Government attorneys will drop money-laundering charges against an Ashland-based Islamic charity because they have been unable to arrest international fugitive Pete Seda.

However, indictments against Seda and Soliman Al-Buthe — principals in Al-Haramain Islamic Foundation Inc. — will continue to stand.

Kent Robinson, supervisory assistant U.S. attorney, said the government would prefer to proceed with the defendants here, and could re-indict the foundation if one or both of the defendants return.

"It’s a shell corporation," he said. "The people behind the corporation are the fugitive defendants."

Robinson said it would be an inefficient use of government resources to proceed just against the corporation. The government’s motion was filed Thursday in U.S. District Court in Eugene.

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The government alleges Seda and Al-Buthe conspired to defraud the United States, filed a false tax return and illegally transported about $150,000 out of the country.

Marc Blackman, a Portland attorney representing Al-Haramain, said he finds it interesting that the government took this action when his client was set to plead not guilty to the charges on Monday.

This would have entitled Al-Haramain to a trial within 70 days, he said.

Because the clock on the trial would have started on Monday, Blackman said, "It casts doubt on the factual validity of the charges that were issued in the first place."

Blackman said the government resisted an earlier effort by his client to file a plea in April.

He said he didn’t have any information about the whereabouts of Seda or Al-Buthe.

An affidavit filed on Aug. 2 by Colleen Anderson, a special agent with the IRS, states that Al-Buthe is living in Saudi Arabia and Seda, who left the country in February 2003, has likely moved back to Iran, where he was born. She also stated that she believes Seda, also known as Pirouz Sedaghaty, still holds citizenship in Iran.

Referring to Iran, which has strained relations with the United States, Robinson said, "We don’t have an extradition treaty with them."

Robinson said he has met with Seda’s attorney to discuss bringing him back into the country.

The motion states that attorneys for Seda and Al-Buthe said the government would agree not to pursue more serious charges against the defendants if they plead guilty to the current charges.

But the government responded that exacting concessions reflects legal and tactical maneuvering on the part of the defendants, the motion states.

"The investigation is continuing into more serious charges, and the government always reserves the right to seek more serious charges depending on the available evidence," the motion states.

The Oregon branch of Al-Haramain has been identified by the Office of Foreign Asset Control, under the U.S. Department of the Treasury, as a threat to the interests of the United States, the motion states.

Al-Buthe also has been identified as a threat, although Seda has not been, the motion states.

A hearing on the motion will be held on Monday in Eugene.

Robinson said he couldn’t comment on any ongoing investigations, or possible additional charges.

Seda’s attorney Larry Matasar, who previously called Seda "a man of peace," declined to comment on the case Thursday.

A friend of Seda, Ashland resident David Berger, said he still thinks Seda isn’t guilty of any crimes.

"I don’t think there’s any grounds for it whatsoever," he said. "I would have done the same thing without a second thought because I never heard of this law, and I’m a lawyer, for pete’s sake."

Berger, who says he still does pro bono work from time to time, said that although Seda hasn’t done anything wrong, it is possible the corporation may have misused funds.

He thinks government officials needed to justify their time by going after Seda.

The move for a dismissal, he said, "may be the government’s acknowledgment that expending huge sums of money and lots of time spent on pinning something on Pete and Soliman and Al- Haramain in America have proved fruitless because they did nothing wrong."

Reach reporter Damian Mann at 776-4476, or e-mail dmann@mailtribune.com.