The story of how a Milan CIA station chief became a fugitive, now caught in Panama

A November 2009 photo from Milan shows Italian judge Oscar Maggi reading the verdict against Robert Lady and other CIA officials. (GIUSEPPE CACACE/AFP/Getty Images)

When Robert Seldon Lady first arrived in Milan, Italy's fashion and business hub, he was officially listed as an employee of the U.S. State Department with the title of deputy consul. In fact, he was the head of the CIA's Milan station. That was 2000. Within a few years, Lady would become an international fugitive on the run from Italian police; he would go from a highly respected CIA officer to, for many in Europe, a symbol of everything that was wrong with the United States' war on terror and a means to publicly pressure the Bush administration.

On Thursday, Lady was detained in Panama, possibly to answer for the Italian extradition charges that have stood against him for years. The story of Lady's journey over the past decade is controversial, disputed and full of holes. But it is a fascinating episode from a complicated period in U.S. foreign policy – one that, as his recent detention reminds us, isn't so long ago as we might think.

Two good retellings of Lady's downfall and the incident that so angered Italian officials are a well-reviewed 2010 book A Kidnapping in Milan: The CIA on Trial," by journalist Steve Hendricks, and Matthew Cole's exhaustive 2007 Esquire story. I've drawn from them both here.

After Sept. 11, 2001, CIA stations across much of Europe ramped up efforts to find and neutralize possible terrorist threats; several of the al-Qaeda operatives involved in the 2001 hijackings had originally operated out of Hamburg. Lady's Milan station, working with Italian counterterrorism officials, dismantled three cells in northern Italy in just two years, according to Cole.

In early 2003, Lady began working with the Italians to follow a fiery Egyptian cleric living in Milan named Osama Mustafa Hasan Nasr, more commonly called Abu Omar. They had been gathering information on Abu Omar – according to Hendricks, he was alleged to have recruited suicide bombers for a group operating in Iraq called Ansar al-Islam – in possible preparation for a criminal case against him. But Lady was under pressure from his superiors to take a very different path.

One of the most controversial elements of the Bush administration's war on terror was a tool called extraordinary rendition, in which the United  States would seize a suspected terrorist and ship him to another country for secret interrogations, often using methods that critics have described as torture. The Bush administration believed this practice of shipping suspects to CIA-run facilities in Eastern Europe or to sympathetic governments such as Jordan's or Egypt's, was a necessary tool for fighting terror.

Lady, according to Cole, came under pressure to seize Abu Omar and send him abroad for interrogation. He reportedly resisted at first, urging the CIA to let their joint investigation with the Italians continue, and warning that nabbing a well-known religious figure on a Western European city street could be provocative. But he was overruled and, ultimately, did as he was told, ordering the rendition to go ahead.

Lady's team grabbed Abu Omar on Feb. 17 around noon, as the Egyptian was walking to a nearby mosque as he did every day. They flew him to a NATO air base in Aviano, Italy, then on to Cairo, where he was handed over to Egyptian authorities, who took several U.S.-renditioned terrorism suspects in the years after September 2001.

Abu Omar surfaced again in April 2004, when an Italian phone tap picked him up calling his wife and describing what sounded, to Italian prosecutor Armando Spataro, like a U.S. rendition. Now released by the Egyptians, Abu Omar described his initial flight with English-speaking men, on a plane bearing an American flag. Spartaro told Cole that he'd already suspected Abu Omar had been renditioned by the Americans, something he considered a national embarrassment for Italy and a violation of its sovereignty and law. And, like many in Europe, he though the renditions were wrong, little more than kidnappings. "Our system requires my office to open an investigation if there is reasonable belief that a crime has been committed," he said. "In this case, Omar’s phone call to his wife was what we needed to investigate."

That phone call was the beginning of an Italian investigation and legal case against Lady and 22 other Americans, an episode that would embarrass the United States and end Lady's career.

Spataro was able to uncover the CIA operation with surprising ease: he used cell phone data to find about a dozen phones that had been used near the site and time of Abu Omar's disappearance and that were registered to fake names. Many of them had previously placed or received calls from the CIA's headquarters in Virginia. From there, the cell phone records illuminated what appeared to be the entirety of the CIA operation in Milan – including, by way of geo-locating, the hotels where they were staying. Some had used the cell phones, and the same CIA-linked accounts that paid the phone bills, in their personal lives, providing Spataro with a trove of data that led him straight to Lady.

Lady was not innocent in leaving a data trail for prosecutors. The Italian villa he had recently bought with his wife contained an itinerary for his flight to Egypt shortly after the rendition, incriminating emails and photos of Abu Omar being monitored. "This was amateur hour with a bunch of Keystone Kops," retired CIA officer and media consultant Milt Bearden told Cole.

