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Turkey Halkbank Not Immune 2d Cir Panel Decided So Halkbank Asks Rehearing En Banc

By Matthew Russell Lee, Patreon, Thread Video
Honduras - The Source - The Root - Podcast

SDNY COURTHOUSE, Nov 5 – Turkey's Halkbank has officially given up its strategy of refusing to official appear in the US criminal case against it, and on February 25, 2020 appeared and agreed to be indicted. Inner City Press live tweeted it here and below.

 On April 12, 2021 with the case stayed pending appeal, a three-judge panel of the Second Circuit heard the arguments. Inner City Press live tweeted it, here: [& fast podcast here]

On October 22, 2021, the Second Circuit ruled that Halkbank is NOT immune, and the criminal prosecution will proceed: "This case presents two questions. First, whether a denial of a motion to dismiss a criminal indictment based on the Foreign Sovereign Immunities Act (“FSIA”) is immediately appealable under the collateral order doctrine. Second, whether FSIA confers immunity on foreign sovereigns from criminal prosecutions. We answer the first question in the affirmative. As to the second, we hold that even if we were to assume that FSIA confers immunity in the criminal context, the offense conduct with which Defendant-Appellant Turkiye Halk Bankasi A.S. is charged would fall under the commercial activity exception to FSIA. Accordingly, we DENY the Government’s motion to dismiss this appeal, and we AFFIRM the Decision and Order of the United States District Court for the Southern District of New York (Richard M. Berman, Judge)." Full order on Inner City Press' DocumentCloud here.

On November 5, Halkbank filed in the Second Circuit for rehearing en banc / by the full Court: PETITION FOR REHEARING/REHEARING EN BANC, on behalf of Appellant Turkiye Halk Bankasi A.S., FILED. Service date 11/05/2021 by CM/ECF.[3206843] [20-3499]."

                        Steps before ban

From April 12: Halkbank's lawyer: Courtroom are not where sovereigns settle disputes - rather it should be diplomatic or "God forbid, with the use of force." The commercial activities exception does not apply to any criminal action

Halkbank's lawyer: Applying the FSIA exception to criminal cases implies Congress stripped immunity "with nary a whisper... But sovereigns were immunity even in criminal cases."  [this is an argument the UN of  Antonio Guterres  likes, for example on Haiti cholera]

Judge Bianco: Why are you relying on the common law? When 3231 says there is jurisdiction to prosecute in the US for all offenses? Halkbank's lawyer: Sovereignty trumps that. Judge Bianco: You would concede that the statute and history are all about civil matters.

 Halkbank's lawyer: As far as the instrumentality theory, the Government has only the DDC case, In Re Shipping - the government was unable to enforce their Grand Jury subpoenas.

 Judge Bianco: What about 1441(d) - why would Congress provide for removal? If New York State indicts Halkbank, it can't be removed.

Halkbank's lawyer: For diplomats, they don't remove their cases either. Our focus is on the plain language of the statute. Judge Bianco: So why did they use the word "litigant," a term usually used in civil litigation?

Halkbank's lawyer: Look at US v. Stein, 2006, "the government like any other litigant," end quote. Judge Cabranes: Your client is a commercial bank? A: It engages in that

 Halkbank's lawyer: My client collects taxes for the government in Turkey. Judge Cabranes: It could be the local candy store - just a conduit for taxes. Halkbank's lawyer: The immunity flow from the ownership and control itself. It makes loans to shop owners

 Judge Cabranes: Would the officers of the bank enjoy diplomatic immunity? Halkbank's lawyer: I don't believe so...

Judge Cabranes: So how is the bank synonymous with the Turkish state? Halkbank: That's not an FSIA question.

Judge Cabranes: Did the individual defendants assert or try to assert diplomatic immunity? Halkbank's lawyer: Not that I'm aware of. AUSA Kamaraju: Their focus on statutory language is selective. They don't apply it to Section 3231, as Judge Bianco noted

Assistant US Attorney Kamaraju: The Hess case, as the DC Circuit found, has no application. The US can weigh, through its executive branch, the balance of diplomacy and law. Congress did not mean to destroy this executive power.

