Iranian Businessman Executed over $2.6B Bank Fraud

Mahafarid Amir Khosravi, also known as Amir Mansour Aria, an Iranian billionaire businessman at the heart of a $2.6 billion state banking scandal, was put to death at Tehran’s Evin prison today. (IRIB/AP, 24 May)

The fraud, for which Khosravi and three others defendants received death sentences, involved using forged documents to get credit at Iran’s Bank Saderat to purchase assets including state-owned companies like major steel producer Khuzestan Steel Co. The bank fraud reportedly began in 2007.

Khosravi's business empire included more than 35 companies from mineral water production to a football club and meat imports from Brazil, AP reported. 

A total of 39 defendants were convicted in the case. Four received death sentences, two got life sentences and the rest received sentences of up to 25 years in prison.

The trials raised questions about corruption at senior levels in Iran's tightly controlled economy. Mahmoud Reza Khavari, a former head of Bank Melli, Iran’s national bank, escaped to Canada in 2011 after he resigned over the case.

File photo: Mahafarid Amir Khosravi speaks at his trial in a court in Tehran, Iran. 18 February 2012. (Hamid Foroutan/ISNA/AP)

Iran Sentences Four to Death in Banking Scandal

Iran has sentenced four people to death for their roles in last-year’s billion-dollar banking fraud scandal. The embezzlement case, discovered in September 2011, revolved around forged documents allegedly used by the directors of an Iranian investment company to secure loans totaling $2.6 billion to buy state-owned enterprises. Thirty-nine people were tried for their involvement in the fraud.

"Four of the accused were sentenced to death," Prosecutor General Qolam Hossein Mohseni-Ejei announced. “Two others were sentenced to life imprisonment and others received sentences up to 25 years imprisonment.” (IRNA, 30 July).

Ejei did not name the individuals sentenced to death.

Trial Starts in Iran’s Biggest Banking Scandal

Thirty-two people suspected of involvement in a $2.6 billion banking fraud went on trial in Tehran on Saturday.

The record embezzlement case revolves around forged documents allegedly used by the directors of the Amir Mansour Arya Investment Company to secure loans to purchase state-owned companies under the government's privatization program. Seven state-owned banks have also been implicated in the scandal that reportedly began in 2007 but only came to light last September.

The defendants included Amir Mansour Aria, the managing partner of the investment company. The former CEO of Bank Melli, Iran's largest government-owned bank, fled to Canada after the embezzlement scandal was exposed last year.

The Central Bank of Iran's Deputy Director Hamid Pourmohammadi is the highest government official that has been arrested so far reportedly on charges of lax supervision of the state-owned banks implicated in the embezzlement scandal.

Source: IRNA

Investigation of Banking Scandal Widening

Iran's prosecutor general announced today that 126 people have been under probe and interrogated in connection with the biggest embezzlement case in the country's banking history.

Hojjatoleslam Mohseni-Ejei said that 27 of the 126 individuals investigated in the banking fraud case remain in detention and another 50 have already been indicted. He added that a score of state-owned and private Iranian banks and business entities are also being investigated over the $2.8-billion embezzlement scandal. The fraud reportedly involved the forgery of banking documents to secure loans that were then used to purchase state-owned companies.

Majlis Begins Impeachment Proceedings Against Minister of Economy

The Iranian parliament, Majlis, has begun the impeachment proceedings against the Minister of Economic Affairs and Finance Shamseddin Hosseini. Mr. Hosseini is blamed for lax leadership in preventing the recent $2.8 billion bank embezzlement case, specifically his “failure to apply the rules related to the economy minister's duties with respect to banks and financial and monetary institutions” [Fars News Agency, 1 November].

Under the Iranian constitution, the Majlis can impeach an individual minister by a simple majority vote, in effect issuing a vote of no confidence in the minister. In today’s session, MPs opposed to the minister make their case, and then Mr. Hosseini defends his records before the vote on his impeachment. President Ahmadinejad is present in Majlis and has already delivered a speech defending his economic minister.

More Arrest Warrants in Growing Banking Scandal

Ahmadinejad’s Administration Also Seen as Target of Attacks

Iran’s Judiciary has issued arrest warrants for 14 more suspects in the largest banking fraud in Iranian history, these in addition to the 22 warrants issued last month. Today, the Judiciary spokesman, Hojjatoleslam Gholam-Hossein Mohseni-Ejei, told reporters in Tehran that even though the banking laws might not have been strong enough to prevent the estimated $3 billion embezzlement, but the main culprits were those trusted to enforce the laws but chose a traitorous path to enrich themselves.

