NEW YORK (Reuters) - The first suspect transferred from Guantanamo military prison to face a U.S. civilian trial was found not guilty on all but one charge in the 1998 African embassy bombings on Wednesday in a setback to President Barack Obama’s plans for trying terrorism suspects.

Ahmed Khalfan Ghailani, 36, a Tanzanian from Zanzibar, had been accused of conspiring in the 1998 al Qaeda bomb attacks on U.S. embassies in Kenya and Tanzania that killed 224 people.

The jury, which deliberated for nearly five days, found him guilty of one relatively minor charge of conspiracy to damage or destroy U.S. property with explosives. He faces a mandatory minimum of 20 years in prison and a maximum of life.

U.S. Attorney Preet Bharara said he would seek life in prison for Ghailani at his sentencing on January 25.

Ghailani was cleared of 276 murder and attempted murder counts, along with four other conspiracy charges. It was a rare defeat for the U.S. Attorney’s Office in New York, which has a near perfect record in prosecuting terrorism cases.

Ghailani’s trial was being watched closely as a test of Obama’s approach to handling the 174 terrorism suspects held at Guantanamo Bay, Cuba, including Khalid Sheikh Mohammed, a self-professed mastermind of the September 11 attacks on the United States by al Qaeda.

Obama has vowed to close the U.S. prison at Guantanamo Bay amid international condemnation of the treatment of detainees, but he has run into political resistance at home.

His administration has adopted an approach that favors military tribunals in some cases for terrorism suspects and civilian trials in others.

Justice Department spokesman Matthew Miller said, “We respect the jury’s verdict and are pleased that Ahmed Ghailani now faces a minimum of 20 years in prison and a potential life sentence for his role in the embassy bombings.”

Ahmed Khalfan Ghailani, a Tanzanian held at the U.S. naval base in Cuba since 2006 accused of involvement in the bombing of U.S. embassies in Africa, is depicted in this courtroom sketch of his arraignment, in New York, June 9, 2009. REUTERS/Christine Cornell

‘TRAGIC VERDICT’

Most Republicans say all terrorism suspects should be tried in military tribunals.

“This tragic verdict demonstrates the absolute insanity of the Obama Administration’s decision to try al-Qaeda terrorists in civilian courts,” said Republican Representative Peter King, in line to chair the House of Representatives Homeland Security Committee when his party takes control of the chamber in January.

King said last week one of his main priorities as committee chairman would be stopping Obama’s plans to transfer Guantanamo Bay detainees to the United States to stand trial in civilian courts.

The Obama administration has backed off an initial proposal to prosecute Mohammed and other accused September 11 plotters in a U.S. criminal court blocks from the World Trade Center site, but has not revealed new prosecution plans.

Prosecutors in the Ghailani case were dealt a blow before the trial started when the judge refused to let a key witness testify, basing his decision on protecting the U.S. Constitution from admitting coerced testimony.

From the outset, prosecutors said they would not use any statements Ghailani may have made while in CIA custody after his July 2004 arrest in Pakistan, acknowledging those statements were likely “coerced.”

But the judge said the government would not have been able to find the key witness without those statements.

Prosecutors had said the witness told FBI agents he had sold explosives to Ghailani that were used later in one of the bombings. Defense attorneys said Ghailani had no idea what the equipment was going to be used for.

Ghailani was moved to Guantanamo Bay in late 2006, and transferred to New York in June 2009 to stand civilian trial.

The government accused Ghailani of buying seven gas cylinders used in the bomb and the truck used to transport it. Prosecutors said Ghailani flew to Pakistan along with senior al Qaeda operatives on the day before the bombings, and that a blasting cap was found in a cupboard in his room.

Defense lawyers called Ghailani a naive boy who was tricked by al Qaeda and they denied he took the flight to Karachi.

“This verdict is a reaffirmation that this nation’s judicial system is the greatest ever devised,” defense attorney Peter Quijano told reporters outside the courthouse.

U.S. District court Judge Lewis Kaplan told the jury it had shown that “American justice can be delivered calmly, deliberately and fairly by ordinary people -- people who are not beholden to any government, including our own.”