United States v. Atilla

• Decision Date: 20 July 2020
• Docket Number: August Term 2019,No. 18-1589,18-1589
• Parties: UNITED STATES of America, Appellee, v. Mehmet Hakan ATILLA, Defendant-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

966 F.3d 118

UNITED STATES of America, Appellee,

v.Mehmet Hakan ATILLA, Defendant-Appellant.^*

No. 18-1589

August Term 2019

United States Court of Appeals, Second Circuit.

Argued: December 16, 2019

Decided: July 20, 2020

John P. Elwood, Arnold & Porter Kaye Scholer LLP, Washington, District of Columbia (Joshua S. Johnson, Vinson & Elkins LLP, Washington, District of Columbia, Victor J. Rocco, Herrick, Feinstein LLP, New York, New York, on the brief), for Defendant-Appellant Mehmet Hakan Atilla.

Michael D. Lockard, Assistant United States Attorney (Sidhardha Kamaraju, David W. Denton, Jr., Won S. Shin, Assistant United States Attorneys, on the brief), for Audrey Strauss, United States Attorney for the Southern District of New York, New York, New York, for Appellee United States of America.

Before: Pooler, Hall, and Sullivan, Circuit Judges.

Richard J. Sullivan, Circuit Judge:

Mehmet Hakan Atilla, a Turkish national and former Deputy General Manager of Turkey’s state-owned bank, Türkiye Halk Bankasi, A.S. ("Halkbank"), appeals his conviction on charges relating to an alleged multibillion-dollar scheme to evade U.S. economic sanctions against Iran. On appeal, Atilla challenges his convictions on four grounds, maintaining that the district court erred in instructing the jury on the International Emergency Economic Powers Act ("IEEPA"), that the evidence was insufficient to support his convictions, that the statute prohibiting defrauding the United States did not reach his conduct, and that the district court abused its discretion in excluding a recording and transcript of a jailhouse phone call that he sought to introduce at trial.

Although we agree that the district court provided a partially erroneous jury instruction on the IEEPA statute, we conclude that any error in the instruction was harmless given that the jury was properly instructed on an alternative theory of liability for which the evidence was overwhelming.

We further find that the trial evidence was sufficient to support the remaining convictions, that 18 U.S.C. § 371 – the statute that prohibits defrauding the United States – reaches Atilla’s conspiracy to obstruct the United States’ enforcement of its economic sanctions laws, and that even assuming that the district court abused its discretion by excluding the phone call recording and transcript, that error was harmless. We therefore affirm the district court’s judgment.

I. BACKGROUND

The evidence at trial established that Atilla agreed with others to evade U.S. economic sanctions against Iran by laundering billions of dollars’ worth of Iranian oil proceeds out of Halkbank. As Deputy General Manager of Halkbank, Atilla oversaw the bank’s international corporate finance efforts and was responsible for the bank’s relationships with U.S. correspondent banks, Iranian banks, and the Central Bank of Iran ("CBI"). At that time, Halkbank held accounts for the CBI and Iran’s government-owned petroleum company, the National Iranian Oil Company ("NIOC"). As part of the scheme, Atilla worked with others to help Halkbank’s customers steer billions of dollars in financing to the Government of Iran by disguising NIOC’s oil funds as permissible private trade and humanitarian assistance. Atilla also repeatedly lied to senior U.S. Treasury Department officials to hide the scheme and to protect Halkbank from the imposition of U.S. sanctions.

At the center of the scheme was Atilla’s codefendant, Reza Zarrab, a dual citizen of Turkey and Iran and a significant client of Halkbank. After Zarrab was apprehended by the United States for his role in the scheme, Zarrab pleaded guilty, agreed to cooperate with the government, and was one of the government’s principal witnesses against Atilla at Atilla’s trial. During his plea allocution, Zarrab admitted that he had agreed with others, including Atilla, to obstruct Treasury’s enforcement of economic sanctions, violate the IEEPA by engaging in commercial transactions designed to evade U.S. sanctions against Iran, mislead U.S. banks through falsified documents, and move funds from inside the United States to places outside the United States for the purposes of promoting the IEEPA violation and bank fraud. Zarrab also admitted to paying millions of dollars in bribes to other codefendants.

Following his arrest in March 2017, Atilla was charged with conspiracy to obstruct the lawful functions of Treasury, in violation of 18 U.S.C. § 371 (Count One); conspiracy to violate the IEEPA, in violation of 50 U.S.C. § 1705 (Count Two); bank fraud, in violation of 18 U.S.C. § 1344 and § 2 (Count Three); conspiracy to commit bank fraud, in violation of 18 U.S.C. § 1349 (Count Four); money laundering, in violation of 18 U.S.C. § 1956(a)(2)(A) and § 2 (Count Five); and conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h) (Count Six).

