A State Department source confirms published reports that the Libyans are now scouring Manhattan for a hotel where Libyan leader Muammar Qaddafi can stay during the U.N. General Assembly in September, instead of the Englewood, N.J., residence.
The source could not confirm the issuance to Qaddafi of a "conditional visa" that would restrict his movements in the U.S. to New York.
But the Libyan leader is no longer expected to stay in New Jersey, officials confirmed to FOX News. Officials say the Libyans are now searching for a hotel in New York City where Qaddafi can stay on the first floor due to his refusal to ride in elevators.
U.S. Rep. Steve Rothman also announced Friday that he'd been assured by Libya officials that Qaddafi won't stay in Englewood, and the State Department said much the same.
"In keeping with prior arrangements, the Englewood, N.J., property is not available for any use in connection with the upcoming visit," State Department spokesman Ian Kelly said in a written statement.
Meanwhile, as questions swirl whether British Prime Minister Gordon Brown paid a dictator's ransom when he released the Lockerbie bomber last week, the Libyan strongman's son said it was "obvious" that efforts to free the convicted killer were tied to lucrative contracts with the oil-rich state.
"Why be so angry?" asked Saif al-Islam al-Qaddafi in an interview with the Scottish Herald, responding to the international uproar ignited as Scotland freed Abdel Baset al-Megrahi, the only man ever convicted in the 1988 bombing of Pan Am Flight 103, which killed 270 people.
Al-Megrahi, who is dying of prostate cancer, was sentenced to life in prison for the crime but served only 8 years of his sentence -- just 11 days in prison for each of his victims.
In the week since his release, pressure has been mounting on Brown to explain his government's role in securing the al-Megrahi's freedom, possibly as part of the so-called "deal in the desert" struck by Britain with Libya two years ago.
Qaddafi said it was "not a secret" that his father inked a 2007 prisoner transfer agreement (PTA) with Britain's then-Prime Minister Tony Blair at the same time the two governments were signing favorable oil and trade deals.
"People should not get angry because we were talking about commerce or oil. We signed an oil deal at the same time," Qaddafi told the Herald. "The commerce and politics and deals were all with the PTA."
U.S. lawmakers, already aboil since al-Megrahi returned home, were set off when Muammar al-Qaddafi announced his intention to pitch a sprawling tent at a home in New Jersey owned by the Libyan embassy. Qaddafi will be visiting New York in September to address the United Nations General Assembly.
N.Y. Rep. Peter King, the top Republican on the Homeland Security Committee, said the decision to let Qaddafi stay in New Jersey was an "absolute disgrace," and called the release of the Pan Am bomber "shameful."
"This whole deal with the British stinks," King told FOX News. "Obviously, to me (the British are) looking for oil, and as a result of that to allow such a known terrorist, a convicted terrorist out of jail, absolutely shameful."
Al-Megrahi's homecoming enraged the families of victims in the U.S. and Scotland, as the Lockerbie bomber was greeted as a returning hero and embraced at a Tripoli airport by Muammar al-Qaddafi himself.
But Qaddafi's son said it was Scottish heartstrings -- not the prisoner transfer agreement -- that led Scotland to free Megrahi on compassionate grounds in a move the strongman's son said was divorced from the bubbling oil deals signed by the U.K.
"They are two completely different animals," Qaddafi said, noting that Scottish Justice Minister Kenny MacAskill roundly rejected releasing al-Megrahi under the terms of the transfer deal, and instead chose to free him so that he could die of his terminal case of cancer outside the walls of a prison.
"The Scottish authorities rejected the PTA," Qaddafi told the Herald. Al-Megrahi "was released for completely different reasons."
But nearly half of Britons -- 45 percent -- think that al-Megrahi's release had more to do with the oil deals than compassion for a dying man, according to a poll conducted by the Times of London.
Sixty-one percent said they objected to freeing al-Megrahi, according to the poll, and an even greater number of Americans -- 82 percent -- have said they objected to the decision.
Brown, under fire in Britain for being mostly invisible since al-Megrahi was released, broke his silence Tuesday and stressed that it was a Scottish decision alone to free the Lockerbie bomber.
Brown reiterated that his "resolve to fight terrorism is absolute" and said he was disgusted by the jubilant reaction from crowds in Tripoli, who waved Libyan and Scottish flags when the convicted murderer returned home.
"I was both angry and I was repulsed by the reception," he said.
But Saif al-Qaddafi told the Herald it was time to "talk about the future" and start working with the "promising, rich market" in Libya.
"Lockerbie is history. The next step is fruitful and productive business with Edinburgh and London," he said.