A Web Of Intrigue

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It was a hot, late August afternoon when the Iraqi exile got a call on his cell phone. Over the crackling line, the Iraqi says, the caller identified himself as Larry Franklin, an analyst for the Defense Department in Washington. Franklin rattled off a series of questions. He wanted to know if the Iraqi, who had spent the past decade working with Ahmad Chalabi's Iraqi National Congress (I.N.C.), could recall whether anyone at the I.N.C. had discussed the U.S.'s ability to intercept and decode Iran's secret communications. The Iraqi, who knew Franklin's name but had never met him, was startled by the call. "How about discussing Iranian codes with a drunken American? Had anyone ever done that?" Franklin wanted to know. For nearly half an hour, Franklin quizzed him about Pentagon officials and Iranian spycraft. "That was really scary," recalls the Iraqi. "I told him, 'I don't remember anything.'"

That phone call, which the Iraqi described to TIME last week, seems to be an indication that two complicated spy cases have become linked. Several weeks ago, according to federal law-enforcement officials, Franklin, who had been under investigation by the FBI for giving classified information to the American Israel Public Affairs Committee (AIPAC), agreed to cooperate in a probe into whether the pro-Israel group was passing sensitive U.S. secrets to Israel.

Franklin's call to the ex-I.N.C. man, who has provided TIME with credible information in the past, suggests that Franklin was also assisting the FBI in a separate inquiry into how highly classified details of America's ability to decode Iranian intelligence messages may have fallen into the hands of Chalabi's organization and been passed on to Iran in February. A U.S. law-enforcement official confirms that the Iraqi's account of the conversation is consistent with the types of calls Franklin was making on behalf of the FBI.

According to law-enforcement officials, Franklin began cooperating with the FBI after agents first confronted him with evidence that he had given classified material to AIPAC, one of Washington's most powerful lobbying organizations. Israel and AIPAC have denied the spy allegations; neither the Pentagon nor Franklin would comment. The law-enforcement officials say Franklin was persuaded in recent weeks to make "pretext calls"—scripted conversations monitored by FBI agents and designed to tease out incriminating evidence about other suspects. It was within this time frame that Franklin approached the ex-I.N.C. official who spoke to TIME.

The two investigations are among the most politically charged espionage cases in years. Israel and the I.N.C. are longtime allies of the U.S., though the CIA has for years warned that Chalabi was not to be trusted. Allegations of Israeli espionage have been a hot-button issue since American naval intelligence analyst Jonathan Pollard was imprisoned for life in 1987 for passing U.S. military secrets to Israel. Ever since the Pollard affair, Israel has publicly insisted it no longer spies on the U.S. "I can tell you here very authoritatively, very categorically, Israel does not spy on the United States," Israel's U.S. ambassador, Daniel Ayalon said last week. "We do not gather information on our best friend and ally."

Federal law-enforcement officials say they remain on the lookout for signs that Israelis still pursue U.S. secrets. A former congressional official told TIME that in the 1990s Israelis in Washington were known to routinely seek copies of classified documents such as secret portions of the annual Javits report, a U.S. compilation on arms sales.

National Security Adviser Condoleezza Rice and her deputy Stephen Hadley were informed of the FBI's probe into AIPAC at least two years ago, according to a U.S. official. But that did not hinder numerous contacts between AIPAC and top Administration officials as well as congressional leaders of both parties. The lobbying group derives its power from its backing among influential Jewish Americans. Just last May, President George W. Bush attended AIPAC's annual conference in Washington and thanked the organization for "serving the cause of America" and bringing to public attention the threat of Iran's development of nuclear weapons.