The Iraqi politician has vehemently denied having any access to American secrets about Iran, let alone spilling them. “Dr. Chalabi would never endanger the national security of the U.S.,” his lawyers insisted last week in a letter to Attorney General John Ashcroft and FBI Director Robert Mueller. Still, intelligence officials think that’s just what he did. They had asked NEWSWEEK, which first reported the outlines of Chalabi’s alleged indiscretions more than a month ago, The New York Times and other news organizations to omit any reference to code breaking or the top-secret National Security Agency from stories about Chalabi until last week, after details leaked on cable news. The latest revelations: in April, the Americans intercepted a cable to Tehran from the Iranian spy ministry’s Baghdad station chief. The cable quoted Chalabi as telling the station chief that the Iranians’ code had been cracked by U.S. intelligence, saying the Iraqi had heard it from a drunken American.

Chalabi’s supporters say it’s all a lie. They say his old antagonists at the State Department and CIA are out to discredit him, or enemies in Iran want to frame him. Perhaps, the Chalabi camp suggests, the Iranians found out years ago that the code was broken, and they kept using it only to feed misinformation to the Americans. Knowledgeable U.S. officials admit they’re not positive who leaked what to whom, but they tell NEWSWEEK that when Iran upgraded its crypto systems two or three years ago, the NSA soon cracked it. Some officials say the Iranians kept using the code until the broadcast media broke the story. The FBI is investigating whether Chalabi leaked to the Iranians, and who in the U.S. government might have leaked secrets to Chalabi.

Regardless of who’s responsible for the security breach, it comes at a bad moment: reports from Iraq say suspected Hizbullah operatives may be helping Iraqi insurgents mount terrorist attacks on Americans and other foreign personnel.