Atlanta Bank Was Hussein’s Lender
At a time when Saddam Hussein was short of cash--strapped by eight years of war with Iran and a depressed oil market--he turned to the Atlanta branch of Italy’s largest commercial bank for a little financial help.
For several years, Iraq had been a customer of that branch, buying American grain and other farm commodities with loans guaranteed by the U.S. Department of Agriculture. Iraq has since defaulted on those loans, leaving U.S. taxpayers to pay off the $1.9 billion that Baghdad owes nearly a dozen banks--including $347 million to the Atlanta branch of Banca Nazionale del Lavoro (BNL).
But in 1988, before those defaults, Hussein was looking for financing to buy technology and machinery. Banca Nazionale del Lavoro agreed to provide more than $2 billion in industrial loans.
According to letters of credit issued by the branch, Iraq was using the loans to finance construction of a petrochemical plant, a dam and a steel mill. U.S. intelligence sources say Iraq used the money in part to finance one of its most important armaments factories, a huge weapons complex at Taji.
Details of the transactions remain shrouded in secrecy, but a series of federal investigations--involving agencies ranging from the FBI and the Federal Reserve to the Department of Agriculture and the Pentagon--could shed light on Hussein’s arms procurement campaign.
In August, 1989, federal agents raided the 20th-floor Peachtree Center offices of the Italian bank and confirmed that the branch had made billions of dollars in loans to Iraq that were not reported on its financial statements. The transactions were recorded on a separate computer known at the bank as “the gray book,” according to the unpublished memoir of former branch Vice President Paul von Wedel.
Agents discovered 3,000 telexes between the bank and Iraqi government agencies, “many providing information detailing loans to companies that were building the Taji complex and other military-related projects within Iraq,” Rep. Henry B. Gonzalez (D-Tex.), chairman of the House Banking, Finance and Urban Affairs Committee, said last week. He also said there is evidence “clearly linking BNL loans to a network of companies that helped to build the Iraq war machine.”
A lawyer for fired branch manager Christopher Drogoul denied that his client knowingly financed any facilities other than a dam project and petrochemical and steel production plants. Drogoul’s conduct is at the center of a federal grand jury investigation in Atlanta. The bank is cooperating with the inquiry, and U.S. authorities say it is not a target.
Some bank documents made public by the Simon Wiesenthal Center in Los Angeles list several military projects that were financed, at least in part, by Banca Nazionale del Lavoro loans.
A major recipient of funds loaned to the Iraqi Central Bank by the Italian bank was Matrix Churchill, a British maker of precision machine tools. A former engineer for that firm told the British Broadcasting Corp. that the equipment was used in “manufacturing 155-millimeter and 130-millimeter artillery shells.”
Last September, the American offices of Matrix Churchill in Ohio were raided by the Customs Service investigating the firm’s links to Iraq’s arms procurement efforts.
The Atlanta bank’s former executive, Von Wedel, in an interview last year with American Banker, described the February loan-signing ceremony with Iraqi officials in Baghdad:
“It was like a cocktail party at a terrorists’ convention: camouflage uniforms, guns, mustaches. I was scared stiff.”
More to Read
Sign up for Essential California
The most important California stories and recommendations in your inbox every morning.
You may occasionally receive promotional content from the Los Angeles Times.