an official U.S. source said Sunday that the FBI will likely refrain from charging suspected Pentagon mole Larry Franklin with espionage, but with mishandling a classified document.

The official source described Franklin as a likely idiot, not a spy.

According to American official sources, Franklin, who holds close relations with many Israel officials, handed classified documents to Israeli officials, but without the prior knowledge of how damaging his act was.

According to Newsweek, the story began as FBI closely monitored an Israeli embassy operative and a member in the pro-Israeli lobby AIPAC. Franklin was seen joining both at lunch in a Washington restaurant.

FBI agents placed him under surveillance, and spotted him attempting to hand a document to another person, who was not named, but that person refused to receive the document and asked Franklin for an oral briefing on its content.

Franklin is known to belong to the pro-Israel “hawks” in the Pentagon.

On Sunday the FBI broaden the probe to include interviews at the State and Defense departments and with Middle East affairs specialists outside the government.

Israel denied Saturday that it had any agents operating on American soil.

‘ Israel, for many years, has not carried out intelligence activity in the United States.’ Israeli official source said.

The alleged Pentagon spy was identified as Larry Franklin, a desk officer in the Defense Department’s Near East and South Asia Bureau, who worked with undersecretary of defense Douglas Feith.

Israeli denied receiving any classified information from Franklin, saying that relation with Franklin did not exceed the boundaries of accepted diplomatic contact.

American TV network CBS reported Friday that the FBI is convinced that an official in the Pentagon has conveyed “secret White House deliberations on Iran” to Israel via two representatives of the American Israel Public Affairs Committee (AIPAC).

A federal law enforcement agent said Saturday that arrests in the case could come as soon as next week.

White House spokesman Scott McClellan refrained from commenting on the issue, but described it as a serious matter.

The New York Times reported that Franklin shared creating the report on the relation between Iraq and Al-Qaida, which formed a base for launching the war on Iraq, and was later criticized by intelligence professionals.

CBS also reported that FBI investigators are concerned that Israel may have used Franklin in an effort to influence U.S. policy on the war in Iraq.

U.S. Defense Department said Saturday that the mole would not have had any influence on decision-making at that level.

The Franklin affair is expected to cause serious damage to Israel’s image and obstruct its working relations with the administration, especially as it rose up in a crucial period ahead of the U.S. presidential election.

The issue that the Current U.S. administration fabricated intelligence information around Iraq-Al-Qaida relations to justify launching the war against Iraq is a hot election debate.

Reports on the Franklin affair present the Bush administration as weak and easy to manipulate, even to the level of launching a superfluous war; an image that is harmful on elections’ eve.

Even if Democrats refrains from using the case against the Bush Administration, U.S. officials, over fears of inquires or surveillance, will think twice before talking to Israeli colleagues or AIPAC representatives.

AIPAC will be the party who will suffer most. The reported direct involvement of committee officials in the Franklin affairs will set to question the legitimacy of the dual loyalty that the committee represents.