How Reza Zarrab circumvented the Iranian oil sanctions and what his story reveals about an international web of government corruption.
On April 15, 2011 Reza Zarrab’s chauffeur, Turgut Happani, was detained while crossing into Russia and accused of conducting illegal money transfers. An investigation conducted by the Russian Customs Service determined that Happani and 13 other individuals were suspected of transporting at least 40 million Dollars and 10 million Euros from Dubai to Russia in ordinary suitcases. The Customs Service further alleged that these transfers took place over the course of 37 separate trips into the country. Police officials were first alerted to the crime because Happani had posted photos of himself on Facebook standing next to stacks of cash wrapped up in bundles that nearly matched his height.
United States of America -v- Reza Zarrab
Chapter 1 — The Rise to Power
This is the story of Reza Zarrab, a young and brash gold dealer from Iran who blatantly exploited his ties to Turkish, Iranian and Middle Eastern power brokers for nearly a decade. Born to Azerbaijani parents in Tabriz, Iran on September 12, 1983 Zarrab spent his early years in Azerbaijan and Turkey. Later, as a young man striking out on his own, Zarrab sought permanent citizenship in Turkey and settled in the city of Istanbul. There he cultivated a wide-ranging collection of government officials, underworld associates and media celebrities.
During his remarkable rise to power, Zarrab laundered nearly 100 billion dollars worth of Iranian oil by exploiting a legal loophole that involved moving tons of gold across state borders using a network of human mules, high speed powerboats and private planes. His connections in Iran also afforded him the use of 12 supertankers and access to Iran's massive oil fields. The scheme was assuredly dangerous but it also made him fabulously wealthy. At just 27 years of age Zarrab had accumulated riches beyond the imagination of even the most jaded playboys on the planet. He capped the end of his 27th year with a marriage to Ebru Gündeş, the most popular female singer, actress and reality television star in Turkey. Together they parlayed Zarrab's immense financial wealth into a Turkish juggernaut of fame and notoriety.
At the height of his celebrity Zarrab was compared to Fitzgerald's iconic bootlegger Jay Gatsby. His boundless wealth and generosity was celebrated at extravagant parties throughout Turkey and his romantic liaison with Gündeş was tracked breathlessly in the tabloid news media. “For those who want to know what he’ll buy me next, I’m telling you right now: He’ll buy me Mars,” Gündeş told the Turkish media in 2012.
However, despite all the glamour and the glitz there were some who questioned Zarrab's ties to organized crime and shady politicians. In private conversations away from microphones and cameras there was talk of bribery and political favors. Zarrab had given nearly 5 million dollars to a charity headed by the Turkish President's wife, Emine Erdogan, and it was alleged that the President himself was profiting from Zarrab's scheme to circumvent U.S. sanctions against Iran. Eventually those whispers of doubt rose into a chorus of accusations that briefly threatened his freedom but for the most part Zarrab's generous philanthropy, both legal and extra-legal, served to make him a national hero. His ardent supporters, the President of Turkey among them, suggested that any supposed violation of U.S. sanctions against Iran, the oil producing giant on Turkey's eastern border, was a morally grounded resistance to a flagrantly one-sided act of U.S. economic aggression that was affecting the entire region.
In actuality it was “a fraud of truly global proportions,” said David W. Denton Jr., the Southern District of New York (SDNY) prosecutor overseeing the United State's criminal trial against Zarrab's accomplice and banking partner, Mehmat Hakan Atilla. Nearly 10 years had passed since Zarrab launched his scheme to challenge the economic sanctions decreed by U.S. policymakers and Denton declared in his opening statement that there had been, “billions of Iranian dollars moving in a scheme so large that it affected the economies of countries in the Middle East, and so large that it was protected by government ministers in Turkey and Iran.”
Atilla is currently serving 36 months in the U.S. Federal prison system for money laundering and fraud. A plea deal reached by Zarrab and his lawyers has kept Zarrab out of prison for now but the allegations and criminal indictments of many of his accomplices reveals a key failure of U.S. and NATO advisers to adequately challenge Turkey's weak money laundering controls. This oversight is particularly alarming in light of the fact that Zarrab openly vowed in a letter written to the President of Iran's Central Bank to wage “Economic Jihad” against U.S. sanctions.
