Erdoğan worried over fallout from US case that implicates him, his family in Iran sanctions busting case

Abdullah Bozkurt/Stockholm

The Turkish president has reportedly been concerned over a possible US probe into his and his family members’ connections to Reza Zarrab, an Iranian gold trader who bribed Turkish government officials in a money laundering scheme to evade US sanctions on Iran.

According to sources in Turkish capital, President Recep Tayyip Erdoğan, who has so far managed to contain the case and prevent it from reaching his wife Emine Erdoğan, his son Bilal Erdoğan and his son-in-law Berat Albayrak, is worried that the new US administration may not be receptive to his lobbying efforts to further stall the investigation into Zarrab’s dealings.

Zarrab, indicted by US federal prosecutors for fraud, money laundering and evading US sanctions on Iran, later turned government witness and blew the whistle on Turkey’s first lady Emine when he submitted documents confirming how he sent millions of US dollars to a charity run by the Turkish president’s wife.

The revelations were made by Benjamin Brafman, the attorney for Zarrab, who said on May 19, 2016 that his client was a philanthropist and had donated a total of $4.6 million to Turkish charity Togem-Der (Social Development Center of Education and Social Solidarity Association), which was founded by Turkey’s first lady. Zarrab contributed approximately $850,000 in 2013, $1 million in 2014 and $2.3 million in 2016, according to the lawyer’s memo.

US federal prosecutor identified the Turkish first lady’s foundation as connected to an Iranian sanctions buster: 

The problem is the foundation never reported this donation in its revenue filings, suggesting that it was a kickback to help Zarrab use Turkish banks for money laundering and secure government favors to continue his illicit trade and gold transfers on behalf of Iran.

Preet Bharara, the former district attorney for the Southern District of New York who indicted Zarrab and Turkish state lender Halkbank senior official Mehmet Hakan Atilla for a scheme to bypass US sanctions on Iran, cited Zarrab’s links to Emine as an example how the gold dealer had influence within the Turkish government.

“… the close ties between Zarrab and high-ranking Turkish officials, including Erdogan, are highlighted by the defendant’s work with the Turkish charity Togem-Der, which the defendant touts in his bail application. … According to press reports …, Togem-Der was founded by Emine Erdogan, wife of President Erdogan,” Bharara said in the government memorandum of law filed with the US District Court in New York on May 25, 2016.

Panicked about exposure, Erdoğan’s family immediately closed down Togem-Der’s website, removed the content they thought might be harmful  to the family and orchestrated a change of name in a bid to try to put some distance between it and the US case.

The donations to Togem-Der were also discovered by Turkish police in a corruption investigation that was made public in December 2013. Zarrab, a key suspect in the case, was found have bribed several Turkish ministers with millions of dollars for facilitation of the money laundering scheme and government favors. The investigators did not have time to ascertain the purpose of the money donated to Togem-Der as Erdoğan stepped in and hushed up the probe by reassigning lead prosecutors and sacking police chiefs.

Another foundation, TÜRGEV (Foundation of Youth and Education in Turkey), led by Erdoğan’s son Bilal Erdoğan, was also implicated in Zarrab’s scheme of corrupt dealings. Huseyin Korkmaz, one of the investigators who worked on the Zarrab file in Turkey, testified in US District Court during the 2017 trial that Zafer Çaglayan, the former economy minister of Turkey who was indicted by the US, met Zarrab on July 14, 2013 to talk about the money to be delivered to TÜRGEV for Bilal Erdoğan and the resumption of the gold trade with Iran while the US gold ban was still in effect.

Iranian sanctions buster delivered bribes to the Turkish president’s son Bilal Erdoğan using the TÜRGEV front organization :

After a cutting a plea deal with the federal prosecutors Zarrab submitted damning evidence about how he bribed Turkish government officials including Çaglayan and testified about the money he distributed to Erdoğan family foundations as well as ministers to get the money laundering scheme going through Turkey.

Not only Halkbank but also the Ziraat and Vakıf banks were implicated in the scheme, according to evidence in the US case file and corroboration from government witness Zarrab. “What I’m saying is that — the prime minister of that time period, Recep Tayyip Erdoğan, and minister of the treasury, Mr. Ali Babacan, had given instructions, had given orders for them to start doing this trade. And with ‘for them,’ I mean the banks,” Zarrab said during cross-examination in the New York court, directly pointing to the Turkish president himself for green lighting money laundering and illicit trading with Iran through Turkish territory and Turkish government institutions.

In December 2017 Zarrab went further with his claims, saying President Erdoğan personally ordered the resumption of the plot to launder billions of dollars in Iranian oil revenue and circumvent US sanctions in 2014 after the Turkish investigation into the matter was quashed.

Another of Erdoğan’s family members, Berat Albayrak, the president’s son in-law, was also named in the Zarrab case as the man who facilitated the Iran sanctions busting scheme. Albayrak helped Zarrab tap into private lender Aktif Bank in money transfers on behalf of Iran. He was not with the government at the time and was working for Çalık Holding, a major conglomerate that owns the bank. Albayrak was later brought to into government by President Erdoğan, first as minister of energy and then as economy and finance minister until he resigned earlier this month.

Court transcript where Reza Zarrab names Berat Albayrak as aiding and abetting the Iran sanctions busting scheme:

Albayrak also lobbied Jared Kushner, son-in-law of outgoing US President Donald Trump, to prevent the Halkbank case from moving forward.

President Erdoğan has relentlessly pursued efforts to undermine the US federal case using both official and unofficial channels, and to some extent he managed to succeed despite the fact that the US case resulted in the conviction of Halkbank deputy General Manager Atilla, who served time in the US and was later released to Turkey. Prosecutor Bharara was removed from office by Trump, and the US Treasury has not yet fined Halkbank over the Iran sanctions violations.

With a new administration in the White House next year, things may change for the worse for Erdoğan, who is concerned that he may not find a receptive ear in the Oval Office. Fresh indictments may come out for other Turkish government officials and Erdoğan’s family members if the US authorities decide to push further. Erdoğan has very few allies left in Washington after he managed to irritate almost the entire US Congress and US military over his government’s efforts to undermine the NATO alliance and its purchase of S-400 long-range missiles from Russia.