In this photograph taken on Dec. 10, 2019, pedestrians pass in front of state-run Halkbank on Istiklal Avenue in Istanbul. (Photo by OZAN KOSE/AFP via Getty Images)
Throughout his administration, former President Donald Trump reportedly pressured federal prosecutors to drop a sanctions-busting case against Turkey’s state-run Halkbank and a related prosecution of a convicted money launderer who spearheaded the scheme.
On Tuesday morning, Supreme Court justices grappled over whether that multi-billion dollar case will survive — and what control U.S. presidents should have over cases that affect international relations.
“A Clearinghouse for Any Federal Crime”
The sanctions-busting case against Halkbank (Turkish for the “People’s Bank”) traces its origins to the related case against gold trader Reza Zarrab, who pleaded guilty in 2017 to conspiring to launder billions of dollar in Iranian oil money.
Zarrab, a Turkish-Iranian gold trader who was then represented by Rudy Giuliani, eventually cooperated with the U.S. government and accused Turkey’s authoritarian ruler Recep Tayyip Erdogan of ordering the sanctions-busting trades.
That is why Halkbank’s lawyer Lisa Blatt warned the case could have “cataclysmic” geopolitical repercussions.
“It 10 times accuses the head of a foreign state of committing a gazillion criminal acts and says, ‘And you ran it through your bank that you owned, operated and that is an affiliate of the Ministry of Finance,'” Blatt said, comparing it to Turkey accusing U.S. Treasury Secretary Janet Yellin and her agency of committing a crime.
Department of Justice attorney Eric Feigin did not back down from those allegations, warning that immunizing the Turkish bank could allow any state-tied entity to becoming a “clearinghouse” for crimes.
“Petitioners asking for an extraordinary and unprecedented rule under which any foreign government owned corporation could become a clearinghouse for any federal crime, including interfering in our elections, stealing our nuclear secrets, or something like here evading our sanctions, and funneling billions of dollars to an embargoed nation, using our banks and lying for regulators,” Feigin told the justices. “That unprecedented rule is based on essentially nothing.”
Blatt insisted that it was the U.S. government’s position that was unprecedented.
“The world has been around for like 7,000 years, and no country has ever tried another country,” Blatt said. “Well, it’s just never happened.”
Depicting the case as a manifestation of American exceptionalism, Blatt mocked that sentiment by saying: “Our country is different. We’re special.”
“The Prior Administration Was Trying to Apply Pressure”
The Supreme Court’s decision also will shape what power the executive branch has to quash cases that might affect international relations and national security. On that question, Justice Elena Kagan pointedly invoked news reports that the Trump administration tried to pressure federal prosecutors to spike the case.
“What do I do with the hearsay news reports that came out that the prior administration was trying to apply pressure to drop this lawsuit on the Southern District of New York,” Kagan said.
Though characterized by the justice as “hearsay,” the reports of Trump interference in the Halkbank case has been backed by court filings and statements by former administration insiders.
In 2017, Zarrab’s then-lawyer Rudy Giuliani disclosed in federal court filings that he traveled between the U.S. and Turkish capitals in a failed effort to arrange a prisoner swap. That effort failed, but if Giuliani succeeded, his efforts would effectively have killed the case. Zarrab’s testimony ultimately built the factual record for the Halkbank prosecution, which the Trump administration reportedly also tried to torpedo.
The Southern District of New York’s former U.S. Attorney Preet Bharara was fired before the Zarrab case went to trial, and one of his successors, ex-U.S. Attorney Richard Berman, accused Attorney General Bill Barr of trying to prevent him from indicting Halkbank, which stands accused of facilitating a $20 billion sanctions-busting scheme. Berman defied Barr and lost his job.
In his memoir The Room Where It Happened, Trump’s National Security Advisor John Bolton opined that his former boss tried to torpedo the Halkbank case as a favor to Erdogan, whom Bolton described as one of the “dictators [Trump] likes.” In 2012, Erdogan attended the ribbon cutting at Trump Towers Istanbul, a relationship that sparked multiple congressional investigations by Democratic-led committees. Erdogan was then prime minister, and Trump was still years away from becoming president.
The complex geopolitics of the case, however, could cross political aisles. The Supreme Court arguments fall a day before Turkey’s top diplomat Mevlut Cavusoglu’s scheduled meeting with his U.S. counterpart Antony Blinken. Court filings showed that the Turkish government also tried unsuccessfully to lobby then-Vice President Joe Biden following Zarrab’s arrest in early 2016, at the tail end of the Barack Obama administration.
A potential fine in the case could have profound effects for the economy of Turkey, now considered a disruptive NATO ally under the leadership of its authoritarian president.
“This Can Start a War”
The Halkbank case came before the Supreme Court after the bank unsuccessfully tried to dismiss on the grounds of sovereign immunity. The bank also lost on appeal to the Second Circuit.
As a result of this history, the Halkbank case has come to be seen as a reckoning over the Department of Justice’s independence — and the U.S. judiciary — from the White House, but the justices appeared to question how much independence prosecutors should have over cases that decide the fates of nations.
If the case were allowed to proceed, Blatt argued, any prosecutor in the United States could prosecute a foreign sovereign without recourse from any White House because of the “commercial activity exemptions” created by Congress.
“So the executive can cry and say, ‘This could start a war,’ and you’re stuck with a statement by Congress,” Blatt argued.
Justice Kagan pressed the Justice Department about the ability of any local or federal prosecutor to bring a case forward, over the executive branch’s objections. She noted that there are more than 90 U.S. Attorney’s offices and asked whether one in “Timbuktu” could bring a case without getting approval.
Justice Amy Coney Barrett asked the Justice Department attorney why the government would need to prosecute a foreign sovereign entity, rather than the people who work there.
“First of all, the individuals — as a couple of individuals are in this case — may be beyond our reach or missing,” Feigin noted.
Zarrab was charged in a nine-person indictment, and only one other defendant — Halkbank manager Hakan Atilla — was prosecuted and convicted after being arrested in the United States. The other seven defendants remain at large.
“You could imagine hostile foreign government acting through one of its corporations that just rotates people in and out and withdraws them and won’t extradite them,” Feigin added.
The Justice Department attorney added that criminal prosecution is a way to avoid a more “destabilizing” outcome like, hypothetically, “going to war with Turkey.”
“What we want to do is to deter other government-owned corporations from these kinds of actions — deter, frankly, other governments from trying to use corporations to do these kinds of things,” Feigin said.
The justices concluded the arguments without a ruling.
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