On Aug. 23, 2013 a federal appeals court overturned the conviction of a former Oregon-area charity leader, saying the government turned a tax fraud case “into a trial about terrorism.” In granting a new trial to Pete Seda, the founder of the now defunct Al-Haramain Islamic Foundation of Oregon, the Ninth Circuit Court of Appeals said the government failed to provide a fair summary of classified material to the defense, failed to disclose that a prosecution witness had been paid, and exceeded the scope of a search warrant used to search computers seized from the charity.
Seda was convicted in 2010 of falsifying a charity tax return and sentenced to a 33 month prison sentence. Seda has already served most of the sentence. Al-Haramain-Oregon was shut down by the Treasury Department in 2004. In 2011 the Ninth Circuit ruled that the charity’s constitutional right to refute Treasury’s designation had been violated.
Al-Haramain Islamic Foundation Oregon was shut down by the Department of Treasury in 2004 in a proceeding that has been held unconstitutional by the federal court in Oregon.
During the trial, prosecutors alleged that the charity routed $150,000 to Chechen fighters in Russia and that Seda then falsified tax records to hide the transaction. Seda’s defense maintained that the tax discrepancy was caused by an accounting error. At Seda’s 2011 sentencing the trial judge said that there was no proof directly linking him to terrorism.
“[This] illustrates the fine line between the government’s use of relevant evidence to document motive for a cover up and its use of inflammatory, unrelated evidence about Osama Bin-Laden and terrorist activity that prejudices the jury,” Judge Margaret McKeown wrote in the panel’s 2-1 decision. The opinion provides extensive background on the facts and history of the case and the evidence at trial.
U.S. Attorney Amanda Marshall said the government is reviewing the opinion and has yet to make a decision about filing an appeal. “Any decision about whether we will seek further review will have to be made in consultation with the Criminal Division and Solicitor General’s Office,” Marshall said.
Appeals to fear and prejudice?
One issue in the trial was Seda’s intent to fund mujadiheen in Chechnya. The trial judge had allowed the prosecution to bring in evidence about Seda’s alleged political and religious beliefs, including videos and religious edicts relating to Chechnya, as well as a list of emails received and websites visited. Evan Kohlmann, a government expert witness “who had no direct knowledge of the facts of the case” testified that the former director of the Saudi charity Al Haramain used to operate its Chechnya relief program was a friend of Osama bin Laden in the 1980s. These alleged connections were reinforced with courtroom props such as “a shadowed cutout of a figure representing Al Haramain’s accountant in Riyadh, and a photograph of the armed mujahideen leader Ul_Kahattab, whom Seda did not know and whom Kohlmann had connected to Bin-Laden.” The prosecution also characterized Seda’s distribution of copies of the Quaran to prisoners as promoting jihad.
Seda argued that the government’s appeal to religious prejudice and guilt by association denied him a fair trial. The appeals court said that since the case “is being sent back for a new trial, we need not reach this issue.” But it goes on to warn that:
“the charge here relates of a false tax return filed on behalf of a tax-exempt organization and does not allege material support of terrorism. We are confident that the district court will recognize the fine line separating necessary and probative evidence of willful falsity from evidence that would cast Seda in the role of a terrorist based on appeals to fear and guilt by association….”
Withholding evidence helpful to the defense
The court found that the prosecution violated the rule (Brady Claim) that requires prosecutors in criminal cases to turn over evidence in their possession to the defense when it could be favorable to the defendant or help to question the credibility of a witness. This violation warranted a new trial.
The withheld evidence related to the testimony of Barbara Cabral, a former member of Seda’s prayer house, whose testimony “was the only evidence directly linking Seda to an effort to fund the Chechen mujadiheen.” The withheld evidence included interview notes and documentation of $14,500 in FBI payments to Cabral’s husband Richard, $5000 of which was made in her presence. Richard died before the trial, and the withheld documents showed that the FBI then offered to pay Barbara “when she was experiencing financial difficulty,” including serious health problems requiring thousands of dollars in out-or-pocket medical expenses. By withholding this information, the prosecution denied Seda’s lawyers an opportunity to point out inconsistencies in the Cabrals’ stories and question Barbara’s motivation for testifying. The court concluded that Barbara Cabral’s testimony “was important enough that a changed perception of her credibility creates a reasonable probability of a different verdict.”