 AUSA Kamaraju: Prosecutions like this are rare, because other mechanisms work. But the executive did not lose the power of criminal prosecution. Sanctions are authorized by Congress, then promulgated through regulation by the executive branch

AUSA: You have a foreign bank that tries to launder $1 billion on behalf of one of the US' primary adversaries. Clerk: You have a minute left. AUSA Kamaraju: Thanks. Defense counsel brought up diplomatic immunity. But Congress dealt that that differently

 AUSA: Diplomatic immunities is asserted in court by a motion to dismiss, not as a matter of jurisdiction. Congress was thoughtful. Halkbank would have this court believe Congress wanted to immunize foreign sovereigns. Judge Bianco: Your SDNY 1929 case was civil

Judge Bianco: I'm not saying the US can't do it, but has it in the past indicted an instrumentality of a foreign state?

AUSA: Subpoenas are an attempt to serve criminal process. We cited the Statoil case, post FSIA. We are not saying it is conclusively settled

 Judge Bianco: It might suggest it wasn't at issue when Congress passed the FSIA. AUSA: The foreign policy issues that might be raised by private litigation do not exist when the executive brings a prosecution. They are trying to expand the FSIA.

 Judge Cabranes: The officers of the bank, do you have any view if the government considers them to have diplomatic immunity? AUSA: No, we've indicted Atilla. And he never asserted diplomatic immunity. The government of Turkey did not file anything at all.

Judge Cabranes: Are there recent cases, beyond the antiques in your brief? What about the Central Bank of Nigeria, in the 10th Circuit?

AUSA Kamaraju: That's the Keller case - it's civil RICO. Before the 9th Circuit, there is one. And, again, the Statoil case. Judge Cabranes: There was a Dec 2020 order by a motions panel of our court, which stayed the District Court - which said it envisioned a jury trial in May 2021. Is the government ready?

AUSA: Because of the stay there were not pre-trial motions, no request to charge

 Judge Cabranes: But would you proceed in the normal course if the stay is vacated? AUSA: Yes, but things are different under COVID. Trial dates are assigned. Those for May have already been assigned. [Inner City Press: The deadline for 3d Q is May 15]

Halkbank's lawyer: Sovereign immunity is based on the comity and grace of the US, not just of the executive branch.  Judge Cabranes: OK. We'll reserve decision.


  On September 10 Judge Berman scheduled a September 18 oral argument on Halkbank's motion to dismiss. Inner City Press live tweeted it, here and below.

On October 1 Judge Berman denied Halkbank's motion to dismiss.

On December 23, from the 2d Circuit (Present: Raymond J. Lohier, Jr., Sudan L. Carney and William J. Nardini, Circuit Judges) this:

"ORDER of USCA (Certified Copy) as to Reza Zarrab, Turkiye Halk Bankasi A.S. USCA Case Number 20-3008; 20-3499. The above proceedings are CONSOLIDATED for the purposes of this order. In the proceeding docketed under 20-3008, Petitioner seeks a writ of mandamus and Respondent moves for leave to file an oversized brief. Upon due consideration, it is hereby ORDERED that the Respondents motion is GRANTED and the mandamus petition is DENIED because Petitioner has not demonstrated that its right to the writ is clear and indisputable, or that granting the writ is appropriate under the circumstances.

On December 8, Halkbank asked Judge Berman to order the prosecutors to provide the custodial information on 1.2 million document provided in discovery: that is, where the documents have come from. Judge Berman has directed the US Attorney's Office to respond by December 14.

