Monday, July 20th, 2020

Circuit Affirms Conviction on Charges Relating to Scheme to Evade U.S. Sanctions Against Iran; Instructional Error Regarding IEEPA Was Harmless.

Does the International Emergency Economic Powers Act (“IEEPA”) impose criminal liability for evading or avoiding the imposition of sanctions not yet in place, or only existing prohibitions already imposed? In United States v. Atilla, No. 18-1589 (2d Cir. July 20, 2020) (Pooler, Hall, and Sullivan), the Circuit agreed with the defendant that the latter, narrower construction is correct and that the district court mischarged the jury on this issue. But the Court held the error harmless because “the jury was properly instructed on an alternative theory of liability for which the evidence was overwhelming.”

Atilla, a Turkish national and former Deputy General Manager of Turkey’s state-owned bank, was convicted on charged relating to a multibillion-dollar scheme to evade U.S. sanctions against Iran. On appeal, he argued that the district court erred in instructing the jury on the 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 erred by excluding evidence of a jailhouse phone call he wanted to introduce.

The Circuit rejected all of these contentions except one. It agreed with Atilla 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 prospective imposition of “secondary sanctions,” i.e., “restrictions on accessing the U.S. financial system imposed on foreigners whom the Secretary of Treasury determines have done business with Iran.” The Court held, as a matter of statutory construction, that the relevant statutory 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.”

The Circuit further held, however, that the instructional error was harmless. It concluded that the jury necessarily found Atilla guilty on a different, properly instructed theory of liability—namely, that he conspired to violated the IEEPA by illegally exporting services from the United States to Iran. Accordingly, the Court affirmed the judgment of conviction.

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