Photo: Shutterstock

Halkbank, the Turkish state-owned financial institution, is prepared to be arraigned on criminal charges of money laundering and related offenses stemming from an alleged scheme to help Iran evade more than $20 billion in U.S. economic sanctions, its King & Spalding attorney told a Manhattan federal judge Tuesday.

Andrew Hruska, a partner with the international law firm, said he and his team had permission to enter a general appearance on Halkbank's behalf, after the bank refused for months to respond to an Oct. 15 indictment accusing it of spearheading the alleged sanctions-busting plot.

U.S. District Judge Richard M. Berman of the Southern District of New York, however, said that, given the "history" of the case, he wanted a written assurance from Halkbank that it had in fact authorized the appearance before proceeding with an arraignment.

"I think it would behoove everybody," Berman said, "to have something from the bank that the bank has authorized King & Spalding to appear."

"I'd feel more comfortable if we had something like that," he said.

Hruska said he would need no more than a week to obtain the document, and the next court date was scheduled for March 3.

Until Tuesday, the Turkish state-run bank had refused to formally acknowledge the criminal charges against it, while its King & Spalding lawyers pursued the unusual strategy of petitioning for a special appearance, which would have allowed them to challenge the court's jurisdiction without requiring Halkbank to appear as a defendant.

Prosecutors for the Manhattan U.S. Attorney's Office, meanwhile, had asked Berman to hold the bank in contempt for its failure to appear and pushed for millions of dollars in fines against the bank.

Berman in December rejected King & Spalding's request for a special appearance as unprecedented for a criminal prosecution, in a decision that was upheld last week by the U.S. Court of Appeals for the Second Circuit.

King & Spalding now believes that it received the necessary guarantees from the Second Circuit that Halkbank would not waive its jurisdictional challenge by entering an appearance in the case, and Hruska said Tuesday that he was ready to proceed without a formal statement from the bank.

"I don't believe that the history of this matter should be an impediment," he said.

Berman responded that he did not mean for his directive to imply that he was being "critical and judgmental" of Halkbank's previous tactics, but said it would be the "best way for all of us to proceed."

Once it is arraigned, Halkbank lawyers said their client plans to move for Berman's recusal based, at least in part, on unspecified comments the judge has made about the case both in and outside of the courtroom. The bank's appearance was also expected to resolve the government's contempt motion, which had been partially briefed before the appeal to the Second Circuit.

Prosecutors in the Southern District have alleged that Halkbank, which is majority-owned by the Turkish government, used a series of money service businesses and front companies in Iran, Turkey and the United Arab Emirates to transfer billions of dollars' worth of Iranian oil revenue in violation of prohibitions barring Iran from accessing the U.S. financial system.

High-ranking officials in Iran and Turkey allegedly participated in the scheme, and some officials took tens of millions of dollars in bribes to shield it from the scrutiny of U.S. regulators and banks, prosecutors said.

In total, nine defendants have been charged, including Reza Zarrab, the Turkish-Iranian gold dealer who pleaded guilty and later testified against Mehmet Hakan Atilla, a top Halkbank executive who was sentenced to 32 months in prison after a federal jury convicted him on five counts of conspiracy, money laundering and related counts.

Berman has said the arrests of Zarrab and Atilla kicked off an "extraordinary, sustained" campaign by Turkish officials to persuade U.S. leaders, lobbyists and attorneys to secure Zarrab's release ahead of trial.

In a footnote to his December ruling, Berman said that Rudy Giuliani, the former New York City mayor and Manhattan U.S. attorney, and Michael B. Mukasey, a former chief judge of the Southern District, both acted on Zarrab's behalf. President Donald Trump, former Vice President Joe Biden, former U.S. Attorney General Loretta Lynch and others had been on the "receiving end" of the overtures, he said, which appeared to "have failed prior to the Halkbank indictment" in October.

 

Read More:

2nd Circuit Denies King & Spalding's Bid for Special Appearance in Halkbank Sanctions-Busting Case

Criminal Case Against Halkbank to Proceed as King & Spalding Asks Appeals Court to Allow Special Appearance, Berman Rules

Halkbank Petitions 2nd Circuit for Mandamus in Sanctions Case, King & Spalding Attorney Says

US Judge Blocks King & Spalding's Bid for 'Special Appearance' in Criminal Case Against Turkish Bank