Spy Case Renews Debate Over Pro-Israel Lobby's Ties to Pentagon

It began like most national security investigations, with a squad of Federal Bureau of Investigation agents surreptitiously tailing two men, noting where they went and whom they met. What was different about this case was that the surveillance subjects were lobbyists for the American Israel Public Affairs Committee, and one of their contacts turned out to be a policy analyst at the Pentagon.

The ensuing criminal investigation into whether Aipac officials passed classified information from the Pentagon official to Israel has become one of the most byzantine counterintelligence stories in recent memory. So far, the Justice Department has not accused anyone of wrongdoing and no one has been arrested.

Aipac has dismissed the accusations as baseless, and Israel has denied conducting espionage operations in the United States.

Behind the scenes, however, the case has reignited a furious and long-running debate about the close relationship between Aipac, the pro-Israel lobbying organization, and a conservative group of Republican civilian officials at the defense department, who are in charge of the office that employs Lawrence A. Franklin, the Pentagon analyst.

Their hard-line policy views on Iraq, Iran and the rest of the Middle East have been controversial and influential within the Bush administration.

"They have no case,'' said Michael Ledeen, a conservative scholar at the American Enterprise Institute and a friend of Mr. Franklin. "If they have a case, why hasn't anybody been arrested or indicted?''

Nearly a dozen officials who have been briefed on the investigation said in interviews last week that the F.B.I. began the inquiry as a national security matter based on specific accusations that Aipac employees had been a conduit for secrets between Israel and the Pentagon. These officials said that the F.B.I., in consultation with the Justice Department, had established the necessary legal foundation required under the law before beginning the investigation.

A half dozen people sympathetic to Aipac and the civilian group at the defense department said they viewed the investigation in different terms, as a politically motivated attempt to discredit Aipac and the Pentagon group. Supporters of Aipac have said the organization is being dragged into an intelligence controversy largely because of its close ties to a Republican administration and the Israeli government of Prime Minister Ariel Sharon.

Friends and associates of the civilian group at the Pentagon believe they are under assault by adversaries from within the intelligence community who have opposed them since before the war in Iraq. The Pentagon civilians, led by Paul D. Wolfowitz, the deputy defense secretary, and Douglas J. Feith, the undersecretary for policy, were among the first in the immediate aftermath of the Sept. 11 attacks to urge military action to topple the regime of Saddam Hussein in Iraq, an approach favored by Aipac and Israel.

Mr. Wolfowitz and Mr. Feith were part of a larger network of policy experts inside and out of the Bush administration who forcefully made the case that the war with Iraq was part of the larger fight against terrorism.

The Pentagon group circulated its own intelligence assessments, which have since been discredited by the Central Intelligence Agency and by the independent Sept. 11 commission, arguing that there was a terrorist alliance between the Hussein regime and Al Qaeda.

The group has also advocated that the Bush administration adopt a more aggressive policy toward Iran, and some of its members have quietly begun to argue for regime change in Tehran. The administration has not yet adopted that stance, however, and the Pentagon conservatives have been engaged in a debate with officials at the State Department and other agencies urging a more moderate approach to Iran.

To Israel, Iran represents a grave threat to its national security. Pushing the United States to adopt a tougher line on Tehran is one of its major foreign policy objectives, and Aipac has lobbied the Bush administration to support Israel's policies.

Mr. Franklin was an expert on Iran in the office of Mr. Feith and among the material he is suspected of turning over to Aipac is a draft presidential policy directive on Iran, which would have provided a glimpse at the Bush administration's early plans.

But skeptics of the case have said that the United States and Israel routinely share highly sensitive information on military and diplomatic matters under an officially sanctioned understanding. In addition, most of the contents of policy drafts affecting either country are well known to people outside the government who follow American-Israeli affairs.

As a result, some of Mr. Franklin's associates regard his efforts as an attempt to obtain Aipac's help to influence the Bush administration rather than an effort to provide Israel with information. They believe the case is the latest in a series of assaults by intelligence and law enforcement agencies, who they believe are determined to diminish the influence of conservative civilians at the Pentagon.

In their view, there have been other attempts to embarrass them. In May, American officials said that Ahmed Chalabi, the leader of the Iraqi National Congress and a longtime ally of the Pentagon conservatives, had told Iranian intelligence officials that the United States had broken Iran's communications codes.

The F.B.I. began a still-open investigation to determine who in the government had told Mr. Chalabi about the secret code-breaking operation. The investigation, which has included the use of polygraph examinations, has focused on Defense Department employees who both knew Mr. Chalabi and knew of the highly classified code-breaking operation.

The F.B.I.'s inquiry of the Chalabi leak may overlap with the Franklin case because some of the same Defense Department officials had access to information that was believed to be compromised.

But officials who have briefed on the case say they remain two separate inquiries being conducted by separate teams of investigators, one with jurisdiction over Iranian matters and one with jurisdiction over Israel issues.

The focus and direction of the Franklin investigation, which was publicly disclosed Aug. 27, remains unclear. The officials said the inquiry first focused on Aipac, but later became more intense after F.B.I. agents gathered evidence indicating that Aipac officials had obtained classified information from Mr. Franklin, which was turned over to Israel.

But it is unclear who, if anyone, is likely to be charged with wrongdoing and whether the government is more interested in Aipac, Mr. Franklin or the Israelis who may have received the classified material. Officials say Mr. Franklin has been cooperating with the F.B.I. since being confronted by agents several weeks ago.

Two officials at Aipac, Steven Rosen and Keith Weissman, have also been interviewed by the bureau.

"I know that this is part of a campaign against us,'' said Michael Maloof, a former Pentagon analyst who worked in a special-intelligence unit created by Mr. Feith after Sept. 11. Mr. Maloof lost his security clearances because of an investigation that he believed was unfair.

He now believes that Mr. Franklin is being unfairly targeted as well. "They are picking us off, one by one,'' Mr. Maloof said.

But leading critics of the Pentagon hard-liners have repeatedly argued that Mr. Wolfowitz, Mr. Feith and others have used the Sept. 11 attacks as a pretext to pursue issues that in some ways mirror the interests of Israel's conservative Likud government.

One piece of evidence repeatedly cited by the critics is a 1996 paper issued by the Institute for Advanced Strategic and Political Studies, an Israeli think tank, calling for the toppling of Saddam Hussein in order to enhance Israeli security. Entitled "A Clean Break," the 1996 paper was intended to offer a foreign policy agenda for the new Likud government of Benjamin Netanyahu.

The paper argued: "Israel can shape its strategic environment, in cooperation with Turkey and Jordan, by weakening, containing and even rolling back Syria. This effort can focus on removing Saddam Hussein from power in Iraq - an important Israeli strategic objective in its own right - as a means of foiling Syria's regional ambitions."

Among those who signed the paper were Mr. Feith; David Wurmser, who later worked for Mr. Feith at the Pentagon and now works for Vice President Dick Cheney; and Richard Perle, a leading conservative who previously served as chairman of the Defense Policy Board, a group of outside consultants to Secretary of Defense Donald H. Rumsfeld.

In the Reagan administration, Mr. Feith served as Mr. Perle's deputy at the Pentagon.

JAMES RISEN and DAVID JOHNSTON