On December 14, after that response, Halkbank cites Brady: ", the government’s description of its efforts to obtain additional discovery from Treasury fails to explain why to date it has only produced ten documents from Treasury. Nor does the government justify why it has failed for months to disclose to the defense what searches are being done at Treasury—not even simple information such as what custodians are being searched for what information. Were the government actually to disclose this information, the defense could bring any discovery disputes (if there are in fact any) to the Court now rather than waiting for months until after the government has completed the search. Instead, the government merely claims that it is searching Treasury files without explaining when it even expects to complete its undescribed process. There are a number of other discovery issues that we are attempting to resolve with the government during these challenging times. For example, we have been requesting Brady information for several months. After initially claiming that it was not aware of any Brady information whatsoever, the government four days ago sent us a lengthy letter addressing Brady that by-and-large merely recited evidence favorable to the defense elicited during the Atilla trial." We'll have more on this.

From September 18: Halkbank's lawyer: The government claims that a handful of discussions with Treasury officials constitutes doing business in the US. We disagree. These statements to Treasury can't be used to bring in the non-US activities in the UAE and elsewhere. 

Halkbank's lawyer: Under the commercial activities exception, the non-US activity must have a direct effect in the US. There was the supposed pool of money traded oversea. 95% of that money never even made it to the US.

Halkbank's lawyer: Post-pool, in Turkey and Dubai, the US dollar transactions were not the product of Halkbank's activities. So, this court has not subject matter jurisdiction. As to personal jurisdiction, this will be quick - you have indicated how you will rule. 

Halkbank's lawyer: As to bank fraud, our indictment differs from Zarrab's. To prove conspiracy to violate IEEPA, they must prove conspiracy to violate primary, not secondary sanctions. Thank you your honor.

Judge Richard M. Berman: I got it.

Assistant US Attorney Sidhardha Kamaraju: While Halkbank claims the Attila decision required us to change our allegations, it's not true. The indictment contains 81 paragraphs. Halkbank wants you to look at one sentence in Paragraph 6.

AUSA: But the next sentence says, used to make payments on behalf of Iran, in dollars, passing through the US, in violation of US sanctions laws. And look at Paragraph 33, which makes clear a knowing scheme to route the funds from the US. A June 20, 2012 email...

AUSA: The email says, these gold deposits can be used for international payments... Bank Melli, Bank Sedarat, Bank Mellat in Turkey. So, the bank knowingly participated in enabling Iran's access to the US financial system. Then there's the slush fund in Dubai...

 AUSA: Their argument is essentially, What's a billion dollars among friends? Except that their friend is the world's largest state sponsor of terrorism.... Halkbank tries to apply civil law to this criminal case, in which acts are attributable to all conspirators

AUSA, cites US v. Noriega then says Halkbank is asking Judge Berman to save it from the US Executive Branch's decision it should not have immunity, as it decided with regard to Noriega. Judge Berman: Five minute warning.

Judge Berman says he'll be asking for a copy of the transcript to Chambers. He'll take it under advisement. "We can be adjourned."

 On July 14, Halkbank filed its motion to try to recuse Judge Berman. They said he chaired a panel entitled "The Rule of Law in Turkey" - and that he was "the only American judge who spoke at the event," along with European Parliament MP Marietje Schaake.

  As such, Halkbank argues, Judge Berman "took sides on factual issues that are core to this case."

  They have a 33 page declaration from Richard E. Flamm, and another from Michael A. Reynolds.

Back on February 25, Judge Berman entered at 10:15 am, and saying that his courtroom deputy "Christine has handed up a notice of appearance by King & Spalding. Does that mean Halkbank wishes to appear in these proceedings?" 

K&S: "That is correct, your Honor."

Judge Berman: And is willing to be arraigned?

K&S: Yes.

 And so they began conferring to pick a date and time for arraignment. When they returned, Judge Berman asked if King and Spalding has written authorization. No, oral.

Judge Berman asked or directed them to get written proof of authorization given the history of the case including Halkbank's legal department refusing service of process. So the next day in March 3. Inner City Press tweeted:

K&S: Why don't we set a control date in a week?

Judge Berman: March 3 at 11 am, does that work?

K&S: Yes, Your Honor. We are comfortable to proceed with oral authorize but will get a writing if the court so directs.

Judge Berman: I so direct. See you March 3.

 Inner City Press will be there. Sometimes losing an appeal has consequences, and quickly. Watch this site.

