QUOTE(jeffmoskin @ Mar 24 2005, 03:33 PM)
Then-Rep. Charles Schumer of New York, a member of Gonzalez's committee said of the BNL scandal:
"From where we stand today, a nation with over 200,000 of its soldiers standing toe-to-toe with the bloodthirsty Iraqi war machine, and with thousands of its citizens held hostage by a ruthless dictator, these eight years of US largesse are shocking, almost incomprehensible."
"In effect, we've doled out billions of dollars of free money, which enabled Saddam Hussein to build the powerful nation that confronts us today."
"And all this could have been accomplished much more easily."
"The US government should simply have asked Saddam Hussein what weapons he wanted, ordered them from a manufacturer, paid the bill, and shipped them, postage paid, to Iraq."
"If the US is going to act stupidly, they at least ought to do it simply."
http://www.fas.org/spp/starwars/congress/1991/h910425g.htm BNL SUBPOENA RENEWAL (House of Representatives - April 25, 1991)
[Page: H2547]
The SPEAKER pro tempore. Under a previous order of the House, the gentleman from Texas [Mr. Gonzalez] is recognized for 60 minutes.
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--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 $4 billion in loans to Iraq without reporting them to the appropriate State and Federal bank regulatory agencies or even to BNL's own U.S. 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 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 RELATIONSThe 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, State, OMB, Commerce, Agriculture, U.S. 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 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. [Page: H2548]
BNL MAJOR SOURCE OF PRIVATE LOANS TO IRAQIThe 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 $3 billion 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 $2 billion 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 $1 billion in United States Government guaranteed loans to Iraq.
BNL was the largest single bank participant in the $5.5 billion United States Department of Agriculture's Commodity Credit Corporation [CCC] Program with Iraq.
Between $800 to $900 million in BNL loans to Iraq were guaranteed by the CCC.
BNL was also the second largest participant in the $267 million Export-Import Bank [Eximbank] program with Iraq.
Over $50 million 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 relations.
That course was increased trade.
Since the United States decided to give the appearance of neutrality in the Iraq-Iran war, it could not provide arms shipments to Iraq.
Given that decision, it was left little choice but to offer trade including U.S. high technology transfer as the cornerstone of its policy.
The majority of our Western allies followed our lead.
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 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 journalist, continual debt servicing problems, rampant fraud in the CCC program, 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 $35 billion in estimated reserves and plunged into the ranks of the Third World debtor nations.
Iraq was forced to ask all its creditors 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 and 1990 the CCC Program provided roughly $4 billion in credit for Iraqi purchases of United States agricultural commodities.
The Eximbank helped provide $267 million 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 of projects United States companies wanted to build in Iraq with the help of Eximbank financing.
As you can see by 1988, U.S. companies were seeking to secure Eximbank financing for projects totalling nearly $13 billion.
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 struck 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 increase 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 States technology destined for Iraq was going directly into upgrading Iraqi military capabilty.
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 Security Policy and Director of Trade Technology Security Administration [DTSA], testifying recently before the Banking Committee, stated:
"The Department of Defense objected to about 40 percent of the export licenses that came before it for Iraq."
"Generally speaking, the Defense Department's strongest objections for Iraq concerned the potential use of exported goods for Iraq's nuclear program, for missile testing and construction, and for chemical and biological weapons development."
"Examples include special computers for missile testing, analytical instruments best suited for chemical and biological weapons development, satellite and airborne surveillance equipment to accurately locate distant targets and furnaces for Iraq's nuclear weapons development program." Officially $1.5 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, almost immediately after the United States normalized relations with Iraq in 1984, the United States-Iraq Business Forum was formed.
It was founded by Mr. Marshall Wiley, a former State Department official stationed in Baghdad prior to the normalization of United States-Iraq relations.
The chairman of the Business Forum was Mr. A. Robert 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 U.S. business community.
To say that the Business Forum was U.S. Government-sanctioned would be going too far.
But the Business Forum did play a key role in United States-Iraq commercial relations.
Many of the companies dealing with Iraq, industrial and agricultural alike, received loans from BNL.
Since the Eximbank 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 to BNL which loaned $4 billion 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. [Page: H2549]
HENRY A. KISSINGERHenry 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 Adviser, 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 that 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 BOARDHenry 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--$4 billion 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 STOGAAlan 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 at 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. EAGLEBURGERLawrence 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 1975, 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 2 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 oganized by Henry Kissinger. EAGLEBURGER CLIENTSDuring 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, Josephson 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 Yugoslavia.
Global Motors, Inc. was the corporation established in the United States to distribute the Yugoslavian-made small compact car called the `Yugo.'
