The U.S. Department of Agriculture is quietly pursuing its investigation of U.S. food sales to Iraq, seeking evidence of kickbacks or other irregularities in American exporters' dealings with the Iraqi government, USDA officials said.
The investigation, conducted by the department's inspector general, forms part of the burgeoning scandal surrounding Iraq's reported acquisition of billions of dollars in military equipment and know-how through loans arranged by the Atlanta branch of Italy's Banca Nazionale del Lavoro.
A preliminary USDA investigation, released May 21, found no evidence that Iraq had used U.S. grain and other commodity purchases to mask ventures into international weapons and technology markets.
But the investigation did unearth apparent irregularities in the sales of $750 million in U.S. grain and sugar purchased by Iraq through Banca Nazionale del Lavoro loans that were guaranteed by the USDA.
The department said May 21 that its inspector general's office was continuing its probe. Paul Dickerson, general sales manager of the USDA's foreign commodity sales program, said he did not know when additional information would be available.
Pending further results, however, Undersecretary Richard T. Crowder, who is in charge of USDA international affairs, earlier decided to delay action on Iraqi requests for $500 million in commodity purchases this year. The delay was announced in the May report and remains in effect, Dickerson said.
"In no way could this be called a suspension," he said. "We have simply not authorized any further sales until our investigation clears up this matter to our satisfaction."
The Iraq scandal broke last year when it was discovered that the Atlanta branch of Banca Nazionale del Lavoro had written nearly $2 billion in loans to Iraq over the previous two years without obtaining permission from the bank's head offices in Rome. Banca Nazionale del Lavoro is one of Italy's most respected financial institutions.
Included in the Atlanta office's "gray" portfolio were $750 million in loans guaranteed by the USDA's Commodity Credit Corp. for Iraqi purchases of U.S. grain and other agricultural commodities.
Under the department's export program, the Commodity Credit Corp. guarantees loans to high-risk purchasers of U.S. agricultural products to encourage American exporters to do business with nations that otherwise might be unable to obtain credit.
Iraq entered the program in 1983, shortly after full diplomatic relations with the United States were restored. Mired in a costly war with Iran for most of the 1980s, Iraq in the past eight years used the program to purchase 20 commodities with a total value of $4.5 billion.
"I can't say Iraq is the biggest purchaser," said Dickerson, who runs the program. "But over the years, they have certainly been near the top." He said Mexico led the list of clients this year with purchases totaling $1.4 billion.
Late last year, Iraq requested $1 billion in guaranteed commodity purchases for fiscal 1990. The Commodity Credit Corp. authorized $500 million as the first of two installments, with the second installment to be reexamined later in light of developments in the banking scandal. Iraq has never defaulted on a Commodity Credit Corp.-guaranteed loan.
The May 21 report said investigators were satisfied that Iraq had not used the commodities to buy weapons or technology for a large-scale military buildup. In addition, Dickerson said, new Atlanta evidence showed Iraq had easily and relatively openly made a large number of military purchases from private Western firms: "They didn't have to fool around with our program."
What the USDA discovered, the report said, was that Iraq over the years had demanded a variety of "after-sales services" from U.S. commodity exporters. Some of these had been provided, the report said, while others had been refused and reported to the department.
Dickerson said the inspector general is investigating the possibility that these "services" resulted in kickbacks or other payments. The investigators also are examining exporters' invoicing procedures in a number of transactions, he added. In all cases, Dickerson said, possible irregularities appeared to have been confined to the commodity purchases.