The State Department said Tuesday that U.S.-hired private security guards accused of killing Iraqi civilians in September may still be subject to prosecution, despite a promise of immunity given by investigators. The case, involving contractors from the U.S. security firm Blackwater USA, has become a major irritant in U.S.-Iraqi relations. VOA's David Gollust reports from the State Department.

Officials here say Iraqi authorities have been told that the Blackwater guards will not necessarily escape punishment, despite a disclosure Monday that State Department investigators offered them an immunity deal in exchange for testimony about the September 16 shooting.

Seventeen Iraqi civilians were reported killed and more than 20 wounded in the incident, in which Blackwater guards protecting a State Department convoy opened fire in a busy Baghdad traffic circle.

Blackwater, the biggest of three security contractors used by the State Department in Iraq, said its employees fired in self defense after coming under fire. But that assertion was later contradicted by both Iraqi and U.S. military investigators who said the shooting was unprovoked.

In a new twist to the story late Monday, unnamed U.S. Justice Department officials told reporters their investigation of the case may have been compromised by a promise of immunity extended to Blackwater guards involved in the incident by State Department officials who initially questioned them.

The State Department has provided few details of the case out of concern about further legal complications.

But at a news briefing Tuesday, State Department Spokesman Sean McCormack said the immunity extended to the Blackwater Guards was limited and would not entirely shield them from federal prosecution.

"The Department of State cannot immunize an individual from federal criminal prosecution," said McCormack. "And the kinds of, quote, immunity that I've seen reported in the press would not preclude a successful criminal prosecution."

McCormack said the State Department would not have asked the U.S. Federal Bureau of Investigation and the Justice Department to get involved in a case that they could not potentially prosecute.

However, legal experts say jurisdiction over the actions of the security firms in Iraq is murky. Before the handover of power to the Iraqi government in 2004, the U.S.-led Coalition Provisional Authority granted immunity to foreign security contractors, a measure that remains part of Iraqi law.

Contractors in Iraq hired by the Defense Department are subject to U.S. military justice, but the status of State Department contractors is unclear.

A New York-based legal activist group, the Center for Constitutional Rights, has filed a civil lawsuit in U.S. federal court in Washington against Blackwater, seeking monetary damages for injured survivors and families of those killed in the September 16 incident.

The U.S. House of Representatives last month approved and sent to the Senate a bill that would subject State Department contractors to the same laws that apply to Pentagon contractors.

Iraq's cabinet this week also approved draft legislation that would lift the immunity enjoyed by contractors since 2004, but neither legislative remedy would apply retroactively to the September case.

Since that shooting, Secretary of State Condoleezza Rice has tightened State Department scrutiny of contractors, including putting department security agents in charge of all convoys protected by Blackwater.

Spokesman McCormack says the secretary believes that any State Department employee or contractor who violated rules, laws or regulations must be held accountable.

Rice last week accepted the resignation of the chief of the department's diplomatic security bureau, Richard Griffin, who had come under heavy Congressional criticism for the handling of the Blackwater case.