The disclosure is the latest to emerge from a wide-ranging investigation into the conduct of the 1st Battalion of the 184th Infantry Regiment of the Guard, which is headquartered in Modesto.

Military officials had confirmed previously that the battalion's commander, Lt. Col. Patrick Frey, had been suspended and that one of the battalion's companies, based in Fullerton, had been removed from patrol duties and restricted to an Army base south of Baghdad.

According to military officials and members of the battalion, soldiers from the battalion's Bravo Company, which is based in Dublin, an East Bay suburb of San Francisco, approached several businesses earlier this year that were owned and operated by Iraqi nationals.

The businesses - a dry cleaner, a convenience store and the like - catered to U.S. soldiers and were located on the fringe of the U.S. military's operating base inside the Green Zone, the fortified hub of the Iraqi government, U.S. occupation officials, embassies and contractor headquarters. The businesses were asked to pay the soldiers "rent."

Lt. Col. Cliff Kent, spokesman for the 3rd Infantry Division in Iraq, confirmed Friday that two vendors agreed to pay.

The money was used to create a "soldiers fund," said one member of the battalion, who spoke on condition of anonymity. Such funds are used by troops for a variety of purposes, such as receiving small loans to pay a bill back home or buying commemorative "challenge coins" - often specially minted to foster morale inside a unit.

Kent said the fund created from the rent money was also used to buy T-shirts, patches and a safe.

Kent declined to discuss the incident further, stating in an e-mail from Iraq: "Specific details are part of the informal investigation which is administrative in nature and protected by privacy rules."

There is considerable dispute about the financial arrangement - how much money was raised, how many soldiers were involved and how important the allegations are.

Army officials say the total amount involved was $4,000, but troops in the battalion have said the scheme raised more than $30,000. The investigation resulted in disciplinary action against one officer from the battalion's Bravo Company. Army officials declined to reveal the officer's name, and his identity could not be confirmed independently.

Army officials say they have no evidence that anyone else was involved beyond the disciplined officer. But members of the battalion, including one who has been briefed directly on the investigation, said that at least six soldiers played some role in the arrangement.

One member of the battalion said the consensus in the ranks was that "this is not the kind of thing that you do alone." Battalion members who discussed the matter did so on condition that their names not be used because they have been told by superiors not to talk about the subject with reporters.

Several soldiers have called the rental arrangement "extortion," but Army officials insist that the word is not an accurate description of the relationship between the soldiers and the vendors.

Military investigators initially received reports that the scheme had been carried out on at least two other U.S. bases in Iraq, but officials said Friday that they have concluded that the arrangement on the Green Zone operating base was an isolated case.

At least three companies in the battalion, which consists of about 680 soldiers, have been affected by the investigation into its conduct in Iraq.

The battalion's Alpha Company, a 130-soldier unit based in Fullerton, has been the subject of the most serious portion of the investigation: that soldiers allegedly mistreated or abused Iraqi detainees in March.

Military sources have said that at least some of the mistreatment involved a Taser stun gun and was captured on videotape. Eleven soldiers have been charged in connection with the alleged abuse; the Army's Criminal Investigation Division will determine whether the soldiers will face courts-martial.

Military officials have also confirmed that a leader of the battalion's Delta Company, 1st Sgt. Robert Jones, was relieved of duty recently after being accused of threatening an Iraqi detainee by, among other things, shooting at a water heater during an interrogation. Delta Company is based in Oakdale, east of Modesto.