A trader accused of helping Iran evade sanctions invoked the name of Turkey’s president, Recep Tayyip Erdogan, as part of a scheme that U.S. prosecutors say was supported by Turkey’s government, according to court documents.
U.S. prosecutors in New York have gathered taped conversations and other records that suggest the trader may have sought support from Erdogan. The Turkish president hasn’t been accused of wrongdoing, and it’s possible that the trader falsely invoked Erdogan’s name to influence others. The people charged in the case are captured in the recorded conversations, which were introduced Monday in a filing in federal court in Manhattan.
The documents introduced in the sanctions and money-laundering case against the Turkish-Iranian gold trader, Reza Zarrab, could further complicate the relationship between the U.S. and Turkey, a majority-Muslim country long considered a crucial ally in the region.
The lira extended declines following the report about the U.S. proceedings, dropping as much as 1.8 percent to 3.8662 per dollar, the weakest since January. The Turkish banking index dropped as much as 3.3 percent. Yields on ten-year bonds jumped 34 basis points to 12.24 percent, a record on a closing basis.
“The Zarrab case is the one to watch in terms of U.S.-Turkey relations,” Tim Ash, a London-based strategist for BlueBay Asset Management LLP, said in an email to clients. “Zarrab is thought to have been close to the Erdogan family and, indeed, he was given Turkish citizenship, alongside Iranian. This is a real stress point.”
Erdogan tried to pressure U.S. officials during the Barack Obama and Donald Trump administrations to drop the prosecution of the trader and has complained in public comments that prosecutors were trying to extract a confession from Zarrab and turn him into an informant. He also claimed President Trump apologized for the prosecution in a phone call.
Trump has praised Erdogan even as the Turkish president has been consolidating power and silencing critics in his country. Close Trump associates including Rudy Giuliani, the former New York mayor, and Michael Mukasey, the former U.S. attorney general, have also been paid by Zarrab to seek a dismissal of the charges against him.
In an extraordinary series of court filings, Giuliani and Mukasey said that they were granted meetings with unnamed senior administration officials to present their case and that they flew to Turkey to meet with Erdogan in an effort to broker a deal.
The trial is scheduled to begin Nov. 27. Along with Zarrab, a Turkish banker has also been arrested in the case. Both sides have begun filing court documents unveiling the evidence they plan to use or hope to suppress during the trial.
Zarrab has denied wrongdoing. A Zarrab lawyer, Benjamin Brafman, declined to comment on the Erdogan-related disclosures. Calls and emails to Erdogan representatives in Ankara, Turkey, and the Turkish embassy in Washington weren’t returned.
Court filings by Zarrab’s co-defendant suggest that he may have struck some kind of deal with prosecutors. They say that Zarrab is no longer participating in the case and that defense lawyers don’t expect him to appear at trial. The precise reason for that isn’t clear, but it could mean he has decided to plead guilty or cooperate with the government, or that prosecutors have dropped the charges. Both sides have declined to explain or elaborate.
Zarrab is accused of using his network of companies to launder hundreds of millions of dollars through the U.S. financial system on behalf of Iran and related companies to help them evade sanctions. Some of the entities that benefited from the transactions are suspected of supporting terrorism, including Iran-based Mahan Airlines, which has allegedly provided transport services to Hezbollah. The airline is on the U.S. Treasury Department’s list of blacklisted companies.
The new filing by prosecutors makes at least three references to evidence that they say suggests that Erdogan or his family members may have known of or supported Zarrab’s activities.
In one, the prosecutors cite a Sept. 19, 2013, wiretapped phone conversation between Zarrab and one of his employees about the alleged laundering scheme, in which Zarrab said: “Even if we do two billion, that is important. Do you understand? It is important for me, in the eye of the prime minister, since I will go straight to him.” Erdogan was prime minister at the time.
In another, prosecutors refer to a discussion that supposedly took place between Zarrab and Erdogan at a wedding in April 2013 in which Zarrab says he asked for Erdogan’s support to buy a bank he hoped to use as a conduit for transactions with Iran. During a wiretapped call a few days later, according to prosecutors, Zarrab said: “I went to him and talked about the thing I was going to do, and I explained it that day at the wedding. I will go back and will say, ‘Mr. Prime Minister, if you approve, give me a license.’” He didn’t ultimately buy the bank.
They also cite instances of Zarrab directing donations to charitable foundations associated with Erdogan’s relatives, including his son and another unnamed relative. Zarrab donated money to a charity run by Erdogan’s wife as well, he has said in court filings.
Prosecutors had made references to Zarrab’s close relationship with Erdogan and members of his family in earlier court documents in the Zarrab case. But the latest filings are the first to offer specific evidence suggesting Erdogan may have known about the scheme, at least according to Zarrab.
The U.S. government “anticipates that the evidence introduced at trial will show that Turkish government and banking officials were integral to the sanctions evasion scheme,” according to a document submitted to the court on Oct. 30.
Much of the evidence cited in the U.S. case emerged in a corruption investigation by Turkish prosecutors that was quashed by Erdogan in 2014 but hadn’t been raised in the U.S. case until now. Erdogan said the probe was aimed at bringing down his government and purged thousands of officials including prosecutors, judges and investigators involved in the case.
As the case has moved toward trial, prosecutors have made increasingly clear that they intend to introduce evidence that wasn’t aired in the Turkish investigation. Although the case was described as a prosecution of Zarrab for helping Iran evade sanctions and launder money through the U.S. financial system, it has drawn attention because of its potential to reveal evidence of bribery and corruption in the Turkish government.
Another point of interest has been Turkish aid to Iran despite nuclear-related sanctions against the country. Turkey is a key U.S. partner in the region and hosts a major airbase used by U.S. and other NATO forces for military operations in the Middle East.
Nine defendants have been charged in the U.S. case, including a former Turkish government minister and senior executives of a state-owned bank, Turkiye Halk Bankasi AS. But only Zarrab and one other defendant, Mehmet Atilla, are facing trial, after both were arrested while traveling to the U.S.
The case is U.S. v. Zarrab, 15-cr-867, U.S. District Court, Southern District of New York.
— With assistance by Peter Chapman
(Taken from Bloomberg.com. Story by Christian Berthelsen)
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