By Jessica Dye

NEW YORK, Feb 5 (Reuters) - The head of a proposed mosque that was to be built near the site of the Sept. 11, 2001 attacks in New York City was sued on Tuesday and accused of squandering millions of dollars in donations on lavish lifestyle perks for himself and his wife.

The lawsuit, filed in Manhattan Supreme Court by several donors, accuses Imam Feisel Abdul Rauf of diverting $167,000 from private donations and $3 million from the Malaysian government for his personal use.

The money was intended for the Cordoba Initiative and the American Society for Muslim Advancement, two non-profits founded by Rauf aimed at educating the public about Islam and combating anti-Islam sentiment, the lawsuit said.

Rauf used the money to pay for vacations, real estate, entertainment, a luxury sports car and other gifts and lavish lifestyle perks for himself and his wife, the lawsuit said. The lawsuit also accused Rauf of falsifying the two groups' tax returns for several years to conceal fund transfers and sources.

The donors are seeking $25 million in damages.

A representative for the Cordoba Initiative and Rauf both referred requests for comment to their lawyer, Paul Knight, who did not immediately return a call Tuesday afternoon.

In 2010, Rauf spearheaded a controversial plan to build a Muslim cultural center and mosque in Lower Manhattan near the site of the World Trade Center attacks. He was ousted as the project's chief religious leader in January 2011.

The case is Robert Leslie Deak et al v. Imam Feisel Abdul Rauf et al., in the New York State Supreme Court, New York County, no. 151092/2013.

For the plaintiffs: Jonathan Nelson of Dorf & Nelson.

For the defendants: Paul Knight.

Follow us on Twitter @ReutersLegal | Like us on Facebook