Italy Probe Unearths Huge Iraq Arms Deal

An Iraqi carries a Russian-designed machine gun at a funeral, July 27, 2007, in Karbala, an Iraqi city dominated by Shiite Muslim militias. Italian authorities have broken up an alleged illegal plot to ship 5,000 such machine guns, along with 100,000 assault rifles, into Iraq. Iraqi police supposedly would have been the end users, but Shiite militias are known to have obtained weapons through police channels. (AP Photo/Ghassan al-Yassiri, File) (Ghassan Al-yassiri - AP)

The Iraqis quibbled over the asking price, $39.7 million, but seemed satisfied. The Italians were set for a $6.6 million profit, the court documents show, and were already discussing air transport for the weapons. At this point prosecutor Razzi acted, seeking an arrest warrant from a Perugia court.

"The negotiation with Iraq is developing very quickly," he wrote the judge.

On Feb. 12, in seven locations across Italy, police arrested the 17 men, including the four alleged arms traffickers: Bettinotti; Gianluca Squarzolo, 39, the man whose luggage had yielded the original clue; Ermete Moretti, 55, and Serafino Rossi, 64. If convicted, they could be sentenced to up to 12 years in prison.

The at-large fifth man, Vittorio Dordi, 42, was believed to be in the Democratic Republic of Congo, where he apparently is involved in the diamond trade. Italian authorities were seeking information on him from the African country.

In the parallel Libya case, the Italians allegedly paid two Libyan Defense Ministry officials about $500,000 in kickbacks to speed that transaction for Chinese-made assault rifles. It isn't known whether such bribes were a factor in the Iraq deal. No Libyans or Iraqis are known to have been detained in connection with the cases.

Al-Handal's operations have caught investigators' notice before. In 1996-2003, the company was involved as a broker in the kickback scandal known as Oil for Food, the CIA says.

In that program, Iraq under U.N. economic sanctions bought food and other necessities with U.N.-supervised oil revenues. Foreign companies, often through intermediaries, surreptitiously kicked back payments to officials of Saddam Hussein's Iraqi government in exchange for such supply contracts.

Those Iraqi middlemen also engaged in "misrepresenting the origin or final destination of goods," said the 2004 report of the CIA's Iraq Survey Group, which investigated both Iraq's defunct advanced weapons programs and Oil for Food.

That report also alleged that during this period Al-Handal General Trading, from its bases in Dubai and Jordan, secretly moved unspecified "equipment" into Iraq that was forbidden by the U.N. sanctions.

Reached at his office in Amman, Jordan, Waleed Noori al-Handal denied the family firm had done anything wrong in the Italian arms case.

"We don't have anything to hide," he told the AP.

Citing the names of "friends" in top U.S. military ranks in Iraq, al-Handal said his company has fulfilled scores of supply and service contracts for the U.S. occupation. Asked why he claimed U.S. approval for the abortive Italian weapons purchase, he said he had a document from the U.S. Army "that says, 'We allow al-Thuraya Group to do all kinds of business.'"