Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that a federal jury today found the 36-story office building at 650 Fifth Avenue (the “Building”), worth at least $500 million, and other real property and bank accounts forfeitable to the United States as proceeds of violations of the Iran sanctions and property involved in laundering the proceeds of those sanctions violations. The jury’s verdict, which represents the largest civil forfeiture jury verdict and the largest terrorism-related civil forfeiture in United States history, came after a five-week trial before the Honorable Katherine B. Forrest.
Acting U.S. Attorney Joon H. Kim said: “For over a decade, hiding in plain sight, this 36-story Manhattan office tower secretly served as a front for the Iranian government and as a gateway for millions of dollars to be funneled to Iran in clear violation of U.S. sanctions laws. In this trial, 650 Fifth Avenue’s secret was laid bare for all to see, and today’s jury verdict affirms what we have been alleging since 2008: that through all the efforts to sanction and isolate Iran, a state sponsor of terrorism, the owners of 650 Fifth Avenue gave the Iranian government a critical foothold in the very heart of Manhattan through which Iran successfully circumvented U.S. economic sanctions. The jury’s verdict finding forfeitable a building valued at over $500 million dollars, as well as other real estate and funds, represents the largest civil forfeiture jury verdict and the largest terrorism-related civil forfeiture in U.S. history. This verdict not only vindicates the exemplary work of all the career prosecutors and law enforcement partners who have doggedly pursued this case for almost a decade, but importantly, it also allows for substantial recovery for victims of Iran-sponsored terrorism.”
According to the allegations contained in the Complaint, Amended Complaint, and other filings in this case, and the evidence presented in Court during the trial:
The International Emergency Economic Powers Act (IEEPA) confers upon the President the authority to take certain actions, defined in 50 U.S.C. Section 1702, in response to declared national emergencies. Since 1995, the President has declared national emergencies with respect to the actions and policies of the Government of Iran through a series of Executive Orders. The Treasury Department’s Iranian Transactions Regulations (“ITR”), and Weapons of Mass Destruction Proliferators Sanctions Regulations, implement these Executive Orders. Pursuant to these Orders, and regulations, the provision of services to the Iranian Government has been illegal since 1995.
From before 1995 until the filing of the Government’s civil forfeiture action in 2008, the Alavi Foundation (“Alavi”), Assa Corp. (“Assa”), and the 650 Fifth Avenue Company, a partnership between Alavi and Assa to own the Building (the “Partnership”) were controlled by and provided numerous services to the Government of Iran, including managing the Building for the Iranian Government, running a charitable organization for the Iranian Government, and transferring rental income funds from the Partnership to Bank Melli, an Iranian owned government bank.
Alavi and the Building
Alavi is a New York non‑profit organization originally created by the Shah of Iran in the 1970s, under the name the Pahlavi Foundation, to pursue Iran’s charitable interests in the United States. The Building was constructed in the 1970s by Alavi, financed by a substantial loan from Bank Melli Iran (“Bank Melli”).
Following the Iranian revolution of 1979, the Islamic Republic of Iran established the Bonyad Mostazafan, also known as the Bonyad Mostazafan va Janbazan (“Bonyad Mostazafan”), to centralize, take possession of, and manage property expropriated by the revolutionary government. The Bonyad Mostazafan was created in or about March 1979 by order of the Ayatollah Khomeini and approved by the Revolutionary Council of the Islamic Republic of Iran, and is controlled by the government of Iran. The Bonyad Mostazafan sought to take control of the Shah’s property, including the assets of the Pahlavi Foundation. The Bonyad Mostazafan reports directly to the Ayatollah. The Bonyad Mostazafan assumed control of Alavi shortly after the revolution.
