Turkish-Iranian mogul flips to US government witness at trial

Turkish-Iranian gold trader Reza Zarrab is expected to testify Wednesday for US government prosecutors in a potentially explosive sanctions-busting New York trial that could further inflame ties with Ankara.

Proceedings, which put Turkish banker Mehmet Hakan Atilla, 49, alone in the dock after Zarrab flipped and agreed to cooperate with prosecutors, opened in Manhattan on Tuesday with opening statements.

"You will hear it from the inside, from Reza Zarrab. He has pleaded guilty to violating US laws and he has decided to cooperate with the government," assistant US attorney David Denton told the jury.

Zarrab, 34, the star witness in the government's case against Turkish banker Atilla -- accused of violating sanctions against Iran, bribery and money laundering -- is expected to take the stand Wednesday morning.

His testimony is likely to take a couple of days and push into Friday, before the defense will have a chance to cross-examine him.

The case has angered Turkish President Recep Tayyip Erdogan, whose government has called the trial a "plot" and who has raised the issue repeatedly in official talks, demanding Zarrab and Atilla's release.

While Erdogan is not charged with any crime, corruption revelations could prove embarrassing to him and his inner circle, analysts believe.

A guilty verdict could also lead to possible sanctions on one or more Turkish banks, spelling bad news for the Turkish economy.

Businessman Zarrab, who enjoyed a life of wealth and privilege in Turkey, was arrested in 2016 during a trip to Disney World with his child and Turkish pop-star wife. He was allegedly at the center of a gold-for-oil operation that Washington claims violated US sanctions.

Atilla's defense lawyer used his opening statement Tuesday to call Zarrab a "liar" and the "mastermind" of a "worldwide sanction-avoiding scheme," seeking to deflect blame from his client.

- 'Storm of lies' -

"This trial is really the Reza Zarrab show," lawyer Victor Rocco told jurors. "He is a liar, a cheat."

Zarrab "paid fortunes in bribes to businessmen all over the world" -- and continued to do so after his arrest, bribing US prison guards "so he would have special treatment," Rocco said.

Atilla, on the other hand, was "a dedicated, hard-working civil servant caught in the middle of a storm of lies and massive corruption... just another one of Zarrab's many victims."

The defendant, deputy chief executive of Turkey's state-owned Halkbank, sat wordlessly in court Tuesday dressed in smartly in a jacket and tie.

Zarrab was a key figure in a 2013 Turkish corruption scandal in which he allegedly bribed four ministers to facilitate sanctions-busting trade and other deals.

He was held for more than two months until prosecutors dropped charges against more than 50 people, citing "lack of evidence," "problems with collecting the evidence" and "lack of proof that they were members of a criminal organization," state-run media said.

Denton suggested to jurors that Zarrab's testimony would shed light on that corruption case, which Ankara has sought to smother since 2013.

Turkey has denounced both the New York trial and the 2013 scandal as conspiracies by the US-based dissident preacher Fethullah Gulen, the alleged mastermind of a 2016 failed coup targeting Erdogan.

Denton said he would also call to the stand a Turkish police officer who uncovered the scandal, said evidence was "swept under the rug by the Turkish government" and subsequently fled his country.

Turkey on Tuesday issued arrest warrants for two men, reportedly on the witness list for the trial, for allegedly handing the United States fabricated reports and stealing documents, local media reported.