102d Congress | Ser. No. 7 2d Session COMMITTEE PRINT | NEED FOR AN INDEPENDENT COUNSEL TO INVESTIGATE U.S. GOVERNMENT ASSISTANCE TO IRAQ U.S. peer-sºror'ſ AUG 17 1992 COMMITTEE ON THE JUDICIARY HOUSE OF REPRESENTATIVES ONE HUNDRED SECOND CONGRESS SECOND SESSION JUNE 1992 U.S. GOVERNMENT PRINTING OFFICE 56–783 WASHINGTON : 1992 For sale by the U.S. Government Printing Office Superintendent of Documents, Congressional Sales Office, washington, DC 20402 ISBN 0-16-038783-3 DOC c. COMMITTEE ON THE JUDICLARY JACK BROOKS, Texas, Chairman DON EDWARDS, California JOHN CONYERS, JR., Michigan ROMANO L. MAZZOLI, Kentucky WILLIAM J. HUGHES, New Jersey MIKE SYNAR, Oklahoma PATRICLA SCHROEDER, Colorado DAN GLICKMAN, Kansas BARNEY FRANK, Massachusetts CHARLES E. SCHUMER, New York EDWARD F. FEIGHAN, Ohio HOWARD L. BERMAN, California RICK BOUCHER, Virginia HARLEY O. STAGGERS, JR., West Virginia JOHN BRYANT, Texas MEL LEVINE, California GEORGE E. SANGMEISTER, Illinois CRAIG A. WASHINGTON, Texas PETER HOAGLAND, Nebraska MICHAEL J. KOPETSKI, Oregon JACK REED, Rhode Island HAMILTON FISH, JR., New York CARLOS J. MOORHEAD, California HENRY J. HYDE, Illinois F. JAMES SENSENBRENNER, JR., Wisconsin BILL MCCOLLUM, Florida GEORGE W. GEKAS, Pennsylvania HOWARD COBLE, North Carolina LAMAR S. SMITH, Texas CRAIG T. JAMES, Florida TOM CAMPBELL, California STEVEN SCHIFF, New Mexico JIM RAMSTAD, Minnesota GEORGE ALLEN, Virginia JONATHAN R. YAROWSKY, General Counsel ROBERT H. BRINK, Deputy General Counsel ALAN F. COFFEY, JR., Minority Chief Counsel (II) KF2 7 J% | ???, DOCS Majority Membexs Jacx Brooxs. Texas, Chairman oor eowaros. California ONE HUNDRED SECOND CONGRESS Congress of the lamitrd States Minority MEMBEXS Hamiltor Fish, Jr. New yorx Carlos - Moorheao. California Henry - Hyoe. L.Linois f Ames sensen Brenner. J.R. wiscorsin Bill Mccoulum. florioa oeonse wº. sexas. Pennsylvania Howaro coalenorth cartouna Lamars SWITH. Texas craio T. James. florioa to-campeel-L-california Steven Schiff, new Mexico JiMraM stao. Minnesota oeoroe allen. viroiria Mixe synar. oxlanoma Patricia schroedera-colonado oar Guickman. xarsas Barney frarx, Massachusetts Hartle-o-staggens. Jr. west viroinia Johr Bavant. Texas Mel-Levine, caurornia oeoroe E. sano Meistex. Illinois crao A-washington. Texas Petex Hoaolano, Nebrasxa Michael J. xopetsxi, ore oor Jacx ineo. rhooe islano indust of Trprtstmtatiots COMMITTEE ON THE JUDICIARY 2138 RAYBURN House OFFICE Building WASHINGTON, DC 20515–6216 FOREWORD Majority-22B-2set Minority-22B-esoe Attached is the transcript of two days of hearings by the full Committee on the Judiciary on June 2 and 23, 1992. The hearings were called to investigate whether the Committee on the Judiciary should, pursuant to 28 U.S.C. § 592(g), request that the Attorney General apply for appointment of an Independent Counsel regarding the United States Government's assistance to the Government of Iraq. The unedited transcript of those hearings is contained in this committee print. The practice of the Committee on the Judiciary is to circulate transcripts of hearings in order to enable Members and witnesses to review their remarks for accuracy prior to publication. The need for Members to have immediate access to the hearing record, however, must, in this case, take precedence over the usual multiple-stage editing process. While it is possible that certain transcription, grammatical or inadvertent errors May be contained in the committee print, any such errors will be corrected in the permanent hearing record. I believe that this version of the transcript of the hearings, together with documents submitted for the record, will provide Members with the information which they need in determining whether to make a formal request to the Attorney General for an Independent Counsel. CK TEROOKS airman C O N T E N T S HEARINGS DATES June 2, 1992 ..................................................…. June 23, 1992 .......................................................................................................….. OPENING STATEMENT BROOKS, Hon. Jack, a Representative in Congress from the State of Texas, and Chairman, Committee on the Judiciary ................................................................................................ WITNESSES Barnard, Hon. Doug, Jr., a Representative in Congress from the State of Georgia ............ DEGEORGE, Frank, Inspector General, Department of Commerce, accompanied by Wayne Page 59 32 Weaver, Esq., and Andrew Cochran, Audit Manager ....................................................... Gonzalez, Hon. Henry B., a Representative in Congress from the State of Texas .............. Leahy, Hon. Patrick, a U.S. Senator in Congress from the State of Vermont ..................... LEMAY, Frank, Legislative Management Officer, Office of Legislative Affairs, Department of State ............................................................................................................ Rose, Hon. Charlie, a Representative in Congress from the State of North Carolina ......... 112 25 19 63 29 NOTE.—Testimony of Robert S. Mueller III, Assistant Attorney General, and Laurence A. Urgenson, Acting Deputy Assistant Attorney General, Criminal Division, U.S. Department of Justice, appears in appendix II–11. (V) 3 would certainly hope that the administration will be forthcoming with the committee’s inquiry. The distinguished Members of Congress appearing today have devoted great time and effort as a service to this body and to the American public in uncovering information surrounding the very nonpublic actions of a num- ber of officials in this area. Their investigations did not begin in an election year; and, in most cases, they were initiated as a result of pursuing other matters that would not have normally led one to explore the Iraqi connec- tion. We are pleased to welcome you today to our committee, and we look for- ward to your testimony today. I would like to insert in the record at this time a Congressional Research Service statement on the exact procedure for the appointment of an independent counsel, which May be of some interest to the people. [See appendix I-1.] Mr. BROOKS. I would yield to my distinguished friend from New York, Mr. Fish. Mr. FISH. Thank you, Mr. Chairman. I also am pleased to welcome my colleagues to this hearing on U.S. Government activities relating to Iraq. This subject, although new to the Committee on the Judiciary, is receiving considerable scrutiny in other congressional committees as well as the news media. There is speculation about possible wrongdoing and diversion of funds. The Judiciary Committee, as always, is interested in the vigorous enforce- ment of the nation's criminal laws. Criminal investigations often take long periods of time. It is a process that requires painstaking investigation and thorough preparation before a decision on a prosecution can be made, and none of us want to see the Government lose in court because of a premature or precipitous decision. It is important that we keep this in front of our minds as we probe the Justice Department actions in the BNL case. The Chairman has appropriately reviewed the history of events and the passage of laws that frame our deliberations today. But allegations of mis- conduct on the part of governmental officials are serious matters. Those who occupy positions of public trust are subject to the rule of law and are fully accountable for their actions. When we are faced with questions about the propriety of governmental conduct, we need to hear directly from the agen- cies involved. It is my understanding, Mr. Chairman, that the committee will receive testimony from the relevant administration witnesses in the very near future. Thank you. Mr. BROOKS. I recognize the Chairman of the Subcommittee on Crime and Criminal Justice, who worked diligently on this entire matter, Mr. SCHUMER. He helped to collate the information we now have available. Mr. SCHUMER, the gentleman from New York. Mr. SCHUMER. Thank you, Mr. Chairman. I appreciate your leadership in calling this hearing this morning to weigh the need for an independent coun- sel to investigate the Government’s handling of the BNL affair. This is a complicated matter, and it is my hope that this hearing will sort out what we know from what we have yet to learn about. One thing is certain, Mr. Chairman. We know that money that was in- tended for food was diverted to help build Iraq’s military machine. The $64,000 question is whether any official of the U.S. Government took part in the diversion or knew about the diversion and looked the other way, or, 7 It is not uncommon in this body, Mr. Chairman, as we all know, for Democrats to beat up on Republicans and Republicans to beat up on Demo- crats. That is a given. But I want to go on record as saying I am not a rub- ber stamp for anyone. If you will recall, I have publicly—in this commit- tee—been critical of two or three past Attorneys General. If I thought he was wrong, I said so in this body. So I come to you not as a fiercely par- tisan member. But I want to us approach this matter very prudently and de- liberately. I received your letter dated June 1 this morning, Mr. Chairman. I left my office last night and apparently this was delivered sometime after 6. And I am going to just mention two or three matters that give me some concern. On the second page of the 3%-page document, these words appear: “USDA oversight of the CCC programs was highly inadequate.” Well, that is a very damaging conclusion, if true, and it May well be true. But I would like to hear the other side. In the same paragraph, these words appear: “The USDA did not force- fully or actively respond to these concerns.” Again, a damaging conclusion, if, in fact, accurate. There surely must be another side to this story. A third conclusion that bothers me, in the final paragraph of the second page: “In October, 1990, Congressman Barnard requested from the Depart- ment of Commerce export licenses to Iraq.between 1985 and 1990. The re- port that he later received contained altered information.” A very damaging conclusion if, in fact, true and accurate. But I want to hear the other side, and I assume there is another side. There has got to be two versions here. And then after we hear the various versions that are presented, I think we will then be in a position to determine whether or not an independent counsel is indeed appropriate. But I want each of us on this committee, Mr. Chairman, to keep in mind that that fiscal meter starts to crank up automatically when the words inde- pendent counsel are mentioned. I want us to be very much aware of that. If it is in order, I think we need to go forward. If it is not in order, I think we need to drop the hook and go on to better things. Thank you, Mr. Chairman. Mr. BROOKS. Thank you. Mr. Hughes, the gentleman from New Jersey. Mr. HUGHES. Thank you, Mr. Chairman. I will try to be very brief. Let me just tell you that, like most of the members, I have just received information within the past few days subject to this particular hearing. It is our responsibility under the Ethics in Government Act to make a decision as to whether an independent counsel should be appointed. I have a number of concerns. There is an ongoing criminal investigation, so obviously it makes whatever we do very sensitive. We have to be very careful that we don’t, in fact, impede in any way the criminal investigation. But, by the same tone, there are a number of allegations that have been made that we need to get to the bottom of. For instance, I did not realize until recently that when our colleague, Doug Barnard, asked for information from the Department of Commerce that he received printouts that were grossly fabricated, distorted, where information was changed to reflect that instead of agricultural products being exported, that it was, in fact, military products. And because that was especially em- barrassing to those in the administration, those facts were changed. Well, frankly, the FBI, the Department of Justice, has had that information for almost 1 year. I think it will be 1 year in July. Yet no indictments have been returned. 8 And that and a number of other instances that appear in the documents before us raises some very serious questions about diversion, which, unfortu- nately, represent violations of our law at a time when our relationship with Iraq and Iran is supposed to be rather neutral. Although I must say, during that period of time, I am not sure whose side we were on, because one day we were on the side of Iran, the next day the side of Iraq. Some days we were reporting out of the State Department to not advance the interests of either one. And, frankly, the whole thing needs to be looked at, and the question is how can we best do that. If the Department of Justice is prepared to do that objectively, then I say fine. That is for them to do so. But to date, the track record, I must say, has not been too impressive, and I am going to listen to the information to be presented at this hearing and make a decision on the basis of fact. It is unfortunate that it happens to come, again, during the political sea- son. That is why, Mr. Chairman, this committee has to be abundantly fair and reasonable and diligent to ensure that we don’t do anything that will, in fact, undercut any ongoing criminal investigation or any indictments that might be forthcoming. Thank you, Mr. Chairman. Mr. BROOKS. Mr. James, the gentleman from Florida. Mr. JAMES. Mr. Chairman, I understand that the purpose of today’s hear- ing is to evaluate the need for an independent counsel to investigate the Bush administration's pre-gulf war dealings with Iraq. The purpose is osten- sibly to determine U.S. Government officials violated laws in these dealings. I am sure you are aware that every President and Attorney General have opposed the independent counsel on constitutional and practical policy grounds. The Supreme Court has upheld the Office of Independent Counsel as constitutional. However, the public policy question of whether freelance prosecutors are in the best interests of our country still remains. I find it fascinating that Representative Gonzalez is calling for an inde- pendent counsel. He fiercely opposed turning over House bank records to the special counsel on the grounds that it would violate separation of pow- CTS. I think in light of recent problems in this institution an appropriate ques- tion is this: Why doesn’t the independent counsel statute apply to the impe- rial Congress? Why does this body continue to exempt themselves from the laws they impose on others? As a former criminal defense attorney, I am keenly aware that criminal prosecutions have great power over their targets. I am concerned that the independent counsel’s office seriously threatens the civil rights of the tar- geted executive branch officials. Since the Office of Independent Counsel was created, there have been nine public independent counsel investigations. The first investigation targeted Jimmy Carter’s top aides for alleged co- caine use in New York’s Studio 54. Both aides were eventually cleared. But, tell me, where do they go to get their reputations back? And, of course, the most recent independent counsel, Lawrence Walsh, has spent $34 million taxpayer dollars investigating and prosecuting Oliver North for, among other things, taking an illegal gratuity in the form of a security fence at his home. Was this really necessary, and what do we have to show for that time and money? Let me get to what I fear is the real danger of independent counsel and that is that the independent counsel is a political tool of this Congress. This can easily be the case since the law allows the appointment of an independ- 10 Mrs. SCHROEDER. Thank you, Mr. Chairman. Thank you for having these hearings and thank you to my colleagues who have been so vigilant on this. Of course, we are looking at this, and it is unfortunate it is a political year, but it takes this long to find out what was really happening. These col- leagues that we are going to hear from have been looking at this for a long time and are finally being able to get some facts and some information we can now act on. And I think we need to say that over and over again. Our duty is way beyond politics. It is to find out what the truth is. And, unfortunately, here the American public is going to be out $2 billion. That is a lot of money anywhere. Second, the American taxpayer is going to be told originally that those billions of dollars went for food, and if we find out they went for something else and if we find out there has been a coverup or something, these are very serious charges. This is a time when people's lack of trust in Government is at its all-time highest. It is a time when this democracy is teetering. And it seems to me we need to listen to these charges and, if they so merit, we need to pursue getting an independent prosecutor in here to get to the bottom of it. That is what we are here for. If we don’t have the guts to do that, we are in real trouble. So I thank them for working so hard on it. Mr. Chairman, I find these memos very, very interesting. I hope people look through these whole files, because I don’t see how you could reach any other conclusion than that we need to proceed on this. As you know, I tried to get this on the S&L'S, and I think we didn't get it, and I think it is very unfortunate to see how that all turned out. The tax- payers would have been much better served if we had had an independent prosecutor on S&L'S. I hope everybody realizes that we are here because the facts have driven us here, and for no other reason. Mr. BROOKS. Mr. Allen, the gentleman from Virginia. Mr. ALLEN. Mr. Chairman, what we are here to do is try to figure out whether there is sufficient evidence to go forward with this. One thing that needs to be stated is, notwithstanding the gentlewoman from Colorado's statement on these memos, the minority members didn’t receive this infor- mation until today or yesterday. All we have had is bits and pieces that we read over the last several months in the newspapers and in the media. I don’t think that this is necessarily the proper way to have a process, in the manner to proceed. Here we have possible political grandstanding, press coverage, and, in the midst of this, we are to investigate in this public hearing without any regard for the innocent. We have charges of coverup. We have the gentleman from New York, Mr. SCHUMER, talking about the innocent presumed guilty. They have the burden of proof to show why they should not be held accountable. It seems to me as the gentleman from Minnesota, Mr. Ramstad, said, the burden of proof really is on this committee to show why we need to go for- ward. We don’t need to be making these broad, subjective accusations and impressions as to what people May or May not have done. We can ask hundreds of questions. You can have questions as to what the Senate of Italy meant to do. You can have questions going on forever. But we don’t need the hyperbole in this. The key today is if there is evidence presented today, (and I will objec- tively listen and read the evidence and read these memos that we just re- ceived today), and if it is probative and if it is trustworthy, I think we ought 11 to proceed, Mr. Chairman, accordingly. But, if it is not, then it is nothing more than political and partisan speculation in the midst of an election year. Let's not drag this matter out for weeks and months. It would be a dis- service, in my view, to Americans and a disservice and abrogation and abuse of the powers of the Congress to do so. So let's try to keep the hyperbole down, listen carefully to the evidence and see whether or not we ought to stop this today or whether we should go forward if the evidence is probative. I thank the Chairman. Mr. BROOKS. Mr. Glickman, the gentleman from Kansas. Mr. GLICKMAN. Thank you, Mr. Chairman. On July 27, 1990, 1 week prior to Saddam Hussein's investigation of Ku- wait, with the help of Mr. SCHUMER and others, I offered an amendment to statutorily cut off the Department of Agriculture’s export credit programs to the country of Iraq. I must say that that amendment was fought by some, including the administration and the State Department. Nearly 1 year before that vote, my Subcommittee on Agriculture, in con- junction with Mr. Rose’s subcommittee and Mr. Brown of California's sub- committee, uncovered several disturbing aspects of the Department of Agri- culture’s dealings with Iraq, and that is what I would like to talk about for 1 minute. At that November 16, 1989, joint hearing, the subcommittees reviewed re- ports from USDA’s Inspector General that listed instances of fraud, mis- representation, kickbacks and other questionable dealings, including the di- version of food shipments and sale of those cargoes for military reasons and the provision of so-called dual-use industrial equipment, that is, goods with ostensible industrial applications that were actually put to military uses. That information we learned in November 1989, led us to address in the 1990 farm bill several reforms to the program that, we have now come to understand, was the primary feature of the United States-Iraqi relationship during the 1980’s and the program which had a large role in the buildup of Saddam’s military machine. As a result of the taxpayer financed food ex- ports Saddam received from the United States of America, he was not only able to feed his army during the war with Iran, but use his foreign trade holdings to finance his machine apparently with little regard to the human rights atrocities of the Baghdad regime. The Reagan administration used the complicated intricacies of this little- known USDA program to finance one of this country's most horrific war machines. At each step of the process, in my judgment, the administration sought to block our reforms, culminating in efforts to block passage of the amendment I mentioned earlier and the denial of other agricultural subsidies to Iraq as well. In spite of the overwhelming evidence of fraud in Iraq’s dealings, much of it uncovered by USDA’s own investigators, the administration refused to cooperate with these efforts and persisted in its shortsighted policy of help- ing the enemy of our enemy. It is clear to me, as it has been clear to me for a very long time, that we had a policy breakdown with respect to Iraq in the months and years before its invasion of Kuwait. Under cover of helping farmers and promoting agricultural exports, the administration was, in fact, helping underwrite Saddam’s military ventures. I can only speculate at this point how events might have turned out dif- ferently and how the political instability of the Middle East that exists to this day because Saddam remains in power might have been different had 14 counsel the Justice Department would have so zealously pursued that pattern of corruption has a great deal more faith in some things than I do. The independent counsel statute has been very useful. Independent counsel have in my recollection more often vindicated the people they have been in- vestigating than not. The independent counsel statute is invoked not because we were convinced that laws have been broken but because a threshold has been met in which there is a reason to think laws have been broken, and the entanglement of the Justice Department with that pattern—not nec- essarily unfortunate, just by the fact of an association—means that you need to go to someone independent. And that is a pattern that I think has borne out, and, as I said, independent counsel have vindicated some people, and they have moved to go against some others. Now, why are we talking about this here? First, we ought to say there was some reference to the Iran-Iraq war. All of what we have been focusing on is post the Iran-Iraq war. This is not a situation where we are talking about trying to help Iraq during the war with Iran. The events here focus after that. As to the timing, the phrase that this is an election year—since every other year is an election year and every other year is the year before an elec- tion year, almost everything is capable is being construed as being too close to the election. I know the gentleman from Texas started these special orders early in 1991. Had we then said, well, gee, when he first said this we better move right away, we would have been accused of undue haste. This is one of your psychological tests to which there is no right answer, and it is an effort to talk about anything but the merits of this case. The gentleman from Georgia has testified and will testify his sub- committee was lied to about the equipment being sent to Iraq with Eximbank funds. Mr. Barnard's subcommittee was lied to. The Commerce Department altered documents and later acknowledged that those documents were altered to mislead. We have—on March 30, 1992, the gentleman from Texas, Mr. Gonzalez, who has been outstanding in this whole series of events, cited on the floor a Justice Department recommendation to the State Department that a Jor- danian official not be indicted whom the Justice Department did not want to indict, and he was not indicted. Now, that seems to me to be an example of the kind of thing we ought to be looking into. We have a pattern in which the funds sent to Iraq were misspent. We have some indictments now. We have a question of the bank that is involved with BNL, which has not itself been indicted, which has been portrayed here as the poor victim, unknowing of these things. So the pattern is very clear. Justice worked with these agencies, and I don’t know if anyone high up committed a crime. We do know many, many people committed crimes. We have got guilty pleas, etcetera. And the answer, I think, is not—to summarize—are we trying to criminalize policy differences. I think it goes the other way around. We are trying to find out if the administration tried to decriminalize for policy rea- sons. That is, they had a policy after the Iran-Iraq war of charming Iraq and paying Iraq enough money so they behaved. It doesn't work. And that is not a subject for criminal investigation. On the other hand, what we have is that, while they were giving the Iraqis the money, the Iraqis were making suckers out of them on two levels, first of all, on the policy level—but also the Iraqis were misspending. They were 15 abusing the program. There were violations with the CCC, the Banking laws, the Eximbank. That is not disputed. The question we have is, given the policy drive to be nice to Iraq, did administration officials to some extent look the other way to cover up this criminal behavior? We have one very clear example presented by Mr. Barnard where his sub- committee was lied to because the information, if correctly shown, would have shown how the Iraqis were using this illegally for military equipment. That is what we are trying to find out, and that is the accusation the ad- ministration has to dispel. Mr. BROOKS. Mr. Sangmeister, the gentleman from Illinois. Mr. SANGMEISTER. Thank you, Mr. Chairman. Along with everybody else, on this side of the aisle at least, I would like to commend you for holding this hearing to determine whether or not the Judiciary Committee is going to apply to the Attorney General for the ap- pointment of an independent counsel. I think it is important to understand we are not here to judge whether or not the administration’s Iraq policy ulti- mately failed. We will leave that to the historians and to the public as a whole to make their own judgment. I would like to say to the gentleman from Florida, Mr. James, my col- league, that his assessment that the Congress seems to exempt themselves from these types of proceedings—I would remind him that I don’t know of anything that Judge Willkie did not receive in the so-called House bank scandal that he wanted. I think the Congress has completely cooperated, and I would like to see, hopefully, that the administration is going to cooperate to get the facts out here. In an effort with my staff to prepare for this hearing, they did supply me with a U.S. News & World Report edition dated May 18, 1992, which I think is a great summary of what happened out there. Just because U.S. News & World Report publishes it doesn’t make it gospel, and that is why it is good to have this kind of a hearing. I am certainly looking forward to hearing from our colleagues as to what their knowledge is. As I said, I would hope the administration would come forward, whether in a defensive position or in the affirmative position, to set aside the innuendoes that certainly have been raised. I look forward to hearing today’s testimony. Mr. JAMES. Will the gentleman yield, since you invoked my name? A special prosecutor is in a different category than Mr. Willkie who can be fired at any time. There is a world of difference between people that can be turned loose and those that can’t be fired, who go on forever. I just want- ed to make that point. Thank you, Mr. Chairman, for your patience. - Mr. BROOKS. Mr. James, let me observe, “Independent counsel appointed under the chapter May be removed from office, other than by impeachment or conviction, only by the personal action of the Attorney General, only for good cause, physical disability, mental incapacity or any other condition that substantially impairs the performance of such independent counsel's duties.” I think the Attorney General has full authority to can him. Mr. JAMES. Mr. Chairman, if you will allow me, there is a difference be- tween the independent counsel and Judge Willkie. Mr. BROOKS. Mr. washington. Mr. WASHINGTON. Thank you, Mr. Chairman. It is always good to be with you on occasions like this, especially to be faithfully and closely by 17 Let me just add one point, and that is what particularly concerns me, hav- ing sat through one of Chairman Gonzalez’s hearings and reviewed some of the material, is the enormous amount of money that has been involved in these transactions and the virtual lack of controls that appear to See that that money is used effectively and lawfully. Iraq received nearly $5 billion in agricultural credits in the 6 years preceding the gulf war. And the United States today has staggering residual liability under these guarantees on those Banks around the world, hundreds of millions of dollars. And as we look at these transactions, we see that the administration seems, or at least is alleged, to have diverted these agricultural credits for its own purposes so that Saddam Hussein could build up his war machine and leads to the questions that Mr. Glickman and others have raised. With- out this phenomenal armament by Saddam, would we have had the war at all? But, in any event, I think one of the most beneficial aspects of an inde- pendent prosecutor's investigation and report is to give us guidance as to what to do with these kinds of programs in the future, to be sure we have appropriate checks and balances, to be sure we have appropriate oversight, to be sure we are not just scattering hundreds of millions of dollars across the countryside for policies that are unexamined, not authorized by Congress, to meet the agenda and the program of some low-level or mid-level people in the administration who are off on the wrong thing with access to nearly $5 million over 6 years. So I think it would be most economical if the special prosecutor’s report gave some guidance, Mr. Chairman, as to what to do in the future to be sure these kinds of programs don’t lead to the apparent abuse. Mr. BROOKS. Thank you. Mr. Kopetski from Oregon. Mr. KOPETSKI. Thank you, Mr. Chairman. I want to commend you for your leadership in setting the agenda of this committee. I don’t have an opening statement. I do want to say that there is nothing like sunshine in our Government that provides a good disinfectant to ques- tionable activities by Government officials. I hope we can move forward today and bring some understanding to the issues at hand so that the Amer- ican people know what their Government officials have been doing and are doing to date in terms of policy, and, as Mr. hoagland said, in terms of the billions and billions of dollars of all of these transactions. Mr. BROOKS. Mr. Reed, the gentleman from Rhode Island. Mr. REED. Thank you, Mr. Chairman. I would like to commend you, Chairman Gonzalez, Chairman Rose, and Chairman Barnard for your efforts to try to get to the bottom of this situation. The events we will be looking at May have led to an armed confrontation between our country and the country of Iraq. And I am sure for the thou- sands of American servicemen and women, they were thinking many nights why they were there in the Persian Gulf and probably thinking ceaselessly where all those trucks came from. And maybe we will be able to shed some light on that, and in the specific context of our deliberations today, whether or not we will determine based on the evidence that there is a need to re- quest from the Attorney General an independent counsel. We are not attempting to displace the Attorney General. He is the only one authorized to request the appointment of an independent counsel, as I understand the law. But this May be the only practical way that we can, in fact, require him to ensure he does take his responsibilities very seriously. I believe with the evidence that is emerging in the last few days this inquiry 20 million pregnant women and working mothers who in the wealthiest Nation on earth don’t get any money now. Instead, we spend the money on foreign aid for Saddam Hussein. The Commodity Credit Corporation’s export guarantee program