Las Vegas Review-Journal (Sunday)
Trial testimony tests relations with Turkey
Erdogan implicated in plot to evade sanctions
NEW YORK — A criminal trial that has chilled relations between the U.S. and one of its important allies, Turkey, began in a New York courtroom over the past week with testimony by a once high-flying gold trader who claimed to have paid millions of dollars in bribes to government and banking officials in Turkey.
Some of the testimony by the Turkish-Iranian businessman, Reza Zarrab, has implicated Turkey’s president, Recep Tayyip Erdogan, in a scheme to help Iran evade U.S. sanctions.
Erdogan’s ministers say the trial is based on fabricated evidence. They have called Zarrab a “hostage.”
Prosecutors say Zarrab made a fortune as the middleman in a conspiracy designed to beat U.S. sanctions that were supposed to keep Iran from profiting by selling its rich supplies of oil and natural gas.
After narrowly avoiding prosecution in his own country in 2013, Zarrab was arrested last year after coming to the United States to visit Disney World with his daughter and his wife, Turkish pop star and TV personality Ebru Gundes.
What followed was a saga that saw demands by the Turkish government for Zarrab’s release, attempts by well-connected American lawyers to broker a prisoner exchange with Turkey, and a mystery over Zarrab’s whereabouts after he stopped appearing at pretrial hearings.
Prosecutors revealed Tuesday that Zarrab secretly had pleaded guilty to charges including money laundering and agreed to testify against a co-defendant, Mehmet Hakan Atilla, the former deputy CEO of the Turkish state-owned bank Halkbank.
The defense has labeled Zarrab a “liar” and a “cheat.” And Turkish prosecutors have ordered the seizure of the assets of Zarrab and 22 others as they investigate claims of “espionage for a foreign country” and an “attempt to smuggle assets,” Turkey’s official Anadolu Agency reported.
As if teaching a class on economics, Zarrab has drawn diagrams for the jury outlining a complex shell game that he said was set up to conceal the origins of money flowing to and from Iran.
Through bribes and with encouragement of Iranian officials, Zarrab said he gained backdoor access to the proceeds parked in Halkbank. The money was transferred to other Turkish financial institutions and used to make gold trades.
In some instances, couriers would fly with suitcases full of gold to Dubai, where it was converted back into cash. More bank deposits and transfers followed before Zarrab used the cash to facilitate international payments for Iran.
Zarrab testified that he needed the blessing of Turkish finance minister, Zafer Caglayan, and the head of Halkbank, Suleyman Aslan. But their participation, he said, came at a price.
Caglayan acted curious about Zarrab’s profits before demanding half of them. Aslan expressed “concerns for his future,” Zarrab said, which meant, “He was asking for money.”
Zarrab said he ended up paying Caglayan more than $50 million in bribes. In an intercepted phone call, Zarrab said Caglayan had told him that Erdogan, then prime minister, had signed off on the arrangement.
Aslan got tens of millions more, he said. Atilla, however, got nothing.
“I was already giving bribes to the Turkish minister of the economy. I was also bribing the HalkBank general manager,” he said. “I didn’t see a need to pay any other individual.”
Officials have responded to the bad publicity by calling the U.S. prosecution a charade aimed at discrediting Erdogan’s government. When Caglayan and Aslan were named in the same indictment charging Zarrab and Atilla last year, Erdogan came to Caglayan’s defense, telling U.S. prosecutors they should back down.