The Federal Bureau Investigation is investigating a mid-level Pentagon official who specialises in Iranian affairs for allegedly passing classified information to Israel, law enforcement officials said.
The espionage investigation has focused on the official who works in the office of Douglas Feith, the under secretary of Defence for Policy, the Pentagon's no 3 official, and whether the employee passed classified policy documents about Bush administration policy toward Iran to the American Israel Public Affairs Committee, a major pro-Israeli lobbying group, which in turn provided the information to Israeli intellgence, they said.
No arrests have been made, said the officials, speaking on condition of anonymity because the investigation is continuing.
But a third law enforcement official, also speaking anonymously, said an arrest in the case could come
as early as next week.
David Siegel, a spokesman for the Israeli Embassy in Washington, said: "We categorically deny these allegations. They are completely false and outrageous."
Spokesman Josh Block of AIPAC said that any allegation of criminal conduct by the organisation or its employees is 'baseless and false'. "We are fully cooperating with the governmental authorities and will continue to do so."
The official under scrutiny was not named but described by them as a desk officer in the Pentagon's Near East and South Asia Bureau and a veteran of the Defence Intelligence Agency who moved to the Pentagon three years ago and nearing retirement.
The investigation is underway for more than a year. Defence Secretary Donald H Rumsfeld and other top officials were informed of it some time ago, officials said.
The investigation was first reported Friday evening by CBS News.
"The Defence Department has been cooperating with the Justice Department on this matter for an extended period of time," the Pentagon said in a statement issued last night.
"The investigation involved a single individual at DOD at the desk officer level, who was not in a position to have significant influence over US policy. Nor could a foreign power be in a position to influence US policy through this individual. To the best of DOD's knowledge, the investigation does not target any other DOD individuals," it said.
President George W Bush has identified Iran as part of an "axis of evil," along with North Korea and the former Iraqi regime. Currently, US officials attack Iran almost daily for its alleged nuclear weapon ambitions and programme.
Israel is one of the United States' staunchest allies but there have been espionage cases between the two countries in the past.
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