is sound policy. It has a good goal—to increase foreign purchases of U.S. agriculture products through the CCC, thereby helping American farmers. But the prob- lem starts when this administration, or any administration for that matter, uses the CCC program as some kind of under-the-table foreign aid. And ap- parently that is what happened here. This was used as under-the-table for- eign aid. I will tell you what happens. Under the CCC program, the U.S. Govern- ment doesn’t actually write a check up front to a foreign nation. It gets do- mestic and foreign Banks to extend loans by promising to guarantee the loan. The United States pledges full faith and credit. Now, if the foreign Government fails to pay back the loans, guess who does? U.S. taxpayers. They get the bill. They pay the loan. Now, the $5 billion in credit the United States extended to finance the purchase of farm products, Iraq defaulted on nearly $2 billion since its inva- sion of Kuwait. Guess what? American taxpayers are left with the bill. We end up paying the tab for Saddam Hussein. And evidence uncovered sug- gests the administration extended CCC loans to Iraq even though the admin- istration’s officials knew Iraq wasn’t creditworthy and the U.S. taxpayers might end up paying the bill. In fact, by mid-1989, no nation on earth except one, the United States, was extending long-term loans of 1 year or more to Iraq because they feared that Iraq after the Iraq-Iran war would default on long-term loans. We were the only nation on earth shoving those loans out there. I have included in my written statement, which I ask be made part of the record, some of the evidence that the administration officials knew Iraq was not creditworthy when the loans were approved. That is what is the most bothersome thing. They knew. They knew these loans might not be repaid. The administration likes the CCC program because it requires no congres- sional approval before specific guarantees are extended. It also allows them to camouflage foreign aid as CCC loans. When money is disguised as loans to a nation not creditworthy, the ad- ministration is not being honest to the American people. That is what is hap- pened with Iraq. For example, they haven’t even learned their lesson in that because the administration is planning to use CCC programs to make loans to Russia and other members of the Commonwealth of Independent States without questioning their creditworthiness. The evidence uncovered so far shows that foreign policy considerations weighed heavily in the administration's decision to extend CCC credit guar- antees to Iraq. That, in and of itself, doesn’t constitute a violation of law. But the problem is, not only do foreign policy concerns result in bad loans, but the administration May have misled both Congress and the American people about the facts. At the end of my testimony I have included a chronology of this issue. Let me just summarize a couple of key points. On February 12, 1990, over 2 years ago, I wrote a letter to then Agri- culture Secretary Clayton Yeutter saying—keep in mind, this was more than 2 years ago—I said, “I am also disturbed by rumors that foreign policy pressures have encouraged the Department to give Iraq special treatment in this case.” 21 More that 2 years ago, on February 20, he wrote back and said to me, “You mentioned there were rumors of foreign policy pressures to give Iraq special treatment in this case. To the contrary. Extension of GSM-02 guar- antees in connection with sales to Iraq have recently been subject to special scrutiny because of the BNL investigation.” But Chairman Gonzalez has placed into the March 16, 1992 Congressional Record what appears to be an earlier draft of Secretary Yeutter's letter. I think it gives a clear sense of what they were thinking. That draft says, “You mentioned there were rumors that foreign policy pressures have oc- curred to give Iraq special treatment in this case. I can assure through is no basis for the rumor.” The day after his letter, I asked Under Secretary Rich Crowder before our committee, “I presume you are getting some pressure from the State Depart- ment or elsewhere within the administration to loan money to Iraq.” He re- sponded, “We are not getting undue pressure from anyone on either side, either for Iraq or for anyone else at this time.” But when you read my chronology, you will find that foreign policy did play a decisive role in the administration’s decision to extend these credits, contrary to what Secretary Yeutter and other USDA officials said. On October 31, 1989, less than 4 months before I wrote to Secretary Yeutter, he was called by Secretary of State James Baker. The talking points for this conversation are in the Congressional Record. The talking points State, “On foreign policy grounds, we support a program of up to $1 billion released in tranches with periodic compliance reviews. We want to get this important program back on track quickly.” According to the February 24 and 25, 1992, reports in the Los Angeles Times, Secretary Baker wrote in his talking points that Yeutter told him dur- ing the phone call, “I think we are seeing it the same way you guys are.” The loans were extended to Iraq soon there after. Secretary Baker testified before the Foreign Operations subcommittee of the Senate, I am Chairman of that subcommittee, and I asked him about the story in the Los Angeles Times. I said, “They indicate to me the rumors I was hearing were correct. The response given by Secretary Yeutter was wrong, and indeed he was pressured by you, Secretary Baker, or by the ad- ministration on foreign policy grounds.” I then said, “Was Secretary Yeutter telling me the truth when he said that foreign policy considerations gave no role in extending credit guarantees to Iraq'?” Secretary Baker then confirmed that foreign policy played a role in the decision. The question still remains, Why mislead Congress and the American peo- ple about the reasons it was giving aid to Iraq in the months and years be- fore that nation invaded Kuwait? The goal of CCC is to export U.S. farm products. Iraq was receiving guarantees to buy food, but Saddam Hussein was getting a lot of other benefits at the same time. At one level, when Iraq was financially devastated, strapped for cash, the administration used U.S. taxpayer money, perhaps inadvertently, to prop up Saddam Hussein and help the dictator rebuild his nation’s war machine after the Iran-Iraq war. He needed cash to buy food to feed his people. But by receiving U.S. agricultural credits which bought the food for his people, he could use other money on military weapons and machinery, which he used in the Persian Gulf War. Money is fungible. The money the administration provided to Iraq for food freed up his other money. On a second level, my committee is going to investigate whether CCC credit guarantees were actually diverted from the purchase of food to other 22 uses. We are concerned that in spite of assurances from the Department that the export credit guarantees program is not used for military purposes, evi- dence continues to come to light indicating there was such a connection. It is well-known the Atlanta Georgia branch of Banca Nazionale de Lavoro, BNL, was instrumental in helping Saddam generate credit between 1984 and 1989 until Federal agents raided it and shut it down. Just this morning the central and final figure in the BNL figure has agreed to plead guilty to many counts of conspiracy and fraud brought against them. Unfortunately, that means there will be no trial or public hearing in court of the Atlanta bank branch that made over $4 billion in loans to Iraq. Now, we fault the administration's investigation of this matter. The ad- ministration assured us in the Agriculture Committee that the USDA’s In- spector General Office was undertaking a thorough investigation. Despite USDA’s assurance, it now appears that no thorough investigation was con- ducted. Instead, the Inspector General only audited the program. This means the IG reviewed the documents rather than vigorously following leads and taking testimony under oath. In conclusion, let me say this, Mr. Chairman. Because of so many unan- swered questions or questions that I think were answered improperly during the last couple of years when I have been asking questions about this, Sen- ator Lugar and I together sent letters on May 22, 1992, to Secretary of State James Baker, Federal Reserve Chairman Alan Greenspan, Federal Reserve Secretary Nicholas Brady and Secretary Madigan, requesting documents to aid our investigation. Senator Lugar and I have also insisted the Treasury Department cease its delaying actions in blocking access to documents. And I have included in my statement all of that, because when you come down to it, the bottom line is CCC money was used for foreign aid. Now, I don’t know whether this was because of a mistake or because of fraud. But the end result is the same: Whether it was done by mistake or done by fraud, the American taxpayers end up paying a foreign aid bill to Saddam Hussein. And I can’t believe there is an American in this country who would be very happy to find out that he or she is paying part of the bill for $1.9 billion in foreign aid to Saddam Hussein. Thank you, Mr. Chairman. [See appendix I–2.] Mr. BROOKS. Senator Leahy is obligated to return to the Senate to a hear- ing that he has been absent from, but Mr. SCHUMER wanted permission to ask one question. Then I will give him that opportunity. Mr. GEKAS. I want to ask a question, too. Mr. BROOKS. You will get that opportunity. You get one. You, Mr. Schu- mer, gets one. You get one. Mr. JAMES. Mr. Chairman, that is an absurd procedure. I would request the opportunity to ask a question. You are about to charge the administration has committed crimes Mr. BROOKS. Regular order. Mr. SCHUMER, you are recognized. Mr. JAMES. That is absurd if you have rules like that. Mr. SCHUMER. Thank you, Mr. Chairman. I want to ask Mr. Leahy Mr. JAMES. That is a joke. There is no order in this committee. Mr. SCHUMER. In February 1990, in the letter in which Secretary Yeutter disclaimed—it was a letter to you, foreign policy pressures, which has now become famous he also said—this is from page 3 of your testimony—“In 24 Mr. GEKAS. In that request that you and Senator Lugar made to the ad- ministration that you asked for classified information Mr. LEAHY. No, we did not. We asked if there were foreign policy pres- sures. The basic question I was concerned about, we asked something that could be asked very easily at open hearing: Were foreign policy pressures brought to bear? The answer was no. In fact, foreign policy pressures were brought to bear. Mr. GEKAS. In that letter, you specifically said that you were not inter- ested in classified— Mr. LEAHY. No, no. I am saying the basis of my question was whether foreign policy considerations were asked—were involved, and whether the creditworthiness was blinked at. In fact, we were told they were not. Our policy is that when classified documents are asked for, those are sent and responses are sent to the special office they have in the Senate security office where they are kept. I would not—and if there were classified matters requested, if they requested a classified letter or response, obviously we couldn’t talk about it in this committee, in open. However, I would note that if there are any, they are available for those who have appropriate security clearance in the Senate, in the Special provi- sions we have in the Senate for keeping classified material. Mr. GEKAS. Would a normal response such as one you expect from the administration signify that X and Y cannot be revealed to you at this time or turned over to you by reason of its classification? Mr. LEAHY. We have this periodically in the three committees I chair. We often have classified information. We just note there will be classified mate- rial to follow. The transcript, of course, is then sealed for that, and is han- dled in an entirely different manner. We also, in the letter to him, we asked, it there are any documents that are classified, please let us know, because they will be kept separately. The question still comes down to one that was asked openly, of course, and answered openly, with no effort to suggest it couldn't be otherwise. Were foreign policy rather than commercial considerations used here, be- cause of the concern raised by many, Republicans and Democrats alike, that CCC is being subverted to a form of foreign policy—I mean, of foreign aid. And there we were told, frankly, not in classified but in open documents, that that was not so. Now it turns out that it was so. Mr. GEKAS. Senator, if the original program to provide food for the Iraqis were the only result of that decision and actual food products were trans- ferred there by American farmers and American entities with the help of those loans, which everybody agrees has happened, is that not a proper tool of foreign policy? Should it not be used as a weapon of foreign policy, if indeed that would help the Iraqis at that juncture in history fortify against the aggressions of Iran, as the world looked at it, or as our foreign policy viewed it? Mr. LEAHY. I think the question could be asked this way. Is it a proper part of our foreign policy to ask the American taxpayers to go on the hook for $1.9 billion in foreign aid to Saddam Hussein at a time he was commit- ting genocide against Some of his people, and when he used that money to free up other money he could buy weapons with? That is a debate I will let somebody else make. For me it is easy. As an American taxpayer, I don’t want to pay foreign aid to Saddam Hussein. I don’t want to at all. Also, is the CCC program a commercial program? It is not a foreign aid program. At a time when no other country in the world considered Iraq cred- 25 itworthy, we were offering a commercial program, which says, in effect, that we, the American taxpayers, think they are creditworthy and will pay it back, and it turned out we found out what apparently every other country in the world knew, that they weren’t creditworthy, and as a result the Amer- ican taxpayers are spending $1.9 billion to pay it back. Mr. GEKAS. Even if there was a decision that that transaction to provide food was a matter of foreign policy for the United States? Mr. LEAHY. I am not aware that that was the decision, and we have a regular foreign aid program where we can make that decision. This is a commercial program which is supposed to be done when people are credit- worthy. You voted for it, I voted for it, virtually everybody in this room has, on that basis. It was not used for the reason it was intended. It was not used for the reason the Congress authorized it. It was not used for the reason the American taxpayers paid for it. Mr. BROOKS. Senator, we appreciate your coming over. We appreciate the necessity of your departure. We will submit some questions to you, Mr. Leahy, in writing. Mr. LEAHY. I would be happy to address them at any time. Mr. BROOKS. Mr. Gonzalez. STATEMENT OF HON. HENRY B. GONZALEZ, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS Mr. GONZALEZ. Thank you, Mr. Chairman, and the members of the Judi- ciary Committee, for this courtesy. Since July 1990, the Committee on Banking, Finance and Urban Affairs has been investigating the activities of the Atlanta branch of the Banca Nazionale de Lavoro, the large Italian Government-owned bank. Our inves- tigation was intended to review the effectiveness of United States regulation of foreign Banks, and that study has led to major statutory improvements. I might say our investigation originated prior to 1990. What I speak of is the official committee looking into the matter. Our investigation has documented how the Bush administration encour- aged closer ties with Iraq right up to the Iraqi invasion of Kuwait; how Iraq took advantage of our Government's ambivalent policies; and how the Gov- ernment of Iraq used BNL and others to operate a secret procurement net- work in this country and in Europe and other parts of the world. My primary interest in this investigation is the adequacy of the regulation of foreign Banks. The BNL case revealed a totally ineffective regulatory sys- tem that invited abuse, with the result that BNL-Atlanta was able to use U.S. Government guarantees to ship billions of dollars worth of agricultural goods to Iraq. The abuse of the guarantee program was facilitated by a policy that delib- erately dismissed concerns about Iraq’s lack of creditworthiness. These are matters that can be dealt with through appropriate legislation, and great strides have been made in cleaning up the credit programs. Our BNL investigation has also displayed how the administration devel- oped a tunnel vision toward Iraq and later sought to obstruct congressional reviews of that policy. Unfortunately, to this day the administration main- tains an obstructionist stand. The review of the BNL case has produced valuable lessons concerning bank regulation. It also should produce valuable lessons about what went wrong with the broader policy toward Iraq. Since that policy failed—and as a result, we went to war against Saddam Hussein—here are clearly lessons to be learned. 26 How did it come to pass that the State Department thought Saddam was a man who could be influenced by easy credit? How did it happen that ef- forts to ingratiate ourselves to Saddam Hussein persisted until the eve of the invasion? Why was it so easy to override regulatory mechanisms intended to prevent abuse of the CCC program? The Congress is the appropriate forum to find answers to these questions. When the idea of an independent counsel was first raised with me, I re- acted positively. If an independent counsel can shed any light on the conduct of U.S. policy toward Iraq so that we can benefit from these lessons, I am fully supportive. Questions like, Was there obstruction of Justice, or, Were documents falsified, might yield to the dispassionate inquiries of an inde- pendent counsel. During the fall of 1989 and into 1990 I read a number of newspaper arti- cles about an Italian Government-owned bank in Atlanta, GA, that had alleg- edly provided illegal loans of over $2 billion to the Government of Iraq to buy U.S. agricultural goods. At the time the Banking Committee was in the midst of passing legislation dealing with the savings and loan crisis, and the restructuring of our nation's deposit insurance system. These enormous tasks consumed the staff re- sources of the Banking Committee, but given the peculiar circumstances sur- rounding the scandal in Atlanta and the magnitude of the loans to Iraq, I thought it important to pursue the BNL scandal as soon as possible. In July 1990 I directed my staff to begin collecting information regarding the BNL scandal. Just weeks later Iraq invaded Kuwait. My original goal was to see if foreign Banks were adequately supervised. I had played a key role in getting the first Foreign Bank Regulation Act passed in 1978, and felt that the BNL scandal provided a good opportunity to evaluate the system of regulating foreign Banks. After several months, we found that the Federal Reserve and most States did not aggressively regulate foreign Banks, nor did they dedicate adequate resources to supervising and regulating these entities. In addition, the BNL scandal exposed several glaring loopholes in the Banking laws. The BNL investigation brought to light the fact that the em- ployees of branches and agencies of foreign Banks were not subject to the criminal statutes for crimes such as fraud, embezzlement and bribery, the ju- risdiction of this committee. So that, in fact, the Banking Committee, work- ing closely with this committee, closed these loopholes in the omnibus crime bill enacted in November 1990, with the Chairman of the subcommittee actu- ally in the forefront. The BNL investigation also brought to light the inadequacy of the regu- latory mechanisms governing foreign Banks. I sponsored amendments to the Federal Deposit Insurance Act of 1991 that markedly improved foreign bank Supervision. Much to my surprise, from the time I first announced hearings on the BNL scandal, the administration has attempted to thwart the BNL investiga- tion. When I announced in September 1990, that the committee would hold hearings on the BNL scandal, I received a letter from Attorney General Richard Thornburgh, who falsely claimed that the hearing would permit cul- pable parties in the BNL scandal to escape prosecution and that the inves- tigation would harm the national security. Of course, the committee’s investigation did not impair the BNL prosecu- tion, nor did it endanger national security. In fact, the committee later found a State Department letter that confirmed there were no national security as- pects to the BNL investigation. 31 If you read those indictments, there is no question of criminality. One of the interesting companies that pled guilty in Atlanta was a company called Casalee America. We have documents that we will put in the record on Casalee Belgium that came out of some investigations the Justice Department was conducting in Belgium. This same company had offered to sell 88-millimeter artillery ammunition, mortar bombs, 120-, 35-millimeter quick firing ammunition. That is not tobacco, Mr. Chairman, these are military products that Casalee sold: Mercury proximity fuses, grenade rifles. The Justice Department had all this information because they had inves- tigated the Belgium part of Casalee, not the American part of Casalee which was the third largest participant in the GSM program so far as selling to- bacco to the Iraqis. I want to know why they didn't pull all that together. There are just a few other items I would like to point out and then I will answer questions. The U.S. attorney for the Northern District of Georgia Mr. Joseph Whitley was in the information loop regarding both actions taken by the U.S. attor- ney. Let me talk about that. Mr. Joseph Whitley—I will read a piece of a September 18, 1989 article. Joseph Whitley has joined Smith, Gambrell & Russell where he began es- tablishing a White-collar criminal defense practice. The article notes Whitley had been in washington for 3 years—U.S. attorney in Atlanta, Mr. Chair- man, that I am talking about. He had been in washington for 3 years, serv- ing as Deputy Assistant Attorney General in the Criminal Division and as principal Deputy Associate Attorney General, as well as the number three post in Justice and in the latter job he oversaw Immigration and Naturaliza- tion, U.S. Marshal Service, Federal Bureau of Prisons, U.S. Parole Commis- sion Interpol as well as 93 U.S. attorneys. When asked to comment about his interest in becoming a U.S. attorney for Atlanta, Whitley said I have already done that once. My direction is to- ward private practice and I am not in the market for it. When he was at Smith, Gambrell, he represented Matrix-Churchill and later he didn’t do what he said he was going to do, he actually did become the U.S. attorney. And when the evidence showed up in Atlanta that there was a company in Pennsylvania called Kennametal that had been dealing with Matrix- Churchill—this was the intermediary, a company in Ohio, but it also had an English component. He recused himself from that case. We have not seen the letter, but he turned that investigation of Matrix-Churchill and Kennametal over to his assistant. And Customs officials came to me and said his assistant who he gave the case to, Ms. Gail McKenzie, wrote them a letter asking for them to send her some more of the illegally seized evidence in the Matrix-Churchill case. U.S. Customs officials plainly told me all the warrants related to Matrix- Churchill were executed with the utmost concern for the law. Frankly this statement by the assistant U.S. attorney clearly undermined any case which might be brought against this Iraqi arms dealer Matrix-Churchill, and so forth. Mr. Chairman, I think there is just one other little piece. I have a French news magazine that described, with Saddam Hussein's picture in it and it describes Casalee as one of his arms dealers. Casalee was clearly a major participant in the GSM program and I am here to urge, Mr. Chairman, that you all positively appoint an independent counsel. I will quit now. Mr. BROOKS. Thank you very much, Mr. Chairman. 34 make certain alterations in the documents before they were delivered to the subcommittee. The fact of this call and the substance of the allegations concerning the alteration of documents subsequently appeared in the media. Because of these allegations in the media, the General Counsel of the Commerce De- partment asked the Commerce Department Inspector General to review the matter. By report dated June 4, 1991, the Commerce Inspector General filed a re- port with then-Secretary of Commerce Mosbacher regarding the alterations on the documents supplied to the subcommittee. The report, a copy of which is submitted herewith and made a part of this statement, finds, among other things, that: Bureau personnel changed information on 68 licenses; ref- erences to “military” end uses were deleted; the designation “military truck” was changed. This was done on licenses having a total value of over $1 billion, or approximately two-thirds of the total value of the approved ex- port licenses for Iraq for the period under review. With respect to the changes in “military truck” designations, the Inspec- tor General concluded that the “changes were unjustified and misleading.” With respect to the 19 deletions of referral notations to other agencies, the Inspector General concluded, “those actions were not clearly justified.” In 31 of 39 additional changes the Inspector General determined that these changes “were not supported by reliable independent documentation.” The Commerce Inspector General, however, did not designate the official/ officials responsible for the alterations in the documents, nor did he ade- quately explore the motivation for the changes in documents supplied to the Congress. Accordingly, on July 10, 1991, in my capacity as Chairman of the Subcommittee on Commerce, Consumer, and Monetary Affairs, I wrote to the then-Attorney General asking him to open an investigation of this matter to determine if any law of the United States was violated in the course of the handling of this matter. Madam Chairman and members of the committee, I understand from the law, the Inspector General is required to refer a matter as this to the Justice Department. This was not done by the Inspector General of the Commerce Department. I did it. I might also say I never received any acknowledgment of my referral to the Justice Department. I subsequently inquired at the Justice Department as to the status of this matter and was informed on January 31, this year, 1992, that the investiga- tion is still ongoing and that I will be notified if the Department of Justice determines that no criminal charges will be brought. Copies of the sub- committee’s file on this matter are annexed here to. The subcommittee staff did receive a visit in August 1991 from two junior attorneys from the criminal division's public integrity section who main- tained they were handling this matter. The staff suggested certain investiga- tive approaches, but I am informed subsequent inquiries disclosed that the Justice Department had not followed up on the subcommittee staff sugges- t1OnS. In addition, after a subsequent inquiry of the Justice Department, the staff was visited by two Federal Bureau of Investigation agents assigned to this matter. I am informed that the two FBI agents were asking questions of du- bious value and were pursuing investigative leads which appeared to be fu- tile. Madam Chair, the above States the extent of my knowledge on this subject and reflects information about which I have been advised by the sub- 40 Mr. SCHUMER. Right. Normally an unidentified person wouldn't mean much, but this one proved to be true later, is that right? Mr. BARNARD. Yes. Mr. SCHUMER. A little more on the White House and National Security Council. Were they involved in the decisionmaking process on how to produce export license record information to your committee? Mr. BARNARD. Well, we were advised by the Department of Commerce's contact with us, Secretary Kloske, that his hands were tied because the deci- sions were being made at the White House. Mr. SCHUMER. OK. Let me ask you: Were you satisfied with the findings of the IG report that came out? Mr. BARNARD. Well, they were, in our estimation, Mr. SCHUMER, they were incomplete, mainly because of the fact that, while they cited the alter- ation of the records, they did not indicate who had done them and what the motivations of the changes were. Mr. SCHUMER. OK. On that last question I asked you about White House and NSC involvement, did Mr. Kloske, Assistant Secretary Kloske, admit to some of the people on your staff that the decision was, “out of his hands being reviewed by the White House?” Mr. BARNARD. That question really ought to be set in context. You see what we were doing, we were trying to get public disclosure of the records which did not include proprietary interests and in our negotiations with him, if they Fell down, because he said it was entirely out of his hands. Mr. SCHUMER. Did he say whose hands it was in? Mr. BARNARD. The White House. Mr. SCHUMER. OK. You think that the Commerce Department should have made its own criminal referral to Justice in light of its Inspector Gen- eral's findings that the alterations were, “unjustified and misleading?” Mr. BARNARD. I do. I think that is required by the law. Mr. SCHUMER. But they didn't and you had to do it in a letter to the Jus- tice Department on July 10, 1991. Mr. BARNARD. Right. Mr. SCHUMER. As I understand it, nothing happened much on that until the last couple of months. Mr. BARNARD. As I said— Mr. SCHUMER. Even though you wrote the letter a couple months ago. Mr. BARNARD. We did not get an acknowledgment from the Justice De- partment until we followed it up with another letter and that was very gen- eral in saying an ongoing investigation was being conducted. That was Janu- ary of this year. Mr. SCHUMER. You say in your testimony you are not too satisfied so far with DOJ'S investigation. Could you elaborate? Mr. BARNARD. Because of our work in this field, we felt like we had some very substantive leads we could furnish the Department of Justice which they certainly didn’t welcome nor follow up on. The contacts that have been made with us since that time have just been cursory. They have not been of any substantive things so there is nothing to give us any information that this—the case is being really seriously considered by the Justice Department, the alteration of the records. And yet the Inspec- tor General of the Commerce Department has stated emphatically, I think before this committee, that those alterations were made at the request of an oversight committee of Congress. Mr. SCHUMER. OK. Were these altered records, by the way, produced to anyone other than your subcommittee? 