Mehmet Hakan Atilla. Photo: Youtube

The U.S. Court of Appeals for the Second Circuit has upheld the conviction of Mehmet Hakan Atilla, the former deputy general manager of Halkbank who served a 36-month prison sentence for his role in helping Iran to avoid billions of dollars in U.S. economic sanctions.

A three-judge panel of the Manhattan-based appeals court on Monday found a flaw in one of prosecutors' main theories of liability in the case, but nonetheless upheld Atilla's conviction, finding that the evidence against him was "overwhelming."

Atilla was convicted in 2018 of conspiring to launder billions of dollars in Iranian oil proceeds out of Halkbank, the Turkish-run financial institution now itself under indictment in the Southern District of New York. According to prosecutors, Atilla and others disguised the funds as private trade and humanitarian assistance and then lied to the U.S. Treasury Department in order to protect the bank from being hit with sanctions.

The prosecution hinged in large part on the nearly weeklong testimony of Reza Zarrab, an Iranian gold trader turned government cooperator, who said that Atilla was closely involved with the scheme. Prosecutors also presented evidence, including wiretap recordings and documents stolen from a 2013 corruption probe in Istanbul.

On appeal, Atilla's attorneys argued that prosecutors could not rely on the International Emergency Economic Powers Act to prove that Atilla had conspired to "evade or avoid" secondary sanctions and that the judge in the case improperly instructed the jury that it could convict him on those grounds.

According to Atilla, the statute's provisions only barred moves around existing prohibitions, not efforts to avoid future sanctions.

Judge Richard J. Sullivan of the U.S. Court of Appeals for the Second Circuit, an appointee of President Donald Trump who penned Monday's decision on behalf of a unanimous Second Circuit panel, agreed with Atilla's reading of the IEEPA, but found that the error was ultimately "harmless," given his convictions on other counts and the body of evidence against him.

"Here, there can be little doubt that the jury necessarily found Atilla guilty on a different, properly instructed theory of liability—namely, that Atilla conspired to violate the IEEPA by exporting services (including the execution of U.S.-dollar transfers) from the United States to Iran in violation of the [Iranian Transactions and Sanctions Regulations]," Sullivan wrote. "Consequently, any instructional error was harmless."

He was joined in the ruling by Judges Rosemary S. Pooler and Peter W. Hall.

An attorney for Atilla did not immediately respond Monday to a request for comment.

He was represented on appeal by John Elwood of Arnold & Porter Kaye Scholer in Washington, D.C.; Joshua Johnson of Vinson & Elkins, also in Washington; and Victor Rocco of Herrick, Feinstein in New York.

The Second Circuit's ruling comes as Halkbank, which is majority-owned by the Turkish government, readies for a planned March 2021 trial on conspiracy, bank fraud and money laundering charges in Manhattan federal court.

The bank, through its attorneys, has pleaded not guilty to the charges, which include using a series of 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 that barred Iran from accessing the U.S. financial system.

In total, nine defendants have been charged in the alleged Halkbank-linked scheme, including Zarrab, who pleaded guilty and later testified against Atilla, who returned to Turkey last July after serving his sentence for conspiracy, money laundering and related convictions.

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