A possible negotiated peace deal was laid out in a heavily guarded compound in Baghdad in the days before the war, ABCNEWS has been told, but a top former Pentagon adviser says he was ordered not to pursue the deal, ABCNEWS has learned.

A prominent Lebanese-American businessman said he secretly met with Iraqi intelligence officials just days after Secretary of State Colin Powell laid out the U.S. case for war at the United Nations in February.

Imad Hage, a prominent businessman and an emerging political leader in Lebanon, said the U.S. missed a chance to avert war with Iraq.  [ABCNEWS.com]

Imad Hage, the president of the American Underwriters Group insurance company and known in the region as having contacts at the Pentagon, told ABCNEWS he was first approached by an Iraqi intelligence official who arrived unannounced at his office in Beirut.

A week later, according to Hage, he and an associate were asked to come to Baghdad, when Hage says he met with Saddam Hussein's chief of intelligence, Gen. Tahir Habbush, later labeled the Jack of Diamonds in the deck of cards depicting the most-wanted members of Saddam Hussein's regime. Habbush is still at large.

"He was conveying a message," said Hage. "He was conveying an offer." Hage said Habbush laid out terms of a negotiated peace during a four-hour session beginning at midnight at a compound in Baghdad.

Hage said Habbush repeated public denials by the regime that Iraq had weapons of mass destruction but offered to allow several thousand U.S. agents or scientists free rein in the country to carry out inspections. "Based on my meeting with his man," said Hage, "I think an effort was there to avert war. They were prepared to meet with high-ranking U.S. officials."

Hage said Habbush also offered U.N.-supervised free elections, oil concessions to U.S. companies and was prepared to turn over a top al Qaeda terrorist, Abdul Rahman Yasin, who Haboush said had been in Iraqi custody since 1994.

Yasin is one of the FBI's most wanted terrorists, indicted in connection with the 1993 bombing of the World Trade Center. Hage says Habbush claimed the United States had refused earlier offers to turn him over. "He said we want to show good faith," Hage told ABCNEWS.

Yasin remains at large and is now thought to be one of the people behind the recent wave of attacks against U.S. forces in Iraq.

Throughout the period of the negotiations claimed by Hage, the Bush administration publicly maintained it would not conduct negotiations with Baghdad to avoid a war that did not first involve the unconditional departure of Saddam Hussein from Iraq or his surrender.

But Richard Perle, the then chairman of the Defense Policy Advisory Board, said in the weeks leading up to war with Iraq, he told the CIA but they refused the plan to meet with Iraqi officials to discuss a possible peace deal along the lines of the plan outlined by Hage to ABCNEWS.

"Although I was not enthusiastic about the offer, I was willing to meet with the Iraqis," Perle told ABCNEWS. "The United States government told me not to." Perle would not disclose which official or arm of the government rejected the talks.

Prepared to Cut a Deal

According to Pentagon e-mails obtained by ABCNEWS, Hage's report of the Iraqi offer was forwarded to Defense Department officials on Feb. 20, including Jaymie Durnan who, at the time, was the top aide to Deputy Secretary of Defense Paul Wolfowitz. However, Pentagon officials said Defense Secretary Rumsfeld and Wolfowitz were not aware of the talks.

Senior Pentagon officials met earlier in the year with Hage, following an introduction from senior Pentagon staffer, Mike Maloof, who worked in the Office of Special Plans and had first recruited Hage to help the United States in its war on terrorism. Maloof, who was put on administrative leave because of the work he was doing at the Pentagon according to sources, declined to comment on his role in the claimed talks with Iraq.

But Hage said Maloof helped arrange a meeting with Perle, considered by many to be a principal architect of the U.S. policy on Iraq. Hage said, and Perle confirmed, that the two met in London in early March. Hage said he told Perle the Iraqis were prepared to meet with him or any U.S. representative.

"They were prepared to go anywhere to talk, to cut a deal," Hage told ABCNEWS.

Hage said Perle told him he could not proceed without approval from the U.S. government. "He wanted to pursue it further with people in Washington," said Hage, "provided he got the blessing or cover from people in Washington."

A few days later, Hage said Perle informed him that Washington had refused to allow him to meet with Habbush to discuss the Iraqi peace offer. "He indicated that the consensus was it was a no-go," said Hage, who has dual American citizenship and is known by many in Lebanon for his ability to work with all groups.

"This was one of many channels going on," said Perle. He added that the United States was discussing options with Saudi Arabia, Russia and France as well.

Hage, an emerging political leader in Lebanon who is considered pro-United States, said the United States missed a chance to avert war. "It seemed to me there was a genuine offer that was on the table and somebody should have talked, at least talked," Hage said.

In March, the American invasion began and Rumsfeld said the United States had done everything possible to avoid war. "The American people can take comfort in knowing that their country has done everything humanly possible to avoid war and to secure Iraq's peaceful disarmament."

A senior U.S. official said the government was unaware of anyone who was in a position to offer a deal that was acceptable to Washington at the time.

The official said that during the run-up to the war there were a wide variety of people, including "intelligence services, and other third parties and charlatans and independent actors," coming forward to offer roles in the negotiating process and that every plausible lead had been exhausted.

One U.S. intelligence officer said there were several attempts to meet with Iraqi intelligence officers but they didn't show up.

"Iraq and Saddam had ample opportunity through highly credible sources over a period of several years to take serious action to avoid war and had the means to use highly credible channels to do that — nobody needed to use questionable channels to convey messages," Acting Assistant Secretary of Defense for Public Affairs Larry DiRita told ABCNEWS.

And a senior White House official said the United States exhausted every legitimate opportunity to resolve it peacefully and it was "Saddam Hussein's unwillingness to comply after 12 years and some 17 United Nations Security Council resolutions, including one final opportunity, that forced the coalition to act to ensure compliance."

The official also added that Saddam was given 48 hours notice to leave before the United States initiated military action.

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