific about that
"active involvement." (His firm was retained by the
Rome Headquarters of BNL, shortly before Hillary
Clinton joined the Lafarge board, to represent the
bank before federal regulators once the scandal hit
the fan in August 1989) But Jack Blum believes the
allegations regarding the First Lady's involvement
with Lafarge border on the absurd. "If you were
Hillary Rodham Clinton," he says , "and Lafarge were
actually involved in a clandestine arms export
operation, would you want to protect them? On the
contrary, if you became aware of such information you
would have every interest in exposing them. What does
she get out of covering-up?" Besides, he argues,
"would anybody involved in such an operation be so
stupid as to inform members of the board of directors
that such things were going on?"

Blum maintains that the Clintons have had "absolutely
no relationship to the intelligence community," either
while in Arkansas or in Washington. As evidence he
cites President Clinton's first two years in the White
House: "During that entire time, Bill Clinton met with
Jim Woolsey, his Director of Central Intelligence
exactly once. Bill Clinton pays no attention to these
things, and has done nothing to take control of the
national security establishment. He didn't care. He
zoomed out." For its part, Lafarge says it "has never
been involved with anything related to arms. Any
conclusion to the contrary is erroneous." If Clinton
was paying no attention to the intelligence community,
however, his Justice Department was demonstrating
remarkable sensitivity to cases involving intelligence
operations. As congressional investigators have
repeated noted, almost every time there was strong
evidence of CIA involvement, the Justice Department
either dropped the prosecution or bungled the case.
Asked why House Banking Committee Chairman Henry
Gonzalez abandoned his BNL crusade, for example, a
senior staff investigator remarked: "We won the
election, and there was a consensus to declare victory
and move on to other things, Besides, if we had wanted
to get to the bottom of the BNL case, we would have
had to take on the intelligence agencies. And none of
the committee members had the stomach for that."

Another Democratic congressional aide, who
investigated whether Iraq used U.S. government export
credits to buy food stuffs that it subsequently traded
for arms agrees. "We saw case after case where
companies shipping hi-tech goods to the Iraqi military
establishment were also working on behalf of U.S.
intelligence agencies," the staffer says. "The CIA
knew what the Iraqis were buying, and that it was
helping their military machine, but turned a blind eye
because it allowed them to gather intelligence."

When the odd case did come to prosecution, the
intelligence community resorted to other techniques.
In 1991, when the head of International Signals Corp.,
James Guerin, first tried using the CIA connection for
defense, "former government officials" started talking
to reporters in an effort to destroy Guerin's
credibility. He was eventually given a 15-year jail
term. Ironically, it was a similar case that finally
went to trial for years later that broke open the
story of the CIA's involvement in arming Iraq. The
government leaned so hard on Teledyne Industries,
which supplied military-grade zirconium to Chilean
arms manufacturer Industrias Cardoen, that the company
agreed to plead guilty to export violations and pay
several million dollars in fines, to avoid a public
trial that most likely would have exonerated it from
any wrong-doing. But the plea did not stop a separate
trial of two former Teledyne employees in Miami. On
January 31, 1995, just two weeks after Teledyne's
guilty plea, former Reagan Administration National
Security Counsel official Howard Teicher filed an
affidavit on behalf of the employees, spelling out the
secret U.S. policy in great detail. Teicher stated
that he was in a position to know about U.S. military
assistance to Saddam because he personally helped
draft a still-classified National Security Decision
Directive, signed by President Reagan in 1982, that
authorized the United States to "do whatever was
necessary and legal to prevent Iraq from losing the
war with Iran."

With the new instructions in hand, Teicher says, CIA
Director William Casey "personally spearheaded the
effort to ensure that Iraq had sufficient military
weapons, ammunition and vehicles to avoid losing the
Iraq-Iran war." While the bulk of Iraq's arsenal
consisted of Soviet and French weapons, making it
impractical for the U.S. to ship main weapons systems
or even spare parts to Iraq, the CIA identified one
key need the U.S. could fulfill: cluster bombs and
anti-armor penetrators. "When I joined the NSC staff
in early 1982, " Treicher says, CIA Director Casey was
adamant that cluster bombs were a perfect 'force
multiplier' that would allow the Iraqis to defend
against the 'human waves' of Iranian attackers. I
recorded these comments in the minutes of National
Security Planning Group meetings in which Casey or
Deputy CIA Director Robert Gates participated."