41 Mr. BARNARD. Yes. They were also furnished to Senator Hollings, and I might say this was somewhat subsequent to our request, but even when they did submit them, they were still altered. Mr. SCHUMER. This was not just a mistake at one point but a permanent alteration of the records. OK. I have this—has my time expired? Mr. BROOKS. Your time has expired. Mr. Hyde, the gentleman from Illinois. Mr. HYDE. I thank you, Mr. Chairman. Because of the limitations on time, I am going to have to go rather swiftly and make a comment or two, rather than ask a question. I was very inter- ested in Chairman Gonzalez’ expressed pride that he played a key role in getting the first foreign bank regulation act passed in 1978. I feel that he clearly had a great interest in foreign bank regulation and yet I must say oversight of that seminal bill was laid back at best because you waited 12 years until the BNL came along and exposed several glaring loopholes in the foreign bank regulation: For example, employees of branches and agencies were not subject to the criminal statutes for fraud em- bezzlement, bribery, et cetera. I think one of the problems is delay in over- sight. I suggest that as a well-wishing observer of the great work of the Banking Committee, I have always been concerned that fault for the S&L scandal, conceding the administration’s role, rested with the Banking Committee. Oversight of the high-flyers was equally laid back, but we are not here to talk about that, we are here to talk about this Scandal. As I listen to you gentlemen and get instructed by you, it seems that you are very critical of a policy error made by the administration in attempting to charm Iraq, I think the phrase was used by one of the members, “to ac- quire a warmer relationship with Iraq when she was really not a very good country to be cozying up to.” So let me read a letter to you, Mr. Barnard, because you didn't sign this letter, but I want to read it to you anyway and ask your opinion. This is dated May 7, 1990, 3 months before the invasion of Kuwait. And it is to Clayton Yeutter. Dear Secretary: “We are writing to inquire about the status of USDA approval of a $500 million GSM-102 export credit allocation for Iraq. “We understand, due to alleged transaction irregularities committed by an Atlanta branch of an Italian bank involving the GSM credit program, that further allocations to Iraq have been held up by the Department of Agri- culture. While we would never want to hurt the integrity of the GSM credit guarantee program, the withholding of these credits will have a significant economic impact on our area. “As I am sure you are aware, Iraq is the 12th largest importer of U.S. agriculture products and large export market for United States rice and wheat. Not only is the Houston area involved in rice growing, but the Hous- ton ports play a key role in the exportation of rice and wheat, etcetera. “Thank you for your consideration and timely response. We look forward to coming to an understanding with regard to this situation.” It is signed by our distinguished Chairman, Jack BROOKS. It would appear to me 3 months before the invasion, Mr. BROOKS was solicitous, to put it as gentle as word as I can, on export credit guarantees for Iraq. Now, I don’t even have to ask you if you agree that was solicitude. Let me read another letter to Mr. Rose here, the Chairman. A letter dated August 4, 1989. It is to Mr. Eagleburger. It says, “Mr. Eagleburger, as you 44 Mr. FRANK. The gentleman is simply incorrect. He was a member of the Banking Committee subsequent to the passage of that law. His memory was among the things that is failing him. Mr. HYDE. It is the 12 years from then until now, and I haven’t been— Mr. FRANK. You were on the Banking Committee in 1981. Mr. HYDE. That was my last year. Mr. FRANK. That is since 1978, by my arithmetic. Mr. HYDE. That is 3 years. That doesn’t add up to 12 years. Anyway, thank you for— Mr. FRANK. I thought the law was passed in 1978. You were talking about oversight of that law. Mr. HYDE. I had 3 years on the Banking Committee. Mr. BROOKS. The Chair now recognizes the gentleman from Kentucky, Mr. MAZZOLI. Mr. MAZZOLI. Does the gentleman seek any part of my time now? Mr. BROOKS. Would the gentleman yield? Mr. MAZZOLI. I would be happy to. Mr. BROOKS. The letter my distinguished friend from Illinois referred to was at the request of my constituents and Congressman Mike Andrews, and we talked about the irregularities of the Atlanta bank, that further allocations were held up. I guess some of them went through but some of them were held up. And we asked them about commodity shipments: That has to do with ag- ricultural products, not military operations. And we wanted to know when the Department of Agriculture foresaw the investigation of the credit guaran- tee program as it pertains to Iraq coming to a conclusion. And I would ask unanimous consent to include my letter and the reply from Secretary Yeutter, who very clearly went on to say when he replied, that they had problems with Iraq, because they had several problems. One of them was the aftersales service, and unusually high, as you noted, Mr. Rose, unusually high commodity pricing. [See appendix I–8.] Mr. BROOKS. So apparently they were buying awful high and taking the float. Mr. MAZZOLI. Mr. Chairman, first, I welcome my colleagues, and I appre- ciate your help here. Let me just ask a couple of questions. The staff has circulated to us a summary of the independent counsel provisions of the Eth- ics in Government Act, and it says: “The statutory mechanisms are initially triggered by the receipt of information by the Attorney General alleging that certain high level officials in the Federal Government have committed a Fed- eral crime.” May I ask each of you in sequence, starting with you, Mr. Chairman, do you agree that based on the evidence, that the trigger has been pulled? Mr. GONZALEZ. I believe there is good probable cause to believe that in- fractions of law, both with respect to conflicts of interest as well as others, May very well be involved, and that is the reason we think we ought to have an independent counsel. Mr. MAZZOLI. Well, before the independent counsel can be actually trig- gered, there has to be a receipt of information by the Attorney General alleg- ing that certain high level officials of the Federal Government have commit- ted a Federal crime. And I think that before this committee could inform the Attorney General that in his opinion he should begin this preliminary— it has got two or three levels of preliminary. I guess I was just again asking, 46 to carry out NSD 26. I believe they have lied about it. They know that some of the transactions, some of the Commodity Credit Corporation transactions, made it straight through to Iraq, and maybe the commodity got there. Mr. MAZZOLI. My question, and maybe it is inartfully asked because I don’t understand the CCC program, is that is it typical and normal to have all kinds of programs for one country going through one bank, and be that itself be some suggestion of manipulation or targeting from above? Mr. ROSE. Something was rotten because of that. Mr. MAZZOLI. Chairman Gonzalez, in your experience, and it has been a long one on that committee. Mr. GONZALEZ. You have to understand these arrangements are also, as somebody said here earlier, money is fungible, and in the handling of these accounts, BNL also syndicates. So, for instance, we read the list of Banks that have been paid out, what was it Mr. MAZZOLI. So it is fair to say it is not typical— Mr. GONZALEZ. Almost $1 billion that are related to the arrangement that BNL set up. But BNL is a fiscal agent, it is the one that is handling the letters of credit. You do have to have a bank for that purpose. Mr. MAZZOLI. Is that unusual, to have one bank being the lead bank to this extent for billions of dollars? Is that unusual? Mr. GONZALEZ. Yes, it is, and to the extent and amount, and particularly a branch agency, and agency, chartered by the State. Mr. ROSE. It has never happened before in the history of the whole GSM- 102 –103 loan program, that so much money has been funneled through one bank for one country. That is—it is absolutely unprecedented. Mr. MAZZOLI. One last question, Mr. Chairman, I appreciate your indul- gence and everyone’s indulgence. As far as documentation for these, is there the usual run of documentation, Doug, Chuck, Henry, on these loans, even though they are going through a single bank and acting as a broker? Is that documentation satisfactory? Mr. ROSE. What we have got has been very revealing. We haven’t gotten everything we asked for. But that is another reason for independent counsel, is to go get these documents that have been withheld. Mr. MAZZOLI. Mr. Chairman. Mr. GONZALEZ. I was just going to say, you have got to remember also that these Banks, whether they are agency or the principal owners in New York, are Government owned in their respective countries, so that the Sen- ate, the Italian Senate Investigating Committee, whose Chairman has been in touch with me from the very beginning, Senator Tarcta, and made possible for us to obtain some of the documentation that the Federal Reserve Board denied us because it said it would injury their reciprocity with this bank, the Government bank in Italy, clearly showed that the Italian Government is also out a little better than $2 billion. Mr. MAZZOLI. Thank you very much. Thank you, Mr. Chairman. Mr. GEKAS. Mr. Chairman. Mr. BROOKS. Mr. Gekas, the Chair recognizes you. Mr. GEKAS. Thank you. I, too, am very much disturbed by the allegations of the alterations to which the gentleman from Georgia has alluded, and which has been processed through his subcommittee. That by itself, in my judgment, justifies the full investigation into that sector of all of this. My problem is that I would vote for a special prosecutor for that purpose alone if I were assured that the Justice Department either refused to inves- tigate it, or showed incompetency to investigate it, or didn’t have the man- power to investigate it, or didn’t have the will to do so, or some rationale 47 that can be offered by the gentleman from Georgia, or anybody else, as to why the Justice Department could not be the vehicle for at least that segment of these allegations. I have to elongate my question by one point. Mr. BARNARD. I will give you a short answer, but I will say I am just as frustrated by that as you May be, because time and time again things from our subcommittee have been brought to the Department of Justice and seem- ingly have been ignored. Not only this hearing, but some other hearings. And I would be delighted to know there is a Committee of Judiciary who has the oversight of the Justice Department, that can get them to do some things. § GEKAS. If I told you we have a full understanding that the Justice Department is investigating that segment of your problem, and that staff had been assigned to it and investigators, would that satisfy you? Mr. BARNARD. As long as I know there is going to be some expeditious completion of the investigation. That is the problem. The altered records here, of which the Inspector General has already agreed took place, shouldn’t be so extensive that the Department of Justice could not have al- ready done something about it. Mr. GEKAS. But to appoint a special prosecutor for that who wouldn't begin on 6 months or more— Mr. BARNARD. I Reserve judgment on that. I am just saying it needs to be taken care of. Mr. GEKAS. I understand. I have no further questions. Mr. BROOKS. Mr. Synar, the gentleman from Oklahoma. Mr. SYNAR. Thank you, Mr. Chairman. Mr. Rose, the population of Iran in 1985 was 15 million people. We gave them $1 billion in CCC guarantees. That amounts to about $66 per person. Mr. ROSE. Is this Iran or Iraq you are talking about? Mr. SYNAR. Iraq. I am sorry. Fifteen million people in Iraq, $1 billion in CCC credits. That is $66 per person. Did anyone think that was an exces- sive amount and has that been investigated? Mr. ROSE. Well, yes, it was an excessive amount, and I think that goes back to the decision based on NSD 26; the President says we are going to help them economically, they picked a sleepy little old program at USDA that nobody looked at very much, and they pumped $5 billion through that funnel. And I think they were very hopeful that Israel would not get wind of all of this. This was one way to get around the public embarrassment over helping somebody that was clearly Israel’s enemy. Mr. SYNAR. Mr. Gonzalez, I would like to go back and pursue that 1990 January draft indictment referred to earlier by Mr. Fish, which apparently has been released to the Republicans despite the Department of Justice’s re- fusal to turn it over to you. Chairman Gonzalez, did you request that document? Mr. GONZALEZ. Yes, we had. Mr. SYNAR. On what grounds was it refused? Mr. GONZALEZ. Well, in fact, I don’t even know if we had anything but sort of a stonewalling. The Attorney General’s letter that I received the Fri- day before last was a clear written statement saying that they were progress- ing from foot-dragging to stonewalling. Mr. SYNAR. Well, I hope Mr. Fish will tell us whether or not he got that draft from DOJ when he comes back, because that would be interesting. Mr. GONZALEZ. We would be extremely interested. 60 requested materials, culminating in the transmission to at least one Chairman of what appears to be altered documents. Obstruction of Congress, false statements and perjury are serious charges, indeed, and they should not be trivialized against what the administration calls larger claims of foreign policy, executive privilege and prosecutorial discretion. The same can be said about possible allegations of violations of conflict of interest statutes as well as possible irregularities in the timing and scope of the Department of Justice’s response into the BNL matter. How should this committee respond to a situation where the refusal to provide documents to other committees has now been compounded by a new refusal to provide critical witnesses to us? That is precisely the situation we face today. Citing some unwritten, “longstanding practice,” President Bush has declined to send Nicholas Rostow and C. Boyden Gray to explain their actions with respect to a number of lines of inquiry established at the first hearing. That is indeed unfortunate, because who, if not Nicholas Rostow, should explain why the NSC, an agency set up to run the cold war against the So- viet Union, has now apparently, under Mr. Rostow's direction, taken to run- ning a cold war against congressional requests for information? Who but C. Boyden Gray should appear before the committee when the Counsel for the President worked closely with Nicholas Rostow in setting up the Rostow gang, in being directly involved in the President waiving con- flict of interest statutes for 11 of his senior advisers, and who communicated frequently, if not daily, over matters involving Iraq export licensing, the CCC program and the BNL litigation? The two empty chairs for Messrs. Rostow and Gray are disquieting sym- bols of a continuing failure of one branch to speak forthrightly with another. And I should add that Mr. Mosbacher had the decency to call me personally to indicate that while he felt the Inspector General is probably best suited to testify about events at Commerce, he indicated that he would appear at a later time before the committee as a private citizen if needed. Nevertheless, we are now pleased to welcome the four officials who have come to provide their perspectives on these issues. I trust that their testi- mony will be very helpful to the members and help lead us to a decision about whether further review of these matters is needed by an independent counsel. I would yield now to the distinguished head of the minority, Mr. Hamilton Fish, the gentleman from New York. Mr. FISH. Thank you, Mr. Chairman. I am pleased to welcome our executive branch witnesses to this second hearing on U.S. Government activities relating to Iraq. Earlier this month when colleagues from other committees described their investigative efforts, I emphasized the importance of our committee hearing directly from the agencies involved, and today I look forward to having the benefit of their testimony. And I anticipate, Mr. Chairman, that you will find that their conduct throughout has been honorable, professional, and thorough. Consideration of whether or not to request that the Attorney General apply for the appointment of an independent counsel is, of course, a very serious matter. We should be careful about allegations of criminal conduct, as we May do unjust harm to innocent, honorable people, and deter good men and women from pursuing careers in public service. The premise of the independent counsel law is that there May be personal, financial or political conflicts of interest between the Attorney General and high-level executive branch officials, and that these possible conflicts May 61 lead to potentially biased investigation or the appearance of a biased inves- tigation. *: independent counsel statute was never intended to be invoked simply based upon allegations of wrongdoing by lower level executive branch em- ployees where potential conflicts are not present. The statute specifies those positions within the executive branch it covers, and yet there is no hard evi- dence that a covered person under the statute has been implicated in this case, nor has there been a showing of a conflict as to the persons currently suspected of misconduct. Many are concerned a pattern has developed whereby Congress automati- cally seeks to bypass the Department of Justice in circumstances where it is neither warranted nor necessary. Criminal law enforcement should not be allowed to become an ad hoc process that we “farm out” to an array of independent attorneys. Rather, law enforcement should be coordinated, professional efforts to apply uniform prosecutorial standards. Centralized institutional law enforcement promotes efficiency, effectiveness and fairness. The Department of Justice is the Federal agency traditionally charged with law enforcement-related responsibilities in our system of Government. We should depart from the norm of Department of Justice prosecutorial respon- sibility only under limited, exceptional circumstances, a point that should be kept in mind during today’s hearing. Thank you, Mr. Chairman. Mr. BROOKS. Thank you very much. No other statements will be heard. We will go directly to the witnesses. But I did want to say before receiving testimony from our witnesses today, I would like to read and then make part of the hearing record a letter I re- ceived from Judge Marvin H. Shoob, the U.S. district court judge who pre- sided over the BNL litigation in Atlanta known as United States v. Drogoul. [See appendix II–1.] Mr. BROOKS. As you recall, on the same day that the committee held its first hearing on whether to appoint an independent counsel, Christopher Drogoul entered a plea to a greatly reduced number of counts. He pleaded guilty to 60 instead of 347 charges from the grand jury and decided against making a public statement possibly implicating higher-ups who knew of his scheme. At that time, June 2, 1992, Judge Shoob publicly called for appointment of a special prosecutor. This is the letter that I received from Judge Shoob dated June 11, 1992, and copies should be made available to all the mem- bers of the committee and anybody that wants one. I would ask unanimous consent to include the letter at this point in the hearing, and ask members to look it over as we go along. I think you will enjoy it. We will go on with our hearing, but today I would say that I am going to swear in the witnesses who assist in our inquiry into whether an inde- pendent counsel on United States dealings with Iraq, should be requested. I do this rather reluctantly. I normally, or very seldom, have sworn in wit- nesses, and seldom sent subpoenas in my tenure in Congress, because, gen- erally, I think people do come when requested and, generally, they tell the truth. But in a recent case, before the D.C. circuit court regarding charges against Admiral Poindexter in the Iran-Contra inquiry, the court, through what I thought was a very strange twisting of logic, managed to make lying to Congress not necessarily a crime. 62 Well, I trust that perjury is still a crime, even if it is before Congress, and so I believe requiring an oath in these circumstances is a prudent course to follow. And I intend to write a letter to every Chairman in the U.S. Con- gress and explain the import of this particular ruling in court, which means, or May mean, that any witness coming before Congress could lie with impu- nity, say whatever they want, whatever they dreamed up, and not be subject to perjury. It is a real danger, and so I think, to be on the safe side, that every con- gressional committee that has witnesses, if anything of any controversy, should certainly swear in the witnesses. So today our first witness is Mr. Frank LEMAY. If Mr. LEMAY will come up. Mr. FISH. Mr. Chairman, MAY I inquire as to whether or not prior to this moment the witnesses have been advised that they would be under oath? Mr. BROOKS. No, but I would think they are fully intending to tell the truth. Mr. FISH. That is not the issue here. It is the inference that I reject and find offensive, and I do think it is only decent to have inquired of them as to whether or not they would be sworn. That is—in anticipation of their ap- pearance—I did so in the case of the Assistant Attorney General. I am not prepared to speak for the Inspector General of the Commerce Department. Mr. BROOKS. Well, that is very nice of you. Mr. FISH. I think, Mr. Chairman, you should have asked them, under the circumstances. Mr. BROOKS. I think it will be standard procedure from now on. Mr. FISH. That MAY well be. Mr. BROOKS. Mr. Ramstad. Mr. RAMSTAD. I would ask unanimous consent that my opening statement be included as part of the record. Mr. BROOKS. Without objection, so ordered. Mr. RAMSTAD. Thank you, Mr. Chairman. I think it is unfortunate—I understand the fiat to muzzle some of us by not allowing opening statements, but I think it is unfortunate, especially in a fishing expedition of this nature. I think we all would be well-advised to heed the words of David Brinkley last Sunday when he talked about the special prosecutor and 5 years and $30 million-- - Mr. SYNAR. Mr. Chairman, Regular order. Mr. Chairman Mr. BROOKS. We agreed not to have statements. Mr. Fish and myself agreed jointly that we would not have statements by everybody in the inter- est of getting these witnesses in in a good time. Mr. RAMSTAD. Mr. Chairman, your opening comments were very pro- vocative, or your followup comments, and I thought, at the very least, they deserved a response. Mr. BROOKS. Well, your statement will be in the record. Mr. RAMSTAD. Thank you, Mr. Chairman. [See appendix II–2.] Mr. BROOKS. Our first witness is Frank LEMAY, a Legislative Management Officer in the Bureau of Legislative Affairs, Department of State. He is a career officer, Foreign Service Officer, whose current responsibilities are De- partment of State relations with the Congress on multilateral economic pol- icy issues and legislation. Last year, he was the recipient of the Department's Superior Honor Award for Outstanding Service. He has received the Department's Meritorious 63 Honor Award for Excellence in Economic and Financial Reporting, and was nominated for the Herman Salzman Award for Excellence in Economic Re- porting. Mr. LEMAY, I want to thank you for appearing before us today. If you would please stand, we will swear you in. Mr. LEMAY, do you swear that the testimony you are about to give is the truth, the whole truth, and nothing but the truth? So help you God. Mr. LEMAY. I do So Swear. [Witness sworn.] Mr. BROOKS. Mr. LEMAY, we are glad to have you here, and we would appreciate if you would summarize your statement and offer a full statement for the record. Every part of it would be included. The gentleman is recognized. STATEMENT OF FRANK LEMAY, LEGISLATIVE MANAGEMENT OFFI- CER, OFFICE OF LEGISLATIVE AFFAIRS, DEPARTMENT OF STATE Mr. LEMAY. Thank you, Mr. Chairman. Good morning, Mr. Chairman, Mr. Fish, and members of the committee. I am here today at your request to discuss your interest in a memo I wrote on October 13, 1989, concerning a meeting I attended with officials of the Department of Agriculture. I believe the work of this committee is impor- tant, and I am prepared to answer your questions to the best of my ability and recollection. I would like to note that I am a career Foreign Service Officer. I thank you for also noting that. I also thank you for your kind words of introduc- tlOn. I have served in the Department of State since 1981 in a variety of posi- tions and capacities. I am currently assigned, as you said, to the Bureau of Legislative Affairs as the Legislative Management Officer responsible for multilateral economic issues. Prior to this assignment, from September 1988 to August 1991, I was as- signed to the Office of the Under Secretary of State for Economic and Agri- cultural Affairs as a special assistant. In the office, my portfolio primarily involved debt and financial issues, energy policy, and food policy and com- modity issues. I was later asked to handle all environmental economic issues as well. I also covered the Near East and African regional accounts, and issues related to the subcontinent. Shortly before leaving the office, I was awarded the State Department’s Superior Honor Award for Excellence in Performance. In my capacity as a special assistant, I was not a policy maker and I am not here today to discuss overall policy toward Iraq. I responded to direction from Under Secretary Richard McCormack and his executive assistant, Sam Hoskinson. Although I had a degree of discretion as to which issues were my priority at any given time, the scene was always set by what was of interest to, or what the Department felt needed to be handled by, the Under Secretary. In General, anything I wrote for the Under Secretary was channeled to him through the executive assistant who was in a position to confirm, to criticize, to rewrite, or to order additional research and work. I also reviewed, within my area of responsibilities, all decision documents, cables and briefing pa- pers for the Under Secretary's attention prior to passing them through the executive assistant to the Under Secretary. In some instances, I provided analysis or information directly to the Under Secretary, verbally or in short memos Or notes. 64 I was also required to ensure that within my areas of responsibilities those issues within, that were within the bureaucratic purview of the Under Sec- retary, were properly brought to his attention. I also had to ensure that he received information and briefings necessary for scheduled meetings with United States or foreign officials. I did not maintain the Under Secretary’s schedule, nor did I maintain or have regular access to his files. Although we had a cordial, first-name relationship, he did not usually con- fide in me and generally did not discuss with me his meetings with officials if I was not present in those meetings. Furthermore, I only attended those meetings for which he gave approval or that he requested I attend. This is common practice in the Department. My relationship with the executive assistant and my special assistant col- leagues involved significantly more give and take. We regularly discussed the issues in our portfolios and the issues of economic policy in General. I would now like to provide you some background on what led up to the meeting of October 13, 1989. It is my recollection that initially the Under Secretary asked the executive assistant to look into the allegations that were surfacing concerning Iraq and the CCC program. I recall that Mr. McCor- mack had been asked to look into the allegations because our office had a policy overview role in commodity issues and financial issues. The executive assistant asked me to take over the issue sometime in Sep- tember or early October. We had a long conversation concerning what he had learned to that point. He asked me to keep him informed of all informa- tion that I developed, and I recall that on a number of occasions—and I do not remember exact dates—we compared notes. Shortly prior to October 13, I was asked by my superiors to arrange with USDA to discuss their views of the rumors and allegations of possible Iraqi misuse of CCC guaranties that were surfacing as a result of the ongoing Jus- tice Department investigation of the Banca Nazionale Del Lavoro’s Atlanta Branch. I do not recall whether I or the executive assistant called Ann Venneman of the Under Secretary of Agriculture Crowder's staff to set up the meeting the officials of USDA. Nonetheless, the meeting was convened at our request. I went, I took careful, sometimes verbatim notes on what was said. I asked for clarifications of points that were unclear to me. I drafted the memo on the date of the meeting from those notes. I left all of my files on Iraq with the Office of the Under Secretary upon my departure. To the best of my knowledge, the files were not retained in that office. I do not know if they were retired or destroyed after I left, nor do I know what documents that May have been in these files have been made available to the Congress. Mr. Chairman, I believe the memo accurately reflects the subject matter of the meeting. The memo does not follow the exact chronology of the dis- cussion. I remember the meeting being very free flowing, with a variety of issues being discussed at different times. When writing the memo, I went through my notes and I grouped similar issues, comments and topics together. I believe this is an efficient way to present information from an unstructured session to a Department principal. In the meeting, we discussed allegations—and I want to stress—allega- tions of wrongdoing on the part of the Iraqis. At no time was I presented with evidence or proof that the allegations were correct. We were faced with a situation where all agencies had incomplete infor- mation. I believed the meeting and the resulting memo were important. My 65 intent was to highlight for the Under Secretary that there were a great many allegations and a great many uncertainties. My experiences in analyzing drug money flows while serving in Bogotá, Colombia, told me money and commodities are fungible and that the poten- tial for a serious problem existed. I provided the memo to the executive assistant. He approved its dis- tribution. I cannot say for certain that it was passed to Under Secretary McCormack, but I recall that it was. I also provided the memo to our staff assistant for distribution. It was my intention that the memo be sent to all participants and to the additional addressees. I do not know if they received the memo or not. I want to stress that, though, that at no time did I have any intention of ex- cluding anyone from seeing and commenting on the memo. I would now be happy to reply to your questions and I will try to answer them to the extent that memories now 3 years old will allow. [See appendix II–3.] Mr. BROOKS. Thank you very much, Mr. LEMAY. You have received numerous awards from the State Department for out- standing performance and for excellence in economic and financial reporting. Would I be correct in assuming these awards are based, in part, on your ability to provide your superiors a complete, accurate and unbiased account of discussions involving complex and detailed matters? Mr. LEMAY. Yes, sir, that is the case. Mr. BROOKS. Mr. LEMAY, the Department of Agriculture apparently did not concur with the State Department’s assessment of your economic report- ing capabilities. For example, in his testimony before the House Banking Committee last month, Mr. Brosch, of USDA’s Office of General Counsel, condemned your October 13, 1989, memo as “totally inaccurate” and “to- tally misleading.” What is your response to these charges? Mr. LEMAY. I was quite taken aback when I read the testimony of my agricultural colleagues. I recalled the meeting. When I first tried to remem- ber what had happened, I remembered in more General terms, but then, as I began reading through the record and looking at my memo, I was quite convinced that the memo was a clear and accurate reflection of what had happened in the course of our discussions. I then went through and read the testimony of others, including Under Secretary Crowder, and I found that there were a number of comments in those testimonies that supported what I had said in the memo. So I do not understand how Mr. Brosch can say I was totally wrong and did not get any- thing right. Mr. BROOKS. Now, Mr. LEMAY, your memo raised a number of red flags concerning potential abuse of the CCC program by the Iraqis, including the possible diversion of funds to purchase nuclear-related equipment at a time when the administration was making critical decisions about extending addi- tional loan guaranties to Iraq. How did your boss and other senior Depart- ment officials respond to the memo? - Mr. LEMAY. I can only speak for my boss. I do not know how other offi- cials responded to the memo. I believe he took the memo very seriously and used it in his decision process on how he wanted to advise other decisionmakers in the Department. I had discussed the memo with Mr. Hoskinson. I believe Mr. Hoskinson discussed the memo with Mr. McCormack. So it was not something that was simply plopped on his desk and was not looked at, as far as I can recall. 66 Mr. BROOKS. William Safire, a man well-known to both sides of the House, had an essay on this very subject matter, and I would, without objec- tion, put it in the record at this point. It is a short article. [See appendix II–4.] Mr. BROOKS. Mr. LEMAY, one last question. Has the State Department provided you with access to your files on Iraq to help you prepare for your testimony this morning? Mr. LEMAY. I did not have access to any of my old files. As I say in my statement, the files were not there. Mr. BROOKS. Did you ask for them? Mr. LEMAY. Yes, I did. Mr. BROOKS. They said they were not there? Mr. LEMAY. Yes. Mr. BROOKS. Well, thank you very much. Mr. Fish, the gentleman from New York. Mr. FISH. Thank you. Did you solicit comments from the other participants in this meeting that was held on October 13, 1989? Did you solicit comments from the other participants present on the accuracy of your memo's description of what was said at the meeting? Mr. LEMAY. No, I did not. Mr. FISH. Any particular reason why not? Mr. LEMAY. Well, I expected the memo would have been given the dis- tribution as I had set it out on the cover sheet, which it should have been gone to participants and to the additional addressees. I do not know if that happened. I tried to make that happen. Mr. FISH. It wouldn't have been a customary practice of yours, when you are being told information by other people and you take notes and you pre- pare a memo that you don’t check with them to be sure that your recollec- tion and your account of the meeting is accurate? Mr. LEMAY. I generally would not discuss it with another agency, no. Mr. FISH. But they are the ones giving you the information, aren’t they? Mr. LEMAY. That is correct. Mr. FISH. And this wouldn’t be your practice to check with them and say, “Is this what you said to me?” Mr. LEMAY. I did not do so in this case. Mr. FISH. Can you please tell us what was your degree of familiarity with the CCC program prior to the October 13 meeting? How thoroughly had you considered the program, researched it or kept abreast of the program prior to that meeting? Also, how much of its workings were discussed with you by the other gentlemen at the meeting? Mr. LEMAY. I found—I assume that you are referring to the statement that, by Mr. Brosch, I believe it was, I had come in and I had said I knew nothing about the GSM program? Mr. FISH. I will repeat my question. Can you please tell us what was your degree of familiarity with the program? You know, of course, that Mr. Brosch has no high regard for your memo, as far as its accuracy is con- cerned, period. And it is regrettable that he is not testifying today. But I am asking you what is the degree of your familiarity with the CCC program prior to the October 13 meeting; second, how thoroughly had you considered the program, researched it or kept abreast of it prior to the meeting; and, third, how much of its workings were discussed with you by the other gen- tlemen at the meeting? 