Subject: Special order in the House of Representatives, transcribed from the Congressional record dated April 25, 1991. H 2547 BNL SUBPOENA RENEWAL Mr Gonzalez: Mr Speaker, I take the floor today to deliver the third in a series of special orders related to the largest banking scandal in history [since the date of Rep. Gonzalez' speech, BNL has been somewhat overshadowed by the BCCI imbroglio and the close connections subsequent indictments have suggested between the last three Administrations and key figures in the rogue bank] - the events surrounding the Banca Nazionale del Lavoro scandal. the BNL scandal is the sensational banking fraud in which the former employees of the BNL provided over four billion dollars in loans to Iraq without reporting them to the appropriate State and Federal bank regulatory agencies or even to BNL's own management in New York or to their headquarters in Rome. But the BNL scandal had implications far beyond the fact that the State and Federal bank regulatory agencies failed to properly supervise the operations of BNL. The BNL scandal was a key factor in the United States-Iraq relations in that it was eventually responsible for halting the extension of billions in United States Government credit to Iraq. BNL KEY FACTOR IN UNITED STATES-IRAQ RELATIONS The importance of BNL to United States-Iraq relations is best revealed in a Federal Reserve workpaper that states that Secretary of State James Baker actually talked to Saddam Hussein in September/October 1989 about the BNL scandal. In addition, there are many BNL-related telexes between Ambassador April Glaspie and the State Department in Washington The importance of BNL to United States-Iraq relations is further illustrated by the fact that in late 1989, the White House Director of Cabinet Affairs, along with deputies from Treasury, States, OMB, Commerce, Agriculture, US Trade Representative, Export-Import Bank and a Federal Reserve Board Governor held a meeting to discuss the implications of the BNL scandal. We also know that a former employee of BNL was close to Saddam Hussein's son-in-law, Hussein Kamel, who headed the Iraqi military industrialization effort. We also know that former BNL employees were close to several members of the Central Bank of Iraq [Bank Raffidian] including its director. BNL employees visited with Mr Kamel and high ranking Central Bank employees while in Baghdad. The involvement of such high level United States and Iraqi Government officials is quite revealing of the importance of the BNL scandal. BNL MAJOR SOURCE OF PRIVATE LOANS TO IRAQ The reason the BNL scandal was so important to Iraq was money. During 1987-89, BNL was the No 1 source of private Western bank loans to Iraq. Because of Iraq's poor financial condition, Western banks would not loan money to Iraq without a government guarantee of repayment. BNL filled the void left by Iraq's inability to borrow by providing over three billion dollars in loans that were not guaranteed by Western governments. About a third of that amount went for food and freight charges while a little over two billion dollars was earmarked for the ambitious Iraqi reconstruction program. We have learned that a good portion of those funds were actually used to upgrade Iraqi military capability. BNL also provided almost one billion in United States Government guaranteed loans to Iraq. BNL was the largest single bank participant in the five point five billion dollar United States Department of Agriculture's Commodity Credit Corporation {CCC} with Iraq. Between eight hundred and nine hundred million in BNL loans to Iraq were guaranteed by the CCC. BNL was also the second largest participant in the two hundred and sixty seven million dollar Export-Import Bank [Eximbank] program with Iraq. Over fifty million dollars in BNL loans to Iraq were guaranteed by the Eximbank. Today I will talk about United States policy toward Iraq and several key people in the administration partly responsible for United States policy toward Iraq - Brent Scowcroft and Lawrence Eagleburger. I will explore their backgrounds, their interlocking relationships and Henry Kissinger's and Mr Eagleburger's relationship to BNL. President Bush, as did his predecessor Ronald Reagan, placed a high value on improving United States-Iraq relations. Both saw Iraq as an important United States ally in the region. Iraq was considered an important player in the Middle East peace process, and a key to subduing the Islamic fundamentalist movement in Iran which was perceived as a threat to United States interests in the region. United States policy makers also saw in Iraq a chance to snatch away a key Soviet ally in the gulf. President Reagan and President Bush followed a similar course of action in pursuing improved United States-Iraq trade. Since the United States decided to give the appearance of neutrality in the Iraq-Iran was, it could not provide arms shipments to Iraq. Given that decision it was left little choice but to offer trade including US high technology transfer as the cornerstone of its policy. The majority of our Western allies followed our lead. [On July 1, 1992, ABC news ran a special Nightline program which detailed how the United States fought a covert war on the side of Iraq during the Iran-Iraq war. Admiral Crowe has since energetically denied the entire affair before a Congressional hearing. ABC, nonetheless, stands by it's story, which goes like this: The bombing of an Iranian civilian airliner by the US Vincenze was a casualty of that covert war. This observer, impressed by the difficulties of defeating Saddam, the previous US administration's decision to share intelligence with Saddam's regime, the enormous possibilities for corruption and defeat-from-within which the present level of arms transfers to Saudi Arabia provide, and the recently reported covert war currently being waged in Iraq, is inclined to predict crisis in energy supplies which may be expected to result from present policy in the Gulf, which seems to be out of control.] A foreign policy based on commercial trade had the advantage of providing Iraq with high quality food and United States technology to upgrade its military capability in order to defeat Iran. It was also easy to sell back home because this policy benefited the American economy as well as some of the most powerful corporations in our country. Remember, during the latter half of the 1980's the United States was frantically seeking to improve its trade deficit [NDT: the result New Economic Policies, otherwise known as Reaganomics, which produced the Reagan Generation, and culminated in riots in seventeen of America's cities] so a trade based foreign policy with Iraq appeared to serve multiple objectives. In order for this trade-based foreign policy to work, the United States had to ignore a few Iraqi bad habits including massive human rights abuses, the imprisonment, torture and execution of political prisoners, an almost complete lack of democracy, the use of poison gas against Iraq's own Kurds, the use of poison gas against the Iranians, state-sponsored terrorism, making refugees out of over 100,000 Kurds, the execution of a foreign [Faroud Barzoft] journalist, continual debt servicing problems, and the diversion of United States technology to improve Iraqi nuclear, chemical and biological weapons capability and for many months, BNL scandal. A key to keeping trade open with Iraq was the availability of United States, European, and Asian government-guaranteed credit. Because of its costly war with Iran, by 1984, Iraq had exhausted its thirty five billion in estimated reserves and plunged into the ranks of the Third Wold debtor nations. Iraq was forced to reschedule their loans. The Iraqi debt situation jeopardized the trade-based policy. Banks and other private creditors would not touch Iraq without a government guarantee. In order to make the trade-based policy work, Western creditors had to cough up government guarantees which they did in generous amounts. For example, by 1988, the CCC program with Iraq reached a billion dollars annually and between 1985 the CCC program provided roughly four billion in credit for Iraqi purchases of United States agricultural commodities. The Eximbank helped provide two hundred and seventy six million dollars in short-term credit to Iraq between 1985 and 1990. That amount would have gone through the roof had it not been for responsible people at Eximbank who realized Iraq was not a fundamentally creditworthy nation given the way it was running its economy and prosecuting the war with Iran At this time I would like to introduce a couple of lists and projects United States companies wanted to building Iraq with the help of Eximbank financing. As you can see by 1988, US companies were seeing to secure Eximbank financing for projects totalling nearly thirteen billion dollars. As you can imagine, lobbying from the export community and their bankers, along with the urging of the State Department, which was trying to achieve the trade-based policy towards Iraq, was intense. Had it not been for responsible people at Eximbank, I am convinced the taxpayer would have been stuck with the tab for many of those projects. As it is, BNL helped to finance many of the very projects on the list. On the industrial side of the ledger the United States export licensing process was used by the State and Commerce Departments, with the backing of the President's National Security Council {NSC}, to increased trade with Iraq. Unfortunately, the export control process often failed to stop Iraq from obtaining militarily-useful technology even though some Defense Department officials warned that United State technology destined for Iraq was going directly into upgrading Iraqi military capability. The following provides an example of the official United States policy toward technology transfer to Iraq. Dr Stephen D. Bryen, former Deputy Under Secretary of Defense for Trade Policy and Director of Trade Technology Security Administration [DTSA}, testifying recently before the Banking Committee, stated: Officially, one point five billion in United States technology was transferred to Iraq through the United States export control process. Nobody knows for sure what additional United states technology reached Iraq. On the private side, ambits immediately after the United States normalized relations with Iraq in 1984, the UNITED STATES-IRAQ BUSINESS FORUM WAS FORMED. IT WAS FOUNDED NY MR MARSHALL WILEY, A FORMER STATE DEPARTMENT OFFICIAL STATIONED IN BAGHDAD prior to the normalization of United States-Iraqi relations. The chairman of the Business Forum was Mr Robert A. Abboud, former chairman of First Chicago Bank, former president of Occidental Petroleum, and until recently, chairman of First City Bank in Houston, Texas. In other words, he was well wired into the US business community. To say that the Business Forum was US government- sanctioned would be going too far. But the Business Forum did play a key role in United States-Iraqi commercial relations. Many of the companies dealing with Iraq, industrial and agricultural alike, received loans from BNL. Since the Eximmbank would not provide loans to finance the Iraqi industrialization effort, the Iraqis turned to BNL as a source of loans for large and small projects alike. During the remainder of my time I would like to talk about Kissinger Associates, Lawrence Eagleburger and Brent Scowcroft. I will explore the relationship of Henry Kissinger and Lawrence Eagleburger** urger to BNL which loaned four billion dollars to Iraq. I will also talk about several interesting links between MR Scowcroft and Mr Eagleburger and companies involved with Iraq. Again, I am merely exploring the interlocking relationship between these people and United States policy toward Iraq. This special order will also offer the public a view of the role of Kissinger Associates. HENRY A. KISSINGER Henry Kissinger, one of the best-known and most powerful Presidential advisors of the post-war era, began his political career in 1956 as a consultant on military affairs. He advised many executive branch organizations including the Joint Chiefs of Staff, the National Security Council, and the Department of State. in 1969 he became President Nixon's National Security Advisor, and in 1973 Nixon named him Secretary of State. He held that post until 1977. Kissinger remains active as a foreign policy analyst and consultant. In 1989, Mr Kissinger was a member of the President's Foreign Intelligence Advisory Board [FIAB]. Members in this elite club are permitted access to highly classified information and members actually advise the President directly on intelligence issues. In 1982, Mr Kissinger founded Kissinger Associates with offices in New York and Washington. It is said hat the firm analyzes political risk and international economic trends to help clients make concrete business decisions. Several of the Kissinger Associates clients are also members of the UNITED STATES-IRAQ BUSINESS FORUM. KISSINGER ON BNL INTERNATIONAL ADVISORY BOARD Henry Kissinger was in fact a paid member of the Banca nazionale del Lavoro Consulting Board for International Policy. Mr Kissinger held this position during the height of the biggest banking scandal of all time -- was four billion dollars in unreported loans to Iraq by the Atlanta branch office of BNL. Other former or current employees of Kissinger Associates had links to Iraq. ALAN STOGA Alan Stoga is a former economist at First Chicago Bank and is currently a director of Kissinger Associates. Mr Stoga is said to be an expert in country risk analysis and international finance. He has been interested in the Middle East for many years and has made numerous visits to the area. Mr Stoga worked as the chief economist of the international division oat First Chicago Bank. The chairman of the First Chicago at that time was A. Robert Abboud, the current chairman of the United States-Iraq Business Forum. Mr Stoga is a friend of Marshall Wiley, the Business Forum founder, and he spoke at Business Forum functions. In June 1989, Mr Stoga, MR Wiley and Mr Abboud, visited Iraq with other members of the United States-Iraq Business Forum. They met with Saddam Hussein who purportedly expressed an interest in expanding commercial relations with the United States. Many Kissinger Associates clients received United States export licenses for exports to Iraq. Several were also the beneficiaries of BNL loans to Iraq. LAWRENCE S. EAGLEBURGER Lawrence Eagleburger, Deputy Secretary of State, has held many positions of international influence, in both the public and private sectors. Eagleburger started his political career in 1957 as a Foreign Service Officer. In this capacity, he represented the United States in Honduras for 2 years, and in YUGOSLAVIA for 4 years. Then in 1969, Henry Kissinger became Nixon's National Security advisor, and Eagleburger served as his executive assistant. After working as a political advisor to NATO in Belgium, and as Deputy Assistant Secretary in the Department of Defense, Eagleburger rejoined Kissinger at the State Department, again as his executive assistant in 1973. In 1973 he was named Deputy Under Secretary for Management at the State Department. Eagleburger was appointed Ambassador to Yugoslavia during the Carter administration and served in that capacity from 1977 to 1981. He has remained a close ally of Yugoslavia. Under President Reagan, Eagleburger became Assistant Secretary of State for European Affairs, and held this position from 1981 to 1982. Subsequently, he served for two years as Deputy Under Secretary for political Affairs. Before assuming his current position as Deputy Secretary of State in 1989, he served as president of Kissinger Associates Inc., a political consulting firm organized by Henry Kissinger. EAGLEBURGER CLIENTS During his confirmation process, Mr Eagleburger identified a number of prominent clients of his at Kissinger Associates. Mr Eagleburger was a director of ITT, Alcatel, Bethlehem Rebar, Global Motors, Mutual of New York, JHosephson International, and Best Mart,. Mr Eagleburger was also a director of LBS Bank from 1986 - 1990. LBS bank is a wholly owned subsidiary of one of the largest banks in [the former] Yugoslavia. Global Motors, Inc., was the corporation established in the United States to distribute the Yugoslavian-made small compact car called the . Global Motors filed for chapter 11 bankruptcy in 1989. A creditor filing suit against the investment bank acting as financial advisor to Global listed Mr Eagleburger as a defendant in that suit. The Yugoslavian maker of the Yugo is a firm called Zavodi Crevna Zastava (ZCS). ZCS is the backbone of the Yugoslavian arms industry and its main clients include Iraq, Libya and other Eastern European nations., As a longtime loyal supporter of Yugoslavian interests, MR Eagleburger was instrumental in helping both Global Motors and LBS establish their United States operations. He was not alone. As we shall see, BNL had a very substantial, and even incestuous relationship with LBS. THE BNL-LBS NEXUS After Iraq, BNL's largest foreigh customer was Yugoslavi. BNL had loans to various Yugoslavian entities as well as a very special relationship with LBS Bank-New York (LBS). LBS is a wholly-owned subsidiary of the [former] Yugoslavian bank - Ljubljanska Banka. Ljubljanska Banka is the second largest bank in Yugoslavia with seven point one billion in assets as of year-end 1990. in 1986, with the help of Mr Eagleburger, LBS opened a State-chargered bank in New York City called LBS Bank-New York. BNL was responsible for a significant amount of the growth of LBS while Mr Eagleburger was on its board. During an examination of BNL in 1989, the Federal Reserve stated that between 1986 and August 1989: BNL fueled a significant amount of LBS's growth in the US with twenty percent to twenty-five percent of LBS's business from BNL. The first transaction between LBS and BNL was a credit facility established in October 1986, three months after LBS opened in New York. BNL also maintained a banki account at LBS. The majority of the business between the two entities -- totalling tens of millions of dollars -- involved the LBS purchase of loans originated by BNL. Some of those loans involved Iraq. Other loans purchased by LBS included BNL loans to Cargill. Cargill is now under investigation for violating the Trading with the Enemy Act involving the BNL-financed sale of Cuban sugar. FORMER BNL-NEW YORK OFFICER REPLACED EAGLEBURGER AS DIRECTOR OF LBS. Symbolic of the close relationship between BNL and LBS, the former regional manager of BNL became a director of LBS soon after Mr Eagleburger left to take his current State Department post. Mr Renato Guadagnini, who worked for BNL for thirty nine years, was appointed a director of LBS in early 1989. Mr Guadagnini was the regional amanger of BNL's US operations while the Atlanta branch of BNL was illegally loaning four billion dollars to Iraw apparently without his knowledge. It is hard to fathom how the person responsible for supervising BNL during the time it illegally loaned four billion to Iraq is qua.lified to be a director of another bank. [Bear in mind that Rep. Henry Gonzaez is Chair of the House Banking and Finance Committee.] ANOTHER LINK BETWEEN BNL AND LBS Another link between BNL and LBS is the chief lending officer of LBS. BNL's Christopher Drogoul, a main conspirator inthe BNL loan scheme with Iraq, had a close business relationship with the chief lending officer of LBS while both were stationed in London. On occasion that LBS lending officer, as well as the chief financial officer, visited BNL's office in Atlanta. BNL employees also visited LBS when they were in NEw York. [NDT: Christopher Drougul was indicted on 370 counts of fraud, and in his defense he recently announced that he would indeed make clear the amount and degree of assistance he received for his system of loans, administered - as we think we have already noted - out of a shoebox in the trunk of his car, and dubbed . The Justice Department subsequently entered into a plea- bargain agreement with Mr Drougul whereby he would plead guilty to sixty counts and the remainder would be dropped. This arrangement ensures that no public pleading will take place and the arguments will not be made in an open forum where the press may report on them. In sum, the trial was held in secret, and amounted to successful blackmail on the part of Drogoul. The Administration acceded to Mr Drogul's manipulation much the same as it did to those of Saddam, presumably because the pressures put on it by this tactic were too powerful. It is interesting to note that one of Mr Drogoul's assistants, Janine Speckman, is no longer mentioned. She is not indicted, and press reports of the story no longer make any reference to her. Another name cited at the beginning with Mr Drogoul's activities at BNL was one familiar to those who have studied successive international banking scandals: Michael Hand. Australian authorities would very much like to question Michael Hand in connection with the failure of the Nugan Hand bank in Australia. The Nugan Hand bank specialized in drug money laundering, gun running and covert activities. A California businessman testified at House Banking Committee hearings that the description given him of the Michael Hand involved with Drogoul did not fit the likeness of the man in photographs of Michael Hand in Jonathan Kwitny's book , which draws on testimony of the various hearings which took place following the collapse of the Nugan Hand bank. The California businessman had not seen the BNL Michael Hand. What are we to make of his testimony?] LBS NOT WELL RUN WHILE EAGLEBURGER A DIRECTOR Apparently LBS was not a well run institution while Mr Eagleburger was on its board. Upon examining the relationship between BNL and LBS in 1989, the Federal Reserve concluded: Sloppy management was mnot the only trouble LBS had during MR Eagleburger's tenure as director -- LBS was also involved in money laundering. LBS CONVICTED OF MONEY LAUNDERING As we have seen, LBS and BNL had a significant relationship while the latter was perpetrating the largest banking scandal of all time. LBS was also involved in criminal activity during that same period. In 1988, LBS and its chairman were indicted on charges of laundering almost one point five billion dollars. The chairman of LBS was eventually cleared of the charges made against him, nevertheless, a jury convicted LBS of money laundering. LBS PARENT IN YUGOSLAVIA INVOLVED IN CRIMINAL ACTIVITY A literature search of the Yugocslavian parent of LBS revealed that it salso has been involved in several criminal proceedings during the past several uyears. Two such scandals took place in the cities of Pristina and Titograd in Yugoslavia. The Yugoslavian parent of LBS was also at the center of Yugoslavia's largest ever financial scandal - the Agrokcmmerc affair. Agrokommerc issued almost one billion dollars worth of false promissory notes in loal Yugoslavian currency. The parent of LBS and many of its affiliates arranged to purchase most of the notes. THe scandal led to scores of arrests, the fall of Yugoslavia's vice president, and shook the Yugoslavian banking system and economy. LBS INVOLVED WITH ENTRADE WHILE EAGLEBURGER A DIRECTOR LBS's association with criminal activity and criminals extended to the New York-based compay called Entrade International, Ltd. and its chief financial officer, Yavuz Tezeller. Entrade International, Ltd., is a Turkish-owned NY- based trading company specializing in the international trade of goods and commodities. Here BNL shows up again, as the bank was indicted with ENtrade and Mr Tezeller for obtaining unauthorized financing for exports to Iraq often with CCC export guarantees or insurance. The Justice Department indicted Entrade and Mr Tezeller for providing cash, houses, jewelery, vacations, and other things of value for personal use and benefit of BNL employees in consideration for the unauthorized loans made to finance Entrade's exports to Iraq and elsewhere. Entrade faces a maximum fine of fifty four million dollars. Mr Tezeller, a Turkish national, is charged with directing Entrade's contracts with BNL and with other entities in Europe and the Midle East owned by Entrade's parent, Enka. Mr Tezeller has fled to Turkey. LBS also extended a three hundred thousand dollar moretgage loan to Yavuz Tezeller. The Federal Reserve stated that Given the level of criminal involvement of LBC and its parent in Yugoslavia, and its close relationship with organizations charged with criminal activity, i have written letters to the Federal Reserve and State of New Yofk asking them to provide more information about LBS's operations in the US as well as a more in-depth look at the relationship between LBS and BNL. EXIMBANK AND YUGOSLAVIA: IS THERE AN EAGLEBURGER CONNECTION? Mr Eagleburger has had a long and prosperous relationship with [the former]Yugoslvia. He was AMbassador to Yugoslavia and prior to holding that post he worked