The Wall Street Journal reports:

The Central Intelligence Agency and Libyan intelligence services developed such a tight relationship during the George W. Bush administration that the U.S. shipped terror suspects to Libya for interrogation and suggested the questions they should be asked, according to documents found in Libya’s External Security agency headquarters.

The relationship was close enough that the CIA moved to establish “a permanent presence” in Libya in 2004, according to a note from Stephen Kappes, at the time the No. 2 in the CIA’s clandestine service, to Libya’s then-intelligence chief, Moussa Koussa.

The memo began “Dear Musa,” and was signed by hand, “Steve.” Mr. Kappes was a critical player in the secret negotiations that led to Libyan leader Col. Moammar Gadhafi’s 2003 decision to give up his nuclear program. Through a spokeswoman, Mr. Kappes, who has retired from the agency, declined to comment.

A U.S. official said Libya had showed progress at the time. “Let’s keep in mind the context here: By 2004, the U.S. had successfully convinced the Libyan government to renounce its nuclear-weapons program and to help stop terrorists who were actively targeting Americans in the U.S. and abroad,” the official said.

The files documenting the renewal of ties between the CIA and Libyan intelligence were reviewed and copied by researchers from Human Rights Watch during a tour of Libya’s External Security agency headquarters in downtown Tripoli. Emergencies Director Peter Bouckaert said he was touring the building on Friday as part of the group’s effort to help the Libyan transitional authority secure sensitive documents left by the Gadhafi regime, which collapsed in August after a five-month rebellion.

Mr. Bouckaert said he discovered the files inside the complex in a room that guards described as the former office of Mr. Koussa, who became foreign minister in 2009. Mr. Bouckaert photographed the documents, leaving the originals in their place, and gave copies to The Wall Street Journal.

Human Rights Watch has been critical of the U.S. policy of sending terror suspects to third countries for interrogation, a practice known as rendition. The practice dates at least to 1995, when Egypt began aiding the U.S. with rendition.

U.S. officials say they obtained assurances from the recipient countries that the rendered detainees would be treated humanely. “There are lots of countries willing to take terrorists off the street who want to kill Americans,” the U.S. official said. “That doesn’t mean U.S. concerns about human rights are ignored in the process.”

In an April 15, 2004 letter to Libyan intelligence, the CIA proposed the rendition of another man, saying, “We respectfully request an expression of interest from your service regarding taking custody.”

Citing “recently developed agreements,” the CIA asked the Libyans to “agree to take our requirements for debriefings of [the suspect], as well as a guarantee that [his] human rights will be protected.”

The files also show the close relationship that some British intelligence officials had with Mr. Koussa.

Mr. Koussa, who defected from Col. Gadhafi’s government in March, was credited with helping negotiate Libya’s rapprochement with the international community and bartering an end to sanctions in return for Libya renouncing its weapons-of-mass-destruction program.

Yet he was also one of the stalwarts of the Gadhafi regime and headed the foreign intelligence service during a time when many Western officials believed Col. Gadhafi was funding and supporting international terrorist groups. In 1980, he was expelled from his diplomatic post in the U.K. after calling in a newspaper interview for the killing of Libyan dissidents in Great Britain. Libya later claimed he had been misquoted.

By the early years of the George W. Bush administration, however, as seen in the 2004 memo, Mr. Kappes was writing to Mr. Koussa: “Libya’s cooperation on WMD and other issues, as well as our nascent intelligence cooperation mean that now is the right moment to move ahead.”

The intelligence services had discussed the move for “quite some time” Mr. Kappes wrote.

The files provide an extraordinary window into the highly secretive and controversial practice of rendition, whereby the agency would send detainees to other countries for interrogation, including ones known for harsh treatment of detainees. The program was ramped up for terror detainees after the Sept. 11 attacks.

When taking over the CIA at the outset of the Obama administration, then-director Leon Panetta said the agency would continue to use rendition, but would seek assurances that the detainee wouldn’t be tortured—which has been the standing U.S. policy. Mr. Panetta left the CIA two months ago to lead the Pentagon.

“We are eager to work with you in the questioning of the terrorist we recently rendered to your country,” Mr. Kappes wrote in the memo, adding that he would like to send two more officers to Libya to question a suspect directly.