As early as 2008, Treasury Under Secretary Stuart Levey had identified and spoken to Turkish economic ministers and banking officials about the dangers of doing business with Iran and strongly suggested that extraordinary vigilance be used when vetting transactions. Levey noted the desperation of Iranian banks to find willing international partners and warned Turkish banking institutions not to expand ties with them.These admonitions were noted and traced back to classified state department cables released by Wikileaks in 2010.
Another classified state department cable compiled in 2009 detailed a series of meetings, conducted by David Cohen, the U.S. Treasury Assistant Secretary for Terrorist Financing and Financial Crimes. In these meetings with Turkish finance ministers and banking officials Cohen expressed concern about Turkey's low level of money laundering and terror finance prosecutions. He specifically reiterated these concerns to Levant Balkan, the Foreign Operations Manager of Turkey's state run bank Halkbank and “warned that the U.S. government has evidence of Iran falsifying documents to push through transactions”. Balkan and Halkbank Chief Information Officer, Bilgehan Kuru, said that they would remain vigilant and welcomed specific details.
Eight years later Levant Balkan was named in the same September 6, 2017 indictment brought to bear against Atilla and Zarrab. SDNY prosecutors alleged that these men, along with six others, conspired to use the U.S. financial system to conduct hundreds of millions of dollars’ worth of transactions on behalf of the Government of Iran and other Iranian entities. All were charged with lying to U.S. government officials about their banking transactions. They were also charged with laundering funds in connection with those illegal transactions, including millions of dollars in bribe payments to Turkish officials and others used to facilitate the scheme. This included defrauding several U.S. financial institutions by concealing the true nature of these transactions.
When Zarrab was arrested by U.S. authorities at a Miami airport on March 19, 2016 he claimed that he had come to Florida with his family to visit Disney World and spend some time vacationing. These initial statements reflected a curious change of heart for a man supposedly waging economic jihad against the United States. However, there were other sources, darker and more attuned to the nuances of Iranian politics, who claimed that Zarrab traveled to Florida because he feared that the new administration in Iran was going to arrest him for stealing some of the oil he had brought to the black market and sold.
Zarrab had good reason to be concerned. Two weeks before he decided to plan a U.S. vacation, the Iranian authorities sentenced his business partner, Babak Zanjani, to death for embezzling 2.7 billion dollars from the Iranian oil ministry. Zanjani had been the key source of oil that underpinned Zarrab's covert operations.
In an exclusive interview with Al-Monitor, Amir Abbas Soltani, an Iranian lawmaker and a member of the parliamentary committee tasked with pursuing the Zanjani case, claims Zarrab traveled to the United States on purpose in order to get caught. Soltani said, “There is no difference between Zarrab and Zanjani. Plus, Zarrab is an important person, the key figure to this [Zanjani] corruption case.”
“Zarrab intentionally visited the U.S. and surrendered himself based on a premeditated plan. Following Zanjani’s case in Iran, he sensed a lurking threat awaiting him. He thought he would be captured by Iranian officials if he stayed in Turkey,” Soltani told Al-Monitor.
Soltani added, “Zarrab sought a safe haven by going to the United States. Our judiciary officials were pursuing his case. The situation in Turkey wasn’t good for him as Tehran and Ankara’s relationship improved. If he were found guilty by Iran’s judiciary, based on our agreements with Turkey, he would have had to be extradited to Tehran.”
According to Soltani, “Zarrab knew that there is no extradition agreement between Iran and the U.S. That is why he decided to go to the United States. He is waiting to see when it will all blow over to and what will happen to Zanjani. If he [Zanjani] gets executed, Zarrab can deny a lot of the facts after Zanjani’s death.”
From Al-Monitor, The Pulse of the Middle East
Author: Rohollah Faghihi
Published May 9, 2016
Zanjani's arrest more than 2 years earlier on December 30th, 2013 had served to put everyone involved in the scheme on notice. The glory days were over. Iran's new political leaders did not and would not condone corruption, no matter how it was framed or who took part in it. Zanjani had been charged with “spreading corruption on earth” and it was his death sentence that sent Zarrab on his way to Florida, forever altering the destiny of the young man who hailed from Tabriz, Iran.
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Link to Chapter 2 — Financial Crimes/Setting the Stage