By Shaimaa Fayed and Maggie Fick
CAIRO (Reuters) - An Egyptian court convicted 43 Americans, Europeans, Egyptians and other Arabs on Tuesday in a case against democracy promotion groups that plunged U.S.-Egyptian ties into their worst crisis in decades.
Judge Makram Awad gave five-year sentences to 27 defendants tried in absentia including 15 U.S. citizens. Another American who stayed for trial was given a two-year sentence, but left Egypt on Tuesday on the advice of his lawyers. A German woman was also given a two-year sentence.
U.S. Secretary of State John Kerry harshly criticized the decision, calling it "incompatible with the transition to democracy" and a violation of the government's commitment to support civil society as it emerges from years of authoritarian rule by former President Hosni Mubarak, a close U.S. ally.
The Egyptian investigation focused on charges that the groups were operating without necessary approvals and had received funds from abroad illegally. Eleven Egyptians who faced lesser charges were handed one-year suspended sentences.
Beginning in late 2011, Egypt's crackdown on organizations that included U.S.-based groups linked to America's two main political parties caused outrage in Washington, which supplies Cairo with $1.3 billion in military aid each year.
The court ordered the closure of the non-governmental organizations (NGOs) involved in the case, including the U.S.-based International Republican Institute (IRI), National Democratic Institute (NDI) and Freedom House.
Both NDI and IRI plan to challenge the verdict.
In Washington, Kerry issued a tough written statement saying the United States was "deeply concerned," but that did not hint at any consequences - such as a cut in U.S. assistance to Egypt - as a result of the verdict.
U.S. Democratic Senator Patrick Leahy, a member of the influential Senate Appropriations Committee and a proponent of tying U.S. military aid to Egypt to progress on democracy and rights, called the convictions "appalling and offensive."
"If Egypt continues on this repressive path it will be increasingly difficult for the United States to support President (Mohamed) Mursi's government," he added.
Under an amendment championed by Leahy, U.S. military aid to Egypt may not be disbursed unless the State Department certifies that its government "is supporting the transition to civilian government, including holding free and fair elections (and) implementing policies to protect freedom of expression, association and religion and due process of law."
The Americans sentenced in absentia include the son of U.S. Transportation Secretary Ray LaHood.
At one point, Egypt placed travel bans on the suspects, including U.S. citizens who took refuge in the U.S. Embassy. They were allowed to leave the country on bail of $330,000 each, money that ultimately came from the U.S. government.
Egypt was run at the time by a military council that assumed power from deposed President Hosni Mubarak. Although the case is a legacy of that era, analysts say it further darkens prospects for an open society after the Islamist-led administration drew up a new NGO law seen as a threat to democracy.
Robert Becker, the American who stayed for the trial and a former NDI employee, boarded a flight for Rome shortly after the verdict against him was read, Cairo airport sources said.
"On my lawyers' advice, I have unwillingly gone into exile until appeals get sorted out," he wrote on his Twitter account.
The German sentenced to two years is an employee of the Berlin-based Konrad Adenauer Foundation.
"We are outraged and very concerned about the court's harsh decisions against the employees of the Konrad Adenauer Foundation in Cairo and the order to close the office," said German Foreign Minister Guido Westerwelle.
'CHILLING EFFECT' ON CIVIL SOCIETY
The government said the NGOs were operating illegally in Egypt and complained that after the anti-Mubarak revolt, the U.S. government had diverted $150 million from its Egypt aid budget to these NGOs, breaking bilateral agreements.
"The verdict is obviously going to have a chilling effect on the climate for civil society in Egypt, but that's already been happening for some time," said Shadi Hamid, director of research at the Brookings Doha Centre, a think tank based in the Gulf.
The other defendants sentenced in absentia included citizens of Norway, Serbia, Germany and Arab states.
Despite the furor over the case, the United States released its annual military aid for Egypt in March 2012, saying U.S. national security required continued military assistance.
The U.S.-based groups were training Egyptians in advocacy, voter education and election monitoring.
The Muslim Brotherhood, banned under Mubarak, has come under fire for proposing new regulations that would severely restrict independent groups. Seeking to ease the concerns, President Mohamed Mursi last week submitted a new draft law to parliament.
But Western and Egyptian critics say the draft falls short.
The EU, a major donor to Cairo, said on Sunday it would unnecessarily constrain the work of NGOs in Egypt, while Washington said the bill imposed significant government controls on the activities and funding of civic groups.
(Additional reporting by Tom Perry and Ali Abdelaty in Cairo, Arshad Mohammed in Washington and Michelle Martin in Berlin; Writing by Tom Perry; Editing by Alistair Lyon, Mike Collett-White and Peter Cooney)