U.S. Indicts Turkish Bank on Charges of Evading Iran Sanctions – The New York Times

WASHINGTON — The Justice Department on Tuesday sharply escalated economic pressure on Turkey by filing fraud and money-laundering charges against the country’s second-largest state-owned bank, accusing it of helping Iran evade United States sanctions.

The charges against the institution, Halkbank, came as the administration sought ways to project that it was taking a tough line with Turkey after President Trump effectively signaled this month that the United States would not stand in the way of Turkey’s desire to send forces into northern Syria.

Mr. Trump’s willingness to allow the military action has thrown the region into chaos and ignited an intense bipartisan backlash against him at home. As the criticism has mounted, the White House has emphasized the steps it is taking to restrain Turkey’s offensive, including a round of sanctions announced on Monday.

President Recep Tayyip Erdogan of Turkey had repeatedly raised the Halkbank case with Mr. Trump over the past year, urging the United States not to take further action, saying that to do so would unfairly expose Turkey to severe financial risks. One of the bank’s top executives was convicted on related charges last year, and the Justice Department has been reviewing since then whether to pursue the case further as Turkish officials and lawyers pressed the government not to indict the bank.

The charges appeared to catch at least some advisers to Turkey’s government off guard. They were filed by prosecutors in the Southern District of New York, which has been investigating the bank’s role in what has been called the largest Iran sanctions violation in United States history, as billions of dollars’ worth of gold and cash were illegally transferred to Iran in exchange for oil and gas.

Justice Department officials said high-ranking government officials in Turkey “participated in and protected this scheme,” with some receiving bribes worth tens of millions of dollars and helping to hide the conspiracy from the scrutiny of regulators in the United States.

“This is one of the most serious Iran sanctions violations we have seen, and no business should profit from evading our laws or risking our national security,” said John C. Demers, the assistant attorney general for national security.

Lawyers and lobbyists representing the bank, including Brian D. Ballard, a friend of Mr. Trump’s and the vice chairman of his inauguration, have been trying for more than a year to persuade the Trump administration not to file charges against the bank, or at least to understand that doing so could threaten the economy of a NATO ally.

Turkish officials had directly made other appeals to Secretary of State Mike Pompeo and Treasury Secretary Steve Mnuchin. The lobbying campaign led some sanctions experts in Washington to question if the case might have been delayed or dropped.

After Mr. Trump came under intense criticism for choosing to stand aside as Turkey pursued its plan to assert control over a section of northern Syria, he began striking a tougher tone toward Mr. Erdogan, focusing in particular on the threat of harming Turkey’s economy if it put United States military personnel at risk or engaged in atrocities against Kurds in the region.

“I am fully prepared to swiftly destroy Turkey’s economy if Turkish leaders continue down this dangerous and destructive path,” Mr. Trump said in a statement Monday, shortly before signing an executive order to impose the first set of sanctions.

Representatives for the Turkish government — who in interviews early Tuesday did not give any hint that they knew the criminal charges were imminent — said late in the day that they suspected a link between the new prosecution of the bank and the invasion of Syria.

“The timing is beyond any reasonable coincidence,” said one individual who has been working with the bank, but spoke on the condition of anonymity to discuss the matter.

The Justice Department and the White House did not respond to questions about whether the decision was influenced by Turkey’s decision to send troops in Syria.

Mr. Ballard, along with Robert Wexler, a former House Democrat from Florida, and James P. Rubin, a State Department official during the Clinton administration, had each been working at times over the last two years to lobby on the matter, Justice Department filings show. They had reached out in 2018 to the office of Vice President Mike Pence and the State Department, among others.

Rudolph W. Giuliani, the former New York mayor and adviser to Mr. Trump, also was involved in the matter in 2016 and 2017, trying to secure the release of one suspect in the case, in a possible prisoner swap with a pastor whom Turkey was holding on espionage charges that the United States claimed were fabricated.

Andrew Hruska, a former federal prosecutor in New York now with the law firm King and Spalding, had also been working on the matter, communicating directly with the Justice and Treasury Departments, on behalf of the bank.

Mr. Erdogan brought the case up with President Trump in November 2018, and his son-in-law, Berat Albayrak, the country’s finance minister, following up a few days later with Mr. Mnuchin, pushing him to closely follow the case.

Lawyers for the bank did not dispute that money was illegally moved through Halkbank to Iran starting around 2012 and continuing through 2016.

But they argued that the moves were largely orchestrated by an Iranian-Turkish gold trader, named Reza Zarrab, who had hired Mr. Giuliani to try to secure his release.

Turkish officials argued that Mr. Zarrab, who then decided to plead guilty to charges and become a witness for the prosecution, had lied to American prosecutors. The Turkish officials said Mr. Zarrab accused the bank and government officials in Turkey of conspiring in the effort as part of an attempt to reduce any time he would spend in prison, after he was arrested by American authorities in 2016.

In January 2018, in part because of Mr. Zarrab’s testimony, a Halkbank executive named Mehmet Hakan Atilla was convicted of violating sanctions as part of the case. At his sentencing in May 2018, a federal judge said that while Mr. Atilla had “unquestionably furthered” the scheme, he was “somewhat of a cog in the wheel” and not “a mastermind.”

These assertions reflected claims made by federal prosecutors that the wrongdoing had reached high into the Turkish government.

But until Tuesday, there had been no public follow-up by the Justice Department, nor any action by the Treasury Department, which separately has the power to impose sanctions on the bank or impose a fine.

The bank was formally charged on Tuesday with conspiracy to defraud the United States, conspiracy to violate sanctions, bank fraud, conspiracy to commit bank fraud, money laundering and conspiracy to commit money laundering.

Representatives for the bank said that they feared the charges alone might lead other global banks to limit doing business with Halkbank, and if a multibillion-dollar penalty results, it could threaten the overall viability of the institution.