Witness in Zarrab case testifies Erdoğan was ‘No. 1’ in 2013 corruption probe

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Turkish President Recep Tayyip Erdoğan (L) and Reza Zarrab

Turkish President Recep Tayyip Erdoğan had been known to İstanbul police as “No. 1” in a 2013 corruption investigation, a witness testified Monday in New York, according to a report by the Courthouse News Service.

Hüseyin Korkmaz, a former İstanbul police officer who was arrested by the Erdoğan regime in the aftermath of corruption operations in late 2013, said the investigation initially focused on the organization run by gold trader Reza Zarrab but later grew to include dozens of others.

He called Erdoğan the “No. 1” target in a group that also included Mehmet Zafer Çağlayan, the former economy minister, and Süleyman Aslan, a former chief executive at Halkbank, a large Turkish state-owned bank that was central to the scheme.

According to a report written by Adam Klasfeld, prosecutors led Korkmaz through the details of the İstanbul probe to kick off the third week of a trial over bank trades that flouted US sanctions against Iran. Erdoğan has not been charged himself, but the trial of Turkish banker Mehmet Hakan Atilla has been replete with allegations of Erdoğan’s involvement in his previous role as Turkey’s prime minister.

The testimony of Korkmaz, who was the head of the police unit that conducted the investigation, has confirmed for the first time that the corruption case in Turkey was aimed directly at Erdoğan, not just ministers, associates and family members. It may go some way toward explaining why Erdoğan responded so forcefully to it as well as the Turkish government’s reactions to the probe being re-opened in the US. Erdoğan has called the 2013 investigation a “judicial coup” orchestrated by his political enemies and has claimed that the current US case is politically motivated as well.

In addition to his testimony about Erdoğan on Monday, Korkmaz used the term “cartel leader” to describe Zarrab, a prominent former ally of Erdoğan who has pleaded guilty to money-laundering charges as part of the sanctions case. Korkmaz said Zarrab’s cartel oversaw three other groups, one of which was led by former Halkbank General Manager Aslan and then-Economy Minister Çağlayan.

Korkmaz, who had made headlines in Turkey when he shouted, “The emperor has no clothes. I wouldn’t be a policeman if I was afraid of thieves” as he was shoved into a police car after his detention, said Turkey’s former interior minister Muammer Güler led the next group and that the final one was overseen by Zarrab’s former partner, Taha Ahmet Alacacı.

The Turkish investigation was ended after the arrest of Zarrab on Dec. 17, 2013 and a raid on the home of Aslan, which recovered millions of dollars in cash stuffed into shoeboxes. Photos taken in the course of the Turkish investigation of the cash recovered in the raid were shown to the jury. Erdoğan was prime minister at the time.

On İstanbul’s police force, Korkmaz said he was a deputy inspector on the projects and public corruption desk after graduating third in a class of roughly 360 students. He testified Monday about large cash bribes his team discovered stashed in shoeboxes in Aslan’s home. “It’s stacks of $100 banknotes,” Korkmaz said, describing a picture of one of these shoeboxes shown to the jury.

There were Turkish lira as well, and “also stacks of euro banknotes at 500 euros each,” Korkmaz continued. The witness’s testimony was to continue Monday afternoon.

Eclipsed by more well-known figures in Turkey and internationally, Atilla stands accused of helping launder billions of dollars in illicit transactions to Iran in violation of US sanctions. As the US ratcheted up financial sanctions on Iran in retaliation for its efforts to become a nuclear power, Iran was increasingly unable to access billions of dollars piling up in overseas banks as a result of oil sales to foreign countries.

Prosecutors allege Zarrab, with the aid of Turkish officials and bank executives, ran a laundering scheme to get around the sanctions and use Iran’s money to make international payments on its behalf, including $1 billion that flowed through banks in New York.

Zarrab pleaded guilty in the weeks before the trial and spent seven days on the witness stand detailing the plot. He testified against Halkbank executive Atilla, now the lone defendant in the case. Nine people were charged in the US case, including Aslan and Çağlayan, but the other defendants have avoided US arrest. Erdoğan was not charged in the case.

Last week Zarrab testified that Turkey’s prime minister personally ordered the resumption of the plot to launder billions of dollars in Iranian oil revenue and circumvent US sanctions in 2014 after an investigation into the matter was quashed. Zarrab did not name Erdoğan in this portion of his testimony, although he appeared to be referring to him. Erdoğan became president in August 2014.

Zarrab also testified that a senior Turkish official said to him that Erdoğan personally approved a plan to involve two Turkish banks in the scheme.

Defense lawyers for Atilla have told the judge they plan to request a mistrial, saying the evidence and testimony are not relevant to Atilla and that US prosecutors have failed to fully explain how they obtained it.