Failure to Follow Process in the Classified Information Procedures Act
The case involved classified information, which must be treated under procedures in the Classified Information Procedures Act. It provides that, in criminal cases, prosecutors can ask trial courts to restrict what they must share with the defense based on national security considerations. When the court finds classified information is relevant and helpful to the defense, it requires the prosecution to provide a substitute summary of the information or a statement admitting the facts the information would tend to prove.
The court found that in this case:
“the substitution’s language unfairly colored presentation of the information and, even more problematic, that the substitution omitted facts helpful to Seda’s defense….The substitution is statutorily inadequate because it does not provide Seda with ‘substantially the same ability to make his defense as would disclosure of the specific classified information.”
Although the court does not find the prosecution acted in bad faith, it said the summary was both inadequate and incomplete, an error that warrants a new trial.
Going beyond the search warrant’s authority
The government’s warrant for the 2004 search of Seda’s home, which also housed the Al Haramain office, authorized search and seizure of financial records and communications about the 2000 IRS Form 990 for Al Haramain. The court said the “government emerged from the search, however, with much more: news articles, records of visits to various websites about Chechnya, photographs of Chechen war scenes, and other documents that were introduced at trial as evidence of Seda’s desire to fund the Chechen mujadiheen.”
The court said the trial judge was in error in concluding these items were within the scope of the warrant. Since illegally seized items must be excluded as evidence at trial, the appeals court said at the new trial the court should determine what items were appropriately seized.
Jury Trial and Conviction
On Sept. 10, 2010, a federal jury convicted Seda of money-laundering and tax evasion charges. Prosecutors say he used the group, shut down by Treasury in 2004, to smuggle money to Chechen rebels fighting in Russia. On Sept. 23, 2010 Seda’s attorneys filed a motion for a new trial, citing fairness problems during the trial.
Seda had been charged with conspiracy to defraud the U.S. government and filing a false return with the Internal Revenue Service (IRS). Prosecutors say Seda conspired in March of 2000 to launder $150,000 from an Egyptian doctor through Al-Haramain to Muslim revolutionaries in the Russian republic of Chechnya. Seda’s attorneys say the money was a charitable donation that his accountant forgot to disclose on the charity’s tax forms.
Seda and the charity have drawn intense scrutiny from the U.S. government. In 2004, Treasury listed both the Ashland, OR chapter of Al-Haramain and its parent organization in Saudi Arabia as terrorist groups. Subsequently, the Ashland branch’s assets were seized and the charity was effectively closed. A federal judge ruled in 2008 that the charity’s constitutional right to refute Treasury’s designation had been violated.
Additionally, lawyers for the charity sued the government for wiretapping their phone conversations without a warrant. A federal appeals judge ruled in May 2010 that those wiretaps violated the law. Al Haramain has proposed that “that in lieu of a transfer of those damages (and likewise compensatory damages) into AHIF’s block account the Court shall order their cy pres distribution to one or more other charitable organizations whose missions are ‘consistent with the nature of the underlying action.”
The motion for new trial asks the trial court to “take a step back from the proceedings and individual rulings that have been made and consider the cumulative impact of the manner in which the case proceeded, particularly: 1) the cumulative prejudicial impact of the government focus on Islam, terrorism, and anti-Semitism in a case that is charged as essentially a tax case,” and review specific rulings on the evidence. The motion also alleges appeals to prejudice, including anti-Islamic statements and actions.
A native of Iran, Seda has been a naturalized U.S. citizen for 16 years, attended Southern Oregon University and had lived in Oregon for almost 25 years. Friends of Seda, including a Rabbi who spoke as a character witness during the trial, were surprised by the verdict. Seda’s friend, Dave Berger, said, “He was always law abiding. And there’s no doubt in my mind he was not trying to do something wrong.”
