Turkish banker found guilty of trying to help Iran dodge U.S. sanctions

Turkish banker found guilty of trying to help Iran dodge U.S. sanctions
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(Bloomberg) — A Turkish banker was convicted of helping Iran evade U.S. financial sanctions in a verdict likely to further strain relations between Turkey and the U.S.

The verdict in Manhattan federal court caps a trial packed with intrigue that sparked vehement protests from the administration of Turkey’s President Recep Tayyip Erdogan, who accused U.S. officials of trying to harm his country’s national and economic interests and furthering the agenda of his opponents. He labeled the prosecution nothing short of an “international coup attempt.”

The Turkish lira weakened after the verdict, declining as much as 0.5 percent. The Turkish embassy in Washington didn’t immediately respond to requests for comment.

“Foreign banks and bankers have a choice,” acting U.S. Attorney Joon H. Kim in Manhattan said in a statement following the verdict. “You can choose willfully to help Iran and other sanctioned nations evade U.S. law, or you can choose to be part of the international banking community transacting in U.S. dollars. But you can’t do both.”

Under the increasingly stringent U.S. sanctions against Iran, through the latter years of the Obama administration, Halkbank was one of just a handful of banks that were authorized to hold funds for Iran, though its access to the money was severely restricted. Billions of dollars in revenue from Iran’s overseas oil sales began piling up in accounts at the bank.

Turkey’s President Recep Tayyip Erdogan, right, talks during a joint news conference with Jordan’s King Abdullah II, left, following their meeting at the Presidential Palace in Ankara, Turkey, Wednesday, Dec. 6, 2017.  Yasin Bulbul / AP

U.S. prosecutors claimed Halkbank became the nucleus of a plot to secretly launder the funds out of Turkey to Dubai, where it could be moved into the global financial system and made available to help pay Iran’s bills. Prosecutors showed how Iranian funds were converted to gold, exported to Dubai, sold for cash and then distributed for Iran’s benefit. About $1 billion was converted into U.S. dollars and moved through banks in New York, the U.S. said.

Foreign banks and bankers have a choice

Atilla was acquitted of a single count of money laundering.

The banker entered court in a gray sweater and white open-collared shirt, and blew a subtle kiss to his wife in the gallery. He sat almost motionless as the verdict was read and showed no emotion. His wife leaned forward and wept after the verdict, covering her mouth with her hand. Jurors declined to speak with reporters as they left court.

Victor Rocco, Atilla’s lawyer, said the prosecutors’ evidence “at most showed him to be a functionary” and didn’t merit the high-powered prosecution. More of the evidence, he said, showed the guilt of gold trader Reza Zarrab, who pleaded guilty before trial and cooperated with the government, testifying against Atilla.

Atilla “was not the architect of some grand scheme to evade sanctions,” Rocco said. “The evidence was more about other people than about Hakan Atilla. It was more about Reza Zarrab.”

In this Nov. 28, 2017 courtroom sketch, defence attorney Victor Rocco, left, gives his opening statement to the jury, as his client, Mehmet Hakan Atilla, right rear, listens from the defence table in New York.  Elizabeth Williams via AP

The case at times also appeared to be more about politics than the law. Erdogan suppressed a Turkish-led investigation into the allegations in 2014, and asked U.S. officials in both the Trump and Obama administrations to drop the prosecution. Zarrab — once the main defendant — hired confidants of President Donald Trump to seek a dismissal through diplomatic channels, including a prisoner swap.

In financial markets, Turkish lira, interest rates and bank stocks have swung in relationship to developments during the trial. Halkbank has gained 23 percent in Istanbul trading since the start of the trial, after a 42 percent slump that began at the end of August.

Gold Trading

The case was front-page news in Turkey. A bold-faced name in Turkey, Zarrab was married to a pop star and ran a diverse group of companies, but his chief business was money transfers, currency exchange and gold trading, giving him entry into the scheme that would prove his downfall.

Zarrab, who was arrested during a March 2016 family trip to Disney World, pleaded guilty on the eve of the trial and testified that Erdogan knew of and supported the laundering effort on behalf of Iran. During his seven days on the witness stand, Zarrab repeatedly implicated Atilla as well, placing him in meetings where the sanctions-evasion plans were discussed and saying Atilla devised key portions.

Prosecutors also pointed to at least six wiretapped calls between Atilla and Zarrab. In one — about the need to make sure customs forms used to cover up transactions looked legitimate — Atilla is heard saying to Zarrab, “Tell your guys to make sure the numbers match.”

In this courtroom sketch, Turkish-Iranian gold trader Reza Zarrab, right, testifies that he helped Iran evade U.S. economic sanctions with help from Turkish banker Mehmet Hakan Atilla, Wednesday, Nov. 29, 2017, in New York.

But Atilla’s lawyers portrayed him as a “pawn” who was in the wrong place at the wrong time. They noted that Atilla never received any bribes and went unmentioned by some of the government’s key witnesses. Although prosecutors called him a ringleader of the plot, Atilla seemed to be almost a peripheral figure, and much of the government’s evidence against him was circumstantial.

Zarrab Takes Jury on Trip Through a Sanctions-Evasion Plot

Zarrab acknowledged lying to Atilla in some instances and admitted that Atilla didn’t know the full details of the conspiracy. In some wiretapped phone calls played for jurors, Zarrab complained that Atilla blocked transactions or inhibited the plot.

Tell your guys to make sure the numbers match

Another government witness, Turkish police officer Huseyin Korkmaz, who investigated the case and whose work was suppressed when prosecution in the country was dropped, testified for days about tracking Zarrab to meetings with government officials. He told jurors about the December 2013 arrests of Zarrab and Suleyman Aslan, the former chief executive at Halkbank, finding millions of dollars in cash stuffed into shoe boxes in a raid.

Erdogan himself was a target in the Turkish probe, Korkmaz testified. Erdogan, who was Prime Minister in 2013, shut down the investigation soon after the allegations burst into the open, jailed or fired all officials involved and portrayed the whole thing as a plot against him. He went on to clinch two decisive election victories within a year.

The Turkish administration continues to go after people who cooperated with the U.S. prosecution. In a letter to U.S. Attorney General Jeff Sessions, Turkey’s Justice Minister Abdulhamit Gul asked for Korkmaz’s extradition, according to the Anadolu News Agency. A warrant was also issued for the arrest of Korkmaz’s parents, Anadolu has reported.

Atilla Testified

Atilla took the unusual step of testifying in his own defence, saying Zarrab lied about his presence at meetings. He denied any involvement in the laundering scheme.

Nine people were charged by the U.S., including Aslan and Turkey’s former economy minister, but Atilla was the only defendant to face trial after Zarrab pleaded guilty. The others have avoided U.S. arrest. Erdogan wasn’t charged.

With the trial over, Zarrab once again finds himself in an awkward place. The gold trader was previously portrayed by pro-government media outlets as a hero who narrowed Turkey’s current-account deficit and even received an award for being a top exporter. More recently, an Istanbul prosecutor charged him with espionage and ordered the seizure of all his assets and those his associates.

Under terms of his plea agreement, Zarrab will now get protection from U.S. law enforcement officials if he requests it.

The case is U.S. v. Atilla, 15-cr-867, U.S. District Court, Southern District of New York (Manhattan).

— With assistance from Taylan Bilgic and Onur Ant

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