A Turkish-Iranian gold dealer is due to go on trial this week in New York, but no one expects him to be there — at least not at the defense table.
After a sealed hearing last week, lawyers and the judge in the case were tight-lipped about what, exactly, will happen once U.S. v. Reza Zarrab et al. gets underway with jury selection Monday. Zarrab, 34, is accused of orchestrating a years-long scheme to violate U.S. sanctions against Iran by concealing bank transactions that delivered gold and U.S. currency to that country's government.
Since Zarrab’s arrest in March 2016, the case has roiled U.S.-Turkey relations. Zarrab is described by U.S. authorities as well-connected to senior members of the Turkish government, which in turn calls his prosecution an attack on their country.
Turkish prosecutors announced Nov. 18 they had launched their own investigation into two of the American prosecutors who have overseen the Zarrab case, to determine if evidence was illegally obtained. U.S. Attorney Joon H. Kim, one of the officials Turkey claims to be investigating, called the accusations “ridiculous on their face.”
“Even before the trial has started, you’ve got really ramped up rhetoric and tension between the two sides, and I would expect that’s going to continue and worsen once the trial actually begins,” said Amanda Sloat, a senior fellow at the Brookings Institution, and a former senior State Department official. “Going forward, this case is going to breed more mistrust.”
Turkey’s president has personally lobbied the U.S. government to release Zarrab, and its foreign minister said Zarrab was a “hostage” being forced to testify against Turkey’s government.
Last week, U.S. District Court Judge Richard M. Berman discounted such talk, saying if Turkey wants to help Zarrab, they should provide evidence that might help him beat the charges.
“The best way for them to be helpful is to help the defense counsel by providing in court any evidence or witnesses they are aware of that could assist the defense,” Berman said.
Zarrab, a wealthy, high-profile figure in Turkey, is charged with conspiring to defraud the United States, conspiring to violate U.S. sanctions law, bank fraud, and money laundering. He was originally slated to go on trial with Mehmet Hakan Attila, deputy CEO of Halkbank, which is majority-owned by the Turkish government.
The alleged scheme allowed Halkbank to “supply billions of dollars’ worth of services to the government of Iran without risking being sanctioned by the U.S.,” according to the indictment.
The indictment says that “high-ranking officials in Iran and Turkey participated in and protected this scheme. Some officials received bribes worth tens of millions of dollars paid from the proceeds of the scheme so that they would promote the scheme, protect the participants, and help to shield the scheme from the scrutiny of U.S. regulators,” it alleges.
The Turkish government has accused American prosecutors of building their case on old corruption charges brought by Turkish prosecutors years earlier that were ultimately dropped amid ongoing internal power struggles in that country’s government.
State Department spokeswoman Heather Nauert said Turkey’s accusations “the old same song and dance . . . I would have to give you the same answer as the last time they accused us of trying to foment some sort of a coup. And I would say that is ridiculous.”
Since his arrest, Zarrab has been held at a federal jail in New York City. But he has stopped appearing at pretrial hearings in court, and in early November, the U.S. Bureau of Prisons website listed him as having been released, though authorities said he was still in federal custody.
Often, that is a strong indicator someone has decided to cooperate with government prosecutors. Several people close to the case, speaking on condition of anonymity, said they believe, but do not know, that Zarrab is cooperating with the Justice Department.
Sloat said if Zarrab does testify for the prosecution, “you would have the prime suspect being able to articulate specifically what happened and who else was involved in these events, and that’s the part that is presumably causing concern in Ankara.”
Last week, Attila’s lawyer, Cathy Fleming, said at a hearing that the growing secrecy surrounding the case was hampering her ability to prepare for the trial. She said she wasn’t even allowed to tell her client the name of one of the witnesses against him.
“Frankly, if we even suggest the name to anybody, it’s going to end up in the press,” she said.
A lawyer for Zarrab declined to comment.
Speculation about Zarrab’s possible cooperation has led some to suspect he may be providing information not only to prosecutors about Turkey, but also to the special counsel investigators probing associates of President Trump, including his former national security adviser, Michael Flynn.
Flynn did work on behalf of Turkey before the election, and investigators have examined his business relationships with figures connected to the Turkish government.
It’s not clear, though, that even if Zarrab is cooperating, he would have much to say about Flynn or Trump. His arrest came in early 2016, well before many of the events that are being probed by special counsel Robert S. Mueller III.
If Zarrab does appear as a prosecution witness at his trial, it will be the latest and biggest twist in an FBI investigation that has had several odd turns.
When the FBI began looking into the financial transactions at the heart of the case, there was much they didn’t understand. But then an outside forensic accounting expert showed them how many of the transactions allegedly concealed major violations of U.S. law, according to people familiar with the case.
Soon after that revelation, investigators learned Zarrab was traveling with his family to Disney World in Florida. They had not planned to move on him so quickly, according to these people, but they seized the opportunity to arrest him.