WASHINGTON  - The Justice Department under Attorney General John Ashcroft failed in 2001 to treat counterterrorism as a top priority, the commission investigating the Sept. 11 attacks said in a report issued on Tuesday.

The commission staff statement focused on a Justice Department document that set out priorities for 2001 issued May 10 of that year. The top priorities were reducing gun violence and combating drug trafficking. It made no mention of counterterrorism.

The report said when Dale Watson, the head of the counterterrorism division, saw the report, he "almost fell out of his chair."

"The FBI's new counterterrorism strategy was not a focus of the Justice Department in 2001," the staff report said.

Then-acting FBI Director Thomas Pickard said he appealed to Ashcroft for more money for counterterrorism but on Sept 10, 2001, one day before the attacks on New York and Washington that killed nearly 3,000 people, Ashcroft rejected the appeal.

The commission was to hear testimony later from Ashcroft, and his Democratic predecessor, Janet Reno. The panel first heard from former FBI Director Louis Freeh at public hearings that were to continue on Wednesday.

The report also focused on FBI failures to detect the hijacked airliner plot, amid new revelations contained in a presidential briefing that the bureau had some 70 separate investigations related to Osama bin Laden's al Qaeda network underway a month before the attacks.

The newly declassified Aug. 6, 2001, briefing said the FBI had detected suspicious activity "consistent with preparations for hijackings or other types of attacks."

The report found that despite increasing concern about terrorist threats, the FBI was hampered by a culture resistant to change, inadequate resources and legal barriers.

"From the first World Trade Center attack in 1993, FBI and Department of Justice leadership in Washington and New York became increasingly concerned about the terrorist threat from Islamic extremists to U.S. interests both at home and abroad," said the report, presented at the commission hearing.

Significant FBI resources were devoted to investigations of major terrorist attacks that resulted in several prosecutions, but FBI attempts to strengthen its ability to prevent such attacks failed to make changes across the bureau, it said.

FBI HOBBLED

"On September 11, 2001, the FBI was limited in several areas critical to an effective, preventive counterterrorism strategy," it said, citing limited intelligence collection and analysis capabilities, limited information sharing, insufficient training, an overly complex legal regime and inadequate resources.

The FBI worked hard on terrorist financing investigations, and before Sept. 11 agents understood there was a network of extremist organizations operating within the United States supporting a global Islamic jihad movement, the report said.

But they did not know the degree to which those extremist groups were associated with al Qaeda, the report said.

While many of the groups appeared to have some connection to bin Laden, FBI agents had little hope they would be able to make a criminal case or disrupt the operation because of rules making distinctions between gathering intelligence and building criminal cases.

In the years before the attacks, counterterrorism investigations that generally resulted in fewer prosecutions "were viewed as backwaters" because FBI agents were rewarded based on arrests, indictments, and prosecutions, the report said.

Agents developed information for their own cases and the poor state of the FBI's information systems meant agents "usually did not know what investigations agents in their own office, let alone in other field offices, were working on."

"As a result, it was almost impossible to develop an understanding of the threat from a particular international terrorist group," the report said.

Although the FBI's counterterrorism budget tripled during the mid-1990s, its counterterrorism spending stayed fairly constant between fiscal years 1998 and 2001, it added.

On Sept. 11, 2001, only about 1,300 agents, or 6 percent of the FBI's total personnel, worked on counterterrorism.

"Former FBI officials told us that prior to 9/11, there was not sufficient national commitment or political will to dedicate the necessary resources to counterterrorism," the report said.

© Copyright 2004 Reuters Ltd

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