Federal Authorities Are Faulted in Idaho Shootout : Probe: Justice Department memo says officers ‘exaggerated the threat’ posed by white separatist. Key FBI official receives letter of censure.

The Justice Department’s No. 2 official Wednesday faulted the FBI, the U.S. Marshals Service and the U.S. attorney’s office in Idaho for actions that led to the 1992 killing of a white separatist’s wife on a remote Idaho ridge by an FBI sharpshooter.

At the same time, however, Deputy Atty. Gen. Jamie S. Gorelick accepted the recommendation of FBI Director Louis J. Freeh to limit the punishment of the senior FBI official involved in the incident--Acting Deputy Director Larry A. Potts--to a letter of censure.

While Freeh has stated strongly that he wants Potts to be named as his deputy permanently, Gorelick did not say whether she would give her approval. Officials said Potts’ promotion has not been formally submitted to the Justice Department, but that it would be shortly.

Sen. Larry E. Craig (R-Ida.), who has led Capitol Hill interest in the Idaho shootout, said Freeh’s desire to elevate Potts in the face of the reprimand is “inappropriate” and calls the Justice Department’s “credibility” into question.

Craig said he expressed his reservations Wednesday in an hourlong telephone conversation with Gorelick and that she promised to convey them to Atty. Gen. Janet Reno. Freeh, who was in San Diego for ceremonies opening a new FBI office, said in a statement that he continues “to have the utmost confidence in Larry Potts.”

The incident at Ruby Ridge, Ida., began with the Aug. 21, 1992, killing of Deputy U.S. Marshal William Degan, who was preparing to arrest separatist Randy C. Weaver on weapons charges, and the death in the same shootout of Weaver’s 14-year-old son, Sammy.

Lon Horiuchi, an FBI sharpshooter from the elite Hostage Rescue Team, subsequently wounded Weaver and his friend, Kevin L. Harris, and shot and killed Weaver’s wife, Vicki, who was standing behind a cabin’s open door, holding her 10-month-old baby.

Gorelick, in a memo to Freeh, U.S. Marshals Director Eduardo Gonzalez and Betty H. Richardson, now U.S. attorney in Idaho, said that federal and some state and local law enforcement members had “exaggerated the threat” posed by Weaver.

“Although he was dangerous, the repetition of these exaggerations to the FBI led to a higher threat assessment than otherwise might have been made,” Gorelick said.

Like Freeh, Gorelick placed significant blame on the “rules of engagement” for the siege, which said deadly force “could and should” be used against any armed adult in the open. The bureau’s standard deadly force policy permits it to be used only in self-defense or the defense of others.

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Gorelick found that Potts, operating from the FBI’s Washington headquarters, “did not adequately follow through to ensure that his intent with the regard to the rules of engagement was properly reflected in the final rules.”

Howard Shapiro, the FBI’s general counsel, noted that he could not speak for Freeh but that “a lot turned on the fact that Potts had not approved the final forms of the rules of engagement. . . . Had we found otherwise, it surely would have been grounds for further sanction,” he said of Freeh’s recommendation that Potts only be censured.

Gorelick also agreed with Freeh’s finding that the sharpshooter, thinking that an armed separatist had brandished his rifle at a helicopter carrying FBI agents, fired in line with the FBI’s deadly force policy--not the rules of engagement, which she said could be read as directing FBI agents to act contrary to policy and law.

FBI rules have since been changed so that rules of engagement must be reviewed by the bureau’s general counsel, Gorelick noted.

At the request of Randall W. Day, prosecuting attorney in Boundary County, Ida., who is investigating the shootout, Gorelick withheld release of more than 1,000 pages of review of the case.