Iran sanctions case against Pilatus banker Ali Sadr Hasheminejad being dropped

United States federal prosecutors are seeking to withdraw a criminal case against Pilatus banker Ali Sadr Hasheminejad, who was convicted of violating U.S. sanctions against Iran earlier this year.

In a filing on Friday in a Manhattan federal court, prosecutors asked a judge for permission to drop the case, a rare move, citing the likelihood of continued litigation over suppression of evidence. Given the resources that would be required to address all the evidentiary issues, continuing to pursue the case “would not be in the interest of justice,” they said.

Hasheminejad was convicted of breaching United States sanctions against Iran, after a two-week trial by jury. With a judge yet to carry out sentencing, Hasheminejad was found guilty of five counts, the highest of which carries a 30-year prison sentence.

Hasheminejad, 40, was found guilty of conspiracy to defraud the United States, conspiracy to violate the IEEPA sanctions against Iran, bank fraud, conspiracy to commit bank fraud, and money laundering. He was found not guilty of one count of conspiracy to commit money laundering.

Hasheminejad’s lawyer, Reid Weingarten, told Bloomberg he was not sure why the government brought the “extraordinary motion” to drop the case. He had already filed for appeal on what he claimed was exculpatory evidence revealed by the government after the verdict, including undisclosed interviews with witnesses.

“We hope it’s that they finally saw the case as we did -- that it never should have been brought and it was compromised from the very beginning,” Weingarten said. “The whole concept of violating sanctions is you’re acting contrary to the interests of the United States. The overwhelming evidence is that this was a fellow who was utterly patriotic, was thrilled to live in the United States, wanted to live in the United States for the rest of his life and was incredibly hostile to the Iranian government.”

The family of assassinated journalist Daphne Caruana Galizia, who had reported on Pilatus Bank when she alleged it was used to hide transactions executed by former chief of staff Keith Schembri as well as the Muscat family, said Malta should request the extradition of Hasheminejad.

“The fact that Ali Sadr Hasheminejad was prosecuted in the US means he was charged on the basis of evidence of money-laundering. The prosecution is ending on the basis of an alleged technical, procedural issue, and only in relation to charges of a breach of US sanctions. None of this changes the evidence against Hasheminejad, which remains overwhelming.

“Proceedings in the United States do not exempt or prevent the Malta Police and Attorney General from prosecuting Ali Sadr Hasheminejad. On the contrary, it is now more important than ever that he is prosecuted in Malta, since he has destroyed Malta’s reputation in the process of using the country as a base for facilitating criminal activity, via Pilatus Bank. For this reason, the Government of Malta must request his extradition immediately,” the Daphne Foundation said in a statement.

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Hasheminejad had been accused of using the US financial system to funnel over $115 million in payments from a construction project in Venezuela his father’s construction company was involved in, back to his family’s companies in Europe. The US Attorney insisted these violated sanctions against Iran because it benefitted Iranian individuals and entities, including the Iranian International Housing Company and its Iranian owner, Hasheminejad’s father Mohammad Sadr Hasheminejad.

Hasheminejad ran a private bank in Malta, which he had licensed in 2013, and which largely dealt with millions in reserves owned by the Azerbaijani ruling family and oligarchs.

His bank was implicated in the Egrant affair, when the late journalist Daphne Caruana Galizia claimed the bank had processed a $1 million payment from the Aliyevs of Azerbaijan to the wife of former prime minister Joseph Muscat. The allegation was disproven by a Maltese magisterial inquiry along with other allegations she made about Pilatus Bank, but by then the banks’ other dealings for Azerbaijan had come under the lens of financial investigators. When Hasheminejad was arrested in Dulles airport in the United States in February 2018, the Maltese financial regulator shut down the bank and started an investigation.

Hasheminejad was then accused of evading US economic sanctions by concealing the role of Iranian parties in US dollar payments sent through the US banking system, from the construction of housing units in Venezuela. 

The project was led by Stratus Group, an Iranian conglomerate controlled by Hasheminejad and his family with international business operations in the construction, banking, and oil industries. In December 2006, Stratus Group incorporated a company in Tehran, which was then known as the Iranian International Housing Company (IIHC). IIHC built approximately 7,000 housing units in Venezuela in exchange for approximately $475 million.

Prosecutors said Hasheminejad used a St. Kitts and Nevis passports and a United Arab Emirates address to incorporate two front companies outside of Iran to receive U.S. dollar payments related to the project: Clarity Trade and Finance in Switzerland, and Stratus International Contracting in Turkey.

Hasheminejad then carried out international financial transactions using Clarity and Stratus Turkey in a manner that concealed the Iranian connection to the payments, in violation of U.S. economic sanctions.

“During that time, SADR took several steps to hide the Iranian beneficiaries of these funds, including changing the name of the Iranian International Housing Company to just the initials, IIHC; directing employees to take down websites and articles from the Internet; lying about the owners of the front companies when asked by the banks; and altering payment vouchers and backdating contracts in order to mislead banks about the source of the funds,” Berman said.

Hasheminejad directed the payments be routed through American banks to a Swiss bank, and finally to an offshore entity in St. Kitts & Nevis. Between 2011 and 2013, Hasheminejad’s front companies wired over $8.6 million directly into the United States, some of which were used to purchase property in California.