Erdogan Accuses Former Allies of Alleged Fraud Over Halkbank

(Bloomberg) -- Turkey’s President Recep Tayyip Erdogan accused allies-turned-rivals of defrauding a state-owned bank.

Erdogan leveled his claims as former Prime Minister Ahmet Davutoglu and former economy chief Ali Babacan prepare to launch breakaway parties in an attempt to challenge the president’s 17-year-rule. He gave no evidence for his allegation that fraud tainted Istanbul Sehir University’s loan from state-owned Halkbank, which he said totaled 417 million lira ($72 million).

Erdogan also accused Babacan and another former economy minister, Mehmet Simsek, of signing a suspect decree allocating state land to the university.

“Halkbank gave a considerably big loan to them. They didn’t pay back and asked a restructuring of the loan that has no warrant,” Erdogan said said in a speech on Saturday. “I don’t want to go into details, but there is a fraud against Halkbank.”

Davutoglu was one of the founders of the university, which is struggling to repay the loan. Halkbank has taken the university to court trying to get back money, and the school’s assets have been frozen.

Babacan, who served as vice premier for the economy and foreign minister, severed ties with Erdogan’s ruling AK Party in July. Davutoglu served as premier and chairman of the party from 2014 to 2016.

Davutoglu denied the accusations and demanded that Erdogan and his family declare their assets and any changes in their holdings in the course of the president’s political career. Babacan hasn’t commented on the allegations.

In October, U.S. prosecutors charged Halbank with taking part in a scheme to help Iran evade U.S. sanctions and access $20 billion in frozen oil revenue.

To contact the reporter on this story: Kerim Karakaya in Istanbul at kkarakaya2@bloomberg.net

To contact the editors responsible for this story: Onur Ant at oant@bloomberg.net, Amy Teibel, Bruce Stanley

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