May 24, 2002 -- An elite anti-terrorism FBI unit received both key memos that are the focus of an inquiry into Sept. 11 intelligence failures, and not only didn't act on them, but hindered the investigation, congressional leaders said today.

Lawmakers are demanding answers to what happened to FBI correspondence from agents in Phoenix and Minneapolis before the Sept. 11 terror attacks. And lawmakers are concerned about a letter sent by an FBI agent in Minnesota that is highly critical of the FBI's handling of the investigation.

"This was worse than dropping the ball. This was bureaucrats at headquarters actively interfering with an investigation that had a terrorist in hand," Sen. Charles Grassley, R-Iowa, said in a statement.

The bureau's Radical Fundamentalist Unit, headed by Supervisory Special Agent Dave Frasca, and its Osama bin Laden Unit, first got a memo that Phoenix FBI agent Ken Williams sent in early July. He informed his superiors of his concerns about Arabs linked to a London fundamentalist group who were attending flight schools in Arizona. Williams suggested a national sweep of such schools for possible terrorists.

Then, in August, agents arrested Zacarias Moussaoui on immigration charges after a flight school in Minnesota became suspicious of him and informed the FBI.

FBI agents in Minnesota asked for authority to get a warrant to check Moussaoui's computer, but were turned down, FBI Director Robert Mueller told Congress recently, because there was insufficient probable cause. Moussaoui has since been charged as the so-called 20th hijacker in the Sept. 11 attacks.

A Scathing Letter

This week, a Minnesota agent wrote a scathing letter to Mueller and members of Congress, complaining that upper-level officials failed to connect the clues. Plus, agent Coleen Rowley charged some in the FBI hindered the work of field agents who understood the importance of what they were reporting.

"The agents in Minneapolis who were closest to the action, and in the best position to gauge the situation locally, did fully appreciate the terrorist risk/danger posed by Moussaoui and the possible co-conspirators even prior to Sept. 11," Rowley wrote, according to a recounting given to The Associated Press.

Central FBI officials failed to act on the original Minnesota concerns, then rebuked agents who sought to continue their investigation with help from the CIA, Rowley alleged.

"When, in a desperate 11th-hour measure to bypass the FBI HQ roadblock, the Minneapolis division undertook to directly notify the CIA's counterterrorist center, FBI HQ personnel chastised the Minneapolis agents for making the direct notification without their approval," she wrote.

And worse, sources told ABCNEWS, Rowley alleged that someone in FBI headquarters rewrote parts of the affidavit that Minnesota agents produced to get access to Moussauoi's computer, weakening it before it was passed to a higher level.

"One of the worst things is that these guys were actively hindering the investigation," a government source familiar with the letter said. "They rewrote the affidavit for the [Moussaoui] warrant. They also took information out of the affidavit. Minnesota had this information [to merit a warrant], and headquarters edited the application."

Collaborating with Osama, Agents Joke

The Minnesota agents were so frustrated by the inaction of their superiors that they apparently joked that headquarters was helping Osama bin Laden.

"After being briefed on this letter, I don't blame agents in Minnesota for wondering if there were unwitting collaborators of Osama bin Laden sitting around at headquarters," Grassley said in his statement.

"This letter documents exactly what headquarters knew and when, and how mid-level officials sabotaged the Moussaoui case before the attacks," Grassley said.

Calling Unit Head on the Carpet

Grassley, Senate Judiciary Chairman Patrick Leahy, D-Vt., and Sen. Arlen Specter, R-Pa., sent a letter to Mueller today demanding that Rowley be granted whistle-blower status, and that she not face retaliation for coming forward.

They also asked Mueller to explain the role of the head of the Radical Fundamentalist Unit, Supervisory Special Agent Frasca, in handling the Phoenix memorandum and the Moussaoui investigation.

"Please explain his role and the role of the RFU in evaluating the requests from the Minneapolis field office in the Moussaoui case; what connection, if any, he or others drew between the two ongoing investigations; and whether he or others brought such a connection to the attention of higher level FBI official," they wrote.

Would it Have Helped?

Staffers for Senate Intelligence Committee Chairman Bob Graham, D-Fla., and chairman of the House Intelligence Committee Porter Goss, R-Fla., confirmed that the Radical Fundamentalist Unit got the relevant memos, as well as the Osama bin Laden Unit, though the leaders did not say acting on the missives might have averted the September attacks.

"There was no single piece of information that on its own would have led you to a further investigation that might have avoided Sept. 11," Graham said.

"But the fact is, it was not a single piece of information, there were a series of pieces of information, and in fact we are continuing to surface additional pieces of information where clues were given," he said.

Graham said that additional information was surfacing, but declined to specify what it was.

ABCNEWS has learned that after Sept. 11, when investigators did get a warrant to further investigate Moussauoi, they found information on his computer about crop dusters, as well as the phone number of a known bin Laden operative.

Frustration in the Field

A union representative for FBI agents said the frustration expressed by Rowley problem across the bureau, although she said Mueller has been improving the ability of agents to act.

"Agents, street agents that were working both foreign counterintelligence as well as international terrorism matters and domestic terrorism matters, have felt a degree of frustration in the past," Nancy Savage, president of the FBI Agents Association, told ABCNEWS. "Most of that frustration could be laid at the hands of the interpretation of the rather significant guidelines that we have on intelligence gathering operations within the United States."

She said the Minnesota agents were running into what they felt was an excessively strict interpretation of guidelines.

"They were frustrated, frustrated with the legal constraints that we were operating under at that time, which one of the issues is that we, in order to pursue with electronic surveillance in aggressive fashion, we had to be able to determine that the individual that we were looking at was actually an agent of a foreign power," she said.

"We have to sort of put that subject into a no-box, even though we might know or might suspect that that individual was conspiring to commit some kind of terrorist act. In order to pursue it any further according to the legal guidelines that we were operate under, we had to be — have — very, very specific information to move forward — sort of a Catch 22."

ABCNEWS' Pierre Thomas, Linda Douglass, Aditya Raval, A.B. Stoddard and Michael McAuliff contributed to this report.