Iraq Study Group co-chair James A. Baker made two points as he testifies before the Senate Armed Services Committee on the release of the ISG report on Dec. 7 (Mike Theiler/AFP)

Former Secretary of State James Baker was involved in a cover-up of illegal trading by his law firm with the regime of Iraqi dictator Saddam Hussein, according to a former contractor who did work for Mr. Baker’s firm.

Mr. Baker used non-Americans to help acquire funds from Iraq in violation of the United Nations embargo and U.S. law, the former contractor said.

Nir Gouaz, an Israeli security veteran, said that in 1999 Mr. Baker's leading deputy at the law firm of Baker Botts ordered him to destroy all documents that detailed how he obtained from Iraq more than $250 million for a client.

Mr. Baker's firm has denied Mr. Gouaz's account.

But the Israeli said he has documents that could destroy Mr. Baker's reputation. He said he has been angered by Mr. Baker's attempt to press the Bush administration to impose an anti-Israeli policy in an attempt to win Arab cooperation to help stabilize Iraq. Mr. Baker, appointed by President Bush in 2003 as his envoy to recover debts from Iraq, has also co-chaired the Iraq Study Group, which on Dec. 6 issued 79 recommendations on U.S. policy in Iraq.

"When I heard the Baker recommendations, I couldn't stand the hypocrisy," said Mr. Gouaz, president of Caesar Global Securities, who worked for Mr. Baker's law firm in Washington for two years. "In his eyes, the diplomatic vision for the Middle East is actually an economic vision. A person like that wouldn't stop at anything to reap profits and dictate to Israel how to behave."

Mr. Gouaz said he began working for Baker Botts, a leading Washington firm with more than 700 attorneys, in the late 1990s. He was assigned a case by Mr. Baker's aide, Jeffrey Stonerock, to help recover an $880 million Iraqi debt to South Korea's Hyundai Engineering, which completed infrastructure projects in Iraq.

Iraq cited the United Nations’ Oil for Food program, which permitted Baghdad to buy only food and vital requirements, for its failure to pay the debt. The United States also froze Iraqi bank accounts abroad.

Mr. Gouaz said he personally maintained what he termed a "superficial relationship" with Mr. Baker. But he said Mr. Baker was informed on everything that took place regarding international transactions at Baker Botts.

Mr. Gouaz said he was hired because he was discreet and not a U.S. national. He said a U.S. national could have been prosecuted for dealing with the regime of Iraqi dictator Saddam Hussein.

"At that point, I thought I was doing work for Hyundai," Mr. Gouaz recalled. "I didn't think deeply about this. I didn't think that James Baker was doing something abnormal. It is very acceptable to sell debts at a very low price. They took me because I was discreet and not American. He [Baker] knew this very well."

In the end, Mr. Gouaz said, he acquired $273 million for Hyundai and helped save the company from bankruptcy. He said Mr. Baker's law firm arranged a meeting with Shaiker Tawfik Fakoury, the president of the Bank of Jordan. In July 2000, Mr. Fakoury purchased the Iraqi government bonds from Hyundai at a discount and resold them to Saddam’s government in exchange for $450 million worth of oil.

Mr. Gouaz said he estimated that Mr. Baker's firm received between 10 and 15 percent. Mr. Gouaz said he received much less, but would not specify. The Israeli said he dealt with everybody from a Chinese liaison to Jordan's royal family to help recover the debt.

The Israeli investigator did not hear from Mr. Baker's office until late 2001, after the al Qaeda suicide strikes on New York and Washington. Mr. Gouaz said Mr. Stonerock asked him to destroy the documents relating to the Hyundai-Iraq deal.

"A month or two after 9/11, I got a phone call from the office of James Baker and they told me 'Remember the deal we did?' I said 'Of course,'" Mr. Gouaz recalled. "He asked 'Do you have any documents from this deal?' I said I don't remember. He said 'If you do, destroy them.'"

"It is in a safe," he added. "At that moment, I knew that I would have to preserve the documents and even photographs [of meetings]. I gave it to somebody from the Israel Security Agency."

Mr. Gouaz said since then he has felt pressure from Mr. Baker's office. He indicated that since 2002 he began experiencing difficulties with acquiring permits from the U.S. government.

"There were no threats," said Mr. Gouaz, who returned to Israel in 2003. "But I was under lots of pressure after 9/11 to get rid of the documents. They asked me to again sign a secrecy document, which I didn't do. I felt under a lot of pressure regarding anything I did that required approval from the administration."

Mr. Gouaz has allowed outsiders to see some of the documents. They included a copy of a July 11, 2000 letter from Hyundai that thanked Mr. Gouaz for his efforts in collecting money from Iraq, an Iraqi government bond for $11 million and photographs of what Mr. Gouaz said was a signing ceremony in 2000 in which Hyundai's Iraqi government bonds were sold to the Bank of Jordan.

Mr. Stonerock, a retired U.S. Army lieutenant colonel, heads the Korea practice group at Baker Botts and advises non-U.S. clients on U.S. corporate matters. The firm cited Mr. Stonerock's services for Hyundai Motor Co., but did not refer to the Iraqi file.

"Mr. Stonerock's practice concentrates on applying both law and public policy to create value for clients," Baker Botts said on its Web site. "He has brought this dual focus to supporting the Hyundai Motor Company in the site selection for its first U.S. manufacturing facility, representing Korean companies in major international arbitrations as well as patent-infringement litigations, working for major Korean energy companies in projects in several countries, and advising on the impact of U.S. trade policy, nuclear nonproliferation issues, and other U.S. governmental processes and matters."

Mr. Gouaz is certain that Mr. Baker knew of every aspect of the Hyundai-Iraq case. In 2005, Mr. Baker, who counseled the firm's clients for more than 20 years, became a partner in charge of the Washington, D.C. office of Baker Botts.

Over the last year, Mr. Gouaz said, he has been approached by some in the U.S. media to discuss his allegations against Mr. Baker. Mr. Gouaz, who has begun meeting reporters, said he is prepared to present evidence against Mr. Baker in any official U.S. inquiry.

"It could be that I will land in the United States and talk to an investigatory committee," Mr. Gouaz said.