An Ashland-based Islamic charity is trying to distance itself from founder and international fugitive Pete Seda as part of an apparent strategy to rid the chapter’s global-terrorist designation, regain its financial assets and be dropped from civil suits stemming from the Sept. 11, 2001, attacks.

In papers filed Monday in U.S. District Court in Eugene, the Oregon Chapter of the Al-Haramain Islamic Foundation wants a judge to remove all charges and any reference to the chapter in a tax evasion and money-laundering indictment against Seda and chapter director Soliman Al-Buthe, a Saudi national.

Seda and Al-Buthe face felony charges alleging they illegally transported about $150,000 out of the country in 2000 to help al-Qaida fighters in Chechnya, then filed a false tax return to hide the transaction. The money allegedly was funneled into the country as a donation to the chapter.

Federal prosecutors filed a motion Aug. 5 to drop criminal charges against the chapter, but reserve the right to re-file them later. The government motion does not remove the chapter from possible loss of assets in forfeiture, court papers say.

In replies filed in court Monday, chapter attorney Marc Blackman urges U.S. Magistrate Thomas Hogan to strike down the dismissal, which would force prosecutors to try the chapter within two months even if Seda and Al-Buthe remain fugitives.

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If the judge rejects the chapter’s request, then Blackman asks that Hogan remove all references to the chapter in the Seda and Al-Buthe indictments.

"We want to be completely in or completely out," Blackman said in a Tuesday interview. He declined to elaborate.

But in his filings, Blackman argues that any ties to the Seda and Al-Buthe cases have stymied the chapter’s efforts to clear itself as a Specially Designated Global Terrorist organization as outlined by the Department of Treasury.

It also would help the chapter’s efforts to be dropped as a co-defendant in a combined federal civil suit in New York filed by Sept. 11 victims against people and groups alleged to be terrorists or those who aid terrorists, the motion states.

The chapter also wants the government to drop any future attempts to seize the chapter’s assets, a move that could ease the sale of chapter holdings.

Previous court filings show the chapter owns Seda’s former Ashland residence as well as a prayer house in Springfield, Mo.

"Al-Haramain still has a stake here," Blackman said. He declined to reveal who and how many people remain involved in the chapter, but documents show Seda and Al-Buthe are the chapter’s only corporate directors.

The U.S. Attorney’s Office has until Monday to respond to Blackman’s motion, and "we’ll address the issues" spelled out by Blackman, said Pamala Holsinger, chief of the criminal division in the U.S. Attorney’s Office in Portland.

A hearing was scheduled for Aug. 29 in Eugene, Holsinger said. She declined further comment.

The federal indictments allege that Al-Buthe and Seda transferred a $150,000 oversees donation to traveler’s checks and a cashier’s check that Al-Buthe carried from Ashland to his native Saudi Arabia in violation of federal reporting laws.

The indictment alleges that Seda tried to hide the transaction from federal authorities by claiming in a document to the Internal Revenue Service that the $150,000 went toward payment of the Missouri prayer house.

Friends and supporters believe Seda is in Iran, with which the United States does not have an extradition treaty.

Seda faces up to seven years in prison if convicted of the charges, while Al-Buthe faces up to 10 years in prison.

Both are international fugitives who would be willing to return to the United States to answer the charges, "except that government representatives informed them that unless they plead guilty to the existing charges, more serious charges would be filed," Monday’s court papers state.

Included in 35 pages of exhibits attached to Monday’s motion is correspondence between Al-Buthe’s attorney in Portland and Robert Werner, director of the treasury department’s Office of Foreign Assets Control.

The OFAC has designated Al-Haramain and Al-Buthe as global terrorists.

In a May 20 letter to Werner, Al-Buthe attorney Tom Nelson asks for authorization to sell off Al-Haramain’s properties frozen by the government. Nelson also asks for authority to use the proceeds from the sale of the Ashland and Missouri properties to pay for the legal defense of the Al-Haramain chapter and Al-Buthe, whose last name was spelled Al-Buthi" in the letter.

In a response received Aug. 3, Werner writes that the properties can be sold through an arrangement already approved by the OFAC. But the request for using the proceeds for legal defense was denied, the letter states.

Werner was out of town and unavailable for comment Tuesday, his law office said.

Reach reporter Mark Freeman at 776-4470, or e-mail mfreeman@mailtribune.com.