Lindsay Lohan 'Person of Interest' in Burglary -- But It May Be Case Closed

Lindsay Lohan is more than just a witness to an alleged burglary that went down in the Hollywood Hills last Sunday ... law enforcement sources tell us she is a "person of interest," but the case may now be over.

Law enforcement sources tell us they are not ready to call Lindsay a suspect, but they are suspicious of her actions at a house party where 2 watches and an expensive pair of sunglasses -- total value $100,000 -- supposedly went missing. We're told Lindsay let 2 friends into the house and cops think when they left they took the goods ... and she may have been in on it.

But now there's a twist in Lindsay's favor. We're told the owner of the house has recanted his story and written a letter to cops saying nothing was stolen. Of course, it flies in the face of his actions Sunday night when he called the cops and made the theft report.

Michael Lohan tells TMZ, "After personally speaking with the homeowner, there was NOTHING stolen from his home. Lindsay has no involvement and the owner has told the cops that."