US narcotics agents stationed overseas held parties with prostitutes that were funded by local drug cartels, according to a Justice Department watchdog.

The inspector general found some of the sex parties took place in government-leased quarters where the Drug Enforcement Administration (DEA) agents' laptops, phones and other equipment were accessible.

Three DEA agents were accused of accepting money, expensive gifts and weapons from drug cartel members, notes the explosive report.

Ultimately, seven out of 10 of the agents admitted attending the parties. Suspensions ranging from two to 10 days were imposed.

The Justice Department watchdog says the cases should have been referred to the office that reviews employee security clearances.

The report states: "The foreign officer allegedly arranged 'sex parties' with prostitutes funded by the local drug cartels for these DEA agents at their government-leased quarters, over a period of several years.

"Although some of the DEA agents participating in these parties denied it, the information in the case file suggested they should have known the prostitutes in attendance were paid with cartel funds."

The report does not state the overseas country where the sex parties took place, but notes the investigation was in response to allegations of DEA misbehaviour in Cartagena, Colombia.

Congress ordered a wider inquiry into claims of sexual harassment and misconduct after a prostitution scandal involving the Secret Service in the South American country.

Sex parties thrown by DEA agents at one government-provided quarters were so loud that building management complained four times to agency officials between August 2005 and December 2008.

The report also notes an allegation that operational funds were used to pay for prostitutes at a farewell party for a DEA regional director stationed overseas.

DEA officials did not fully comply with the official inquiry, said the inspector general, and some agents wiped data off their phones before handing them over.

Also subject to the inspector general's investigation were the FBI, the US Marshals Service, and the Bureau of Alcohol, Tobacco and Firearms.

(Sky News)