67 Mr. LEMAY. I was familiar with the General parameters of the CCC pro- gram. I had been in the Foreign Service up to that point for 8 years. I had been a Deputy Head of Section in Colombia. At times, when I was Acting Economic Counselor, I was responsible for the work product of the Foreign Agricultural Service people and for the Foreign Commercial Service people. I believe what I said during the meeting was I was not totally familiar with how an exporter would fully go about getting the documentation for a CCC credit. I do not recall ever saying that I knew nothing about the CCC program. I had probably—and, again, I am going on very long-term memory here— I had more than likely discussed the CCC program before going over there with our Office of Food Policy. That would have been my General approach to this type of an issue. I did homework before I went to the meeting. I did not go to the meeting cold. Mr. FISH. Thank you, Mr. Chairman. Mr. GEKAS. Mr. Chairman. Mr. BROOKS. Mr. SCHUMER, the distinguished Chairman of the Crime and Criminal Justice Subcommittee. Mr. SCHUMER. Thank you, Mr. Chairman. First I want to thank you, Mr. LEMAY, for coming here and for your out- standing record in the State Department. I think your memo of October 13 was a very important memo. I just wish people would have acted on it then rather than now. Oftentimes you get the best perspective on things from career officials, and I think in your case that 1S true. I would like to just ask a few questions to help the committee better un- derstand what was going on at the State Department, and please elaborate. Don't restrict yourself to a simple yes or no. First, have you discussed your testimony with anyone at the State Depart- ment before coming here today? Mr. LEMAY. No, I have not. Mr. SCHUMER. So you have no instructions on how to handle it or any- thing like that? Mr. LEMAY. I had a meeting with Mr. Williams, the legal adviser, but I did not have any substantive discussions on the testimony. Mr. SCHUMER. Did they tell you not to volunteer anything, just answer the questions as narrowly as possible? Mr. LEMAY. It was a conversation with the legal adviser and I probably shouldn’t get into that. Mr. SCHUMER. OK. Mr. LEMAY. I will say one thing: They told me to tell the truth. Mr. SCHUMER. I have been advised by my legal advisers here that that really, that question really doesn’t fall under the purview of an attorney-cli- ent privilege. No one is saying you did anything wrong. In fact, everyone is saying you did everything right and you have come here to testify. Mr. LEMAY. They did not tell me not to respond to questions. I was warned to be careful about classified information, and that if I was worried about classified information or disclosing classified information, raise it at the time the question was made. Mr. SCHUMER. Did they tell you not to volunteer anything that wasn’t di- rectly on point to the questions at hand? Mr. LEMAY. No, they said to answer the questions. 68 Mr. SCHUMER. The Chairman brought up about reviewing your old files on the October 13 meeting and the other files you mentioned, and you said you went there and the files were not there. Mr. LEMAY. That is correct. Mr. SCHUMER. Did you try to pursue that and find out where the files were? Is it characteristic that files of such a meeting, in your experience, are just not there? Mr. LEMAY. The files, by this time, would have been 3 years old, and the staff people who came in after I left would probably have cleaned out the files. Now, whether they just cleaned them out and threw them away, I don’t know; or whether they were retired. Given the level that I was working at, it is unlikely anybody would have taken the time to actually retire the files. Mr. SCHUMER. So it is not atypical for files from 3 years ago, when you go back and look at them, I am sure this isn’t the first time it has happened not to be there. Mr. LEMAY. No, it is not atypical in my experience. Mr. SCHUMER. What did you know about Iraq and the CCC program prior to your October 13, 1989, meeting? When you said you had done your homework on it, what was your General view of it before you went into the meeting? Mr. LEMAY. My General view before going to the meeting was there were a series of allegations and we needed a better handle on what those allega- tions were. In discussing and preparing for the meeting, I recall speaking with a num- ber of people in the Department, including officers in the Near East Bureau. I also spoke with Mr. Hoskinson. I recall, again, vaguely, speaking with somebody in the Legal Adviser’s Office because they were also involved in looking at the allegations, and because of their connections with other legal staffs were in a position to do so from that angle. So the basic outline of what I knew was, there were several problems. One was a question of creditworthiness, two were the allegations of the BNL scandal, and the other was the just General question of corruption within the CCC program itself. Mr. SCHUMER. OK. Mr. LEMAY. There are no great specifics here. This was General param- eters of what I was to talk about. Mr. SCHUMER. Right. I want to go over again, because it is not just Mr. Brosch but also Mr. McElvain, and they say that they just totally disagree with the contents of the memo. I want to read to you Mr. Mcelvain's statement at that same committee hearing. He says: “I can say that, no, I don’t recall expressing any, making any comments or having any doubts during that meeting that there was a possibility of any of these commodities being diverted or bartered or what- ever, or for military equipment, I believe is the way that the memo was stat- ing. That memo, in my opinion, was the “–and then there is a dash—” the discussions at the meeting were misrepresented very badly. First, do you recall McElvain, do you recall that being an accurate state- ment for what McElvain has said? Mr. LEMAY. I have to stand by the memo. I wrote the memo directly after the meeting from notes which, in large measure, included quotes from what people said. I am not really in a position to say why Mr. McElvain is saying what he is saying. He probably doesn’t remember. It was a long time ago. 69 Mr. SCHUMER. Do you remember terms, these terms coming up at the meeting? Diversion? Mr. LEMAY. Yes. Mr. SCHUMER. Nuclear-fuel compounder? Mr. LEMAY. Yes. Mr. SCHUMER. Nose cone Burr. Mr. LEMAY. Yes. And the reason I remember those is they sort of caught me by surprise that there were even allegations of nuclear issues. Mr. SCHUMER. But it is clear those types of allegations did, from your recollection, did come up at the meeting? Mr. LEMAY. From my recollection, that is the case, yes. Mr. SCHUMER. That would be pretty— Mr. LEMAY. Let me make one other point. Mr. SCHUMER. Sure. Mr. LEMAY. I had never heard of a nose cone Burr or a fuel compounder before the meeting. It was not in my areas of responsibilities. I have nothing to do with political military Affairs and nothing to do with nuclear Affairs. Mr. SCHUMER. OK. Let me ask you, would you have had any motivation to make this up? Mr. LEMAY. I had no motivation to make anything up. I was there on in- structions. The meeting was at our request and I was simply trying to do the best job I could to provide information to the Under Secretary that he could then factor or use however he saw fit. Mr. SCHUMER. Who Said “blow the lid off the CCC four-alarm blast?” It was quite incendiary language in that memo. Mr. LEMAY. I said the four alarm blaze, not blast. Mr. SCHUMER. Who Said “blow the lid off CCC?” Mr. LEMAY. I do not recall. I didn't write it in the memo, and to this day I don’t know why I didn’t put a name on this. Mr. SCHUMER. Was it something that someone said in the meeting or was that just your characterization? . LEMAY. No, someone said that. . SCHUMER. And it was not you. . LEMAY. No. . SCHUMER. So it had to be one of the other people. . LEMAY. That is correct. . SCHUMER. And all the others were from USDA. . LEMAY. That is correct, to the best of my recollection. SCHUMER. So that pretty much doesn’t square with what Mr. McElvain said there. Mr. LEMAY. It does not. Mr. SCHUMER. Or from Brosch, and that is being kind to McElvain and Brosch. Let me ask you this. Again, the memo is fairly explosive. What was the reaction to your memo at the State Department? Mr. LEMAY. Well, once I gave it to Mr. Hoskinson, as I say, he reviewed it. He felt it was important enough to pass on. I did not get much feedback from that point. I knew that several—I don’t know what documents have been made avail- able to the committees, but there are documents indicating that Mr. McCor- mack was concerned, although he eventually supported the traunching idea and proceeding with the program. That was about a month and a half later, So I assumed that he used it however he used it. i 70 Mr. SCHUMER. So there was disagreement within the State Department it- self? I mean, from what we have learned, the Economic Division felt one way and the more political parts of the State Department felt another at first; is that right? Mr. LEMAY. I don’t want to characterize it as disagreement. I think there was a General policy discussion going on and people were looking at dif- ferent pieces of the puzzle trying to come up with what to do next. Mr. SCHUMER. But no one, as far as you know, here is the memo that talks about things like “blow the lid off CCC,” “four alarm blast” and all of that, “four alarm blaze,” and no one but Hoskinson ever came back to you and talked to you about that memo; is that fair to say? Mr. LEMAY. To the best of my recollection. Mr. SCHUMER. To the best of your recollection. Mr. LEMAY. That is fair, yes. Mr. SCHUMER. Which I find surprising. Did you ever go on your own and discuss it with anybody? Mr. LEMAY. I do not recall. I May have touched base with Mr. McCor- mack, but I really don’t recall. Mr. SCHUMER. So it wouldn’t have been a lengthy conversation or some- thing that would stick in your memory. Mr. LEMAY. No, sir. Mr. SCHUMER. Now, next question is, is there any other information or documentation that you came across, that you know of, that relates to the CCC Iraq matter besides your October 13, 1989, memorandum? Mr. LEMAY. There are other documents in the record. I think most of these have been—the ones that I recollect have been made available to the best of my knowledge to Mr. Gonzalez. There were several memos from Mr. McCormack to the Secretary, and then there were various decision memos and things of that sort related to the CCC program. So, yes, there are docu- ments available on the decision process. Mr. SCHUMER. Well, there is one that I, that we are particularly interested in here, and that is, it was evidently a chronology or there May have been— I have not seen this with my own eyes—a chronology of events that was circulated in your area in the State Department which refers to a cable from Rome, which presumably the U.S. Embassy or State Department cable, to the State Department in washington. And in that cable—did you see that cable? Mr. LEMAY. I don’t know. Mr. SCHUMER. There was mention of arms sales, supposedly. Mr. LEMAY. I have not seen the cable, no. I May have seen if cable in the past, but I don’t recall. Mr. SCHUMER. If you could pull the microphone a little closer, I am sorry, I couldn't hear you. Mr. LEMAY. I say, I don’t recall having seen the cable. Mr. SCHUMER. How about in reference—do you recall hearing or seeing reference to that cable? Mr. LEMAY. Yes, I have seen reference to that cable. Mr. SCHUMER. Could you tell me a little about the reference? Mr. LEMAY. Again, I do not recall having seen the cable itself and the document that I saw was labeled “Secret,” so I am really in a tough posi- tion here, that I can’t really discuss, I don’t think. I can check with legal counsel from the Department, but that is something, since it was in a classified document, that I am not at liberty to discuss in an open session. 71 Mr. SCHUMER. All right. You would be prepared to discuss that with members of this committee in a closed session, I presume, provided the State Department adviser has told you that was OK? Mr. LEMAY. I have been told that I can discuss classified information if everybody in the room is cleared to hear it. Mr. SCHUMER. Except for Members, I presume. Mr. LEMAY. That is right. Mr. SCHUMER. OK, then we MAY want to pursue that. You use the term repeatedly throughout your memorandum, “diversion.” You couple that term with military hardware and funds on occasion. Are you aware—and I would ask you to comb your mind carefully on this—of other issues that we have not yet discussed which relate to either Iraq, the Middle East, and involve these terms, apart from the CCC program? Mr. LEMAY. Am I aware of other instances of diversion outside of the CCC program? Mr. SCHUMER. Yes, that is correct. Mr. LEMAY. I am not personally aware of that, no. Mr. SCHUMER. Have you heard in terms of conversations or other ref- erences, just as in the previous discussions, about that? Mr. LEMAY. Yes, I am aware of some other issues that were in the docu- mentary evidence given to Mr. Gonzalez, but it is so far outside of my area that I feel very incompetent to discuss it. Mr. SCHUMER. Would it involve any possible violations of law as this di- version did? Mr. LEMAY. I am not a lawyer and I am, again, just not familiar enough with the evidence to say that it did. Again, I just Mr. SCHUMER. Could you fill us in on your recollections there? I under- stand they are coming from someone who does not have great expertise in those areas but it might help us if we understood. Mr. LEMAY. Well, the only thing I recall Mr. SCHUMER. Let me set it in context. Here is a memo–go ahead make your point and then I will make mine. Mr. LEMAY. As I was going through the documents, there was some indi- cation of third-country arms transfers of American military technology, but I do not—again, I didn’t make it a point to look at these documents. They are outside of my area and I was not trying to bone up on Iraq policy; I was simply trying to find the documents with which I was familiar. Mr. SCHUMER. And were these to Iraq, do you recall? Mr. LEMAY. I recall they were to Iraq. Mr. SCHUMER. And when? Mr. LEMAY. I do not recall dates. As I say, I did not get into the sub- stance of the various Mr. SCHUMER. Do you know who received or who sent those documents and who received them within the State Department? Mr. LEMAY. I do not. Mr. SCHUMER. Would other people know of this? Mr. LEMAY. I don’t know. I have no idea. Again, it is outside of my area. Mr. SCHUMER. I understand that. Mr. Chairman, I might ask that we just pursue this maybe again, if we wish to talk to Mr. LEMAY again in this area. I have finished with my questions. Thank you, Mr. Chairman. Mr. BROOKS. Let me observe at this time there was some question about whether it was regrettable that Mr. Brosch couldn't be here. I will suggest that in my letter of May 20 to the President of the United States, “I, there- 73 Mr. LEMAY. Yes, I think so. I mean, I recall it being quite friendly. I don’t recall it being antagonistic. I recall just a pretty friendly, open give- and-take of commentary. I had told them I was there specifically to get the information and that is what I was doing. I was taking notes, I was getting information which I was then going to put into a memo and provide to my Superiors. Mr. MOORHEAD. From what you say, it was, then, a time when you and the other people present were trying to ascertain if there were any problems with this program, or with the Italian bank, or anything which you can do something about or for which you can achieve a positive result. Or, was it one in which, apparently, the allegations are, you were trying to run away from? Mr. LEMAY. I honestly believe we were sitting there trying to figure out what other people knew. There was a great deal of question as to what was actually out there; what were these allegations; were any of them true; was there any evidence, and, as far as I know today, evidence of these allega- tions has not been found. But at the time the allegations were being made. I wrote them down, I presented them to my superiors. Mr. MOORHEAD. Thank you very much. Mr. LEMAY. Thank you. Mr. BROOKS. Mr. EDWARDS, gentleman from California. Mr. EDWARDS. No. Mr. BROOKS. Mr. MAZZOLI, the gentleman from Kentucky. Mr. MAZZOLI. Thank you very much, Mr. Chairman. Mr. LEMAY, I welcome and I applaud your being here today. May I refer you to a statement which was in the column written by Mr. William Safire on June 22, and I would just read one excerpt that perhaps you . perhaps help me here. This is as to why you are being permitted to testify. Apparently, Mr. Safire has heard from people, sources, friends, whatever, that you are being allowed to testify today because “Frank”—Mr. LEMAY “Frank is being set up to be discredited by the coverup crowd at Agriculture who have already lied to Congress and because Frank does not know to this day what happened when his memo went upstairs.” I will let you read that. It is in the middle of the second—starting with “because Frank is being set up.” Mr. LEMAY. And what is the question? Mr. MAZZOLI. The question, having read that, is that a fair statement? Do you agree with anything that is said there? Are you being set up? Do you believe that you are being allowed to walk forward as a kind of sacrificial lamb? Mr. LEMAY. I think, to be perfectly Frank, if I May. Mr. MAZZOLI. Please be Frank. No pun intended. Mr. LEMAY. I am too junior to be set up on this thing. I am not a policy- maker. I was not a policymaker. I provided information. What happened to that information, how my superiors used that information, is generally be- yond my ken. So I do not feel that I am being set up to be discredited. I am very concerned, I will tell you, I am very concerned about the state- ments that were made by Agriculture. Because I do not believe the memo is incorrect. I believe it accurately reflects what occurred at the meeting. Mr. MAZZOLI. Thank you. Well, I appreciate that because I would hate to certainly, just as an edi- torial comment on my part, I would hate to think there is anybody even in the State Department or elsewhere in the executive branch that would allow 75 my current job, and that is the way I do my work. I think it is important to have that kind of detail. Mr. MAZZOLI. You State straightforward—I think it is a very straight- forward memo. Straightforward, it could have a connotation of being fairly draft—fairly declarative, fairly absent adjectives and, once again, phrase- making. So would this be a typical kind of memo from you to your superior on what we would call an average conversation you were asked to report upon? Mr. LEMAY. Again, it would depend totally on the subject matter. In a sense, what I was providing was a warning. Mr. MAZZOLI. That leads me to my last question. I want to acknowledge the time constraints we are operating under. That is because it might be more pungent, because it might have more red flags woven through it, threaded through it, salted through it. Does that lead a panel of observers, this panel, to conclude you May have seen more evidence here than you might have seen in a normal setting, and therefore, you were trying to, by your memo, inform your bosses they better be alert to this thing, this was more than the average situation? Mr. LEMAY. As I said, I was providing a warning that there were a great many allegations, and they needed to be looked into before we proceeded with the program. Mr. MAZZOLI. Is it fair to say that when you set this thing up, you did not expect this to be considered just routine and therefore laid aside? You did, in fact—by the way you drafted it, by the way you wrote it, by what you said and what you concluded, you wanted them to give very clear atten- tion to this thing. Mr. LEMAY. I wanted the memo to get the full distribution I had re- quested, and I was happy to receive commentary. I did not, by and large. Mr. MAZZOLI. Thank you very much. Mr. BROOKS. Mr. Gekas. Mr. GEKAS. I thank the Chair. Mr. LEMAY, continuing on the line of inquiry as to the purpose of the memo, was it your understanding you were going to hear what the invitees were going to say, and reduce that to a memo and then submit it to your principal; is that correct? Mr. LEMAY. I guess technically I was the invitee. I went there. Mr. GEKAS. I thought you said other people were invited to the meeting that you had set up. Mr. LEMAY. No, sir. We set up the meeting with USDA, and I went there. I went to USDA for the meeting. Mr. GEKAS. Didn’t you request the meeting? Mr. LEMAY. I requested the meeting. Mr. GEKAS. You requested the meeting? Mr. LEMAY. Or Mr. Hoskinson requested the meeting. Mr. GEKAS. When you went there, was it your purpose to listen to what allegations or conversations might be held and report that, like a reporter, back to your superiors; or was the memo intended from the beginning to also include your conclusions, your determinations, as to what these con- versations or allegations meant? Mr. LEMAY. I cannot think any of many instances where I have passed a memo to anybody that didn't have my conclusions in them. I am not try- ing to beg the question. I am an analyst basically. I have to give some kind of an idea as to what I think of information. 77 group my personal comments in that section, rather than in other sections throughout the memo. I cannot tell you at this time that I didn't Mr. GEKAS. When you say, “it appears more and more likely,” that isn’t relegated to your personal conclusion, but rather what you felt was con- cluded by the other parties? Mr. LEMAY. I really don’t recall. But—I simply don’t recall. Mr. GEKAS. Then you end your conclusion and comment with the state- ment that the U.S. attorney was going to be meeting with the USDA attor- neys in Atlanta. Is that correct? Mr. LEMAY. Yes. Mr. GEKAS. Was there any time during this meeting, or before or sub- sequently, that you felt that the Justice Department was not involved in this matter, was not pursuing any one of the allegations? Mr. LEMAY. I was under the impression the Justice Department was very actively involved. Again, this is peripheral information. I am not with the Justice Department. I had no reason to believe they were not heavily in- volved, once they raided the Atlanta branch. Mr. GEKAS. I have no further questions. Mr. BROOKS. Mr. Conyers, Mr. Hughes. Mr. Conyers. Mr. CONYERS. I will pass. Mr. BROOKS. Mr. Hughes, the gentleman from New Jersey. Mr. HUGHES. Thank you, Mr. Chairman. Mr. LEMAY, I understand your October 13 memo was distributed to a number of people, Richard McCormack, Under Secretary, assistant to the Secretary of State for Economic Affairs. Was it distributed to other participants, participants at the meeting? Mr. LEMAY. It was my intention it was to be distributed to the partici- pants. Mr. HUGHES. Do you know from your personal knowledge that it was? Mr. LEMAY. I do not. I—again, I would have passed it to our support Staff. Mr. HUGHES. At any time between then and let's say October 20 when the Brosch memo was apparently written, did you have occasion to talk to any of the participants about the meeting? Mr. LEMAY. I have a vague recollection of some phone calls, but I don’t recall discussing the meeting per se. Mr. HUGHES. Let me be more specific. Between then and the time the Brosch memo surfaced, did you have occasion to talk to Kevin Brosch? Mr. LEMAY. I have no records or phone records. I was not able to refresh my memory on that. I don’t remember. I think I probably did, but I do not remember. Mr. HUGHES. At any time between then and October 20, did he raise any questions about your particular memo” Mr. LEMAY. Not to the best of my recollection. Mr. HUGHES. Did he intend to refute anything you said by way of recol- lection as to what took place at the October 13 meeting? Mr. LEMAY. No, sir. Mr. HUGHES. Are you familiar with the October 20 meeting of Kevin Brosch? Mr. LEMAY. Meeting in Atlanta? Mr. HUGHES. No, the October 20 memorandum. 80 dated October 20, 1989, be made a part of the record at this point, because I think it is important. It is a contemporaneous memorandum by a principal at the meeting of the 13th of October. Is that going to appear now in the record at this point? Mr. BROOKS. I am not sure it will be at this point. I already told Mr. Hughes that that and the other documents that you refer to are going to be included in the record, and we will consider putting it in at the conclusion of this testimony. Mr. FISH. Thank you, Mr. Chairman. Mr. BROOKS. Does Mr. Coble have any questions on this? Mr. Coble. Mr. COBLE. Thank you, Mr. Chairman. Mr. LEMAY, it is good to have you here. Mr. LEMAY, hearings such as this, I guess by necessity are, or by choice, involve the propounding of iden- tical questions time and time again, soliciting identical answers time and time again. I am going to fall into that rut, but I think that is the nature of the beast, and I don’t mean this critically. The gentleman from New Jersey has plowed the field that I was plowing in my mind, and I want to replow it, if I May. Directing attention to the October 13 meeting, did you respond to an invi- tation, or did you initiate the meeting? Mr. LEMAY. It is my recollection that I–we—somebody—I don’t know whether it was myself or Mr. Hoskinson initiated the request for the meet- Ing. Mr. COBLE. You went to Agriculture for the meeting? Mr. LEMAY. I did. Mr. COBLE. Were you the only State Department representative at the meeting? Mr. LEMAY. I was. Mr. COBLE. How many Agriculture officials attended? Mr. LEMAY. My recollection, there were four. Mr. COBLE. There were five of you at that meeting. I am going to reiterate what the gentleman from New Jersey said. I think this is important. As I recall from your testimony, Mr. LEMAY, you do not know with certainty who the recipients were of your October 13 memoran- dum; is that correct? Mr. LEMAY. No, I don’t know with certainty who received the memo, other than Mr. Hoskinson, and to the best of my recollection Mr. COBLE. Other than your boss? Mr. LEMAY. Yes. Mr. COBLE. Conversely, did you receive any written or oral message from anybody at the meeting? Mr. LEMAY. I did not. Mr. COBLE. Not then or since then? Mr. LEMAY. I have never received anything concerning the meeting from the Department of Agriculture. Mr. COBLE. The reason I think this is very timely and very significant, I think it would be one thing if the your colleagues at Agriculture had been privy to your memorandum of the October 13 meeting, disagreed with it, and did not respond. That is, of course, a horse of one color. If they did not receive your memo, and then subsequently perhaps learned of it, and then came forward and said this is all wet, nothing to this, obvi- ously we have two different avenues that would be pursued there. 81 Mr. Chairman, I think it is incumbent upon this committee to act upon all the information which we can gain; and I think—in view of Mr. Hughes' questioning and my questioning—I think it apparent now that we perhaps need additional information. Not that anyone is not telling the truth, but I think it would be advisable if we could supplement what Mr. LEMAY has told us with information or testimony from the Agriculture Department peo- ple who were at that meeting. Let me ask you another question—if I May, Mr. LEMAY—in regard again to the October 13 meeting. You stated in your testimony—page 5, I think it was—I am quoting now—“In the meeting we discussed allegations—and I want to stress—allegations of wrong-doing on the part of the Iraqis. At no time was I presented with evidence or proof that the allegations were cor- rect. We were faced with a situation where all agencies had incomplete in- formation.” Now in light of that, Mr. LEMAY, how did you reach the conclusion in your memo that, “it appears more and more likely that CCC guaranteed funds and-or commodities had been diverted from Iraq to third parties in ex- change for military hardware?” Mr. LEMAY. Note that it was and-or commodities May have been, May have been. Now, it is a subtle difference, but I was not saying—again, I was trying to deal with allegations, and maybe there are some sentences in this memo that are not beautiful prose, but in General I think the point that came across in this memo and the point I wanted to make, there are serious allegations. You need to investigate the allegations, you need to find out what is going on before you decide what your policy recommendations are to be. I don’t think I was remiss in making that kind of statement. Mr. COBLE. I didn’t intend to imply that you were. It seemed to me there appeared to be lack of proof on the one hand, and perhaps you were qualify- ing that in your comment. You say you said "May have,” "May have been diverted?” Mr. LEMAY. “May have been.” It was basically a look-before-you-leap- type Statement. Mr. COBLE. Let me ask you one final question, Mr. LEMAY. Did you know then or do you know now of any single instance of this so-called diversion or exchange for military goods of CCC-guaranteed com- modities? Mr. LEMAY. I did—I do not. Mr. COBLE. Thank you, sir. I have no further questions, Mr. Chairman. Mr. CONYERS. Mr. Chairman. Mr. BROOKS. Mr. Conyers. Mr. CONYERS. I thank the Chairman. Mr. LEMAY, I–I first of all want to commend you. I only have a couple questions, but I think you are performing an incredibly important service, and you reflect so well upon those people in the Federal Government that just want to do the right thing. - We are talking now about a $2 billion default on Iraq’s part that May have to be paid by the American people. We are talking about 5 billion dollars' worth of agriculture commodity credits from 1982 to 1990, and so I ask you, to your knowledge, were you the first to warn your superiors at State that these grain loans might be being used for other purposes? Mr. LEMAY. I was not. Mr. CONYERS. You were not? Mr. LEMAY. I am sorry. 82 Mr. CONYERS. Were there a long line of other people preceding you? Mr. LEMAY. Excuse me. Did you ask whether the grain loans had been used for other purposes? Mr. CONYERS. No. I asked, were there other people who warned their su- periors that the grain loans might be used for other purposes. Mr. LEMAY. Well, I mean, I had discussions with all of my superiors be- fore I went to the meeting. So the information was generally—there was some General knowledge of what was going on, and there is a documentary record of when memos went forward. Mr. CONYERS. Like Sam Hoskinson, you talked with him about the mat- ter? Mr. LEMAY. Yes. Mr. CONYERS. You talked with the Under Secretary then, Richard McCor- mack, about this matter? Mr. LEMAY. It is my recollection that I did, yes. Mr. CONYERS. Now, were there other persons like yourself, that brought this matter to the attention of the Department of State? Mr. LEMAY. That brought this to the attention of the Department of State, or to policymakers in the Department of State? Mr. CONYERS. Yes. Mr. LEMAY. Well, I–I believe that the—all of the bureaus involved were interested in finding out what the allegations were and whether there was any evidence that they were in any way correct; so I would have to answer, yes. Mr. CONYERS. There were probably others whose names you May not par- ticularly know. Mr. LEMAY. That's right. Mr. CONYERS. On the other hand, there May be some names that you might faintly recall. Mr. LEMAY. That is also right. Mr. CONYERS. Right. Well, let’s go down the list of the names that you faintly recall. Mr. LEMAY. Sorry to keep you waiting. Mr. CONYERS. That is no problem at all. That is what counsel are for. Mr. LEMAY. I wasn’t sure you were going to give me a list, or I was to give you a list. Mr. CONYERS. OK. Mr. LEMAY. It is difficult for me to say exactly who was involved in which decisions and who was critical to any part of the policymaking. It was a very big policy and there were a lot of people involved. I am familiar with a small part of that policy. I know in terms of the CCC issue, the memo was given to my superiors. I am—as to who discussed the overall Iraqi policy issues with the Secretary or the Deputy Secretary or any of the other officials in the Near East Bu- reau, or in the legal advisor's office, I really can’t say with a degree of cer- tainty. Again, it May be that it is in the documentary record that has been provided to the Agriculture Committee; and I am absolutely unfamiliar with what documents have been provided to this committee, since I did not see them. Mr. CONYERS. I compliment you on your answer, because you are under oath, and we don’t need to search for these recollections if they will are not in front of you. Now, Mr. LEMAY, were you surprised when nobody got back to you after you submitted the memo? 83 Mr. LEMAY. I don't think I said nobody got back to me. I think I dis- cussed it with Mr. Hoskinson, and that would have been normal. Mr. CONYERS. But, I mean, were you surprised about the reaction that you received? This is a personal view I am trying to seek from you, so your counsel won't be of much good to you. Mr. LEMAY. No, I am not asking for his advice. I—I was just turning to him to see if I could jog my memory. Mr. CONYERS. Tell me what you recall. Mr. LEMAY. I don’t recall being particularly surprised. I recall I gave it a distribution that I thought would ensure—that would get it into the hands of people making these decisions. I figured that was the end of it, that was the end of my role. Mr. CONYERS. Didn't you think Secretary Baker should find out about this right away? Mr. LEMAY. Well, I believe the information should have received the dis- tribution I requested for it, and he was not part of that distribution. Mr. CONYERS. So you didn't think Secretary Baker should receive it right away? Mr. LEMAY. I believe that that call remained with Mr. McCormack. Mr. CONYERS. I see. OK. Now, you indicated earlier that you requested copies of your memo to be provided to the participants from USDA in the October 13th meeting. Did those USDA officials provide you with any memo they May have written concerning the meeting? Mr. LEMAY. Not to the best of my recollection. I do not recall ever re- ceiving any documents from USDA. Mr. CONYERS. Right. We got a little two-pager here that is more embar- rassing than anything else, so I assume that there wasn't any writing, at least that we know about. Final question: What is your understanding of the timing of your memo, sir, in relation to the granting of the fiscal year 1990 commodity credits for Iraq'? Mr. LEMAY. My memo, I think, was probably early in the process, and again, it was a memo discussing allegations which were apparently then in- vestigated by different agencies. I understand USDA’s Inspector General in- vestigated and found no case for wrongdoing, and then the process of mak- ing those determinations as to amounts and so forth went forward. Again, I am not familiar with that process. Mr. CONYERS. Great. Thank you very much for your responses, Mr. LEMAY. Mr. BROOKS. Thank you, Mr. Conyers. Mr. James, the gentleman from Florida. Mr. JAMES. Thank you so much. Mr. LEMAY, what is your background, your educational background? Mr. LEMAY. I have an associate of arts degree from the University of Maryland. Bachelor of science, in Foreign Service, from Georgetown Uni- versity and a master of arts from Johns Hopkins School of Advanced Inter- national Studies; and I have done a year of additional advanced graduate work in theoretical economics at the George washington University. Mr. JAMES. What were your bachelors or arts degrees in? Mr. LEMAY. The undergraduate degree was in political science with a minor in economics. Graduate degree was in a field which is called Devel- opment, which is mainly economic development issues. 