in the Embassy as a foreign service officer. WHile at Kissinger Asociates he ehlped set up Global Motors to distribute the Yugo and he helped LBs get started in New York. It is fair to say that over the past couple of decades Mr Eagleburger has been one of Yugoslavia's biggest backers in the US government. These facts could posslbly explain the Eximbank exposure to Yugoslavia which stood at a whopping one point zero five six billion dollars as of March 1991. One lontime Eximbank employee stated that he Upon closer examination, Yugoslavia may be receiving special treatment from theEximbank at this very moment. BANKING COMMITTEE DENIED ACCESS TO YUGOSLAVIA DATA Yugoslavia is now on the brink of political and economic chaos. It is being torn apart politically and the most recent Eximbank country risk analysis for Yugoslavia is not encouraging. WHile the Committee was able to see the country risk analyses for Iraq, John Macomber, the President of Eximbank and a friend of Mr Eagleburger, would not permit Committee investigators access to the country risk analysis for Yugoslavia. YUGOSLAVIA ADMINISTRATIVELY SUSPENDED FROM EXIMBANK PROGRAMS Mr Macomber recently decided to place all Yugoslavian transactions on hold -- effectively suspending Yugoslavia from Eximbank programs. This was not done throuth the usual process which calls for Eximbank Board of Directors to make the call regarding the suspension of a country from Eximbank programs. instead, Mr Macomber decided to give the order to place all Yugoslavian business at the Benk on hold without allowing the Board to formally vote on suspending Yugoslavia. Without a formal board action, an American exporter has no way of knowing Eximbank will not process yugoslavian transactions. That is unless the exporter has the foresigt to call the Eximbank before going to the expense of doing business with Yugoslavian concerns. The mission of the Exminbank is to serve exporters. by not formally suspending Yugoslavia, the Eximabk may be doing a disservice to American exporters. LBS AND PARENT NOT SUSPENDED FROM EXIMBANK lbs and its parent bank in Yugoslavia both participate in Eximbank programs. both have been involved in serious ciniminal activity, one in the United States and the other in Yugoslavia, yet the Export-Import bank has not suspended either bank from its programs. IS EAGLEBURGER MEDDLING IN EXIMBANK AFFAIRS? The question arises why Yugoslavia has received special treatment from the Eximbank. Has Mr Eagleburger influenced the actions of Eximbank? Mr Macomber has stated that Yugoslavia has not received special treatment, but that statement is hard to understand given the facts. For example, longimt Eximbank staff stated that it was rare that an Eximbank President would take a unilateral action to place business with a nation on hold. they also stated that it was unusual for the Eximbank to decide not to formally suspend a nation that is suffering from such severe economic and political problems and is in arrears on Eximbank programs. Yugoslavia is evidently such a country. Staff at the Bank stated that Mr Macomber speaks to Mr Eagleb urger oftem, sometimes as often as two or three times a day. They also indicated that the topic of discussion between the two is sometimes Yugoslavia. Mr Macomber has stated that although he has frequent chats wityh Mr Eagleburger, the topic of Yugoslavia has bever been broached. This seems highly unlikely given Mr Eagleburger's position, his obvious interest in Yugoslavia and the importance placed on the Eximbank program in Yugoslavia. It would seem reasonable that Mr Eagleburger would inquire about Yugoslavia's status at Eximbank, but according to Mr Macmber this has not been the case. What is clear is that Yugoslavia is receiving special treatment from Eximbank. At this time the Committee does not know why. EXIMBANK PLAYING GREATER FOREIGN POLICY ROLE Considering the Administration promosal to allow Eximbank to finance one billion dollars in military sales and to open up a three million Eximbank program with the Societ Union, the trend toward using Eximbank as a foreign policy tool is clear. This is a disturbing trend. The Eximbank was created to assist US exporters. It was not created to be a major foreign policy tool. Rest assured, in order to protect the taxpayer investment in the Eximbank, the Banking Committee will continue to fight to maintain the commercial export promotion function of the Eximbank. End of Transcript of first half of this section of the April 25, 1991 record. Congressional Record - House - April 25, 1991 H 2551 Part two, Rep Henry Gonzalez, Chairman of the House of Representatives Banking and Finance Committee during the Special Orders, to an empty house. BRENT SCOWCROFT Another Kissinger Associates alumni is Brent Scowcroft, a career Air Force officer and a specialist in Slavic languages and history, who has held various positions in six administrations. Early in his military career, Scowcroft served one year as the air attache at the United States embassy in Belgrade, Yugoslavia. After earning a Ph.D and working in academia from 1962 to 1968, he held a succession of poses in the Department of Defense. In 1971, President Nixon appointed Scowcroft Military Aide to the President and in 1973, Kissinger chose him to be Deputy Assistant to the President for National Security affairs. Scowcroft often took charge of the National Security Council while Kissinger was fulfilling his duties as Secretary of State, and in 1975 succeded Kissinger as National Security Adviser under President Ford. Although he resigned the position during the Carter administration, Scowcroft stayed active as a member of the President's general Advisory Committee on Arms control. In 1982, Scowcroft joined Kissinger in setting up Kissinger Associates. Scowcroft served as vice chairman until regaining his position as National Security Adviser to President Bush in January 1989. During his tenure at Kissinger Associates, President Reagan appointed Scowcroft to various special commissions on defense issues and often sought his advice in national security matters. SCOWCROFT OWNS STOCK IN FORTY COMPANIES WHILE NSC DIRECTOR Mr Scowcroft's financial disclosure forms indicate that up until October 4, 1990, he owned stock in forty companies. Several of the companies, like Lockheed and General Electric, are among the Nation's largest defense contractors. Other companies include multi-nationals like General Motors, ITT, Westinghouse, AT&T, Mobil Oil, Du Pont, Xerox, and Hewlett-Packard. Some of these companies are also defense contractors, but all routinely must obtain export licenses as a part of their international business operations. The NSC has considerable sway over the export licensing process. Mr Scowcroft's stock holdings are most startling since the actions of the NSC, whether related to the export licensing process or US security policy, could have an influence on those companies. NSC HAS CONSIDERABLE SWAY OVER EXPORT LICENSING As I stated earlier, when George Bush took over as President , he issued a national security directive ordering improved relations with Iraq. The President, with the advice and consent of his senior advisers, including Mr Eagleburger and Mr Scowcroft, determined that the best way to improve relations with Iraq was through expanded trade. This policy was little different from that pursued during the Reagan administration. The NSC has direct responsibility carrying out the President's national security directives. In the case of export licensing, the National Security Act of 1947, and subsequent legislation provided the President, through the National Security Council, with ample authority to establish policies on export controls. To get a feel for the export licensing role of the NSC during the Reagan-Bush administrations, just look at the comments of Paul Freedengerg. He was the chief export licensing official at the Commerce Department during the latter half of the Reagan years and the beginning of the Bush administration. He recently testified that Iraqi use of poison gas against its own Kurds and the Iranians did not suppress the zeal of the NSC to approve technology transfer to Iraq. In testimony before Congress, Freedenberg stated: < In the summer of 1988, a number of licenses were This provides clear insiht into the power the NSC can exercise over the export licensing process. I would also like to include in the RECORD an article from the February 25, 1991 issue of Legal Times. This article gives the reader a good overview of Mr Scowcroft's role in promoting military sales. The article illustrates that an environment existed that could make it possible for Iraq to obtain sophisticated US technology to upgrade its military capability. The truth about the export licensing process is that the NSC and the State Department ignored or actually encouraged the transfer of militarily useful technology to Iraq, in violation of its public oath to prohibit such uses. Regarding the question of whether or not the companies that Mr Scowcroft owned stock in benefited from the United States policy toward Iraq, I can reveal one fact: Together, those companies received over one hundred out of the total eight hundred US export licenses for sales to Iraq. NAMES CANNOT BE RELEASED Unfortunately, the names of the companies cannot be released at this time. [NDT: But some names were released on February 3, 1992, and are included in a footnote at the end of this transcript; they were also published in the WSJ around that time.] The administration has stated that the list of export licenses for Iraq must be kept secret because of the supposed "proprietary" information it contains. Maybe the real reason for the secrecy stance is that the administration is embarassed by the list because it symbolizes the abysmal failure of the trade-based approach to foreign policy. KISSINGER ASSOCIATES AND THE GENERAL-MOTORS VOLVO TRUCK PLANT IN IRAQ [NDT: Please remember that not only does this mean that Saddam was supplied with American technology and goods while he was threatening a US ally in the Middle East, but also that a number of jobs were exported to Iraq at taxpayer expense. Have the US taxpayers reaped any particular benefit from this scheme?] The following is an interesting story involving General Motors and Volvo and their link to Mr Eagleburger and Mr Scowcroft and to BNL, and illustrates the odd triangle linking foreign policy toward Iraq, and BNL's role in financing it -- not to mention the role of Kissinger Associates. Volvo was a client of Kissinger Associates and the chairman of Volvo, Pehr Gyllenhammar, was on the Kissinger Associates board of directors with Mr Eagleburger and Mr Scowcroft. Mr Scowcroft owned stock in General Motors until at least October 2, 1990. Mr Scowcroft's and Mr Eagleburger's jobs placed them in a position of considerable influence over United States-Iraq trade. Both were responsible for carrying out the President's directive calling for improved relations with Iraq. Volvo and General Motors are partners in a company called Volvo GM Heavy Truck Corp. In 1989, Volvo GM Heavy Truck proposed to build a 5,000 unit-per-year heavy truck factory in Iraq. A copy of that proposal is in the record. GM and Volvo had considerable dealings with Iraq. In 1988, GM sold five thousand one hundred and twenty five Chevrolet Celebrities to Iraq. During 1989, GM secured financing from BNL for ten thousand Cutlass Cieras to be sold to Iraq. The BNL operation may have been shut down prior to actual disbursement of BNL monies. BNL money paid for dump trucks and units for Volvo and diesel engines to Iraq. GM frequently met with Eximbank officials to secure additionl GM projects in Iraq totaling an estimated eight hundred million. Hussein Kamel (or Kamil) is Saddam Hussein's son in law. BNL employees met with Mr Kamel when they travelled to Iraq. Mr Kamel is said to have been responsible for the secret Iraqi technology procurement network operating in Europe and the United States; Mr Kamel was the head of the Ministry of Industry and Military Manufacturing in Iraq. [NDT: Today - July 6, 1992 - CNN is reporting that the Iraqi's will not allow UN inspectors into a building which houses the Ministry of Agriculture. Given the strong connection between part of their military procurement scheme and USDA funds sucked out of BNL, one cannot help but wonder whether or not there exist a number of documents of a particularly compromising nature inside that building. Update: July 29, 1992, Many documents removed. No