Zarrab agrees to testify against Turkish banker Atilla in Iran sanctions case

Reza Zarrab, a Turkish-Iranian gold trader whose prosecution in Manhattan has drawn sharp criticism from Turkey’s autocratic President Recep Tayyip Erdoğan, has pleaded guilty and has been cooperating with the American authorities, a federal prosecutor disclosed in court on Tuesday, according to a report by the New York Times.

Turkey’s pro-government Doğan news agency has also reported that Zarrab has agreed to testify against former Halkbank deputy general manager Hakan Atilla in a case about evading US sanctions on Iran. Prosecutors said Reza Zarrab, the trader, was expected to testify in court either later Tuesday or on Wednesday, and they asked the judge to unseal his plea agreement.

Ahead of the hearing on Tuesday, US District Judge Richard Berman questioned Assistant US Attorney Sidhardha Kamaraju about who will attend the hearing as a witness. Kamaraju reportedly responded that Zarrab was pleading guilty and would be brought to the court on Wednesday as a witness against Atilla.

The prosecutor also added that Office of Foreign Assets Control (OFAC) expert Mark Dubowitz, FBI spy Lisa Palluconi, and FBI witness Bülent Bulut will also appear before the court as witnesses for the prosecution.

The court also rejected a request by Atilla’s defense lawyers to adjourn the hearing to Dec. 11 as he needed time to prepare for Zarrab’s testimony. Defense lawyer Robert Fettweis noted that prosecutors recently released 10,000 pages of evidence related to Zarrab, including emails.

Judge Berman rejected the postponement request, saying lawyers should have known for months that Zarrab would testify, according to a report by The Associated Press.

Speculation had swirled that Zarrab, 34, who was charged with helping orchestrate a broad conspiracy to violate United States sanctions on Iran, had agreed to become a government witness after he stopped appearing at recent court hearings. His lawyers also allowed an important deadline to pass without filing court papers that would have allowed Zarrab to challenge the admissibility of critical government evidence against him.

The New York Times wrote that Zarrab’s decision to cooperate is not only a major advance for prosecutors in their investigation of the alleged sanctions-busting scheme. It could also further strain relations between the United States and Turkey, especially if Zarrab reveals evidence about corruption in Turkish government and banking circles.

“Erdoğan, has raised the case repeatedly with American officials, including in a telephone call with US President Trump. He has depicted the prosecution as a continuation of a 2016 coup attempt against him, which he has laid to followers of the Islamic cleric Fethullah Gulen, who is living in self-imposed exile in Pennsylvania,” wrote the New York Times.

Meanwhile, Atilla has pleaded not guilty. Prosecutors had kept secret that Zarrab was cooperating in a bid for leniency. Atilla’s lawyer says the trial is about Zarrab’s crimes. Zarrab will describe a multibillion-dollar international money laundering scheme “from the inside,” Assistant US Attorney David Denton said during his opening statement in the New York federal court trial of Atilla on Tuesday.

Atilla’s lawyer, Victor Rocco, told jurors in his opening statement that Zarrab was prepared to lie in order to avoid jail time and lacked credibility.

US prosecutors have charged nine people in the criminal case, though only Zarrab and Atilla are known to be in US custody. The other defendants include the former head of Halkbank Süleyman Aslan and the former Turkish Economy Minister Zafer Çağlayan.

In the New York trial, Denton described two schemes intended to help Iran to spend money from global oil sales despite US sanctions. In one, he said, the defendants helped entities in Iran buy gold, which was in turn smuggled to Dubai and sold for U.S. dollars or other currencies. In the second scheme, Denton said, transactions prohibited by sanctions were disguised as purchases of food, which fell under a humanitarian exemption to the sanctions regime.

Denton said Zarrab’s companies carried out transactions, but Atilla, whom he called “an expert on finance and economic sanctions,” designed the schemes to make them appear legitimate. “Zarrab would provide the means, Atilla would provide the method,” Denton said. Denton has also said Zarrab, Atilla and the other defendants lied to conceal the scheme from US officials.

In addition to Zarrab, Denton said the prosecutors’ witnesses would include a former Turkish law enforcement officer who participated in a Turkish investigation into the alleged money laundering scheme, made public in 2013.

Rocco, in his opening statement, told the jury that Atilla never took part in a conspiracy. “Hakan Atilla rarely communicated with Zarrab,” he said. “They weren’t friends, confidantes or conspirators. They didn’t like each other. Reza Zarrab saw Hakan Atilla as a money wrench in his schemes.”

Zarrab, Rocco said, bribed other people to further his scheme, including Aslan and Çağlayan, but he never bribed Atilla. Rocco also said Zarrab bribed a US prison guard for access to “liquor, drugs and women,” though he did not give details, Reuters reported.

 

Hours after the hearing, Turkey’s ruling Justice and Development Party (AKP) spokesperson Mahir Ünal described the trial as a “theater” and claimed that it has been staged with the help of US-based Turkish-Muslim scholar Fethullah Gülen. Ünal repeated Ankara’s claims that US judicial officials are “cooperating with Gülen against Turkey,” alleged that “we know who has staged this play and what its aim is.”

The hearing comes after the judge in the trial of Atilla announced late on Tuesday that a jury of 12, including six alternates, had been selected and Zarrab would not face trial. Berman said on Wednesday that Zarrab would not face trial. Instead, Atilla will be the only defendant, Berman told jurors in Manhattan, adding the trial would last three to four weeks.

Zarrab was detained last year on charges of violating sanctions against Iran while Atilla was arrested in the US earlier this year on similar sanctions violations charges.

Under a previous Turkish investigation that became public in 2013, Turkish prosecutors accused Zarrab and high-ranking Turkish officials of involvement in facilitating Iranian money transfers via gold smuggling, leaked documents at the time showed.

President Erdoğan, then prime minister, cast that investigation as a coup attempt orchestrated by his political enemies. Several Turkish prosecutors were removed from the case, police investigators were reassigned, and the investigation was later dropped.

Halkbank and Turkish officials have said all the bank’s transactions have been fully compliant with national and international regulations, but investors are worried. At 11:00 GMT on Tuesday, shares in Turkey’s state-owned lender Halkbank were trading 4,47 percent lower at 8,97 Turkish Liras.

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