NEW YORK (Reuters) - Veteran Hollywood director Brian De Palma has lashed out at what he calls the censorship of his new film about Iraq and the chilling effect of corporate America on the war.

Director Brian De Palma on the set of "Redacted" in an undated image courtesy of Magnolia Pictures. REUTERS/Handout

De Palma’s film, “Redacted,” is based on the true story of a group of U.S. soldiers who raped and killed a 14-year-old Iraqi girl and murdered members of her family. It has stunned audiences for its shocking images and rattled American conservative commentators before its U.S. opening next month.

But De Palma says he is upset that the documentary-style drama -- its name derived from his view that news coverage of the war has been incomplete -- has been censored.

The film’s distributor, Magnolia Pictures, ordered the faces of dead Iraqis shown in a montage of photographs at the end of the film be blacked out.

“I find it remarkable. ‘Redacted’ got redacted. I mean, how ironic,” De Palma, who made his name directing violent films like “Scarface” and “The Untouchables,” said in an interview. “I fought every way I could in order to stop those photographs from being redacted and I still lost.”

De Palma has loudly argued the issue in public, including sparring with Eamonn Bowles, the president of Magnolia, during a recent forum at the New York Film Festival. Bowles countered that possible future lawsuits by the families of the dead Iraqis meant the photos had to be edited.

Bowles said Magnolia had been put in “an untenable legal position,” and that De Palma lost rights to the film’s final cut in recent arbitration with the Directors Guild of America.

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“We were always open about letting him make the sort of film he wanted to make,” Bowles said in an interview, adding not many distribution companies would have supported the film at all.

CORPORATE POWER

De Palma, who has criticized Hollywood for not being willing to finance such independent films, said he was shocked at his own lack of editorial control.

“I can’t even get the photographs out there, that was all surprising to me,” he said. “What is going on here? These are war photographs. ... You see these and you go ‘oh boy, this shouldn’t be happening.’”

The 67-year-old director said he blames “the insurance companies” for exercising too much control over film distribution. Bowles admitted Magnolia could not insure the film if it ran the unedited photos, which were too graphic to run in mainstream newspapers or television reports.

De Palma said he expected the images in “Redacted” to stir U.S. public debate about the conduct of American soldiers. Abeer Qasim Hamza al-Janabi was gang-raped, killed and burned by U.S. troops in Mahmudiya, south of Baghdad, in March 2006. Her parents and another family member were also killed.

He said the film provided a realistic portrait of U.S. troops and how “the presentation of our troops has been whitewashed” by mainstream media.

De Palma, who looked at the atrocities of conflict in the 1989 film “Casualties of War,” which also centers on the rape of a young girl by U.S. soldiers, believes news coverage of wars had changed since the Vietnam War.

“We saw fallen soldiers, we saw suffering Vietnamese. We don’t see any of that now,” he said. “We see bombs go off, but where do they come down? Who do they hit?”

The U.S. invasion of Iraq was “clearly a mistake,” he said, that was perpetuated by “defense contractors, big corporations of America” profiting from the war.

“How many billions of dollars are those companies making? And who gets more famous than ever? The media. There is nothing like a war to fill the airwaves 24 hours a day,” he said.