CQ Politics quotes two formal national-security officials in reporting that Jane Harman cut a deal with the American Israeli Public Affairs Committee (AIPAC) to get two of its officials off the hook on espionage charges in exchange for lobbying help with Nancy Pelosi to get Harman the chair of the House Intelligence Committee.  If true, the wiretap transcript could provide an explicit quid pro quo that could result in obstruction of justice charges and an ethics probe that could allow Pelosi to expel her California rival from Congress:

Rep. Jane Harman , the California Democrat with a longtime involvement in intelligence issues, was overheard on an NSA wiretap telling a suspected Israeli agent that she would lobby the Justice Department to reduce espionage-related charges against two officials of the American Israeli Public Affairs Committee, the most powerful pro-Israel organization in Washington.

Harman was recorded saying she would “waddle into” the AIPAC case “if you think it’ll make a difference,” according to two former senior national security officials familiar with the NSA transcript.

In exchange for Harman’s help, the sources said, the suspected Israeli agent pledged to help lobby Nancy Pelosi , D-Calif., then-House minority leader, to appoint Harman chair of the Intelligence Committee after the 2006 elections, which the Democrats were heavily favored to win.

Seemingly wary of what she had just agreed to, according to an official who read the NSA transcript, Harman hung up after saying, “This conversation doesn’t exist.”

Harmon hotly denies the story; her spokesperson calls it a regurgitation of previous rumors over her ties to AIPAC:

“These claims are an outrageous and recycled canard, and have no basis in fact,” Harman said in a prepared statement. “I never engaged in any such activity. Those who are peddling these false accusations should be ashamed of themselves.”

For those who may not know the background, Harman had been the ranking member on the House Intelligence Committee when the Republicans had the majority.  When the Democrats succeeded to power after the 2006 midterm elections, Harman expected to automatically get the chair, as tradition would dictate.  However, Pelosi wanted to pay back Harman for her support on the Iraq war and especially on Harman’s support for the Bush administration’s surveillance programs — a nifty little bit of historical irony.  Initially, Pelosi picked the impeached federal judge turned Congressman Alcee Hastings for the chair, but after an eruption of outrage over that selection, settled for Silvestre Reyes, who has held the position ever since.

This mess doesn’t end with Harman, either.  According to CQ Politics, the probe got quashed by none other than Alberto Gonzales while serving as Attorney General.  Gonzales, who later had to resign after botching the routine dismissal of political appointments at the DoJ, stopped the probe not because he thought the charges were baseless, but because he thought Harman was too valuable on the committee to put at risk.  If true, it means that Gonzales — the man responsible for enforcing American law and a key member of the national-security effort — willingly turned a blind eye to espionage and obstruction of justice in order to protect a corrupt member of Congress.

Specifically, according to CQ-P, Gonzales felt that the administration needed a Democratic voice to support the NSA wiretap program that the New York Times was about to blow open.  He got what he wanted.  Harman went to bat for the administration, defending the program and pushing back against the outrage voiced by Pelosi, Harry Reid, and a host of Democrats.  In the end, Harman was vindicated by the eventual position of Barack Obama on the wiretap program, but too late to gain an appointment with the Obama administration on national-security matters.

Now, the woman who defended the wiretaps may be undone by them.  We’ll see how far Pelosi will go to satisfy her grudge against Harman, and whether Eric Holder will do better than Gonzales on this case.

Update: CQ-P reporter Jeff Stein will host an online Q&A session at 3:30 pm ET today, and people can start submitting questions now.

Update II: Jazz Shaw wonders why I’m not mentioning that Israel got caught spying in the US — again. Well, it’s old news; I covered it pretty extensively in 2005-6, when the case came to light. The big breaking news in this story isn’t that Israel got caught spying (by the Bush administration!) in 2005, but that Harman got caught trying to sell her intervention for her personal gain — and that Gonzales apparently helped cover it up. Many of us have been around longer than the Israeli spy story, including the Boss.

Update III: Be sure to read David Schraub’s response at TMV. Anyone “shocked, shocked” that even friendly nations spy on each other needs to get a Captain Louis Renault award.