Attorney General would consider spy bill deal

WASHINGTON (Reuters) - Attorney General Michael Mukasey said on Friday he was open to compromise with Congress on renewing an anti-terrorism spy bill that has been deadlocked over whether telephone companies should be shielded from lawsuits.

"If somebody has some brilliantly creative compromise, I'm happy to hear that," Mukasey told reporters.

His remarks came one week after the Democratic-led House of Representatives ignored White House veto threats and passed a bill permitting lawsuits against phone companies that participated in President George W. Bush's warrantless domestic spying program that was secretly launched after the September 11 attacks.

The Bush administration wants retroactive immunity granted to the companies.

As a result of the program, about 40 lawsuits have been filed against AT&T Inc, Verizon Communications Inc and Sprint Nextel Corp, accusing them of violating the privacy rights of law-abiding Americans swept up in the electronic surveillance of phone calls and e-mails.

The Senate has passed a bill with retroactive immunity that is supported by the Republican president. The House measure, while denying immunity, would let phone companies present their cases in a closed-door court with the judge given access to confidential documents.

Congress is trying to renew a 1978 law, the Foreign Intelligence Surveillance Act, to keep it current with new technology, such as e-mails, which did not exist when it was first written. The administration has warned of possible intelligence gaps if Congress fails to promptly renew FISA.

"The only weapon we have is intelligence," Mukasey said. "A large part of that is electronic intelligence; the ability to conduct surveillance of targets abroad."

While Republicans in Congress have demanded the House simply pass the Senate measure, which they say enjoys bipartisan support in both chambers, Mukasey on Friday struck a more conciliatory tone.

"WORKABLE BILL"

"We're willing and happy to work with Congress on a workable bill." He said the House-passed measure did not meet that standard though.

Mukasey said the tussle between the administration and Congress over the shape of the anti-terrorism legislation may have led to a brief interruption, lasting "a couple days," in intelligence gathering. He did not specify when that occurred.

During that time, Mukasey said the government was not "working as smoothly with our private partners as we would wish and as a result we weren't getting what we were getting before." He added, "That has since been put back together."

Mukasey said he did not know what information might have been missed by intelligence officers. "I hope it wasn't anything vital."

Mukasey became attorney general last November after a career that included service as a federal judge who presided over terrorism cases.

Mukasey said that since taking his post as the country's highest law enforcement officer, he had been "surprised" by the terrorist threats that exist.

Asked to elaborate, he said: "In terms of how varied it is, from how many directions it comes, how geographically spread out it is. It's just coming from a lot of directions and a lot of places."

(Editing by Peter Cooney)