Let's review. The problem with HRW's fundraising in Saudi Arabia is two-fold: (1) Totalitarian (or even run-of-the-mill authoritarian) governments will only allow fundraising for human rights NGOs to the extent that the NGO is at worst only a minor nuisance to it. If HRW becomes dependent on Saudi money, it will have a significant incentive softpedal Saudi Arabia's human rights violations; (2) HRW specifically asked for money in Saudi Arabia due to its research and publicizing of Israel's alleged human rights violations in Gaza, and the cost of its battles with "pro-Israel pressure groups in the US, the European Union and the United Nations" (as if the U.N., with dozens of Arab and Muslim countries, is a hot bed of pro-Israel sentiment!). So HRW went to the elites of a totalitarian nation, with some representatives of the government in the audience(!) to ask for money to help it combat the controversial policies of a liberal democracy.
The rest at The Volokh Conspiracy
Via the Instapundit