One of the more puzzling details of the Abu Omar case is how the CIA had managed to be so clumsy and to leave so much information for Spataro to recover. Cole argues that Lady's immediate superior carries much of the blame, suggesting that the Rome CIA chief was long of careerism and short on operational focus. Hendricks, though, offers more compelling explanations:

Afterward, theories abounded about why the CIA had been so reckless from start to finish – why, for example, the spies had not used satellite phones, which the Italians could not have traced, why they had used their phones like teenagers, why they had not paid in cash, why Lady had brought work home. One theory focused primarily on mechanics: satellite phones had larger antennae and might have seemed more conspicuous on the street; paying $8,000 hotel bills in cash would have seemed suspicious. But this theory was unsatisfying because the mechanical problems were easily solved: satellite phones would not have been conspicuous if used sparingly; the team could have stayed in less expensive hotels and changed them every few nights. And no mechanical dilemma explained Lady's domestic carelessness, the frequent-flier accounts, and other Keystone Kommando-isms.

But, according to Hendricks, a "somewhat more satisfying theory" gets to the explosive growth of CIA operations after September 2001, when the CIA's mission and scope was changing so rapidly that, in retrospect, it's amazing there weren't more mistakes. In those first few years after September 2001, a kind of mania had swept through much of the U.S. national security community; compared to the Iraqi weapons of mass destruction that never materialized, Milan station's otherwise sloppy execution seems pristine.

By mid-2005, the Italian investigation had built such a compelling case – including testimony from an Italian woman named Luciano Pironi who had worked as a CIA asset – that, on June 24, an Italian judge issued arrest warrants for 13 Americans suspected of involvement in the case. Eventually, Italy would seek 24 people in all in connection with the case, including one U.S. Air Force officer and one Italian national. Spataro would publicly name every CIA officer involved and would publicize the details of the rendition – a major embarrassment for the world's preeminent spy agency.

It's difficult to overstate just how politically significant this was, how remarkably unprecedented for Italy to seek the arrests of intelligence officials belonging to a fellow NATO member and close ally. As the Washington Post's Craig Whitlock and Dafna Lizner wrote at the time, "The case marks the first known instance of a foreign government filing criminal charges against U.S. operatives for their alleged role in an overseas counterterrorism mission." The political implications clearly went well beyond just the rendition of Abu Omar and were taken as a repudiation of the U.S. war on terror and its increasingly controversial rendition program. As Whitlock and Lizner wrote, "Coming from a longtime ally, Italy, which has worked closely with the U.S. government to fight terrorism and has sent troops to Iraq, the charges reflect growing unease in Europe about some U.S. tactics against suspected Islamic terrorists."

Lady fled to the United States and the others named in the Italian investigation appear to have left the country. No Americans have yet been arrested in connection to the case. In 2007, though, an Italian court began trying several of them in absentia. That same year, when Cole met Lady at a Florida mall, he found the former CIA station chief depressed and dejected: his Italian villa had been seized by Italian police, his wife had left him a week earlier, he lived in fear of terrorist retribution or, should he leave the U.S., an Italian extradition.

Behind the scenes, the United States was pushing the Italian government to slow or stop the case against the CIA officials. According to a U.S. diplomatic cable released by Wikileaks, then-Secretary of Defense Robert M. Gates personally lobbied Italian President Silvio Berlusconi, who reassured him the Italian government "was working hard to resolve the situation." In 2009, the Italian court convicted 23 Americans in absentia, including Lady, who was sentenced to eight years in prison and now faces threats of extradition should he travel abroad. In an interview with an Italian newspaper, Lady argued that the rendition had been an act of counterterrorism, not a crime. The paper quoted him as saying, "I was a soldier."

It's not clear why Lady may have been in Panama, where he was detained Thursday. He is originally from Honduras; as a high school student there, according to Hendricks, other kids used to call him "gringo" or "yanqui" or "imperialist" for his partial American heritage. He has traveled back to Honduras previously; he was there in 2005 when police raided his Italian villa, presumably visiting family. It's possible that Lady may have been traveling through Panama to or from Honduras, although the geography doesn't quite make sense, given that Panama is further south. In Cole's profile, Lady said that one reason his marriage had ended was that his wife had grown tired of "constant moving," although that may have been within the United States.

Panama's foreign policy is typically seen as pro-American; it would be taken as a slap to Washington if Panama honored Italy's arrest warrant by extraditing him. Still, the 2003 rendition program and the Bush administration war on terror of which it was a part were not so long ago. If those policies could so anger Italian authorities that they would publicize the names of over a dozen CIA officials and humiliate the United States with a years-long investigation and trial, maybe a Panamanian extradition would not be so surprising.



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Max Fisher · July 18, 2013