WASHINGTON, Oct 29 (Reuters) - U.S. State Department investigators looking into the shooting deaths of 17 Iraqis in Baghdad last month offered immunity deals to Blackwater security guards, The New York Times reported on Monday.

The investigators from the agency's investigative arm, the Bureau of Diplomatic Security, did not, however, have the authority to offer such immunity grants, the newspaper said, citing U.S. government officials.

The offers represent a potentially serious investigative misstep that could complicate efforts to prosecute Blackwater employees involved in the incident, the newspaper said.

The officials, who were not identified, said Justice Department prosecutors, who do have the authority to offer such deals, had no advance knowledge of the arrangement, the newspaper said.

Most of the Blackwater guards who took part in the Sept. 16 incident were offered what officials described as limited-use immunity, the report said.

Limited-use immunity means the private security guards were promised they would not be prosecuted for anything they said in interviews with the authorities as long as their statements were true, the Times said.

North Carolina-based Blackwater has about 1,000 employees in Iraq who protect U.S. diplomats and other officials.

The FBI took control of the investigation from the State Department early this month.

A Justice Department spokesman had no comment. A State Department official said the department does not comment on ongoing investigations and referred questions to the FBI.

Foreign contractors in Iraq are immune from prosecution under Iraqi law under a decree issued by the U.S.-led Coalition Provisional Authority in 2004.

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