end to sanctions can be forseen.] On June 20, 1989, Volvo GM Heavy Truck Corp. wrote to the Iraqi Minister of the Ministry of Industry, Hussein Kamel, proposing the construction of a five thousand unit per year heavy truck factory in Iraq. The Volvo GM letter failed to add the words "Military Manufacturing" to Mr Kamel's title. Two other US automotive companies considered participating in the project. They were Cummings Engine Co. and Eaton Corp., Cleveland OH. In a memo describing their visit to Iraq, Volvo GM staff stated: First, the delegation meeting them was headed by a Brigadier General. Second, the ministry they met with is responsible for Industry and Armament. Third, the delegation visited a number of top secret defense operations. The Volvo GM memo goes on to state: Who at the White House was contacted remains a mystery. [NDT: Perhaps it was the same person to whom the UN-IAEA spoke by satellite telephone after a standoff situation in a Baghdad parking lot had been resolved.] But the White House was not alone in being sought out to suppor the project. Eximbank received fifteen letters from Congressmen, Senators, and one Governor interested in Eximbank financing for the truck factory. Thankfully for the taxpayer, the Eximbank refused to fund the project because it did not think Iraq was creditworthy. The project provides a good illustration of the sort of pressure the Eximbank was under to do business in Iraq. EATON CORP IDENTIFIES MATRIX CHURCHILL AS IRAQI OWNED COMPANY A startling revelation appears in the Eaton Corporation portion of the Volvo GM memo. In that portion of the memo an Eaton employee states: Matrix Churchill, Ltd., was the prime Iraqi front company operating in the United Kingdom. Its Cleveland, OH affiliate, Matrix Churchill Corp., was the main Iraqi front company operating in the United States. Matrix was responsible for procuring technology to be used in Iraqi weapons factories. What is amazing is that the US Government did not confiscate the Cleveland operation of Matix until September 1990 and the British did not confiscate the London operation until October 1990, both after the Iraqi invasion of Kuwait and months after Iraqi assets were supposed to be frozen. BNL was a main source of funds for Matrix Churchill and other members of the secret Iraqi technology procurement network. SCOWCROFT-EAGLEBURGER AND EXIMBANK MILITARY SALES The Legal Times article I referred to mentions the Eagleburger-Scocroft effort to get the Exoport-Import Bank to finance military sales. I have two points to make regarding the Eximbank financing of military sales; the first regards Iraq. I have evidence showing that Eximbank backed the sale of military articles to Iraq. I would like to place in the RECORD several examples of Eximbank financed military sales to Iraq. In 1986, the Eximbank approved the sale of six hundred thousand sollars' worth of and in 1987 it approved the sale of to Iraq. I have also included a Mack Truck sale of two hundred fifth wheel trucks to Iraq that the Eximbank refused to finance because of their military applications. Mack Truck sold trucks, tractors cranes and dumbers worth six point four million to Iraq with the heklp of BNL loans. Iraq also paid for forty heavy duty Mack truck chassis worth over two point five million dollars with BNL loans. The sad part about the Exim-backed sales to Iraq is that only a small handful of the one hundred and eighty seven transactions were checked for military use by the Eximbank engineers familiar with dual-usetechnology. The vast majority of Eximbank bbacked sales to Iraq were checked only by a loan officer. Nobody really knows the extent of Eximbank-backed militarily useful exports to Iraq. It is imperative that the Banking Committee plug the loophole that allows Eximbank-backed exports to go to dangerous nations without being adequately checked by professional engineers. The second point I have relates to the Eagleburger- Scowcroft proposal to finance one billion dollars in military sales using Eximbank. I have stated before and I will state again, Eximbank should not be used as a tool to augment declining military sales. CONCLUSION One interesting question that remains unanswered is why United States law enforcement authorities have not arrested or charged many companies with violations of US export control laws related to Iraq. Other governments, such as Germany, have announced efforts to pursue dozens of companies, many very prominent, for criminal violations of export control laws. I challenge you to name one United States company that has been indicted for violating the export control laws related to Iraq. Clearly, it was official US Government policy to provide Iraq with the credit necessary to purchase enormous amounts of United States agricultural products and sophisticated United States technology. Warnings about the miitary uses of the technology, warnings about Irq's creditworthiness, and warnings about Saddam's ruthlessness were routinely ignored. [NDT: In the early eighties the Spanish Ambassador was appalled to learn that Saddam's eldest son, with whom his children had been playing, boasted of having been allowed by his father to perform executions personally, at the age of nine. See Abdel Darwish and an unidentified contributor.] It was in this climate that the BNL flourished, and close friends of those in key positions of power facilitated and profited from this shortsighted policy. This official neglect may in large part account for BNL's disastrous conduct. Section 1230 Mr Speaker, let me conclude by saying that the worst of all is that this is just a small fragment of the huge, over seven hundred and thirty billion dollars' worth, of this type of money, foreign financing or banking money in our country, that is here, that can just -- with a small proportion of that, as in BNL, propel huge financial packages, for God only knows what purpose, because nobody in our government knows, neither the Federal Reserve Board nor the State banking regulators in the States where these foreign entities charter their agencies, know just what is being done in the United States. [NDT: But there is going to be new legislation so that the FBI can listen into telephone conversations and capture data as it is transmitted along fiber optic lines....] Mr Speaker, as chairman of the committee I have set forth the urgent need for the Congress to legislate with some priority in order to provide the American people with the sufficient assurance that their national interests and the very policies of their Government are in turn being protected, and at least being overseen. Mr Speaker, at this point I include for the RECORD the documents I have referred to during my special order. [NDT: One and two thirds of six-point type over three columns of Volvo GM documents. Please consult library copies of the RECORD if you wish to study them. They are very detailed. If you think they should be included, append them as a response to this message.] [ARTICLE FROM THE LEGAL TIMES] DEFENSE EXPORTERS' SECRET WEAPONS By Peter H. Stone For embattled weapons exporters, it was a salvo heard round the world. Last July, Deputy Secretary of State Lawrence Eagleburger fired off a classified memo to all US Embassies urging that US defense firms be given more help marketing weapons abroad. Some industry leaders boast that the Eagleburger memo was written at their behest., several months after a Januaru 1990 meeting with defense executives. And these leaders say that Eagleburger's directive is starting to provide an extra fillip fo foreign sales. The memo is just one result of the Bush administration's decision to put the government firmly in the business of promoting defense exports. Ambassadors now open doors, weapons makers may seeon qualify for government-backed loans, and the State Department helps push sales. But the change of policy is controversial -- and ironically timed, as the war in Iraq raises new worries about the proliferation of weapons. A key proponent of the pro-export policy has been Eagleburger. But he is dogged by ethical concerns about his dealings with former business associates. One industry representative at the January meeting with Eagleburger was chief executive of a defense subsidiary of the ITT Corp. Eagleburger was a director of the ITT Corp. before taking office in 1989 and will eventually receive benefits from the corporation's pension plan. He pledged to recuse himself from government matters in which the giant conglomerate is a formal party. In addition, as president of the consulting firm Kissinger Associates, Ind., Eagleburger did work for ITT. At least one critic believes that Eagleburger erred by participating in the meeting with the ITT official and by writing the directive promoting defense exporters. But a State Department legal expert says that Eagleburger, who declines comment, did not violate his recusal pledges. ADMINISTRATION AID Eagleburger's memo is just one of several administration moves to provide help overseas for weapons makers. Prsident George Bush's budget proposal, for instance, authorizes the Export-Import Bank of the United States to provide in the next fiscal year up to one billion dollars in loan guarantees for defense products. Several companies have pushed hard for such guarantees, in a bid to make their deals more competitive with fopreign rivals. In addition, the State Department last year hettisoned its Office of Munitions Control, long a target of criticism from the defense industry because of delays in processing license applications. The office was replaced with a larger operation that for the first time has an export-promotion component. Industry leaders say the new Center for Defense Trade has already made a clear dirrerence in speeding up the licensing process. says Fred Haynes, a vice president for planning at the LTV corporation. [NDT: LTV Corporation is now bankrupt, and it's missile manufacturing segment has been awarded by a Bankruptcy judge to an international consortium composed of Thompson- CSF, Mercedes Benz and Raytheon, who also participated very actively in end-running domestic controls on arms transfers for the benefit of Saddam's military program. The administration is considering allowing this sale, providing Americans are included on the board of directors. But Americans were on the boards of directors of over two hundred companies which shipped military and dual use technology to Iraq.] agrees George Perlman, president of Martin Marietta International Inc [also on the list of Saddam's suppliers]. The backing for weapons exports follows high-powered lobbying by leading defense trade groups, including the Aerospace Industries Association and the American League for Exports and Security Assistance. In addition, several defense contractors have served as effective advocates for their cause. They include some CEO's and other top officials fromthe Lockheed Corp., the Unite Technologies Corp., the Martin Marietta Corp., the LTV Corp., and ITT Defense Inc. A SHOT IN THE ARM State Department officials and defense executives stress that defense exports are different from cmmmercial trade since they must be deemed in the national interst before sales are allowed. Nevertheless, the thrust of the recent lobbying campaign and the government's campaign to promote the export has been to spur defense business abroad, which has been in the doldrums for years. Worldwide export deliveries of US arms totaled sixteen point five billion in 1987, but by 1989 had slipped to eleven point seven billion. Defense executives have used the shrinking defense budget as a key element in their campaign to increase foreign sales. With the Pentagon budget going down, they argue, exports are critical to individual companies and to the well-being of the defense industrial base. The war against Iraq notwithstanding, annual defense spending is projected to decrease by some fifty six billion, in constant dollars, over the next five years. says Gordon Adams, the director of the Defense Budget Project, an independent research group on defense issues. Adams adds. That's just what the industry has been busy doing. And it has had a strong and well-placed ally in Eagleburger, who, along with National Security Adviser Brent Scowcroft, has been instrumental in forging closer ties between US agencies and industry export programs. REVERSING THE LEPROSY LETTER For years, exporters smarted over one legacy of President Jimmy Carter. Dubbed the leprosy letter, the directive instructed US embassies