84 Mr. JAMES. Your background is not in law; it is in economics and politi- cal Science? Mr. LEMAY. I have no background in the law. I have never been part of any kind of legal action. Mr. JAMES. Mr. Brosch, of course, is an attorney? Mr. LEMAY. That is correct. Mr. JAMES. So it would be reasonable to assume in the techniques one would express themselves would rely largely on one's background and edu- cation as to how you would deliver conclusionary statements and recitation of facts Would that be reasonable to assume? Mr. LEMAY. I don’t know. I think often the facts speak for themselves. Mr. JAMES. Indeed. Let’s read your summary conclusions and tell me how much there is in terms of facts in this summary, conclusion, and comments you have in your memo. Taken together the points discussed during the meeting indicated we should provide carefully and urging the immediate pro- visions of the CCC guarantees to Iraq. “If smoke indicates fire”—that is not a fact is it, anything said thus far—“we May be facing a four-alarm blaze in the near future.” That is not a fact is it, I would assume? This is particularly true, given the intense scrutiny the CCC program has been under during the last year. McElvain indicated that there were 19 investigations of CCC this year, and the integrity of the program is now in question. USDA attorneys will be going to Atlanta for discussions with the U.S. attorney during the coming week. Additional information on the various investigations will be available upon their return. The only fact I really find in there—I am not being critical of your con- clusion—the “USDA attorneys will be going to Atlanta for discussions with the U.S. attorney in the coming week.” That was not yet a fact at the time. This conclusion is the intention of the attorneys as to where they might go 1 week later. - *: LEMAY. A conclusion and comment statement; I wasn’t putting facts 1Il IIICIC. Mr. JAMES. Precisely my point. It wasn’t your intention there to put facts in that conclusionary comment—is that correct? Mr. LEMAY. It was my intention to put an analysis of what I thought was worth analyzing. Mr. JAMES. Was that a political conclusion or a legal conclusion—your conclusions and comments when you talk about “smoke,” “fire?” Mr. LEMAY. It was neither. It was a statement to the Under Secretary, we should proceed with great caution. Mr. JAMES. Analyzed perhaps from your educational background of eco- nomics and political science? Mr. LEMAY. It was not a legal conclusion; I am not a lawyer. Mr. JAMES. Have you analyzed—I understand you have not yet analyzed the subject matter contained in the lawyer's memo and yours yet; is that cor- rect? Mr. LEMAY. Have I not seen their memo. Mr. JAMES. I have, and it appears to me that—both when you examine the facts and the other facts you recited that appear in the Congressional Record, that the facts are largely facts concerning allegations made, as far as what we are to expect to see the investigation on in your memo. Mr. LEMAY. In my memo? Mr. JAMES. Yes. Mr. LEMAY. Yes, it is a question of allegations. 85 Mr. JAMES. Almost no recitation of facts, but allegations concerning things that need to be investigated; that is, perhaps a fair recitation made no conclusion as to facts, but only as to the existence of allegations that needed to be investigated. That was the substance basically of the memo, was it not? Mr. LEMAY. The substance of the memo was that these issues were, in fact, discussed. Mr. JAMES. Yes, which was a fact. You discussed these issues and these allegations. Mr. LEMAY. That is right. Mr. JAMES. It was not a discussion to come to a conclusion as to any specific fact, was it? In other words, the purpose of your meeting was to discuss mere allegations, not to make factual determinations. Mr. LEMAY. The factual determination here was that additional investiga- tion was needed. Mr. JAMES. Yes, thank you. Now, I find—and correct me if I am wrong—the attorney's memo dis- cussed almost the identical allegations. I compared point one, payments. I find in his memo that he also-where you said, payments, available informa- tion indicates that the GOI required exporters to pay a substantial consulting fee. Well, he covered that, too. Allegations owed. He said in his legal memo- randum or his memorandum—whether—of the meeting, allegations that ex- porters May have been required to pay consulting fees to companies in the United States that were controlled by the Iraqi Government, parenthesis, names mentioned were XYZ Corp. And Churchill-Matrix.-covered the same subject matter. The next item, diversion of guaranteed funds, commodities. Three, this also was mentioned in his memo. Allegations, commodities shipments destined for Iraq under GSM program were transshipped else- where and bartered for cash or materials—that is also mentioned in yours. In other words, as I go down it, I think you will find your memo is totally consistent; it is a matter of style and expression. His, being as I think law- yers would report facts, specifically avoiding the temptation to come to in- cendiary remarks, whereas yours was an impression from your background. Nothing wrong with it—of coming to conclusions that would be more lay- man in nature and less careful in regard to conclusionary factual allegations. Indeed, then you were careful, I find, very careful to make no statement of fact; but because of the alarm and the quality of the allegations, you used colorful language to perhaps get the attention of your superiors. I don’t see a distinction between the two. If you think there is a difference factually or there is something that is different—I did find One difference. I have not—I did not have time to See whether he made a reference to your comment on nuclear-related equipment. However, the nuclear-related equipment in your memo referred to USDA’s. Brosch noted that the U.S. attorney said there was some indication that di- verted funds and possibly direct bank-lent funds were used to procure nu- clear-related equipment. In other words, that was his comment which was omitted. The only thing I could find thus far omitted was something he perhaps said at the meeting. I don’t know how relevant that May be. I was surprised to see the memos as parallel as they were as far as subject matter. I was not surprised to see the difference in style. And I find—I didn't see the in- COnSiStencies. 86 So if anyone on this committee can point up the inconsistencies that ex- isted between those two memos, I would appreciate it. If I missed something I haven’t heard it yet. Can you point up something he May have left out of his report? Mr. LEMAY. I have not seen his report. Mr. JAMES. And no one has told you there was something—there was a factual difference between the two reports? Mr. LEMAY. No. I didn't know until this hearing that there were reports. Mr. JAMES. I see. You didn’t know he had done a memo? Mr. LEMAY. I did not know that. Mr. JAMES. Thank you very much. No further questions. Mr. BROOKS. Mrs. Schroeder, the gentlewoman from Colorado. Mrs. SCHROEDER. Thank you, Mr. Chairman. I don’t know whether to ask legal questions or factual questions. I really want to compliment the witness on his wonderful record and point out, my understanding is a lot of your job is writing memos. This isn’t the first memo you have written? Mr. LEMAY. No. I have been writing memos for 11 years. Mrs. SCHROEDER. If it is a meeting, it is a memo, right? Mr. LEMAY. That is pretty much the case, yes. Mrs. SCHROEDER. Basically a lot of your promotions and a lot of distinc- tions you received, that would be a very important part of your job criteria as to how well you write memos to your superiors? Mr. LEMAY. That is correct. Mrs. SCHROEDER. One of the things, I suppose you are not just to give them hard facts, but tell them maybe there were traps out there— Mr. LEMAY. That was my job working for the Under Secretary, yes. Mrs. SCHROEDER [continuing]. If whistles and bells rang in your head. I assume he selected you, and his head was kind of similar to yours and he would want to know where those whistles and bells were ringing, I guess. You were not there as legal counsel to say, this had been closed out. You— but you could say, this might be a problem; and that is what you were trying to say in the memo, is my understanding. Mr. LEMAY. That is correct. Mrs. SCHROEDER. You weren’t holding yourself out as the Under Sec- retary’s counsel. Let me ask a question: Were you at all concerned after this all happened and you later on found out that this had been shifted from your boss to someone else's portfolio or to someone else’s attention? Mr. LEMAY. At the time—even today, I don’t think I was terribly con- cerned about it. It was not my issue to be concerned about. If the senior policymakers of the State Department decide that one Under Secretary or an- other is to handle an issue, that is really their call. I am just going to be there to support the Under Secretary for whom I work. If it is clear he is no longer following an issue or no longer interested in an issue, for whatever reason, that is going to become a lower priority for the people on his staff because they are going to have other work to do. Mrs. SCHROEDER. Does this happen a lot? I mean, I think immediately of the Congress where once a committee gets assigned an issue, the Speaker can’t take it back and give it to another one. So you are telling me the Sec- retary often May transfer an issue from one Under Secretary to another. Does that happen frequently? 87 Mr. LEMAY. I don't know who does it. It May be by mutual agreement. I don’t know how those decisions are arrived at. I am not really—does it happen frequently? Again, I am in a weak position to say that. I know there were several other issues divvied up in the period, unrelated to this. Sometimes an issue that begins as an economic investigation—I don’t mean “investigation” in the sense of legal, but an economic issue— turns into some other issue. Maybe it becomes a foreign aid issue or a re- gional issue. Different people and different actors will tend to move into a more paramount position. Mrs. SCHROEDER. They never gave your boss any reason that you know of why it got transferred? Were they told it now looks like something other than an economic issue, or did you ever ask your boss why did we lose this oversight? I find this kind of interesting because human beings tend to fight over turf. They all willingly shrugged their shoulders and said, I guess someone else needs to handle this? Mr. LEMAY. I think you need to ask Mr. McCormack that series of ques- tions. I don’t recall going in and saying, gee, Mr. McCormack, why did they take this away from you? It wouldn’t be my place to do that. Mrs. SCHROEDER. When did you know it was taken away from him? Mr. LEMAY. To the best of my recollection, we were involved in this issue from probably around August 1989, through—through the discussion period when it was decided to double-tranche, and then we were sort of out of it; and then we become involved a little bit when it came time to do a second tranche. Again, I recall our input on the second tranche issue was rather minimal. Again, these are just my recollections. I do not know what Mr. McCormack May have discussed with other Under Secretaries, or what May have hap- pened at the senior staff meetings. This is my recollection of what I know, and I only, again, know a small part of the picture. Mrs. SCHROEDER. But McCormack never talked to you specifically about this memo and what kind of information you were conveying to him? Mr. LEMAY. About my memo? Mrs. SCHROEDER. Yes. Mr. LEMAY. I have a recollection we discussed it, but I can’t really put it in perspective. It would have been odd had I not discussed it. I recall dis- cussing it with Mr. Hoskinson. What I can’t remember is whether Mr. McCormack right at that time dis- º it with us, or whether Mr. Hoskinson discussed it with us, I just don’t recall. Mrs. SCHROEDER. Do you remember any particular kind of reactions from Mr. Hoskinson or Mr. McCormack in discussing this memo with him? It doesn’t sound like a routine memo. Mr. LEMAY. Again, this is my recollection, but Mr. Hoskinson seemed to think it was an important memo. Mrs. SCHROEDER. He thought it was an important memo, and you can’t specifically remember a reaction from McCormack? Mr. LEMAY. No, I don’t remember a specific McCormack reaction. Again, I probably wasn’t the person who handed it to McCormack. He May have come out and said, gee, this is a great memo, or this needs more work. I don’t recall. Mrs. SCHROEDER. There wasn’t any gossip that went around about the memo and this issue and it being transferred to another Under Secretary? 88 Mr. LEMAY. Not, to the best of my recollection, among the people I talked to, and those were other special assistants. Again, it is a long time ago. Mrs. SCHROEDER. Did you handle other things dealing with the commod- ity credits, other issues and meetings that you went to at the Department of Agriculture, or was this— Mr. LEMAY. This was the only commodity credit issue that came up. I did some work on coffee policy. Miscellaneous things would come up at dif- ferent things, and those tended to fall into my portfolio. Mrs. SCHROEDER. Thank you very much, Mr. Chairman. I really appre- ciate your letting me do this. Thank you. Mr. BROOKS. Mr. Campbell, the gentleman from California. Mr. CAMPBELL. Thank you, Mr. Chairman. Mr. LEMAY, thank you for your testimony and being here today. We have a very specific and narrow purpose on this committee. It is to ascertain whether there should be a special prosecutor, an independent counsel, I guess is the phrase. And the statute under which we operate says, we look into that question where we believe there May be wrongdoing by a specified number of individuals. And those are the President, Vice President, Cabinet officers, individuals above Executive Schedule 2 in the Executive Office of the President, Assistant Attorneys General working at executive level 3 or higher, the head of the CIA or the Deputy Commissioner of Internal Reve- nue. Chairman and treasurer of the national campaign committees of either party seeking the Presidency. We have two possible routes: One, something you knew from the evi- dence from that meeting, or otherwise, would indicate one of these listed individuals might have condoned diversion. The other route is that your memo itself, being ignored by one of these individuals, might indicate com- plicity in a coverup or desire not to explore fully. This is my point of departure for the two questions I have to ask you. Going back to the first route, is there anything you know, based upon what you heard at that October 13 meeting or in any other capacity or in any other context that gives you cause to believe or suspect that any of the individuals whom I listed had knowledge of or condoned diversion of CCC money for Iraq.” Mr. LEMAY. There is not. Mr. CAMPBELL. Let me pursue the second path. I observe that your memorandum is addressed to the Under Secretary and not to the Secretary of State. I observe also, if I might just refresh your memory, that in the part of the memorandum dealing with diversion you conclude, the paragraph that begins: “Although additional research needs to be done”—the last sentence; perhaps you would be kind enough to read that aloud. It might be more helpful. The last sentence of your memorandum in that paragraph. Mr. LEMAY. The sentence beginning where documents indicate or the very bottom of page 2,011? Mr. CAMPBELL. The carryover page 2,012 appears to be the carryover paragraph. Mr. LEMAY. Parties in exchange for military hardware? Mr. CAMPBELL. Let me draw your attention to that sentence which con- cludes the paragraph in which—parties in exchanges, the carryover sentence. Mr. LEMAY. You want me to read that although additional research needs to be done? Mr. CAMPBELL. That is the paragraph. I draw your attention to the last sentence of that paragraph. 89 Mr. LEMAY. “BDLA paperwork is so sloppy on this point that it May be months (or never) before we can reach a firm conclusion on the diversion issue.” Mr. CAMPBELL. That is the sentence to which I refer. “BDLA paperwork is so sloppy on this point that it May be months (or never) we can reach a firm conclusion on the diversion issue.” This is your judgment contained in a memorandum to the deputy. On the basis of what you know and what happened to your memorandum and how it was treated in the Department after you wrote it and sent it up- stairs, or sent it into your boss, do you have any reason to believe that diver- sion of funds to Iraq was condoned by any individual listed in the list I gave you at the start of my question? Mr. LEMAY. To the best of my—to the best of my knowledge, no. I mean, it was not condoned. I believe people were looking into these allegations very seriously. Mr. CAMPBELL. I thank you, and I thank the Chairman. Mr. BROOKS. Mr. Glickman had a couple of questions and I think Mr. Berman did. Mr. Glickman, the gentleman from Kansas. Mr. GLICKMAN. Thank you, Mr. Chairman. Mr. Hughes asked if you had seen the memo from the Agriculture Office of Inspector General dated June 8, 1992. I believe your answer was, you had not seen the memo. Mr. LEMAY. Not to the best of my recollection. Mr. GLICKMAN. That was a memo–actually I don’t know why it came to us at this late date, confirming your version of the 1989 meeting. There were notes taken at another briefing on the same subject by Assistant U.S. Attorney Gail McKenzie. She briefed Brosch and McElvain. The OIG has compared the notes of both briefings and put this in memo form. I want to make sure the record reflects the fact that the other memo con- firms much of what your memo contained. That memo, that USDA memo, compares notes taken by two OIG, Office of Inspector General, special agents who attended the assistant U.S. attorney's briefing of Brosch and McElvain. It compares these notes point by point, and the two versions ap- pear to confirm each other very specifically. First, with regard to the consulting fee to a company called Churchill-Ma- trix and allegations that Churchill-Matrix provided military hardware to Iraq. Second, both memos discuss, “after-Sales Services.” Third, both discuss the likelihood that commodities bound for Iraq were diverted to third countries. Fourth, both memos discuss nuclear missile technology, and specifically, the terms, “nuclear fuel compactor”—it is “compounder” in the other memo, but it is probably the same term I don’t know, and, “nose cone Burr." Again, that is in the OIG'S memo, separate and apart from yours. Fifth, both memos contain additional allegations about overpricing com- modities. Now, I would like you to look at this, as Mr. Hughes asked you. I raise this to point out the questions with respect to comments disavowing and dis- crediting your memo by Messrs. Brosch and Mr. McElvain. As far as I am aware, I would say to my colleague from Florida, I believe this memo and the OIG memo basically confirm each other, two independent sources talk- ing about the same subject. The other thing that I find that is interesting in all of this is Mr. Brosch, in his memo, basically treats in rather cursory fashion the allegations which are made; and it goes on—apparently, there was 1 week’s worth of inves- 90 tigation done by him. People went down to Atlanta, talked to the bank and everything else. If you look at the testimony Mr. McElvain gave to Mr. Gonzalez's com- mittee—I am looking at page 271—Mr. McElvain, who is Director of Export Credits at the CCC, who attended the meeting which was the subject of the OIG'S comparative memo he was asked about your memo of October 13. McElvain stated, “OK, first thing, I would like to point out that I have never seen that memo, but I did read about the contents of the memo in the Congressional Record and, Mr. Chairman, I say that, no, I do not recall expressing any—making any comments or having any doubts during that meeting that there was a possibility of any of these commodities being di- verted or bartered or whatever, or for military equipment, I believe, is the way that memo is stating. That memo, in my opinion, was—the discussions of that meeting were misrepresented very badly.” And then, if you look at page 288, Mr. Brosch said those notes are “to- tally misleading. They do not represent the conversation that was had in that meeting on October the 13th, in my view.” And then, on page 291, Mr. Brosch says—he is talking about his name being spelled correctly, and then he said to Mr. Vento, “Beyond that, I am not too sure if he got anything right.” Then you keep going down that page, 291, and Mr. Brosch continues, “All I can say is I can’t account for why Mr. LEMAY wrote this. He wrote it. You will have to ask him, but it is cer- tainly not accurate, in my judgment.” I guess—I raise these points to again point out that there is another memo from the Office of Inspector General which outlines the notes that were taken by the OIG people who were at another meeting attended by Brosch and McElvain that basically confirms your memorandum. I just want to again ask you, for the record, when Mr. Brosch character- izes your memorandum as totally misleading and not accurate, I wonder if you would repeat what you have stated before, perhaps, or how you would respond to his determination that, in fact, it was not accurate. Mr. LEMAY. I completely stand behind the memo that I wrote. I will take full responsibility for what is said in there, and I believe I was right in pro- viding that information to Under Secretary McCormack. Mr. GLICKMAN. Then I would ask one other question. In your memo you conclude, “If smoke indicates fire, we May be facing a four-alarm blaze in the near future.” And then you go on, “This is particularly true given the intense scrutiny the CCC program has been under during the last year. McElvain indicated that there were 19 investigations of CCC this year, and the integrity of the program is now in question.” Now, as it turned out, there have been a whole series of not only criminal investigations, but congressional investigations involving the operation of the Commodity Credit Corporation during the last 5 years. But can you give us a little more information of what kinds of scrutiny you were referring to in that memo, and what you were talking about, “If smoke indicates fire, we May be facing a four-alarm blaze in the near future?” I am not exactly sure how that relates to the rest of the stuff in your memorandum. Mr. LEMAY. I think what I was trying to say with “the smoke indicates fire” line, was that if any of these allegations prove to be true, if any of these allegations are borne out, then the administration has an even bigger foreign policy problem on its hands that will have to be dealt with. I was simply warning people that you have allegations here that are very serious, and that these allegations have to be looked at. 91 It is any my General view that people did look at the allegations, and deci- sions were made that they were baseless and so forth and so on. But, again, if smoke indicates fire, there was a lot of smoke and the smoke involved all of the issues that I have discussed in my memorandum. Mr. GLICKMAN. Just finally, the CCC, the intense scrutiny the CCC pro- gram has been undergoing, was that something that had been related to you at that meeting by the other folks that were there, and specifically by whom? Mr. LEMAY. The CCC program scrutiny issue I recall coming up with Mr. McElvain. We were discussing what other investigation—and, again, this is 3-year-old memory, but I recall we were discussing just the General types of investigations that were proceeding, both in the BNL thing and I remem- ber him mentioning that there were other investigations, and I said, Well, what type? How many, what type? And then we came up with a number. I didn’t know whether that was correct information or incorrect. Again, I found it to be consistent with what I was putting in the memo, so when I was going through my notes, I added that as well. Mr. GLICKMAN. OK. Thank you, Mr. Chairman. Appreciate it. Mr. BROOKS. Mr. Frank from Massachusetts. Mr. FRANK. Mr. LEMAY, I have one question, inviting you to do some re- consideration. Given all that you have been through and all that you have heard, do you know now wish you went to law school? You don’t have to answer that. Mr. LEMAY. No, I like being an economist. I don’t have a problem. Mr. FRANK. A couple of things I think should be clear about your own role, which I must say I admire enormously. It shouldn’t be the case that simply doing your job without worrying about the consequences is a remark- able thing but sometimes it is. You wrote this memo, clearly contemporaneously, with no idea it was to be made public; is that correct? Mr. LEMAY. I never expected it to be made public. Mr. FRANK. So that, to the extent you were being incendiary, and I sup- pose the phase “where there is smoke, there is fire” is literally incendiary, you were not writing a memo that later it was to be made public or used in any way? It was written for internal consumption in the Department? Mr. LEMAY. Yes, it was written for internal consumption in the Depart- ment, and I hoped that it would have been distributed to the participants. Mr. FRANK. And, in fact, it became public because of the initiative of whether it was Mr. Gonzalez, Mr. Rose, Mr. Gejdenson, you didn't publish the memorandum yourself subsequent? - . LEMAY. No, I didn’t have even have the memo until I saw it appear 1Il IIIC– Mr. FRANK. So we are talking about a memorandum which you, in the course of your duties as a State Department employee, wrote, fully expecting it to be contained within the State Department, and subsequently, with no involvement by you, this became public? Mr. LEMAY. That is absolutely correct. Mr. FRANK. I hope that that will be made clear, and it seems to me that that is a very important set of rules. My colleague, Mr. Campbell, asked you whether you had any evidence that the named parties in the independent counsel statute were involved, and you correctly said no. There is, of course, a second group in the independent counsel statute which says that we should have an independent counsel if there is any reason to believe that a crime was committed by anybody, not 56–783 O – 92 – 4 92 specifically one of those named, and there is some political, legal or finan- cial conflict of interest that would prevent it being investigated by the Justice Department. So it seems to me that is the area that we are very much in. In other words, if someone were to have concluded that the bank itself, as opposed to simply its employee or anybody else, people in the Iraqi Government or elsewhere, had violated the law, the question would be whether, because of a failure aggressively to follow up earlier, it would be a political embarrass- ment for the Justice Department or for somebody then in the administration, and that is the General area we are going in. So just to summarize, your recollection is that at the time, hearing what you heard, you said that there was reason to investigate further some serious allegations about violations of the law; is that correct? I mean, is that basi- cally what you were talking about at the time? Mr. LEMAY. Yes. Mr. FRANK. These were allegations, among others, that laws had been vio- lated. Mr. LEMAY. I mean I am not a lawyer. Mr. FRANK. We have established that. Were there any economists—maybe the law of supply and demand was impugned. Mr. LEMAY. There was a lot of supply and demand, but the point is that I was looking at allegations of Iraqi wrongdoing. I don't know whether they were breaking the law. That would be the Justice Department's— Mr. FRANK. That is a valid point, because one of the questions, it seems to me, and Mr. Gonzalez put into the record at one time point a memoran- dum quoting administration officials saying, Oh, but we couldn't indict the central bank of Iraq because that would be wrong. So we are talking about a conscious decision by some administration officials not to bring an indict- ment against the Bank of Iraq, and that is one of the things we would be talking about. You are not in a position to tell us at this point with what degree of dili- gence these things were subsequently investigated? That was not part of your job? Mr. LEMAY. No, I cannot tell you that. Mr. FRANK. So what we have from you, and I must say it seems to me it is important, is the contemporaneous document by someone just doing his job which says, Hey, based on what I heard late in 1989, or in the fall of 1989, there are some serious problems here. And I must say, if people are going to look back and say was your memo justified or not, I think hindsight is much more on your side than on the other side. Anybody who looks back here now sees that there have in fact been serious problems and some still left undone. So I just want to close with the hope, and I have no reason to think there is anything other than that, but I would hope your career is not at all af- fected by this. It seems very clear you did your job, you did it contempora- neously, you had to reason to think this would later be used, and I hope that will be very clear to everybody and I think that that is a factor that this committee has an obligation now to monitor fairly closely. Thank you, Mr. Chairman. Mr. BROOKS. Mr. Berman, the gentleman from California. Mr. BERMAN. Well, thank you very much, Mr. Chairman. My colleague from Massachusetts has mentioned the other appropriate area where an independent, special counsel might be selected. A far broader area than a few named individuals, involves fundamental political, economic, 93 and legal conflicts of interest which could give the administration and or the Justice Department reasons not to want to pursue, or could constrain reasons to pursue, some issues fully. Your memo comes in the context of a meeting called because the Depart- ment of Agriculture says: “There is so much swirling around about these commodity credits, we don’t want to give another billion dollars right now. We are recommending another $400 million.” The Government of Iraq says, or the State Department says: “This is an insult to Iraq, this does not go along with our notion of better relationships, and a meeting is convened to discuss all these allegations.” Is that a reasonable summary of the context of the meeting; and, if not, can you go back and tell me what caused this meeting to happen? Mr. LEMAY. To the best of my recollection, the meeting occurred because we had heard, and I don’t recall whether it was me or Mr. Hoskinson or someone else in the Department had told us, that the attorneys in this, the USDA attorneys had gone down to Atlanta to discuss the allegations. That was really the first concrete information that we knew of. Mr. BERMAN. What is the broader context for— Mr. LEMAY. The broader context was trying to find a policy to deal with Iraq. I mean, I am not, again, I am not a policymaker. I am just a small package here, and I know you need an answer to that question but I am not competent to give it. Mr. BERMAN. Have you had any conversations in the last couple of weeks with the former Under Secretary McCormack? Mr. LEMAY. Yes, I have. Mr. BERMAN. On this subject? Mr. LEMAY. Yes, sir. Mr. BERMAN. Are you aware of what actions he might have taken pursu- ant to this memorandum, from these more recent contexts? Are you aware or did he mention to you what actions he might have taken after reading your memo? Mr. LEMAY. He said he did not recall exactly what he did with the memo, but he also said there were, or we discussed two memos he sent forward, which I think have been provided to the committee. I don’t know. Mr. BERMAN. Two memos from McCormack to? Mr. LEMAY. To the Secretary, I believe. Mr. BERMAN. That arose from the subject matter of your memo? The question of diversion and the question of kickbacks, and the question of Mr. LEMAY. No. The memo that he sent up did not go into all of the details of my memo. Mr. BERMAN. No, but was it based on the information contained in your memo'? Mr. LEMAY. There was one section that I recall of the memo which— excuse me just 1 minute. I don’t know which of the McCormack memos have been declassified, so I am sort of, again, over a barrel here. Mr. BERMAN. All right. In other words, in terms of talking— Mr. LEMAY. I am happy to respond to your questions on these memos, because I am familiar with them, but I don't— Mr. BERMAN. Just to repeat, within the last few weeks you and former Under Secretary McCormack—what is he doing now? Mr. LEMAY. I believe he is in a consulting firm. 98 Mr. LEMAY. That was my understanding of this memorandum, yes. And the reason I say that is, when I asked for a copy of the memo as it was in the record, I got a copy that was stamped “draft.” Mr. WASHINGTON. OK. Have you had an opportunity to look at-before I get to that question, let me ask you: In the regular course of business, would this be delivered to some person for typing by you in handwritten form or would it be dictated with the use of dictation equipment? Mr. LEMAY. I had a Wang word processor and I simply did it myself. Mr. WASHINGTON. You did it yourself? Mr. LEMAY. Yes, sir. Mr. WASHINGTON. So the fact that an earlier version was labeled a draft was merely for the purpose of your having an opportunity—and I don’t want to put words in your mouth—but for the purpose of your own review for editorial comment and substantive thought before you would consider it to be in final form and would affix your signature to it. Mr. LEMAY. That is correct. Mr. WASHINGTON. Would you, in the regular course of business, then, sign the version that would be the final copy in quotes and available for distribution? Mr. LEMAY. I would sign the drafting information, yes. Mr. WASHINGTON. You would sign the draft as well? Mr. LEMAY. No, no. The information at the end of the memo is called drafting information and my name would appear there. Mr. WASHINGTON. May I inquire as to whether the copy that was given to you from whatever source that is marked draft is signed or unsigned? Mr. LEMAY. This memorandum is unsigned. Mr. WASHINGTON. So in all likelihood it was a draft? Mr. LEMAY. In all likelihood this was a draft. But I mean it is the same document, it was just not the document that I forwarded. Mr. WASHINGTON. After preparation of a draft, did you, at some point, prepare that document in final form, sign it and send it for distribution, as you have testified? Mr. LEMAY. I did do so. Mr. WASHINGTON. Now, then, in the normal course of business, about how many days would the preparation of the document have taken place after the date of the meeting itself? Mr. LEMAY. Well, this memo I wrote the day of the meeting and then put in final on—I believe it was the 14th in the morning and provided it on the 14th. Mr. WASHINGTON. So your testimony is that you have a specific recollec- tion that after the meeting you returned to your office used your Wang and typed up the draft? Mr. LEMAY. That is correct. Mr. WASHINGTON. And subsequent to that, then, on the following day— that being the 14th of October 1989—you produced it in final form and sent it for distribution? - Mr. LEMAY. That is correct. Mr. WASHINGTON. What is the name of the individual to whom you deliv- ered the copies or did you deliver an original and copies or only an original for distribution? Mr. LEMAY. I gave an original to Mr. Hoskinson and it is my recollection that I gave a copy to our staff assistants. Mr. WASHINGTON. Staff assistant’s name being? Mr. LEMAY. Patricia Mueller. 