Turkey's Halkbank in last-ditch appeal to block Iran sanctions case in US

The legal saga of Turkey’s Halkbank will continue in a Manhattan courtroom on Monday as it pursues its quest to kill the criminal case against it.

One of the country’s largest lenders, Halkbank stands accused by federal prosecutors in the Southern District of New York (SDNY) of aiding what they called the largest sanctions busting scheme to date – a plot to trade gold for Iranian oil and gas that helped Tehran evade U.S. measures imposed over its nuclear programme.

The initial indictment puts the money laundered at $20 billion in what prosecutors called “one of the most serious Iran sanctions violations we have ever seen”. After the charges were first announced, Halkbank refused to appear in court and went to an absurd length to deny the case’s existence.

According to prosecutors, Halkbank even refused to accept a physically mailed copy of the indictment that was sent to its headquarters in Turkey. It finally agreed to appear in court in February 2020, almost five months after the initial indictment.

Now the whole case hangs in the balance before the Second Circuit Court of Appeals, the appellate court with jurisdiction over the SDNY.

In its appeal to the higher court, Halkbank claims immunity from criminal charges on the grounds that it was majority owned by the Turkish state and that the SDNY lacked jurisdiction over it. The decision by the appellate court to consider the claims was met with enthusiasm by pro-government circles that Halkbank might have a chance to win this time.

Depending on the outcome of Monday’s hearing, Halkbank will see its case go to trial in May or completely dismissed. Here is a quick recap of developments in the legal developments ahead of the hearing’s final result:

Halkbank already lost a bid to dismiss the case on immunity grounds

Last October, the district judge presiding over Halkbank’s case rejected its arguments of immunity from U.S criminal charges. It soon after filed its appeal with the Second Circuit which was granted in December.

In his ruling, Judge Richard Berman wrote that the statute for immunity the bank cited, the Foreign Sovereigns Immunity Act (FSIA), only applied to commercial activities and did not explicitly prohibit criminal charges against a foreign entity.

In a memo shared by white-shoe law firm Cleary Gottlieb, U.S appellate courts have not ruled definitively on whether or not the FSIA precludes criminal charges against foreign entities like Halkbank. Other courts have ruled for and against this argument, but absent a Supreme Court ruling it remains undecided.

This is Halkbank’s second appeal to dismiss the SDNY’s case

Halkbank was previously granted an appeal by the Second Circuit in February 2020. The bank’s then-legal team King & Spalding had requested the court dismiss the charges on jurisdictional grounds. However, the three-judge panel declined to endorse Halkbank’s request in a paragraph-long letter on Feb. 21.

“The petitioner has not demonstrated that it lacks an adequate alternative means of obtaining relief, that its right to the writ (of mandamus) is clear and indisputable, or that granting the writ is appropriate under the circumstances,” read the judges’ ruling.

The case before the Second Circuit maintains the lack of jurisdiction point against the case, but it has been bunched together as part of its sovereign immunity that will be ruled on.

Judge Berman is going to preside over the trial if it goes forward

Judge Berman was an early target of Halkbank’s efforts to end the trial before it even began.

After obtaining a pause in proceedings as its appeal went through the Second Circuit last year, King & Spalding requested Berman recuse himself from the case for what they said was a lack of impartiality. Berman himself dismissed this request last August, saying in an order that the demand lacked substantive merit.

Berman previously served as the presiding judge against two other offenders in the sanctions-busting scheme: Turkish Iranian businessman Reza Zarrab and former Halkbank senior manager Mehmet Hakan Attila.

In Zarrab’s case, the defendant’s legal team also tried to seek Berman’s recusal from the case based on comments he made in 2014 at a legal forum in Istanbul.

President Joe Biden promises no interference in criminal cases

Perhaps the most indirect change to the Halkbank case if it does go to trial is the election of U.S. President Joe Biden, who has promised zero personal involvement in any criminal cases.

Biden’s Attorney General Merrick Garland, formerly an appellate judge himself, has similarly pledged to remain impartial. This approach lies in stake contrast to that of Biden’s predecessor, President Donald Trump, who attempted to offer Halkbank a way out of any accountability at the request of Turkish President Recep Tayyip Erdoğan.

There were frequent mentions of Erdoğan lobbying Trump to protect Halkbank through intermediaries like former New York City Mayor Rudy Giuliani, who for a time served as Zarrab’s lawyer in the case.

According to the New York Times, which cited interviews with dozens of current and former U.S officials, Trump pushed two attorney generals, Matthew Whittaker and William Barr, to seek an end to the investigation into Halkbank. Whittaker declined U.S Attorney Geoffrey Berman’s request to file charges in late 2018 and Barr later ordered Berman to end the investigation into Halkbank in a June 2019 meeting.

Berman refused and was fired by Trump in June 2020. The current acting U.S Attorney for the SDNY is Berman’s deputy, Audrey Strauss. Her replacement has not been officially named, but it was reported that veteran corruption prosecutor Damian Williams could be nominated at the recommendation of Senator Chuck Schumer of New York.

When Biden served as vice president to President Barack Obama in 2016, Erdoğan urged him to fire then-U.S. Attorney Preet Bharara and remove Judge Berman from the Halkbank case, according to the Times’ report.

One former Biden aide recounted that Erdoğan pressed the administration to make the case go away if it wanted better relations with Turkey. His wife Emine Erdoğan appealed to Jill Biden during a bilateral meeting at the United Nations in 2016 to assist for the Zarrab case to be dropped.

Bharara’s office kicked off the legal trials that would come by initiating the trial against Reza Zarrab in 2016. Bharara was fired by President Trump in March 2017, shortly before Hakan Attila was arrested by FBI agents in New York.