U.S. Democracy Activists' Trial Set to Begin in Egypt Sunday

Dozens of democracy activists -- 16 Americans among them -- go on trial in Egypt Sunday in a politically charged case that has led to a crisis in relations between Cairo and Washington while threatening $1.3 billion in annual U.S. military aid to the North African nation.

Forty-three Egyptian and foreign nonprofit workers -- including the son of U.S.Transportation Secretary Ray LaHood -- are accused of receiving illegal funds from abroad and carrying out political activities unrelated to their civil society work.

A senior U.S. official said Washington and Cairo were holding what he described as intense discussions to resolve the crisis within days. U.S. Secretary of State Hillary Clinton, who arrived in the Moroccan capital after visits to Algeria and Tunisia, has met Egypt's Foreign Minister Mohamed Kamel Amr twice in the last three days, the official said on condition of anonymity.

Human-rights campaigners say the case constitutes retaliation by Egypt's ruling generals against pro-democracy groups that have been among the army's harshest critics since it took power when Hosni Mubarak was overthrown a year ago.

The whole basis of this case is unfair, an Egyptian activist working for one of the organizations told Reuters.

It was unclear whether all of the accused -- who are banned from leaving Egypt pending trial -- would appear in court.

A number of them were already abroad when the ban was placed, and some of those who remained in Egypt have taken refuge in the U.S. embassy in Cairo.

The U.S. pro-democracy groups whose staff have been charged deny they have done anything illegal. They say the crackdown is an attempt by Egypt's military rulers to derail democracy.

Egypt says the case is a judicial matter and that all groups must heed Egyptian law.

Negad al-Borai, a lawyer representing the accused in Cairo, said the charges referred only to a short period in the groups' activities and could therefore be argued against. The charges made involve only the period from March 2011 to December 2011, he told Reuters. These groups have applied for permits before that period.

Some Egyptian officials have linked the funding of civil-society initiatives to a U.S. plot to undermine Egypt's sovereignty -- accusations the United States and the civil-society workers deny.

Among those accused is Sam LaHood, Egypt director of the International Republican Institute and the son of the U.S. transportation secretary.

The crisis escalated on Dec. 29 when Egyptian authorities swooped down on the offices of the American groups -- the International Republican Institute and the National Democratic Institute -- confiscating documents, computers, and cash on the premises.

The government and the ruling military council say the case was initiated by the judiciary and is out of their hands.

(Additional reporting by Arshad Mohammed in Rabat; Writing by Marwa Awad; Editing by Maria Golovnina)