Last Updated 4:18 p.m. ET
CAIRO - Ignoring a U.S. threat to cut off aid, Egypt on Sunday referred 19 Americans and 24 other employees of nonprofit groups to trial before a criminal court on accusations they illegally used foreign funds to foment unrest in the country.
Egypt's military rulers had already deeply strained ties with Washington with their crackdown on U.S.-funded groups promoting democracy and human rights and accused of stirring up violence in the aftermath of the uprising a year ago that ousted Hosni Mubarak. The decision to send 43 workers from the various groups to trials marks a sharp escalation in the dispute.
Egypt and the United States have been close allies for more than three decades, but the campaign against the organizations has angered Washington, and jeopardized the $1.5 billion in aid Egypt is set to receive from the U.S. this year.
On Saturday, U.S. Secretary of State Hillary Rodham Clinton warned Egypt that failure to resolve the dispute may lead to the loss of American aid. The Egyptian minister, Mohammed Amr, responded Sunday by saying the government cannot interfere in the work of the judiciary.
"We are doing our best to contain this but ... we cannot actually exercise any influence on the investigating judges right now when it comes to the investigation," Amr told reporters at a security conference in Munich, Germany. A few hours later, word of the referral to trials came.
The Egyptian investigation into the work of nonprofit groups in the country is closely linked to the political turmoil that has engulfed the nation since the ouster of Mubarak, a close U.S. ally who ruled Egypt for nearly 30 years.
Egypt's military rulers have been under fire by liberal and secular groups for bungling what was supposed to be a transition to democracy after Mubarak's ouster. The ruling generals who took power after the uprising, led by a man who was Mubarak's defense minister for 20 years, have tried to deflect the criticism by claiming "foreign hands" are behind protests against their rule and frequently depict the protesters as receiving funds from abroad in a plot to destabilize the country.
Those allegations have cost the youth activists that spearheaded Mubarak's ouster support among a wider public that is sensitive to allegations of foreign meddling and which sees a conspiracy to destabilize Egypt in nearly every move by a foreign nation.
Egypt has just been plunged into a new cycle of violence with 12 killed in four days of clashes. The clashes were sparked by anger at the authorities inability to prevent a riot after a soccer match last week left 74 people dead.
International Cooperation Minister Faiza Aboul Naga, a remnant of the Mubarak regime who retained her post after his ouster, is leading the crackdown on nonprofit groups. On Sunday, she vowed to pursue the issue to the very end. The investigation into the funding issue, she claimed, has uncovered "plots aimed at striking at Egypt's stability."
Egyptian security officials said that among the Americans sent to trial is Sam LaHood, the head of the Egypt office of the Washington-based International Republican Institute and the son of U.S. Transportation Secretary Ray LaHood. Five Serbs, two Germans and three non-Egyptian Arab nationals are also targeted.
Lahood's group called the decision "politically motivated" and said it "reflects escalating attacks against international and Egyptian democracy organizations." The IRI statement from Washington said the campaign was being carried out "in part by Mubarak-era holdovers."
All 43 have been banned from leaving the country. A date has yet to be set for the start of the trial.
"Governments have the right to regulate (nonprofits) but not to micromanage them and impede their activities and decisions," Joe Stork, deputy Middle East director at Human Rights Watch, said in a statement Sunday. He urged Egypt's newly elected parliament to pass a law guaranteeing the rights of civil society groups.
Sunday's decision to refer the 43 to trial raises questions about the Egyptian military's motive to allow the issue to escalate so much that the valuable $1.3 billion it gets annually be placed in jeopardy. Washington also is set to give Egypt $250 million in economic aid this year.
The U.S. assistance has allowed the Egyptian military to replace its relatively antiquated Soviet-era weaponry with modern and sophisticated arms, ranging from fighter-bombers and transport aircraft to tanks and personnel carriers. The aid is closely but informally linked to Egypt's continued adherence to its 1979 peace treaty with Israel, Washington's closest Middle East ally.
Already, Egyptian authorities are preventing at least six Americans including LaHood and four Europeans from leaving the country, citing a probe opened last month when heavily armed security forces raided the offices of 17 pro-democracy and rights groups. Egyptian officials have defended the raid as part of a legitimate investigation into the groups' work and funding.
"The ruling military council is searching for scapegoats to cover up its successive failures, the disastrous ones, since it took power on Feb. 11 (2011)," said prominent rights activist Bahy Eddin Hassan. "It has managed to stain the reputation of everybody to come out at the only party to be trusted in the eyes of ordinary Egyptians."
Laws requiring local and foreign civil society groups to register with the government have long been a source of contention, with rights activists accusing authorities of using legal provisions to go after groups critical of their policies. Offenders can be sentenced to prison if convicted.
Foreign civil society groups must receive permission to legally operate in Egypt by registering with the ministries of foreign affairs and international cooperation.
Legally, the Social Solidarity Ministry must approve any foreign funds funneled to local or foreign civil society groups in Egypt.
Also Sunday, security officials said Mubarak, 83, would shortly be moved to a prison for the first time since his arrest last April. Mubarak has since his arrest been kept in custody in a hospital at the Red Sea resort of Sharm el-Sheikh and later at an army's medical facility east of Cairo.
Mubarak is on trial on charges of complicity in the killing of hundreds of protesters during the 18-day uprising that forced him to step down.
The officials also said that around 50 former regime insiders held at Tora would be dispersed to five different jails in the greater Cairo area within the next 48 hours. They include Mubarak's two sons, businessman Alaa and one-time heir apparent Gamal, two former prime ministers and the former speakers of parliament's two chambers.
The decision to move Mubarak and spread the regime officials appeared to be a concession by the military to pro-reform activists who complain that the ruling generals led by Mubarak's defense minister for 20 years were treating the ousted leader with reverence and turning a blind eye to former regime officials clustered in Tora to use supporters to undermine security.