WASHINGTON -- FBI Director Louis J. Freeh removed Larry A. Potts as his deputy director yesterday, saying that Mr. Potts is unable to perform his duties effectively because of controversy over the FBI's 1992 siege of a white separatist's house in Idaho, which left a woman dead.
The transfer of Mr. Potts, 47, to the FBI's training division in Quantico, Va., was Mr. Freeh's most serious setback in his nearly two years as FBI director. He had fought for Mr. Potts' promotion to deputy director, even after censuring him in January for management failures in the Ruby Ridge, Idaho, siege.
Mr. Potts, who has less than three years to serve before becoming eligible for full pension, "fully supports this transfer for both personal reasons, as well as his desire to best serve the bureau," Mr. Freeh said of the official he knows best in the organization and whom he has described as "superb."
The demotion of Mr. Potts came only two days after it was disclosed that a ranking FBI official had admitted destroying a document describing the Ruby Ridge action. The document dealt in part with whether Mr. Potts, before the woman was killed by an FBI agent, had approved changes to the "rules of engagement" allowing agents more freedom to fire their weapons.
Mr. Freeh's action, however, failed to defuse calls for congressional hearings into Ruby Ridge. The demotion comes on the eve of congressional hearings into the FBI's 1993 actions to end the standoff at the Branch Davidian compound near Waco, Texas, where Mr. Potts also had a supervisory role.
Sen. Arlen Specter, Pennsylvania Republican and chairman of the Senate Judiciary subcommittee on terrorism, called yesterday for hearings on the Ruby Ridge episode "as soon as possible," saying they are needed because of clouds over Mr. Potts, the FBI and the Justice Department.
The official who admitted destroying the document, E. Michael Kahoe, was placed on leave Tuesday from his post as special agent in charge of the FBI's Jacksonville, Fla., office.
Mr. Potts has denied approving the change in the rules of engagement, but two other FBI officials who received heavier punishment have sworn that he did, sources close to the investigation said.
One of the two officials, Eugene F. Glenn, whose role in Ruby Ridge led to his removal as special agent in charge of the FBI's Salt Lake City office, complained that the investigation was a cover-up. His complaint prompted the Justice Department to reopen its investigation.
There was no indication yesterday whether Mr. Potts had any knowledge of the alleged tampering with the detailed "after-action report" on Ruby Ridge. But it was clear that he and other FBI officials mentioned in the document face extensive questioning in the review of events during and after Ruby Ridge.
There was no sign that Mr. Freeh's decision on Mr. Potts resulted from pressure brought by Attorney General Janet Reno or other high Justice Department officials.
In fact, on Thursday, Deputy Attorney General Jamie S. Gorelick said she had no second thoughts about approving Mr. Freeh's recommendation to censure Mr. Potts over Ruby Ridge, rather than subject him to harsher discipline. Mr. Potts' censure was the lightest punishment handed out to the 12 people disciplined in the matter.
Ms. Gorelick said she acted on the basis of the FBI report on the incident.
"If a subsequent investigation suggests that the original report was wrong, we will revisit whatever conclusions were based upon the original report," Ms. Gorelick said.
Ms. Reno approved Mr. Freeh's recommendation to name Mr. Potts permanent deputy, after expressing admiration for Mr. Potts' direction of the FBI's investigation of the bombing April 19 of a federal building in Oklahoma City.
Testifying before the Senate Judiciary Committee, Ms. Reno cited her policy of deferring to agency heads on the choice of deputies.
Mr. Freeh's strong ties to Mr. Potts date back to 1990 when Mr. Freeh, then a federal prosecutor, headed the prosecution of Walter Leroy Moody for the mail-bomb murders of a federal judge and a civil rights attorney.
Mr. Potts headed a multi-agency task force that conducted the successful investigation that led to Moody's conviction.