Video: TRT World – YouTube
This is the second post in a series about two separate but related federal criminal cases: USA v. Casado, and USA v. Zarrab. The first post focused on the recent indictment of federal correctional officer Victor Casado for allegedly taking bribes to smuggle contraband into jail. This post focuses on the case against businessman Reza Zarrab who pled guilty to violating U.S. sanctions against Iran in October 2017.
Casado and Zarrab are roughly the same age, 35 and 34, respectively, although they come from very different backgrounds. Their fates became linked after Zarrab was transferred to the federal jail where Casado works in lower Manhattan in mid-2016, and Casado allegedly solicited a bribe from Zarrab.
Who is Reza Zarrab?
Reza Zarrab was born in Tehran, Iran but raised in Istanbul, Turkey from the age of one. He holds Iranian, Turkish, and Macedonian passports. Zarrab lives in Instanbul with his wife Ebru Gundes, a popular Turkish singer and television personality, and their young daughter.
Zarrab is a successful international businessman and owns numerous companies in Turkey, Dubai, and the United Arab Emirates including a gold brokerage and currency exchange, an investment company, money services businesses, a shipbuilding company, a furniture manufacturing company, and a share of a real estate construction company. As of mid-2016, Zarrab employed more than 250 people in Turkey through his various businesses. Zarrab’s business ventures reportedly generate billions of dollars of revenue annually.
Reza Zarrab indicted for violating the Iran sanctions
In December 2015, Zarrab and two other individuals were charged in a sealed, four-count indictment alleging violations of U.S. sanctions against Iran, bank fraud, conspiracy, and money laundering.
According to the State Department, the U.S. has been imposing restrictions on activities with Iran since the seizure of the U.S. Embassy in Tehran in 1979.
In March 1995, President Clinton determined that the Government of Iran posed a threat to the national security, foreign policy, and economy of the U.S. and issued an executive order prohibiting U.S. persons from assisting with the development of Iranian oil resources. In May 1995, President Clinton issued an executive order prohibiting the exportation of any goods, services, or technology from the U.S. to Iran, including banking services. The Treasury Department’s Office of Foreign Assets Control (OFAC) adopted the Iranian Transactions and Sanctions Regulations (ITSR) to implement these directives.
In December 2011, Congress passed a law imposing sanctions on the Central Bank of Iran (CBI) and other Iranian financial institutions in an effort to prevent Iran from accessing the proceeds from its international oil sales, which was the country’s main source of income (the “oil sanctions”). As a result of these sanctions, any foreign financial institution that did business with the CBI or designated Iranian financial institutions risked losing access to the U.S. financial system.
OFAC identifies the National Iranian Oil Company (NIOC) as an agent or affiliate of the Islamic Revolutionary Guard Corps (IRGC), which is considered a threat to U.S. national security.
The U.S. also issued sanctions that prohibited assisting the purchase of U.S. banknotes or precious metals by the Government of Iran, and prohibited the sale of gold and other precious metals to Iran after July 1, 2013 (the “gold sanctions”).
The Iran sanctions evasion scheme at Halk Bank
According to court records, Zarrab participated in a multi-year scheme to help Iran violate the ITSR, the oil sanctions, and the gold sanctions. Zarrab and his co-conspirators used the Turkish bank Halk Bank, which is majority-owned by the Government of Turkey, to launder billions of dollars of Iranian oil proceeds to create a slush fund for the Government of Iran.
One scheme centered around accounts that the CBI and NIOC held at Halk Bank to accept payments for oil sales to Tupras, which is Turkey’s state-owned oil company. The Iranian oil proceeds on deposit at Halk Bank would be transferred to the account of a private Iranian bank, then to the account of one of Zarrab’s companies, and finally to a Turkish gold supplier’s account, all within Halk Bank, to mask the connection between the funds and the CBI or NIOC from outside banks. The gold supplier would provide Zarrab’s company with gold in Turkey, which Zarrab’s company would export to Dubai to be sold for cash. Zarrab’s companies would then use Dubai banks to transfer the funds around the world.
