'Fast and Furious' report finds DHS missed warning signs, Napolitano in the dark

The second of two reports examining who's to blame over the federal anti-gunrunning scheme known as Operation Fast and Furious exonerates top officials at the Department of Homeland Security, but paints a picture of ineptitude, ignorance and mismanagement at the DHS operations in Arizona.

A report by the Homeland Security inspector general, obtained Friday by Fox News, concluded many in the agency's Arizona operation knew for a long time the U.S. helped criminals smuggle guns to Mexico in violation of policy, but did nothing to stop it.

Further, the report said word of the gun-smuggling operation within DHS never traveled beyond Arizona -- and claimed Immigration and Customs Enforcement Director John Morton and Homeland Security Secretary Janet Napolitano were never informed of the role ICE played.

According to the report, on numerous occasions ICE and Border Patrol agents stopped vehicles smuggling guns to Mexico, but were instructed by the ATF and U.S. attorney's office to back off. Even after "suspects admitted to having transported weapons across the border five or six times," they were not arrested, and ATF did not "try to flip the suspects to get them to cooperate, which was a mistake," the report said.

The report was especially critical of senior management in Arizona, who oversaw the Fast and Furious case and assigned a full-time agent to the task force running the operation. That agent conducted surveillance, wrote and received reports, and was aware "gun-walking" -- or allowing the guns to go into Mexico -- "was against policy." But "senior leaders did not read (his) reports nor instruct him to change his methodology or activities."

The report did not name names. However, the Phoenix agent in charge then and now is Matt Allen, a highly regarded and long-time ICE agent who transferred to Arizona in 2008. It criticized Allen's use of the word "tangential" when describing ICE's role in Fast and Furious and the death of Border Patrol Agent Brian Terry.

"We question (Allen's) use of the word 'tangential'," said the report. "Just a few weeks earlier, (the department described HSI agents as) fully involved. ... (Allen) should have provided ICE headquarters officials with a more thorough and clear account of the role his office had in the operation."

Early in the case -- after learning the ATF let more than 200 guns get smuggled to Mexico despite a warning the buyers were dirty from Lone Wolf gun store owner Andre Howard --  a senior ICE agent said in an email, "I'm speechless. Even the owner knows this ain't right, and ATF apparently doesn't get it."

Following the death of Agent Brian Terry, another supervisor wrote, "and this is exactly what I said would happen when you let that many guns walk."

Yet the debate apparently stayed within Arizona.

"Senior DHS officials in Washington DC had no awareness of the methodology used by the task force to investigate Operation Fast and Furious until media reports were published in March 2011," the report said.

The report also claimed that days after the death of Terry, former U.S. Attorney for Arizona Dennis Burke, who oversaw Fast and Furious and later resigned because of his role in it, declined to tell Napolitano about the case, even as she called for an investigation into it.

Robert Heyer, a spokesman for the Terry family, said no one from the OIG ever contacted the family and criticized the report for failing to hold anyone accountable.

"We are very disappointed with the quality and depth of the investigation," Heyer told Fox News. "The report says that Homeland Security personnel in Arizona all knew on December 15th that the weapons found at the murder scene were from (Fast and Furious). That information was passed to (headquarters), yet was never passed on to Secretary Napolitano," he said. "(Allen) had the opportunity to shut down the operation because of public safety concerns but he chose not to. How about holding DHS executives accountable for that decision."

The OIG has not responded to a question from Fox News on why the report did not include names.