May 31, 2017 / 1:32 AM / 2 months ago

Trial kicks off in U.S. case over Iran-linked New York office tower

3 Min Read

NEW YORK (Reuters) - Jurors in Manhattan federal court on Tuesday settled in for a weeks-long trial to decide the fate of a Manhattan office tower built for the shah of Iran, which the U.S. government is trying to seize for the benefit of people who have won terrorism-related court judgments against Iran.

The government claims the nonprofit Alavi Foundation, the majority owner of 650 Fifth Avenue, knowingly acted on behalf of the government of Iran, violating U.S. sanctions.

In an opening statement on Tuesday, Assistant U.S. Attorney Martin Bell told jurors that Alavi knew that its co-owner, Assa Corp, was backed by Iran's state-controlled Bank Melli and was an agent of Iran's government. He urged jurors to hold Alavi "accountable" for funneling money to Iran and providing other services.

John Gleeson, arguing for Alavi, painted a different picture, focusing on the nonprofit's stated mission of promoting Islamic culture and providing social services. The organization was founded in the 1970s by then-Shah Mohammad Reza Pahlavi.

"There's a reason Mr. Bell said to you it seems like an ordinary nonprofit - it's because it is," Gleeson said.

He also said that Alavi entered into its ownership arrangement with Assa to reduce its tax burden years before the U.S. passed a sanctions law against Iran in the mid 1990s, and that there was nothing improper about it.

The 36-story building is just north of Rockefeller Center and St. Patrick's Cathedral, and would likely fetch hundreds of millions of dollars in a sale. It generated close to $39 million in rental income from 1999 through 2007, according to the government's lawsuit.

In 2014, then-U.S. Attorney Preet Bharara in Manhattan reached an agreement with people who had won terrorism-related judgments against Iran. Under the deal, federal authorities would seize the building and other Alavi assets, sell them and distribute the proceeds to the judgment holders.

U.S. District Judge Katherine Forrest ruled in 2013 that the government could seize the building, finding that its owners were illegally shielding Iranian assets. But the 2nd U.S. Circuit Court of Appeals overruled her last year, finding that the issue should go to trial instead.

The judgment holders have their own separate claims against Alavi, but those claims will not be presented to the jury. Instead, they will be decided by Forrest, who is presiding over the trial.

Reporting By Brendan Pierson in New York; Editing by Chris Reese

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