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Iran’s Central Bank Loses Appeal in Terror Suit Payout

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July 9 (Bloomberg) -- Iran’s Central Bank must turn over $1.75 billion to families of hundreds of Americans killed in terrorist attacks sponsored by that country after a federal appeals court rejected its challenge to a law mandating payment.

The money, which is being held in a Citigroup Inc. unit’s account, must be used to satisfy terrorism-related judgments, the U.S. Court of Appeals in New York ruled today. A three-judge panel turned aside arguments by Bank Markazi Jomhouri Islami Iran that a 2012 law permitting seizure of the funds violated the U.S. Constitution, and a treaty between the U.S. and Iran.

The case stems from a lawsuit filed by Deborah Peterson, the sister of a James Knipple, a U.S. Marines captain killed when terrorists bombed military barracks in Beirut in October 1983. U.S. District Judge Katherine Forrest in Manhattan last year ordered the money turned over to a fund for the victims’ families, who hold billions of dollars in unpaid judgments against Iran. The nation’s central bank appealed.

Under the 2012 law, the Iran Threat Reduction and Syria Human Rights Act, Congress specified that the money “shall be subject to execution” to pay the judgments against Iran.

The funds were held in an account for Clearstream Banking SA, a financial intermediary. Clearstream maintained the account for customers including the Italian bank Banca UBAE S.p.A. Bank Markazi is a Banca UBAE customer, according to the appeals court.

David Lindsey, a lawyer for Bank Markazi, didn’t immediately return a call seeking comment on the ruling.

The case is Peterson v. Islamic Republic of Iran, 10-cv-4518, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Bob Van Voris in federal court in Manhattan at rvanvoris@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net David E. Rovella, Stephen Farr

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