Wall Street Journal
Smearing Mr. Chalabi
The State Department tries to corrupt its own audit process.

Thursday, April 10, 2003 12:01 a.m. EDT

Iraqis cheered U.S. troops yesterday in the streets of Baghdad. But they might be disappointed to learn what some Americans really think about the prospects for Iraqi democracy. We raise that issue after watching much of the federal bureaucracy, and its media echo chamber, deride Ahmed Chalabi and his Iraqi National Congress, a coalition of Iraqis who have risked their lives opposing the despotism of Saddam Hussein.

No American official wants to admit to this view publicly, especially with President Bush promising a new government run by Iraqis themselves. But we've now found smoking-gun proof of the State Department's hostility in the form of records of meetings compiled by auditors in State's Office of Inspector General. The minutes suggest that the forces of the Middle East status quo will resist Iraqi democracy even once Saddam is history (if he isn't already).

One redolent passage, dated May 17, 2002, says that, "During the meeting, Ms. [Yael] Lempert stated that NEA would appreciate any assistance the OIG could provide with NEA's desire to 'shut down the INC.' " The NEA is State's Bureau of Near Eastern Affairs, and the hand holder of Egypt and Saudi Arabia and other Middle East despotisms.

According to the notes, the Inspector General's office replied that it would "do a 'by the book' audit as always" and "report accordingly." The INC would later receive a clean bill of health from the OIG, which opined publicly that it was "impossible" for the INC to comply with various State demands. The auditors also document a number of other apparent NEA attempts to influence the audit process, noting that NEA was "violating" government rules and "the possible lack of independence and conflict of interest that can occur when the grants officers report to Bureau management."

IN ANY EVENT, the Near East Bureau had no authority to "shut down the INC." In 1998, Congress passed, and Bill Clinton signed, the Iraq Liberation Act. The act made "regime change" the policy of the U.S. government and appropriated $97 million for the Iraqi opposition. But these papers make clear that State went to unusual lengths to avoid implementing the law.

This is all highly relevant now because of the growing smear campaign against Mr. Chalabi and the fight over the future of Iraq. Numerous news stories are repeating the unsubstantiated allegations (financial impropriety, no support in Iraq) that State and the CIA have been peddling about the INC for years. And our media colleagues are swallowing the stories hook, line and sinker.

Their credulity is all about guilt by association. Mr. Chalabi must be bad news because "hawks" like Dick Cheney, Don Rumsfeld and Paul Wolfowitz have taken the time to get to know him and actually like him. As for the State Department, it will never forgive Mr. Chalabi and his allies for helping to persuade the Bush Administration of an Iraq policy that the diplomats never supported. Having failed to stop the war, State is now trying to hijack the peace.

Besmirching Mr. Chalabi's reputation is only part of the strategy. Another appears to be wresting control of Iraqi reconstruction funds. Though Mr. Bush had wanted to be able to spend such money without restrictions, both houses of Congress voted last week to keep a whopping $2.5 billion in reconstruction aid away from the Defense Department, with the House version specifying it be controlled by Colin Powell and his deputy, Richard Armitage. (The bills were being reconciled in a House-Senate conference yesterday.)

Senior State Department officials deny rumors they played a role in Congress's decision to deny the President's request for flexibility. "No calls were made by me. No lobbying was done by me. This is complete \[expletive\]. I testified on behalf of the President's submission," Deputy Secretary Armitage told us.

But the documents we received show that State hasn't been above such underhanded games on this issue in the past. They were leaked by an official aghast that State would be entrusted with such responsibility given its record on Iraq.

Mr. Armitage's name comes up repeatedly. "Deputy Secretary makes all decisions," one Near East Affairs staffer is quoted as saying of the Bureau's policy on the INC. "Ms. Lempert stated that D (Deputy Secretary Armitage) instructed NEA to issue the last three grant amendments" restricting funding for the INC, says the account of another meeting. At bottom the motivation seems to be a simple policy disagreement. "If the INC were allowed to operate inside Iraq, they would start a war," someone from NEA is paraphrased as saying.

THESE SHENANIGANS BEGAN during the Clinton Administration, when despite the Iraq Liberation Act there was no clear direction from the top. But the fact that they continued after President Bush had set a firm policy of disarming Saddam amounts to insubordination. It speaks volumes about who should be entrusted with rebuilding a post-Saddam Iraq.

State's Near East Affairs Bureau has always been a force for preserving the region's despotic status quo. And now that Saddam's regime is on the way out, NEA bureaucrats would prefer to see him replaced by ex-Baathists more amenable to their friends in the Saudi and Egyptian foreign ministries.

We're not saying the U.S. should anoint Mr. Chalabi or any individual as the next Iraqi leader. But State and the CIA seem less afraid of Saddam than of real democrats who could set a new example and exert pressure for change throughout the Middle East.

If Mr. Bush means what he says about a democratic Iraq, the last thing he should want is State's hands on the purse strings. If the war supplemental arrives on his desk with Foggy Bottom in control of Iraqi reconstruction, he would be well-advised to consider a veto.