Middle East studies in the News
Did the Feds Flip Turkish Businessman Reza Zarrab—and Could He Bring Down Michael Flynn? [Henri Barkey]
A man who may be part of special counsel Robert Mueller's probe of alleged misdoings by President Donald Trump's campaign and administration was secretly removed from a federal prison this month.
Mueller is reportedly looking at a December meeting blocks from Trump Tower where Michael Flynn—shortly before Trump became president and named him national security adviser—was reportedly offered upward of $15 million if he could help Turkey win the extradition of cleric Fethullah Gülen as well as the release of gold trader Reza Zarrab.
Now it appears Zarrab, whose trial for allegedly cheating U.S. sanctions by facilitating gold-for-gas deals between Turkey and Iran is scheduled to begin in just days, may be working with federal prosecutors.
Last month, lawyers for his co-defendant, bank manager Mehmet Atilla, remarked sardonically in court filings that Zarrab, the man at the root of the charges facing their client, had all but vanished, and it seemed "likely that Mr. Atilla will be the only defendant appearing at trial."
The Bureau of Prisons website shows that Zarrab was released from BOP custody on Nov. 8. He had been held at the Metropolitan Correctional Center, a federal administrative prison near the Southern District of New York courthouse, before then.
Zarrab has not filed any court documents in the last month. Zarrab and his attorney, Benjamin Brafman, were not at a pre-trial conference Thursday. Flynn's lawyer did not return a request for comment Wednesday evening.
"All I can tell you is that he is in federal custody," Nick Biase, a spokesman for the U.S. Attorney's Office for the Southern District of New York, told The Daily Beast.
In court on Thursday, Victor Rocco, an attorney for Atilla, brought up the issue of the missing co-defendant with a prosecutor during break.
"Where's Waldo?" Rocco asked. "Are we gonna know? I've never been in a case where the defendant has been absent for virtually every proceeding."
Brafman declined to comment on where Zarrab is being held, or anything else, as Zarrab's removal from the federal prison system has reignited speculation that he has struck a plea deal on the eve of his trial.
On Wednesday, the Turkish foreign ministry contacted U.S. officials about Zarrab's whereabouts, pro-government Turkish media reported. The foreign ministry urged "the U.S. to notify Turkish authorities before relocating Turkish detainees to different facilities," according to The Daily Sabah, which added that "Zarrab was recently threatened in a federal holding facility," necessitating the move. (A spokesperson for the U.S. attorney's office would not comment on the allegation.)
Renato Mariotti, a former assistant U.S. attorney and now candidate for attorney general in Illinois, told The Daily Beast that inmates in pre-trial detention are sometimes moved when they are working to cooperate with the federal government.
"It can be a challenge to work with them as a cooperator in a more active way," Mariotti said. "Maybe he's spending time in a hotel suite with some FBI agents, or in their local lockup."
War of Words
Zarrab's arrest in Miami last march, while he was on vacation with his family, ignited a bitter war of words between the Turkish government and the Manhattan U.S. attorney's office.
Turkish President Recep Tayyip Erdoğan has said he asked then-Vice President Joe Biden about arranging for the release of the 34-year-old trader, a dual Turkish and Iranian citizen who's socialized with the Turkish president and is married to a popular Turkish singer.
And Erdoğan has intimated that both former U.S. attorney for the Southern District Preet Bharara and Judge Richard Berman were secretly agents of exiled Turkish cleric Fethullah Gülen.
Gülen, who has lived in Pennsylvania for nearly two decades, is a common scapegoat for the Turkish government, which blames his followers for, among other things, a failed coup attempt in 2016 that was quickly followed by arrests, trials, and increased powers for Erdoğan, whose efforts to pressure the United States into extraditing Gülen and releasing Zarrab continued when Trump took office.
While Trump fired Bharara in March—and is now personally interviewing candidates to be the new SDNY U.S. attorney, with jurisdiction over much of his business empire—the Zarrab case has continued under the leadership of former Bharara deputy and acting U.S. Attorney Joon Kim.
