W.House threatens spy bill veto over interrogation

(Corrects Schakowsky's state to Illinois in 11th paragraph)

By Randall Mikkelsen

WASHINGTON, July 16 (Reuters) - The White House threatened to veto legislation on Wednesday that would bar CIA contractors from interrogating suspected terrorists, in the latest debate over treatment of detainees in the U.S.-declared war on terrorism.

The White House issued the threat in a notice to Congress as the Democratic-controlled House of Representatives began considering a broad measure to authorize funding of U.S. intelligence activities for the 2009 fiscal year.

The Bush administration also objected to several other provisions in the multibillion-dollar bill.

They include the establishment of an inspector general with authority over all federal intelligence agencies and requirements that the president give Congress more sensitive national security information.

In addition to such oversight measures, the bill also would increase funding for intelligence agents and to monitor issues in Asia, Africa and Latin America.

The bill contains many provisions "that conflict with the conduct of intelligence activities," the White House budget office told Congress. "If (the bill) were presented to the president, the president's senior advisors would recommend that he veto the bill."

The contractor provision was the first objection listed by the White House.

CIA Director Michael Hayden has acknowledged that outside contractors were used to conduct some interrogations in the agency's detention program for suspected terrorists, which has been widely condemned for harsh techniques that critics say amount to torture.

He told Congress in February he believed contractors helped conduct "waterboarding," the fiercely condemned simulated drowning technique that he acknowledged using on three al Qaeda suspects.

Critics say the use of outside contractors could allow the CIA to dodge accountability for abuses, but the agency has said contractors are subject to the same laws as agency staffers.

"Our bill will take detention-related activities out of the hands of private contractors and put the responsibility back where it belongs, in the hands of authorized government personnel," U.S. Rep. Jan Schakowsky, an Illinois Democrat, said shortly before the House Intelligence Committee passed the authorization measure in May.

The panel passed the bill on a voice vote with broad bipartisan support.

But the White House said prohibiting contract interrogators could deprive the program of necessary questioning skills and expertise.

"Such a provision would unduly limit the United States' ability to obtain intelligence needed to protect Americans from attack," it said.

The Senate Intelligence Committee passed in May its version the bill, which also contains a ban on CIA interrogation contractors. It also would ban CIA harsh interrogations and require that the Red Cross be granted access to all detainees.

The measure awaits action by the full Senate. Differences between the House and Senate versions would have be resolved before any final measure is passed.

Major funding provisions of the intelligence bill are classified. Last year the the administration bowed to a law ordering disclosure of the annual intelligence budget and said it had spent $43.5 billion in fiscal 2007. The law also requires disclosure of spending in fiscal 2008, which ends in September, but the U.S. president can waive the requirement after 2008 for a valid national security reason.

Separate appropriations legislation is needed to actually allocate the intelligence funds. (Editing by Anthony Boadle)