March 9 (Bloomberg) -- The FBI violated the privacy of U.S. citizens when investigators illegally gathered information using expanded powers granted under the USA Patriot Act, a government report said.

The report by Justice Department Inspector General Glenn Fine found that the Federal Bureau of Investigation improperly used so-called national security letters to collect telephone, banking, e-mail records and other data. The audit also showed that the FBI, in congressionally mandated reports, understated by thousands the number of letters it issued.

The inspector general found that the FBI's mistakes weren't criminal, instead blaming errors by agents, poor record-keeping and widespread confusion about the proper process for obtaining the letters. The information demands let the bureau gather material on suspected terrorists or spies without a judicially approved subpoena.

``I am committed to ensuring that we correct these deficiencies,'' FBI Director Robert Mueller said at a news conference at the bureau's Washington headquarters. Mueller accepted full responsibility for the lapses. ``I am to be held accountable,'' he said.

The report immediately touched off a firestorm on Capitol Hill where lawmakers of both parties chastised the FBI. The House and Senate Judiciary Committees said they will hold hearings on the findings.

Sensitive to Privacy

``This is, regrettably, part of an ongoing process where the federal authorities are not really sensitive to privacy,'' said Senator Arlen Specter, a Pennsylvania Republican and Judiciary Committee member.

House Judiciary Committee Chairman John Conyers, a Michigan Democrat, said the ``potential for abuse of the Patriot Act's national security letter authority is almost without limit.'' The report ``demonstrates how that potential has now become a reality,'' he added.

The Justice Department already has been confronting a political uproar over its firing last year of eight U.S. attorneys. Today, Conyers's committee asked the Bush administration to provide documents on the dismissals and make several officials available for interviews, including former White House Counsel Harriet Miers.

The FBI was given broader authority to collect the information when Congress rushed to enact the Patriot Act after the Sept. 11, 2001, terrorist attacks. The surveillance methods have long spurred complaints from civil liberties groups and some lawmakers who say the Bush administration may be abusing the rights of Americans.

House Inquiry

Attorney General Alberto Gonzales, speaking to the International Association of Privacy Professionals in Washington, said he was ``upset'' about the report's conclusions.

``Failure to adequately protect information privacy simply is a failure to do our jobs,'' he said. ``There is no excuse for the mistakes that have been made and we're going to make things right as quickly as possible.''

He acknowledged that the report's findings will spur calls to revoke the FBI's authority to use the letters, but he said critics should allow time for the bureau's new safeguards to work.

Investigators use the national security letters ``to begin to tie together the various threads of the life of a suspected terrorist,'' Gonzales said, calling them ``vital to our national security.''

He also said that the privacy violations and the U.S. attorney firings have damaged the agency's credibility with lawmakers. ``We have some work to do to re-assure members of Congress,'' Gonzales told reporters after the speech.

22 Violations

The report, based on a sampling of the letters, said the FBI overstepped its authority at least 22 times. The FBI failed to tell Congress about at least 4,600 letters it issued from 2003 to 2005, the report said. There were almost 150,000 letter requests during the period.

Auditors singled out two incidents in which it said national security letters were used to obtain information that the FBI wasn't entitled to have under the law. One letter sought full consumer credit reports for a counter-intelligence case. Another requested educational reports from a university.

The inspector general also said that the FBI improperly issued more than 700 so-called ``exigent letters'' when often no emergency existed. The FBI has since stopped using these types of letters, Mueller said.

The FBI has vastly increased its use of the letters, the report noted. The bureau issued 47,000 requests for them in 2005, compared with 8,500 in 2000 before the Patriot Act made them easier to obtain.

Both Mueller and Gonzales said today's report was thorough and fair. Congress ordered it over the wishes of the Bush administration.

``The problems identified in your review are serious and must be addressed immediately,'' Gonzales wrote in a letter to Fine. ``I have confidence'' in Mueller ``to implement the changes necessary to ensure the proper use of these authorities.''

To contact the reporters on this story: Scott Cendrowski in Washington at scendrowski@bloomberg.netRobert Schmidt in Washington at rschmidt5@bloomberg.net.

Last Updated: March 9, 2007 16:23 EST