I always took that explanation as the thinnest of lie meant to give an air of legitimacy.
I think a lot of people did, but the episode doesn’t really make the case that it’s a lie - in fact, Sloan is protected at the highest levels of Starfleet Command, which supports the idea that Sloan was being completely truthful when he was trying to recruit Bashir. It’s a legitimate reading of the episode, at any rate.