Bloomberg– U.S. prosecutors are pushing forward on an Iran sanctions investigation that had languished during the multiyear period when Washington and Tehran were negotiating their nuclear pact, according to people briefed on the matter.
The Justice Department is continuing to examine whether Clearstream Banking SA and its parent company, Deutsche Boerse AG, provided a conduit for illegal Iranian transactions and made false statements to regulators during a review of Deutsche Boerse’s unsuccessful 2012 bid to buy the New York Stock Exchange, two people with knowledge of the matter said.
The investigation is being run by the office of Preet Bharara, the U.S. attorney in Manhattan, a holdover from the Obama administration who was asked to stay on by President Donald Trump. The inquiry picked up again last year, they said, after the sensitive international negotiations had been completed and the nuclear agreement had taken effect, and before the Nov. 8 election that carried Trump to the presidency.
Bharara’s renewed focus on the case coincides with Trump’s aggressive posture toward Tehran and his frequent criticism of the 2015 nuclear non-proliferation deal that eased some sanctions. The Trump administration has imposed fresh sanctions against companies and individuals because of recent Iranian missile tests that the U.S. considered provocative.
Deutsche Boerse has disclosed in regulatory filings that its Clearstream unit is the subject of a U.S. investigation over Iran sanctions. Grit Beecken, a Deutsche Boerse spokeswoman, said the company was cooperating with the U.S. attorney’s office.
Deutsche Boese shares traded up 0.9 percent to 82.68 euros at 4:04 p.m. in Frankfurt.
Prosecutors are looking at the role of Clearstream, a Luxembourg-based securities-clearing and settlement firm, as an intermediary between Bank Markazi, the name for Iran’s central bank, and JPMorgan Chase & Co. Clearstream’s account at JPMorgan received interest payments and redemptions on $1.67 billion in bonds held on behalf of an Italian bank fronting for the Iranians, according to evidence that emerged in a civil suit. There is no evidence that JPMorgan was aware that the accounts were connected to Iran.
Federal prosecutors will soon decide whether to charge Clearstream with violations of sanctions laws and making false statements to U.S. regulators about those alleged violations, the two people briefed on the matter said. No determination has been made about whether the company or any individuals will face charges, one of them said.
Through spokesmen, Bharara’s office and JPMorgan Chase declined to comment.
Bharara’s office started its probe of Clearstream three years ago, at a time when the Obama administration was negotiating to lift some sanctions against Iran in return for measures by Tehran to scale back its nuclear ambitions. As the U.S. and other Western powers moved toward a joint nuclear agreement with Tehran in 2015, the Clearstream matter was put on the back burner, two people with knowledge of the matter said.
One person said the Clearstream matter was never put on hold,, noting that complex cases can take years to build. Another person said there was a slowdown in the investigation and attributed it to special monitoring of all Iran matters by the Treasury, State and Justice departments during the negotiation period.
Statements to SEC
The false-statements element of the investigation is focused on information that Deutsche Boerse gave to the Securities and Exchange Commission in 2011 as it sought approval for a proposed acquisition of the New York Stock Exchange. In those statements, Deutsche Boerse said Clearstream had cut ties with Iranian clients.
The SEC didn’t respond to a request for comment.
Deutsche Boerse eventually won U.S. approval to acquire the exchange, but the deal was abandoned in 2012 after the European Commission moved to block the transaction.
In 2014, Clearstream resolved a sanctions case with the Treasury Department’s Office of Foreign Assets Control, known as OFAC, agreeing to pay $152 million for its role managing an Iranian account that received bond payments indirectly from a U.S. bank.
In that settlement, which was relatively small compared with the $2.8 billion under management, OFAC noted that Clearstream had cooperated with the investigation and had no blemishes on its record in the previous five years.
If prosecutors determine that Clearstream’s management, which signed the OFAC settlement, knowingly withheld information from the government, they could consider charges against individuals, according to the two people briefed on the matter. They could also single out managers at Deutsche Boerse responsible for any statements made to the SEC in 2011 that investigators may find to be inaccurate.
Much of the evidence against Clearstream stems from two civil suits brought by families of U.S. Marines killed in a 1983 terrorist bombing in Lebanon, who are pursuing damages from Iran after the country was found to have funded the attack. In the first suit, filed in 2010, the families successfully sued to seize approximately $1.75 billion in Iranian assets held in a Clearstream account at Citibank. There was no evidence that Citibank had knowledge of the Iran link.
One month before the OFAC settlement, in December 2013, the families of the 241 Marines killed in Beirut filed a second lawsuit, this one aimed at seizing $1.67 billion held in a Clearstream account at JPMorgan Chase on behalf of Iran’s central bank.
The JPMorgan matter differed in an important way: Clearstream’s lawyers argued that money was never wired from the U.S. to Clearstream’s Luxembourg offices. Instead, once JPMorgan received payments on the bonds owned by Iran, Clearstream bankers made a bookkeeping entry on their side of the Atlantic.
Thus, Clearstream’s lawyers argued, even though the company may have provided a service to the Iranians in these transactions, the fact that money was never wired from New York to an account held by Bank Markazi meant that the Marine families had no legal claim to the $1.67 billion.
In February 2015, U.S. District Judge Katherine Forrest ruled in favor of Clearstream and dismissed the family’s claims. The case is under appeal.
Bharara’s office has actively pursued Iran sanctions cases. In 2013, the office won a court judgment enabling it to seize a Manhattan office building, at 650 Fifth Avenue, owned by Iran, and sell it, with some of the proceeds going to victims of terrorist attacks sponsored by Tehran. The office also led the prosecution of BNP Paribas SA, the French bank that pleaded guilty to processing payments for Iran and other sanctioned nations and paid a total of $8.9 billion to state and federal regulators in 2014.
Last year, charges from Bharara’s office led to the arrest of Reza Zarrab, a financier accused of moving money for Iran through his network of companies to circumvent sanctions controls. The arrest of Zarrab, considered an ally of Turkish president Recep Erdogan, roiled relations between Turkey and the U.S. Zarrab has pleaded not guilty and is fighting the charges.