"I don't make the decision lightly, nor do I make it happily, but I think the evidence demands it," Pead said.
Raymond Mansolillo, Lustyik's attorney, said he will appeal the decision.
Prosecutors allege that, while still working for the FBI, Lustyik engaged in an extensive effort to derail a criminal investigation into Michael L. Taylor's role in the fraud scheme. The government has accused Taylor and two other men of conspiring to use inside information to land $54 million in contracts for training and security services to Afghan special forces. Prosecutors allege about $20 million paid to American International Security Corp., owned by Taylor, was ill-gotten.
Lustyik had formed what promised to be a lucrative business relationship with Taylor to develop security and alternative energy contracts throughout the world, according to prosecutors, and began working to stop the investigation in the fall of 2011 at Taylor's behest. Taylor was arrested on Sept. 18 and has been incarcerated in Utah since then awaiting trial.
Lustyik was suspended and then retired from his job as a counterintelligence agent on Sept. 20, ending a stellar 24-year career, as investigators began looking into his efforts to help Taylor. He was arrested on Sept. 29 and was later indicted on 11 counts of conspiracy, wire fraud and obstruction of justice. He has pleaded not guilty.
Two other federal judges, one in New York and one in Utah, declined to lock up Lustyik but required him to abide by numerous conditions, including avoiding contact with anyone who "is or may be" a witness in the case. Despite that, prosecutors told Pead that Lustyik arranged for a friend to deliver a bag containing $26,000 in cash to the potential witness.
Mansolillo said the money was repayment of a legitimate loan to cover medical bills for Lustyik's daughter and that the status of the man as a potential witness was unclear.
That indirect contact, however, showed Lustyik's "callous disregard for the rule of law and the authority of the courts," said Kevin Driscoll, a trial attorney for the Department of Justice's public integrity section. The witness, whom Driscoll described as "intimately involved" in the business relationships involving Taylor, also visited Lustyik's home several times.
While it showed poor judgment, Lustyik had no bad intent, his attorney said.
Lustyik "wants to go forward with his trial," Mansolillo said. "The government knows if they put him out here in Utah how difficult it will be to put on a defense."