A federal judge, ruling that passing a crack pipe and offering a puff at a party does not constitute drug distribution, dismissed drug charges yesterday against two local businessmen alleged to have run a drug conspiracy by hosting all-night crack parties.

U.S. District Judge Albert V. Bryan Jr. in Alexandria dismissed the case against Nasser Zolfaghari and Mohammed Saberi.

Zolfaghari, owner of The Dome nightclub in Washington's West End as well as several other local restaurants and bars, and Saberi, a former World Bank official, were charged with a single count of conspiring to buy dozens of ounces of cocaine and manufacturing crack for distribution in the Berkshire Apartments on Massachusetts Avenue NW.

Bryan agreed with defense lawyers' contention that the quantities the two men shared at parties in Saberi's Berkshire apartment were too small to amount to anything other than personal use. But Bryan emphasized after dismissing the case that "I don't mean to condone the behavior of these two individuals, particularly to the younger people they drew into their gatherings."

The ruling, drawing cries of joy from a courtroom crowded with the defendants' families, friends and employees, marked the end of a two-day non-jury trial that provided a glimpse into a clique of professionals -- bankers, real estate agents, restaurateurs and doctors -- who shared drugs in the area's most affluent neighborhoods.

Zolfaghari, described during the trial as a prominent member of Washington's Iranian community, said in an interview after his acquittal that the United States is "a country of justice." He said he has also prevailed in a battle over drug abuse that began when his father and sister were mysteriously killed in Iran shortly after the fall of the shah.

The crowd of Zolfaghari's supporters, after applauding defense attorneys Brian P. Gettings, William B. Moffitt and Lisa Kemler in the courthouse lobby, were asked by federal marshals to quiet down or leave the building.

Although the government lost the criminal case against Zolfaghari, federal forfeiture statutes allow prosecutors to press a civil case against him in an effort to seize his $800,000 home in Bethesda and a second one in College Park.

Attorneys for Zolfaghari and Saberi conceded that their clients were pathetic addicts in 1988 and made dozens of phone calls to a cocaine organization run by Roberto Esteban Fuentes, convicted last year of 38 drug-related charges.

But, Moffitt argued, Saberi and Zolfaghari were no more than loyal drug customers who generously passed the crack pipe to friends. "They called a lot of times because they used a lot of cocaine and there were a lot of people with them using the cocaine," Moffitt said.

Isam Igle, a former roommate of Saberi's and a former vice president for Sovran Bank, testified that Zolfaghari once grew so hungry for cocaine that he gave away his Mercedes-Benz for a "bag of cocaine."

Igle was one of several individuals identified in the case as a former friend or employee who had had a falling out with Zolfaghari. Igle expressed surprise on the stand when informed that Zolfaghari filed a civil suit against him and Sovran Bank in Montgomery Circuit Court, alleging that he had embezzled funds from Zolfaghari's bank accounts.

Raymond Badnar, a former University of Maryland football player and general manager of The Dome and Zolfaghari's Italian Gardens restaurant in College Park, testified that Zolfaghari blamed Igle's alleged embezzlement on Igle's drug habit.

Khosroe Shadab, another former World Bank official and a former employee at the Iranian Embassy, said he often joined Zolfaghari and others in preparing and smoking crack at Saberi's apartment. At times, Shadab said, "young women" were brought to the apartment "for entertainment."

A 19-year-old woman testified yesterday that she met a man who identified himself as Nasser one night at The Dome when she was 16 years old. She said that the man, who claimed to own the club, took her to Saberi's apartment, and later, when she fled the apartment in fright, he chased her.

Staff writer Jeffrey S. Rowland contributed to this report.