US Judge Refuses to Delay Case Against Turkish Bank Accused of Evading US Sanctions on Iran

Patrick Goodenough | December 27, 2019 | 5:52am EST
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President Trump and Turkish President Recep Tayyip Erdogan at the White House on Nov. 13, 2019. (Photo by Mandel Ngan/AFP via Getty Images)
President Trump and Turkish President Recep Tayyip Erdogan at the White House on Nov. 13, 2019. (Photo by Mandel Ngan/AFP via Getty Images)

( – In a fresh blow to Turkey’s Islamist government, a federal judge in New York City on Thursday rejected a request by the state-owned Halkbank to delay a case in which the Turkish institution stands accused of a scheme to help Iran to dodge U.S. sanctions.

President Recep Tayyip Erdogan has long been urging the United States to back off, but in mid-October the Justice Department indicted Halkbank for offenses relating to a scheme to evade U.S. sanctions on Iran.

Rejecting the bank’s request, District Court Judge Richard Berman said in a five-page decision that a stay “would impede the speedy adjudication of Halkbank’s alleged role as facilitator of a $20 billion conspiracy to evade U.S. sanctions against Iran.”

“The public has a strong interest in the prompt adjudication of the case against Halkbank.”

Halkbank’s lawyers had asked the court to hold off until a federal appeals court had ruled on whether the accused could challenge U.S. jurisdiction before first entering a plea. On December 5, Berman ruled that a plea should be entered first.

In its latest request for a stay, Halkbank offered a new reason, arguing that its “further deterioration would harm the Turkish economy and risk leaving [Halkbank] clients without a lender while also having a negative impact on the bilateral relations between the United States and the Republic of Turkey.”

In response, Berman said the bank’s economic problems may have predated the indictment, and stated that the best way to mitigate any “economic and reputational damage” would be to respond speedily to the criminal charges.

He noted that Halkbank was in violation of two court orders to appear, and set a February 25 date for a hearing to determine whether it should be held in contempt of court.

‘High-ranking government officials’

According to the indictment, Halkbank between 2012 and 2016 used businesses and front companies in Iran, Turkey and the United Arab Emirates to evade sanctions, and allow Iran to access the U.S. financial system.

“High-ranking government officials in Iran and Turkey participated in and protected this scheme,” it alleges. “Some officials received bribes worth tens of millions of dollars paid from the proceeds of the scheme so that they would promote the scheme, protect the participants, and help to shield the scheme from the scrutiny of U.S. regulators.”

  A branch of the state-owned Halkbank in Istanbul. (Photo by Ozan Kose/AFP via Getty Images)
A branch of the state-owned Halkbank in Istanbul. (Photo by Ozan Kose/AFP via Getty Images)

Among the illicit transactions alleged, the bank allowed the proceeds of sales of Iranian oil to be used to buy gold for the benefit of the Iranian regime.

Some transactions were fraudulently designed to appear to involve the buying of food and medicine for Iranians – under a “humanitarian exception” to U.S. sanctions – “when in fact no purchases of food or medicine actually occurred.”

Nine individual defendants previously charged in the alleged scheme include Halkbank executives and a former Turkish Economy Minister. All remain fugitive apart from the bank’s former deputy general manager, Hakan Atilla, whom a jury in January 2018 convicted of five counts; and Turkish-Iranian gold trader Reza Zarrab, who pleaded guilty in October 2017 to seven counts.

After serving jail time Atilla returned last July to Turkey, where he was named head of the Istanbul stock exchange.

Zarrab, who turned state’s evidence, testified during Atilla’s trial that Erdogan himself had approved Halkbank’s participation in the sanctions-busting scheme.

Zarrab was represented by former NYC Mayor Rudy Giuliani, who reportedly met with Erdogan in early 2017 in an attempt to resolve the case diplomatically. (Giuliani was not at the time Trump’s personal lawyer, a post he assumed in April 2018.)

In 2017 rumors emerged that a deal could be in the works to swap Zarrab for Andrew Brunson, the American evangelical pastor held by the Turks for two years and tried on terror and spying charges.

In July of that year, a former U.S. ambassador to Turkey urged the administration not to consider a Zarrab-Brunson exchange, saying while it may be tempting, a swap would “only help Erdogan suborn the rule of law in the United States as he has done in Turkey.”

(In Oct. 2018 Brunson was convicted of aiding terrorism, sentenced to time already served, and returned home. Two months earlier the Trump administration had sanctioned two Turkish government ministers over his treatment. Trump had said he was effectively a “hostage.”)

‘Unusual contacts’

In his Dec. 5 decision, Judge Berman referred – in a background section entitled “Unusual contacts” – to an “extraordinary” campaign of pressure initiated by the Turks early on to have Zarrab released and returned home, “even though he was in the middle of a U.S. federal criminal proceeding and heading for trial.”

Among those involved, he wrote, was Erdogan and senior members of his cabinet.

“The Americans who appear for the most part to have been on the receiving end of these efforts” included Trump, former Vice President Joe Biden, former Attorney General Loretta Lynch, Treasury Secretary Steven Mnuchin, and former Secretary of State Rex Tillerson,” Berman said.

Erdogan has been persistent. When Vice President Mike Pence traveled to Ankara in mid-October – two days after the Justice Department indicted Halkbank – to discuss Erdogan’s unilateral military offensive in northern Syria, Pence said the Turks had raised the Halkbank case.

“And we informed them that that was a matter for the Southern District of New York and the Justice Department,” he said.

Heading to Washington for a White House meeting last month, Erdogan told reporters he planned to raise the indictment of Halkbank during his talks with Trump.

With no apparent progress on the issue, however, Halkbank shares dropped after the White House meeting, by up to three percent.


See earlier story:
Iran-Related Arrest in Florida Could Have Serious Political Implications for Turkey’s Ruling Party (March 23, 2016)


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