King & Spalding, Atlanta HQ. Photo: John Disney/ALM

A Manhattan federal judge on Tuesday said he was "not convinced" that Halkbank, the Turkish state-run bank accused of helping Iran evade U.S. economic sanctions in an alleged money-laundering scheme, could attack the criminal proceedings against it without even acknowledging the charges.

The comments, from U.S. District Judge Richard M. Berman of the Southern District of New York, came in response to King & Spalding's request Monday to enter a "special appearance" on behalf of Halkbank for the narrow purpose of seeking to have the criminal case dismissed and Berman recused from the case.

"You haven't convinced me that you're entitled to that without your client responding to the indictment," Berman said.

Halkank last month did not appear for an arraignment on a six-count indictment accusing it of fraud, money laundering and sanctions offenses. It has since refused to accept service and has yet to show up in court, despite the threat of sanctions if it does not comply with two summonses.

Berman, however, repeatedly told King & Spalding partner Andrew Hruska that he did not understand the basis for King & Spalding's request for a special appearance. There was no Second Circuit precedent, Berman said, to support such a move, and granting the request would only serve to "delay" and "obfuscate" the case.

"Why would any court do that," he asked. "And why does that make any sense?"

King & Spalding, which has previously represented Halkbank in a Department of Justice investigation, had informed Berman in a letter late Monday that it had signed on to represent Halkbank for the "limited and special purpose" of challenging the Oct. 15 indictment on jurisdictional grounds. Hruska also said the firm would move for Berman to recuse himself, based on unspecified comments he had made "both in and out of the courtroom."

Halkbank, he emphasized in the letter, had refused to accept service and "has not stipulated to service by any means."

The filing kicked off a flurry of submissions from prosecutors, who said a special appearance would "not excuse" Halkbank's failure to comply with the summonses. On Tuesday, the government submitted additional evidence that Halkbank had received the indictment in Turkey but refused to accept the delivery.

Scheduled to begin at 11 a.m., Tuesday's hearing was delayed for more than 30 minutes, as Berman reviewed the filings and a crowded courtroom of observers, including U.S. Attorney Geoffrey Berman, looked on.

"There are some issues in this matter I'm still working on," he said, appearing briefly in the courtroom without his robe.

During the approximately 50-minute hearing, Berman pressed Hruska on why Halkbank still had not appeared, while Assistant U.S. Attorney Michael Lockard complained that the maneuvering carried an "air of gamesmanship."

"None of us are aware of any authority for that prospect," Lockard said.

Hruska responded that, by not accepting service, his client was trying to advance the case without waiving its ability to challenge the court's jurisdiction.

"We are here," he said. "We wish to argue these issues."

Both Berman and the prosecution, however, agreed that there would be no waiver, and they expressed concern that Halkbank would simply back out of the case if it lost its motion to dismiss.

Hruska, meanwhile, admitted to not having any Second Circuit authority permitting special appearances in criminal matters, but said prosecutors had "ginned up the apparatus" of the court by bringing charges outside of its jurisdiction.

"There must be a mechanism to challenge jurisdiction," he said, citing the issue as a "threshold matter."

Despite the back-and-forth, Tuesday's hearing ended without a resolution to the issue at hand. Berman ordered the parties to both submit briefs on whether the court could consider King & Spalding's request for a special appearance to file its motions.

Berman did not address the merits of recusal or jurisdiction.

Halkbank's next submission is due Nov. 19, with briefing set to wrap by Dec. 2.

 

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