Prosecutors Admit Failure to Turn Over Evidence
On Jan. 12, 2011 lawyers for Seda filed motions in federal court asking for a re-trial of his conviction for tax fraud, based on post-trial revelations that the FBI paid $14,500 to a key prosecution witness. The motions also seek the release of Seda, who has been in jail awaiting sentencing since the conviction, and an investigation into government conduct of the case.
Seda’s supplemental motion for a new trial provided details regarding the payments to witness Barbara Cabral and her husband, saying “We now learn for the first time, from FBI documents that are themselves suspect, that the Cabrals were paid $14,500 in cash by the FBI, that Barbara Cabral, a testifying witness for the government, was told before the trial that the FBI would attempt to make a direct payment to her, but only after the trial in this matter, and that Barbara Cabral and her late husband, Richard Cabral, developed a close personal relationship with the principal FBI case agent.”
The motion also noted that “Over nine years of investigation by numerous federal agents, only one witness – Barbara Cabral – directly linked Mr. Sedaghaty with attempting to raise money for the Chechen mujahedeen. .. In all, the new information reveals at least twelve investigative contacts and interviews with the Cabrals that were not previously disclosed, some of which involved payments and discussions of potential further payments.”
Failure to provide Seda with this information prior to trial is an apparent violation of Rule 16 of the Federal Rules of Criminal Procedure, which requires the prosecution to turn over records material to preparing a defense before trial, as an essential element of due process. In particular, the “Brady rule,” named after the 1963 Supreme Court case Brady v. Maryland, requires prosecutors to turnover information that may help the defense, such as statements that conflict with a prosecution witness’s testimony or information, such as the cash payments in this case that would allow the defense to attack the credibility of a prosecution witness. Seda’s motion for a new trial noted that “It is axiomatic that payments and offers of payments are among the most fundamental of tools for impeachment and that their pre-trial disclosure is required.”
Tom Nelson, one of Seda’s attorneys, reacted to the news of the witness payments by saying,
“This was not disclosed to defense counsel prior to the trial, and had it been it would have been the source of deep, searching, and long-lasting cross examination…the FBI, or at least the FBI in Oregon, simply cannot be trusted. Secret cash payments to witnesses willing to say what the FBI wants should be unthinkable in American courts, but here we have a clear-cut case of precisely that happening.”
Assistant U.S. Attorney Kelly Zusman told the Associated Press that “What has changed since Seda was taken into custody at the close of the trial is that the United States has discovered some materials that should have been turned over to the defense during pretrial discovery.” In Jan. 13, 2011 court filings the government said it will take no position on whether Seda should be released.
The details of the withheld information are provided in an affidavit from James Strupp, an investigator for the federal public defender’s office.
An additional motion asks the court for further investigation and an evidentiary hearing to “uncover the extent of the government’s failings.” It states that Seda “takes strong issue with the government’s statement that its failure to comply with its obligations can be characterized as “inadvertent.” Moreover, the full extent of the government’s failings is not known at this time. The record as it exists now suggests that this case has been infected with governmental conduct so extreme that dismissal of the indictment is warranted.
A previous motion for new trial based on appeals to prejudice was filed on Sept. 23, 2010. A footnote summary in the new motion says:
“3 E.g.: (1) the government appealed to prejudice by referring to the defendant’s association with a “strident form of Islam” that “promoted acts of violence” and a “kill people” jihad, and by telling the jury that “The Noble Qur’an is the defendant,” calling it “junk,” waving it before the jury and slamming it down on the table; (2) the government materially changed the trial testimony of the chief IRS case agent from her grand jury testimony and influenced the trial testimony of accountant Tom Wilcox concerning who provided the false information on the tax form; (3) the government refused to use its unique ability to obtain authentication of evidence that undermined its theory that the El Fiki funds were diverted to Chechen mujahideen and used for personal gain.”
