Turkish Banker Is Convicted in Plot to Evade Sanctions on Iran
Posted January 3, 2018 7:55 p.m. EST
NEW YORK — A Turkish banker was convicted Wednesday of taking part in a billion-dollar scheme to evade U.S. sanctions against Iran, in a case that painted a picture of high-level corruption in Turkey and heightened tensions between the United States and its NATO ally.
Turkey’s president, Recep Tayyip Erdogan, was not charged in the indictment, but he seemed to loom over the U.S. District Court case in Manhattan during the monthlong trial and even before it began. Testimony suggested that he had approved the sanctions-busting scheme.
Erdogan and other Turkish officials had bitterly denounced the charges against the banker, Mehmet Hakan Atilla, and eight co-defendants, and repeatedly urged U.S. officials to drop the case. Erdogan even took the matter up with President Donald Trump.
The case was followed closely in Turkey, where the government was already angry at the United States for giving shelter to a cleric Erdogan says was behind a coup attempt in 2016.
Atilla, the deputy general manager for international banking at Halkbank, a Turkish state bank, was the only defendant to be tried. A co-defendant, Reza Zarrab, a wealthy gold trader, pleaded guilty shortly before the trial began and became the star prosecution witness. The seven other defendants are still at large.
Atilla, 47, was described by prosecutors as a “fixer” who helped Iran circumvent the sanctions and gain access to billions of dollars of restricted petrodollar funds that were being held at the bank.
In testimony over seven days, Zarrab described an illicit operation that relied on false documents and front companies. He also described support from the highest levels of the Turkish government, as well from as Iranian officials and Halkbank, an institution that prosecutors said was critical to the scheme’s success.
Zarrab testified that in 2012, Erdogan, then Turkey’s prime minister and now its president, ordered that two Turkish banks be allowed to participate in the sanctions evasion scheme.
He also told the jury that he had paid tens of millions of dollars in bribes to Zafer Caglayan, then Turkey’s economy minister, and additional bribes to Suleyman Aslan, the general manager of Halkbank, for help in facilitating the operation. Caglayan and Aslan are among the defendants still at large in the case.
Zarrab, 34, testified that he had made as much as $150 million from the scheme.
Prosecutors portrayed Atilla as a sanctions expert who designed the complex scheme and then lied to U.S. Treasury Department officials about it. He lied again, they argued, when he testified in his own defense at the trial.
“Why did Mr. Atilla tell all those lies?” Michael D. Lockard, a federal prosecutor, said in a closing argument. “To help his bank, to help his bank’s customers — customers like Mr. Zarrab, customers like the government of Iran, the Central Bank of Iran, the National Iranian Oil Co. Lies that he told to keep his bank from being blacklisted from the American financial system.”
Atilla denied that he had conspired with Zarrab or that he had been involved in any other wrongdoing.
The jury returned its verdict on its fourth day of deliberations. Atilla was convicted of five of the six counts against him, including bank fraud and conspiracies to violate the Iran sanctions, to defraud the United States, to commit bank fraud and to commit money laundering. He was acquitted on one count, money laundering.
Atilla is to be sentenced April 11 by Judge Richard M. Berman. The bank fraud count alone carries a maximum sentence of 30 years in prison. Victor J. Rocco, one of Atilla’s lawyers, said his client would appeal.
“We believe he is innocent, and he intends, most importantly, to continue to fight and clear his name,” Rocco said.
Erdogan has said that the case was based on fabricated evidence. And during a recent interview on the news channel 24 TV, Turkey’s justice minister, Abdulhamit Gul, assailed the credibility of the entire proceeding.
“A final ruling on this will mean nothing to us,” Gul said. “This is a tragedy in the judiciary with no legal foundations, turning into a comedy over time.”
The case had been an important one for federal prosecutors in Manhattan, who were the object of much criticism from Turkish officials. In November, Turkey said it had opened an investigation of Preet Bharara, the former U.S. attorney for the Southern District of New York, whose office announced the original charges in 2016, and of his successor, Joon H. Kim, who oversaw the prosecution through the trial.
After the verdict, Kim, the acting U.S. attorney, said: “Foreign banks and bankers have a choice. 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.” As the trial began, Erdogan and other Turkish officials made strenuous efforts to play down its significance. More recently, as they awaited a verdict, they struck a tone of confidence that they had ridden out the worst.
Most Turkish newspapers were predicting a favorable verdict, and analysts said the government, which controls most of the media in Turkey, had managed to frame the trial as a U.S. plot.
On his way back from Africa on Dec. 27, Erdogan told pro-government reporters on his presidential plane that he expected Atilla would be acquitted. “I am of the opinion that they have also realized that Atilla is not guilty,” he said.
Political analysts and opposition politicians had suggested that whatever the verdict, Erdogan was likely to emerge unscathed, but that Turkish banks — and consequently the Turkish economy — might be hurt.
“The economic downside is more important than the political effect,” said Sinan Ulgen, a visiting scholar at Carnegie Europe. “It would be unrealistic to expect an immediate challenge to the government.”
Gonul Tol, director of the Middle East Institute’s Center for Turkish Studies, said a conviction might not have many consequences.
“First,” she said, “the Turkish nation has never been very sensitive about corruption. Also, in a period of strong anti-U.S. feeling, the government successfully managed to frame it.”
Initial reaction to Atilla’s conviction, which Turks learned about late in the evening, seemed to bear that out.
Pro-government Twitter accounts began promoting a hashtag meaning “We Will Not Bow Down to the USA.” One post read: “The judge and the prosecutors are dubious, fake evidence, scandalous experts. They set up this plot in front of our eyes, they are playing.”
Selva Tor, a former banker and political analyst who has criticized the U.S. policy of enforcing its laws on foreign citizens, wondered why the Turkish government was not protecting a citizen. “Not only Hakan Atilla,” he wrote. “Halkbank and the Turkish banking system are taken as slaves too.”