Turkey’s Halkbank demands U.S. drops Iran sanctions-busting charges

Turkey’s majority state-owned Halkbank is seeking the dismissal of a U.S. indictment charging it with circumventing U.S. sanctions on Iran, Bloomberg reported on Tuesday.

Halkbank is also seeking the recusal of District Judge Richard Berman, who has been assigned to the case after presiding over a related trial. The bank’s lawyers said the judge had made statements that cast doubt on his impartiality, without further elaborating.

The case against Halkbank has gained added importance in U.S.-Turkish relations, as the bank was indicted in October at a time when U.S. politicians were angered by Turkey’s military offensive in Syria. The indictment was also followed by reports that figures close to U.S. President Donald Trump had sought to suppress legal action against the bank.

"On Monday, a lawyer for the bank filed papers in federal court in Manhattan seeking special permission to seek the case’s dismissal," Bloomberg said.

Halkbank is accused of involvement in a complex scheme to circumvent sanctions on Iran. The indictment states that Turkish-Iranian millionaire businessman Reza Zarrab bribed high-ranking Turkish officials, including a minister, to facilitate the oil-for-gold scheme in which Halkbank laundered the revenues in the U.S. banking system. 

Zarrab was arrested as he arrived in Florida for a family holiday in 2016 and charged with breaking sanctions on Iran, money laundering and fraud, but turned state’s witness to reveal details of the scheme he ran and identify his co-conspirators.

Halkbank deputy manager Mehmet Hakan Atilla was arrested in New York in 2017 and charged with using the U.S. financial system to launder the proceeds of the scheme and sentenced to 32 months in prison. Since his release in July, the Turkish government has appointed him head of the Istanbul stock exchange. Zarrab has gone into witness protection.

U.S prosecutors issued a summons to Halkbank to appear in court on Oct. 22., but did lawyers for the bank did not show up, leading one prosecutor to brand the bank a fugitive.

Halkbank refuses to accept the U.S. court's authority over the case since the bank has no physical presence in the United States or U.S.-based operations, said Andrew Hruska, a lawyer for Halkbank.

But federal prosecutors told Judge Berman that he had authority to impose punitive measures against Halkbank if it does not appear in court again.

Turkey has been working behind the scenes to press U.S. authorities to drop the charges against Halkbank. Reports published by Bloomberg and other U.S. media outlets said that aides and officials close to Trump, including his personal attorney Rudy Giuliani, had intervened in the case on Turkey’s behalf.

In 2017, Trump pressed then-Secretary of State Rex Tillerson to help convince the Justice Department to drop the criminal case against Zarrab, who was at the time Giuliani’s client, Bloomberg said. It was after these efforts failed that Zarrab, married to a famous Turkish singer and friends with a host of Turkish politicians and celebrities, turned state’s witness.

U.S. Treasury Secretary Steven Mnuchin was asked to provide information about his relations with Turkish officials as part of an inquiry into the Trump administration’s alleged interference with the Halkbank investigation.

Meanwhile, sanction bills currently progressing through Congress in response to Turkey's Syria offensive also seek measures against Halkbank for breaking sanctions on Iran.

https://www.bloomberg.com/news/articles/2019-11-04/halkbank-to-file-legal-motion-to-dismiss-u-s-indictment