After the district court denied Atilla’s motion to dismiss the indictment, the case proceeded to a three-and-a-half-week jury trial. At the end of the government’s case-in-chief, Atilla moved for a judgment of acquittal under Rule 29(a) of the Federal Rules of Criminal Procedure, arguing that the evidence was insufficient to prove that he knew the scheme would involve the use of the U.S. financial system; that willfully avoiding the imposition of sanctions was not a criminal violation under the IEEPA; and that Counts One, Two, Four, and Six each charged multiple conspiracies. The district court reserved decision on that motion, which it ultimately denied after trial. Following the close of the defense’s case, the jury deliberated for four days and returned a verdict of guilty on Counts One through Four and Count Six, and a verdict of not guilty on Count Five.

The district court sentenced Atilla to 32 months’ imprisonment and imposed a $500 mandatory special assessment. Atilla completed his term of imprisonment on July 19, 2018 and was deported to Turkey. Because "a challenge to a criminal conviction itself presents a justiciable case or controversy even after the expiration of the sentence that was imposed as a result of the conviction," United States v. Probber , 170 F.3d 345 (2d Cir. 1999), this case is not moot.

II. DISCUSSION

On appeal, Atilla challenges his convictions on four grounds. First, he contends that the district court wrongly instructed the jury that it could convict him of conspiring to violate the IEEPA merely if he agreed to evade or avoid the imposition of secondary sanctions. Second, he asserts that there was insufficient evidence for the jury to convict him of conspiracy to violate the IEEPA, bank fraud, conspiracy to commit bank fraud, and conspiracy to commit money laundering because the government presented no evidence that he knew the sanctions-avoidance scheme would involve the use of U.S. banks. Third, Atilla maintains that his conviction for conspiring to defraud the United States fails because the statute of conviction, 18 U.S.C. § 371, does not reach agreements to obstruct the United States’ enforcement of economic sanctions laws. Fourth, Atilla argues that the district court abused its discretion by excluding a recording and transcript of an Azeri-language phone call involving Zarrab while he was incarcerated. We address each contention in turn.

A. The District Court Wrongly Instructed the Jury that Atilla Could be Convicted Under the IEEPA for Conspiring to Avoid the Imposition of Secondary Sanctions

Atilla contends that the district court wrongly instructed the jury that it could "convict [him] of conspiring to violate [the] IEEPA based on the theory that he conspired to evade or avoid the imposition of secondary sanctions" – restrictions on accessing the U.S. financial system imposed on foreigners whom the Secretary of the Treasury determines have done business with Iran. Atilla’s Br. at 27. According to Atilla, the court’s instruction conflicted "with the longstanding position of the agency charged with sanctions administration, the plain language of [the] IEEPA and the regulatory provisions at issue, the presumption against extraterritoriality, the rule of lenity, and the Due Process Clause." Id. His core assertion is that "[t]he relevant provisions only forbid transactions that evade or avoid existing ‘prohibitions’ already imposed on a foreign financial institution’s ability to open or maintain U.S. accounts," not "efforts to evade or avoid the imposition of secondary sanctions." Id. at 27–28. Atilla therefore maintains that, because the instructional error was not harmless, he is entitled to a new trial on Count 2 (and the money laundering conspiracy in Count 6, which "effectively incorporated the erroneous IEEPA charge"). Id. at 47.

"We review a claim of error in jury instructions de novo , reversing only where, viewing the charge as a whole, there was a prejudicial error." United States v. Aina-Marshall , 336 F.3d 167, 170 (2d Cir. 2003). The object of that review is "to see if the entire charge delivered a correct interpretation of the law." United States v. Bala , 236 F.3d 87, 94–95 (2d Cir. 2000) (internal quotation marks omitted). The requirement that any instructional error be prejudicial precludes a defendant from obtaining relief where it is "clear beyond a reasonable doubt that a rational jury would have found the defendant guilty absent the error." Neder v. United States , 527 U.S. 1, 18, 119 S.Ct. 1827, 144 L.Ed.2d 35 (1999). Furthermore, prejudice is not present if "the jury would have necessarily found the defendant[ ] guilty on one of the properly instructed theories of liability." United States v. Ferguson , 676 F.3d 260, 277 (2d Cir. 2011) (citing Hedgpeth v. Pulido , 555 U.S. 57, 61, 129 S.Ct. 530, 172 L.Ed.2d 388 (2008) ).

The IEEPA makes it unlawful for a person "to violate, attempt to violate, conspire to violate, or cause a violation of any license, order, regulation, or prohibition issued under" the statute. 50 U.S.C. § 1705(a). A person who "willfully conspires to commit" such an unlawful...