(Adds details, quotes)

By Kristin Roberts

WASHINGTON, June 16 (Reuters) - U.S. soldiers who killed a Reuters journalist in Iraq acted within military rules, but the Army's probe of the incident was tainted by its failure to preserve evidence, a Pentagon investigation said on Monday.

The Defense Department's inspector general, the Pentagon's watchdog agency, found that U.S. soldiers who fired on a Reuters car in west Baghdad in August 2005, killing Reuters Television soundman Waleed Khaled, reasonably responded to what they thought was a threat.

But the inspector general criticized the Army investigator for losing a critical piece of evidence -- video from a Reuters cameraman in the car that captured events leading up to and including the shooting.

That Army investigator's actions rightfully led Reuters to believe the investigation was not thorough or independent, the inspector general's report said.

"We found that although the (investigating officer) who conducted the Army investigation did not pursue some logical investigative actions, he properly concluded that during an ongoing enemy attack the soldiers thought a video camera and external microphone held out of an indigenous, unmarked vehicle was a rocket propelled grenade," the inspector general said.

"The soldiers reasonably believed that act constituted a threat to United States forces and as such were obligated to act and did so in accordance with the (rules of engagement)."

SAFETY MEASURES

The inspector general also faulted Reuters and its safety practices. The car carrying Khaled and cameraman Haider Kadhem was not marked "press," for example, and Kadhem wrongly stuck his camera out the car window, according to the military.

That made it difficult for soldiers to distinguish the journalists from combatants, the inspector general said.

Reuters said it disagreed with the Pentagon agency's findings but appreciated its recommendation that the U.S. military work with news organizations on safety procedures to avoid similar incidents.

"I am never satisfied when a journalist is killed in the course of covering a story," said Reuters Editor-in-Chief David Schlesinger. "I am satisfied that the inspector general took this case seriously and came up with useful and positive recommendations."

Khaled and Kadhem were inside a Reuters car while Kadhem, in the front passenger seat, filmed the aftermath of an insurgent ambush on Iraqi police. The car was not marked "press" due to worries that Iraqi insurgents were targeting reporters, Schlesinger said.

Soldiers positioned more than 200 yards (meters) away -- the length of two American football fields -- thought they saw someone leaning out of the car with a rocket propelled grenade, according to the U.S. military.

Without confirming what they thought they saw by using binoculars, the soldiers fired on the car, killing Khaled.

No weapons were found in or near the car.

The U.S. military confiscated Kadhem's camera, which contained video of the shooting. The U.S. military showed the footage to Reuters staff but later lost that video, characterized by Reuters as a "key piece of evidence" and one that corroborated the Reuters version of events.

Reuters Chief Counsel Thomas Kim called the video "the only piece of objective evidence" available in the incident.

An independent inquiry commissioned by Reuters concluded in April 2006 that the shooting appeared "unlawful" and said nothing Khaled or Kadhem did could have been mistaken as hostile.

That investigation by The Risk Advisory Group, a risk management consultancy, said it would be impossible to identify a rocket propelled grenade from 200 yards (meters) away.

JOURNALISTS KILLED

Iraq is the world's most dangerous country for journalists. At least 179 reporters and media assistants have been killed since the U.S.-led invasion in 2003, according to the New York-based Committee to Protect Journalists.

That exceeds the number of journalists killed in World War Two and during fighting in Vietnam, according to data on the group's Web site.

Seven Reuters staff have been killed in Iraq since 2003.

Journalists have been killed covering other ongoing conflicts as well.

Two months ago, Reuters cameraman Fadel Shana was killed in Gaza by an Israeli tank shell. The Israeli army has not released findings of its internal probe into the incident.

Reuters, the news division of global information company Thomson Reuters Corp <TRI.TO> <TRIL.L>, commissioned an independent report that found there was no fighting or militant activity in the immediate area where Shana was working. (Reporting by Kristin Roberts, Editing by Howard Goller)

AlertNet news is provided by