Ilhan Tanir
Jan 04 2018

Atilla case verdict “may just be the start”

It was a grievous day for the former deputy general manager of Turkish state-owned Halkbank, Mehmet Hakan Atilla.

It was a harrowing day for Halkbank as well.

A U.S. federal court found Atilla guilty on five counts including conspiracy to violate the International Emergency Economic Powers Act, conspiracy to defraud the United States, conspiracy to defraud U.S. banks, and one count of bank fraud.

Atilla was one of nine defendants charged in the case, but seven of them, including a Turkish former minister, are outside U.S. jurisdiction, most likely in Turkey. The other one, Atilla’s co-defendant Reza Zarrab, a Turkish-Iranian gold trader and leading figure in the Iran sanctions-busting scheme, signed a plea deal in October before the trial began in exchange for the possibility of leniency and entering the federal witness protection programme.

“Two men at the heart of this massive and brazen scheme that blew a billion-dollar hole in the Iran sanctions regime now stand convicted of serious federal crimes,” acting U.S. Attorney Joon H. Kim said in a statement.

With his guilty verdict, Atilla could be sentenced to decades in prison. U.S. Federal Judge Richard Berman scheduled Atilla's sentencing hearing for April 11.

Between now and April, Atilla will have time to ponder his own fate. He can still negotiate a plea deal with the prosecution even after the guilty verdict. But for a plea deal, Atilla will have to tell the FBI everything he knows, just as Zarrab did.

Even if Atilla decides to cooperate with the prosecution, his plea deal will be considerably different to Zarrab's: The Iranian-born millionaire negotiated with U.S. prosecutors before the trial and would have reached a deal on markedly better terms. Atilla, on the other hand, wanted his day at court and was found guilty.

Thus, as someone who has lost his bet, Atilla lost much of his negotiating power. To negotiate a shorter sentence, Atilla will have to provide U.S. prosecutors with convincing evidence of his wrongdoings and those of others involved in the illicit and lucrative scheme. Of course, we do not know if he will cooperate or not.

In the U.S. legal process, this is called “substantial assistance”.  If U.S. prosecutors are convinced of Atilla's cooperation, they might ask for a reduced sentence. Atilla could provide information to the U.S. justice system about Halkbank, or even other about banks' involvement.

A point worth emphasising is that U.S. prosecutors acknowledged that Atilla did not receive any bribes from Zarrab, so made no direct personal financial gain, but they argued he deliberately misled U.S. sanctions officers about Zarrab's corrupt business dealings.

Atilla, unlike many other Halkbank officials, was a high-level officer at Halkbank both before and after December 17, 2013 when Turkish law enforcement officers interrupted the scheme in Turkey and arrested dozens of Turkish suspects over bribes paid to cover up the scheme.

Thus, the prosecutors argued that Atilla had to be aware of the misconduct that went on during his years working at the bank. Apparently this argument won the day.

During his testimony, Zarrab also implicated Turkish President Recep Tayyip Erdoğan, saying that he ordered two additional Turkish banks to participate in the sanctions evasion scheme. Zarrab, via phone text messages shown during the court, also alleged that Erdoğan had ordered the sanctions-busting scheme to restart in mid-2014, after officials had quashed the Turkish investigation.

After Zarrab's testimony, the gold trader’s assets in Turkey were seized and a number of his former employees and some of his relatives in the country were arrested.

Kevin Snapp, a retired U.S. lawyer and financial crimes expert who has followed the case against Atilla and Zarrab from the very beginning, told Ahval that the jury's decision was not a surprise, but the Turkish reaction to it was.

The Turkish government has hired a new lobbyist in the United States, Andrew C. Hruska, the former chief assistant U.S. attorney for the Eastern District of New York. His expertise is foreign corrupt practices, banking regulations, international trade sanctions and false claims.

In other words, according to Snapp, the Turkish government now seems to have launched a campaign in the United States to negotiate with the U.S. Treasury Department to reduce potential fines for money laundering and sanction evasion by Turkish banks.

The verdict against Atilla, who was not considered to be a prominent actor in the scheme, would increase the concerns of any other Turkish banks that may have taken part.

In addition to Halkbank, Arab & Turk Bank, Aktifbank and to a lesser degree Denizbank and Finansbank were also mentioned during the trial for alleged illegal banking practices.

Both Arab & Turk Bank and Aktifbank were accused of money laundering for Iran. Aktifbank is part of Çalık Holding, and the CEO of Çalık Holding at the time was none other than Berat Albayrak, Erdogan’s son-in-law who has now been promoted to energy minister.

At a time when President Donald Trump is pursuing a hawkish position against Iran over anti-government protests there, the New York verdict can also be considered a victory for him and the U.S. Congress, which is considering new and enhanced sanctions on the Islamic Republic.

The guilty verdict and likely lengthy jail sentence facing Atilla, who appears to have been a reluctant and unwilling minor player in the scheme, is also terrible news for others who took part, some we know of and some we do not.

Zarrab promised to divulge everything he knew and he admitted during trial in December that he gave information on other people, and not just on Atilla.

The Zarrab case is not over. In terms of its impact on the Turkish banking industry, as well as politically on the relations with the Erdoğan government, it might just be getting going.