101 Mr. LEMAY. I don’t understand the question. I am sorry. Hold on. Mr. WASHINGTON. Is the Mr. LEMAY. When I first heard that my memo had been placed in the Congressional Record, my immediate recollection was of a meeting that I had. I remembered many of the General topics, but, yes, looking at the memo did refresh my memory as to the specifics. Mr. WASHINGTON. Let me ask you one other question, then, which I for- got about. Have you compared the copy that is marked “draft?” Have you seen a copy that was actually signed by you on October 14, 1989? Mr. LEMAY. Yes, I have seen both copies. Mr. WASHINGTON. Have you compared them to see if there are any dif- ferences between the copy that is marked “draft,” and the copy that was actually signed by you and handed to Mr. Hoskinson, the original of which was handed to Mr. Hoskinson, the copy of which was requested for dis- tribution to all the named individuals? Mr. LEMAY. I have read both documents. I have not done a line-by-line check of each word, but they are—I mean they are the same document, as far as I can tell from having read them both. Mr. WASHINGTON. As the author of both the draft and the original, is there any difference, in your mind, between one and the other? Mr. LEMAY. There is not, except for the designator. Mr. WASHINGTON. Except for the designation. Mr. LEMAY. Yes. Mr. WASHINGTON. Now, then, you have said that the contemporaneous º: were reduced to written form, which is the document itself; is that cor- reCt. Mr. LEMAY. That is correct. Mr. WASHINGTON. All right. Mr. LEMAY. But not in chronological order. Mr. WASHINGTON. And as far as you are able to recall, since you do not have the contemporaneous notes, does the written, the typed version which was typed by you, accurately reflect, insofar as you are able to recall it at this time, the contemporaneous notes that you made contemporaneous with the events in question? Mr. LEMAY. Yes, it does. Mr. WASHINGTON. You said that you later saw a copy that was marked “not for the system.” When was this that you saw that? Mr. LEMAY. It was given—well I saw it yesterday afternoon. Mr. WASHINGTON. All right. Yesterday being June the 22, 1992. Mr. LEMAY. Yes. Mr. WASHINGTON. Was that the first time you saw that interlineation on the document? Mr. LEMAY. Yes, it is. Mr. WASHINGTON. So MAY I take it then when you last saw it you didn’t see such denomination “not for the system” on the document? Mr. LEMAY. That is correct. Mr. WASHINGTON. So you didn’t place it on the document? Mr. LEMAY. I did not place “not for the system” on the document. Mr. WASHINGTON. And you do not know who did? Mr. LEMAY. I do not know who did. Mr. WASHINGTON. What was the source of the document you received yesterday? Mr. LEMAY. I requested it from the Legal Adviser’s Office and they pro- vided it to me. 102 Mr. WASHINGTON. So it MAY have been placed on there any time be- tween—I take it you last saw the document that you can recall, on the 14th of October 1989; is that correct? Mr. LEMAY. I mean, I May have seen it again during, you know, the fol- lowing week, but, yes, that is substantially correct. Mr. WASHINGTON. On about October 1989, you would have no other rea- son to go back and continually pursue the document on a daily basis? Mr. LEMAY. No, because again after 3 or 4 months we were largely out of the decision on this issue. Mr. WASHINGTON. Right. You were out of the loop, at least. So between— Mr. LEMAY. Right. Mr. WASHINGTON. So the legend “not for the system” was placed on there some time between when you last saw it in October 1989, and when you next saw it on June 22, 1992, and you know not by whom; is that cor- rect? Mr. LEMAY. I don’t know by whom and I don’t know when. Mr. WASHINGTON. All right. Now, just one other question and I will be finished. Did the procedure that you outlined in this memo follow what you would ordinarily do for distribution, that is, within your agency as well as partici- pants in the meeting? Mr. LEMAY. To the best of my knowledge. Mr. WASHINGTON. All right. So we don’t know whether Mr. Kenneth Brosch received your memo” We don’t know from you of our own knowl- edge whether he received your memo, which was dated October 13, 1989, and at least sent for distribution on October 14, 1989, before his memo dated October 20, 1989, do we? Mr. LEMAY. I have not seen his memo, but I do not know whether he received my memo either. Mr. WASHINGTON. We don’t know, even though it is dated October 20, 1989, when it was actually prepared; do we? Mr. LEMAY. Whose memo; his memo? Mr. WASHINGTON. Mr. Brosch's memo. Mr. LEMAY. I have not seen Mr. Brosch's memo. Mr. WASHINGTON. Would it surprise you to know that, at least in that portion of the memo dated October 12, 1989, there is no reference to an October 13—there is a reference to October 13, 1989, but not to a meeting with you? Mr. LEMAY. I have not seen the memo. Mr. WASHINGTON. Would it surprise you? He was present at the meeting, according to your recollection. Mr. LEMAY. Yes. Mr. WASHINGTON. And so, going back to one of my colleague's ques- tions, I am not sure which, but another possible scenario is that this October 20, 1989, is what is known as a CYA memo! Mr. LEMAY. I have no knowledge whatsoever of the Agriculture memo. I have never seen it. I don’t know when it was written. Mr. WASHINGTON. Neither were you given the courtesy of a copy. Mr. LEMAY. I did not get a copy, no. Mr. WASHINGTON. Finally, on the question from my good friend from California, Congressman Campbell, there is a third scenario that he did not mention with respect—you recall the litany of items he drew your attention 103 to from the statute requiring consideration of special counsel. If the allega- tions that you have set out, the facts—and I find no appreciable distinction between those, contrary to the views of those from my friend from Florida, you were not asserting them as being true, you were asserting them as hav- ing been said; was that not correct? Mr. LEMAY. That is correct. Mr. WASHINGTON. And you put them in that context at the time? Mr. LEMAY. Yes, I did. Mr. WASHINGTON. Now, then, if these things were true, if the allegations or some of them were true with respect to diversion of funds, to BNL, to CCC credit actually being given to help pay for the kickbacks, which is what you were suggesting in nice sounding terms in your memorandum, was that not correct? That the supplier would increase the cost of the item to cover the fact that he had to pay this proof-of-sale services, including buying trucks for Iraq and all those kind of things, that that would inflate the price but the CCC would end up guaranteeing the purchase of all those things in- cluding kickbacks; right? Mr. LEMAY. That is my recollection of the discussion. Mr. WASHINGTON. If those things were true and if they were brought after the date of your memo, after October 13, 1989, when you met, and after October 14 when your memo was sent for distribution, if that memorandum were made available to the President of the United States or any of those people on Mr. Campbell's list, if, if—one if—if those things were done, if that was made available to them, this warning that you made in clear, intel- ligible language, and following that, funds continued to flow for the very same purpose for which you had suggested clearly that there was abuse, there was a violation of U.S. law, as well as of the CCC program, then that would raise, in and of itself, without regard to the second part of the statute, don’t you think, not even being a lawyer, that would raise some concern as to whether these people, having known that these things, having been warned they were done, followed a course of action that allowed them to continue to be done, would maybe not be criminal, but it would surely be negligence in the ordinary use of the term; would you agree? In other words, if I tell you that if you walk to the ends of the hall and every person who has walked to the end of the hall has fallen a thousand feet, and if you walk to the end of the hall knowing that every person before you has fallen a thousand feet, and you tell someone to go and walk to the end of the hall, and lo and behold, they fall a thousand feet, you would call that negligence without being a lawyer, wouldn’t you? Mr. LEMAY. I would say that I had access to a small portion of the infor- mation. It May be that there was other information. It May be there was in- telligence information. It May be there was a whole host of different issues that were also being reviewed at the same time. I cannot attribute negligence or lack of ability to look at information to anyone else. I can only say that I wrote the memo, I provided it where it was supposed to go, and I assumed that people took it into account. - . WASHINGTON. And you had, if you will, fulfilled your responsibility; right. Mr. LEMAY. I had, if you will, fulfilled my responsibility; that is correct. Mr. WASHINGTON. Right. I thank the Chair. Mr. BROOKS. Thank you, Mr. washington. 105 Mr. LEMAY. Yes, that is correct. Mr. HOAGLAND. Did you have to take an exam in connection with your application to become a Foreign Service officer? Mr. LEMAY. Yes there is a written exam and a battery of oral exams given to people who are candidates for a job in the Foreign Service. Mr. HOAGLAND. Do you know approximately how many people took those written and oral exams during the year that you applied for? Mr. LEMAY. I do not recall exactly how many did in the year that I ap- plied, but on average I believe its somewhere in the neighborhood of be- tween 17,000 and 20,000 people take the written exam and I believe several thousand take the-who take the test, pass the test and are given oral inter- v1CWS. Mr. HOAGLAND. Of those that pass the written test and give oral inter- views, how many pass the oral interviews? Mr. LEMAY. I do not know how many passed the oral but, in General, I believe you get about 200 positions offered a year, at least that was my recollection of the year that I came in. So again, a smaller percentage. Mr. HOAGLAND. So the application process begins with you, say, over 17,000 people a year? Mr. LEMAY. That is my recollection of 1981, yes. Mr. HOAGLAND. From which 200 are selected. Mr. LEMAY. Roughly. Mr. HOAGLAND. You were one of the 200 selected. Mr. LEMAY. Yes. Mr. HOAGLAND.. I note also that you can speak German, French, and Spanish. Mr. LEMAY. To a better or lesser degree, yes I do. Mr. HOAGLAND. In addition to English. Mr. LEMAY. That is correct. Mr. HOAGLAND. All right and prior to joining the Foreign Service, you worked with the Agriculture Department as a foreign Affairs specialist? Mr. LEMAY. That is correct. That was while I was in graduate school. Mr. HOAGLAND. While you were at Johns Hopkins Graduate School? Mr. LEMAY. Yes. Mr. HOAGLAND. And was your first assignment as a foreign service offi- cer a counselor officer in the Dominican Republic? Mr. LEMAY. Yes, it was actually something called a rotational officer po- sition where I did counselor work for 1 year and then I did administrative work for 1 year. Mr. HOAGLAND. And you did that work in the Dominican Republic? Mr. LEMAY. Yes, I did. Mr. HOAGLAND. Then your next job was staff assistant to the Assistant Secretary of State for Latin America Affairs? LEMAY. That is correct. HOAGLAND. How long did you occupy that position? LEMAY. I was there for a year and a third. HOAGLAND. Here in washington? LEMAY. Yes. HOAGLAND. At the Department of State? LEMAY. Yes. HOAGLAND. You were promoted to become a policy planning officer for economic Affairs in the Bureau of Latin America Affairs, is that right? Mr. LEMAY. That is right. Mr. HOAGLAND. Also here in washington? i 106 LEMAY. Here in washington, that’s right. HOAGLAND. How long was that assignment? LEMAY. I believe I was there for just under 2 years. HOAGLAND. Then you were sent to Bogotá, Colombia; is that right? LEMAY. Yes. HOAGLAND. You were deputy Director of the economic section? LEMAY. That is correct. HOAGLAND. How long were you stationed in Colombia? LEMAY. I was in Colombia for roughly 2% years. HOAGLAND. And then you were promoted following an assignment to become Special Assistant to the Under Secretary of State for Economic and Agricultural Affairs; is that right? Mr. LEMAY. First I had 1 year of university training, then I took the— Mr. HOAGLAND. Sorry, you did advanced graduate work in macro- economics. Mr. LEMAY. That is correct. Mr. HOAGLAND. At George washington University Law School here in washington. Mr. LEMAY. George washington University, the economics Department. Mr. HOAGLAND. Sorry, George washington University, economics depart- ment here in washington. Mr. LEMAY. Correct. Mr. HOAGLAND. That was an 1-year program. Mr. LEMAY. Yes, it was. Mr. HOAGLAND. You continued your status as a foreign service officer? Mr. LEMAY. Yes, it was a sabbatical fully paid by the Department of State. Mr. HOAGLAND. And then after that, did you receive a degree for that work? Mr. LEMAY. No, I did not. It was not a degree program. Mr. HOAGLAND. And then following Mr. LEMAY. The State Department program is generally not a degree pro- gram. Mr. HOAGLAND. So you completed what the program was designed to consist of? Mr. LEMAY. Yes, I did. Mr. HOAGLAND. All right. Then you were asked to become Special As- sistant to the Under Secretary of State for Economic and Agricultural Af- fairs? Mr. LEMAY. That is correct. Mr. HOAGLAND. And what are the responsibilities of the Special Assist- ant? Mr. LEMAY. Well, in General they are what I outlined in my testimony that I had to ensure that the issues within my area of responsibility that were under the purview of the Under Secretary of State for Economic Affairs were brought to his attention, that he was fully briefed for all meetings that he might have had, that he received information on whatever issues he asked me about. Basically, I would follow what other bureaus were doing in economic areas and provide information to him independent of them. Sometimes I would review their work and provide guidance to the bureaus so that the final product that came up to the Under Secretary would be adequate to his needs. 109 the IG report but I believe there was a sit-down meeting in his office at that time. But again we were coworkers, we were very friendly and it was, you got a 1 minute, I will come in and talk to you, type of approach. Mr. KOPETSKI. You would say this is over a 2 to 3 week period leading up to the October 13 meeting? Mr. LEMAY. After the initial meeting, yes, I would say I went in for guid- ance a few times and got additional information from him. That's right. Mr. KOPETSKI. And was this—were these—so I am assuming the range of time is from a few minutes to maybe even an hour? Were they longer, shorter? Mr. LEMAY. I believe the first meeting—again my recollection on this fails me—first meeting was longer and the other meetings, as I said, tended to be shorter. Sort of got a minute, I will come in and talk. They would range, they probably didn’t go more than 10 to 20 minutes in General. Mr. KOPETSKI. Were there less than 10 of these or more than 10 of these kinds of encounters? Mr. LEMAY. I would guess less than 10, but again my recollection is very weak. Mr. KOPETSKI. And the aftersales service fees of about $350 million at least in one instance, at what time did you gain knowledge of that? Was that at the October 13 meeting or did you have some sort of paper indication prior to that? Mr. LEMAY. Again, my recollection is fairly vague, but I believe that I had discussed the aftersales service issue with Mr. Hoskinson prior to the October 13 meeting and I seem to recall being asked to ask about that issue. Mr. KOPETSKI. I have not been in washington very long but $1 million is still a lot to me, but did you think that $350 million was a lot of money? Mr. LEMAY. Yes, I do. Much more than my salary. Mr. KOPETSKI. I thought at one point in your testimony you talk about— here it is, you talk on page 4 that you State, I remember one meeting being very free-flowing with a variety of issues being discussed at different times. That is the October 13 meeting; is that correct? Mr. LEMAY. That is correct. Mr. KOPETSKI. Prior to that meeting, did you sit down with Mr. Hoskinson or anybody else and develop an agenda for the meeting or points that you wanted to ask about? Mr. LEMAY. I do not recall sitting down with Mr. Hoskinson or anyone else and coming up with an agenda. I worked through the issues and the information we had and sort of developed my own agenda which was basi- cally to get information. Mr. KOPETSKI. And there were topic areas that you were obviously inter- ested in pursuing in this meeting; is that correct? Mr. LEMAY. I recall that I didn’t have a great deal of information on the topic areas, certainly not on all the issues that I have discussed in my memo. But I wanted to-I seem to recall, and again bear with me, but I seem to recall the diversion issue being one I was interested in and I seem—this is in preparation for the meeting—and the aftersales services issue to be an- other one. I had not heard at that time of the nuclear, potential nuclear diver- Sion Stuff So I didn’t focus at all on that. I did not focus on the other issues that are in my memo. I think those came directly from the meeting. Mr. KOPETSKI. Were there any individuals or personalities whether foreign or domestic that you wanted to inquire about at the October 13 meeting? 111 Mr. LEMAY. That is accurate. Mr. REED. After you reported back to him and gave him this memoran- dum, were you ordered to do additional work with respect to the issues that had been the topic of this meeting? Mr. LEMAY. I was not. Mr. REED. Do you find that to be unusual in that you wrote a memoran- dum which was rather vivid in its imagery and significance in some of the conclusions which might be drawn from it? Mr. LEMAY. I believe that Mr. Hoskinson had confidence in my ability, and I don’t know whether he checked up on the memo and called people or not. I have no way of knowing that, but he did not come in and tell me that he thought that something was faulty with the memo or that a portion of it was too inflammatory or other portions should be excised. He simply accepted the memo as something I had drafted and assumed that it was correct. Mr. REED. He accepted the memorandum but he did not ask you to pursue this further to see if there was additional evidence of the allegations that you raised or, to your knowledge, in any other way seek to find further substance to these allegations? Mr. LEMAY. I was already responsible for that issue, so that would have been my job in any case. Mr. REED. So essentially you presented the memorandum to Mr. Hoskinson, nothing was done in your office to further pursue these serious allegations which were raised in the memo? Mr. LEMAY. No, that is not the case. I think that we continued to follow the issue. It is my recollection that the liaison issue with the other Legal Advisors’ Offices which were handling the BNL investigation was passed to the legal advisors’ staff of the Department of State—this is my recollec- tion—at that point I ceased working with the Department of Agriculture legal people because we had our own legal people doing that sort of thing. Mr. REED. So your best recollection is that the information you uncov- ered, the allegations which are the substance of your memorandum were not pursued by your office at all but were pursued by legal officers within the Department of State. Mr. LEMAY. That is my recollection. They were pursued but—again, pur- sued is an interesting word. I didn't just drop the issue. I kept on—sort of kept tabs on it but I did not go to any additional meetings on the subject. Mr. REED. In keeping tabs on this issue, did you continually inform your superiors, Mr. Hoskinson and his superior, Mr. McCormack as to what was going on on a regular basis? Mr. LEMAY. Yes, I recall discussing it with Mr. Hoskinson. Again, this is short meetings that I told you about earlier. Mr. REED. But there was no direction from your superiors to follow through or to continue this or do anything other than what you summarized in your memorandum? Mr. LEMAY. Not that I recall. Mr. REED. Again, going back to your perception, you wrote a rather strin- gent memorandum with rather strong language which I suggest—I don’t want to put things into your mind—that this was you were surprised, per- haps amazed at some of the revelations and that whole approach seemed to Peter out except for your own initiative to keep it going informally. That didn't cause you any concern? Mr. LEMAY. I was concerned about the memo and the issues I raised in the memo, but I was under the impression at the time that these were being 112 looked into by other offices and that my role in this had, in large measure, passed on to more senior officers in other bureaus. In other words, what I had done is I had gone, I had discussed the issues with the Department of Agriculture, I had made my report, that report was forwarded to the appropriate officials in the Department and then it was han- dled by other people. Mr. REED. Can you specifically indicate what senior people in the Depart- ment you felt were pursuing this issue? Mr. LEMAY. At the time it was my impression that the Legal Advisors Office was involved in the issue and that some of the officers from the Near East bureau were involved in pursuing the issue, and to some extent our of. fice continued to be interested in the issue. There May have been others. Mr. REED. Thank you, Mr. LEMAY. Mr. BROOKS. Thank you very much, Mr. Reed. We now have a vote on the previous question on the rule and we May have a vote on the rule, so I would say the committee will stand in recess until 20 minutes after and you can have a quick coffee to wake you up this afternoon. Mr. LEMAY, we are deeply grateful for your having been here and it has been a long session and you got to know more about Congress than you ever planned on knowing. Delighted to have had you here. Mr. LEMAY. Thank you, Mr. Chairman. [RECESS.] Mr. BROOKS. The committee will come to order. The second witness is Frank DEGEORGE, Inspector General of the Depart- ment of Commerce. He has held that position since April 1988. Previously, he was Deputy Inspector General at Commerce and Associate Deputy Ad- ministrator of the VA. We welcome you to the committee. We would appreciate it if you will summarize your statement and we will accept the full statement, every pris- tine word of it, for the record. I would ask you to rise and raise your right hand. Mr. DEGEORGE. Mr. Chairman, I have two members with me, my coun- sel, Wayne Weaver, and the Audit Manager, Andrew Cochran, who are pre- pared to testify as well. Do you want to swear them in as well? Mr. BROOKS. We might as well. We are delighted to have you, gentlemen. Do you swear or affirm that the testimony you are about to give is the truth, the whole truth, and nothing but the truth? [Witnesses sworn.] Mr. BROOKS. We are glad to have you, and you can proceed, sir. STATEMENT OF FRANK DEGEORGE, INSPECTOR GENERAL, DEPART- MENT OF COMMERCE, ACCOMPANIED BY WAYNE WEAVER, COUN- SEL, AND ANDREW COCHRAN, AUDIT MANAGER Mr. DEGEORGE. Mr. Chairman, in June 1991, we issued two reports to the Department on matters relating to the release of Iraqi export license in- formation to the Subcommittee on Commerce, Consumer, and Monetary Af- fairs, House Committee on Government Operations. Copies of both reports are attached to my statement. Our audit, which was initiated after requests of the Department's General counsel, found changes were made by BXA to 68 license records out of records for 1130 license applications processed for export to Iraq from 1985 113 through August 2, 1990. BXA personnel also changed permanent records on the bank’s automated data base. We concluded that changes to five truck license records were unjustified and misleading. We also reported that almost all other changes, though in- consequential in effect, were not supported by satisfactory documentation. These changes included deletions of notations that indicated referrals of the applications to other involved agencies, changes in the positions of those agencies, and changes in end-use statements and a commodity description. We conducted over 20 interviews of persons involved in the matter and reviewed hundreds of pages of documents. Based upon the audit, we in- spected the automated export licensing system at BXA and identified 14 cor- rections to ensure better controls over licensing data for the future. Members of Congress, some Members of Congress, have expressed con- cern that we did not name the individuals responsible for the changes in the report. We seldom, if ever, name officials in our audit reports. However, we believe our working papers contain sufficient information on the identities of the individuals responsible for the changes, and those work papers have been provided to this committee. In fact, all the work papers, every piece of paper that we have, has been provided to this committee. The committee has been provided copies of our audit inspection, other than interview notes, which the staff has also re- viewed. The Justice Department advises that their criminal investigation is still open. No one within the administration or outside it, including Secretary Mosbacher or General Counsel Willkie, or anyone else, has influenced, di- rected, approved, restricted or changed how this office conducted its work and the reporting of its results. I will be happy to answer any questions of the committee. [See appendix II–8.] Mr. BROOKS. Thank you very much, Mr. DEGEORGE. Under the 5-minute rule, I have a few questions for you. The difference between an audit report and an investigative report by an IG is that the latter assesses generally the blame for misconduct, while the former does not. Now, why did you decide to conduct merely an audit of the alteration of records? Mr. DEGEORGE. We decided preliminarily and first to conduct an audit for several reasons, not the least of which it was an involved process. We did not have numbers of auditors or inspectors or investigators who were familiar with it. It is not unusual for us to start a complex job with a series of allegations as an audit. In this particular case, we started as an audit because we had One or two people, including Mr. Cochran, who were available; two, we had no allegations, other than the ones that are in newspapers, no smoking guns, no statements, a few records and concerns. I was also more vitally con- cerned, Mr. Chairman, that we find out if complete records had been deleted. The whole inference of the charges to date has been that somehow the administration has taken records, changed them, deleted them and made mas- sive changes. I was concerned that we find original source documents, and these are accounting records and systems records, and that was the primary reason we started as an audit. Mr. BROOKS. Now, interview notes obtained from your office yesterday indicate that Under Secretary Kloske spoke with General counsel Willkie about the changes to the records on the day they were first released to Con- gressman Barnard. 114 Why didn't you proceed to question Mr. Willkie about his knowledge or involvement in this action? Mr. DEGEORGE. Well, there were three or four different reports, Mr. Chairman. Mr. BROOKS. Yes. Mr. DEGEORGE. And each of them went through many iterations, and, in effect, Mr. Willkie had very little to do, in our conclusion, with the process. He worked—he and Mr. Haendel, who is his deputy, worked very closely with the so-called Rostow committee, which was dealing with policy issues, which was dealing with third-party paperwork, which was dealing with is- sues of, I think the term is deliberative process, to determine what, in effect, the form and the content of the form of the reports were. We also had no reason to believe, from early on, that this process was not self-contained within BXA. So there was no reason to interview Mr. Willkie. We did talk to Mr. Haendel in some depth. I also find it difficult to believe, if I can add a P.S., and I think there has been some confusion in the newspapers, Mr. Willkie recommended that I look at it. I really found it difficult at that point in time to believe he would have me look at something that he himself was involved in. We subsequently have had some discussions, but not formal interviews. Mr. BROOKS. Did you talk to Mr. Iain Baird, Director of the Office of Export Licensing? Mr. DEGEORGE. Yes, sir. Mr. BROOKS. Got Some Statements from him. He stated that the State De- partment says “trucks classified as military vehicles should be reclassified as cargo trucks.” He also told the auditors Mr. Kloske said something about a gag order. “The administration didn’t want criticism during the Iraqi engagement.” Do you know anything about that? Mr. DEGEORGE. I don’t know anything about gag orders. Those terms were never brought up except that was a rumor and we were never able to substantiate that. The issue, in my mind, of the trucks and the licenses were one license was mentioned by the State Department in their comments. The other four or five licenses, Mr. Kloske told us, in effect, that Mr. Kloske decided to change. The other gentlemen involved, the other employees that are career employees, I would just as soon restrict their names, but a Mr. Hill basically told us and confirmed that, in effect, as your records would indicate, I am sure, that Mr. Hill and Mr. Kloske made essentially all the decisions on the 66 licenses. Mr. BROOKS. Now, your testimony identifies only three goals for the audit: to determine if changes were made to the information given to Chair- man Barnard, and if changes were made to the permanent data base, and the accuracy of notations concerning the positions of other agencies regard- ing the export licenses to Iraq. Were there any other objectives of your audit? Mr. DEGEORGE. Implicit in all our audits, sir, is the education and the background the auditors have. They know the rules. If they find anything that smells slightly of criminal, they are to bring it to our attention. I had no allegations through the whole process by anyone connected with the job, including my deputy, including the audit manager, including my counsel, including any of the auditors, most of whom are in this audience, that anyone ever felt there were any criminal actions. Mr. BROOKS. And the reasons for changes, you never went into those? 