Halkbank was indicted for Iran sanctions violations and money laundering on October 15 in the U.S. District Court for the Southern District of New York. On October 21, Turkey named convicted former Halkbank executive Hakan Atilla as the new managing director of Borsa Istanbul.

  On December 26 SDNY Judge Richard M. Berman issued an order "respectfully denying" Halkbank's attempt to stay the proceedings before him.

 But as released at 7:47 am on February 3, the Second Circuit Court of Appeals issued an administrative stay pending expedited referral to and review by a three-judge panel.

  Now on February 21, this Second Circuit three judge panel has denied Halkbank's requests: "Present:  Amalya L. Kearse, Richard J. Sullivan, Joseph F. Bianco, Circuit Judges.                                                        Petitioner seeks a writ of mandamus and moves for a stay of the district court’s criminal proceeding pending decision on the mandamus petition.  Upon due consideration, it is hereby ORDERED that the petition is DENIED because Petitioner has not demonstrated that it lacks an adequate, alternative means of obtaining relief, that its right to the writ is clear and indisputable, or that granting the writ is appropriate under the circumstances.  See Cheney v. U.S. Dist. Ct. for D.C., 542 U.S. 367, 380–81 (2004); see also United States v. McLaughlin, No. 19-308, 2019 WL 7602324 (2d Cir. Dec. 30, 2019) (reviewing de novo, on appeal from final judgment, district court’s determination that it had personal jurisdiction over criminal defendant)," etc.

 Back on December 19, the US Attorney's Office wrote to Judge Berman: "The Government respectfully submits this letter in response to a motion by Turkiye Halk Bankasi, A.S. (“Halkbank” or the “defendant”) to stay all proceedings in this matter (the “Motion” or “Mot.”). Halkbank asks for a stay because it filed a petition for a writ of mandamus in the Court of Appeals on December 17, 2019, seeking an order directing this Court to allow Halkbank to enter a special appearance to challenge personal jurisdiction and to seek recusal of the presiding District Judge. The stay request is at the very least premature, and in any event unnecessary to prevent irreparable harm, and the Government opposes a stay. The Government does, however, ask that the briefing schedule in connection with the show-cause hearing currently scheduled for February 10, 2020 be adjourned as described below to allow additional time for the Circuit’s response to the petition.    the Government does request a modest adjournment of the briefing schedule in connection with the February 10 hearing. Though the Circuit could deny the petition without further briefing, the Circuit may also order the Government to respond to the petition. Id. Because Halkbank did not file its petition until the week before the holidays, the Circuit may not issue its response to the petition before the Government’s brief is due on January 3, 2020. Accordingly, we ask that the briefing schedule be adjourned in order to provide additional time for the Circuit’s response. The Government requests that the schedule be adjourned as follows: the Government’s brief and related filings to be filed by January 17, 2020; Halkbank’s opposition (if any) due by January 31, 2020; and the Government’s reply due by February 5, 2020. In the event of changed circumstances arising out of the Court of Appeals’ response to the petition, they can be addressed at that time."

  There was a footnote: "Halkbank’s contention about “a negative impact on the bilateral relationship between the United States and the Republic of Turkey” is irrelevant. Whatever impact Halkbank’s own contumacious refusal to comply with the summonses may have on diplomatic relations does not favor providing Halkbank with further opportunities to evade this Court’s jurisdiction. Moreover, the Supreme Court has cautioned against courts “impinging on the discretion of the Legislative and Executive Branches in managing foreign affairs.” Kiobel v. Royal Dutch Petroleum Co., 569 U.S. 108, 116 (2013) (quoting Sosa v. Alvarez-Manchain, 542 U.S. 692, 727 (2004)). Purported foreign affairs implications do not alter the application of clear law or warrant treating Halkbank differently from any other party before the Court." How might this apply to the total impunity of the UN? Watch this site.

