Sept. 29 (Bloomberg) -- Attorney General Michael Mukasey named a special prosecutor to investigate possible crimes arising from the Bush administration's firing of nine U.S. attorneys.

Mukasey made the appointment after a blistering internal Justice Department report today said officials may have made false statements and obstructed justice in dismissals likely tainted by politics. The review said there should be further investigation by an attorney who can compel witness cooperation.

``The Justice Department has an obligation to the American people to pursue this case wherever the facts and the law require,'' Mukasey said in a statement. He said the handling of the dismissals was ``haphazard, arbitrary and unprofessional.''

The 2006 firings mired the Justice Department in scandal and led to resignations last year of many top agency leaders, including Mukasey's predecessor, Attorney General Alberto Gonzales. Congress has spent more than a year investigating whether partisanship played a role in the ousters.

U.S. attorneys are political appointees who serve at the pleasure of the president but can't be fired for improper reasons.

The dispute is also playing out in the courts where the House Judiciary Committee is suing to enforce subpoenas against ex-White House Counsel Harriet Miers and Joshua Bolten, President George W. Bush's chief of staff, for testimony and documents about the discharges.

Today's report concluded that Gonzales was primarily to blame for the episode. It also called into question his candor to investigators and lawmakers.

`Lack of Recollection'

Gonzales had ``an extraordinary lack of recollection about the entire removal process,'' the report said. ``Most remarkable'' was his congressional testimony that he didn't remember a November 2006 meeting in his conference room where he approved the dismissals.

``It is about time the baton gets passed to a prosecutor with the power to compel answers,'' said Senator Charles Schumer, a New York Democrat who has helped lead congressional inquiries of the firings.

Arlen Specter of Pennsylvania, the senior Republican on the Senate Judiciary Committee, praised Mukasey's decision.

``There were substantial problems in what former Attorney General Gonzales did and I think that it is very important that the matter be reviewed,'' Specter said.

The internal investigation, by the agency's inspector general and ethics office, found ``substantial evidence'' that partisan politics played a role in removing several federal prosecutors.

`Gaps' in Investigation

Still, the investigators said there were ``gaps'' in their probe because of the refusal of some important witnesses to cooperate, including former White House officials Miers and Karl Rove. The White House also didn't turn over some documents requested by the Justice Department watchdogs.

``It is important to note that our report did not conclude that the evidence we have uncovered thus far establishes that a violation of any criminal statute has occurred,'' wrote Inspector General Glenn Fine and Marshall Jarrett, head of the department's Office of Professional Responsibility. ``However, we believe that the evidence collected in this investigation is not complete and that serious allegations have not been fully investigated or resolved.''

Gonzales's attorney, George Terwilliger, said the report confirms his client ``engaged in no wrongdoing'' and ``provided Congress with a truthful account of his knowledge and involvement.''

Gonzales Statement

In a statement issued by Terwilliger, Gonzales said, ``My family and I are glad to have the investigation of my conduct in this matter behind us and we look forward to moving on to new challenges.''

Nora Dannehy, a career prosecutor and acting U.S. attorney for Connecticut, was named by Mukasey as the special counsel. He said the report ``leaves some important questions unanswered'' though ``many of the most disturbing allegations'' have been put to rest.

Mukasey directed Dannehy to assess the facts in the report, conduct further investigation as needed and determine whether any offenses in connection with the firings or testimony about them merit prosecution. He told her to give a progress report within 60 days.

The report concluded that Gonzales and his Deputy Attorney General Paul McNulty ``abdicated their responsibility to safeguard the integrity and independence'' of the Justice Department by failing to oversee the firings.

Misleading Officials

Investigators said Kyle Sampson, Gonzales's chief of staff, was the one most responsible for conceiving the plan to fire the prosecutors and selecting who should go. Once the ousters became public, the report said, Sampson downplayed his role and misled the White House, members of Congress and Justice Department officials.

``It is mystifying and disappointing that the inspector general chose to impugn Mr. Sampson's candor and integrity,'' said his attorney, Bradford Berenson. Sampson ``at all times cooperated fully and voluntarily with any and all investigators, without preconditions, and provided his best, most honest and complete recollection of these events,'' his lawyer said.

The ``most troubling'' discharge, according to the report, was the firing of New Mexico U.S. Attorney David Iglesias after Republicans and party activists complained to Bush administration officials. Republicans accused Iglesias of failing to bring voter fraud and public corruption cases prior to the 2006 elections.

McKay's Firing

Investigators said they couldn't determine why Seattle U.S. attorney John McKay was dismissed, noting there is evidence he may have been targeted because of complaints from local Republicans about his handling of voter fraud probes. The main reason for McKay's firing, they said, was likely his clash with McNulty over a law enforcement information-sharing program.

Kansas City U.S. Attorney Todd Graves was removed after complaints from Senator Christopher Bond, a Missouri Republican, the probe found. Graves refused to intercede in a conflict between Bond's staff and aides to Graves's brother, Sam, a Republican congressman from Missouri.

Another U.S. attorney, Bud Cummins of Arkansas, was pushed out to provide a job for Timothy Griffin, a former aide to Rove, investigators said.

The report said two U.S. attorneys, Kevin Ryan of San Francisco and Margaret Chiara of Grand Rapids, Michigan, were fired for ``reasonable concerns'' about their performance. U.S. Attorney Daniel Bogden of Las Vegas first appeared on a list of candidates to be fired after a complaint that he wouldn't assign a prosecutor to work on a case for the Justice Department's task force for obscenity prosecutions, the report found.

Also, investigators said they found no evidence Carol Lam, the chief prosecutor in San Diego, was dismissed because of her handling of public corruption cases. The office successfully prosecuted ex-Republican Representative Randy ``Duke'' Cunningham.

Arizona U.S. Attorney Paul Charlton wasn't fired for his office's prosecution of Rick Renzi, a Republican congressman, the report concluded.

Seven of the former prosecutors, all but Ryan and Graves, issued a statement saying they were ``saddened by the picture of mismanagement, dissembling, and lack of accountability by some Department of Justice officials that is set forth in the report.''

The investigation's findings show ``the need to be vigilant in protecting the independence of United States Attorneys throughout the country, and to safeguard their ability to make judgment calls based only upon what is just and fair,'' they said.

To contact the reporter on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net.

Last Updated: September 29, 2008 19:36 EDT