- Gold trader bribed Turkish ministers, bank CEO, U.S. says
- U.S. prosecutors say FBI probe corroborates corruption claims
The U.S. government’s efforts to deny bail to a 33-year-old gold trader has rekindled allegations of a multi-million dollar bribery scheme involving Turkey’s former EU minister, a charity close to President Recep Tayyip Erdogan and the chief executive officer of a major state bank.
The trader, Reza Zarrab, was arrested in March in Florida and accused of laundering hundreds of millions of dollars in a conspiracy to evade American sanctions against Iran. His lawyer said he was on a family trip to Disney World. In arguing to keep Zarrab in prison, U.S. officials told a New York judge Wednesday they had corroborated Turkish allegations that Zarrab had paid bribes to Turkish ministers and former Turkiye Halk Bankasi AS Executive Officer Suleyman Aslan, whose bank, according to the police reports, was used to process the trader’s Iranian transactions.
Prosecutors argued that Zarrab was a flight risk, in part because he has three passports but only admitted to one of them. In urging the court to deny his request to be released on a $50 million bond, prosecutors said the security Zarrab would pay amounts to a third of what he allegedly gave in bribes in just one year.
It’s not only Zarrab’s wealth that Manhattan U.S. Attorney Preet Bharara wants the court to consider. The prosecutor alleged that the Iranian-born Zarrab managed to evade prosecution on bribery claims in Turkey, where he enjoys the benefits of nationality, a network of businesses and high-level connections.
“When charged with serious crimes in Turkey, the defendant simply paid off high-ranking Turkish officials to squash the investigation, even to the point of having law enforcement officials involved in that investigation arrested, terminated, reassigned or criminally charged,”’ the U.S. said. “If the defendant were able to reach Turkish soil, he could cause the highest levels of Turkish government to block his return to the United States.”
In a court filing Thursday, Zarrab’s attorney, Benjamin Brafman, called the government’s allegations “inaccurate and fundamentally flawed.” Brafman said he would file a reply by Tuesday at noon.
The U.S. has collected evidence, including e-mails, that corroborate that 2013 report by Turkish authorities accusing Zarrab and others of participating in a “massive bribery scheme” in Turkey, federal prosecutors said. The report says Zarrab paid $10 million in bribes to Mehmet Zafer Caglayan, then the Turkish minister of economic affairs, $5.8 million to Muammer Guler, then minister of the interior, and an unspecified amount of bribes to Egemen Bagis, then minister of European Union affairs, prosecutors said.
Zarrab allegedly paid at least $1.4 million to Halkbank’s Aslan. Turkey’s largest publicly traded state lender, Halkbank has denied wrongdoing. Nevertheless, its shares fell as much as 3.5 percent in Istanbul trading, extending their losses since Zarrab’s March arrest to 22 percent.
According to the findings of Turkish police, Zarrab was allegedly funneling more money through Halkbank than the bank is valued at today. The investigation found that two of Zarrab’s companies transferred 16.9 billion liras ($5.8 billion) through the bank, whose market capitalization has plummeted to about $3.8 billion, less than a quarter of the $14.7 billion valuation it had three years ago.
“The report’s conclusions are corroborated by e-mails obtained through the FBI’s investigation,” prosecutors wrote in their filing. Zarrab and high-ranking Turkish officials “conspired to obstruct the Turkish investigation,” they said.
Erdogan’s administration had dismissed the allegations by Turkish police, spawning a political crisis that shaved about quarter off the value of Turkey’s main equity index. The former ministers in Turkey, Aslan and Erdogan’s representatives didn’t respond to requests for comment.
U.S. prosecutors said Zarrab’s close ties with high-ranking Turkish officials were reinforced by his work for a Turkish charity, Togem-Der, which provides education to poor children. The charity was founded by Emine Erdogan, the president’s wife, and Bagis’s wife serves on the board of directors. Zarrab has contributed more than $2 million to the charity so far this year, his lawyer said in a bail application.
“Mr. Zarrab was touched by the organization’s work, and driven by his general concern for the underprivileged,” Brafman said in a request that Zarrab be freed on bail.
Zarrab told U.S. authorities his annual income was $720,000 and came from a gold export business, a furniture firm and a shop he leases in Turkey, a figure prosecutors said was “dramatically understated.” His assets include more than 20 properties, 17 luxury automobiles, a private plane and a yacht longer than a football field, prosecutors allege. He established a gold brokerage business with his family in 2002.
He’s also the owner and operator of Royal Holding AS, a manufacturer of river-cruise ships, according to his lawyer. His businesses generate “a tremendous amount of revenue -- more than $11 billion annually -- in foreign countries, and have allowed the defendant to amass a sizable fortune,” according to Wednesday’s court filing.
In the U.S., Zarrab is accused along with two others of using a web of companies to induce American banks to unwittingly launder money that violated international sanctions against Iran, according to the indictment.
“As a dual citizen of Iran and Turkey, who is alleged by Turkish authorities to have used his wealth and influence to secure his recent release from Turkish prison, the defendant poses an extraordinary risk of flight and there are no bail conditions that will assure his presence in court,” U.S. prosecutors wrote.
The case is U.S. v. Reza Zarrab, 15-cr-867, U.S. District Court, Southern District of New York (Manhattan).