Investigations into a gunrunning sting gone haywire are creeping closer to the top of the U.S. Justice Department and its head, U.S. Attorney General Eric H. Holder, Jr.

A congressional report released yesterday reveals that top DOJ officials had knowledge of the sting, known as Operation Fast and Furious, in which U.S. Bureau of Alcohol, Tobacco, and Firearms (ATF) agents allowed more than 2,000 firearms to “walk” across the U.S. border to Mexico and into the hands of Mexico’s brutal drug cartels. As many as 1,700 of those weapons have since been lost. More than 100 have been linked to crimes on both sides of the border, including the murder of a U.S. Border Patrol agent last December.

U.S. Rep. Darrell Issa (R-CA) and U.S. Sen. Charles Grassley (R-IA), who are leading the congressional investigation into the operation, have made it clear that the attorney general — a confidant of President Barack Obama — is a central focus of their probe.

“I do have serious concerns that the attorney general should have known a lot more than he says he knew,” Issa told the Washington Post. “In some ways, I’m more disappointed that he’s saying he didn’t know than if he says he was getting briefings and he didn’t understand.”

So far, the DOJ has stonewalled the Issa/Grassley probe. But recent testimony from the embattled ATF director made the astounding claim that the cartel leaders targeted by Fast and Furious were allegedly paid informants for the Drug Enforcement Administration and the FBI.

If true, these allegations could taint the entire Justice Department.

As the investigation widens, Holder will likely face some tough questions about how an ill-fated operation to actively arm — and perhaps pay — Mexico's brutal drug cartels could have happened under his watch, with or without his knowledge.

Here’s our guide to Operation Fast and Furious:

What is Operation Fast and Furious?

In October 2009, directors of the FBI, the DEA, the ATF, met with DOJ officials in Arizona and Washington to form a new strategy to track guns smuggled to high-level cartel suspects. The new strategy, dubbed "Project Gunrunner," emphasized identifying and eliminating gun smuggling networks, rather than prosecuting the individual “straw purchasers,” who buy guns for the cartels.

In theory, the strategy made sense. As we have previously written, given their reputation for violence, Mexican drug cartels are notoriously difficult to crack — nearly all low-level traffickers working for the cartels have relatives and friends in Mexico who could be targets if they turned against their bosses. Further, straw purchasers typically have no criminal records, making it difficult to prosecute them for buying guns — usually the toughest consequence they face is probation.

ATF agents in Phoenix immediately implemented the strategy, dubbing their program Operation Fast and Furious because most of straw buyers worked at auto shops. Under the program, instead of arresting the straw buyers, ATF agents tailed them to track where the guns ended up.

According to an ATF briefing paper from January 2010, the ATF agents worked with the Phoenix DEA and the U.S. prosecutors in Arizona on the investigations. In some cases, ATF agents even used DOJ-funded wire tapping to track the guns.

While DOJ officials have claimed Fast and the Furious guns were tracked, testimony from ATF agents and evidence from the agency’s database shows that more than half of the guns were lost after they crossed the border. At least 122 of the guns have been found at bloody cartel crime scenes in Mexico.

Fast and Furious is technically legal under ATF rules because the agents were not directly supplying guns to the cartels. But the danger of letting guns walk is obvious. More than 40,000 people have been killed in drug violence in Mexico since 2006.

Who Knew What?

According to Issa and Grassley’s first report, released in May, Operation Fast and Furious was “known and authorized at the highest level of the Justice Department.”

“Through both the U.S. Attorney’s Office in Arizona and “Main Justice,” headquarters in Washington, D.C., the Department closely monitored and supervised the activities of the ATF,” the report says.

Yesterday's report elaborates:

“The Department of Justice, and more specifically, Assistant Attorney General Lanny Breuer, clearly knew about Operation Fast and Furious. Further, the Department of Justice’s Office of Enforcement Operations (OEO) approved numerous of the wiretap applications in this case. These applications were signed on behalf of Assistant Attorney General Breuer in the spring of 2010.”

In a May Congressional hearing, Issa and Holder had a tense exchange about Operation Fast and Furious, in which Holder said he was not sure of the exact date he first heard of the operation. He also said he could not say who authorized the operation.

When asked specifically if Breuer had authorized it, Holder responded:

“I’m not sure whether Mr. Breuer authorized it. I mean, you have to understand the way in which the department operates. Although there are — there are operations, this one has become — has gotten a great deal of publicity.”

DOJ has not responded to our request for comment on when Holder learned of Breuer’s involvement in Fast and Furious.

During an interview with Univision, President Barack Obama categorically denied that he or Holder had authorized the operation.

“Well, first of all, I did not authorize it,” Obama said. “Eric Holder, the attorney general, did not authorize it. There may be a situation here in which a serious mistake was made. If that’s the case, then we’ll find — find out and we’ll hold somebody accountable.”

According to Tuesday's congressional report, ATF agents in Mexico — and the Mexican government — received “little to no information” about the gunrunning probe from their counterparts in Phoenix — even as they were reporting that an alarming number of weapons found at cartel crime scenes were being traced back to Arizona,

"I wasn’t convinced that this happened until this past April after all the allegations were made, and I talked to different people," the ATF's acting attache in Mexico City told Congressional investigators. "I was beyond shocked. Embarrassed. I was angry. I'm still angry. Because this is not what we do….I mean, this is the perfect storm of idiocy."

What Are The Political Implications?

Since the scandal broke rumors have swirled that the ATF’s acting director, Kenneth Melson, would resign. An email obtained by the House Committee on Oversight shows that Melson knew of Fast and Furious and was even able to watch a live feed of straw buyers purchasing AK-47s from his Washington office.

In his secret July 4 testimony, Melson, accompanied by a private lawyer, told Congressional investigators that DOJ officials had told him to keep quiet, and asked him not to cooperate with the House probe. He added that the department seemed primarily concerned with protecting senior political appointees.

Concerned that Holder was looking to make Melson his “fall guy,” Issa and Grassley subsequently wrote a letter detailing Melson's testimony to the DOJ, warning Holder not to fire or retaliate against the ATF director. The letter requests emails, memos, and notes from 12 senior DOJ officials.

In addition, Issa and Grassley wrote that Melson's testimony corroborated claims, from unidentified sources, that the Mexican drug cartel leaders targeted by Fast and Furious were apparently paid informants for the FBI and the DEA, a connection the ATF was not aware of.

As a result, the probe has now escalated. If Melson's allegations are true, the Fast and Furious investigation will widen to the other law enforcement agencies, and possibly the upper echelons of DOJ.

"Our investigation has clearly expanded," one source close to the investigation told the LAT. "We know now it was not something limited to just a small group of ATF agents in Arizona."