Bloomberg, June 29, 2017

By Greg Farrell  and Christian Berthelsen

Federal prosecutors won a major victory in their nine-year effort to seize a midtown Manhattan office tower owned by an Iranian charity. The decision clears way to seize building at 650 Fifth Avenue. Justice Department plans to give proceeds to terror victims.

——————————————–

A Manhattan jury on Thursday found that the charity, the Alavi Foundation, was controlled by the Iranian government. It also agreed with prosecutors that the charity’s management of the Fifth Avenue office building, which has generated millions of dollars in rental income annually, constituted a violation of U.S. sanctions against Iran.

The verdict, which came after a day of deliberations, means that prosecutors can move ahead with their attempt to seize the building at 650 Fifth Avenue, a prime location. The government plans to sell the property, valued at more than $500 million, and distribute much of the proceeds to victims of Iran-sponsored terrorist attacks.

The finding “represents the largest civil forfeiture jury verdict and the largest terrorism-related civil forfeiture in U.S. history,” Joon H. Kim, the acting U.S. attorney in Manhattan, said in a statement. The foundation’s lead lawyer, John Gleeson, said Alavi is “disappointed by today’s verdict” and “considering its options.”

In 2014, U.S. District Judge Katherine Forrest ruled in favor of the prosecutors’ forfeiture request, agreeing the government had established that the building’s primary owners — the Alavi Foundation and a shell company controlled by the government of Iran — had been violating Iran sanctions laws since 1995.

Minority Owner

An appeals court reversed that ruling last year. It agreed that a minority owner of the building was controlled by the Iranian government and subject to forfeiture. But it ordered Forrest to allow the Alavi Foundation to make its case at trial.

Alavi’s lawyers said the foundation was independent of Iran’s government and spent its money on schools, health care and higher education, as well as promoting Persian culture and supporting interfaith studies.

Prosecutors first sought to seize 650 Fifth Avenue in 2008. The case unfolded as the U.S. relationship with the Islamic Republic of Iran evolved from one of hostility — President George W. Bush famously described the regime as part of an “axis of evil” — through a period of détente under President Barack Obama, and back to one of belligerence under the current administration.

The U.S. first took action against an entity called Assa Corporation — owner of 40 percent of the Fifth Avenue tower — claiming it was a shell company for Bank Melli, an Iranian lender controlled by Iran’s government.

In 2009, prosecutors said the Alavi Foundation, which owned the other 60 percent of the building, was directed by Iran’s supreme leader, Ayatollah Ali Khamenei. The U.S. said Tehran’s control of the tower violated U.S. sanctions.

The trial began May 30. Prosecutors showed jurors scores of documents that sought to prove that Alavi was run not by its board of directors but by the Iranian government through its ambassador to the United Nations in New York.

Assistant U.S. Attorney Michael Lockard read from a 1991 letter written by an Alavi director affirming that he would step down from his position in line with a directive from “the supreme leader.” Khamenei succeeded Ayatollah Ruhollah Khomeini in 1989.

‘Great Satan’

“Under the worst and most sensitive of political conditions between America and Iran, we have succeeded in fully protecting and expanding the foundation’s interests, which in truth belongs to the people of Iran,” the director wrote. “We were also able to successfully carry out cultural and Islamic activities in the country of the Great Satan.”

The government’s case was buttressed by colorful stories of how government agents secured some of the documents, retrieving them from a trash bin at a Yonkers strip mall in one case, and finding them hidden in an attic of a Long Island, New York, townhouse in another. Prosecutors also relied on a key witness: a former secretary of the foundation who became an informant and secretly recorded conversations with board members.Top of FormBottom of Form

Gleeson, Alavi’s primary lawyer, attacked the credibility of the witness, Seyed Hasami-Kiche. He and his colleague, Matthew Fishbein, emphasized that since 2007 the U.S. paid Hasami-Kiche almost $784,000, and that he had yet to pay taxes for the years from 2007 to 2013. They said he approached the FBI because he was unemployed and needed money and would do anything to ingratiate himself with the U.S. government.

Because he was a confidential witness, FBI payment stubs did not use his name. Instead, government records showed payments being made to “Blue Horseshoe,” an apparent reference to the movie “Wall Street.”

Another set of lawyers also participated in a related lawsuit before Forrest. These lawyers represent victims of the 1983 bombing of a Marine barracks in Lebanon and other attacks sponsored by Iran. After Thursday’s verdict, Forrest ruled that the estates of the victims were entitled to claim the proceeds of the government’s forfeiture actions in that case.

The office-tower case is In Re: 650 Fifth Avenue and related properties, 08-cv-10934. U.S. District Court, Southern District of New York (Manhattan).