Standing of Former Key U.S. Ally in Iraq Falls to New Low

Chalabi was among the 25 Iraqis selected last summer for the Iraqi Governing Council, but relations continued to fray. The U.S. failure to find weapons of mass destruction during the summer and fall further undermined his credibility -- and irritated the Bush administration. INC intelligence and defectors played a major role in building the case against Hussein, U.S. officials say.

"Now it's demonstrable that he told the U.S. government a lot of things that were not true," said Pat Lang, former head of Middle East intelligence at the Defense Intelligence Agency. At the United Nations last year, Secretary of State Colin L. Powell presented the U.S. case for war, which included information on mobile labs for the production of chemical or biological weapons based on data from a defector provided by the INC, data that the United States has since conceded were untrue.

But Chalabi, a Shiite Muslim educated at MIT and the University of Chicago, has been unrepentant. "We are heroes in error," he told the Daily Telegraph of London in February. "As far as we're concerned, we've been entirely successful. That tyrant Saddam is gone and the Americans are in Baghdad. What was said before is not important."

Throughout much of its relationship with him, the United States has been willing to shrug off Chalabi's past as a convicted felon disliked and mistrusted by many in the Arab world. In 1992, Chalabi, whose family fled Iraq when he was a teenager, was sentenced in absentia by Jordan to 22 years in prison on 31 counts of embezzlement and other bank fraud charges.

But Chalabi's close relationship with Iran, the only neighboring state that regularly deals with him, is now a further cause of concern in Washington. The INC chief has always been a master at balancing the two foes, but U.S. officials have recently cited fears that Chalabi's ties could endanger U.S. operations in Iraq.

As U.S. and U.N. officials work to form an interim Iraqi government, U.S. officials have increasingly been frustrated by Chalabi's maneuvering to ensure that he and some of his Governing Council allies retain strong positions. Washington fears that he will try to undermine whomever U.N. envoy Lakhdar Brahimi names, possibly next week.

Chalabi insisted yesterday that he is still "America's best friend in Iraq," although he later told reporters that he is severing ties with the U.S.-led coalition government and now wants to see Iraq liberated. "Let my people go," he said. "It is time for the Iraqi people to run their affairs."

Researcher Julie Tate contributed to this report.