U.S. Attorney General Loretta Lynch said Tuesday she won't allow Alaska prosecutors to pursue a sexual exploitation case under federal law against former Veco chief Bill Allen.

Lynch, speaking on behalf of the U.S. Department of Justice, said her decision was based on weaknesses in the potential case, not an immunity agreement with Allen.

Top officials at the Justice Department vetoed Allen's prosecution on sex crimes in 2010 in spite of an investigation by the FBI and Anchorage Police Department that the leading police officer called "very solid." And two previous requests by the state were denied by the federal government without much explanation, Alaska Attorney General Craig Richards said at a February news conference.

In a letter to Richards sent Tuesday, Lynch wrote that "we continue to conclude it would be inappropriate — and that it would undermine the administration of justice — to cross-designate state prosecutors as federal prosecutors to investigate and prosecute this matter after the department has already determined it did not meet the Principles of Federal Prosecution."

Those principles allow prosecution only if the department believes the admissible evidence will probably obtain and sustain a conviction, Lynch wrote.

She added that her department's decision to abandon a case against Allen was not based on "any non-prosecution promise, or agreement between the government and Mr. Allen," contradicting speculation by some Alaskans that Allen was offered immunity in exchange for his cooperation with the case against the late U.S. Sen. Ted Stevens.

Richards, in a phone interview Tuesday night, said he appreciated hearing the "unqualified statement" from Lynch that there was no immunity deal between Allen and the federal government.

"I think it's good for Alaskans to be able to put that sort of conspiracy theory to bed," he said.

But, Richards added, he's disappointed that the Justice Department won't allow the state to pursue prosecution.

"What is the potential downside of letting the state of Alaska apply its resources to see if it can put a case together?" he asked. "We felt strongly that if we were able to pursue it, we had a good chance of making the case. So it's a disappointment we were denied that chance."

Through his attorneys, Bill Allen has denied wrongdoing.

Anchorage police detectives said the federal Mann Act, which bars interstate transportation of a person for prostitution, was the only appropriate tool to prosecute Allen, not state law. A witness said she was working as an underage prostitute in Spenard when Bill Allen first picked her up. She said she told him her age. She said he later paid to fly her from Washington state, where she had moved, to Anchorage for sex visits at an Anchorage hotel.

A federal prosecutor had agreed with the Anchorage detectives that prosecution was justified, but was overruled by his superiors. State prosecutors can't use federal law unless they're deputized, or "cross-designated," by the Justice Department.

Sen. Dan Sullivan, R-Alaska, recently amended the Mann Act to force the department to give a "detailed reason" for rejecting a cross-designation request — providing the basis for the February request from Richards.

According to the amendment, the Justice Department could only deny Richards' request if it found that granting the cross-designation would "undermine the administration of justice."

Lynch said in her letter that a denial was justified because the federal government had already decided that the case against Allen didn't meet the standards for prosecution, with Richards' recent request based on "the same underlying facts and considerations that the department previously took into account when declining prosecution in 2010."

"The proper administration of justice requires consistent application of principles regarding the circumstances in which federal prosecution is initiated," Lynch wrote.

Sullivan issued his own prepared statement late Tuesday in which he said that "justice continues to be denied."

He added: "I find it incredibly frustrating that it took the threat of violating a new federal law for the Department of Justice to finally and directly answer a question that Alaskans have been asking for years."

While Lynch's letter ends Alaska's third bid to prosecute Allen, Richards said the effort isn't necessarily dead.