The film, "The Third Jihad" was shown to officers during counterterrorism training seminars.
It was bankrolled by a conservative group and many Muslims find it biased and offensive.
Kelly says the movie was not part of the official curriculum and he was not aware it was being shown.
In a statement issued Wednesday night, Kelly said, "I offer my apologies to members of the Muslim community, in particular, who would find the film inflammatory and its airing on department property, though unauthorized, to be inappropriate."
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