According to an FBI affidavit, the men laundered money for the purchase of the launcher they were told would be used to assassinate the ambassador at the Pakistani consulate across from the United Nations in New York. The murder supposedly was meant to punish the Pakistani government for cooperating with non-Muslims.
In fact, there was no such plot. The purchase of the RPG-7 grenade launcher and the assassination scheme were fabrications put forth by a convicted felon who was secretly cooperating with federal prosecutors to reduce his prison sentence on document fraud charges.
At a news conference, Deputy Attorney General James Comey acknowledged there was no genuine threat of any terrorist attack. "This is not the case of the century," he said.
However, Comey said, in addition to removing two potentially dangerous people from the streets, the sting operation was meant to send a message to terrorists and their sympathizers.
"Anyone engaging in terrorist planning would be very wise to consider whether their accomplice is not really one of our guys," he said.
The arrests in Albany were unrelated to the Bush administration's terror alerts over the weekend indicating al Qaeda may be plotting attacks against U.S. financial buildings, Comey said. He dismissed suggestions that the administration's warning, largely based on intelligence that was several years old, was overblown.
"We are not playing games," Comey said. "This is a very serious time, and I wish it weren't. I wish we were worried about something else this summer. But I am worried about one thing, and so is everybody else in law enforcement."
The Albany men were identified as Yassin Muhiddin Aref, 34, the imam of the Masjid As-Salam mosque, and Mohammed Mosharref Hossain, 49, one of the mosque's founders and owner of the Little Italy Pizzeria in Albany. They were arrested during early-morning raids at their homes.
Their wives denied the men were involved in any terror plot.
"It's totally wrong and totally false and totally a lie," Hossain's wife, Mossamat, said in a telephone interview.
Some mosque members held morning prayers Thursday on a nearby sidewalk and voiced anger over the arrests.
"This, we believe, is an act of … bias and stereotyping - an undo scrutiny of the Muslim community," Faisal Ahmad, a worshipper at the mosque, tells CBS Radio News. "It is certainly difficult on the Muslim community to have these type of investigations, especially in the middle of the night, and to come and find their house of worship closed for prayers.
The men are charged money laundering, conspiracy to commit money laundering and conspiracy to conceal material support for terrorism. Both could face up to 70 years in prison and a $750,000 fine.
U.S. Magistrate David Homer ordered the men held without bail pending a hearing on Tuesday.
According to the FBI affidavit, Hossain approached the FBI informant in the summer of 2003 about getting a fraudulent New York driver's license. In subsequent meetings, the informant told Hossain that he imported weapons from China, the affidavit said.
At a videotaped meeting on Nov. 20, the informant showed Hossain a picture of an RPG-7, a fairly rudimentary anti-tank weapon developed by the Soviet Union in the early 1960s. The two discussed using such a weapon, according to the affidavit.
The FBI said its informant, who wasn't identified except as a non-U.S. citizen, told the men he was affiliated with Jaish e-Mohammed, an Islamic extremist group in Pakistan that the U.S. government has designated a terrorist organization.
Authorities said the men were paid $65,000 in checks and cash to purchase a missile and disguise the source of the money involved.
Two U.S. law enforcement officials who spoke only on condition of anonymity said Hossain and Aref have ties to a group called Ansar al-Islam, which has been linked to al Qaeda. However, there were no references to Ansar al-Islam in the court papers in the case.
Comey declined to discuss any alleged ties but said more information about their backgrounds may come out in court proceedings.