http://en.wikipedia.org/wiki/USS_Stark_%28FFG-31%29
I am somewhat familiar with the circumstances, having been there earlier on a ship doing the same job as the Stark.
The story we got is that the TAO failed to act immediately after being informed by the CIC petty officer of the watch that an Iraqi military plane was peregrinating in an apparent search for a target. While the Wiki article is a bit vague, it does not contradict that.
Note that the Vulcan Phalanx CIWS was in standby. That indicates that the TAO failed to respond to the threat posed by the diaperhead and his missiles.
I blame the TAO. He should have gone to GQ and begun dealing with the Iraqi long before he got within his missile release range.