U.S. troops and Iraqi police on Thursday suddenly surrounded and raided the house of Iraqi Governing Council member Ahmad Chalabi (search), once a darling of the American government.
Police also searched offices of his organization, the Iraqi National Congress.
Coalition officials in Baghdad portrayed the raid as one in which the United States did not have a major role. Coalition spokesman Dan Senor said it was led by Iraqi authorities with support from the U.S.-run Coalition Provisional Authority (CPA).
American officials in Iraq have complained privately that Chalabi has been interfering with a U.S. investigation into allegations that Saddam Hussein's regime skimmed billions of dollars in oil revenues from the controversial United Nations-run oil-for-food program (search).
But Senor said that investigation has "nothing to do with what transpired today" and Chalabi and the INC were not the targets.
An Iraqi judge issued a series of search and arrest warrants relating to fraud, kidnapping and "associated matters," Senor said. Up to 15 people were named in the warrants, but Chalabi himself wasn't believed to have been on the list.
Evidence and illegal weapons were seized during the raid.
Once favored by the American government as the possible new leader of Iraq, Chalabi has also recently come under suspicion because he has been openly criticizing the United States for its plans to transfer power to the Iraqi people at the end of June.
Sources told Fox News that the raid was the result of a corruption investigation initiated by the Iraqi Ministry of the Interior.
The sources said the probe may have something to do with members of the Iraqi National Congress bribing or extorting former members of Saddam's Baath Party, perhaps demanding payments for withhold damaging information.
Additionally, there was speculation that INC members allegedly shared information with Iran (search) and misused funds and property belonging to the Iraqi Governing Council.
Senior Department of Defense officials told Fox News that early reports that U.S. troops were involved in the actual raid itself were untrue. Instead, they said, soldiers provided a security perimeter but didn't accompany Iraqi police inside the Chalabi house.
In a news conference Thursday, Chalabi blasted the coalition for raiding his house. Though he said he and his people are grateful to President Bush for ousting Saddam, he believes it's time for the Americans to leave and demanded that sovereignty be turned over to the Iraqis immediately. He blamed the coalition for coddling former members of Saddam's Baath Party and treating Iraqis badly.
"Let my people go," he said with characteristic drama. "My relationship with the CPA now is nonexistent."
He described his colleagues on the Iraqi Governing Council as "great patriots" and demanded that complete control be passed to them.
"I am America's best friend in Iraq," Chalabi said. "If the CPA finds it necessary to direct an armed attack against my home you can see the state of relations between the CPA and the Iraqi people ... This is the penultimate act of failure of the CPA in Iraq."
He said that more than five Humvees, filled with what he alleges were FBI and CIA officers and American civilians, came to the house where he and the defense minister live and forced their way in.
There was a fistfight outside, but no weapons fired, according to Chalabi. He said he was sleeping when police stormed into his room carrying guns.
"I was asleep. I opened the door. The police went into my room carrying pistols," Chalabi said. "I told them to get out."
The men made off with computers, documents, files and prayer beads, Chalabi said, and helped themselves to food and "several cases of Pepsi."
Police seized documents related to the oil-for-food program, a report by the Oil Ministry to the Governing Council and letters from the council, he said.
A U.S. official told Fox News that while the FBI and the United States Marshals Service were involved in Thursday's action, the CIA was not.
Chalabi claimed U.S. authorities here were angry with him because "I am now calling for policies to liberate the Iraqi people, to get full sovereignty now and I am pushing the gate in a way they don't like.
"I have opened up the investigation of the oil-for-food program which has cast doubt about the integrity of the U.N. here, which they don't like," he said.
In a statement, Chalabi's INC accused authorities of behaving in "a manner unbecoming in the climate of the new Iraq" and reminiscent of "the former fascist regime."
It called on the U.S.-appointed Iraqi Governing Council, of which Chalabi is a prominent member, to take "a national and responsible stand toward these provocations."
Entifadh Quanbar, an INC spokesman in Washington, D.C., told Fox News that soldiers raided Chalabi's home because he has been outspoken about the oil-for-food investigation and Iraqi sovereignty. Quanbar said the raid was a politically motivated attempt to intimidate Chalabi.
