The department told U.S. District Judge Gerald Rosen that it supports the Detroit defendants' request for a new trial and would no longer pursue charges of material support of terrorism. That means the defendants at most would only face fraud charges at a new trial, the legal sources said.
The department's decision came after a months-long independent investigation uncovered several pieces of evidence that prosecutors failed to turn over to defense lawyers before the trial last year and exposed deep disputes within the government over the course of the case and the quality of the prosecution's evidence.
The announcement, expected as early as Wednesday, in the shadows of the Republican National Convention in New York, where President Bush and his allies are trumpeting his successes in the war on terror.
The legal sources, who would speak only on condition of anonymity because the judge in the Detroit case has imposed a gag order, said the department's filing with the court is harshly critical of Assistant U.S. Attorney Richard Convertino, the lead prosecutor in the case.
Convertino has been under investigation for months and filed a whistle-blower lawsuit against Attorney General John Ashcroft earlier this year. In an interview with The Associated Press, Convertino accused Justice Department superiors of thwarting his efforts to introduce some evidence against the accused terror cell at trial.
In the new court papers, the Justice Department divulges new testimony from a recently retired CIA officer who calls into question one of the government's key conclusions at trial, the legal sources said.
The retired CIA officer told the Justice Department that he had offered to testify at the trial but was turned down and that he came to a somewhat different analysis of a sketch the prosecutors introduced at trial as evidence the Detroit men cased and intended to attack a Turkish air base, the sources said.
The internal review also turned up evidence the government failed to turn over satellite photos of a suspected terror target in Jordan that the Detroit cell was accused of plotting to attack, the legal sources said.
And the government uncovered new evidence, recently reported by the AP, that FBI agents in Las Vegas and Detroit disagreed over whether a videotape found in the Detroit terror cell's apartment was surveillance footage as jurors were told.
In addition, a Tunisian man who appeared in the videotape of landmarks in New York, Las Vegas and California has told investigators the tape was amateur footage from a university student trip, not surveillance as prosecutors claimed, the AP reported.
Memos obtained by AP and reported last month show Justice supervisors in Washington and Detroit bickered over numerous aspects of the case, with Washington portraying the Detroit prosecution team as wayward.
The internal review, however, turned up evidence that some testimony government witnesses gave at trial was wrong or overstated, leading to the decision that terrorism charges could not be support at a new trial, the legal sources said.
In a jury verdict last summer hailed by the administration as the breakup of a terror cell, Karim Koubriti, 25, and Abdel-Ilah Elmardoudi, 38, were convicted on terrorism and fraud charges and Ahmed Hannan, 36, was convicted of fraud. A fourth defendant, Farouk Ali-Haimoud, 24, was acquitted.
Their lawyers have argued for months for a new trial, accusing the prosecutors of withholding evidence that could have aided the defense during the trial. Rosen ordered a formal review of the prosecution's conduct and even was interviewed by the FBI.