Translation:The spokesman did not tell us what the source of the pollution was.
Actually, this is one of those sentences where both word orders work, though I would say that "what the source of the pollution was" may be used more often than "what was the source of the pollution." But it's true that "he did not tell us what was IT" would not work, and your logic was sound. Sometimes, with English, there are exceptions to what are otherwise pretty reliable rules... bet that never happens in Czech, though, right? :-)