The United States is investigating accusations that Iraqi Governing Council member and former Pentagon favourite Ahmed Chalabi passed on sensitive information to Iran, a media report said.

American intelligence officials told FBI they have 'hard' evidence that Chalabi met with a senior officer of Iran's Ministry of Intelligence and Security in Iraq.

A senior US official told a news magazine that Chalabi and his intelligence chief, Aras Karim Habib, are suspected of giving Iran 'highly classified' data that were 'known to only a few within the US government'.

After a CIA complaint, the FBI launched a full field criminal probe into whether Chalabi and senior Iraqi National Congress aides passed high-level intelligence to Iran-information believed to be so sensitive, an official said, it may have provided Iranian authorities with insights into American sources and methods for collecting intelligence and could even 'lead to the loss of lives'.

The FBI investigation, sources were quoted as telling Time magazine, will probably involve dozens of agents and a full arsenal of investigative techniques, possibly including court-authorized searches and wiretaps.

For years, the INC has maintained an office in Tehran with the full knowledge of the US State Department. In fact, a top deputy to Habib, one of the principal targets of last week's raid at Chalabi's house, said he left Iraq on May 14 and is now in Teheran, a common port of call for INC officials on their way out of Iraq.

The probe will also examine whether US officials illegally transmitted state secrets to the INC.

The investigation could ultimately reach high-ranking civilian officials at the Pentagon and the Defence Intelligence Agency (DIA) who have dealings with Chalabi and his organisation.

In an occupation marked by dizzying strategy shifts and policy repudiations, Time said the US' abandonment of Chalabi as he falls from grace may prove to be the most head-snapping reversal of all.

Last week's raid at Chalabi's house was the culmination of months of irritation with the INC chief over his discredited prewar claims about Saddam's weapons programmes, the suspected corruption of his party members and his criticism of the US plan to hand political control to a UN-appointed Iraqi government on June 30, officials said.

With questions swirling about Chalabi's fidelity, Time says, administration neo-conservatives who once blessed Chalabi as Iraq's President-in-waiting but have watched their influence wane as Iraq has descended into chaos fell over themselves last week trying to cut loose their former friend.

One of Chalabi's Pentagon boosters, Under Secretary of Defence Douglas Feith, insisted to Time that 'there's all this stuff about his advising us on policy and his being highly influential, and it is wildly overstated. The stuff that's been reported about us being very close is just wrong'.

Yet by choosing to go after Chalabi, Time says the US risks alienating some of its few remaining allies in Iraq while inviting fresh doubts about its judgement -- all at a time when America is trying to line up support for the planned transfer of power on June 30 in a last-gasp bid to stave off spiralling discontent with the occupation.

"This is always the way the United States does things," Chalabi tells Time. "One of the first things they do when they come into a place is turn their backs on their friends who were instrumental in bringing them there."

Chalabi also dismissed the notion that he may have been working as an agent of Teheran.

"Total nonsense," Chalabi says. "They don't need us to pass information to them. They have scores and scores of agents all over this country."

The INC has made no secret of its friendliness with the Iranian government, which supported the campaign to topple Saddam, he added.

The rupture between the US and its favourite son, Time said, has been months in the making, the product of election-year politics, bureaucratic jousting and deeply personal feuds.

Meanwhile, another magazine Newsweek reported that Chalabi tried to get corruption investigation against him quashed. His nephew, Salem Chalabi, has been accused of offering, through an intermediary, one of the main Iraqi investigative magistrates a seat on the tribunal that will try Saddam Hussein.

The news magazine said the magistrate told it that he had received such an offer, but declined to say from whom.

Salem has denied making any such offer, and Chalabi and his associates all insist they will be cleared of any wrongdoing.

State Department auditors have also found that Chalabi had not always kept the most meticulous records of the funds flowing into the Iraqi National Congress, Newsweek said quoting diplomats who suggested Chalabi was using taxpayers' money to fund his own war propaganda campaign, which was barred by law.