The argument that the government seems to have been using is that they can't admit an administrative error because doing so would tip off terrorists that they are not on the watch list. But that's not the case: if, for the sake of argument, a person is on the watch list both
because of an administrative error and because there is independent evidence, not tainted by the error [*], of their involvement in terrorism, then you could perfectly well admit the error and keep them on the watch list.
[*] but see previous story http://boingboing.net/2014/02/09/a-reason-to-hang-him-mass.html
about confirmation bias