Banker to Plead Guilty in Iraqi Loan Case : Courts: Former branch manager faces up to 30 years for conspiracy, fraud. The White House avoids trial testimony about aid to Hussein.

WASHINGTON —  The central figure in a scandal involving nearly $5 billion in loans to Iraq by a U.S. branch of an Italian bank agreed unexpectedly Wednesday to plead guilty to all 347 counts of conspiracy and fraud.

The surprise plea reflects the apparent strength of the government’s case against the former manager of the Banca Nazionale del Lavoro branch in Atlanta--a case the Bush Administration allegedly held up for more than a year to avoid straining relations with Iraq.

At the same time, the plea means that because there will be no trial, the Administration will not have to face potentially embarrassing public testimony about its assistance to Iraq in the months leading up to Saddam Hussein’s invasion of Kuwait.

Defense attorneys for the ex-manager had been planning to call senior White House aide Clayton K. Yeutter as a witness at the trial, according to a copy of the subpoena.

Yeutter, President Bush’s chief domestic adviser, played a central role in approving the final $1 billion in U.S. economic aid to Iraq in the fall of 1989 when he was agriculture secretary.

The subpoena was potentially significant because Yeutter would have been the first high-ranking Bush Administration official to testify under oath about the intense lobbying effort within the Administration to continue assistance to Iraq after the end of the Iran-Iraq war despite reports of irregularities in the aid.

Defense attorneys had planned to question Yeutter about pressure from other Administration officials to grant nearly $2 billion in loans, guaranteed by the Agriculture Department’s Commodity Credit Corp., to Iraq, according to sources close to the case. Classified documents have shown that Yeutter rescued the final $1 billion in aid after a telephone appeal from Secretary of State James A. Baker III.

The loans guaranteed by the Commodity Credit Corp. were part of the $5 billion in financing provided to Iraq from 1986 to 1989 through the Banca Nazionale del Lavoro’s Atlanta branch. Prosecutors charge that the BNL loans were fraudulent and made without approval from the bank’s senior executives in Rome.

The ex-manager, Christopher P. Drogoul, was the sixth and final former BNL employee to plead guilty in the case, so no trial will be held.

“I’m sure our government is breathing a sigh of relief that there won’t be a trial,” said a congressional investigator.

The plea agreement was announced by the office of U.S. District Judge Marvin H. Shoob.

According to the judge’s office, Drogoul’s attorneys informed Shoob on Wednesday that Drogoul would plead guilty to all counts in the indictment. The judge’s office said the plea will be entered Tuesday and that the agreement was reached without a bargain from the government. He faces up to 30 years in prison.

Attempts Wednesday to reach Drogoul’s lawyers and prosecutors handling the case were unsuccessful.

Drogoul’s bond was revoked last month and he was imprisoned pending the trial, which had been scheduled for June 26. Some attorneys in the case speculated last week that Drogoul’s incarceration was an attempt to pressure him into pleading guilty. Pleas by five other bank employees--and their agreements to testify against Drogoul--also had weakened his defense.

Documents obtained by The Times showed that prosecutors in Atlanta first planned to indict Drogoul and others as early as late 1989. But charges in the politically sensitive case were delayed by officials at the Justice Department in Washington.

A top federal official said last week that the Atlanta prosecutors wanted to move too fast with a complex case. However, confidential government documents show that the case was monitored closely by the State Department and White House National Security Council.

The government’s handling of the BNL case has attracted criticism from Democrats in Congress. Led by Rep. Henry B. Gonzalez (D-Tex.), they have accused the Administration of refusing to cooperate with congressional investigations into the case and the Administration’s overall policy toward Iraq in the months before Iraq’s invasion of Kuwait in August, 1990.

Sen. Patrick J. Leahy (D-Vt.), chairman of the Senate Agriculture Committee, is investigating the use of the Commodity Credit Corp. program to assist Baghdad. He demanded all documents concerning Commodity Credit Corp.-guaranteed loans to Iraq from the Agriculture, Treasury and State departments and the Federal Reserve Board.

“I intend to pursue this investigation, no matter how high up in the Administration I have to go,” said Leahy.

Agriculture Department officials themselves raised the possibility of a cover-up on the Commodity Credit Corp. program the day the BNL indictment was issued, Feb. 28, 1991, according to a document obtained by The Times.

In a series of questions to the Justice Department about the case, agriculture officials asked whether anyone at the White House had been interviewed to determine if BNL was an “off the shelf” operation similar to former Col. Oliver L. North’s funding of the Nicaraguan Contras through arms sales to Iran.

“No, there was absolutely no reason to do so,” said the Justice Department’s official.

Frantz is a Times staff writer and Waas is a special correspondent.