Carlos Cardoen, head of Chile's Industrias Cardoen,
alleges that he was approached by the U.S. to sell the
cluster bombs to Iraq in the early 1980's, and
received U.S. assistance to provide the weapons in
Chile. His company was given access to U.S. blueprints
of the "Rockeye" cluster bomb, made by James Guerin's
International Signals Corp. Cardoen also received
highly sensitive raw materials from the United States,
such as military-grade zirconium from a Teledyne
subsidiary. by controlling Cardoen's supplies, the CIA
may have thought the U.S. could regulate the flow of
weapons to Iraq, increasing it in time of need and
reducing it to a trickle in slack times. That may well
have been true during the Iran-Iraq war. But when Iraq
emerged victorious against Iran in June 1988, Saddam
Hussein decided to produce the cluster bombs locally,
and turned to Cardoen to build a plant to produce them
in Iraq. Much of the equipment for the plant was
purchased by Matrix Churchill Ltd., House Banking
Committee investigators found, financed by
BNL-Atlanta. The U.S. Customs Service raided Cardoen's
Florida office in 1991, and he was indicted in May
1993 along with Teledyne.

But once again the Justice Department never brought
the case to court. In a February 8, 1995 interview
with the Chilean newspaper La Segunda, Cardoen himself
explained, "We had nothing and have nothing to hide
from the CIA, nor the United States government, nor
anyone." The U.S., he insisted, had been behind him
"all the way" in his dealings with Iraq. The Justice
Department also declined to prosecute Kennametal-a key
supplier to the Cardoen cluster bomb plant in Iraq and
Marianne Gasior's former employer-referring the matter
instead to the Treasury Department's Office of Foreign
Assets Control, where it languishes to this day. (A
Treasury spokesman says, rather defensively, "There
has been no effort to bury this investigation.")
Internal corporate documents obtained by congressional
investigators and U.S. Customs reveal Kennametal's
British subsidiary continued to ship tungsten-carbide
parts to an Iraqi front company after the United
Nations embargo on Iraq, fully aware that the
equipment was to be used in an Iraqi weapons plant.
"That ." says Gasior, "is a clear violation of Trading
with the Enemy Act."

Of all the neglected investigations, though, it is the
burying of the BNL scandal that remains the most
tantalizing. The final report exonerated every company
that sold high technology to Iraq during the 1980's.
In some cases, the report concluded, the companies had
legally obtained export licenses for sales. In others,
the statute of limitations had run out. In still
others, the violations were so technical that the
Justice department declined to prosecute because of
the high cost, or because a prosecution, even if
successful, would have little if any deterrent
effect." Perhaps, as John Hogan and Jack Blum
conclude, U.S. export control laws were so lax that no
prosecutable offenses were ever committed-or if they
were committed, the slight penalties render
prosecution disproportionately expensive. Or perhaps,
as a former investigator for Congressman Henry
Gonzalez now admits, the whole BNL scandal affair was
merely a political witch hunt aimed at discrediting
George Bush during the 1992 campaign. If so, the
Clinton campaign seems to have been aware just how
risky a gambit it was. Top campaign adviser George
Stephanopoulos faxed a brief memo to staffers in
Nashville-after Gore had called the BNL scandal "worse
than Watergate"-telling them to lay off the Iraq
charges. The memo, made available to Marianne Gasior
and a reporter by a former campaign worker who
accidentally received a copy, was dated October 14,
1992, and began by praising the Gore staff for making
Iraqgate a "very strong campaign issue [which] has
gained votes and a great deal of attention for the
Democratic Party." Then it concluded: At this point in
time, though, the Clinton staff in Little Rock,
Arkansas believes that this situation has [addressed]
itself, and no longer needs attention. In fact, it has
done enough damage to the Republican party and
campaign that we now can sit on the fact that we have
made it clear to the Bush people that they were
involved in subterfuge vis-a-vis Saddam Hussein and
Iraq...Please refrain from any more talk about
Iraqgate. Stephanopoulos had reason for concern: As
governor of Arkansas, Clinton had been a vocal
supporter of U.S. exports to Iraq. He had also opposed
Operation desert Storm. Or perhaps Stephanopoulos may
have been worried that Hillary's involvement with
Lafarge would come out.

Whatever the reason, Clinton's campaign staff seems to
have been especially sensitive to the Iraq matter-in a
way strikingly analogous to his Justice Department's
tip-toe fashion of pursuing the BNL scandal. Despite
Jack Blum's assertions to the contrary, might Bill
Clinton's ties to the intelligence community run
deeper than previously imagined? Such unsuspected
connections to Bill Clinton could account for at least
some of Janet Reno's reluctance to pursue the BNL
scandal vigorously. If the report was indeed a
cover-up to protect the intelligence community, then
the CIA's influence over the Justice department is
more powerful than anybody outside the Clinton
administration might have suspected. Nobody but
William Safire of the New York Times seems to have
paid attention, but just three weeks after the BNL
report was released, Reno decided to pay the bank more
than $400 million-U.S. taxpayer money-to compensate
the losses of its Atlantic branch by Iraq. "Mr.
Clinton's BNL bailout,' Safire scolded, "makes him a
$400 million participant in Iraqgate." That pay-off
may yet turn out to be the least of the Clinton's
connections to this scandal.