to steer clear of defense firms because of concerns about regional arms races and high-tech weapons proliferation. Companies complained that many foreign governments took the opposite approach, providing their defense industries with strong encouragement for exports. Now that's all changing. And Lawrence Eagleburger has been getting a lot of the credit. says Joel Johnson, vice president for international operations at the Aerospace Industries Association (AIA), a trade group made up of fifty six of the nation*s leading aerospace firms. Defense officials have been direct in their approaches to Eagleburger. At the January 1990 dinner meeting with defense executives, he was urged to send a clea signal to US embassies in favor of defense exporters. says Don Fuqua, a former Democratic congressman from Florida who is president of the AIA. Adds Perlman of Martin Marietta, who wasn't at the meeting, but has worked on export issues: According to a State Department release in August, Eagleburger's July 10 cable advised ambassies to be Eagleburger also agreed to recuse himself for one year from matters specifically involving his former clients at Kissinger Associates. That year expired on March 20, 1990, weeks after the January 8, 1990 meeting with defense officials that was attended by ITT Defense's Engen. While Eagleburger would not comment, a State Department lawyer, speaking on the condition of anonymity, says that Eagleburger -- through his meeting with the ITT Defense executive and through his subsequent embassy cable -- did not violate his pledge to recuse himself from matters relating to ITT. this official says. The ITT Corp. was not a formal party because the memo promoting exports was a general policy initiative that affected all American defense companies, not just ITT, according to this official. Another federal ethics officer concurs that Eagleburger's actions did not violate any ethics standards. **Formal Party**, this official says, is generally understood to mean a company or individual with a petition or other official proceeding pending at the department. In the one-year recusal from matters relating to his former Kissinger clients, Eagleburger did not specify that only situations where the clients were formal parties were covered. Nevertheless, the State Department official says that the **formal party** standard applies. At least one liberal public-interest activist, David Dohen, co-founder of the Advocacy Institute, is not convinced by the State Department's explanation. says Cohen, whose organization trains public- interest advocates. As for the notion that ITT *individually* would have had to petition Eagleburger for help in order for the recusal pledge to come into play, Cohen calls it a Cohen adds tht Eagleburger's presence at the meeting and his writing of the cable are issues that the State Department and the Office of Government Ethics [Orwellian] ought to address. Eagleburger is not the only high-ranking official who has passed through the revolvint door and is not pushing defense exports from the inside. Defense lobbyists also tou the help they've received from National Security Adviser Scowcroft, who for a time headed Kissinger Associates' Washington office. Scowcroft, who could not be reached for comment, also served as a consultant to the Lockheed Corp. William Paul, a senior vice president for United Technologies Corp. in Washington, says he and three other industry officials met with Scowcroft last year on the issue of developing a cohesive administration policy on defense exports. Nobody from Lockheed attended that meeting, participants say. Paul says. Paul adds. The AIA's Johnson says that both Scowcroft's and Eagleburger's offices had significant roles in developing the administration's proposalo to provide loan guarantees for weapons exports fromthe Export-Import Bank. Without question, the defense industry's spadework is paying off. In relationships with other countries, the sale of defense weapons is now on the table with other issues. Duelfer adds that the revamping of the Office of Munitions Control grew out of extensive conversations with Eagleburger and Secretary of State james Baker on the need for streaml;ining the licensing process and promoting exports. BANKING GUARANTEES The Export-Impor Bank is also likely to be part of the new effort to promote weapons exports. Under a new administration proposal, the Export-Import Bank programs - - now almost entirely for commercial trade -- would be expanded to indlude loan guarantees for military sales to Japan, Israel, Australia, New Zealand, and the nations of the North Atlantic Treaty Organization. Sen. Christopher Dodd (D-Conn.) recently introduced a bill along these lines. Although the military guarantees would be limited to about one billion of the bank's nine point five billion dollars in direct loans and loan guarantees for fiscal 1992, there is considerable dissension in Congress about whether the bank should be getting into the defense-export game. [NDT: Typically, the clients most needy and greedy for defense imports will be those who subsequently require a forgiveness of indebtedness : seven billion in defense loans forgiven Egypt for its participation in the Gulf war - the list is quite long...and leads to the conclusion that the US will not be able to borrow on International markets indefinitely to pay the interest on a four trillion dollar debt which is allocated to projects such as these on the say-so of a handful of individuals and without public debate. We are not looking at a simple recession if this practice continues unabated. The scene is being set for one of two things: the collapse of capitalism as we know it, or Zee Big Bang.] says Rep. Lee Hamilton (D-Ind), Hamilton is a senior member of the House Foreign Affairs Committee. Albert Hamilton, a senior staffer at the bank from 1964 through 1987, is another prominent critic. says Hamilton, now a senior associate at First Washington Associates Ltd., which consults for the foreign counterparts of the Export-Import Bank. Critics nothwistanding, the defense industry [Orwellian] is upbeat about its export prospects -- and about the ability of its lobbyists to continue to win backing from the Bush administration. says Thomas Peterson, the head of Raytheon's Patriot International unit. HOT PLACE FOR ARMS:ISTABNBUL By Peter H. Stone A good example of how defense companies are benefiting from administration backing is the burgeoning arms trade focused on Turkey,, one of the United States' key allies in the coalition against Iraq. Fred Haynes, a vice president of the Dallas-based LTV Corp., says defense companies have found an increasingly receptive audience in Turkey, where a ten-year, ten billion dollar defense-modernization program is under way. The Lexington, Mass.-based Raytheon Co., for instance, approached the Turkish government last March about a sale to Turkey of ten of the company's Patriot missile firing units. To expedite the sale, Thomas Peterson, the manager of the company's Patriot International unit, says he met with Morton Abramowitz, the US ambassador to Turkey, and since then has been in touch with the embassy regularly. he sais. Peterson notes that the State Department's Office of Defense Trade is in trying to put together a deal soon. As part of that effort, Peterson says, the Senate Department and Raytheon -- along with its German partner, Siemens -- have been prodding the German government to get its export-import bank to provide loan guarantees for a sale of Patriots in the German configuration -- a sale worth more than one billion dollars. Another defense giant, the Hartford, Conn.-based United Technologies Corp., is also eyeing the Turkish market. William Paul, head of United Technologies' DC office, boasts that he met with Abramowitz both in Turkey and in the United States, trying to get his help in convincing Turkey to produce jointly two hundred helicopters with United Technologies' Sikorsky unit. Among those working the issue for United Technologies is Alexander Haig, the former secretary of state and ex- president of United Technologies who now runs Worldwide Associates Ind., a Washington consulting firm. says Paul. Although neither Paul nor Haig would comment on what Haig [i]s doing for the company, Raytheon's Peterson arrests to Haig's diligence. Peterson reports that he bumped into Haig leaving Abramowitz's office in Istanbul. [NDT: Haig was commander of NATO forces during the crisis in Iran, which is known in the US as the Fall of the Shah, and which Iranians remember as kicking out the foreign devils...] To make its deal financially attracive to the Turks, United Technologies turned to its home-State senator, Christopher Dodd (D-Conn) Dodd spearheaded successful legislation in 1989 that emabled the Export-Import Bank of the United States to provide loan guarantees for military sales to Turkey or Greece -- guarantees that United Technologies is using in its Turkish deal. End of the second part of transcription of April 25, 1991 speech by Rep. Henry Gonzalez, Chairman of the United States House of Representatives Committee on Banking and Finance. The speech was made to an empty house and it was not transmitted on C-Span. [NDT: There are also some interesting charts, which the format is difficult to replicate.] Congressional Record - House - May 9, 1991 H2934 Rep. Henry GONZALES: Mr Speaker, today I will continue the discussion concerning the Banca Nazionale del Lavoro branch or agency of the bank headquartered in New York, the branch in Atlanta GA, and its involvement in the sizable transactions involving letters of credit from Iraq and other countries. The German Government has admitted that it permitted German companies to assist Saddam Hussein in upgrading Iraq's military capability. In fact, German firms wee often the main contractors at Iraqi plants that produced the weapons of war, including chemical weapons. Unlike the United States Government, the German Government has announced that it has identified and is investigating numerous companies that are suspected of violating German export control laws. Dozens of thes e German companies were the beneficiaries of BNL loans to Iraq. The revelation by the Bonn government raises the question of why the United States Government has not admitted to the American people its own role in upgrading the military capability of Saddam Hussein. This floor statement today will address several actions of the administration that are in effect working to cover up the truth about our Government's role in upgrading Iraq's military. One of the biggest surprises uncovered by the Commitee on Banking, Finance and Urban Affairs, of which I happen to be the chairman, in its investigation into BNL's relationship with the Soviet Union, was the fact of this highly intricate, meshed relationship with the Soviet Union plus Germany plus other countries. BNL was a major player in Soviet Union purchases of United States grains such as wheat and corn. For example, in the first quarter of 1989, BNL helped finance United States exporters for five hundred and sixty five million of Soviet grain purchases. BNL also loaned a Soviet trading company one hundred million in unsecured and unreported loans. I will remind my colleageues that in the three billion dollars of the total of over five billion with the letters of credit on agricultural commodities, the taxpayer is now being dunned for billions of dollars on those guarantees that, once the Iraqi Government and others failed to honor their obligations, the guarantees of the United States Government through the Commodity Credit Corporation guarantees, that have been the mainstays of our policy, once the default was in, it left the taxpayers holding the bag with respect to those guarantees, as in the case of the S and L's, the banks now, and the other insured aor guaranteed institutions. Mr Speaker, BNL's relationship with the Soviet Union raises several interesting questions, including whether or not our Government would have or should have known about BNL's relationship with the Soviet Union. It is reasonable to assume that Government knowledge of BNL's involvement with the Soviet Union most certainly would have led directly to the unreported four billion dollars in BNL loans to Iraq. Unfortunately, that was not the case. Either through the sheer ignorance of US authorities -- which I doubt -- or with their tacit approval -- which I more or less suspect -- the BNL scandal went on for years. BNL AND THE SOVIET UNION - GRAIN SALES