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 (ZCZ).
ZCZ 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 NEXUSAfter Iraq, BNL's largest foreign customer was Yugoslavia.
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 Yugoslavian bank--Ljubljanska Banka.
Ljubljanksa Banka is the second largest bank in Yugoslavia with $7.1 billion in assets as of year-end 1990.
In 1986, with the help of Mr. Eagleburger, LBS opened a State-chartered 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 U.S. with 20 percent to 25 percent of LBS's business from BNL.
The first transaction between LBS and BNL was a credit facility established in October 1986, 3 months after LBS opened in New York.
BNL also maintained a bank account at LBS.
The majority of the business between the two entities--totaling 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. [Page: H2550]
FORMER BNL-NEW YORK OFFICER REPLACED EAGLEBURGER AS DIRECTOR OF LBSSymbolic 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 39 years, was appointed a director of LBS in early 1989.
Mr. Guadagnini was the regional manager of BNL's U.S. operations while the Atlanta branch of BNL was illegally loaning $4 billion to Iraq apparently without his knowledge.
It is hard to fathom how the person responsible for supervising BNL during the time it illegally loaned $4 billion to Iraq is qualified to be a director of another bank. ANOTHER LINK BETWEEN BNL AND LBSAnother link between BNL and LBS is the chief lending officer of LBS.
BNL's Christopher Drogoul, a main conspirator in the 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.
LBS NOT WELL RUN WHILE EAGLEBURGER A DIRECTORApparently 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:
"LBS is conducting a very sloppy operation and supervision by the head office is extremely weak."
"Examiners have found a number of instances where there is a lack of documentation in loan participations with BNL."
"LBS does not have an internal auditor."
Sloppy management was not the only trouble LBS had during Mr. Eagleburger's tenure as director--LBS was also involved in money laundering. LBS CONVICTED OF MONEY LAUNDERINGAs 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 time period.
In 1988, LBS and its chairman were indicted on charges of laundering almost $1.5 million.
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 ACTIVITYA literature search of the Yugoslavian parent of LBS revealed that it also has been involved in several criminal proceedings during the past several years.
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 Agrokmerc affair.
Agrokmerc issued almost $1 billion worth of false promissory notes in local 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 DIRECTORLBS's association with criminal activity and criminals extended to the New York-based company called Entrade International, Ltd. and its chief financial officer, Yavuz Tezeller.
Entrade International, Ltd. is a Turkish-owned New York-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, jewelry, vacations, and other things of value for personal use and benefit of BNL employees in consideration for the unathorized loans made to finance Entrade's exports to Iraq and elsewhere.
Entrade faces a maximum fine of $54 million.
Mr. Tezeller, a Turkish national, is charged with directing Entrade's contracts with BNL and with other entities in Europe and the Middile East owned by Entrade's parent holding company, Enka.
Mr. Tezeller has fled to Turkey. LBS also extended a $300,000 mortgage loan to Yavuz Tezeller.
The Federal Reserve stated that "this loan appears to have been the first and only mortgage loan made by LBS."
Given the level of criminal involvement of LBS 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 York asking them to provide more information about LBS's operations in the U.S. 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 Yugoslavia.
He was Ambassador to Yugoslavia and prior to holding that post he worked in the Embassy as a foreign service officer.
While at Kissinger Associates he helped 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 U.S. Government. These facts could possibly explain the Eximbank exposure to Yugoslavia which stood at a whopping $1.056 billion as of March 1991.
One longtime Eximbank employee stated that he "always considered Eximbank's large exposure to Yugoslavia unusual."
Upon closer examination, Yugoslavia may be receiving special treatment from the Eximbank at this very moment.
BANKING COMMITTEE DENIED ACCESS TO YUGOSLAVIA DATAYugoslavia 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 PROGRAMSMr. Macomber recently decided to place all Yugoslavian transactions on hold--effectively suspending Yugoslavia from Eximbank programs.
This was not done through 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 Bank 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 foresight to call the Eximbank before going to the expense of doing business with Yugoslavian concerns.
The mission of the Eximbank is to serve exporters.
By not formally suspending Yugoslavia, the Eximbank may be doing a disservice to American exporters.
LBS AND PARENT NOT SUSPENDED FROM EXIMBANK PROGRAMSLBS and its parent bank in Yugoslavia both participate in Eximbank programs.
Both have been involved in serious criminal 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, longtime 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. Eagleburger often, 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 with Mr. Eagleburger, the topic of Yugoslavia has never 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. Macomber 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.
