AP: Blackwater Guards Given Immunity in Deadly Baghdad Shooting

The investigative misstep comes in the wake of already-strained relations between the United States and Iraq, which is demanding the right to launch its own prosecution of the Blackwater bodyguards.

Blackwater spokeswoman Anne Tyrrell declined comment about the U.S. investigation. Based in Moyock, N.C., Blackwater USA is the largest private security firm protecting U.S. diplomats in Iraq.

The company has said its Sept. 16 convoy was under attack before it opened fire in west Baghdad's Nisoor Square, killing 17 Iraqis. A follow-up investigation by the Iraqi government, however, concluded that Blackwater's men were unprovoked. No witnesses have been found to contradict that finding.

An initial incident report by U.S. Central Command, which oversees military operations in Iraq, also indicated "no enemy activity involved" in the Sept. 16 incident. The report says Blackwater guards were traveling against the flow of traffic through a traffic circle when they "engaged five civilian vehicles with small arms fire" at a distance of 50 meters.

The FBI took over the case early this month, officials said, after prosecutors in the Justice Department's criminal division realized it could not bring charges against Blackwater guards based on their statements to the Diplomatic Security investigators.

Officials said the Blackwater bodyguards spoke only after receiving so-called "Garrity" protections, requiring that their statements only be used internally — and not for criminal prosecutions.