Over the past twenty years the Soviet Union has been an important customer of the United States grain farmer, purchasing twenty six point four billion dollars in United States agricultural products. During twelve of the past fifteen years, the Soviet Union has annually purchased well over a billion dollars' worth of United States wheat, rice, and corn. In the past three years alone the Soviets have purchased over six point four billion dollars in United States grains. For a time, the small Atlanta office of BNL played a significant role in the Soviet Union purchases of United States grains. During the first quarter of 1989, BNL helped finance in excess of five hundred and sixty five million in United States grain sales as I repeat, to theSoviet Union. If you project that rate out over the entire year, BNL would have financed seventy five percent of the Soviet's grain purchases from the United States in 1989. The loan scheme with the Soviet Union worked in the following way. During 1989, the Soviet Union was in the process of purchasing a record three point one billion in United States agricultural products. Until late 1990, when the Bush administration decided to allow the Soviets to purchase United States agricultural products using the CCC credit program, the guaranty the Soviets had to pay cash for United States agricultural products. Mind you, this did not come until late 1990. And it is easy to see why. And this was the unofficial bribe to gain Soviet support for the UN resolution, and it is, up to a certain point tacit acquiescence in our activities in the persian Gulf. Mr Speaker, the United States exporter would have to wait for the Soviet Union to pay for the goods which would occur anytime from a few daus to a few weeks after shipment. BNL helped to streamline that process by paying United States exporters immediately upon shipping goods to the Soviet Union. In effect, BNL was acting as the collecting bank for US exporters. BNL would pay exporters such as Cargill, Continental Grain and Louis Dreyfus for sales of grains to the Soviet trading company called Exportclub. While the exporter had to pay BNL a small fee to get its money immediately, it did not have to worry about the payment risks involved in dealing with the Soviets. In turn, a Moscow-based Soviet Union bank called the Bnk for Economic Affairs, would later reimburse BNL for its previous payments to the United States-based grain exporters. CONCEALING LOANS TO THE SOVIET UNION Besides acting as a collecting bank, Federal Reserve reports reveal that BNL also extended the Soviet trading company Exoport Club between one hundred and one hundred and fifty million in unsecured credits. Like BNL loans to Iraq, only a small portion, just twenty million, were authorized by BNL's management, so it said. The former BNL employees concealed the unreported and apparently unauthorized loans to Exportclub by recording loans under BNL-Rome approved lines of credit supposedly set aside for major US companies like Goergia Pacific. These corporations never knew BNL was using their names to conceal BNL loans to the Soviet Union. These false bookings or gray book operations supposedly started because BNL's headquarters in Rome regused to approve a larger loan balance for the Soviets. In many instances the employees of BNL would create forged documents, fraudulent telexes, and facsimilies. Supposedly, the former employees of BNL were forced to hide the loans to Exportclub because Rome threatened to close BNL's Atlanta office. Making false bookings in the name of prominent US companies worked to give BNL Rome the impression that the Atlanta operation was worthwhile. Section 1500 One can only guess how the unreported one hundred million dollars was used. Given Iraq's need for cash and its arms purchases from the Soviets, the money could have been used to pay for Soviet weapons shipments to Iraq, and in my mind unquestionably did. BNL also dealt with the Soviet Union through the New York-based Turkish trading company called Entrade International, Ltd. Entrade is a subsidiary of a large Turkish company called Enka, ad it specializes in international trade in goods and agricultureal commodities. The Justice Department recently indicted Entrade and its chief officer, Yavuz Tezeller, for providing cash, houses, jewelery, vacations and other things of value for the personal use and benefit of BNL employees in consideration for the unauthorized loans made to finance Entrade's exports to Iraq and elsewhere. Entrade faces a maximum fine of fifty four million dollars for its involvement in facilitating the BNL scanda. Mr Tezeller, a Turkish national, was charged with directing Entrade's contacts with BNL and with Enka entities inEurope and the Middle East. Mr Tezeller fled the United States to escape prosecution. [For information about Mr Tezeller's contacts with Mr Eagleburger, see Congressional Record dated April 25, 1991. There is more information on BNL-Turkish contacts in March 30, 1992 RECORD, H 2005 to H2014.] One very worrisome aspect of BNL's Soviet relationship relates to the bank regulators' inability to detect the fraudulent practices by foreign banks. This is what we are interested in , in the Banking Committee. I have said this before, and I will repeat it. The United States is the only country that has no minimal oversight; that means protectionor regulation, of a huge activity in excess of seven hundred and thirty five billion dollars from these foreign financial entities doing business in the United States, and who can with just a modicum of this amount put together deals that can result in huge, huge dollar activities? For what purposes? Only God knows. I will tell my colleagues one: drug money laundering. As a matter of fact, I will say by way of parentheses that, when we invaded Panama, and captured its then national official, leader, Noriega, and installed the officials that are there now, the men we installed are all bankers, and every one of them had been involved and associated with banks that had been very much involved in the famous or infamous Panamanian secret bank account systems that had grown to a sophisticated level almost, but I would think even better than the so-called Swiss secret accounts, and which facilitated and has continued to, among others, the Medellin drug cartel's activity for which we have incarcerated under very questionable status General Noriega in Florida today. Now mind you, behind all this are finances and financial transactions that the United States has no screening boar. Almost every other country, even Canada, does, and so we have at this time, for instance, especially during the President Reagan administration, allowed vital, direct assets and indirect assets purchase and control by foreign entities and investments into what I wold say is a level that would call for some kind of similar screening boards such as Canada belatedly found out it had to do. Now there is no desire to say that one should stop international transactions since these things are global today, and there is such an interdependence it would be very difficult to do it. However, certainly the United States has its own national interest, has a basic responsibility to look after, and what I am saying is we have not. There is nobody. the Federal Reserve Board cannot, and since we have this dual system, bank, like the BNL, are chartered by the State regulatory commissions. So, neither the State regulators have the ability, nor the Federal Reserve knows or has the ability to adequately autit, supervise, or follow these activities of these foreign financial institutions doing business in our country. Mr Speaker, this is the reason we consider this one of the most important and prime of issues, and, as of this moment, our purpose, being wholly legislative, we are not intent in going out here and pursuing revelations and exposes of individuals. Thise will come in place as the facts fall in place, and some other agency in the executive branch, like the Justice Department, will properly take care of that, I hope. But we are vitally interested in plugging the hole in our regulatory system that leaves the national interest unprotected, as far as the unrestrained activities of these huge financial resources floating around in our country are concerned. Now there were indications that former employees of BNL had a history of making false loan entries, creating false credit files and falsifying telexes and facsimilies going back as far as 1984. Federal Reserve examiners stated that, and I quote, So what? Was anything done? Was there followthrough? Was there any attempt to find out how much of this could be possible in the rest of this massive amount in our country? For this is just the tip of the iceberg. No, it never has been. How could such practices have occurred for so long without detection by the State of Georgia or the Federal Reserve Board or both? If the bank examiners were doing their job correctly, there is no way such a massive gfraud could have been perpetrated over such a long period of time. But then let me say this, that even in our own domestic oversight, our own regulatory system, it is so totally broken down that even at this late hour with the crisis engulfing us, with the bankruptcy incsolvency in both of the fundamental deposit insurance funds, there is no perception of the crisis engulfing us now. Let me tell my colleagues, as chairman of this Commitee on Banking, Finance and Urban Affairs, that is the most demoralizing thing of all. the people simply cannot on their own, if their Representatives do not or will not, and what I am saying is the percention is not here as to the depth, the scope, the scale, the gravity, the complexity of the crisis that is now endantering the very essential well-being of this country in the most vital way. Well, now, all of the sheiks from Kuwait, for instance, when they were here waiting for our Army to go and put them back in, had at least close to two hundred bilion here in the United States in the family name, and another close to one hundred billion in European and other banks. A lot of that, I am sure, was used in the ads you saw in the paper asking us to go on ahead and go to war and go in there and retrieve Kuwait. Fine, that is OK [Actually, the former ambassador to Bahrain, Mr Sam Zakhem, and two associates were indicted on July 7, 1992 for having accepted seven point seven million dollars from the Ambassador of Kuwait, spent two million on an advertising/propaganda campaign supporting US engagement in the war against Iraq, and pocketing the rest. The story appears on page A12 of the WSJ, July 8, 1992. The group named itself Coalition for America, and declared neither their status as foreign agents nor the which they accorded themselves. The so-called Coalition for America was not the only private group agitating for open hostilities. Mr Zakhem ran unsuccessfully for the Republican senatorial nomination in Colorado, in 1992. It will be remembered that US corporations had hoped to reap enormous profits from the reconstruction of Kuwait; once the war was over, their expected automatic access on reconstruction work poved neither reliable nor particularly profitable. US Corporations were not generally well received.] But it is entirely possible, because every one of these leaders, the sheiks, Saddam Hussein, and others in those countries and in other countries to have money not in the name of the government or the central banks of those countries, but in their own personal names, so it is very possible that Saddam Hussein can have un untold amount of money right here in the United States, without anybody really knowing, because the Federal Reserve Board says, well, no, we cannot rveal to you anybody, because that is comity here; we have to respect the privacy. [As it turns out, Saddam Hussein owns fourteen point five percent of the French conglomerate, Hachette. Hachette acquired Matra, the French arms producer, in 1992...] ` The BNL Iraq-Soviet Union nexus is very intriguing and it raises many additional questions. For exmample, did any of the four billion in BNL loans to Iraq go to pay for Soviet weapons? This seems very plausible since hundreds of millions of cdollars in BNL loans to Iraq cannot possibly be traced because the money was placed directly in secret Iraqi bank accounts. Only the Iraqis know for sure what happened to the money, but it is sage to assume that some of the BNL monty went to pay for Soviet armanents. At a milimum, the BNL loans freed up scarce