This is a partial transcript of "Special Report with Brit Hume", May 21, 2004 that has been edited for clarity.

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(BEGIN VIDEO CLIP)

AHMED CHALABI, MEMBER OF IGC: I am America's best friend in Iraq. 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 Iraqi people.

(END VIDEO CLIP)

JIM ANGLE, GUEST-HOST: Well, it wasn't an armed attack. It was a search, and the CPA, of course, is the Coalition Authority (search). That is Ahmed Chalabi (search), a member of the Iraqi Governing Council, who fought a long battle against Saddam Hussein, and was seen as a key ally during the war, and in the efforts since to build a new Iraq.

But now his offices have been raided by Iraqi police in a corruption investigation. U.S. officials also say they are certain, "that he gave sensitive intelligence to the Iranians." Chalabi has turned on the coalition now and says it's out to get him.

What's behind this fall from U.S. graces? And what does it mean for the transition to a new government? For the answer to those and other questions we turn to Dennis Ross, former envoy to the Mid East, and a Fox foreign affairs analyst.

Dennis, this is a -- I wouldn't say it was quick because there's been a lot of discussion and different views about Chalabi in the administration, but this is a pretty dramatic fall from grace.

DENNIS ROSS, FMR. U.S. ENVOY: No question. First of all, this is a man who was at the State of the Union Address sitting behind the first lady. This is a man who clearly had major support within the administration. It's no secret that some people in the White House, and certainly in the Pentagon, were very big promoters of the his believing that, in fact, one day he might be the president within Iraq.

He also had his detractors in the administration for some time. People in the CIA and in the State Department were clearly negative. I can tell you at one point, one senior person in the administration said to me, he won't last 24 hours once he goes back. And another one said he will lead, basically, a kind of people's revolution once we have him on the ground. Well, I think it's fair to say that both of those assessments turned out not to be right.

ANGLE: Now, obviously, we'll get to the investigation in a minute, and there are a lot of allegations about corruption. But I think we should say at the outset, he does deserve some credit for having been in the wilderness all those years, fighting and trying to organize defense Saddam Hussein.

ROSS: Well, there's no question that he was a focal point of resistance to Saddam on the outside. He organized not just the United States, but also many around the world to focus on the evils of the regime, the need to take it on. Some people now want to say he fed us a lot of bad intelligence. In the end, you can't blame him for the bad intelligence. You know, the fact of the matter is we had to evaluate it.

ANGLE: Right. And a lot of peep -- people do say that he saved a lot of lives.

ROSS: I suspect that certainly is the case. If he is the one who helped to produce the change, which in some sense, I'd think you'd have to say that probably is the case, there are a lot of people who are alive today who might not have been alive were it not for him.

ANGLE: Now, there are a lot of allegations about corruption, about using intelligence information to blackmail former Baathist Party members to essentially siphon money out of things, like the currency exchange in Iraq, to steal cars, to bribe ministry officials who were investigating him for corruption. Does all of that ring true to you?

ROSS: It's hard to know. I mean let's look at the reality there. There are not any real ground rules for how people are going to operate, which is not a way of justifying what may well be misdeeds that he has been responsible for. But let's recognize where it's -- I think I can say with some degree of certainty that he didn't do what he said he would do.

He has been getting money from us, and actually, quite a significant amount of money from us for some period of time. He was supposed to be sharing intelligence with us. He was supposed to be collecting it internally and sharing it with us. What's pretty clear is a lot of what he was supposed to be sharing with us, he was holding back. Now, was he not sharing with us and sharing it with the Iranians? Was he using it international internally to gain leverage over others? I think that's probably a fair assumption.

ANGLE: Now, a senior official has told us that they are certain that he shared very sensitive, U.S. intelligence with the Iranians. No question about that in the minds of some officials. What kind of relationship did he have with Iran? And why would he want to share U.S. intelligence with the Iranians?

ROSS: You know, it's very interesting. He is known, above all else, as being a secular Shiia. And I think one would not have assumed that he would develop this kind of relationship with the Iranians. But I think, again you have got to put in perspective probably what has happened. In his case, he did not generate this huge groundswell of support when he went back to Iraq.

In fact, one of the scenarios was that when he was put on the ground, with about 800 people, they would go from village to village, and their ranks would swell. And suddenly you would see a very strong leader beginning to emerge. Well, that clearly didn't happen. Something Stalin said about the pope. How many divisions does he have? As it turns out, Chalabi didn't have as many divisions as perhaps he needed.

He began to look for ways to build his power. One of the ways to build his power was to create a relationship with the Iranians. Did he end up trafficking in certain kinds of information that may well cross the line with us? I wouldn't be surprised. If he was using the Iranians to build his leverage, build his power among the Shiia within Iraq generally, then it wouldn't be surprising to me that the Iranians would be saying look, we need to know the following. And he may well have provided it.

ANGLE: Now, less than a minute left. Clearly he has some vision of being a political player in Iraq. New government is about to take over. It seemed fairly clear he wasn't going to be in it, though Brahimi, the U.N. envoy, said it's not for politicians. It's for an interim government to set up elections for those who do want to be in politics.

ROSS: Brahimi has focused on principally on having technicians in there. As a way of saying these are neutral, these are not people presuming anything or preempting anything. It's clear that many members, not just to be fair -- not just Chalabi, many members of the Governing Council fear that once they're out, they're out. And they would like to have a continuing political base within the government. He is certainly is one of those who feels that.

ANGLE: OK. Dennis Ross, thank you very much. Always a pleasure to have you.

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