A lengthy profile of Kappes appeared in Washingtonian Magazine last year written by Jeff Stein, the SpyTalk columnist for the Washington Post. Stein’s account describes Kappes as resolutely loyal, dedicated, well-liked, politically skilled, and incompetent. Under his watch, the CIA was implicated in fraud, rape, and homicide.

Jeffrey Castelli, a friend of Kappes, had a pivotal role in propagating myths about Saddam Hussein’s WMD program. Castelli passed along the bogus intelligence that allowed President Bush, in his 2003 State of the Union speech to claim that Saddam had attempted to buy yellow cake uranium from Niger.

Castelli then oversaw the kidnapping of Abu Omar off a Milan street, which led to him and 24 other CIA agents being indicted by Italian magistrates.

In spite of this track record, “in 2008, Kappes picked Castelli to run the CIA’s New York station, one of the agency’s most prestigious appointments. Shock turned into protest, according to CIA insiders, forcing Kappes to drop the idea. Castelli soon retired.”

Kappes’s rise to behind-the-scenes stardom in the intelligence community is a lesson in how to maneuver in Washington: It’s one thing to be successful in the field; it’s more valuable to convince Congress you’re effective. “Kappes runs better ops on the Hill and with the White House than he ran human sources in the field,” a CIA veteran says in what turns out to be a consistent refrain.

“He’s the Teflon Don,” says a veteran of the CIA’s Operations Directorate, renamed the National Clandestine Service in 2005. “Nothing bad ever sticks to him.”

Over more than 20 years with the CIA, Kappes’s career has taken him through most of the world’s cold- and hot-war battlefields from India and Pakistan to Germany and Russia. But the journey of Kappes from secret agent to CIA superstar began in Libya.

In March 2003, leader Muammar Qaddafi signaled that he was ready to jump-start his on-again, off-again campaign to end his long diplomatic and commercial isolation, get off Washington’s list of terrorist states, and get back into the oil business with the West. Two years earlier, he’d dispatched one of his top operatives, Michigan State–educated Mousa Kousa, to a clandestine meeting in London with top CIA and British intelligence officials. Kousa carried with him the names of some of Osama bin Laden’s closest associates, including Ibn al-Sheikh al-Libi, a Libyan who would soon be the first major catch in the CIA’s pursuit of al-Qaeda. But with Qaddafi dragging his feet on final payouts over Libya’s 1988 downing of PanAm Flight 103 over Lockerbie, Scotland, negotiations stalled.

Then, with American and British troops massing to invade Iraq, Qaddafi decided it was time to talk again—in secret.

President George W. Bush and CIA chief George Tenet, desperate for intelligence on al-Qaeda, decided the time was ripe, too. But they wanted something big in return, a “deliverable,” as Bush put it: Qaddafi’s public renunciation of his nuclear, chemical, and biological weapons programs.

For the secret mission to Tripoli to work out the deal, they chose Steve Kappes.

By 2003, Kappes was deeply schooled in the dark arts. He had been station chief in Kuwait and Moscow. At a CIA station in Frankfurt, he had run highly sensitive operations targeting Iran’s nuclear-weapons program, and he had served in Pakistan, which sheltered its own nuclear-bomb effort. For the past year, as associate deputy director for operations, he had supervised some of the CIA’s most secret programs, from “extraordinary renditions”—kidnapping terrorist suspects abroad—to the agency’s secret foreign prisons to waterboarding and other “enhanced interrogation techniques.”

Then came Libya.

“Clearly, Kappes was a man who could keep a secret, and Bush gave him one: No one at State or Defense, not even Rumsfeld or Powell, should know about this major initiative,” Ron Suskind wrote in the Washington Monthly. Suskind’s account of the clandestine affair was one of a flurry of flattering articles about Kappes that began surfacing in the spring of 2006 as pressure was building to bring Kappes back to Langley.

The Libyan mission was a “lengthy dialogue, a delicate and subtle dance,” wrote Newsweek’s Mark Hosenball, quoting an anonymous former agency official. “And Steve handled it very well.”

