Let Prosecutors Serve Justice, Not The Justice Dept.

As President Bush staggers into the final days of the campaign, an expanding scandal in his Administration is the last thing he needs. But that's just what he's getting with a stream of revelations about the mishandled prosecution of an Atlanta bank official charged with illegally making loans to Iraq. Both the Central Intelligence Agency and the Justice Dept. admit they have provided misleading accounts.

With political pressure on Bush growing, Attorney General William P. Barr tried to stanch the bleeding on Oct. 16 by naming a special prosecutor to untangle the mess. But Barr's appointment of former Federal District Judge Frederick B. Lacey is little more than pre-election damage control. The Attorney General stopped short of asking for a court-appointed independent counsel under the 1978 Ethics in Government Act. He opted instead for a special prosecutor under Justice Dept. regulations. That's no better than a halfway measure.

Lacey may carry out his duties with integrity. But as a special prosecutor, he'll have to report to Justice. Independent counsels report only to the court that names them. What's more, the court can review the firing of an independent counsel by the Attorney General, but not the firing of a special prosecutor.

FALL GUY. Although it's unlikely, Barr could still reverse a decision made in August and go for an independent counsel. And a Clinton Administration might favor appointing one if possible. Meanwhile, though, the law authorizing independent counsels is set to expire on Dec. 15, and Congress, under pressure from the Administration and Republican senators, has failed to extend it. Congress should correct its mistake when it returns in January. Lawmakers should revive independent counsels--but they also should fix some problems in the law that the Iraqgate mess highlights.

One of the most glaring defects of the current law is the Attorney General's broad discretion in deciding whether to appoint an independent counsel. That can become a problem in cases where the Attorney General's own impartiality is in question. Consider what happened in Iraqgate. The Atlanta branch of Banca Nazionale del Lavoro, a bank controlled by the Italian government, extended Iraq at least $4 billion in commodity loans, some guaranteed by the U.S. But some members of Congress suspect that Saddam Hussein diverted the funds to the Iraqi war machine rather than use them to buy American farm products.

When the head of the Atlanta branch pleaded guilty to fraud in June, Acting U.S. Attorney Gerrilyn G. Brill chalked up full responsibility for the crime to one errant bank employee. And the CIA insisted that it had no new information. But in recent weeks, the CIA has admitted that it had evidence that the Italian government knew of the loans. The agency says it withheld the information at Justice's request--a charge the department hotly denies.

The result: In Iraqgate, the Justice Dept.'s special prosecutor will be investigating his own employer. "There's all the more reason to put the investigation as far from the Justice Dept. as possible, because the department itself is charged with wrongdoing," says University of Virginia Law Professor Dick Howard.

Congress ought to consider a check on the Justice Dept. The U.S. Supreme Court has made it clear that the Constitution requires that the executive branch have some say in the appointment of a prosecutor. But lawmakers should give the courts power to review an Attorney General's decision.

While Democrats complain that independent counsels lack real independence, Republicans have been arguing for years that they're all too independent and lacking in accountability. The Iran-contra probe took five years, cost taxpayers $32 million, and produced few successful prosecutions. To deal with Republicans' concerns, Congress could adopt proposals that would require independent counsels to appear more regularly in court to justify their expenses and to report on their progress. The law also could make clear that prosecutors can't go after misdemeanors.

Voters venting their spleen against privileged Washington insiders should remember that the independent counsel law is a good way to keep them from abusing power. The Constitution has checks on each branch of government. But the Iraqi loan mess suggests that the public needs the extra protection of an independent counsel.

Catherine Yang and Amy Borrus