According to a report by Bloomberg, prosecutors’ questioning of Korkmaz is intended to show the jury how the investigation came to be shut down. Prosecutors showed the jury more surveillance photographs in which Korkmaz said bribery payments were being made. They included one depicting a man identified as Zarrab’s bribery courier outside the office of a charitable foundation founded by Erdoğan.

The laundering scheme first employed gold trading as a means of getting Iran’s money out of Halkbank, then turned to disguising the flows as humanitarian food shipments after revised sanctions rules banned the gold trade. The photo of the courier outside the charitable foundation, taken July 7, 2013, was taken around the same time Zarrab was recorded in a wiretapped conversation discussing efforts to revive the gold trade, Korkmaz testified.

Under questioning by Assistant US Attorney Michael Lockard, Korkmaz testified that Atilla was among the Halkbank executives who were under investigation in the Turkish case. But he said he wasn’t aware of any evidence that Atilla was among the people who received bribes from Zarrab.

Other photos from the Turkish investigation shown to the jury included one of Zarrab’s courier stopped at İstanbul Atatürk Airport with bundles of cash in a bag on the way to see the then-Turkish Economy Minister Çağlayan and one of Zarrab arriving at the office of Turkey’s European Union Affairs minister, Egemen Bağış. Another was of two men outside Zarrab’s office, picking up what Korkmaz said was $200,000 in bribes for then-Interior Minister Güler, who controls the Turkish police force.

Meanwhile, Yurter Özcan, Washington representative of Turkey’s main opposition Republican People’s Party (CHP), said that a lawyer for Erdoğan was the intermediary between him, his son-in-law and Energy Minister Berat Albayrak, and Reza Zarrab. “The messages presented by the New York prosecutors and accepted by Zarrab are between Zarrab and ‘my politically well-connected lawyer’,” Özcan tweeted. “What a pity that the media did not give this important detail: This lawyer is Mustafa Doğan İnal. İnal is at the same time Erdoğan’s lawyer,” he said.

The text messages apparently sent between Zarrab and İnal show the latter conveying a message from Albayrak that “this business must be done,” and that then-Prime Minister Erdoğan would order “the general manager” of state-owned Halkbank to continue it.

US prosecutors interpreted the message as an order for Halkbank to resume its participation in Zarrab’s scheme to undermine US sanctions on Iran after he and dozens of others were freed following their arrest in late 2013. İnal not only represented Erdoğan but also Saudi Arabian billionaire Yassin al-Qadi, who spent most of the last decade on a UN sanctions list for alleged links to al-Qaeda, and Turkish businessman of Egyptian origin Osama Qutb, nephew of Muslim Brotherhood founder Said Qutb. Both Qadi and Qutb are seen as close to the Erdoğan family.

Zarrab and eight other people, including Turkey’s former economy minister and three Halkbank executives, have been charged with engaging in transactions worth hundreds of millions of dollars for Iran’s government and Iranian entities from 2010 to 2015 in a scheme to evade US sanctions.

The gold trader had been held in a New York prison awaiting trial but said he was removed after a fellow inmate pulled a knife and tried to kill him for cooperating with prosecutors, part of a plea deal agreed by Zarrab part to lessen his prison sentence.

Zarrab was the prime suspect in a major corruption investigation in Turkey that became public in December 2013 and implicated the inner circle of the ruling Justice and Development Party (AKP) government and then-Prime Minister Erdoğan. Zarrab was alleged to have paid Cabinet-level officials and bank officers bribes to facilitate transactions benefiting Iran.

After Erdoğan cast the case as a coup attempt to overthrow his government orchestrated by his political enemies, several prosecutors were removed from the case, police were reassigned and the investigation against Zarrab was dropped in Turkey.

The Turkish-Iranian gold trader told the New York court that he made payments to secure his release in February 2014 and that those payments were partly bribes. Zarrab, who was arrested in the US in March 2016, testified in federal court that he had bribed Turkey’s former economy minister, Çağlayan, in a billion-dollar scheme to smuggle gold for oil in violation of US sanctions on Iran.

Zarrab said that Erdoğan personally authorized the involvement of Turkish banks in the scheme to evade US sanctions on Iran. Zarrab also said for the first time that Turkey’s Ziraat Bank and VakıfBank were involved in the scheme and that former Deputy Prime Minister Ali Babacan signed off with Erdoğan on the operation.

While Zarrab revealed his tactics and accomplices within the Turkish government in violating US sanctions on Iran in New York federal court, President Erdoğan said the case was an international coup attempt against Turkey.
(Stockholm Center for Freedom [SCF] with Turkish Minute)

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