Terror Watch: Tip of the Iceberg?

The Iraqi exile group headed by Ahmad Chalabi--formerly a key ally of the Bush administration--is suspected of leaking confidential information about U.S. war plans for Iraq to the government of Iran before last year's invasion to oust Saddam Hussein, government sources told NEWSWEEK.

The allegation that Chalabi may have supplied the Iranians information about U.S. military plans comes on the heels of recent disclosures that Chalabi or others in his organization may have compromised more recent U.S. intelligence operations by leaking what officials initially described as "extremely sensitive" and "highly classified" information to Iranian officials--information which could "get people killed" if abused by the Iranians.

NEWSWEEK has learned that the National Security Agency first uncovered evidence indicating Chalabi's possible compromises of U.S. intelligence and sent a criminal referral to the FBI requesting an investigation into the alleged leak to Iran. A similar referral was sent to the FBI by the Defense Intelligence Agency, which until recently was responsible for managing Pentagon payments to Chalabi's group and for supervising its intelligence-collection efforts.

Last week, U.S. intelligence officials requested that NEWSWEEK and several other media organizations refrain from publishing some details about what kind of intelligence information Chalabi and the INC were alleged to have given to the Iranians. After some details surfaced in print and TV reports earlier this week, however, officials withdrew their requests, leading to a spate of media reports alleging that Chalabi or one of his associates told the Iranians that U.S. intelligence had cracked a secret code system used by the Iranian intelligence service. U.S. political activists close to Chalabi have told reporters in recent days that Chalabi learned about the codebreaking in Baghdad from a drunken U.S. official.

The evidence that Chalabi had compromised U.S. codebreaking was disclosed to President Bush and Vice President Cheney several weeks ago and was a factor in the decision to raid the INC's headquarters in Baghdad last month. It also influenced high-level Bush administration efforts to distance the administration in recent days from Chalabi, who had once been viewed by Pentagon civilians as a favored candidate to replace Saddam Hussein as Iraq's government leader.

"This is an enormous loss to the U.S. intelligence community," one former U.S. intelligence official said today about the reported leak of the secret code system. "Obviously, the Iranians are not going to use that code anymore. We're going from having a complete window into what their intelligence service was doing to having no window at all."