(Adds quote from family member, details on disgraced FBI agent)
By Scott Malone
BOSTON, June 25 (Reuters) - Reputed mob boss James "Whitey" Bulger's lawyers questioned the accuracy of a key piece of evidence in his murder and racketeering trial on Tuesday, seeking to cast doubt on the 700-page informant file that a now-disgraced FBI agent had kept on him.
The attorneys pointed out several times that the agent, John Connolly, is in prison after being convicted on racketeering and murder charges in 2009, and that a federal investigation found that Connolly had falsified some of his reports.
The reports were part of a file that the FBI developed through the 1970s and '80s when Bulger is accused of murdering or ordering the murder of 19 people.
Prosecution witnesses this week told jurors about meetings during which Bulger had provided tips on gangland rivals to his Federal Bureau of Investigation handlers, including Connolly.
But Bulger, 83, has heatedly denied serving as an informant.
The defendant, whose story had inspired Martin Scorsese's 2006 Academy Award-winning film "The Departed," has pleaded not guilty to all charges and faces the possibility of life in prison if convicted.
On Tuesday, Bulger's attorneys cross-examined FBI Special Agent James Marra, who headed the Justice Department probe that lead to Connolly's conviction on murder and racketeering charges.
"Can you confirm firsthand that (Bulger) gave any of that information?" Henry Brennan, of the Boston law firm Carney & Bassil, asked Marra.
"Firsthand? No," the agent replied.
Brennan later asked if the federal government went out of its way to protect informants, getting Marra to admit that "it was clear to me that John Connolly was protecting them."
Marra acknowledged that agents such as Connolly received financial incentives from the FBI to develop high-level informants such as Bulger.
"I don't know if it was an enormous incentive, but the agents were encouraged to cultivate informants," Marra said.
Bulger's attorneys have argued that Connolly made up at least some of the information in Bulger's file to justify his frequent meetings with the gangster.
Connolly's former boss, John Morris, is due to take the stand as soon as Wednesday.
Jurors also heard on Tuesday how Connolly had set up alerts in U.S. Justice Department computer systems that ensured he was tipped off whenever another law enforcement agent ran a background check on Bulger.
'RATTING PEOPLE OUT'
The families of some of Bulger's victims said they were not buying the argument that he had not worked with the FBI.
"He was obviously an informant, he's been ratting people out left and right, even his own colleagues," said Tom Donahue, son of Michael Donahue, one of the people Bulger is accused of killing. "That wasn't even a question of mine."
Cooperating with the FBI was enough of a breach of mob ethics that prosecutors contend it was the motivation behind several of Bulger's murders, but this was not uncommon - as the testimony of some of Bulger's former associates in the past two weeks showed.
Prosecutors say Connolly, who shared Bulger's Irish background, turned a blind eye to Bulger's crimes in exchange for information on the Italian Mafia, which was the top priority of the Justice Department at the time.
Prosecutors also scoff at the idea that Bulger was not an informant, noting that he met with several other FBI agents and supervisors in addition to Connolly.
In an exchange before jurors were brought into the courtroom on Tuesday, Assistant U.S. Attorney Brian Kelly accused Bulger's defense of wanting to "play the game of 'Let's pretend. Let's pretend he wasn't an informant.'"
Bulger's story has fascinated Boston for decades. He was one of two brothers to rise from gritty South Boston to positions of power. James was a feared gangster, while his brother William was the powerful speaker of the state Senate.
"Whitey" Bulger fled the city after a 1994 tip from Connolly that arrest was imminent. He spent 16 years evading arrest, many of them on the FBI's "Most Wanted" list, before authorities caught up with him in a seaside apartment in Santa Monica, California, a little more than two years ago.
(Reporting by Scott Malone; Editing by Paul Thomasch, Douglas Royalty and Richard Chang)