The Creation of Assa and the Partnership
In 1989, Alavi and Bank Melli formed the Partnership in order to avoid paying federal taxes on rental income from the Building. Bank Melli’s ownership interest in the Partnership, however, was disguised through the creation of two shell companies. Alavi transferred 35 percent of the Partnership to Assa, an entity wholly owned by Assa Co. Ltd. Assa Co. Ltd. is a Jersey, Channel Islands, United Kingdom, entity owned by Iranian citizens who represent the interests of Bank Melli. In conjunction with the transfer of the 35 percent interest in the Partnership to Assa, Bank Melli cancelled its loan on the Building. Several years later Assa received an additional 5 percent, leaving Alavi owning 60 percent of the Partnership, and Bank Melli owning 40 percent of the Partnership, through Assa and Assa Co. Ltd.
The decision to convert Bank Melli’s mortgage on the Building into a partnership interest in the Partnership was discussed and approved by high-level Iranian government officials. Among others, the head of the Bonyad Mostazafan (also the Deputy Prime Minister of Iran), the Office of the Prime Minister of Iran, the director of the Central Bank of Iran, and the general director of Bank Melli, as well as other Bonyad Mostazafan and Bank Melli officials, discussed and approved the partnership between Alavi and Bank Melli. After Alavi and Assa Corp. entered into the partnership agreement, a Bonyad Mostazafan official forwarded the agreement to the head of the Bonyad Mostazafan, noting that “the partnership is based on prior agreements between the Ministry of Finance, Bank Melli Iran, and the Bonyad Mostazafan, with the only change being the building will be valued at two million dollars less than as previously agreed. . . .”
The Partnership continued to distribute rental income from the Building to Bank Melli, concealed by the use of Assa as an intermediary, after it became illegal with the imposition of Iranian sanctions in 1995.
The Government of Iran’s Continued Control over Alavi
The Iranian Government’s control of Alavi continued after the creation of the Partnership and the imposition of the sanctions against Iran.
In 1991, the Supreme Leader of Iran, the Ayatollah Ruhollah Khomeini ordered that control of Alavi be transferred from the Bonyad Mostazafan to the Iranian Ambassador to the United Nations. According to the minutes of a May 16, 1991, board meeting held in Zurich, Switzerland, the head of the Bonyad Mostazafan explained that, as directed by the Supreme Leader, several board members were to resign. In a letter, Alavi’s president described how, a few days later, Ambassador Kamal Kharrazi called the president and another board member to his office. The Ambassador said that “the Foundation from here on out is under the oversight of Haj Agha, not Mr. Rafighdoost [then the head of the Bonyad Mostazafan]. . . . [F]rom now on, the role of the Managing Director and the role of the Board of Directors will be just a formality and he [the Ambassador] will be conducting all of its [the Foundation’s] affairs.” The president of Alavi then wrote a letter to the Ayatollah cautioning that although the Ambassador’s “appointment to a position of responsibility connected to the Foundation’s affairs presents enormous political, security, and economic dangers, we feel assured that the Supreme Leader has made this decision with discernment, unique insight, and a thorough knowledge of all pertaining aspects.” In July 1991, the president resigned his position and he was replaced that August by an individual who served as president until the summer of 2007.
In 1992, Alavi’s new president met in New York and in Tehran with Bank Melli officials concerning $1.7 million in real estate taxes owed by the Partnership and $2.2 million in unpaid distributions owed by the partnership to Assa. The Tehran meeting was attended by a Bank Melli board member, the head of Bank Melli’s Overseas Network Supervisory Department, the head of Bank Melli’s New York branch, and the head of Bank Melli’s Foreign Affairs. The head of the board of directors and managing director of Bank Melli forwarded the minutes of the Tehran meeting to the head of the Bonyad Mostazafan along with a cover letter stating, among other things, that “It is hoped that your firm instructions and the extra attention of the brothers from that esteemed Foundation, who are responsible for the Alavi Foundation of New York, will resolve the partnership’s mutual problems quickly . . . .”
