Iran sanctions trial returns to defendant after flashy detour

Bloomberg | Christian Berthelsen & Bob Van Voris:  A Turkish banker is on trial in New York accused of helping Iran evade U.S. financial sanctions. But it’s his former co-defendant Reza Zarrab who has stolen the limelight.

The banker, Mehmet Hakan Atilla, faded so far into the background that U.S. District Judge Richard Berman reminded prosecutors to turn their attention back to the defendant. That’s because Zarrab spent much of his time recounting an intricate sanctions-avoidance scheme that reached into the upper echelons of Turkish government.

“I’m having a little trouble understanding where the focus is going,” he told them Thursday out of earshot of the jury, according to a transcript that was later released publicly. “Ultimately, this case — not even ultimately, initially — is about Mr. Atilla. So you’re not saying much now about Mr. Atilla that I’m gathering.”

On Friday, prosecutors seemed to heed the advice.

Under questioning by Assistant U.S. Attorney Sidhardha Kamaraju, Zarrab repeatedly placed Atilla in meetings and conversations about the plot to help Iran tap billions of dollars in revenue from oil sales that couldn’t be accessed otherwise because of strict U.S. sanctions. Prosecutors also played a recorded phone call between Zarrab and Atilla, and introduced a text message in which Atilla was mentioned as a go-to person on the laundering method.

Zarrab also testified Atilla devised key parts of the scheme and scoured the U.S. sanctions regulations to find loopholes that would allow certain types of transactions.

Erdogan Linked at Trial to Plot to Evade Sanctions on Iran

One of the reasons for the phone call, Zarrab said, was that errors had been made on customs forms being used to cover up the money laundering, and Atilla was telling him to be more careful.

“For the fake customs documents, he was making phone calls and giving warnings about mistakes we were making,” Zarrab said.

Zarrab was initially the key defendant, but after a year in U.S. jails awaiting trial he agreed last month to plead guilty, cooperate and testify. Though nine defendants have been charged, only Atilla, who was a deputy general manager at Turkiye Halk Bankasi AS, is being tried.

Since being called as the government’s star witness, Zarrab has testified to helping Iran tap its funds and access the global financial system, including by executing payments through U.S. banks. On Thursday, he testified that two Turkish banks were included in the scheme with the approval of Recep Tayyip Erdogan, who at the time was Turkey’s prime minister and is now its president.

Key Meeting

On Friday, Zarrab said he and Atilla were present at a key meeting with Halkbank general manager Suleyman Aslan, when a new money-laundering plan was devised disguising Iranian transactions as food sales. They turned to the plan after updates to the U.S. sanctions regime upended their earlier method of using gold shipments.

Zarrab said Atilla introduced an important step into the process to create more separation between the Iranian funds to reduce suspicion. He also said Atilla discovered a loophole that allowed them to resume the gold transactions after they had been shut down.

Prosecutors also cited an exchange between Zarrab and Aslan, in which Aslan asked him: “Do you have a problem with the method proposed by Hakan Atilla?” No, Zarrab replied, “That is absolutely a very correct method.”

Zarrab’s questioning by prosecutors is scheduled to continue Dec. 4, after which he will be subject to at least a day of cross-examination by Atilla’s defense lawyers. The U.S. expects to finish presenting evidence to the jury the week of Dec. 11. Atilla’s lawyers haven’t said whether they’ll put up a defense, or whether the banker will testify,

At the end of Friday’s session, Berman said he was going to dismiss a juror who had been sleeping through the proceedings.

“Really sound asleep, I might add, not just dozing,” Berman said.

The case is U.S. v Zarrab, 15-cr-867, U.S. District Court, Southern District of New York (Manhattan).

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