On Thursday, the Italian government announced that Robert Seldon Lady had been arrested in Panama on the border with Costa Rica and asked that he be held.
But the next day, the US State Department said the former Milan CIA station chief was on his way back to Washington.
Explaining his government's role in the affair, Foreign Minister Fernando Nunez claimed there was no evidence that Lady had ever been detained in Panama.
"We called all the checkpoints on the border and this person wasn't at any of them," he said.
He acknowledged that the Italian government had contacted the Panamanian foreign ministry to request Lady's arrest but had failed to write it in Spanish.
Moreover, he said, "The reason that the arrest of this person is being requested has to be clear."
Nunez's account contradicted that of Panamanian Security Minister Jose Mulino who told the newspaper La Prensa that Lady had been detained on July 17th on the border.
Mulino said Lady was released "because the state that required him for extradition did not formalize the request."
Lady and 22 other CIA agents were convicted in absentia in 2009 of the kidnapping of Osama Mustafa Hassan, a radical Islamist opposition figure better known as Abu Omar.
It was one of the world's biggest court cases against the US "extraordinary rendition" program to interrogate alleged Islamist militants after the September 11th, 2001 attacks.
Now 59, Lady received the heaviest sentence, which was increased from eight to nine years on appeal in 2010. The other fugitive agents had their sentences upped from five to seven years.