Iranian Ambassadors to the U.N. continued to direct the affairs of Alavi and to attend meetings of Alavi’s board. In the late 1990s, two Bank Melli employees sought Ambassador Kharrazi’s permission for Assa to sell its interest in the Partnership. The Ambassador informed Bank Melli that the Building would be sold when the real estate market improved. In 2004, Ambassador Javad Zarif directed Alavi to settle a lawsuit that threatened to expose Assa’s ownership by Bank Melli and Alavi’s relationship with the Government of Iran for $4 million, and then caused these settlement proceeds to be distributed through other New York real estate companies to officials at Iranian Embassies in Europe.
In October 2007, Alavi Foundation board members met with Ambassador Mohammad Khazaee and a former Iranian government official to address issues relating to the Building’s management and Alavi’s charitable services. According to notes taken by a board member, the Ambassador stated, among other things, that it was necessary to increase the profit from the Building; the Ambassador was worried about Assa’s 40 percent share; the Foundation should only allocate to Shiites; and that the Ambassador would determine the composition of the board. The Ambassador ordered a study about the possibility of increasing the Foundation’s revenue and profit, stating that a business plan and comparative analysis had to be done. The Ambassador instructed: “I have to definitely see the proposed allocations before a final decision is reached. I have to be kept informed and I have to be able to state my opinion in order for you to make a decision.” The Ambassador told the board members that “[i]f there is an issue that needs to be conveyed to Tehran, let me know, I will convey it.”
On December 19, 2008, Farshid Jahedi, who at the time was the president of Alavi, was arrested for obstruction of justice for allegedly destroying documents required to be produced under a grand jury subpoena concerning Alavi’s relationship with Bank Melli Iran and the ownership of the Building. Jahedi pled guilty to obstruction of justice on December 30, 2009.
The Complaints and the Jury Verdict
On December 17, 2008, this Office filed a civil Complaint seeking forfeiture of the 40 percent interest held by Assa in the Partnership. In the Amended Complaint, filed on November 12, 2009, the United States sought to forfeit all right, title and interest in the Partnership, including Alavi’s 60 percent interest in the company. The United States also sought to forfeit the contents of bank accounts held by the Partnership, Alavi, and Assa, as well as other real properties owned by Alavi.
After a five-week trial, the jury found that both IEEPA violations and money laundering had been committed, and that all but one of the defendant properties were fully or partially forfeitable as result. Specifically, the jury found the Building and Alavi’s share in the 650 Fifth Avenue Partnership, along with the contents of bank accounts containing in excess of a million dollars, forfeitable in their entirety as a result of their involvement in money laundering. The jury also found certain portions of properties owned by Alavi in Queens, New York; Houston, Texas; Carmichael, California; and Rockville, Maryland partially forfeitable to the United States as proceeds of IEEPA violations and properties traceable to properties involved in money laundering, in the following amounts:
|Alavi Foundation Property||Percentage Found Forfeitable|
|Rockville, MD (two properties)||17%|
The jury also found Alavi’s share in the 650 Fifth Avenue Partnership entirely forfeitable, and the Building partially forfeitable, as the proceeds of an IEEPA violation in addition to both being entirely forfeitable as property involved in money laundering.
Judge Forrest had previously ruled, on September 11, 2013, that Assa was a front company for Bank Melli Iran and that Assa’s interests in the Partnership and the Building also subject to forfeiture.
Claims against the defendant properties brought by private parties holding terrorism-related judgments against the Government of Iran were also resolved against Alavi and the 650 Fifth Avenue Partnership in a separate ruling issued by Judge Forrest today.
Mr. Kim praised the investigative work of the Federal Bureau of Investigation (“FBI”), the Internal Revenue Service – Criminal Investigation Division, the New York FBI Joint Terrorism Task Force, and the Police Department of the City of New York. He also thanked the Counterterrorism Section of the Department of Justice National Security Division and the Manhattan District Attorney’s Office for their assistance in this case.
This case is being handled by the Office’s Money Laundering and Asset Forfeiture Unit. Assistant United States Attorneys Michael D. Lockard, Martin S. Bell, and Daniel M. Tracer are in charge of the case.[/vc_column_text][/vc_column][/vc_row]