By Susan Cornwell
WASHINGTON (Reuters) - U.S. pro-democracy activists face the prospect of imprisonment in Egypt as a result of false accusations made against them there, their leaders told Congress on Thursday.
In prepared testimony about the case that has strained ties between Washington and Cairo, the presidents of the U.S. democracy-building organizations whose staff have been charged in Egypt denied that they had done anything illegal or improper.
They said the crackdown on civil society groups was a clear attempt by Egypt's military rulers to derail democracy, with the main public accuser -- Minister of International Cooperation Faiza Abul Naga -- a holdover from the era of Egyptian President Hosni Mubarak.
Mubarak was overthrown last year in a popular uprising. The army has managed Egypt since then but pledged to hand power to an elected president by the middle of this year.
"Trial with the possibility of prison time for our staff appears the most likely outcome at present," Lorne Craner, president of the International Republican Institute, told the House Foreign Affairs Committee in prepared testimony.
IRI's Egypt director, Sam LaHood, the son of the U.S. transportation secretary, is one of the Americans caught up in the investigation.
Charges have been brought against 43 foreign and Egyptian activists after investigators swooped down on the offices of civil society groups on December 29, confiscating computers and other equipment and seizing cash and documents.
Around 20 of those charged are Americans, and they have been banned from leaving Egypt. Some have taken refuge in the U.S. Embassy.
The American groups raided were the IRI and the National Democratic Institute, both democracy-building groups loosely affiliated with the U.S. political parties, as well as the human rights group Freedom House, and the International Center for Journalists.
The charges include allegations that the activists were working for organizations not legally registered in Egypt. The groups say they have long sought to register there.
They are also alleged to have broken the law by accepting foreign funds -- grant money from the U.S. government -- without Egyptian government approval.
The Egyptian government says the issue is a matter of law, not politics. But in Washington, both Congress and the administration of President Barack Obama have said the probe threatens an annual $1.3 billion in U.S. military aid to Egypt.
The December 29 assault by Egyptian security forces was unprecedented, said David Kramer, president of Freedom House.
"Not even under Hosni Mubarak did we and our partners face such attacks," he said. "No where else in the world has any of our offices been treated as they are in Egypt."
"Despite promises made by Egyptian authorities to the highest levels of the U.S. government, we remain closed, our computers, files and cash still in the possession of the Ministry of Justice, and our staffs face hostile interrogations by investigating judges, and now the prospect of arrest and imprisonment," Kramer said.
Ken Wollack, president of the National Democratic Institute, said Egyptian media had reported a number of false and misleading accusations.
He said NDI had never trained or funded protest movements, never funded political parties, and never supported a particular outcome in any election.
"Our goal is to support a transparent, democratic process that gives people the freedom to make choices," Wollack said.
Of the 10 organizations raided on December 29, five were foreign (the four U.S. groups plus the Konrad Adenauer Foundation of Germany) and five were Egyptian, Freedom House's Kramer said.
He said some additional 400 Egyptian non-governmental organizations have been under investigation and face "relentless" pressure from the government.
"The crackdown on civil society represents a clear effort to block a democratic transition in Egypt," Kramer said. "Essentially, in the minds of many Egyptians, the military has hijacked the revolution and what it represented."
The Egyptian minister, Abul Naga, had sought full control over funding for all non-military aid going to Egypt, and resented the decision by the Obama administration last year to shift nearly $20 million directly to IRI and NDI for the purposes of helping Egypt with its elections, Kramer said.
He said Washington should immediately end any relationship with her ministry because she "has lost all credibility to handle any U.S. assistance funds in a constructive or accountable manner."
(Reporting By Susan Cornwell)