Turkish Banker Makes Risky Bet With Sanctions-Case Testimony

(Bloomberg) -- Prosecutors ended their case against a Turkish banker accused of helping violate U.S. sanctions against Iran, in a trial implicating top Turkish officials including President Recep Tayyip Erdogan, and the defendant took the stand in his own defense.

Mehmet Hakan Atilla, a former executive with the state-owned Turkiye Halk Bankasi AS, known as Halkbank, began testifying Friday, a risky strategy that opens him up to hostile cross-examination by prosecutors. He began his testimony by declaring that he did not work with Reza Zarrab, a wealthy Turkish-Iranian gold trader, to dodge U.S. sanctions.

"Did you conspire with Reza Zarrab to evade sanctions?" his lawyer, Cathy Fleming, asked at the start of Atilla’s testimony.

"Never," Atilla replied.

The U.S. case, which began on Nov. 28, has covered a wide range of subjects, educating jurors on Turkish politics, Iranian money laundering and bribery inside U.S. jails. At times, however, the case has appeared to lose track of Atilla, who has emerged as a marginal figure in a scheme to help Iran evade U.S.-imposed sanctions and spend billions of dollars in oil revenue.

U.S. District Judge Richard Berman in Manhattan has repeatedly expressed frustration with both sides over the focus of testimony, including one exchange Wednesday, out of earshot of the jury and spectators, about the cross-examination of a former Turkish police officer who testified for the government.

“How about this for a novelty, how about asking him what he knows about Mr. Atilla? How about that?” Berman asked, according to a court transcript.

Prosecutors claim Atilla conspired with Zarrab in a scheme to launder Iranian oil profits through fraudulent sales of gold and food into Iran. Zarrab, who pleaded guilty and admitted paying tens of millions in bribes to Turkish officials, agreed to cooperate with U.S. prosecutors in hopes of leniency when he’s sentenced.

Zarrab spent seven days on the stand telling jurors how he orchestrated the plot. He explained how he used a web of shell companies, phony documents, and couriers carrying suitcases full of gold bars. He also described shadowy meetings with Iranian oil officials and Halkbank executives, including then-Chief Executive Suleyman Aslan. Occasionally Zarrab offered testimony directly implicating Atilla, who sat silently flanked by his lawyers in Berman’s lower-Manhattan courtroom. Atilla’s lawyers claim the two men never met.

Zarrab told jurors of Atilla’s part in the plot and testified about a text message in which Aslan asked: “Do you have a problem with the method proposed by Hakan Atilla?” No, Zarrab replied. “That is absolutely a very correct method.”

Phony Shipments

In a wiretapped telephone conversation, Atilla and Zarrab discussed the problem of recording phony food shipments on vessels that would have been much too small to carry them. Prosecutors say that shows Atilla’s awareness of the fraud. Zarrab also claimed Atilla was present at a meeting in which they discussed methods to hide the scheme.

Atilla was one of nine people charged in the U.S. case. All but Atilla and Zarrab have avoided falling into the hands of U.S. law enforcement. And with Zarrab’s guilty plea shortly before he and Atilla were to begin trial, Atilla is the sole defendant. He’s charged with six criminal counts, including conspiracy and money laundering. The most serious charge, bank fraud, carries a maximum sentence of 30 years in prison.

Lead Investigator

Lawyers concluded their questioning Thursday of Huseyin Korkmaz, a former Turkish police officer, on his fourth day of testimony. Korkmaz was the lead investigator in the 2012-2013 investigation of Zarrab’s ring that eventually targeted Erdogan and other politicians. He told jurors he stole copies of evidence from the investigation out of fear his government planned to destroy it.

Korkmaz called Erdogan the “number one” target in a group that also included Mehmet Zafer Caglayan, the former economy minister, and Halkbank’s Aslan. The Turkish investigation ended after a December 2013 raid on Aslan’s home, which recovered millions of dollars in cash stuffed in shoe boxes.

Korkmaz said that Atilla was among the Halkbank executives who were under investigation in the Turkish case. Atilla wasn’t charged in Turkey.

Much of Korkmaz’s testimony was focused on how the Turkish criminal investigation was suppressed, with little mention of Atilla. His lawyers complained that Korkmaz testified about the Turkish investigation in ways they say violated U.S. trial rules and unfairly prejudiced the jury against their client.

On cross-examination by Todd Harrison, one of Atilla’s lawyers, Korkmaz agreed he had no information that Atilla ever met with Zarrab or that Atilla was paid any bribes.

Korkmaz denied questions by Harrison seeking to link him to a movement tied to former Erdogan ally Fethullah Gulen, which the Turkish government blames for a 2016 coup attempt. Gulen currently lives in Pennsylvania.

Lawyers for Atilla told the judge they plan to present three or four witnesses in addition to their client. Jurors may begin deliberations late next week.

The case is U.S. v. Atilla, 15-cr-867, U.S. District Court, Southern District of New York (Manhattan).

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