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U.S. claims on North Korea come under scrutiny

WASHINGTON—The Bush administration, which used some false and exaggerated intelligence to make its case for invading Iraq, also may have inflated some of its allegations against North Korea to justify a hard-line policy toward the Stalinist regime.

President Bush claimed in 2002 that North Korea was making highly enriched uranium for nuclear weapons when there was no intelligence that it was doing so.

Now there are new questions about the administration's assertions that a bank in Macau knowingly laundered proceedings from North Korean narcotics trafficking, cigarette smuggling and counterfeit American currency.

An audit of the Banco Delta Asia's finances by accounting firm Ernst & Young found no evidence that the bank had facilitated North Korean money-laundering, either by circulating counterfeit U.S. bank notes or by knowingly sheltering illicit earnings of the North Korean government.

In a filing submitted to the Treasury Department last October, Heller Ehrman LLP, the bank's New York law firm, reported that an audit by the government of Macau also had found no evidence of money-laundering.

The Treasury Department refused to discuss the findings of either audit, as did the government of Macau and Ernst & Young.

Taken together, the pronouncements raised questions about whether the administration has been overstating its case against North Korea, a heavily armed communist dictatorship that Bush included in his "axis of evil" with Iran and Iraq under the late dictator Saddam Hussein.

The White House didn't respond immediately to a request for comment.

The Bush administration used its charges against Pyongyang to justify a hard-line policy that led the regime of Kim Jong Il to end an eight-year freeze on plutonium production. It then harvested enough plutonium for as many as a dozen nuclear weapons and conducted its first nuclear test explosion in October.

Meanwhile, talks with North Korea on ending its nuclear program collapsed over the U.S. charge that Pyongyang was laundering counterfeit money and proceeds from other illicit activities through the Macau bank. North Korea walked out of the talks and refused to return until the United States agreed to discuss lifting its restrictions on the Macau bank.

The administration has since softened its stand. Under a deal reached last month, North Korea agreed to give up the nuclear program, and the United States agreed to provide aid to the destitute country and open talks on normalizing relations.

North Korea hasn't publicly acknowledged the Bush administration's charges that it was secretly pursuing uranium enrichment in parallel with its known plutonium production program.

But Bush appears to have gone well beyond what U.S. intelligence could support in describing the advanced state of the North Korean program. At a Nov. 7, 2002, news conference, Bush said that North Korea was enriching uranium in violation of two treaties and a 1994 deal with the United States.

"We discovered that, contrary to an agreement they had with the United States, they're enriching uranium with the desire of developing a nuclear weapon," Bush asserted.

But that same month, an unclassified CIA report to Congress said that North Korea had begun building a plant that could be used for uranium enrichment, but that it wouldn't become operational until at least 2005.

The administration cited the uranium enrichment effort in its decision to halt heavy-fuel oil shipments to energy-starved North Korea under a deal reached in 1994 with the former Clinton administration. The cutoff prompted the North to end the freeze on plutonium production and expel U.N. nuclear inspectors.

Former and current senior U.S. intelligence officials and diplomats involved in Korea policy disclosed that the United States knew with "high confidence" that North Korea was purchasing materials around the world for a uranium enrichment program.

North Korea bought two dozen or so machines—known as centrifuges—that spin uranium hexafluoride gas at supersonic speeds into highly enriched uranium from the same Pakistani scientist who sold nuclear technology to Iran and Libya.

Pyongyang also managed to acquire thousands of aluminum tubes milled precisely to the dimensions of the Pakistani-supplied devices, said James Kelley, the former assistant secretary of state who oversaw talks with North Korea.

But he and other current and former officials said that the United States had no information—and still doesn't—that North Korea has acquired the knowledge or overcame the technical hurdles required to build an industrial-scale enrichment plant with tens of thousands of centrifuges.

"There never was a judgment that they had a uranium enrichment-producing program," former Ambassador Charles Pritchard, who resigned in 2003 as Bush's special envoy to the negotiations, said in an interview.

Pritchard suggested that Bush might simply have misspoken in declaring that North Korea was enriching uranium.

U.S. officials admit that they don't know the current status of the effort.

"It's a complex program. It would require a lot more equipment than we know that they have actually purchased," Assistant Secretary of State Christopher Hill, the current chief U.S. negotiator, said in a Feb. 22 talk at a Washington think tank. "It requires some production techniques, considerable production techniques, that we are not sure whether they have mastered."

The controversy surrounding the Banco Delta Asia and the North Korean leadership's accounts there may come to a head soon, as the Treasury Department has said it'll conclude its investigation shortly.

The Treasury Department said that its initial allegations against the Banco Delta Asia stand up. But according to the filing by the bank's attorneys, which the Treasury Department hasn't challenged, there was almost no way that North Korea could have laundered counterfeit U.S. currency through the bank.

Large deposits of North Korean cash were sent to the New York branch of the giant HSBC bank to be run through sophisticated counterfeit-detecting machines, the law firm's filing said. The only evidence of counterfeit currency that Banco Delta Asia found was much earlier, in 1994, and the bank notified local authorities immediately, the filing said.

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(c) 2007, McClatchy-Tribune Information Services.

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