115 Mr. DEGEORGE. The reasons for changes—yes, sir, we went into the rea- sons for the changes, and I think our audit report discusses them. There were various reasons given, some of which I think were absolutely wrong. Examples: Parts and components are one series of errors—changes that were made, the thesis being if you had a hard disk— Mr. BROOKS. Let me ask you one more question and my time will be up. Could you tell us today with certainty who was the final authority for changes of the information submitted to the Congress or to the permanent database? Mr. DEGEORGE. Who made the changes? Mr. BROOKS. Who was the final authority for the changes? Might have had some Secretary make the changes, but she didn’t dream it up. Who was the authority for it? Mr. DEGEORGE. Mr. Kloske and Mr. Hill, who worked for him, between the two of them, identified the changes. Ten or 11 of the changes were di- rected by Mr. Kloske. The rest of the changes, which included mostly com- ments from other departments, mostly corrections—I repeat that, mostly cor- rections. Mr. BROOKS. You think they did it on their own? Mr. DEGEORGE. Within that office? Yes, sir, I do. Mr. BROOKS. Nobody told them to do it; they just did it? Mr. DEGEORGE. We have no evidence to that regard. Mr. BROOKS. Do you have any idea in God’s will why they would do it? Mr. DEGEORGE. We have records, and I think the records that you have seen will indicate exactly what took place. They were doing this over a Co- lumbus Day weekend. They were in a hurry. They made changes, they made runs, they looked at the data. They saw obvious mistakes, mistakes on li- censes, for instance, where they knew that they had not been disapproved, but disapproval was indicated. We were told time and time again that the staffs went back and checked all the way back to source documentation, and sometimes they did. We have confirmed that the only changes to all 1,500, 1,700 licenses are the ones we have talked about. We even went back to the CIA to get preinvasion date records to be certain that nothing was lost. They routinely received copies of these databases. I have no reason to believe that there were any changes, to my knowl- edge, directed by anyone except within the office of BXA. Mr. BROOKS. I find that very difficult to believe. Mr. Fish, the gentleman from New York. Mr. FISH. Thank you. Mr. DEGEORGE, it is your testimony that of 60-odd alterations, most of them were inconsequential; is that correct? Mr. DEGEORGE. Yes, sir. Mr. FISH. I think this is explained in more detail in the full text of your prepared Statement. Mr. DEGEORGE. As well as the work papers, Mr. Fish. Mr. FISH. And the ones that you did consider consequential with respect to, say, the sale of the military trucks, the reason given for the alteration being that the bureau doesn’t license the sale of trucks, you disagreed with that for that reason at the time? Mr. DEGEORGE. The bureau does license military trucks. New, used trucks. Mr. FISH. And the discussion of the 60-odd alterations was in your report? 56–783 O – 92 – 5 116 Mr. DEGEORGE. Yes, sir. Mr. FISH. And the IG'S report has been submitted to committees of the Congress? Mr. DEGEORGE. It was in our semiannual report that was submitted last January, I think. December. And other committees and other members have received these reports. Mr. FISH. In your investigation, did you uncover any evidence to suggest to you that changes in the license records involved criminal intent? Mr. DEGEORGE. No, not to my knowledge. Not to the information we have got. And I would ask Mr. Cochran, who basically did almost all the interviews, what his experience is. Mr. FISH. Mr. Cochran. Mr. COCHRAN. Thank you. It isn’t easy to determine, but from what we gathered, there didn't seem to be an intent. There was not a secrecy involved. There didn't appear to be anything withheld or lost in our audit. People contributed their knowl- edge, they contributed documents voluntarily. There appeared to be no intent to deceive Congress as to the total realm of exports license for Iraq of dual- use items. For instance, there are military users throughout the document that are clearly of a military nature. There are exports that could clearly be used in a military nature. Mr. FISH. So you did not uncover any evidence to suggest changes were part of a conscious effort of deception? Mr. COCHRAN. No, Sir. Mr. FISH. Thank you. Is it not true that you or Mr. DEGEORGE decided not to refer the matter ºfting the alterations to the Department of Justice for criminal prosecu- tion'. Mr. DEGEORGE. We didn’t reach that point, is the best way to put it, Mr. Fish. We basically reviewed the data. We issued our report, we issued the second report, and within 2 or 3 weeks after that, Congressman Barnard, Chairman Barnard sent the report to the public integrity people. Mr. FISH. Mr. DEGEORGE, do you have any evidence—I don’t see any evi- dence in the record to this effect—but do you have any that the Secretary of Commerce knew of any such changes before the documents were sent to the Congress? Mr. DEGEORGE. I have no evidence of that. Mr. FISH. Does the fact that the records on over a thousand licenses were not changed, suggest anything to you about whether deception was the intent behind the changes that were made? Would a successful deception effort necessarily have involved changing the records of additional licenses? Mr. DEGEORGE. I guess the best way to answer that is, there doesn’t seem to be any pattern to the changes, with the exception of the trucks which ap- parently most people thought was going to be embarrassing is the reason they made the changes. The rest of the changes seemed to be random. There were two or three— there was one deletion on an HP computer of some comments. There was Some additional information added to three or four others. There doesn’t seem to be any pattern. I guess the best way to put it is, if you look at the total licenses that were Submitted, and you try to reach a judgment as to whether or not these would be the ones that you would suggest were the most embarrassing, I do not think so, from my judgment. There were many other items on that list that 117 I think one could argue, in effect, could cause more embarrassment to the administration. Mr. FISH. Thank you very much. Thank you, Mr. Chairman. Mr. EDWARDS [presiding]. The gentleman from New York, the Chairman of the Crime Subcommittee, Mr. SCHUMER. Mr. SCHUMER. Thank you, Mr. Chairman. First I want to say, Mr. DEGEORGE, I think at least you deserve praise for analyzing the record and calling the shots at least as you saw them in terms of changes in the record. On the other hand, I am very troubled by your testimony in General. The committee staff has had an opportunity to talk on three occasions with Mr. Kloske, and the contradictions—he was supposed to be here, but at 11 last night he said he wasn't not going to come. He will submit his statement for the record by Thursday. But let me go over the contradictions between what you say and he says, which are glaring. Someone has it all wrong. I won't cast any motivation. Let me tell you some of the things that Mr. Kloske said. One, he was instructed by senior advisers and lawyers at the Department of Commerce to provide only “the bare minimum to Congressman Barnard.” He was told to “keep it simple,” volunteer no information. Kloske identified Wendell Willkie, Don Haendel, Wayne Berman, and Bruce Soll as the individuals who gave him those orders. Two, Kloske was under daily supervision from Secretary Mosbacher's senior advisers about what information was being provided to Congressman Barnard. Kloske said he got calls “every day” from people on “the 5th floor” at Commerce about what was in the records and what kind of progress was being made to respond to Congressman Barnard. Three, Kloske thought that he might have talked with Secretary Mosbacher in General terms at the meetings. Kloske said he suggested that Mosbacher meet with Congressman Barnard because Barnard might think Mosbacher was “playing games” with him. Four, they get more serious as we move along. Kloske said that other agencies were reluctant to give printouts containing interagency positions to Congressman Barnard. Kloske also remembers a document which indicated that the Department of Defense wanted changes in the permanent record be- cause they were “not satisfactory.” Five, Kloske said he thought Commerce might have spoken with Nick Rostow of the NSC about the records and remembered meeting with Steven Rademaker of the NSC. He also recalled Richard Barth of the NSC was in- volved as well. He recalled one telephone conversation involving White House Counsel Boyden Gray. Six, Kloske said that Commerce General Counsel Wendell Willkie had called Robert Kimmitt at the State Department during the late fall of 1990 about document production to Congressman Barnard. Kloske described Kimmitt as in favor of “letting the clock run out on Barnard's subpoena.” What that means is, wait until there is a new Congress and the subpoena will expire. Seven, Kloske said he discussed with Wendell Willkie about whether or not to provide to Barnard, to Congressman Barnard, the interagency posi- tions on the licenses. Willkie was against this disclosure because it revealed “deliberative process.” Kloske said Willkie was adamant but called both the State Department and the White House in Kloske's presence. 119 Willkie. So we concluded that what they were talking about there was the process by which all agency positions would be represented or would not be represented as evidence of the deliberative process. That was our judg- ment. Mr. SCHUMER. I am a little—OK. Mr. COCHRAN. It is the difference between policy and specific changes. Mr. SCHUMER. You were making a surmise about what was in Someone's head without even interviewing them and just interviewing their assistant. Mr. COCHRAN. Well, since we interviewed the deputy, whom Mr. Kloske said— Mr. SCHUMER. Well, why wouldn't you? Give me one reason why you shouldn’t have interviewed Mr. Willkie? Did he not have enough time for you? Mr. COCHRAN. No, sir. We didn’t consider that Mr. Willkie had ordered specific changes to specific positions on those records. Mr. SCHUMER. Kloske told you he did. Mr. COCHRAN. And the lower level assistant volunteered Mr. SCHUMER. Kloske stated to you, as I understand it, and I will let you finish, that he was in an office where Willkie made this decision after get- ting on the phone and talking to other people. Haendel May or May not have been in that office; I don’t know. It doesn’t have it in our records of the interview there. Mr. DEGEORGE. Mr. DEGEORGE. Mr. SCHUMER, we did not see it was our job to determine what was a policy determinant on the part of the lawyers. We did not look at that issue. We didn’t try to look at that issue. We were charged with looking at whether specific changes were made to the license process including the original source data base. That is what we looked at. That is what I thought was appropriate to look at. I cannot second-guess the lawyers' deliberative process or whatever the comments were or whoever Mr. Willkie talked to, including Mr. Rostow's Staff. It was not the intent of the audit. There was no reason to believe dur- ing the audit that it affected any people—that it had affected that. Mr. SCHUMER. But the man who did the audit, the gentleman to your left, just said he had to make certain determinations to come to the conclusion whether things should have been changed or shouldn't in terms of what was in people's heads. Let me ask you another question. I have a list of all the people you have interviewed. It very curiously leaves out any of the top level people at Com- merce who were involved in the processing of the Barnard request. Mosbacher was not interviewed, Willkie was not interviewed, the two assist- ants to Mosbacher who were involved in this, Mr. Soll and Mr. Berman, were not interviewed, no one at the White House or the NSC was inter- viewed, even though Kloske has stated—I don’t know if he stated it to you; he May have just stated it to us—that they were on the phone with Willkie making a determination. Why were none of these people interviewed? Mr. DEGEORGE. Let me make another comment before I directly answer you. You have read, I am sure, Mr. Kloske's—the notes we took from Mr. Kloske's interview. Mr. SCHUMER. I have them here. Mr. DEGEORGE. Almost nothing which you basically have told us was told to us. Nothing that you repeat, almost nothing, I think you would con- 121 tacts with licensing officials. Negotiated those out with licensing officials from DOD, State and— Mr. SCHUMER. And you make a determination about these changes with- out talking to any of those people. I will move on to the next point, but your answers, at least to me, are very unsatisfactory. Very unsatisfactory. Now, Mr. DEGEORGE stated in his comments, I believe it was in response to Chairman BROOKS, that Kloske said that he and Mr. Hill made all the deci- sions about changes in the permanent record. Mr. DEGEORGE. That is correct. That is my understanding. Mr. SCHUMER. Well, here is what Kloske told us. Kloske told us that he didn't even know of changes in the permanent record until it came out pub- licly; that he read about them in the newspapers. Something is rotten in the State of Denmark. Mr. DEGEORGE. Well, you better check with the other statements. I know Mr. Hill said that he made the changes, Mr. Young said they were aware of the changes. There were five or six other employees that were apparently present when Mr. Kloske directed the changes. Mr. COCHRAN. Mr. Hill told us that he saw Dennis Kloske order the per- manent ECASS records changed. That is in the memorandum of Mr. Hill's interview. Mr. DEGEORGE. I find it very unusual, Mr. SCHUMER, that you have the advantage of a discussion with Mr. Kloske when Mr. Kloske is not here, and I can only take your word for what he has told you or even that he has told you the truth. Mr. SCHUMER. That is a fair statement, Mr. DEGEORGE. We believe Mr. Kloske. I believe him. But he will have to Submit a statement for the record and maybe he should be called here. Mr. COCHRAN. Will he be sworn in? Mr. SCHUMER. He was supposed to come until 11 last night. I don’t want to forgo the opportunity of getting your view on the record under oath as to what his Statements were. Next, I would like to know about the change in purpose of the audit. Ac- cording to a draft audit dated March 13, 1991, the purpose of the audit was to determine not just the nature but “the reasons for changes to export li- cense data.” Yet, this is not one of the three purposes, three listed purposes of your audit described in your testimony, and, obviously, your audit doesn’t include those reasons for the changes. Why was it changed? Mr. DEGEORGE. I thought we had explained that we tried to determine the reasons, Mr. SCHUMER. That, in effect, we asked people—all the people on the staff involved. I don’t understand the nature of the question. We didn’t walk away from determining what people decided, or have any reason to believe that we slowed the job down because, in effect, we didn't ask that question. Mr. SCHUMER. You told me a minute ago, and so did Mr. Cochran, that you were not interested in the motivations of people. You just wanted to compare the record. Mr. DEGEORGE. I didn’t say that. I never said that. What I said is that the primary thrust of our job was, basically, to look at who made what changes and did the report, as submitted to the Congress—I mean, I am not—we constantly go back and forth between policy and specific changes. We looked at specific changes. We went as far back as we could, as far north as we could, to determine who authorized those changes. And from 122 the records we have, that have been provided to this committee, we reached a judgment. Mr. SCHUMER. So there was no intent in the change from the audit letter of, the audit outline of 3/13 to finally to delete reasons as to why these were changed? Mr. DEGEORGE. There was no intent to— Mr. SCHUMER. In your report there is not much evidence of the reasons for changing; correct? Mr. DEGEORGE. There is not much evidence because there seems to be no rhyme nor reason to it, from my perspective. Mr. SCHUMER. I just want to get on the record again it is your view— just, again, following up on the chairman's question—who ordered the changes in the permanent record? You still State that that was Mr. Kloske and Mr. Hill and them alone; is that right? Mr. DEGEORGE. Well, tell him what you believe. Mr. SCHUMER. Go ahead, Mr. Cochran. Mr. COCHRAN. There is some indication that Mr. Kloske May have or- dered that, the change to the permanent database, but that is—and then there are other indications that Mr. Hill May have asked officials at the ECASS office to make other changes. Mr. SCHUMER. What office is that? Mr. COCHRAN. ECASS is the Export Control Automated Support System, and we have some information on different changes. Mr. SCHUMER. Are you as sure as Mr. DEGEORGE was 5 minutes ago that * was Hill and-or Kloske who were totally responsible for making those changes? #. is what he stated both 5 minutes ago and then 10 minutes before that. Mr. COCHRAN. Yes. Mr. SCHUMER. You are sure of that? Mr. COCHRAN. The changes were initiated, to the best of our evidence— the changes were initiated by personnel of the BXA. Either the lower level people, such as with Mr. Hill, or by Mr. Kloske himself. And, as our report States, Mr. Kloske concurred with all the changes. Mr. SCHUMER. OK. Let me ask you this. Mr. Cochran, was this the first audit that you have done in the IG'S of fice? Mr. COCHRAN. I began working with the Inspector General’s Office, the Office of Inspections and Resource Management, in April 1990. This was the-this May have been the first audit using auditing standards. I conducted a number of inspections using inspection standards. Mr. SCHUMER. Can you tell me what your background was? Mr. COCHRAN. I would be pleased to. Thank you. I graduated from high school in Springfield, OH, in 1974; I attended Miami University in Ohio, graduated with honors with a degree in account- ing in 1978. I attended the University of Notre Dame and graduated in 1982 with an MBA degree with high honors and a law degree. I then began work as a tax specialist in the Cincinnati office of Arthur Andersen & Co. in Cin- Clnſlatl. During my years in law school, I had served as a congressional intern for my Congressman in Ohio, Clarence J. Brown. And I guess I caught Potomac fever, because when Mr. Brown became Deputy Secretary in 1983, he of. fered me a position on his personal staff, and I served on his personal staff from November 1983, through his departure in early 1988. 124 be filled with rocks and shoals and reefs, and I don’t want anybody who is innocent to be put through that. Many times I think it May be an ego exercise for the special prosecutor. Now, having said all that, I will shift my line of questioning. I have be- fore me a sanitized version of a printout that contains one of what I have been told are five significant changes. You all are familiar with those, I pre- sume. I have one up here. This reads 2406, and this is a commodity classification number. 2406— commercial utility cargo truck. Now, I am advised that this one alteration resulted in having altered the description of the truck but left the commodity classification number unaltered. Mr. DEGEORGE. That is correct. Left everything else unaltered including the value of the shipment, the end user, the military and Iraq, etcetera. Mr. COBLE. Now, I am not an expert in cryptics either, but it seems to me that if one intends to deceive or mislead, that this number would have been altered as well. Am I off on the wrong track? Mr. DEGEORGE. No, I think that that is, essentially, one of the reasons that we were concerned about taking this automatically into an investiga- tion—these issues, such as this one, where they changed only partial database elements, where others seemed to make no sense as they were made. This was made over one long weekend, Columbus Day, by, I would say, 20 career bureaucrats and Dennis Kloske, who directed it all himself. That is, essentially, the way the process worked. I had no reason to believe that those bureaucrats, all of whom we inter- viewed, those career civil servants, in any way misled us. So the only thing I would say to you is that it didn’t delete it entirely. They didn’t remove the license so it never existed. They didn't, in effect, change the commodity code number or the dollar amount or the fact that, in effect, the end user, who that was—they simply changed the data that said military trucks to commercial trucks. Mr. COBLE. So with the commodity classification number still intact and unaltered, I guess to one familiar with this sort of operation, this would still identify it, would it not? Mr. DEGEORGE. I am sure the manuals that they use to identify by com- modity code exactly what the description is—programs—Mr. Cochran can— is that correct? Mr. COCHRAN. Yes. The Code of Federal Regulations will—if you pick it up and read it, it says, vehicles designed especially for military purposes. And there are certain vehicles designed especially for military purposes that are licensed by the State Department and are on the U.S. munitions list. And there are certain of those vehicle licenses by the Commerce Department, and they have different features. Mr. COBLE. Well, finally, Mr. Chairman, I would conclude—and the basis of my indepth knowledge on this is limited; I want to make that clear, first of all—but it seems to me, based upon this limited examination, that if this were an intent to mislead or deceive, it was a rather amateurish, unsophisti- cated effort, with apologies to those who did it. Do you want to add anything to that, gentlemen? Mr. DEGEORGE. No, sir. I just would say that the changes seemed to be random, incomplete and not very sensible. And the reason we used the term misleading rather than fraudulent or they lied was because they were incom- plete snippets of work, and that is essentially why we arrived at our conclu- sions in the audit report. 125 Mr. COBLE. I appreciate you all being here. And, Mr. Chairman, I just want to reiterate if anybody has done wrong, I want to see them nailed; but if no one has done wrong, I will be doggone if I want to see them go through this exercise and have us spend $30 million more on a special pros- Ccutor Course. Mr. HYDE. Will the gentleman yield? Mr. COBLE. Yes, sir. Mr. HYDE. Did either of you three gentlemen—Mr. Weaver, DEGEORGE, Cochran—find any evidence of criminality on behalf of any Government em- ployee in all of your investigations? Mr. COCHRAN. No, sir. Mr. DEGEORGE. No, sir. Mr. HYDE. No? Thank you. Mr. COBLE. Thank you, Mr. Chairman. Mr. SCHUMER. Will the gentleman yield? Mr. COBLE. I will be glad to. Mr. SCHUMER. Thank the gentleman. I think the record will show who was interviewed and who was wasn’t, but I just have one more question—if the gentleman’s time hasn’t expired— which I couldn’t get to. I have here, Mr. DEGEORGE, a memo from you to Mr. Mosbacher, June 4, 1991, that—well, for lack of a better word—contradicts what you have just told us. It says, and let me quote from it: Our review disclosed that the former Under Secretary—that is Kloske— concurred with all of the changes to the data sent to the Chairman but was unaware of any system data base changes. The changes to the permanent record. That would back up what Kloske told this committee in the last few days and contradict what you just said to us. Mr. DEGEORGE. May I answer, sir? Mr. SCHUMER. Please. Mr. DEGEORGE. In reviewing for purposes of this report, because our records—and I think you would admit it—went both ways, some employees said Mr. Kloske had; some said he had not. We have at least some evidence that Mr. Kloske directed it, in my judgment. Mr. Cochran, in reviewing that process, wrote: We discovered a mistake in our records which, in effect, caused us to issue an errata sheet to that document which was issued last week. Now, that errata sheet is included in all pertinent copies of the report. But it seems very clear to me that, whether or not you agree with that one change that we made, it is clear to me that, at least in some cases, Mr. Kloske had complete knowledge and was told and approved of the changes to the data sheet. That is where we disagree. Mr. SCHUMER. Well, Mr. DEGEORGE, first, I am getting a little weary of this. You said 1 minute ago unequivocally Kloske did the changes to the permanent data base and he never told you anything else. Then I find a doc- ument that says he told you something else, signed by you. I am beginning to smell a scapegoat here. Mr. COCHRAN. Let me seek to clarify that, sir. I am sorry. In reviewing the records in preparation for this testimony, we came to the conclusion that that phrase there, we were not confident—I was not con- fident in reviewing the records of the work done by all of the auditors that we could support that phrase in the audit report. And, to be safe, to be abso- lutely safe, I recommended we take that phrase out. 128 Mr. COCHRAN. Let me go through some of these papers here as our report had indicated. Mr. SCHUMER. You can submit those for the record if that is OK with the Chairman. Mr. EDWARDS. Without objection, so ordered. [See appendix II-9.] Mr. SCHUMER. Just the specific pages for the record of this hearing. I know you submitted them to us in General. At the end, tell the stenographer the specific pages. Mr. COCHRAN. The report stated Mr. Kloske was unaware of any system database changes. Here is what we did and what I found in going back through the papers. Mr. Hill— Mr. SCHUMER. Who-just for the record, tell us who Mr. Hill is. Mr. COCHRAN. Dan Hill was a licensing official in BXA. Mr. SCHUMER. Under Mr. Kloske? Mr. COCHRAN. Under Mr. Kloske. He no longer works at the agency. On April 11, we interviewed him, I believe for the third time. It is on B–17 in our work papers. You will see, point number two, Dennis Kloske told John Young to change the printouts and ECASS to amend the descrip- tions of the vehicles to commercial utility cargo trucks. John Young was the Director of the Office of Resource Management. Mr. SCHUMER. Correct. That says Kloske ordered some lower-down to do it. It doesn’t say it was solely his idea. Mr. COCHRAN. That is correct. Mr. SCHUMER. The rest of the submissions are just like that? Mr. COCHRAN. Submissions indicate information about who ordered or who knew of the changes. I would like to call your attention to Mr. Kloske's February 26 memoran- dum to Mr. Willkie, and that is included in Exhibit 5 in our work papers. He included an attachment called Iraq database assessment. On page 2 of that, the end of the third paragraph, last two sentences, States: Based on con- crete and specific documentation available on microfiche, we corrected the database by including the additional information. These corrections are de- tailed case by case on the attachment. He discusses those. Mr. SCHUMER. Mr. Cochran, fine. We will submit others for the record. I would like to submit in the record one other thing—the IG'S own report of-I don’t have the front sheet here—of March 21, 1991, auditor, and it has your name, Cochran, date March 21, 1991. [See appendix II–10.] Item ten. We asked him, Kloske, if there are standing orders from the Of- fice of the Secretary, including the General Counsel's Office, to silently take the heat for export license controversies. He would only answer, “Orders are orders.” That is right. Is that correctly from your document? Mr. COCHRAN. That is from my document. That was indicating— Mr. SCHUMER. Let me ask you something, Mr. Cochran. Mr. FISH. Can he finish answering the question? Mr. COCHRAN. I can explain, I think, the context for that remark. Mr. SCHUMER. I thought I was asking the question. 130 changes on the positions—to deletion of positions and the changes of posi- tions—and that he identified that Mr. Kloske ordered changes to other—to the trucks and the end-use statements. We received no information during this audit. You know, if people didn't tell us something or people tell someone something else 1 year later, I would be real surprised. But during the audit, the evidence we gathered, there was no specific finger pointing to someone outside of BXA as a source for the specific changes. Mr. SCHUMER. Mr. Cochran, I don’t want to take the committee’s time any further. But it is not that Mr. Kloske changed his story when he came and talked to us; in your own record you have evidence of his story being completely consistent, and you folks ignoring it. Mr. EDWARDS. We haven’t heard from the Justice Department. We do Want to move On. Mr. Coble has several minutes left. Mr. Coble. Mr. COBLE. I will be brief, Mr. Chairman. Mr. Chairman and ladies and gentlemen, I realize that we operate very liberally as we examine our witnesses. We don’t apply the strict rules of evi- dence, and properly so, but I think my friend from New York has contrib- uted dimension to liberal examination. I mean, here we have heard about this midnight witness who appeared, Lord only knows from where. I don’t know whether the gentleman from New York examined Mr. Kloske or maybe Mr. Kloske's brother-in-law or Mr. Kloske's uncle. I don’t know under what conditions the examination took place. I do know, Mr. Chairman, we have three warm bodies who are seated out here before us, under oath, responding to questions by this committee; and it appears Mr. Kloske's testimony has been given more weight than the witnesses before us. That bothers me. Mr. Kloske is conspicuously absent, A; and B, therefore not under oath. So I am uneasy about all this weight that is being submitted to Mr. Kloske's testimony. We all know, I think, that the Department of Justice is investigating this issue of altered entries. I am wondering if the gentleman from New York, Mr. SCHUMER shared the information that he gained from Mr. Kloske with the Department of Justice. That might well be a pertinent point. My point is, there are many unanswered questions here. And, Mr. Chair- man, I am not proposing to have answers to them, but I hope someone does. Mr. FISH. Will the gentleman yield? Mr. COBLE. I will be glad to. Mr. FISH. I thank the gentleman for his statement. He is right on the tar- get. I want to add to that no member of our staff has been provided, before this hearing, right up to this minute, with a statement by Mr. Kloske in affi- davit form or otherwise. There is no way we can verify or refute any of the statements we have heard this afternoon. Mr. COBLE. I agree. I thank the gentleman from New York, Mr. Fish, for his statement. I think this is taking an irregular, unnatural turn of events; and Mr. Chairman, I wanted to share my discontent with the committee. I thank the Chairman. Mr. EDWARDS. We thank the gentleman. We have the Department of Jus- tice to testify after this, so we will stick as closely as possible to the 5- minute rule. The gentleman from Massachusetts, Mr. Frank, is recognized. 