Mohseni-Ejei who is acting as the chief prosecutor in the case added that he was investigating the behavior of the Central Bank of Iran (CBI) as well: Did the CBI exercise its supervisory role over the banks involved in the embezzlement and did its auditors performed their duties? [Fars news Agency, 10 October].

Any direct or indirect linkage of the CBI to the embezzlement case by the Judiciary would inevitably involve the most senior politicians in the government, including President Ahmadinejad, who has authority over the central bank. There were also parallel attempts by the conservatives to link the main suspect in the case to Ahmadinajd’s chief of staff and son-in-law, Esfandiar Rahim Mashaie, and his group that has already been branded as “deviationists” prior to breakout of the banking scandal.

There seems to be a two-prong attack on Ahmadinejad’s administration: Implicating it in the case indirectly for lack of supervision over the banks involved in the embezzlement and directly through linkage of the top suspect in the case to the group very close to the sitting president. The banking scandal is rapidly growing into a political scandal as well.

Correction: Esfandiar Rahim Mashaie is NOT Ahmadinejad's son-in-law. He is his son's father-in-law. Our apologies to our readers for the unintentional error made in this post, and thanks to one of our readers for catching it.

Khamenei on Banking Scandal

Iran’s Supreme Leader Ayatollah Ali Khamenei in a frank discussion of the growing banking scandal in the country told a group of visiting government officials that if in the past ten years the government had followed his edict on combating the economic corruption in the country, the country would not have witnessed scandals such as the recent banking embezzlement.

“Although the senior government officials welcomed (our edict of ten years ago) on combatting economic corruption in the country, if they had followed those suggestions, we would have never faced scandals such as the recent banking corruption incident,” Ayatollah Khamenei said [Fars News Agency, 3 October].

“Such incidents would affect the hearts and minds of our people, and break their hearts. Do they really deserve this? People getting upset over such incidents, even lose their hope (in their government), only because the government leaders did not act (to eliminate the corruption),” Khamenei added.

“From the very early years, I had warned everyone not to let corruption become endemic and grow roots (in the society). When passing of time, uprooting corruption becomes that much more difficult. The honest investors become disappointed. But unfortunately (the campaign against corruption) did not materialize,” Ayatollah Khamenei said.

The supreme leaders promised the public that the three branches of the government would be committed to fight corruption and would monitor the recent banking scandal and similar incidents. He warned against misuse of the recent incident to bring the senior government leader under question. Ayatollah Khamenei added that the officials in the government, Majlis and the Judiciary are performing their duties.

“The people should know, the officials will monitor this latest incident carefully, and the hands of all the traitors will be cut,” Khamenei said.

Bank Melli ex-Chairman in Toronto

Mahmoud Reza Khavari, the former chairman of the board and managing director of Iran’s largest bank, the state-owned Bank Melli, has reportedly fled Iran and arrived in Toronto, where he owns a home. Bank Melli was one of the banks involved in a massive embezzlement scandal. Khavari resigned his post on Tuesday. It is not uncommon for the Islamic Republic’s elite to have dual citizenship or close relatives living in the West.

Bank Sedarat and Bank Saman are also implicated in the $2.6 billion fraud, biggest in the country’s history, and their chairmen were removed from their posts.

Toronto’s The Globe and Mail has published a picture of Mr. Khavari’s home in the city's affluent Bridle Path neighborhood and reports that the property is valued at $3 million.

Khavari's Home in Toronto. Photo: J.P. Moczulski /The Globe and Mail. 30 September 2011

Growing Banking Scandal in Iran

Amidst the largest and growing banking scandal in Iranian history, the president of Bank Melli, the country’s largest state-owned bank, resigned today and the presidents of two large privately-held banks, Bank Saderat and Bank Saman, are forced to resign by the Central Bank of Iran. The three banks are accused of issuing letters of credit in a scam, which amounted to $2.6 billion embezzlement.

Earlier in the day, Iran's Prosecutor General Hojjatoleslam Gholam-Hossein Mohseni-Ejei said 22 arrest warrants have been issued in connection with the bank fraud. He did not say how many of those people have actually been arrested.

In total, seven state-owned and private Iranian banks are said to be involved in the case, which allegedly involved forging documents to secure multi-billion-dollar loans and purchase state-owned companies.