The revelation raises questions about whether Iran may have used a small cabal of officials in the Pentagon and in Vice President Dick Cheney's office to feed bogus intelligence on Iraq and Iran to senior policymakers in the Bush administration who were eager to oust the Iraqi dictator.

Iran, which was a mortal enemy of Iraqi dictator Saddam Hussein and fought a bloody eight-year war with Iraq during his reign, has been the primary beneficiary of U.S. policy in Iraq, where Iranian-backed groups now run much of the government and the security forces.

The aborted counterintelligence investigation probed some Pentagon officials' contacts with Iranian exile Manucher Ghorbanifar, whom the CIA had labeled a "fabricator" in 1984. Those contacts were brokered by an American civilian, Michael Ledeen, a former Pentagon and National Security Council consultant and a leading advocate of invading Iraq and overthrowing Iran's Islamic regime.

According to the Senate report, the Pentagon's Counterintelligence Field Activity unit concluded in 2003 that Ledeen "was likely unwitting of any counterintelligence issues related to his relationship with Mr. Ghorbanifar."

The counterintelligence unit said, however, that Ledeen's association with Ghorbanifar "was widely known, and therefore it should be presumed other foreign intelligence services, including those of Iran, would know."

Stephen Cambone, then the undersecretary of defense for intelligence, shut down the counterintelligence investigation after only a month, the Senate report said.

The Senate report said that Pentagon officials never followed up on the investigators' recommendation for a comprehensive analysis of whether Ghorbanifar or his associates tried "to directly or indirectly influence or access U.S. government officials."

The counterintelligence investigators recommended that U.S. officials attempt "to map Ghorbanifar's relationship within Iranian elite social networks and, if possible, his contacts with other governments and/or intelligence organizations," but that effort was never undertaken.

The Senate committee also found that Pentagon officials concealed the contacts with Ghorbanifar from the CIA, the Defense Intelligence Agency and the State Department. Pentagon officials also provided Senate investigators with an inaccurate account of events and, with support from two unnamed officials in Cheney's office, continued meeting with Ghorbanifar after contact with him was officially ordered to stop.

The first meetings with Ghorbanifar, which were disclosed in August 2003 by the Long Island, N.Y., newspaper Newsday, took place in Rome in December 2001. They were attended by two Pentagon Iran experts, Harold Rhode and Larry Franklin; by an Italian military intelligence official, and by Ledeen

On the Iranian side were Ghorbanifar, an unidentified Iranian exile from Morocco and an alleged Iranian Revolutionary Guard Corps defector.

Among other things, the Iranians told the Americans about:

_ Iranian "hit teams" they said were targeting U.S. personnel and facilities in Afghanistan.

_ What they claimed was Shiite Muslim Iran's longstanding relationship with the secular Palestine Liberation Organization.

_ "Tunnel complexes in Iran for weapons storage or exfiltration of regime leaders," and about the alleged growth of anti-regime sentiment in Iran.

Franklin, who, in an unrelated matter, pleaded guilty and was sentenced to prison in 2006 for providing classified information on Iran policy to the American Israel Public Affairs Committee, passed the information about the alleged Iranian hit squads to a U.S. Special Forces commander in Afghanistan. Although a DIA analyst told the Senate committee that he couldn't speculate on whether the information had been "truly useful," Ledeen and Pentagon officials claimed it saved American lives, the committee said.

During the Rome meetings, Ghorbanifar also laid out a scheme to overthrow the Iranian regime on a napkin during a late night meeting in a bar. "The plan," said the Senate committee, "involved the simultaneous disruption of traffic at key intersections leading to Tehran that would create anxiety, work stoppages and other disruptive measures" in a capital city famous for its traffic congestion.

Ghorbanifar asked for $5 million in seed money, Franklin told the committee, and indicated that if the traffic jam plan succeeded, he'd need additional money.

"The proposed funding for, and foreign involvement in, Mr. Ghorbanifar's plan for regime change were never fully understood," the Senate committee said.

Nevertheless, Ghorbanifar's proposals grew more ambitious - and expensive. A February 2002 memo from Assistant Secretary of Defense Peter Rodman referred to an unnamed foreign government's support for a Ghorbanifar plan that would cost millions of dollars. A later summary referred to contracts "that would assure oil and gas sales in the event of regime change". The U.S. ambassador to Italy said that DOD officials "were talking about 25 million for some kind of Iran program."

After Franklin and Rhode returned from the Rome meetings, the Senate report said, two series of events began to unfold in Washington that were typical of the gamesmanship that plagued the Bush administration's national security team.

"First," the report said, "State Department and CIA officials attempted to determine what Mr. Ledeen and the DOD representatives had done in Rome, and second, DOD officials debated the next course of action."

When the CIA and the State Department discovered that Ledeen and Ghorbanifar were involved, they opposed any further contact with the two. Ledeen's contacts, the Defense Human Intelligence Service concluded, were "nefarious and unreliable," the Senate committee reported.

According to the report, Ledeen, however, persisted, presenting then-Undersecretary of Defense Douglas Feith with a new 100-day plan to provide, among other things, evidence of Iraqi weapons of mass destruction that supposedly had been moved to Iran - Saddam Hussein's archenemy. This time, the report said, Ledeen solicited support from former speaker of the House of Representatives Newt Gingrich and from three then-GOP senators, Sam Brownback of Kansas, Jon Kyl of Arizona and Rick Santorum of Pennsylvania.

Rhode and Ghorbanifar met again in Paris in June 2003 with at least the tacit approval of an official in Cheney's office, the Senate report said.

He reported back to officials in the Pentagon and the vice president's office, but "there is no indication that the information collected during the Paris meeting was shared with the Intelligence Community for a determination of potential intelligence value," the report said.