On December 5 Judge Berman issued a more detailed order denying the application by King & Spalding to make a "special appearance" in this criminal case. Judge Berman last month in his courtroom asked if there is any Second Circuit Court of Appeals precedent. On December 5 he wrote and ruled:

"The Second Circuit recognizes that a defendant may become a fugitive when, “having learned of charges while legally outside the jurisdiction, [the defendant] ‘constructively flees’ by deciding not to return.” See United States v. Catino, 735 F.2d 718, 722 (2d Cir. 1984); see also United States v. Blanco, 861 F.2d 773, 779 (2d Cir. 1988) (“A person can be said to be a fugitive when, while abroad, they learn that they are under indictment and make no effort to return to the United States to face charges.”). It appears to the Court that this is what Halkbank – which is an important institution in Turkey – has done so far in this case. “The primary purpose of the fugitive disentitlement doctrine—promoting mutuality of litigation—is served both when a defendant flees the United States and when he chooses to remain outside the United States.” Miller, 166 F. Supp. 3d at 348; see also Martirossian, 917 F.3d at 890 (where the Court confirmed that “a defendant need not be Case 1:15-cr-00867-RMB Document 581 Filed 12/05/19 Page 26 of 27  27  present in and leave a jurisdiction to become a fugitive; the mere refusal to report for prosecution can constitute constructive flight”). Halkbank has failed to appear following the service of two summonses, with full knowledge and notice of the charges in the Indictment and of the related Atilla and Zarrab cases. See pp. 3–5 above. Halkbank has also been represented by U.S. legal counsel, Mr. Hruska of King & Spaulding LLP, for at least two years in connection with the U.S. criminal investigation of Halkbank’s alleged Iran sanctions evasion. See Gov. Letter, dated Nov. 4, 2019, at 1.

And, this Court has found that “Halkbank has willfully and knowingly disobeyed the Court’s order in the First Summons to appear at the First Conference.” Order, dated Oct. 23, 2019, at 3. The fugitive disentitlement doctrine exists to encourage compliance with the law and to protect against entities that “‘attempt to invoke from a safe distance only so much of a United States court’s jurisdiction as might secure . . . a dismissal while carefully shielding [itself] from the possibility of a penal sanction.’” Hayes, 118 F. Supp. 3d at 625–26 (brackets omitted) (quoting Collazos v. United States, 368 F.3d 190, 200 (2d Cir. 2004)); see also Niemi v. Lasshofer, 728 F.3d 1252, 1255 (10th Cir. 2013).

IV. Conclusion & Order For the reasons stated above, the Court denies Halkbank’s application, dated November 19, 2019, to make a special appearance."

    Back on November 26 the US Attorney office  opposed the special appearance, noting "Halkbank participates in a U.S. Department of Agriculture program that provides guaranteed financing for certain buyers of U.S. agricultural exports.  In order to shield its access to these essential U.S. financial markets and facilities, Halkbank went to extraordinary lengths to conceal the scheme from Treasury officials. Because of Halkbank’s relationships with the Central Bank of Iran, NIOC, and other Iranian government and private entities, sanctions against the Government of Iran had particular significance for Halkbank and Treasury believed Halkbank was at particular risk of Iranian sanctions-evasion efforts. Accordingly, Treasury officials maintained continuous and in-depth communications with Halkbank’s top executives. These included in-person meetings held in Treasury’s Washington, D.C. offices and Halkbank’s Turkey offices; telephone calls between Halkbank executives in Turkey and Treasury officials in the United States; and letter and email correspondence." We'll have more on this.

  King & Spalding's Andrew C. Hruska wanted to file by ECF without making a notice of appearance. Judge Berman said he believes a notice of appearance is required, and would not give legal advise on what should be written on it. King and Spalding said they will file on paper, presumably meaning their briefing.

  Of this lawless attempt to escape the court's reach, Inner City Press asked the UN which has made worse arguments for impunity for bringing cholera to Haiti for its comment (Turkish state media were present in the SDNY on November 5). There has been no answer from the UN.

This case is US v. Turkiye Halk Bankasi A.S., 15-cr-867 (Berman)


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