Did Ariel Sharon, the Prime Minister of Israel, run a covert program with operatives in high-level US government positions to influence the Bush Administration’s decision to go to war in Iraq? The FBI wants to know.

That’s the story behind the latest Washington spy scandal, involving Israel, the American Israel Public Affairs Committee (AIPAC) and a mid-level civilian Pentagon employee allegedly caught red-handed trying to deliver US secrets to the Israelis.

It’s not a routine spy case. According to sources familiar with the investigation, the FBI is looking at a group of neoconservatives who have occupied senior posts at the White House, the Pentagon and in Vice President Cheney’s office. It’s not that they are supporters of Israel–no crime there–but that some of them might be conspirators in a clandestine operation launched by Sharon’s Likud Party. They make up the very network of ideologues–from civilians at the Defense Department to fellow travelers at right-wing think tanks–who have been accused of pushing George W. Bush into war. The point of the probe, sources believe, is not to examine the push to war but rather to ascertain whether Sharon recruited or helped place in office people who knowingly, and secretly, worked with him to affect the direction of US policy in the Middle East. The most likely targets of the inquiry are Douglas Feith, Under Secretary of Defense for Policy, and Harold Rhode of the Pentagon’s Office of Net Assessment.

It’s an explosive inquiry and one that raises the most sensitive hackles, since it involves the possibility that US officials (most, but not all, Jews) are working on Sharon’s behalf. They include Feith and a handful of other officials, including those in the inner circle of his policy office who formed the core of the Office of Special Plans (OSP). The probe faces stiff political resistance. Yet it may have legs.

The investigation burst into the news in late August when CBS News reported that the FBI had caught a Feith staffer, later identified as Larry Franklin, trying to deliver what turned out to be a classified draft of a presidential memo on Iran to AIPAC and an Israeli Embassy diplomat. Subsequent attention focused largely on whether Franklin was a spy for Israel, but in fact he is only a minor figure in a far more sweeping probe that began two years ago.

What triggered the original investigation isn’t known, but it is known that it began at a critical moment, as Feith and Rhode began assembling a team, which included Franklin, to form the OSP. It’s been widely reported that the OSP manufactured exaggerated intelligence reports on the threat from Iraq, but less reported is the fact that the OSP also carried out unauthorized operations. Several OSP officials–including Rhode, Franklin and Michael Maloof, one of the two original staffers of the forerunner to OSP, joined by Michael Ledeen of the American Enterprise Institute (AEI)–took part in a rogue Pentagon initiative, beginning in 2001 with unsavory wheeler-dealers in Rome and Paris, to discuss regime change beyond Iraq, in Iran and Syria. The CIA found out about the Rome meeting, and the agency may have asked the FBI to start watching Feith, Rhode, Ledeen, Franklin et al. Former CIA and Defense intelligence officials familiar with the case stress that the FBI is looking at an operation run by the Israeli prime minister, not by the Mossad, Israel’s intelligence agency, and that the investigation is based solely on concerns about foreign influence. “It’s about Sharon,” says a former senior CIA operations officer. “This has nothing to do with anti-Semitism.”

Some familiar with the case suggest that the FBI’s investigation is looking back as far as 1996, when Feith, Richard Perle, Feith’s boss at the Pentagon in the 1980s and until recently chairman of the Pentagon’s Defense Policy Board, and David Wurmser, a co-founder of OSP who is now Cheney’s Middle East adviser, wrote a radical memo, called “A Clean Break,” to incoming Israeli Prime Minister Benjamin Netanyahu calling for confrontation with Iraq, Syria, Lebanon and the PLO.

Since the investigation came to light, Sharon’s closest allies have led an effort to derail it. Screaming the loudest is Marc Zell, Feith’s former law partner, who is now an attorney in Israel tied to the Likud’s right wing and to the settler movement. “It’s a cheap shot by certain people inside the government to embarrass Doug and the Pentagon leadership,” Zell told the Philadelphia Inquirer. “Certain elements inside the military and intelligence communities are unhappy with the policy decisions of people in the upper echelon and attempt, sometimes in a very crude way, to embarrass them.” News of the investigation stunned AIPAC, the Jewish Institute for National Security Affairs, AEI and others in Likud’s Washington circuit. And, of course, AIPAC’s friends in Congress are hopping mad. Ha’aretz, the Israeli daily, said that news of the inquiry landed like the “diplomatic equivalent of an unexploded cluster bomb.”

Perle is demanding that the White House clamp down on the investigators, according to the Boston Globe. “It’s pretty nasty, and unfortunately the Administration doesn’t seem to have it under control,” the Globe quotes Perle as saying. But according to the Financial Times, the White House is quietly doing just that: The London daily reports that the White House is pressuring the FBI and the Justice Department not to issue indictments in the case.

Other voices are also being heard. Democratic Representative John Conyers wrote to the chairman of the House Judiciary Committee demanding an investigation into “substantial and credible evidence that Pentagon officials…have engaged in unauthorized covert activities.” Conyers specifically cited Feith. And the Senate Select Committee on Intelligence is now deep into phase two of its own probe, which includes examining the work of the OSP; its report is expected after the November election.

The FBI has an ace in the hole that may allow it to resist White House pressure. “By now,” says a retired intelligence official, “the FBI has gathered up so much material in grand jury records and things like that that they are in a position to push back against pressure from the Administration to back away from this. When they get pressure, they leak to somebody. And the potential of disclosure is a real threat to the Administration.” In addition, the counterintelligence probe could spin off investigations in several possibly related scandals, including the Ahmad Chalabi case and the Valerie Plame leak, not to mention the Franklin matter.

“They have no case,” says AEI’s Michael Ledeen. We’ll see.