foreign exchange that could then be used by Iraq to purchase Soviet weaponry. Another interesting question is how a small branch of an Italian bank operating in Atlanta could become a MAJOR SOURCE OF FUNDS FOR IRAQ and the Soviet Union procurement of United States goods. Is it possible that Iraq informed the Soviets about BNL's ability to loan billions at cheap rates without reporting the loans to United States authorities? It is possible that the Soviet Union was utilizing the BNL-financed Iraqi technology procurement network to obtain US technology? These interesting questions dealing with the relationship between BNL, Iraq and the soviet Union may never be answered. It is certainly not in the best interest of Iraq or the USSR to reveal how they used BNL and the United States banking system to obtain secret funds. In order to better illustrate the link between VIraq and the Soviet Union and the potential importance of BNL to that relationship, I will provide some background on Iraq and Soviet Union miliary relations. Iraq was the second largest importer of arms in the Third World during the 1989's when it was in its long, bitter, and inconclusive war with Iran. Between 1982 and 1989, Iraq imported forty five point seven billion dollars in arms, second only to Saudi Arabia. Arms imports represented about one-half of Iraq's total imports during the decade of the 1980's. The Soviet Union was by far Iraq's largest supplier of arms accounting for nearly half of Iraq's arms purchases during the 1980's. While the French supplied important systems for Iraq's military capability, especially fighter planes [MATRA!] and nonballistic missiles, the Soviets provided the backbone of the Iraqi military. Before the Persian Gulf war, Iraq's arsenal included over five thousant Soviet tanks, thousands of armored vehncles'; about fifteen hundred ground-toground artillery pieces. close to five thousant ground-toair airtillery pieces; almost two hundred Soviet ffighters and bokmbers; forty Soviet helicopters; hundreds of Soviet surface-to- air missiles; three thousand rocket launchers; three thousand antitank missiles, and hundred of Scud missiles. The Soviet Union suplied the majority of Iraq's weapons purchases, but there have not been accusations that the Soviet Union was not helping Iraq develop its own military research and production capability. Thattask was left to the Germans, French, Italians, English, Swiss and Americans. Much has been reported about the United Staes . The accepted explanation for this tilt is our concern about the implications of Iranian dominance in the Middle East which was fueled by the Iranian hostage situation. It was not a tilt, it was a complete crawling over. As a matter opf fact, I would think that with every one of our agencies, from the intelligence agencies to the State Department and the Commerce Department saying this is a policy of the United States to do business with Iraq, to foster their commercial developments, and whatever else, forgetting that the title of the miister doing butiness with us is the Minister of ECONOMICS AND MILITARY PROCUREMENT in Ira. And also the fact that if that is the policy, the banks, like BNL, are really government-owned. Americans here do not realize the sohphisticated side of this thing. BNL is really Italian government-owned, so that basic policy in Italy, that other wise would be frowned upon. If the CIA and the ambassador say, they are going to cooperate. They have cooperated. Our Government has done a lot of business that way with the French. We really stimulated them in a way, and in a way indirectly helped finance them in many areas. I will tell you that right now. Also other countries besides France. But that is not the issue at this time. One often overlooked, but nevertheless important factor in the so-called tilt toward Iraq was the United States attempt to detach the secular regime of Iraq from the influence of the Soviet Union. Pursuing fundamentalist Iraq as an ally had the potential benefit of helping thwart Iranian plans in the Middle East while at the same time potentially striking a blow to Soviet influence in that area. We must remember all along the United States-Soviet Union antipathy and enmity all during the cold war was being used for the individual purposes, aims, and intents of many countries, all the way from Europe to the Middle East, to Asia and Central America, and Latin America. All that any dictator had to do was say, of what they labeled as communists, and maybe the communist was a labor leader asking for an increase in wages and working conditions improvement. Saddam Hussein was able to use the United States- Soviet Union competition to his advantage. He was one of those, among many others, as I said, all the way from Durope, Central America, Asia and the Middle East, that maintained relations with both superpowers, and in the process was able to obntain food, high-technology products, billions of dollars in credit from the United States, and, at the same time, military hardware and training from the Soviet Union. In order to ensure that the West maintains its military edge over the Soviet Union, or any other petneital enemy, the United States and other industrial nationa have adopted export control laws that prohibit the sale of sophsticated technology. [This point will soon be moot, as the dis- industrialization of America proceeds apace - financed with American savings and American borrowings for which American tax revenues are earmarked to service the interest, at the cost of American employment. To the unpropagandized and natural perspicacity, this does not immediately present all the hallmarks of a winning strategy for job growth - or indeed, survival. It is seen as troubling by this transcriber that a great deal of ingenuity is now being devoted to preventing the problems which supposedly arose from the Treaty of Versailles, upon which the cocky little Chancellor (sic: Time magazine, 1934) based his critique of geopolitics. The problem did not reside in the Treaty of Versailles, but rather in the determination of Rhineland industrialists to overthrow the Weimar Republic; in other words, the spectre of Socialism is now being combatted as though the commonweal were a palpable threat to competitivity. Congress pulled the plug on the VP's council on Competitiveness, rejecting its' funding..] A good portion of the United States technology that wsent to Iraq would not have been legal to sell to the Soviet Union, but the Soviet Union could easily have persuaded Iraq to send its Western technology across the line. The Iraq border is less than one hundred miles from the Soviet border, I want to remind Members. [But perhaps readers will remember that the strength of the Evil Empire was very much overblown, and served as a convenient smokescreen for the accumulation of private wealth and enormous influence. This is called abuse of trust.] Section 1530 The Soviet Union was an important arms supplier to Iraq and even had thousands of military advisers in Iraq, up until the United States offensive against Iraq in January. The Soviet Union was also providing Iraq with credit to purchase Soviet weapons. Iraq was always short of cash and had relied upon Soviet credit to make direct arms purchases, the Soviets having made the loans contingent upon receiving western technology from Iraq. [But alas, the US does not appear to have made the five billions dollars in loans and guarantees it provided to Iraq CONTINGENT upon anything except the sale of American military hardware and technology. Did the US require political assurances from Hussein with regard to its' longstanding ally, Israel? did the US enter into any kind of agreement among competing Western arms' dealers, representing supposed Western allies? Once Hussein no longer felt obliged to repay the loans, did the US pull the plug, or did it fall victim to the same kind of blackmail which created the Savings and Loan disaster, namely: too big to fail? How are we going to continue to manage with a government which cannot work out how to counter this obvious ploy, and which keeps all it's mistakes secret so that they can neither be remedied, prevented nor arrested before they become, T-B-T-F? It will be remarked that the former Soviet Union also became too big to fail.] Another factor that makes such technology transfer possible is the Soviet Union's efforts to obtain western technology. The recent Tochiba case, whereby the Soviet obtained sophisticated machine tools that enabled them to silence their submarine propellers, for example [thank gott we've gotten rid of all that stuff...], os a prime example of the Soviet procurement operation. Fiven their strong and strategic alliance with Iraq, it seems highly likely that the Soviets would have attempted to obtain sophisticated United States and western technology from the Iraqis. After all, how hard would it have been for Iraq to transfer sophisticated United States and western technology to the Soviet Union given their borders are almost contiguous? The United States may never know if such a technology transfer occurred and, if it did occur, how much United States and western technology was sold to Iraq and then passed on to the Soviets. If the Soviets were smart they used their leverage ofer Iraq to obtain sophisticated and United States western technology. If Iraq was smart, it used its access to that technology as a bargaining chip for obtaining weapons from the Soviet Union. We know Saddam Hussein lied, not the only one, but we certainly know he did routinely. Why should he keep his word and not let the technology go to the Soviet Union? I am writing the Defense Department, the CIA, and the State Department to ask them if they have any knowledge of such transfers and if they have a process in place to ensure that third party nations like Iraq are not being used by others to obtain western technology. [Several authors have, however, documented that we do not need an enemy like Iraq to squander in bad faith our technological edge. We can do that ourselves quite serenely, without treacherous allies or false assurances. We do it naturally, quick as a flash - for a buck. The US will ineviably fall into the classic General's trap of complacency, and since the US continues to rely on purely military solutions for political dilemmas and is able to succesfully deploy a barrage of domestic propaganda which brooks no criticism or dissent, we can depend upon defeat, economic, political and military.] The BNL relationship with the Soviet Union also raises the question of our Government's knowledge of BNL activity. Given our Governments ability to monitor international communications as well as monitoring the Soviet Union's actions in the United States, our Government had to know about BNL's loans to the Soviet Union. Monitoring BNL's relationship with the Soviet Union should have led to the BNL relationship with Iraq. There is a US Government agency specifically in the business of monitoring these types of communications. Telexes, phone conversations, facsimilie communications are monitored by the NSA and that is our huge National Security Agency. Dr Norman Bailey, a former Natioal Security Agency staffer and a specialist in tracking the flow of suspected money abroad recently stated: I will vouch for that statement from personal knowledge in the case of other activities in the course of the years that I have been involved as a Member of this House, over thirty years. This assertion is further strengthened by the fact that BNL had a signifia=cant relationship with the Soviet Union. As I stated, BNL was providing the Soviet Union with hundreds of millions in short-term loans. This business required BNL to communicate with Moscow throuth telex, facsimilie, and the phone. Fiven that the administration considered the Soviet Union to be, in the words of President Reagan during the time the BNL scandal was taking place, it is safe to say that the NSA WAS MONITORING SOVIET COMMUNICATIONS WITH ENTITIES LKIKE BNL, especially communications INVOLVING LARGE FUND TRANSFERS. But then last week I brought out that ensconced in the highest places of our Government, in the most sensitive of all judgement-making, decision making levels, like the National Security Council, you have men like Scowcroft , its present director, who was there before and never nothered to divest himself of all the interests he had obtiained as a member and vice president of Kissinger Associates and all of the corporations that I listed in