Before Attorney General William Barr-spoiled the symmetry on Friday, we had a near-perfect Washington triangle: FBI Director William Sessions was investigating the Central Intelligence Agency and the Justice Department. The CIA was investigating itself. And the Justice Department was investigating Sessions, his assistant, and his wife.

And now comes Frederick Lacey, a retired federal district judge from New Jersey whom Barr-named as "independent counsel"-but not the normal, court-appointed kind-to investigate Justice’s "Iraqgate" investigation.

It was a wise move by Barr, although it’s unclear whether Lacey’s probe will carry the same credibility as would one by a court-appointed independent counsel. (Lacey’s assignment includes advising Barr on whether to seek a court-appointed independent counsel later.) Barr-said that his subordinates "deserve to be exonerated," but that "in the current political climate, I have regrettably concluded that if I determine that they have done nothing wrong, they will not receive that exoneration.”

That’s one of the reasons why Iraqgate is a textbook illustration of the need for some kind of mechanism-not necessarily the one we have now, which will expire on Dec. 15-for referring such politically charged matters to prosecutors genuinely independent of the incumbent administration. Barr’s solution of making the appointment himself may get him past this crisis, but for the long term it’s not good enough.

What gave this scandal legs was the flap over the submission by Justice and the CIA of a misleading-or, at best, incomplete-Sept. 17 CIA letter to U.S. District Judge Marvin Shoob, who was presiding over a case involving billions of dollars in allegedly illegal loans to Iraq that were funneled through the Banca Nazionale del Lavoro in Atlanta.

Justice and the CIA have at various points pointed fingers at one another for any misleading of Shoob; claimed he wasn’t misled; said they didn’t learn how misleading the letter was until after they had sent it; and indicated that the only problem was the CIA’s ever-remarkable inability to find documents in its own files.

In other words, we’ve never seen that dog, he belongs to the neighbors, he didn’t bite you, and besides, it was just a playful nip.

Something strange is going on here. But I’m betting that it’s far less sinister than it looks, and comes down to bureaucratic bungling and posterior-covering at the CIA, rather than a cover-up conspiracy at the Justice Department.

Democrats in Congress, and Judge Shoob, have been clamoring for months for Barr to seek a court-appointed independent counsel to investigate Iraqgate. The controversy grows out of the Bush administration’s policy of cozying up to Saddam Hussein by providing Iraq with hundreds of millions of dollars in loan guarantees to buy American grain in the years leading up to Iraq’s August 1990 invasion of Kuwait.

Democrats charge that the administration flouted the loan-guarantee program’s statutory purpose in pursuit of a misguided foreign policy, by extending guarantees to an uncreditworthy Iraqi regime that was spending every available dollar arming itself to the teeth.

While that smacks more of a policy dispute than of criminality, Democrats have also charged that the administration’s efforts to conceal its prewar coddling of Iraq may amount to a criminal cover-up, complete with improper manipulation of the Atlanta case.

Barr, an executive-power devotee eager to bury the independent-counsel statute, angrily spurned demands for a court-appointed independent counsel in an Aug. 10 letter to the Democrats on the House Judiciary Committee. He said there was "not a shred of evidence that any [Justice] Department employee acted improperly ." But since early September, the alleged misleading of federal prosecutors in Atlanta and Judge Shoob about a critical issue in the-Atlanta case have sent the press and gleeful Democrats into a scandal-feeding frenzy.

The case began with an August 1989 raid by the Federal Bureau of Investigation on the Atlanta branch of the Banca Nazionale del Lavoro, which is owned by the Italian government and which had funneled more than $4 billion in loans to Iraq since 1985, including many illegal transactions. Prosecutors focused their case on BNL’s branch manager in Atlanta, Christopher Drogoul. His February 1991 indictment focused on alleged defrauding of his superiors at BNL-Rome by making loans to Iraq without their knowledge.

Although Drogoul pleaded guilty to 60 felony counts on June 2, Judge Shoob and others remained skeptical of the prosecution’s claim that Drogoul’s superiors at BNL’s headquarters in Rome could have been in the dark. Judge Shoob has written that the evidence strongly suggests that "officials at BNL-Rome were aware of and approved" Drogoul’s activities; that the Italian government lobbied the Bush administration not to charge BNL-Rome; and that prosecutors in Atlanta "may have been blocked by agencies with political agendas from developing a fuller picture of this affair,” either to avoid embarrassing Italy "or to contain criticism of a failed foreign policy.”

After Judge Shoob demanded this summer that the Justice Department make sure that he had any CIA information bearing on the issues in the case, the current spectacle unfolded as follows:

• On Sept. 1, Justice sent the CIA a list of questions, including this one: "Does the CIA have any information that BNL-Rome was aware of the illegal activities engaged in by BNL-Atlanta? If so, when did the CIA acquire such knowledge?" The as-yet-unidentified author’s phrasing is seen by some as an invitation-which the-CIA accepted- to conduct the narrowest of searches and to pass over any documents showing BNL-Rome awareness of activities not clearly "illegal."

• On Sept. 4, the CIA sent Judge Shoob and the prosecutors a still-classified letter providing answers to Justice’s questions.

• On Sept. 17, in an unclassified letter sent to the court and prosecutors, CIA Acting General Counsel David Holmes gave this answer: "CIA has publicly available information, acquired in the December 1989 – January 1990 time-frame, that BNL-Rome was aware of the illegal activities engaged in by BNL-Atlanta." This was at best incomplete because-contrary to the letter’s implication that the CIA had nothing more than press reports-the government lawyers were then aware of several CIA cables citing statements by confidential CIA sources that BNL-Rome was involved (whether or not illegally) in loans to Iraq.

Judge Shoob has told the Los Angeles Times that "certainly either the CIA or the Justice Department or both have misled me." But Justice says the judge could not have been misled because he was also given the CIA cables themselves. CIA and Justice Department lawyers have also said that they thought the Sept. 17 letter was literally true when they sent it because the CIA cables of which they were then aware did not specify illegalities.

• On Sept. 30, the CIA provided Justice with more previously undisclosed cables. They indicated that BNL-Rome had known of illegal conduct by Drogoul. If so, this would blow the premise of the Justice Department’s charge that Drogoul had defrauded BNL-Rome.

• On Oct. 1, prosecutors suddenly dropped their opposition to Drogoul’s effort to withdraw his guilty plea.

• On Oct. 8 and 9, in closed Senate Intelligence Committee testimony, CIA officials reportedly said that they had sent the Sept. 17 letter as written based on "strong advice" from Laurence Urgenson, deputy chief of the Justice Department’s Criminal Division, not to change what was said in the Sept. 4 classified version, lest changes provoke further questions. Urgenson contradicted this, saying that he had told the CIA lawyers only that it was their decision what to say in their letter, but that they’d better be prepared to explain any changes.

• The CIA and Justice sought to paper over their feud in an Oct. 10 CIA press release denying that anyone at Justice had pressured the CIA to mislead anyone and denying that any CIA official had so testified. But the press release was itself criticized as a misleading account of the CIA’s testimony by Sen. David Boren (D-Okla.), chairman of the Intelligence Committee.

And so the spectacle continues. Ugly as it looks, my guess is that this was not a case of intentional deception. Urgenson in particular is reliably reputed to be far too honorable, and far too smart, to be drawn into a conspiracy (and a ham-handed one at that) to mislead a federal judge. Nevertheless, the surest way for innocent officials to avoid a lingering taint in such cases is not to pass inspection with a quasi-independent counsel handpicked by the attorney general, but rather to seek the kind of court-appointed independent counsel that Barr wants to abolish.