Blackwater employees were told that they could speak freely and that what they said would not be used against them individually, but a source with firsthand knowledge of the investigation said that does not mean what they said about each other could not be used against the individuals who fired their weapons.

An FBI official told FOX News that the case "is an ongoing matter, and we will have no comment." A Department of Justice source agreed that "the investigation is continuing."

But one source indicated the Department of Justice and the FBI feel hamstrung by the immunity grant, which blocked the FBI investigative team in Baghdad from collecting essential information from those allegedly involved in the shootings.

Senior federal law enforcement officials confirm that the FBI investigative team was en route home Monday to Washington, D.C., from Baghdad. The team had been trying to collect evidence in the Sept. 16 embassy convoy shooting, and was not able to collect statements from Blackwater employees who were given immunity.

"Once you give immunity, you can't take it away," a senior law enforcement official familiar with the investigation told The Associated Press.

Blackwater spokeswoman Anne Tyrrell declined comment about the U.S. investigation. Based in Moyock, N.C., Blackwater USA is the largest private security firm protecting U.S. diplomats in Iraq.

Just as the immunity deal was being reported, a Blackwater representative said a press release issued Monday on what appears to be Blackwater letterhead suggesting it is setting up a corporate responsibility office is not true and designed to further besmirch the name of Blackwater.

That press release quoted Eric Prince, chairman and CEO of the Prince Group and Blackwater USA, as saying: “Just as in warfare, a good offense is the best defense. So we are going on the offense to defend the image of our great company.”

The company has defended itself against accusations by saying its convoy was under attack on Sept. 16 before it opened fire in west Baghdad's Nisoor Square, killing 17 Iraqis. A follow-up investigation by the Iraqi government, however, concluded that Blackwater's men were unprovoked. No witnesses have been found to contradict that finding.

An initial incident report by U.S. Central Command, which oversees military operations in Iraq, also indicated "no enemy activity involved" in the Sept. 16 incident. The report says Blackwater guards were traveling against the flow of traffic through a traffic circle when they "engaged five civilian vehicles with small arms fire" at a distance of 50 meters.

All the Blackwater bodyguards involved — both in the vehicle convoy and in at least two helicopters above — were given legal protections as investigators from the Bureau of Diplomatic Security sought to find out what happened. The bureau is an arm of the State Department.

The FBI had taken over the case early this month, officials said, after prosecutors in the Justice Department's criminal division realized it could not bring charges against Blackwater guards based on their statements to the Diplomatic Security investigators.

Officials said the Blackwater bodyguards spoke only after receiving so-called "Garrity" protections, requiring that their statements only be used internally — and not for criminal prosecutions.

At that point, the Justice Department shifted the investigation to prosecutors in its national security division, sealing the guards' statements and attempting to build a case based on other evidence from a crime scene that was by then already two weeks old.

The FBI has re-interviewed some of the Blackwater employees, and one official said Monday that at least several of them have refused to answer questions, citing their constitutional right to avoid self-incrimination. Any statements that the guards give to the FBI could be used to bring criminal charges.

A second official, however, said that not all the guards have cited their Fifth Amendment right against self-incrimination — leaving open the possibility for future charges. The official declined to elaborate.

Prosecutors will have to prove that any evidence they use in bringing charges against Blackwater employees was uncovered without using the guards' statements to State Department investigators. They "have to show we got the information independently," one official said.

Garrity protections generally are given to police or other public law enforcement officers, and were extended to the Blackwater guards because they were working on behalf of the US government, one official said. Experts said it's rare for them to be given to all or even most witnesses — particularly before a suspect is identified.

"You have to be careful," said Michael Horowitz, a former federal prosecutor in Manhattan and senior Justice Department official. "You have to understand early on who your serious subjects are in the investigation, and avoid giving these people the protections."

It's not clear why the Diplomatic Security investigators agreed to give immunity to the bodyguards, or who authorized doing so.

Bureau of Diplomatic Security chief Richard Griffin last week announced his resignation, effective Thursday. Senior State Department officials, speaking on conditions of anonymity, have said his departure was directly related to his oversight of Blackwater contractors.

Tyrrell, the Blackwater spokeswoman, said the company was alerted Oct. 2 that the FBI would be taking over the investigation from the State Department. She declined further comment.

On Oct. 3, the State Department's Sean McCormack said the FBI had been called in to assist Diplomatic Security investigators. A day later, he said the FBI had taken over the probe.

"We, internally and in talking with the FBI, had been thinking about the idea of the FBI leading the investigation for a number of different reasons," McCormack told reporters during an Oct. 4 briefing.

Last week, Secretary of State Condoleezza Rice ordered a series of measures to boost government oversight of the private guards who protect American diplomats in Iraq. They include increased monitoring and explicit rules on when and how they can use deadly force.

Blackwater's contract with the State Department expires in May, and Iraqi Prime Minister Nouri al-Maliki has said his Cabinet is drafting legislation that would force the State Department to replace Blackwater with another security company.

The latest news is sure to inflame Rep. Henry Waxman, chairman of the House Oversight and Government Affairs Committee, who had been conducting his own probe of the shootings until the Justice Department requested lawmakers wait until the FBI concludes its inquiry.