SEPTEMBER 14--In remarks stressing that the U.S. government had “absolutely nothing to do with” the anti-Islam film that has touched off violence in the Middle East, Secretary of State Hillary Clinton yesterday sought to quash Arab concerns that the “disgusting and reprehensible” movie was somehow produced or condoned by American officials.

However, Clinton’s attempt to distance the U.S. from “Innocence of Muslims”--and, by extension, its felonious producer--may be complicated by the revelation that Nakoula Basseley Nakoula became a government informant after his 2009 arrest for bank fraud, The Smoking Gun has learned.

Though many key documents from the U.S. District Court case remain sealed, a June 2010 sentencing transcript provides an account of Nakoula’s cooperation with federal investigators in Los Angeles (and how his prison sentence was reduced as a result).

Nakoula, 55, was arrested in June 2009 for his role in a check-kiting ring that stole nearly $800,000 from six financial institutions by using stolen Social Security numbers and identities. Nakoula was named in a six-count felony indictment accusing him and unnamed “co-schemers” of perpetrating the bank fraud.

Denied bail, Nakoula, a married father of three, was locked up at the Metropolitan Detention Center in L.A. when he began cooperating with Justice Department lawyers and federal agents. During a series of debriefing sessions, Nakoula provided investigators with a detailed account of the fraud operation and fingered the man who allegedly headed the operation, according to comments made by his lawyer at sentencing.

Nakoula identified the ring’s leader as Eiad Salameh, a notorious fraudster who has been tracked for more than a decade by state and federal investigators. In his debriefings, Nakoula said he was recruited as a “runner” by Salameh, who pocketed the majority of money generated by the bank swindles, according to James Henderson, Nakoula’s attorney.

As a result of Nakoula’s cooperation, Henderson told Judge Christina Snyder, “We all know what's gonna happen. Salameh is gonna get arrested some day and based on the debriefing information turned over, he is gonna enter a guilty plea or if he doesn’t, then Mr. Nakoula is gonna be called on to testify at trial.”

It is unclear whether Salameh, whose whereabouts are unknown, has been charged in connection with the bank fraud. Salameh was named in a 2006 federal criminal complaint charging him with felony fraud. That complaint--filed under one of Salameh’s many aliases--was dismissed last year by federal prosecutors. A court docket shows that no filings were made after the initial complaint, likely indicating that Salameh was never apprehended.

With an Arabic interpreter standing by, Nakoula told Snyder about his decision to inform. He explained, “I decided to cooperate with the government to retrieve some of these mistakes or damage happened. I want to cooperate with the government that they can catch with this other criminals who is their involvement.”

In return for Nakoula’s cooperation, prosecutors provided Snyder with a letter noting that his substantial assistance to authorities warranted a sentence reduction.

Along with citing the government missive--known as a 5K1 letter--Henderson told Snyder that Nakoula’s kin would suffer financially during his imprisonment since he was he family’s sole breadwinner. Henderson also reported that Nakoula suffered from various maladies, including Hepatitis C, a “serious diabetes problem,” and “prostate issues” for which he had undergone surgery. “He is on ten medications at this point,” added Henderson.

Nakoula’s involvement in the fraud, Henderson stated, was caused by his need to support his family, including his elderly father. “At the time he did this, he was out of work in the gas station industry, which is what he's really familiar in this country,” said Henderson, adding, “and he was working swap meets for a few dollars every weekend trying to support his family.”

Snyder eventually ordered Nakoula to serve 21 months in prison to be followed by six months in a federal halfway house. The sentence was about a year less than the punishment sought in separate submissions by probation officials and federal prosecutors.

Before Snyder announced her sentence, Henderson referred to a character letter written by a friend of Nakoula’s who offered to provide work for the convicted felon. The friend, the lawyer said, reported that he attended church with Nakoula, whom he described as “a God-fearing man.” (8 pages)