last week's RECORD that had business with Iraq, for instance. Here is a man that is shaping the policy, having to do with export licenses, having to do with the Export- Import bank and guarantees, the Department of Commerce. I can tell you this, that if the Export-Import Bank is having its meeetings and present are listed a representative from CIA, who says, meaning Iraan. And then you have Mr Kissinger himself, through these two agents and one in the State Department that I brought out last week, the Deputy Director of State, Eagleburger, and who still are influencing these decisions, should be be surprised if there is a reluctance for our Government to reveal the truth? Of course not. It would be too embarassing. It is like the series of addresses that I made here on this House floor in the late 1970's on the occasion of the murder of a Federal district judge, the most heinous crime ever committed against a mumber of the US judiciary, and alongside with the assissination of President Kennedy, was really the crime of the century. It was going to die. it was going to be covered up. And it was obvious that there were a lot of things, and I began to talk about them. Then I had a series of over fifty addresses which I entitled and brought out the now hard to discern, much less to disentangle, presence of organized crime in the most intricate levels of not only business but in our Government. We should not be surprised that we have the drug business we have. There is such an intertwining here of all levels, private business, government and crime organized, highly sophisticated. When I made those speeches in the early seventies, I brought out how sophisticated. In many ways, I had such a system that exceeded any ability of our organized governmental forces supposedly trying to act as antibodies fromn this invasion of crime in our society. It is the same thing here. It is no different. If you have got men who are profiting on their own and have an interest, whether it is legal of illegal is beside the point, whether it is technically or not in violation of conflict of interest [laws], it is certainly immoral and it is cedrtainly putting the well-being and the selfish interest of individuals above the national interest, as we now see to our calamity. What else does the sorry record show? I brought it out fully last week, and if anybody wants fuller, we will give them fuller details of Mr Scowcroft and Mr Eagleburger, other than they were procurers. They prostituted themselves. In effect, there is no other word to describe it. If this be treason, then make the most of it. While the majority of the Iraqi military machine -- aircraft, tanks, artillery -- was acquired mainly through government-to-government deals, such countries as the Soviet Union ad France and other countries like the United States, United Kingdom, Italy, German y supplied Iraq with the technology and equipment to build or operate its nuclear, chemical, biological and nuclear capability. The country most involved in helping Iraq build a self-sufficient military was Germany. German companies helped Iraq build the largest armament plant in the Middle East, build a chemical weapons factory and move years closer to developing nuclear weapons. Some of the biggest names in German industry have been implicated for being involved in supplying these critical technologies -- Daimler Benz, Messerschmitt, Gildemeister, and Siemens -- along with many smaller, lesser known firms. [But also IG Farben, which manufactured the gas for Hitler's gas chambers.] In total, over one hundred German firms contributed technology and/or equipment to Iraq's war machine. Section 1540 But let me again have this say: I doubt seriously that without the United States Government officials advising that this was in consonance and in congruency with United States policy that the German Government would have prohibited. Mr Speaker, at this time I would like to place in the RECORD a list of German beneficiaries of BNL loans. German companies were the major suppliers to Iraq's chemical weapons program. the chemical weapons complex in Samarra was a product of German technology. Pilot plant, the subsidiary of Karl Kolb, has stated it was exporting an insecticide plant from Germany, although experts say that nothing in the Samarra plant indicates that it could be used to make insecticides. Rather, it is believed that the Samarra plant produced mustard has used against Iranian soldiers and the Kurds. Now, with respect to mustard gas, there is no comfort for usWesterners to take in saying, and then the evidence showing that, well, Iranians used some, too, but let me say that the first one to approve the use of chemicals was Winston Churchill when he was in the War Office in 1919. Officials of the Royal Air Force said, The reclacitrant Arabs were what is today Iraqis and the like. Winston Churchill said, [You can tell.. when its pointed at you.] Even though he approved it, it was not until 1923 that the British Royal Air Force did use it against Iraqis in what is now Iraq and with untold and unreported deaths and injuries. But we know it was used first by us, civilized whites or Westerners. So we had better remember this before we start casting judgements. BNL loans were particularly significant in building the Taji armaments complex. The Taji complex was the largest weapons plant in the Middle East building artillery, machine guns, rifles, and other battlefield equipment. Gerrostaal, a beneficiary of BNL loans [and a foreign company] was one of the prime contractors for the Taji complex. It supplied a smelting plant and other German firms, Klockner, Thyssen, SMS Hasenclever, Siemens, and Mannesman together recieved over two hundred million deutsche marks from BNL for supplying critical elements of the Taji complex. The Saad 16 Project was a laboratory complex for militarily usable missiles, aircraft and other armaments that were developed and smaller missiles could be produced. The German firm Guildmeister was the general contractor for the project, and a Messerschmidt joint venture was the biggest subcontractor. Two other companies financed by BNL, Inwako and Havert Industrie, have been reported to have provided technology which allowed Iraq to increase the rante of Soviet-supplied Scud missiles. The increased range allowed Iraw to hit Teheran, Tel Aviv, and Riyadh where, if you will remember, twenty eight of our soldiers died when a Scud missile hit their barracks. If anybody wants to tell you that the Scud did not get by, gop and ask the Saudi kings, for their palace windows all shook and broke. In addition, Inwako and Siemens have reportedly supplied technology and equipment to Iraq's nuclear weapons research. Many of these companies have been indicted by the German Government for violating export control laws. So, in effect, at the time doing what the United States was doing, Germany winking at the violations of its own laws, today though is not pulling back. It is exposing, unlike our Government and our President. Now, where was the US Government in all of this? Supposedly, we complained to German officials, but to no avail; but this appears to be a classic case of, It is likely that our CIA or Defence Intelligence Agency knew about the German involvement in upgrading Iraq's military capability. In fact, I will say categorically they did. It would be hard to imagine that they did not know, given that some of the equipment that German companies sent to Iraq was from United States sources. For example, according to the German Ministry of Economics, electronic equipment supplied to a German company by Hewlett-Packard and Wiltron received United States export licenses, even though the equipment was expressly for a missile project. Giuldmeister, the general contractor for the Saad 16 missile research project, obtained a United States export license for computerized microfilm equipment made by Kodak specifically for use at this project. Siemens, Carl Zeiss, and Leybold AG were other German firms that received United States export licenses for United-States-made equipment that was later used by the Iraqi military. At a national security meeting in the summer of 1987, a Department of Defense official actually presented satellite photographs of the Saad 16 project in order to stop United States technology from being used by Guildemeister to upgrade the Iraqi missile program. Based on the photos, Paul Freedenberg, then the Commerce Department official in charge of export controls, directed that the Guildmeister license involving US hybrid analog computers be suspended. I believe that the exportation of the hybrid analog computer was later approved at the direction of the national security staff. Mr Speaker, there are many other cases. Remember, Scowcroft, Mr Kissinger lurking in the background, and Mr Eagleburger brought US technology. Our Government knew about the military uses of this technology and did nothing to stop it. The truth about the United States export licensing process is that the NSC, State Department, and Commerce Department routinely ignored and actually encouraged the transfer of militarily useful technology to Iraq in violation of its PUBLIC OATH TO PROHIBIT SUCH USES. On top of that, they are now engaged in a comprehensive effort to cover up, unlike the German Government to its credit, the American people, like the German people, expect its Government to come clean and to admit its blunders. The people have the right to know which companies helped to build up the Iraqi war machine. Unfortunately, the names of these companies that were the beneficiaries of the bankrupt United States export control policy toward Iraq cannot be released [see footnote at the end of this transcript for a list taken from Rep. Gonzalez' February 3, 1992 declarations.] The administration has stated that the list of export licenses for Iraq must be kept secret because of this supposed proprietary information it contains. The real reason, I say, my colleagues, is that the administration is embarassed by the list because it will show that the United States Government actually encouraged United States firms to helkp upgrade Iraq's military capacity plus its own highly placed policymakers [were] cheek by jowl and in comfortable commercial relationships for profits with these very same companies. Keeping the export licensing list as a secret is not only an indication that United States export is involved, the United States Government is involved, in trying to cover up its past policy related to Iraq, but also not quite willing to face the reality of the truth that it must admit. If the Congress does not, and this is the reason I feel the committee has a broader obligation and have thought so for two and a half years, even though there have been those that have directed some criticism. While the Bonn Government has admitted to its role, the US Government continues to cover up. Another indication of the administration's effort to conceal their past policy toward Iraq relates to reporting requirements contained in the Iraq Sanctions Act of 1990. On November 5, 1990, President Bush signed into law the Iraq Sanctions Act of 1990. This act contains a provision requiring the President to conduct a study and report on individuals, companies, and countries that sold, exported, or otherwise transferred technology useful in the development of Iraq's nuclear, biological, chemical and ballistic missile programs. Like I say, that is locked out, and we know the result and the products of the secret basements that obscure to the eyes of the people and the Congress the nefarious and the unwholesome aspects of these germinating insidious darkroom plants. -!!!!!!!!!!!!!!!!!!!!!!- Some of the US Corporations participating in the TEACO project: Mack Truck, Pennsylvania, tractors, trucks and trailers; Lincoln Electric, Phio, welding machines and supplies; Rotec Industries, Illinois, cement handling equipment; Hewlett Packard, California, computer systems; EMCO Engineering, Massachusetts, water treatment facility IONICS, Machassuchetts, water demineralization plants and water pumping systems; Dresser Construction, Illinois, construction equipment; Mundratech, Ltd., Illinois, dump trucks; Caterpillar Tractor Co., Illinois, tractors, earth movers; Grove Manufacturing, Pennsulvania, truch mounted cranes; Ingersoll Rand Co., New Jersey, cement compacting machines; Liebherr-America, Virginia, Liebherr cement mixers on Mach truck chassis; and Mannesmann Demag, Illinois, heavy construction equipment.