The transformation of MKO to a pseudo-religious cult occurred through a lengthy process
For sure, as many experts on the subject believe, there are certain similarities between cults and terrorist groups in the way each uses sophisticated psychological techniques to indoctrinate their devoted members. As a matter of fact, there exists a high potentiality in a terrorist group to actually change into a dangerous cult as it possesses cult features, because any group that challenges adopted norms that advocates moving against the current for sure it avails backdrop of a cult. In the same way, any cult has the potential to be a terrorist group. in the case of MKO it is not an exception.
But still there is a question to put that how and when it happened that MKO transformed from a Marxist-oriented political group with a fundamental ideology of advocating armed warfare to what is today known as a total cult of personality. Speculations fueled by a considerable bulk of studies as well as assertions by detached and former MKO members center on the fact that it was not an overnight transformation but a plot that hatched gradually through some lengthy process of guilefully outlined stages. Ali Akbar Rastgoo, an ex-member, firmly believes that MKO had some cult-like features even from the beginning but due to some reasons, they did not break the surface:
The transformation of MKO to a dangerous pseudo-religious cult occurred through a lengthy process. It has to be pointed out that it was a potentiality existing from the very beginning in the organization’s Islamic-Marxist eclectic ideology. If it failed to be manifested in those first years of its formation, it was because it was impossible to build up the current relations at that time. 
There are more than enough evidences to prove that Massoud Rajavi had a personal ambition of establishing a cult of personality after a complete failure in armed warfare and facing an overall political stalemate that led his group into total isolation from the masses. Even before the initiation of the military phase and declaring armed struggle against the regime in 1980, some eminent political figures well acquainted with MKO envisaged it would turn into a cult sooner or later. And Rajavi needed some information before taking the first step. Ali Ferasati, an ex-member, discloses that in 1984 while in Paris, Rajavi ordered the information bureau of umbrella groups and associations to do comprehensive studies about the structure of cults in the West:
In 1984, the information bureau of associations was asked to conduct a study into the Western religious cults. The reason was said to be since the imperialists were pushing policies ahead through religious cults, the organization needed to find out what the cults were doing and under what mechanism. … At the time I got to the bottom that Massoud [Rajavi] was aware of the fact that the organization was getting disintegrated and thus, he wanted to see how the western cults operated so he could follow their model. 
It may seem hard to believe that the first seeds of MKO’s transition to a cult of personality were sown in the heart of the Western democratic and free soil following the shocking initiation of a heretic inter-organizational revolution within MKO. In fact, before MKO relocation to Iraq to execute cultic relations in Camp Ashraf as its main cult bastion, the cult thought had passed beyond its embryo stage at Auvers-Sur-Oise in Paris. The four-year settlement of MKO in France and a great accumulation of members made them engaged in a routine bureaucracy that caused a staff crisis. Many other factors such as daily-life problems, lack of a clear strategy in 1981 to 1985, critical detachment and separation of members and lack of motivation as a result of long residence in France, attractions of life and beauties of European countries all and all caused the organization suffer acute crises. Besides, Rajavi was receiving formal messages and invitations from Saddam Hussein for a complete transfer of the organization to Iraq. The group had been caught in a difficult dilemma since Iraq was at war with Iran and Saddam was the most hated man in the eyes of Iranian. As a matter of fact, move to Iraq was equal to involving in an unforgivable conspiracy against a nation for whom the group had promised freedom and democracy.
Knowing the problem and hearing murmurs of protest from the ranking members against his goals and plans, Massoud Rajavi came to a conclusion to make a basic change in the already adopted conventional model of the Leadership Council for steering his group. On the other hand, the very existence of the Leadership Council had to be dissolved as it was an obstacle and threat to his authoritative leadership and he needed a plan to dissolve it. To find a way around all these problems and to pave the way to break any probable resistance, it required a very wise, deep plan which should also support a kind of revolutionary move. Besides, Rajavi was already embroiled in the scandal of having intimate and amorous relations with his office secretary, Maryam Qajar Azodanlu, the wife of Mehdi Abrishamchi at the time. The relation uncovered, it could cause a serious crash against the structure of the group that claimed to highly value moral principles in its campaign.
1. Ra’isi and et al. Ravand-e Jodaee (originally in Persian) “The process of separation”. 1979. Samadie publication. p.164.
2. Massoud Jabani; Ravanshenasi Khoshunat va Terror (originally in Persian) “A psychology of aggression and terror” , Khavaran publication. p.127.