U.S. government told to review terrorist list decision

WASHINGTON (Reuters) - The State Department must review its designation of the People's Mujahedin Organization of Iran, or PMOI, as a foreign terrorist organization, a U.S. appeals court ruled on Friday.

In a 22-page decision, the U.S. Court of Appeals for the District of Columbia said the State Department failed to give the group a fair chance to overturn the listing. It remanded the matter to the department.

PMOI filed a petition on July 15, 2008, saying it should no longer be listed as a terrorist group. On January 12, 2009, in the final days of the Bush administration, the State Department rejected the request after examining material submitted by PMOI and the U.S. intelligence community, including classified information.

If a group is listed as a foreign terrorist organization, the U.S. government can freeze its assets, bar entry of group members and bring criminal charges against people who knowingly aid it.

The government was obligated under a 1996 antiterrorism law and 2004 revisions to give PMOI the chance to rebut unclassified information, the appeals court said.

"This did not happen here. The PMOI was notified of the Secretary's decision and permitted access to the unclassified portion of the record only after the decision was final," it said.

In a statement, the State Department said it would study the decision. Using the abbreviation for another name for the group, Mujahedin-e Khalq, it added, "The U.S. Government continues to view the MEK as a terrorist organization."

PMOI initially was listed as a foreign terrorist group in 1997. In 2008, it asked for removal of the designation, saying it ceased its military campaign against the Iranian government in 2001, handed over its weapons to U.S. forces in Iraq in 2003 and had provided information to U.S. officials about Iran's nuclear program.

The State Department said PMOI "has not shown that the relevant circumstances are sufficiently different" to warrant a change. Material that was declassified in the autumn of 2009 contained allegations that PMOI trained women in Iraq to be suicide bombers, had not ended military operations and that much of its information about Iran's nuclear program was wrong.

(Reporting by Charles Abbott; Editing by Peter Cooney)