131 Mr. FRANK. I think that answers the gentleman from North Carolina’s question, about whether Mr. SCHUMER has told the Justice Department. My guess is, Mr. SCHUMER has told the Justice Department more than they wish to hear and they have had the benefit of it. I think we should note that much of what Mr. SCHUMER was quoting from was not a discussion he had with Mr. Kloske but a discussion he pointed out the IG'S Office had with Mr. Kloske. Many of the comments came from that. I would like to ask a couple of questions. Mr. DeGeorge—and I understand, in fairness to you, you are not a free- wheeling agent. You are restricted by rules. You in this case, as you said, were given a charge; is that correct? You said you were charged to do this investigation and that had a lot to do with the scope of it. Mr. DEGEORGE. That is not the way I would interpret it, Mr. Frank. I was asked by Mr. Willkie to take a look at the facts after he received a report from Mr. Kloske. I decided to do it. It was not an order. Mr. FRANK. You did say, on several occasions the scope was influenced by what you were charged with. Mr. DEGEORGE. The scope was influenced by the decisions that I thought were pertinent to the audit. Mr. FRANK. Now I think you are making a contradiction to what you said before. And I am going to ask that we let—my recollection is, you said at one point—you said you did it this way because that was what you were charged to do. Mr. DEGEORGE. Yes, sir. A request was made. I looked at that request and made judgments of what work I thought was satisfactory, necessary. Mr. FRANK. What was the charge? Mr. DEGEORGE. May I read the letter to you? Mr. FRANK. Yes. And your interpretation of it. Mr. DEGEORGE. As you know, there have been—this is to Frank DEGEORGE from Wendell Willkie, dated March 11. As you know, there have been questions raised by the trade press and others concerning the accuracy of the Iraq export license computer printouts provided to Congressman Bar- nard. In response to my request of February 8, 1991, Under Secretary Kloske transmitted a report dated February 26, 1991, explaining changes made to the printout. Since allegations continue to emerge about these and other possible changes, the Secretary and I believe it would be appropriate for you to look into the allegations concerning preparation of the Iraqi print- Out. Mr. FRANK. You said earlier you interpreted your charge to be—you used the word “charge,” it was in response to some questions about why you hadn't broadened the scope and why you hadn't gone into what you deter- mined were policy-type things. You said because your charge was to find out who had made the changes, and that was it. That is the obvious problem we have here. It was certainly the thrust of your answers before. I would ask that we have those prepared and get them to you if you want to amplify them later. I got the clear impression you indicated you focused on—as you did on who made the changes and didn’t go beyond that because that is what you were asked to do. Did I hear you incorrectly? fi Mr. DEGEORGE. That is what I was asked to do and that is what we did irst. Mr. FRANK. The point is you were asked by Mr. Willkie. The point I am making, you cited—again—I will try and find these in the transcript. You cited the nature of your charge as one of the reasons you didn’t ask Mr. 132 Willkie, but Mr. Willkie was the charger. I think to have Mr. Willkie—I beg your pardon? Mr. DEGEORGE. I am sorry. I didn’t understand. The charger? Mr. FRANK. The charger. Mr. Willkie charged you; and you gave as a rea- son why the scope was narrower than some people here were asking you, your answers were that, well, we didn’t go into some of these things because our charge was to find out who did what. You said the primary thrust of my job was who made what changes. When asked or, in fact, criticized for not going beyond that, you said, well this is my charge. My point is, your charge is from Mr. Willkie. Your own testimony indi- cated you took from Mr. Willkie this charge, and I don’t think that is a good argument as to why you didn’t go ask Mr. Willkie some questions. Yes. Mr. DEGEORGE. I do not accept the word “charged.” Mr. FRANK. You used it. Mr. DEGEORGE. If I used the word previously, it was in error. Mr. Willkie made a request. He asked me if I would look. We decided to what extent we would look and how we would look. Mr. FRANK. I interrupted you. You used the word “charge” before. You obviously have a right to now say you didn't use the word. I think frankly you are concerned now about the implications of it. The clear thrust of your testimony is you pled a scoping from Mr. Willkie as the reason you didn’t ask Mr. Willkie the questions. Mr. DEGEORGE. I don't agree with that conclusion, Mr. Frank. Mr. FRANK. I think you do, and that is why you want to change the use of the word charge. I will get the transcript. You said the primary thrust of your job was who made what changes. Mr. DEGEORGE. We said the primary thrust of what we wanted to do was who made 66 changes and why. Mr. FRANK. What did you do to find out why? Mr. DEGEORGE. What did I do to find out why? Mr. FRANK. Yes. Mr. DEGEORGE. I don’t understand the question. Mr. FRANK. All right, I will ask you another one. The why is one of the weakest parts of your report because you appear—if you read the report, it appears to be almost random mistakes. You say, a Bureau official told us the descriptions were changed to clarify the Bureau does not license the sale of military trucks. You then go on to point out the bureau, in fact, does license the sale of military trucks. Did you believe the bureau didn’t know what it did? Did you think that was an honest error or a conscious lie? Mr. DEGEORGE. I believe the changes were made because Mr. Hill and Mr.— Mr. FRANK. I asked you a specific question. On page 4 here of your state- ment it says: A bureau official told us the commodity descriptions were changed to clarify the bureau does not license the sale of military trucks. Mr. DEGEORGE. That is the what Mr. Hill told us. Mr. FRANK. In the next paragraph you say, the bureau does license mili- tary trucks. One of the two reasons they gave you was simply wrong. It wasn’t a case of interpretation. I am asking you whether you think that was a conscious lie or an honest error? Did they forget they didn’t license mili- tary trucks? Mr. DEGEORGE. I think it was an error. Mr. FRANK. That is why I am bothered. Do you think they forgot they licensed military trucks? Was it they hadn’t licensed any for 1 week and 133 it slipped their mind? How can you be the Bureau of Export Administration and forget that you license military trucks? Mr. DEGEORGE. You will have to ask Mr. Hill. Mr. FRANK. Did you ask him, sir? Mr. DEGEORGE. Yes, we did. Mr. FRANK. What did he say? Mr. DEGEORGE. He told us, first, he thought it was the policy; and Sec- ond, told us he disagreed and he had made a mistake. Mr. FRANK. I understand. You said he thought it was the policy. He was wrong. He didn’t know he licensed military trucks? Mr. DEGEORGE. I am sorry, I don’t follow your semantics. Mr. FRANK. When he told you he didn’t license military trucks, did you think he had forgotten, that he didn’t know? Military trucks ain't yo-yos. It would seem to me if I was running the Department of Export Administra- tion, I would know whether or not they licensed military trucks. Mr. DEGEORGE. I do not know it was Mr. Kloske's. Mr. FRANK. If that is all you know, it was an abominable job of an inves- tigation. Mr. DEGEORGE. It wasn’t an investigation. As soon as we finished— Mr. FRANK. Why didn't you finish this investigation? Mr. DEGEORGE. Because as soon as we finished this audit, we had an- Other. Mr. FRANK. It was a time problem and staff resources? Mr. DEGEORGE. Among other things. We had a limited number of people. I don't have 4,000 people. Mr. FRANK. Time and resources were the issues. Resources is people. Mr. DEGEORGE. Right. Mr. FRANK. I still want to get back to what seems to me a very shoddy investigation. He gave two reasons: One, the State Department letter justified it. You say, no, the State Department letter didn’t justify it. Two, you said you don’t license military trucks, but you do license military trucks. That is so glaring an error. You didn’t try to find out why he told you? Mr. Cochran. Mr. COCHRAN. Let me read from Mr. Hill's interview with us, his first interview. Dan said Kloske called him directly and wanted to make four ad- ditional changes to the printout. The- Mr. FRANK. Speak into the microphone. Mr. COCHRAN. The ECC end description for certain trucks was military trucks. Yet, it is obvious—this is my characterization of Dan's discussion Mr. FRANK. Move the microphone. Mr. COCHRAN. Yet it is obvious DOC-BXA doesn’t license military vehi- cles. The description was due to the CCL number entered by the exporter. Mr. FRANK. Who said it is obvious they don’t license military vehicles? Mr. COCHRAN. Dan. Mr. FRANK. He told you it was obvious? Mr. COCHRAN. He told me that is what he was thinking at the time he made the change. They saw the change; they were working over a weekend. Mr. FRANK. Who made the change? Mr. COCHRAN. Dan Hill. Mr. FRANK. What is his position? Mr. COCHRAN. May I finish? Mr. FRANK. No, I can’t follow you. 134 What was Dan Hill’s position? Mr. COCHRAN. Dan Hill was a licensing official under Mr. Kloske at the time. Mr. FRANK. He told you they didn't license military trucks? Mr. COCHRAN. He is saying at the time it was obvious to him DOC-BXA didn’t license military trucks and the exporter entered the description. And that Kloske called and said—and wanted to make this additional change. That is what Mr. Hill told us on March 13. That is interview memoranda B–1. Mr. FRANK. You have gone past the point of my question. Isn’t it odd Mr. Hill, who works there as an export licenser—you say he told you they didn’t license military trucks when, in fact, they do? They were at the time. Isn’t it odd that you didn’t wonder how he happened— it slipped his mind they licensed military trucks? Mr. COCHRAN. He told us he was in error. Mr. FRANK. Did you ask him how he happened to make the error? Did you ask him when he found out? Mr. COCHRAN. When he found out? Mr. FRANK. Did he suddenly wake up at 3 o'clock in the morning and say, oh, my God, of course we license military trucks; or was he watching a movie and saw a military truck? How did this man in the licensing busi- ness suddenly recall? Mr. COCHRAN. He did not tell us when he realized the error. Mr. FRANK. That is such an obvious error—if you are an investigator wouldn’t you have asked him why he made such an obvious error? You leave us with the inference it is not an honest error, especially—you also say, page 4 of your statement, the total value of the licensed trucks was over $1 billion. I thought we were talking five or six trucks—five instances, but five instances of $1 billion, two-thirds of the total value for the export li- censes for Iraq during that period. In fact, your statement, Mr. DeGeorge—more than 97 percent of the total value of the changed licenses is accounted for by changes to the truck li- censes—we are talking about large sums of money. My time has expired. I would simply say, I am wholly unpersuaded you made a serious effort to find out how this man made such a glaring and obvious error that led to Congress being misled on a very serious point. Mr. DEGEORGE. We can only disagree with you. Mr. FRANK. I thought you would. Mr. EDWARDS. Gentleman from Florida. Mr. JAMES. Thank you very much. This question is for Mr. DEGEORGE. Could you explain the actual changes the information related to the truck licenses? Mr. DEGEORGE. The actual changes. Mr. JAMES. Of the information. Mr. DEGEORGE. The only change was a change of characterization from military trucks to commercial trucks. Mr. JAMES. In those three memos, including those corrections sent to Con- gress in regard to the truck licenses, were those the only changes we are dealing with here? Mr. DEGEORGE. In this particular case those changes, the only data ele- ment of those changes, the end user, the CCN, commodity code number and the other—the dollar values were not changed, only the categorization. Mr. JAMES. Now, did you—I know you testified to this, but I would like to get it in a simple question-answer form, if I can. 135 Who specifically do you know, as a fact, was involved in those changes? You said Dennis Kloske was one that made the changes. Is that my under- standing? Kloske? Mr. DEGEORGE. Staff—some of the changes were initiated by Mr. Kloske, yes. A great number were initiated by Mr. Hill. Mr. Kloske was involved in about 11, I believe. Mr. JAMES. Kloske was involved in 11 and Hill was involved in how many? ". DEGEORGE. The balance, 57, 56. Mr. JAMES. Fifty-seven or 56 so 15 or 16 percent were Kloske's changes and Hill’s was the balance. Now did Kloske have knowledge of Hill’s changes? Mr. DEGEORGE. He had knowledge to changes in the data base. I am not positive he had knowledge—he acknowledged changes to data which was transmitted to Congress. I am not positive he had knowledge of all the changes made to the data base, but at least Some. Mr. JAMES. Congressman Frank asked you questions about Hill's reasons for the changes and Hill later corrected himself and said “I made a mis- take.” Did Kloske have knowledge of Hill's earlier assumption? Mr. DEGEORGE. I am uncertain of that. Perhaps—well, no. We are talking about the other changes. I know Mr. Kloske had knowledge because he transmitted a letter of detailed changes with explanations to Mr. Willkie, which was the basis of Mr. Willkie's direction to me. Mr. JAMES. I mean previously. Did Mr. Kloske have knowledge of Hill’s changes and the reason for the changes? Mr. DEGEORGE. I believe So. Mr. JAMES. If he did, are we to assume Kloske made the same mistake, an assumption that they didn’t handle the military trucks? Mr. DEGEORGE. I don’t have Mr. Kloske's testimony in front of me, but I know at least Mr. Hill and others have basically said Mr. Kloske was the one that directed the changes to the trucks, yes. Mr. JAMES. Hill was just the functionary for the changes? Mr. DEGEORGE. In that case, yes. Mr. JAMES. Wouldn’t it be more important what Kloske thought the des- ignation was, rather than what Hill thought? Mr. DEGEORGE. That is correct. Mr. JAMES. Why are we interested in what Hill thought? Mr. DEGEORGE. Mr. Hill made some of the mistakes and I would argue Mr. Kloske made some of the mistakes. Mr. JAMES. My point is if Kloske knew what Hill was doing, I assume Kloske made the same assumption of fact that they don’t do the reporting the same way with regard to military vehicles. Mr. DEGEORGE. Mr. Kloske and Mr. Hill worked very closely. I don’t think there were any changes in the data reported to Congress or to the Hill without the other one knowing. Mr. JAMES. I MAY be confused. Page 4, a Bureau official told us commod- ity descriptions were changed. We clarified the Bureau does not license the Sale of military trucks. I assume that Bureau official, although it doesn’t say, was Mr. Hill. Mr. DEGEORGE. My understanding is those were Mr. Kloske's words. We don’t license military trucks. Mr. JAMES. “No, sir,” were Kloske's words. Mr. DEGEORGE. My understanding. Mr. JAMES. Did Hill have the same assumption or just follow instructions? 136 Mr. COCHRAN. Sir, he did have that same assumption, strange as it May appear and he used a State Department letter to justify the change also. Mr. JAMES. We have heard allegations, we don’t have Kloske's statements before us. But we heard, I think Congressman SCHUMER recite that Mr. Kloske reported he transmitted certain information to Mr. Willkie. Does your information conclude that that is correct or did you inquire of Kloske as to his conversations with Willkie? In other words, do you have reason to believe it was correct, Mr. Schu- mer’s representation as to Kloske—who at least he contends he talked to- Mr. WEAVER. If I might answer that question, it appears there was quite a bit of communication between Mr. Kloske and people at the departmental level and the printouts and copies were sent to other agencies for their re- view. The communique—the evidence that we discovered during our audit shows that these communications were concerning policy issues such as whether the descriptions of the other agencies Fell within the executive privi- lege or the deliberative process privilege and therefore should be withheld from Congressman Barnard's subcommittee. We did not have evidence—we did not disclose any evidence so therefore I can’t say whether any exists, but we did not disclose any evidence during our audit that the purpose of those transmittals was for the other agencies to make changes to the data that was being Sent to the Hill, that the communications that were going on between Kloske and senior departmental officials and others outside the De- partment were for policy issues. Mr. JAMES. In other words, see if I am phrasing it correctly. The discus- sions that happened with Willkie and any higher up officials was as to what subject matter was covered by executive privilege. But nowhere in those communications did you find evidence that there was a mandate or directive to change any data system information. Mr. WEAVER. If I could clarify that, we are aware several printouts were sent to Congressman Barnard's subcommittee; that in certain printouts there were orders that classes of information would be deleted from the printouts that were sent, but our understanding was that was not a secretive process, that they told the committee what was going on. That information was not being provided to them, and our understanding was that those deletions of classes of information such as end users in cer- tain cases or other agency positions were on policy basis of making a deter- mination whether deliberative process applied. Mr. JAMES. In other words you are asking us—you drew a distinction be- tween intentionally trying to mislead Congress by saying it is a military truck or nonmilitary truck and telling Congress, look, we don't believe you are entitled to this deposition, therefore we are deleting it because of execu- tive privilege. There is a distinction between those two types of information is what you are saying. Mr. WEAVER. That is correct. We don’t associate the communications— we have found no evidence to date and you will have to defer to Department of Justice on this—but we have found no evidence to date that during our audit that leveraged the military truck changes to these other communica- tions that were going on in these policy matters. Mr. JAMES. I see my time was up. There was one clarifying question. I take it, then, you got no information from Mr. Kloske that would suggest that Mr. Willkie in any way instructed, mandated, implied or expressed there be deletions of the nature to mislead Congress in regard to the trucks; is that correct? 137 Mr. DEGEORGE. We have no evidence of that whatsoever. Mr. JAMES. Thank you very much. Mr. BROOKS. Mr. washington, the gentleman from Texas. Mr. WASHINGTON. Thank you, Mr. Chairman. Mr. Cochran, since you are privileged to be a member of two professions, let me preface my questions with do you consider law or accountancy to be your long suit? Mr. COCHRAN. In my job I really use the accounting skills and, of course, the analytical skills that I developed further in law school. The job requires the use of auditors techniques. I leave the legal judgments to Mr. Weaver. Mr. WASHINGTON. Yes, sir. What is your definition of intent? It is not a law school question, just your working thumbnail definition. You recall a question came up on several occasions as to why you didn't inquire into the intent of certain individuals. I need to know—can you hear me? A lot of other noise going on. I will wait. Mr. COCHRAN. OK. My definition of intent? Mr. WASHINGTON. Yes, sir. Mr. COCHRAN. Well, I think especially in this context it was—it was an indication that there was some specific thought to direct action for some pur- pose, to a specific purpose to, let’s say, a specific thought to deceive Con- gress, to withhold information, to conceal data, to do something like that. Mr. WASHINGTON. So you wouldn't measure by the results, you would measure it, then, by the State of mind of the individual involved, would you? Mr. COCHRAN. We try to do that by the totality of the circumstances. What the individuals told us they intended to do, what they did and the time frame they did it in, whatever the documents indicated, and the end result. So, yes, we did go into trying to determine some kind of reason, State of mind as far as intent, and then see what the end result is and determine some kind of perspective with respect to the final information. Mr. WASHINGTON. Would you agree that a circumstantial way of adducing that would be to look at the circumstances, to look at the chain of events, to look at the time frame? Mr. COCHRAN. Certainly in an auditing standpoint, yes. Mr. WASHINGTON. Would you also agree the direct evidence would be to inquire of an individual why they did certain things? Mr. COCHRAN. Yes, sir. In fact, we did inquire as to the individuals. We did not include in our work papers a list of the questions. We did inquire how the changes were made and who made the changes. Mr. WASHINGTON. Why the changes were made would go to intent. Mr. COCHRAN. That is correct, intent, justification, basis, support. Mr. WASHINGTON. Rationale, etcetera. You mentioned in connection with the inquiry on the question of intent you raised the spector of, “policy role.” I am curious to know how you read a policy consideration into the question of intent. Mr. COCHRAN. Could you repeat the question? I am not sure I understood the question. Mr. WASHINGTON. To put it in focus—I forgot—I believe it was from Chairman SCHUMER when he put questions to you about why you didn’t in- quire of Mr. Willkie. You—I don’t remember the entire sentence structure or the thought expressed, but I wrote down at that time that I wanted to inquire of you with respect to your use of the term, “policy role,” in con- nection with reaching a point where you had satisfied yourself with respect to the inquiry as to what was done and when it was done. And you used that as an explanation—not an excuse, but an explanation as to why you 138 didn't inquire of Mr. Willkie as to his involvement with that aspect of your audit. Mr. COCHRAN. Yes, sir. Our evidence indicated that Mr. Willkie didn’t have a role in ordering a specific change, OK. But he had a role in distribut- ing documents and participating in these discussions on executive privilege and deliberative process. When we were satisfied as to the individuals as far as we were concerned, as far as our evidence indicated, the individuals re- sponsible for the changes and the processes by which the changes were made to printouts there was—by definition if that is all the relevant evi- dence, that is as far as you need to go. Mr. WASHINGTON. OK. I have just one other question and I will be fin- ished. Going back, again, I believe it was the chairman’s line of questioning, I want to focus in on the quotation “orders are orders.” I assume for the sake of discussion when a person speaks of an order, he or she speaks of someone who is higher on the totem pole than he or she, rather than some- one who is lower. Would you agree with me on that? Mr. COCHRAN. Yes. Mr. WASHINGTON. An order wouldn't come from a person's subordinate. It would come from a person's superior. Since there has been agreement that Mr. Kloske made the statement on the question whether the General Coun- sel’s Office was, quote, “taking heat on the export licensing controversy,” his answer, I guess, with a shrug of the shoulders “orders are orders,” what did you take that to mean? Mr. COCHRAN. Took that to mean—I think people May recall there were stories which Department was responsible for licensing the sale of arms to the Soviet Union and the Eastern bloc. That is what he was referring to. That is what I took it to mean. If I thought he meant with regards to specific changes, nobody told me to stop with Kloske. Nobody told me— Mr. WASHINGTON. No one told you to stop. Mr. COCHRAN. No one told me to stop anywhere. Mr. WASHINGTON. I am not suggesting you did. Mr. COCHRAN. I want that on the record. If I thought that meant with re- spect to specific changes, I would have pursued the line of questioning. Mr. WASHINGTON. What did you take it to mean? Mr. COCHRAN. Since we had already identified individuals responsible for specific changes, recall that Dan Hill took responsibility for most of the changes. I took it to mean he was referring to the overall U.S. Government export control policy that somehow the Commerce Department is supposed to take the rap for export licensing decisions and other people told us that, to o. Mr. WASHINGTON. OK. Let me ask you finally—I want to make sure this is in the proper context. I understand it to mean Kloske was asked, quote, “if there are any standing orders from the Office of the Secretary, including the General Counsel's Office to silently take the heat for export licensing controversies,” you would mean in General, not in particular with respect to the changes that were made? Mr. COCHRAN. That is right, I mean in General. If he had meant in spe- cific I would have gone into a further line of questioning about the specific changes. Mr. WASHINGTON. How do you know he didn’t mean that? Mr. COCHRAN. We were satisfied—at that point he already told us what he knew of the specific changes, about the trucks, that he had been shown a letter, that he May have—my notation in the case May have ordered a 139 change to the data base and what other people had told us. He was one of the last interviews conducted. Mr. WASHINGTON. You found these things to be extricable then from the General concept of “orders are orders” on the wider plane and not related to your specific inquiry. You knew him to understand the nature of your in- quiry. Mr. COCHRAN. That is right. Mr. WASHINGTON. Thank you, sir, I have no further questions. Mr. EDWARDS. It will be a few moments before we continue. Two or three members are on their way back from the Chamber where there is a vote. The committee will come to order. The gentleman from California, Mr. Campbell is recognized. Mr. CAMPBELL. Thank you, Mr. Chairman. I thank the witnesses for their patience. I am going to ask you to help me one more time to the best of your recollection in your investigation. What reason did Kloske give and what reason did Hill give for making the alterations they did? Mr. DEGEORGE. The alterations to the data base? Mr. CAMPBELL. More importantly the alterations to the submissions to Barnard? Mr. DEGEORGE. In our testimony I think we list the various reasons given. On the truck licenses the confusion apparently between Hill and Kloske, both the effect they, “did not license military trucks which were dual use trucks,” and basically it was a category that the request, as submitted, was proper. They didn’t have to make that change. There were others that dealt with parts and components, parts and compo- nents Mr. Hill made the judgment—and there were two parts of their admin- istrative procedure that he had confused. On one part of it he said basically because a part component does not have to go to Defense for computer, say, a hard disc on computers, it doesn’t have to go to Defense for approval. When it came back we resolved—made a decision, yes or no, since it didn't have to go. We put it there in the first place. I think it would be better off to leave it alone. They decided in the best interest they want the best presentation they would take it off. There were end use comments and a lot of issues like that. There were three tape facilities—I think they were taping facilities, not unlike what we have here that they added that they were for editing purposes in some Iraqi information. The information was added. In another case the computer, certain data was subtracted. They give ex- planations in a letter from Mr. Kloske that I will give you a copy of. The rationalizations I don’t understand. Mr. CAMPBELL. As you recall your original testimony here today, I mean in your written statement, not that you changed it, because to my knowledge you did not. I remember you saying the truck designation might have been changed by Kloske to avoid embarrassment. That is my recollection. Mr. DEGEORGE. That is my sense why they did it. There was 1 billion dollars’ worth of trucks even though they were never shipped. Sometimes we lose sight of the fact they never were shipped. During that process after he made the decision—the actual discussion I recall from the notes when it was brought to Mr. Kloske's attention he said, “We don’t ship military trucks do we?” Mr. Hill said, no, and then Bang they changed it. 141 DEGEORGE. I don’t think there is any point in hammering this out and com- ing back at 7 o'clock tonight working from 7 to 9. We will put this off, we will have another meeting of the panel on Thursday morning at 10 o'clock. We can finish it in regular order. Does that sound reasonable to you all, gentlemen? I realize you have schedule problems, but I don’t know what else we can do. Well, would they prefer to submit their statements and submit to written questions? It is not as effective for members, they might not be that happy. Lee, what do you think. Mr. RAWLS. I think we can. Mr. BROOKS. Stand up so I can hear you. Mr. RAWLS. We will be prepared to submit our statements, any written questions and then if you wanted us back Thursday for followup, if that suit- ed the committee, we would also be prepared for that. But perhaps to save you the time, take a look at our statements and we will answer any written questions and if you then want us back for further questions, we will come on back. Mr. BROOKS. Let's do it like that, and then you are not committed to an- other day of hanging around fooling with this business. Mr. RAWLS. It is at your discretion, Mr. Chairman. Mr. BROOKS. Is that your request; is that your suggestion? Mr. RAWLS. Yes, sir. Mr. BROOKS. Without objection then, we will accept at the conclusion of Mr. Degeorge's testimony written statements by the gentlemen from the Jus- tice Department and they agree to answer all the written questions we might have and we will advise all of the committee of that in writing in the morn- ing at qawn. and the questions will have to be in by—what kind of period of time? I guess by 48 hours on the questions for us to get them to you, 48 hours for them back, so we can get them in the record. We will hold the record on this basis. We will try to get the questions tomorrow, maybe 36 hours. You will get the answer by Friday and go to press on Friday. It is easier than written answers to written questions, you know that. All right, without objection, so ordered then. The gentleman is recognized. [See appendix II–11.] Mr. HOAGLAND. Mr. DEGEORGE, I notice that the results of your investiga- tion are to contain any responsibility for the record changes within the Bu- reau of Export Administration in the Commerce Department; is that right? Mr. DEGEORGE. I am sorry, sir, would you repeat the question? Mr. HOAGLAND. Sure. The results of your investigations are to contain any responsibility for the 66 or 68 record changes within the Bureau of Ex- port Administration; is that right? Mr. DEGEORGE. Well, it was an audit and we do confirm, in our judg- ment, that the restrictions and decisions were all made within the Bureau of Export Administration, yes, sir. Mr. HOAGLAND. Right. And any responsibilities for record changes lies within that Bureau; is that right? Mr. DEGEORGE. Yes, sir. Mr. HOAGLAND. Entirely within the bureau. And basically, with the ex- ception of a couple of interviews in Defense and other agencies, all of the interviews were of individuals within the Bureau; is that right? Mr. DEGEORGE. No, there were, the Deputy General Counsel, Dan Haendel, and generally most of the people within the agency, yes, sir. 144 documents, some of them, were, they say, protected under nondisclosure rules pertaining to grand jury proceedings. And, finally, the Justice Department has been requested to provide classi- fied documents which pertain to BNL and other matters involving sales to Iraq of military-related equipment prior to the Persian Gulf conflict. Some of these documents have been provided to the committee while others have been withheld. Unfortunately, the classified documents provided to the com- mittee late last week have not been viewed, in large part, because of a pre- vious decision by the administration to suspend the security clearances of key Judiciary staff. Apparently, the CIA and the National Security Council decided that the security clearance procedures applicable to this committee, previously hon- ored by three past presidents, are no longer valid. As a result, the committee staff were unable to review any documents classified by the executive as na- tional security related materials. And I would now like to say that we thank all the witnesses for their pa- tience and for their participation in the hearing today. Their testimony will be useful to the committee’s assessment of whether to request the Attorney General to appoint an independent counsel. I want to make sure that all members have the benefit of a complete tran- script of the hearing record from June 2 and from today’s proceedings, and this can be done promptly. At this point, at that point, rather, when that has been done, the committee May proceed a number of ways: It May do nothing further based on the evi- dence received, or, if a majority of either party comprising the committee write to the Attorney General requesting the appointment of an independent counsel, then the statute is triggered and the Attorney General must conduct a threshold inquiry and report back to us within 30 days. The written request need not be preceded by collective action by the com- mittee in voting on a motion to appoint an independent counsel. But such a vote May be useful to the process developed so far. In any event, as I indicated at the June 2 hearing, the matter needs to be resolved and resolved expeditiously. I trust it will be. The hearing is adjourned. [Whereupon, at 5:25 p.m., the committee adjourned, to reconvene subject to the call of the Chair.] O ISBN 0-16-038783-3 | | 90 000 9 "7801 60'387838