Special prosecutor held unnecessary Barr says Justice probe of banking fraud was clean

December 10, 1992|By New York Times News Service

WASHINGTON -- Attorney General William P. Barr ha rejected congressional demands for an independent prosecutor to investigate whether the government had committed a crime in a bank fraud case involving loans to Iraq. He asserts that the Justice Department had acted properly in every aspect of the politically contentious case.

Mr. Barr's refusal to seek a judicially appointed prosecutor in the case involving the Atlanta branch of the Banca Nazionale del Lavoro followed the recommendation of Frederick B. Lacey, his own counsel. Mr. Lacey had submitted a two-volume report that found "no reasonable grounds to believe further investigation is warranted with respect to the matters involved here."

Saying the Justice Department had nothing to hide, Mr. Barr said yesterday he fully agreed with Mr. Lacey's findings "and will not apply to the court for appointment of an independent counsel."

Mr. Lacey, who is retired from the federal bench, was appointed by Mr. Barr to assess whether an outside investigator should be assigned to the case. He turned on Mr. Barr's congressional critics at a news conference, dismissing as "nonsense" accusations that federal prosecutors had stifled a full investigation of the loans. "Had there been any corruption here, I would have smelled it and found it," he said.

Mr. Barr's decision yesterday, which was immediately denounced by congressional Democrats, was the Bush administration's last attempt to bring the bank scandal to a close, although there are other investigations under way that will keep the issue alive long after President Bush leaves office.

Those include the federal prosecution of the bank's officials, an internal inquiry at the CIA and a review by the Senate Intelligence and Judiciary committees.

Mr. Lacey said he would resign but several minor matters would continue to be pursued by the Justice Department.

Mr. Barr's move and Mr. Lacey's remarks seemed sharply at odds with the impression both men left last month after Mr. Lacey's independence had been questioned by congressional Democrats. At the time, Mr. Lacey, a Republican, suggested that he had put Mr. Barr on notice that he had uncovered "sufficient and credible evidence" to justify moving to the next phase -- appointing an independent prosecutor.

Mr. Barr approved that recommendation, which was seen at the time as embarrassing to the attorney general. Mr. Barr said he would abide by Mr. Lacey's final decision, leaving the impression on Capitol Hill that a prosecutor might be appointed.

In that atmosphere, congressional Democrats yesterday blasted Mr. Barr's decision and Mr. Lacey's seven-week investigation, saying it whitewashed serious issues and left important questions unanswered.

"After this futile exercise, the American public is left with the unmistakable impression that the wheels of justice can grind so exceedingly fine as to crush the truth in the process," said Rep. Jack Brooks of Texas, the chairman of the House Judiciary Committee.

At the news conference at which he announced his decision, Mr. Lacey bristled at reporters who probed his impartiality and thoroughness. The Republican jurist and former prosecutor in New Jersey blamed news organizations for reporting as fact what he called the "unbridled attacks of a legislator."

He did not name the lawmaker, but he clearly had in mind Rep. Henry B. Gonzalez, D-Texas, who has led congressional inquiries into the bank case.

"Many decent people have had their careers tarnished and their reputations stained by being charged with corruption, being part of a cover-up," said the judge, gripping the podium as he spoke in the headquarters of the FBI. "These charges were baseless. And you have been taken in by them."

While Mr. Lacey asserted that there was no evidence of any criminal wrongdoing, he did not rule out the possibility that someone may have tried to slow down the prosecution, hinting )) that the Agriculture Department may have tried to interfere in the case to enable the Bush administration to extend $1 billion in credits for farm products to Iraq in the fall of 1989.

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