(CN) - An Oregon man convicted in a tax fraud case "that was transformed into a trial on terrorism" is entitled to a new trial based on government misconduct, the 9th Circuit ruled Friday.
The three-judge panel in Seattle cited "significant errors" that it found merit a new trial, including a government search that "went well beyond the explicit limitations of the warrant."
Pete Seda, also known as Pirouz Sedaghaty, was convicted in 2011 of falsifying a 2000 charity tax return to hide his support of an independence movement in Chechnya.
The Iranian-born Seda founded the U.S. branch of the Al-Haramain Islamic Foundation, a Saudi Arabian charity that U.S. officials suspected of funding Chechen mujahedeen -
or holy warriors - under the guise of providing humanitarian aid.
Seda claimed any discrepancies on his tax return could be traced to his accountant, and cited his own track record of peaceful, charitable work in the United States and abroad.
U.S. District Judge Michael Hogan ordered
Seda's release in January 2011 while he argued for a new trial.
Seda claimed the government failed to disclose a $14,500 payment from the FBI to the husband of a key witness who testified against him and had even offered to pay the witness.
He also challenged the lower court's handling of classified information and the scope of a computer search and seizure. He said the government denied him a fair trial by refusing to help him obtain evidence overseas, and by appealing to religious prejudices and guilt by association.
"The appeal 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 M. Margaret McKeown wrote. "This tension was evident both before and during trial and dominates much of the briefing on appeal."
The three-judge panel said it was "particularly troubled by the cumulative effect" of the government's errors, "which resulted in admitting evidence illegally seized while denying Seda both material impeachment evidence and potentially exculpatory evidence."
The only evidence directly linking Seda to an effort to fund Chechen mujahedeen
was the testimony of Barbara Cabral, the witness whom the FBI paid, the panel noted.
"The records of the FBI's payments provide significant impeachment evidence that would have shaded the jurors' perceptions of Cabral's credibility," McKeown wrote.
Withheld notes revealed that the payments came at a time when Cabral was "experiencing serious medical issues that left her with several thousand dollars of out-of-pocket medical expenses," according to the ruling.
McKeown said the undisclosed material "would have allowed the defense to paint a picture of, at best, a witness whose shaky recollection was influenced by her gratitude to the FBI for its financial assistance; at worst, a witness making up a story to obtain money for medical bills, with the FBI revising its materials to match her anticipated testimony."
The court also rejected the lower court's substitution of classified material that the government acknowledged was helpful to Seda's defense. The government had submitted an unclassified summary of the material that was far from neutral and still left out facts helpful to the defense.
The panel dove into more detail about the substitution in a classified opinion, also released Friday, as it cannot describe the classified content on public record.
"We can say, however, that the summary excludes exculpatory information and fails to provide crucial context for certain information that it does convey," McKeown wrote.
Finally, the panel said government agents went too far when they seized from Seda's home in 2004 nine computers, news articles, records of visits to websites about Chechnya, photographs of Chechen war scenes and other documents not listed in the search warrant.
Neither the warrant nor an accompanying affidavit authorized the "far flung scope of the agents' search," McKeown concluded.
Though the court rejected Seda's remaining arguments, it said the areas in which it agreed with him "were significant errors that merit a new trial."
Dissenting in part, Judge Richard Tallman said Seda's conviction and sentencing "should be affirmed."