Fox News learned that Chalabi has alleged that he has files pertaining to the oil-for-food program, though it wasn't confirmed whether any of those documents were seized in Thursday's raid.
The CPA has asked Chalabi to turn over all his oil-for-food files to an official auditing body, Fox News learned.
Chalabi claims L. Paul Bremer, the top U.S. civilian administrator in Iraq, has been withholding funds he was supposed to be given to investigate the scandal-scarred program. However, CPA officials say he was never promised such funds and does not have the power to conduct such an investigation, sources told Fox News.
During Thursday's search, police sealed off Chalabi's residence in Baghdad's swanky Mansour district. Reporters were barred from approaching the scene.
Some people could be seen loading boxes into vehicles. A couple of Humvees were in sight, along with about a dozen U.S. soldiers and several armed Westerners wearing flak vests and using SUVs without license tags — vehicles associated here with U.S. security.
Neighbors said some members of Chalabi's entourage were taken away in the raid.
A Chalabi aide, Haidar Musawi (search), accused the Americans of trying to pressure Chalabi.
"The aim is to put political pressure," Musawi told The Associated Press. "Why is this happening at a time when the government is being formed?"
Musawi said the U.S.-Iraqi force surrounded the compound at about 10:30 a.m. while Chalabi was inside. They told Chalabi's aides that they wanted to search the house for INC officials wanted by the authorities.
The aides agreed to let one unarmed Iraqi policeman inside to look around.
Abdul Kareem Abbas, an INC official, said Chalabi's entourage objected to the raid but "we couldn't because they came with U.S. troops."
"They came this morning, entered the office of Dr. Ahmad Chalabi and said that they were looking for people," said Abbas. He said they wanted to make arrests.
For years, Chalabi's INC received hundreds of thousands of dollars every month from the Pentagon, in part for intelligence passed along by exiles about Saddam's purported weapons of mass destruction.
Chalabi, long mistrusted by the CIA and the State Department, came under further criticism after major combat ended and the large stockpiles of weapons he had promised existed were never found.
Last week, the Pentagon abruptly cut off the INC's funding. U.S. Deputy Defense Secretary Paul Wolfowitz confirmed earlier this week, during testimony before Congress, that Washington has ended payments of $340,000 a month to Chalabi's organization for intelligence gathering.
Chalabi, a secular Shiite Arab and former banker who left Iraq for exile after a left-wing coup in 1958, was convicted of fraud in absentia in Jordan in 1992 for allegedly embezzling over $1 billion from a bank he ran and sentenced to 22 years in jail. He has repeatedly denied the charges.
The oil-for-food program, which began in December 1996 and ended in November, was designed to help Iraqis cope with U.N. sanctions.
Chalabi has complained recently about U.S. plans to retain control of Iraqi security forces and maintain widespread influence over political institutions after power is transferred from the CPA to an Iraqi interim administration.
Musawi said Chalabi "had been clear on rejecting incomplete sovereignty ... and against having the security portfolio remain in the hands of those who have proved their failure."
However, U.S. and coalition officials have recently accused him of undermining the investigation into the oil-for-food program. The U.S.-backed investigation has collected more than 20,000 files from Saddam's regime and hired American accounting firm Ernst & Young to conduct the review.
Chalabi has launched his own investigation, saying an independent probe would have more credibility. He took an early lead in exposing alleged abuses of the oil-for-food program and has been trying to force the coalition to give him the $5 million in Iraqi funds set aside for the probe to pay for his effort. The move has been strongly resisted by Bremer.
Chalabi's backers have hired a competing American accounting giant, KPMG, to do its audit, but they want Bremer's administration to pay the bill out of the Iraqi funds, mostly seized Saddam assets and Iraqi oil sales.
The United Nations is conducting its own investigation, led by former Federal Reserve chairman Paul Volcker.
Another source of tension could be Chalabi's calls for closer relations with Iran. Washington and Tehran have been at odds since Islamic revolutionaries ousted Iran's U.S.-backed shah in 1979 and held Americans hostage for more than a year.
Fox News' Kelly Wright, Teri Schultz, Bret Bair, Ian McCaleb, Catherine Donaldson-Evans and The Associated Press contributed to this report.