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Gold trader Reza Zarrab testifies at Iran sanctions trial

In this courtroom sketch, Turkish-Iranian gold trader Reza

In this courtroom sketch, Turkish-Iranian gold trader Reza Zarrab testifies before Judge Richard Berman, right, on Wednesday, Nov. 29, 2017. Credit: AP / Elizabeth Williams

Turkish gold trader Reza Zarrab revealed at a co-defendant’s Iran sanctions-busting trial Wednesday that he decided to flip and become a cooperating government witness when high-level efforts to win his freedom through a prisoner exchange for Americans held in Turkey failed.

Zarrab, whose arrest last year triggered diplomatic tensions with Turkey and complaints from Turkish President Recep Erdogan, also provided embarrassing testimony about paying millions in bribes to Erdogan’s economy minister in 2012 to clear the way for a massive money-laundering scheme that blew a hole in U.S. efforts to isolate Iran.

The testimony in the Manhattan federal court trial of banker Mehmet Hakan Atilla came one day after prosecutors revealed their plea deal with Zarrab, who hired ex-mayor Rudy Giuliani and former attorney general Michael Mukasey earlier this year to try to shape a diplomatic solution.

Although he didn’t name them, Zarrab told jurors that he decided to inform on co-conspirators in the alleged billion-dollar scheme after he “hired lawyers” to try to work out a prisoner swap “within the legal limits” and the effort fell through.

“Cooperation was the fastest way to accept responsibility and get out of jail at once,” he said.

Zarrab, 34, a wealthy Turkish celebrity married to a pop-music star, pleaded guilty last month to laundering billions in Iranian oil money through intricate 10-step transactions in gold and food that provided access to U.S. banks and helped Iran break the American economic stranglehold.

The scam was first exposed by Turkish police, but Zarrab and others accused were freed and prosecutors purged by Erdogan, who claims the charges now being pursued in the United States. were concocted by anti-government forces loyal to Fethullah Gulen, a dissident living in Pennsylvania.

Although Zarrab was released from prison to the FBI as part of his deal, prosecutors tried to counter any appearance of coddling by having him testify that he wasn’t staying “in a hotel” and dress in a prison smock. U.S. District Judge Richard Berman urged prosecutors at the end of the day to give him the option of normal clothes.

In his testimony, Zarrab said he was first turned down when he proposed the sanctions-busting scam to a top manager at Turkey’s Hakbank, the government bank where Atilla works, because he was too much of a public figure.

“He said I am too popular to do the gold trade and I am a person who is very transparent,” Zarrab testified. “Because my wife was a famous artist in Turkey I was a person who was within the public eye all the time.”

To get help, he said, he went to Turkey’s economy minister at the time, Mehmet Caglayan, whom he knew socially, to get him to lean on the bank.

“He got some more information about the details of the trade,” Zarrab said. “He asked about the profit margins. And he said I can broker this, providing there is a profit shared 50/50.”

Zarrab testified that he agreed and paid bribes to Caglayan and his family in three currencies — 2.4 million Turkish liras, about $7 million U.S. dollars, and euros. “I’m thinking that I paid bribes in amount of 45 to 50 million euros,” he said.

Caglayan is one of seven Turks in addition to Zarrab and Atilla who have been indicted. Mukasey declined to comment and Giuliani did not respond to questions about any role they played in prisoner-exchange talks. Zarrab’s testimony is scheduled to resume Thursday.

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