U.S. prosecutor says accused gold trader spoke with Turkey’s Erdoğan

Ankara - A U.S. prosecutor said Iranian gold trader Reza Zarrab, charged with circumventing U.S. sanctions against Iran, spoke with Turkey’s current president, Recep Tayyip Erdoğan, at a wedding in 2013 and afterwards made donations to a charitable foundation run by the then prime minister’s son.

It was the first time U.S. prosecutors have made a direct link between Zarrab and the Turkish president.

The case has hurt relations between NATO allies Turkey and the United States. Erdoğan has called it a plot to undermine Turkey and has raised the case in a conversation with U.S. President Donald Trump. He has also accused the U.S. government of trying to turn Turkish citizens into informants.

Millionaire businessman Zarrab, who has both Iranian and Turkish citizenship, was arrested in Miami on his way to a family holiday in Disney World on March 19, 2016. He is charged with running a complex scheme to help the Iranian government evade U.S. sanctions imposed over its nuclear programme by buying oil from Iran with gold and then laundering the proceeds through Turkey’s state-owned Halkbank.

He and Halkbank deputy general manager Mehmet Hakan Atilla, also arrested during a visit to the United States, are due to face trial in New York starting on Nov. 27.

The memorandum issued by the U.S. attorney for New York Southern District seeks to allow new evidence from wiretaps in the case by describing what the recordings show. Dated Oct. 30, the memorandum also includes accusations that former Economy Minister Zafer Çağlayan was a key figure in the scheme and persuaded Halkbank to allow fraudulent transactions, receiving tens of millions of dollars in bribes in return.

The prosecutor’s statement said Zarrab talked to then-Prime Minister Erdoğan on April 12, 2013 at the wedding of one of Çağlayan’s relatives about his plan to buy a bank in Turkey. The statement quotes Zarrab telling Halkbank president Süleyman Aslan how the meeting went:

I went to the prime minister. . . I went to him and talked about the thing I was going to do and I explained it that day at the wedding. I will go back and will say, Mr. Prime Minister, if you approve, give me a license, I will go though BDDK (the Turkish bank regulator) even if I bought the bank anyway.

Later, the memorandum said, the economy minister met Zarrab, who then decided to help Turkey polish up its economic figures in advance of an upcoming election:

Those matters were so urgent that Zarrab flew his private plane from Istanbul to Ankara to pick up Çağlayan so the two could fly together back to Istanbul and speak on the flight. Right after this meeting, Zarrab did two things. First, he called (his assistant Abdullah) Happani to tell Happani to “hit (send money through) Halk” with “no limit,” and to devise a way to “increase the exports of gold and reduce the imports.”

After the meeting, Zarrab called a Turkish charitable foundation linked to the Erdoğan family to make a donation.

Second, Zarrab called the flight attendant for his plane to retrieve a phone number that had been written (along with the name of the then-prime minister’s son) on a slip of paper during Zarrab’s flight with Çağlayan. The number was for the manager of a Turkish charitable foundation. Zarrab then called the manager on July 16, 2013 to advise that Zarrab would be sending money to the foundation.

Reza Zarrab recieves Exports Award from Deputy Prime Minister Kurtulmuş.
Reza Zarrab recieves top exporter award from Deputy Prime Minister Kurtulmuş and Economy Minister Zeybekçi, 2015

Erdoğan’s son Bilal Erdoğan is among several family members and close friends on the boards of TÜRGEV and TÜGVA, two educational foundations that have grown to become giants in the education and student dormitory sectors. TÜRGEV even opened its own university in 2015.

Zarrab is also known to have donated millions of dollars to a foundation established by Erdoğan’s wife, Emine Erdoğan.

The memorandum describes the sanctions-busting scheme in two parts. First, Zarrab used Halkbank to send oil money to Dubai, from which it was sent in gold to Iran.

First, working with senior officials from the Central Bank of Iran, the Iranian Ministry of Oil, and NIOC (National Iranian Oil Company), as well as senior officials from the government of Turkey, including then Minister of the Economy Zafer Çağlayan, and other officials at Halk Bank, including its then general manager, Süleyman Aslan, the defendants devised a scheme to transfer Iranian oil proceeds out of Halk Bank to front companies in Dubai by disguising the transfers as being part of fake food sales to Iran.

Also in 2013, when Erdoğan’s popularity was suffering amid huge protests over Gezi Park in Istanbul, the U.S. attorney said Zarrab began a scheme to use gold transfers to buoy Turkish economy figures:

The government of Turkey instructed Zarrab and Halk Bank to resume gold exports in order to manipulate Turkey’s economic statistics in advance of upcoming elections. Both aspects of the scheme - gold exports and fraudulent food trade - were promoted and protected by massive bribes to Turkish government officials, including then-Minister of the Economy Zafer Çağlayan, and to bank officials, including Aslan.

Facing a possible 75-year sentence, 34-year-old Zarrab could enter a plea bargain to reduce his jail time in return for full disclosure of the details of the alleged plot.