ATLANTA -- A federal judge agreed Thursday to order a trial for the former manager of the Atlanta branch of Banca Nazionale del Lavoro on charges that he authorized fraudulent loans to Iraq before Baghdad's 1990 invasion of Kuwait.

U.S. District Judge Marvin Shoob said he concluded after a three-week sentencing hearing for Christopher Drogoul that the bank was not a victim of a loan scandalbut that its officials "knew or closed their eyes" to the Atlanta branch's extending loans to Iraq.

In a plea bargain, Mr. Drogoul in June pleaded guilty to 60 counts of bank fraud, but will not be tried on 347 counts. Acting U.S. Attorney Gerrilyn Brill asked for the trial order, saying Mr. Drogoul was "lying to the court."

Judge Shoob said executives of Lavoro, which is owned by the Italian government, were willing to let the U.S. government face possible losses of up to $ 2 billion on loans to Iraq. The loans were guaranteed by the U.S. Department of Agriculture's Commodity Credit Corp.

The judge also said he would disqualify himself from presiding at the trial of Mr. Drogoul, who was allowed to change his plea to not guilty.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.