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The reasoning is that the Department of Justice may have political connections to those it might be asked to investigate. Inherently, this creates a conflict of interest. The solution is to have someone Having someone from outside the department lead the investigation.
Archibald Cox was one of the most notable special prosectors. He was fired during the Saturday Night Massacre. See also Watergate Scandal.
In many ways, the term is synonomous with Independent Counsel.