The banks processing the payments did not know that the funds were being transferred on behalf of Iranian banks and NIOC. Many of the transfers were processed through U.S. financial institutions. U.S. banks that execute barred transactions face potential civil liability, fines, and forfeiture.
Zarrab worked with Mehmet Hakan Atilla, a senior executive at Halk Bank, and Suleyman Aslan, Halk Bank’s general manager and Atilla’s supervisor. At a certain point Aslan demanded bribes from Zarrab to continue the gold scheme.
Alleged involvement by the Turkish government
Zarrab sought assistance from Zafer Caglayan, then the Turkish Minister of the Economy, who directed Halk Bank to allow the transfers in exchange for half of Zarrab’s profits. Caglayan received tens of millions of dollars in bribes from Zarrab. The scheme generated millions of dollars worth of commissions for Halk Bank.
The Government of Turkey allegedly pressured Zarrab and Halk Bank to continue the gold trade to inflate Turkey’s export statistics. Zarrab’s companies exported almost half-a-billion dollars worth of gold from July to December 2013 using restricted Iranian funds.
Zarrab and Halk Bank also conducted fake food transactions, pretending to send food to Iran to extract Iranian oil revenues on deposit at Halk Bank. From July to December 2013, Zarrab and Halk Bank transferred approximately $1.5 billion worth of currency from Halk Bank to Dubai using fake food transactions.
In December 2013, Zarrab, Aslan, and several other individuals were arrested by Turkish authorities for paying bribes to Aslan, Caglayan, and other senior Turkish government officials, however the investigation was closed allegedly in exchange for bribes from Zarrab.
We’re going to Disney World
Zarrab was arrested on March 19, 2016 at Miami International Airport as he entered the country with his wife and daughter to visit Disney World. He was carrying $100,000 in cash at the time of his arrest, which he declared to U.S. Customs.
Zarrab was detained and spent around three weeks at the Federal Detention Center in Miami before arriving at the Metropolitan Correctional Center (MCC) on April 26, 2016.
Reza Zarrab’s attorney, Benjamin Brafman, warns the court about prison guards who are compromised by inmates more than a year before his client is accused of bribing correctional officer Victor Casado
In May 2016, Zarrab’s attorney, Ben Brafman, proposed a bail package including a $50 million personal recognizance bond secured by $10 million in cash, travel restrictions, strict pretrial supervision, and home detention with GPS monitoring at a leased apartment in Manhattan secured by 24-hour armed security guards.
In June 2016, a bail hearing was held before U.S. District Judge Richard M. Berman. Zarrab was present in the courtroom. Towards the end of the proceeding, Brafman made the following statement in an effort to convince the judge to accept Zarrab’s private armed guard proposal:
“We read in the tabloids, unfortunately, about bureau of prisons people who are compromised by cunning inmates, whether they get contraband in or whether they got contraband out and people are being disciplined and fired. No system is perfect.”
The court denied Zarrab’s application for bail on the grounds that he was a flight risk, and that no condition, including private armed guards, would reasonably assure his appearance at trial. As a result of the judge’s decision, Zarrab ended up spending more than a year at the MCC.
Judge Berman’s decision also included this statement: “The Court concludes that undermining U.S. sanctions against Iran may well pose a threat to the United States and that Mr. Zarrab’s release may exacerbate that threat by, for example, enabling him to communicate with business associates or others at or from his New York City apartment.”
Reza Zarrab indicted for bribing Victor Casado
On October 16, 2017, the government charged Zarrab with conspiring to bribe a public official and possessing contraband in a federal detention center, which carries a maximum sentence of five years in prison.
Ten days later on October 26, 2017, Zarrab pled guilty to all of the charges against him including the bribery charge and agreed to cooperate with the government. Zarrab was released from the MCC on November 8.
Atilla was arrested at JFK International Airport in March 2017 while on his way back to Turkey after a U.S. business trip. He was convicted of bank fraud, conspiracy to commit money laundering and other offenses in December 2017 after a four-week trial in Manhattan federal court. Zarrab testified at the trial. On May 16, 2018, Atilla was sentenced to 2 years and 8 months in prison, with credit for time already served (14 months).
Zarrab’s sentencing has not been scheduled.