[Page: H2551]
EXIMBANK PLAYING GREATER FOREIGN POLICY ROLEConsidering the Administration proposal to allow Eximbank to finance $1 billion in military sales, and to open up a $300 million Eximbank program with the Soviet Union, the trend toward using Eximbank as a foreign policy tool is clear.
This is a disturbing trend.
The Eximbank was created to assist U.S. 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. BRENT SCOWCROFTAnother 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 1 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 national security posts 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 succeeded 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 40 COMPANIES WHILE NSC DIRECTORMr. Scowcroft's financial disclosure forms indicate that up until October 4, 1990, he owned stock in 40 companies.
Several of the companies, like Lockheed and General Electric, are among the Nation's largest defense contractors.
Other companies include multinationals 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.
To this day he still owns stock in many of those companies.
Mr. Scowcroft's stock holdings are most startling since the actions of the NSC, whether related to the export licensing process or U.S. security policy, could have an influence on those companies. NSC HAS CONSIDERABLE SWAY OVER EXPORT LICENSINGAs 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 [NCS], 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 Freedenberg.
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 pending with regard to technology transfer to Iraq."
"I asked for official guidance with regard to what the licensing policy would be toward Iraq since by that time there was credible evidence of the use of poison gas by the Iraqis against their own people and also against the Iranians.""I suggested that the imposition of foreign policy controls be considered as a way of justifying the denial of export licenses to Iraq."
"I was told by the National Security Council that the licensing policy with regard to Iraq was that of normal trade and that under normal circumstances I should clear the licenses that were pending.""I passed that information on to my licensing officers and the few dozen licenses that were pending at that time were approved and licenses were issued for exports to Iraq."
This provides clear insight 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 and Mr. Eagleburger's role in promoting military sales.
The article illustrates that an environment existed that could make it possible for Iraq to obtain sophisticated U.S. 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 100 out of the total 800 U.S. export licenses for sales to Iraq. NAMES CANNOT BE RELEASEDUnfortunately, the names of the companies cannot be released at this 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 embarrassed 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 IRAQThe following is an interesting story involving General Motors and Volvo and their link to Mr. Eagleburger and Mr. Scowcroft and 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 4, 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 5,125 Chevrolet Celebrities to Iraq.
During 1989, GM secured financing from BNL for 10,000 Cutlass Cieras to be sold to Iraq.
The BNL operation may have been shut down prior to actual disbursement of BNL moneys.
BNL money paid for Volvo exports of spare parts for dump trucks, water tank trucks and tanks, and units for Volvo diesel engines to Iraq.
GM frequently met with Eximbank officials to secure additional GM projects in Iraq totaling an estimated $800 million.
Hussein Kamel (or Kamil) is Saddam Hussein's son-in-law.
BNL employees met with Mr. Kamel when they traveled 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. 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 5,000-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 U.S. 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:
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U.S. authorities have been approached with the objective to obtain loans from the Eximbank.
The different government agencies have responded very positively and appointments are made for further talks with the government including the White House. So far, no credit line is available from Eximbank.
Who at the White House was contacted remains a mystery.
But the White House was not alone in being sought out to support the project.
Eximbank received 15 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 COMPANYA startling revelation appears in the Eaton Corp. portion of the Volvo GM memo.
In that portion of the memo an Eaton employee states:
"It is interesting to note that Matrix Churchill in the U.K. is 75 percent owned by the Iraqi Government."
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 U.S. Government did not confiscate the Cleveland operation of Matrix 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 SALESThe Legal Times article I referred to before mentions the Eagleburger-Scowcroft effort to get the Export-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 600,000 dollars' worth of portable radio communications equipment and in 1987 it approved the sale of "250 armored military truck ambulances" to Iraq.
I have also included a Mack Truck sale of 200 fifth wheel trucks to Iraq that the Eximbank refused to finance because of their military applications. Mack Truck sold trucks, tractors, cranes, and dumpers worth $6.4 million to Iraq with the help of BNL loans.
Iraq also paid for 40 heavy duty Mack truck chassis worth over $2.5 million with BNL loans.
The sad part about the Exim-backed sales to Iraq is that only a small handful of the 187 transactions were checked for military use by the Eximbank engineers familiar with dual-use technology.
The vast majority of the Eximbank backed sales to Iraqi 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 $1 billion 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. This program should be run out of the Defense Department using their resources.
Eximbank is poorly equipped to review the military implications of given sales.
CONCLUSIONOne interesting question that remains unanswered is why United States law enforcement authorities have not arrested or charged many companies with violations of U.S. 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 U.S. 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 military uses of the technology, warnings about Iraq's creditworthiness, and warnings about Saddam's ruthlessness were routinely ignored.
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. [TIME: 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 730 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.
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.