* Department's Inspector General finds no cover-up
* Two senior Justice officials leave after report issued
By David Ingram
WASHINGTON, Sept 19 (Reuters) - The U.S. Justice Department's internal watchdog faulted 14 federal employees on Wednesday for the botched anti-gun-trafficking effort known as "Operation Fast and Furious," prompting two senior officials to leave the government but clearing Attorney General Eric Holder of any wrongdoing.
Congressional Republicans during a series of hearings investigating the failed operation sharply criticized Holder, the nation's top law-enforcement official appointed by President Barack Obama, during this year's presidential campaign. One U.S. agent was killed in Arizona, potentially in connection with the operation.
The new report from the department's Inspector General found screw-ups of "systemic" scope that risked public safety but found no cover-up, as charged by Republicans.
That, and a statement supportive of the report from Holder's main Republican accuser, Representative Darrell Issa, seems likely to defuse what could have been a politically explosive conclusion to the probe.
Two senior department officials left the government as the report was made public. Kenneth Melson, former head of the U.S. agency that enforces gun laws, retired, while Jason Weinstein, responsible for oversight of many criminal-related matters, resigned.
The highest official to be criticized, Lanny Breuer, the assistant attorney general in charge of criminal prosecutions, has been "admonished," said a department official.
The book-length, 471-page report is the most in-depth look yet at Operation Fast and Furious. It follows a 19-month review by the department watchdog that had access to non-public documents.
Fast and Furious began in 2009 as an effort to stop the flow of firearms from Arizona to Mexican drug cartels. As U.S. agents tried to build an expansive case, they did not pursue low-level gun buyers who bought about 2,000 potentially illegal firearms and trafficked many of them across the border.
The report said that Melson and Weinstein failed to ask detailed questions about the tactics in Fast and Furious, allowing the operation to go on in 2010 when they could have stopped it, the report said.
Melson said in a statement that he disagrees with parts of the report that he called "speculative assumptions, conclusions and characterizations," but he added, "I was ultimately responsible for the actions of each employee."
Melson was pushed out in August 2011 as acting director of the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and recently worked on forensic policy for the department.
Weinstein wrote in a blistering resignation letter that the inspector general's conclusion about him is "completely false."
"For me to have done this would have run counter to the entire body of work I compiled during the past 15 years," Weinstein wrote, adding that he was singled out for blame because of politicized congressional hearings.
Weinstein's boss, Breuer, was among those the inspector general recommends for potential internal discipline.
Breuer should have alerted his superiors, including Holder, in 2010 to flaws in a program similar to Fast and Furious that was started during George W. Bush's presidency. Breuer said in a congressional hearing in 2011 that not doing so "was a mistake" and that he had regrets.
The 12 officials, including Gary Grindler, a former deputy attorney general who is now Holder's chief of staff, could face a wide range of discipline or none at all, depending on the judgment of Justice Department and ATF authorities.
But at Justice headquarters at least, no further personnel shake-ups are expected, one department official said.
VINDICATION FOR HOLDER
Holder pointed to the inspector general's report, which he requested in February 2011, as vindication that he knew nothing of the operation's tactics and did not try to cover them up.
"It is unfortunate that some were so quick to make baseless accusations before they possessed the facts about these operations - accusations that turned out to be without foundation and that have caused a great deal of unnecessary harm and confusion," he said in a statement.
He praised the newly departed officials, saying Weinstein had "unwavering" commitment to the Justice Department.
In a rare show of agreement, Issa, the Republican who has led a congressional inquiry into Fast and Furious, also found reason to praise the inspector general's report. Issa said it confirms the operation's "near total disregard for public safety."
"It's time for President Obama to step in and provide accountability for officials at both the Department of Justice and ATF who failed to do their jobs," Issa said in a statement.
Fast and Furious came to light after the December 2010 shooting death of a U.S. Border Patrol agent, Brian Terry. Two guns that firearms agents attempted to track were found at the scene of Terry's death in rural Arizona.
The operation raised the fury of U.S. gun-rights advocates, who helped to drive attention in Congress and the media.