Claim: U.S. Spurned Peace Talks

Nov. 5 -- 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.

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, 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.