Turkish-Iranian Gold Trader Pleads Guilty in Multibillion Dollar Conspiracy

A Turkish-Iranian gold trader will be the star witness for the U.S. government in a trial alleging a multibillion dollar conspiracy to violate U.S. sanctions against trading with Iran, a prosecutor in federal court said Tuesday.

Reza Zarrab, 34, pleaded guilty to conspiring to evade U.S. sanctions on Iran and agreed to cooperate with the prosecution, giving the “inside story” behind the conspiracy, Assistant U.S. Attorney David Denton announced at the start of the case in which Zarrab is a co-defendant.

Zarrab is set to testify later this week against Turkish banker Mehmet Hakan Attila, 47, who has pleaded not guilty and will now face trial on his own after Zarrab struck a plea bargain with the government.

Attila is being tried on multiple charges, including violation of U.S. sanctions, bribery and money-laundering. The government alleges that Attila, a deputy CEO at Turkiye Halk Bankasi AS, known as Halkbank, and his boss Suleyman Aslan, used the state-owned bank to help Zarrab smuggle gold and U.S. currency to the Iranian government and other Iranian entities in exchange for Iranian oil money from 2010 to 2015.

In his opening statement, Denton laid out the complex scheme. Because of U.S. economic sanctions against Iran, he said, large amounts of Iranian oil money were sitting untouched in bank vaults in Iran. In order to obtain U.S. and other currencies the Iranian government needed, funds were deposited at Halkbank in Turkey and used to buy gold. The gold was then smuggled to Dubai in suitcases and sold for the desired currencies.

Zarrab would supply the gold and currency to the Iranian government and other entities, facilitated by Halkbank’s Attila and Aslan, said Denton.  

Former Turkish economic minister Mehmet Zafer Caglayan, 59, is said to have received “tens of millions of dollars’ worth of bribes in cash and jewelry” from the scheme to encourage and conceal the provision of these services to the Iranian government, according to the indictment. As a result, U.S. banks unwittingly processed international financial transactions that violated the International Emergency Economic Powers Act that allows the president to impose sanctions in the face of a threat to national security.

Denton described the scheme as “one of the biggest lies the banking world has ever known,” with Attila leading the charge. “Lies that were devised and told by this man, Mehmet Hakan Attila,” said Denton, dramatically pointing at Atilla as his words rang through the silent courtroom.

“He lied to help Iran repeatedly evade U.S. sanctions and to the tune of a billion dollars,” Denton continued. “Zarrab would provide the means, and Atilla would provide the method.”

Attila watched with a serious expression that matched his somber, grey three-piece suit. His defense attorney, Victor Rocco, turned around the government’s claims and said it was Zarrab who had engineered the scheme with Attila merely being a cog in the machine.

“We just fell into a rabbit hole,” said Rocco. “But this isn’t like Alice in Wonderland. This has real human consequences.”

Rocco argued that Zarrab profited massively from the scheme and made hundreds of millions of dollars that he used to buy “jets, yachts, people,” and that he was the ultimate “master of the deal” who pleaded guilty as a “get-out-of-jail-free card.” Rocco said the evidence would show that Attila did not accept bribes and was a hardworking man being prosecuted merely for doing his job.

“He was misled and duped by Zarrab,” said Rocco. “He was misled and duped by his boss Suleyman Aslan.”

Acting U.S. Attorney Joon Kim watched the opening statements from the back of U.S. District Judge Richard Berman’s courtroom.

Earlier this year, Zarrab, an influential figure in Turkey married to Turkish pop star Ebru Gundes, hired former New York City Mayor Rudolph Giuliani and former U.S. Attorney General Michael Mukasey, in an unsuccessful bid to bring about a diplomatic resolution to the case.

Turkey’s President, Recep Tayyip Erdogan, also tried to get American authorities to drop the case for over a year, having admitted to pressing former Vice President Joe Biden about the issue during last year’s U.N. General Assembly. Now the Turkish government claims the trial is a continuation of an elaborate scheme to overthrow Erdogan that began with last year’s coup attempt.

Turkish-U.S. relations have grown increasingly strained due to the trial, as Erdogan could be politically implicated if Zarrab’s testimony leads to the U.S. taking action against Turkish banks involved in the scheme. The trial comes at an unfortunate time in Ankara’s and Washington’s foreign relations, which have been deteriorating over the past two years due in part to the U.S. granting military aid to Syria’s leftist Kurdish militia and delaying the Turkish government’s request to extradite Islamic cleric Fethullah Gulen. Gulen, who lives in self-exile in Pennsylvania, is the spiritual leader of a Turkish Muslim sect that Erdogan accused of instigating the country’s July 2016 coup.

“Turkey believes that the trial is politicized,” said David Phillips, director of the Program on Peace-building and Rights at Columbia University’s Institute for the Study of Human Rights. “The rule of law is meaningless in Turkey, where checks and balances have been gutted by the Erdogan government. Turkey has become a dictatorship with no constraint on executive power.”

Turkish markets have also been affected by concerns about the trial. The Lira is already the worst-performing currency of 2017, and there are fears that U.S. authorities will penalize Turkey or its banks, depending on what Zarrab reveals.

On Tuesday morning, Turkish prosecutors issued detention warrants for two of the individuals named on a witness list for the trial, including a Turkish former opposition lawmaker charged with giving fake evidence to this court case, according to CNN Turk.

Zarrab will take the witness stand on Wednesday to testify on the intricacies of the complex oil-for-gold scheme. If Attila is found guilty, he faces a maximum term of 20 years in prison for conspiring to violate the IEEPA and 30 years for bank fraud.


(Header photo credit: Wikimedia Commons)