Hoping to cut the prosecutor out of the loop, Zarrab hired former New York City Mayor Rudy Giuliani and former U.S. Attorney General Michael Mukasey to "determine whether this case can be resolved as part of some agreement between the United States and Turkey that will promote the national-security interests of the United States and redound to the benefit of Mr. Zarrab," as the two men put it in affidavits filed in federal court. Judge Berman called them "disingenuous" for omitting any mention of Iran.
The two former federal prosecutors also met with high-level Trump administration officials in Washington, D.C., to discuss Zarrab's release but told the court that they would not be appearing there on his behalf.
Flynn, who disclosed that he had been a paid agent of Turkey only after he was forced to resign as national security adviser because of his interactions with Russian officials, had also been a prominent Trump campaign surrogate. The Mueller investigation is looking into whether Flynn discussed the Zarrab case with Turkish contacts, NBC News reported Friday.
Giuliani and Mukasey did not return a request for comment. Victor Rocco, an attorney for Atilla, also did not return a request for comment.
Meanwhile, Turkey has launched a series of retaliatory measures over Zarrab's arrest, including the arrests of Americans and Turkish personnel working at U.S. embassies.
"They're using these people as hostages, they thought they could use these people as leverage to get Zarrab released," Henri Barkey, a Lehigh University professor and former State Department official, told The Daily Beast.
A 'Multi-Year Scheme'
The key to understanding why a young Turkish-Iranian businessman has become a focal point in international relations lies in the charges against Zarrab and a slew of others, including Atilla, a former Halkbank manager.
In a lengthy superseding indictment filed in September, SDNY prosecutors alleged a "multi-year scheme" run by high-ranking Iranian and Turkish officials. Zarrab and others traded Turkish gold to Iran in exchange for oil and natural gas, in violation of U.S. sanctions, and a Turkish state-owned bank was used to facilitate the scheme and lie to regulators, the complaint says.
The complaint alleges that Iranian and Turkish government "officials received bribes worth tens of millions of dollars paid from the proceeds of the scheme so that they would promote the scheme, protect the participants, and help to shield the scheme from the scrutiny of U.S. regulators."
The allegations are similar to those in a 2013 corruption scandal that rocked Turkey before being swept under the rug by Erdoğan's government, Barkey said. The scandal was also related to the Turkish-Iranian gas-for-gold scheme, and included recorded audio of bribes and Erdoğan telling his son to hide money.
"The fact that they broke sanctions, and stuff like that? [Erdoğan] can explain that at home," Barkey said. "What he can't explain, obviously, is direct bribery."
If Zarrab is cooperating with U.S. officials, his testimony could bring a torrent of embarrassment down on the Turkish establishment by implicating top officials there, including Erdoğan himself.
"But that's really problematic for [Zarrab], because he's never going to be able to go to Turkey," Barkey said. "He's essentially going to be on the run, because they're going to be really mad if he drops the dime on Turkey."
The Turkish government has already played up the prosecution as an anti-government campaign.
"The reason Zarrab is in jail with Atilla is because the nasty United States is trying to plot the overthrow of Erdoğan," Barkey explained, paraphrasing the government-run media line.
But if Zarrab is only testifying against Atilla, prosecutors traded in a big fish for a smaller one: letting an ultra-wealthy gold trader with two homes on the banks of the Bosphorus, close ties to Erdoğan, and a pop-star wife off the hook to take down a middling bank manager. It's hard to see the feds making that deal after alleging in court that top Turkish and Iranian officials were involved in the criminal scheme.
Mueller's investigation into Flynn's Turkish dealings offers an alternative explanation.
The details of Zarrab's extrajudicial discussions with members of the Trump administration may line up with lines of inquiry in the Mueller investigation. If so, Zarrab's cooperation could go as far as to waive any potential privilege in his communications with Giuliani and Mukasey, freeing them to relay the substance of their dealings in D.C. and Ankara.
"Giuliani can't keep anything a secret from Bob Mueller as long as his client does not want him to," Mariotti, the former prosecutor, said.
In court on Thursday, Judge Berman suggested the answer may come soon.
"My client has asked me repeatedly to ask: Is Mr. Zarrab going to be on trial with Mr. Atilla or not?" Rocco, Atilla's lawyer, asked at the end of the proceedings.
"The one perk of being a judge is you don't have to answer questions, as witnesses or lawyers do," Berman replied. "So I would say just keep your eye on the docket."
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