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Abu Dhabi, UAEMonday 17 December 2018

Gold trader says he paid millions of dollars in bribes to former Turkish official as part of Iranian oil deal

Reza Zarrab was speaking as the star witness in the trial of Mehmet Hakan Atilla, an executive at Turkey's state-owned Halkbank

In this courtroom sketch Judge Richard Berman, second from right, and prosecuting Assistant U.S. Attorney Sidhardha Kamarju, far right, listen as Turkish-Iranian gold trader Reza Zarrab, second from left, with the aide of an unidentified interpreter, far left, describe a scheme using a diagram he drew, outlining how he helped Iran evade US economic sanctions. Elizabeth Williams via AP
In this courtroom sketch Judge Richard Berman, second from right, and prosecuting Assistant U.S. Attorney Sidhardha Kamarju, far right, listen as Turkish-Iranian gold trader Reza Zarrab, second from left, with the aide of an unidentified interpreter, far left, describe a scheme using a diagram he drew, outlining how he helped Iran evade US economic sanctions. Elizabeth Williams via AP

If it weren’t for the tan prison scrubs, Reza Zarrab would have looked like an economics lecturer using coloured markers to illustrate complex financial transactions stretching from Turkey to Iran via Dubai.

Instead the charismatic Turkish-Iranian gold dealer was the star prosecution witness using a sketch pad and pens to show the jury his part in a plot to launder billions of dollars in Iranian oil money.

With hand gestures and the occasional joke, he described paying tens of millions of dollars in bribes to a former Turkish government official and revealed the code word used to hide fake transactions.

His testimony came on the second day of the trial of Mehmet Hakan Atilla, an executive at Turkey's state-owned Halkbank, in a case that has strained diplomatic relations between the United States and Turkey.

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Gold trader tells US court of scheme to launder Iranian oil money and circumvent US sanctions

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Zarrab has admitted his role in the scheme. In a packed Manhattan courtroom on Wednesday he said he pleaded guilty to seven charges, including evading sanctions, fraud, money laundering and bribing an American prison guard.

“Co-operation was the fastest way to accept responsibility and get out of jail,” he said as he began his testimony.

The 34-year-old’s taut answers and charismatic presence brought occasional chuckles from the Turkish press corps who filled the New York courtroom.

The case has all the elements of a political thriller. It features gold bars in suitcases, a key witness who is one half of a celebrity couple and the potential to upend a government.

Zarrab, who is married to a Turkish pop star, said he and Atilla were key to a web of financial arrangements designed to allow Iran to profit from oil sales despite US sanctions.

At one stage he said he was moving up to 10 million euros a year for Iranian clients but wanted to expand his business.

He approached Halkbank in late 2011 or early 2012 offering to use his expertise in gold trading in return for access to Iranian money but was rebuffed – in part because of his high profile.

Zarrab said he then met Zafer Caglayan, Turkey's finance minister, to ask for help in getting the bank to reconsider.

He said Mr Caglayan replied: “I can broker this, providing there’s a profit share, 50-50.”

Gold mogul Reza Zarrab outlined the scheme that allowed Iran to avoid US sanctions that implicates Turkish government ministers. Ozan Kose / AFP
Gold mogul Reza Zarrab outlined the scheme that allowed Iran to avoid US sanctions that implicates Turkish government ministers. Ozan Kose / AFP

The result was an arrangement – illustrated in court with a spreadsheet - that eventually saw Mr Caglayan paid as much as 50 million euros.

The Turkish government has previously said that the former minister acted within the law and has dismissed much of the evidence as part of a plot to bring it down.

Zarrab used markers and a sketch pad to diagram the complex web of transactions needed to skirt US and UN sanctions against Iran.

Turkish buyers of Iranian gas and oil would deposit money into an account belonging to the National Iranian Oil Company held at Halkbank, he said. The money would then be moved into an account held by an Iranian bank there before being transferred into one of Zarrab’s front companies.

He would use the money to buy gold and send couriers to collect the bars in suitcases.

“These couriers, I mean physically, would transport the gold to Dubai,” he said, adding that the customs documents showed the cargo was being exported to Iran, via the UAE.

“The gold would not go to Iran,” he added.

Instead another of his companies would sell the gold bars, converting it into dirhams which would then be paid into a local bank account, essentially re-entering the global financial system so that Iran could use it to make international payments, he said – taking a minimum of 10 transactions to reach that point.

On some occasions, he even dispensed with the need for gold, simply making phantom trades. Those transfers were referred to in code, he said, as sending “chicken over”.

Prosecutors say the scheme exploited exemptions that allowed Iran to sell oil to Turkey so long as the proceeds were deposited in Turkish banks and used in trade with Turkey.

Zarrab said he relied on officials at Halkbank, including Atilla, for guidance in avoiding sanctions.

Atilla has pleaded not guilty.