Qaddafi did renounce his weapons-of-mass-destruction programs, allowing the Bush administration to claim that regime change in Iraq was already paying dividends elsewhere. After the Lockerbie claims were finally settled, diplomatic recognition came. The oil companies moved into Libya.

Washington, the story went, had eliminated a potential threat and gained an ally in the “war on terror.”

But on closer examination, some thought Qaddafi got the better end of it: His nuclear effort had never really gotten off the ground, intelligence sources say, despite the acquisition of millions of dollars of black-market equipment and supplies from Pakistani rogue nuclear scientist A.Q. Khan.

Qaddafi liked to buy stuff that was way beyond his scientists’ ken to assemble, a former top CIA official says.

Nor were Qaddafi’s other WMD programs much to write home about, according to the Monterey Institute’s Jonathan Tucker, one of the foremost WMD experts.

Libya’s chemical-warfare capability was “quite limited,” Tucker says. “Although Libya wanted to expand its chemical arsenal to include nerve agents, it did not have the materials, equipment, or know-how needed to do so. The nuclear program, however embryonic, was perceived as being of greater potential value, but after the interdiction of [A.Q. Khan’s] centrifuges en route to Libya, Qaddafi began to view his WMD programs as a security risk rather than an asset.”

Kappes has a reputation for micromanagement, right down to his recent insistence on selecting applicants for a two-person station. Therefore, says a former high-level official, Kappes had to know—and approve of—virtually everything that went on in the counterterrorism program after 9/11.

“All decision making in the Directorate of Operations flowed through the ADDO,” or assistant deputy director of operations, the position Kappes held when the war on terror ramped up in 2002–04, says a former top official during that era. “And he was specifically in a position of decision making and influence and persuasion. . . . So any decision or voice he gave to a particular point of view would have been, and was, given great consideration.”

“So if he was opposed to [waterboarding] and made his position known,” the former official adds, “that would have carried great weight. After all, not only was he ADDO, but don’t forget that at the same time he was carrying water for the White House on the Libya stuff and had a personal relationship, he claimed, with the President. So if he was able to do what he did on Libya, he should have been able to persuade the same decision makers with respect to enhanced interrogation techniques if he actually was opposed to them.”

It’s not likely Kappes was opposed to such programs, says a retired station chief who knows Kappes well: “He’s very jingoistic, very much a believer in American exceptionalism and the leading place the United States has in the world.”

Says John Sifton, a private investigator and attorney in New York who has carried out extensive research on the CIA’s secret programs for law firms and human-rights groups: “It strains credulity for him to say, ‘I didn’t know, I wasn’t involved.’ His denials would be like the Yankees pitching coach saying he didn’t know the playoffs rotation.”

“He became ADDO in the fall of 2002,” Sifton said, “just as the CIA was expanding its program for secret prisons and harsh interrogations and as it continued its renditions program with zeal.”

In at least one case, Kappes didn’t stay far away, sources say. According to an internal investigation, he helped tailor the agency’s paper trail regarding the death of a detainee at a secret CIA interrogation facility in Afghanistan, known internally as the Salt Pit.

The detainee froze to death after being doused with water, stripped naked, and left alone overnight, according to reports in the Washington Post and Los Angeles Times. He was secretly buried and his death kept “off-the-books,” the Post said.

According to two former officials who read a CIA inspector general’s report on the incident, Kappes coached the base chief—whose identity is being withheld at the request of the CIA—on how to respond to the agency’s investigators. They would report it as an accident.

“The ADDO’s direction to the field officer anticipated that something worse had occurred and so gave him directions on how to report the situation in his cable,” one of the former officials says.

“The ADDO basically told the officer, ‘Don’t put something in the report that can’t be proved or that you are going to have trouble explaining.’ In essence, the officer was told: Be careful what you put in your cable because the investigators are coming out there and they will pick your cable apart, and any discrepancies will be difficult to explain.”

As a result, the former official says, the Salt Pit officer’s cable was “minimalist in its reporting” on what happened to the prisoner. “It seems to me the ADDO should have been telling him, ‘Report the truth, don’t hold anything back, there’s an investigative team coming out, be honest and forthright. But that was not the message that was given to the chief of base by the ADDO.”