Charity's fugitive leader arraigned.

Byline: Bill Bishop The Register-Guard

A fugitive former Ashland resident accused of raising money for al-Qaeda-linked Islamist fighters in Chechnya in 2000 turned himself in on Wednesday and was arraigned in federal court in Eugene.

Pirouz Seda- ghaty, also known as Pete Seda, is being held pending a custody hearing before U.S. Magistrate Judge Thomas Coffin next week. He has pleaded not guilty to charges of conspiring to defraud the United States and filing false tax returns by a tax-exempt organization.

Sedaghaty, a native of Iran who is a U.S. citizen, is a co-founder of the U.S. branch of the Al-Haramain Islamic Foundation, which operated in Ashland from 1999 until 2003. In February 2003 he fled to Saudi Arabia, where the foundation was based, in the midst of a criminal investigation into the branch's fundraising activities, according to the U.S. Department of Justice.

He was indicted in February 2005, along with the foundation itself and with the other co-founder of the Ashland-based branch, Soliman Hamd Al-Buthi. Al-Buthi, a prominent religious leader in Saudi Arabia and a ranking government official, remains a fugitive.

The U.S. government has labeled Al-Buthi a terrorist. He is subject to arrest and deportation to the United States if he steps outside Saudi Arabia.

At its height, Al-Haramain raised almost $50 million a year in contributions worldwide, with the vast majority going to feed hungry Somali orphans, educate poor Indonesian students and help sick Kenyan children. But Saudi officials dissolved the Al-Haramain headquarters in Riyadh in 2004 after U.S. officials said a small percentage of the charity's funds were being siphoned for terrorist causes.

``The investigation shows direct links between the U.S. branch and Osama bin Laden,'' the U.S. Treasury said in a news release announcing that the Al-Haramain foundation and Al-Buthi were being placed on the government's terror list alongside bin Laden.

The indictment against Al-Buthi and Sedaghaty alleges that their branch of the foundation collected money through "zakat," the obligatory charitable donation required of all practicing Muslims, and diverted the money to Islamist radicals fighting the Russian army in Chechnya.

Specifically, the indictment cites a $150,000 zakat by an individual in Egypt that was transferred to an Al-Haramain account in Oregon. The money was withdrawn as travelers checks and a cashier's check and smuggled out of the country by Al-Buthi, according to the indictment.

The foundation attempted to account for most of the money as being used to purchase property in Missouri. However, it was actually diverted to Islamist fighters, according to the indictment.

Al-Buthi told The Associated Press that the money ended up at a Chechnya charity for refugees rather than in the hands of terrorists. The tax issue, he said, was an innocent mistake made by the charity's accountant without his knowledge.

He also acknowledged that he erred in not declaring that he was carrying such a large amount of money out of the United States, which requires anyone removing more than $10,000 from the country to report it. Al-Buthi said he was unaware of the requirement.

Al-Buthi and his lawyers argue that the terrorist label was wrongly applied to Al-Buthi, who has been cleared after an investigation by authorities in Saudi Arabia.

"My government knows me very well," he said in an interview with The Associated Press. "I have been twice interrogated."

On Wednesday, Sedaghaty's defense lawyer, Lawrence Matasar of Portland, declined to comment about the case. However, another of Sedaghaty's lawyers, Thomas Nelson of Welches, told The Associated Press that Sedaghaty was "voluntarily returning home to clear his name."

Tentacles of the case are entangled in broader issues of legal rights in the war on terrorism.

The Al-Haramain foundation filed suit on Aug. 6 in U.S. District Court in Portland to get itself removed from the federal government's list of groups suspected of supporting terrorism.

It claims that the "regulatory scheme" created by a long-standing federal trade law and an executive order from President Bush shortly after the attacks of Sept. 11, 2001, deprived the charity of its free speech and due process rights.

In February 2004, the Treasury Department ordered banks to freeze assets and property of the Ashland group, saying it was a branch of a large Saudi charity accused of funneling money to al-Qaeda. In September 2004, the Treasury Department formally designated the group as suspected of supporting terrorism, saying a federal investigation "shows direct links between the U.S. branch and Osama bin Laden."

At the time, the department said humanitarian contributions were diverted to Chechen rebel leaders affiliated with al-Qaeda. The Al-Haramain suit said the group had shown that its participation in a Chechnya project "was undertaken exclusively for humanitarian purposes, and had nothing to do with terrorist or violent activities."

The Al-Haramain organization also is central to a legal challenge to the Bush administration's warrantless eavesdropping program.

A 2006 suit filed in Portland alleges that a document inadvertently disclosed to an Al-Haramain lawyer shows the government illegally intercepted telephone calls, without warrants, between Al-Buthi and his two American lawyers.

The U.S. 9th Circuit Court of Appeals in San Francisco was hearing that case on Wednes- day.

The suit filed Monday cites the document and describes it as a log of telephone calls. It says the Treasury Department's allegation in 2004 of a "direct link" between the Al-Haramain foundation and bin Laden was "based on a misunderstanding of the privileged and illegally intercepted attorney-client conversations."

Also named as a plaintiff in the case is the Multicultural Association of Southern Oregon, alleging that its First Amendment right to work with the Al-Haramain group has been violated.

A trial date is expected to be set for Sedaghaty after a hearing next Wednesday in Eugene.

The Associated Press contributed to this report.