Turkish state banker arrested in US: will case implicate government?

Mehmet Hakan Atilla (R), a deputy general manager of Halkbank, is shown in this court room sketch with his attorney Gerald J. DiChiara (C) as he appears before Judge James C. Francis IV in Manhattan federal court in New York, New York, U.S., March 28, 2017. REUTERS/Jane Rosenberg

Mehmet Hakan Atilla, Deputy General Manager of Turkish state owned bank Halkbank was arrested in accordance with a Manhattan court decision on Tuesday, a day after being taken into custody in New York’s JFK International Airport. Atilla has been charged with participating in a multi-year scheme to violate US sanctions against Iran.

The 47-year-old Turkish citizen is accused of conspiring with wealthy Turkish gold trader Reza Zarrab, using his position at the Turkish bank to facilitate access to the US financial system and to conceal hundreds of millions of dollars of illegal transactions through US banks on behalf of Iran’s government and other Iranian entities in violation of US sanctions.

Zarrab, a gold trader who was at the centre of a corruption scandal that engulfed Turkey’s leadership in December 2013 was arrested in Miami, Florida in March 2016 and has been in prison in New York since then in a case that has strained relations between Ankara and Washington.

“Atilla worked with Zarrab to create and use fraudulent documents to try to disguise prohibited Iranian financial transactions as food that would qualify under the humanitarian exception to the sanctions regime,” said acting US Attorney Joon H. Kim in a statement posted on the US Department of Justice website just before the Manhattan federal court hearing that resulted with Atilla’s arrest.

Reza Zarrab, the 33-year-old Iranian-Turkish dual citizen was arrested in Istanbul on 17 December 2013 as part of a corruption investigation involving the sons of three ministers from Erdogan’s cabinet as well as Egemen Bagis, former minister for EU Affairs and Turkey’s chief negotiator in accession talks with the European Union. Zarrab was accused of bribing ministers (through their sons) with millions of dollars in cash and gifts to help facilitate trade in gold with Iran. A parliamentary investigation committee was formed to decide whether the ministers would be put on trial or not but members of Erdogan’s party, holding the majority in the committee voted against a criminal proceeding.

Halkbank, the Turkish state-run bank that processed Zarrab’s payments was also embroiled in the scandal and its former chief executive officer, Suleyman Aslan, was briefly jailed. Police found millions of dollars stuffed into shoe boxes when they raided Aslan’s home in December 2013. He said the money was donations he was collecting for a university in Macedonia.

The then Prime Minister of Turkey Tayyip Erdogan turned Turkey’s bureaucracy upside-down in response to the arrests, dismissing thousands of state employees, police officers and prosecutors, with many jailed. This was also when he began to label a group of former allies – the Gulenist movement he blamed for the accusations – as a terrorist organisation. All charges against Zarrab and members of Erdogan’s government were eventually dropped.

The arrest of Zarrab in the United States in March 2016 was a blow to Turkish President Recep Tayyip Erdogan, who has repeatedly insisted that allegations of corruption against him and his inner circle were nothing more than a coup attempt. But prosecutors in New York, arguing against bail for Zarrab in 2016, said he had used his considerable wealth and influence to be released from a prison in Turkey after his detention in Istanbul in 2013. Erdogan who publicly criticised Zarrab’s prosecution in the United States on many occasions maintains that prosecutors who ordered Zarrab’s arrest in Istanbul were trying to implicate him by referring in the indictment to Zarrab’s donations to an educational charity with which Erdogan and his family were affiliated.

Zarrab has also been charged in the US with conspiracies to commit money laundering and bank fraud. He pleaded ‘not guilty’ to the charges, and was detained without bond. Atilla and Zarrab used front companies and fake invoices to trick US banks into processing transactions disguised to appear as though they involved food, and thus were exempt from US sanctions, prosecutors said. Atilla was charged with conspiring to commit bank fraud, which carries a maximum 30-year prison term, and violating US sanctions, which carries a maximum 20-year term.

Adding further intrigue to the case, Rudolph Giuliani, the former New York mayor and a figure very close to President Donald Trump, joined Zarrab’s defence team the day of Atilla’s arrest, in what has been interpreted as an effort by Zarrab to negotiate a beneficial resolution of his case at the highest levels of the Trump administration.

The New York Times revealed in a report on Monday that Mr. Giuliani and another prominent lawyer, Michael Mukasey, traveled to Turkey in February to meet with Turkish president Erdogan, as part of their efforts on behalf of Mr. Zarrab. Mukasey is a former federal judge and an attorney general in the George W. Bush administration.

Mr. Giuliani recommended Mukasey’s son, Marc Mukasey, to President Trump to become the next United States attorney in Manhattan, according to the same report in The New York Times.