Seda Released Amid Charges of Evidence Tampering
On Jan. 19, 2011 U.S. District Court Judge Michael Hogan ordered Seda released from jail pending proceedings examining FBI payments to the chief prosecution witness in the case. Seda was convicted of tax fraud charges based on allegations he hid a contribution to Chechen militants. On Jan. 18 lawyers for Seda filed another motion seeking his release and a new trial based on recent revelations that the FBI apparently deleted a key sentence from a prosecution witness summary provided to the defense before the trial. It said, the witness “did not recall Sedaghaty discussing the topic of Kosovo or supporting mujahedin there.”
The Ashland (OR) Daily Tidings reported that at the hearing “The government also admitted giving the defense team conflicting versions of a report from an August 2007 interview FBI agent David Carroll had with Richard Cabral…”, the deceased husband of prosecution witness Barbara Cabral. Post-trial evidence revealed the Cabrals had been paid $14,500 by the FBI prior to the trial,but the defense was not informed until afterwards.
The defense learned about the payments and inconsistencies in the witness statement reports after prosecutors asked U.S. Attorney Dwight Holton to approve an additional payment of $7,500 to Barbara Cabral. He denied the request and ordered the information to be turned over the defense. The prosecution team of Gorder (terrorism AUSA for Oregon), Cardani (AUSA, Eugene), Anderson (IRS) and Carroll (FBI) are all off the case .
In documents filed on Feb. 18, prosecutors said the witness who received the payment, Barbara Cabral, was “not a crucial witness,” and its omission “was a mistake, not a deliberate attempt to gain an advantage… and that the error was harmless.” They asked the court to not grant a new trial.
The judge gave both sides in the case 30 days to file briefs on whether Seda should get a new trial, but no hearing date has been set. Seda’s lawyers said they will be filing a motion to dismiss the indictment.
Request for More Evidence Denied
On Feb. 23, 2011, attorneys Seda filed documents seeking additional evidence about the prosecution’s failure to disclose that payments to a witness had been made. The request came six days after documents filed by the prosecutor’s office shed light on several mistakes in the government’s handling of the case.
On March 3, 2011, a district judge ruled that prosecutors do not have to provide an Oregon charity founder more documentation about their failure to disclose a witness against him had been paid by the FBI. This ruling came two days after the same judge said he would not respond to Pete Seda’s attorneys’ oral request for a new trial. Seda’s attorneys have said they will file a written request for a new trial. No date has been set for a hearing on the defense motion for a new trial. Defense lawyers have until March 14 to file their response to the prosecution’s arguments that their failure to divulge the information about paid witnesses did not justify throwing out Seda’s convictions for tax fraud and conspiracy.
As part of their efforts to win a new trial, attorneys for Seda argue that they need more information about the prosecution’s actions to determine the extent of their misconduct. In their request for a hearing, they wrote, “The importance of providing access to the material sought is underscored by the fact that the material provided to date by the government is rife with inconsistencies and incomplete accounts and statements strongly suggesting that more specific information exists.”
Request for New Trial Denied
On Aug. 10, 2011, a federal judge in Oregon denied a new trial for Seda. His defense attorney said he will appeal U.S. District Judge Michael Hogan’s ruling. “We anticipate that many of the issues will be raised on appeal,” Seda’s attorney said.
Sentencing
On Sept. 27, 2011 the former head of an Oregon-based charity was sentenced to nearly three years in prison for tax evasion and conspiracy to defraud the government. Federal Judge Michael Hogan said there was insufficient evidence to add an additional 8 years to the sentence for “terrorism enhacement” as prosecutors had requested.
Seda was convicted on money-laundering and tax-evasion charges in September 2010, but was released in January after post-trial evidence revealed that the prosecution may have altered documents and the FBI paid $14,500 to a prosecution witness but failed to notify Seda’s attorneys before the trial.
The case was appealed to the Court of Appeals for the Ninth Circuit. The charity is also known for winning the first judgment against the United States for an illegal wiretap of its communications with its attorneys. The government is appealing that ruling.