The Pentagon has halted its monthly payments to the Iraqi National Congress, the group led by Ahmed Chalabi, the man once viewed by U.S. defense officials as a potential post-war Iraqi leader.

A Pentagon spokesman says the decision to halt the monthly payments of $340,000 was made last week and that the May payment to the group was the last.

Deputy Defense Secretary Paul Wolfowitz confirmed the move in testimony before Congress. He said the cutting off of further funds to the Iraqi National Congress was linked to the coming turnover of power in Iraq following last year's U.S. invasion.

"That was a decision that was made in light of the process of transferring sovereignty to the Iraqi people," he said. "We felt it was no longer appropriate for us to continue funding in that fashion."

Mr. Wolfowitz went on to challenge charges that the Iraqi National Congress had provided the United States with faulty intelligence that led it into the war.

"There has been some very valuable intelligence that has been gathered through that process that has been very important to our forces, but we will seek to obtain that in the future through normal intelligence channels," said Mr. Wolfowitz.

There have also been suggestions that Mr. Chalabi's group may have misused U.S. funds.

But a Pentagon spokesman said audits of payments made by the Defense Department do not suggest any unauthorized expenditures.

Mr. Chalabi is a member of Iraq's interim governing council. After years in exile, he was flown into the country last year by the Pentagon along with a group of supporters.