U.S. judge to look into Giuliani, Mukasey's role in sanctions case

NEW YORK (Reuters) - A U.S. judge said he will inquire further into whether former New York City mayor Rudolph Giuliani and former U.S. Attorney General Michael Mukasey can represent a Turkish gold trader charged with conspiring to violate U.S. sanctions against Iran.

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U.S. District Judge Richard Berman said at a hearing on Tuesday in Manhattan federal court that he will hold another hearing, likely later this month, into whether conflicts of interest prevent the two men from effectively representing the trader, Reza Zarrab.

Giuliani and Mukasey will not appear in court or help prepare for Zarrab’s trial, Benjamin Brafman, another of Zarrab’s lawyers, said at the hearing. Instead, he said, they are seeking a “diplomatic solution” to the case.

The two men traveled to Turkey shortly after Feb. 24 to meet with Turkish President Recep Tayyip Erdogan. Giuliani, an ally of President Donald Trump, discussed the trip in advance with then-U.S. Attorney Preet Bharara, who brought the charges against Zarrab, Brafman said, while Mukasey conferred with Attorney General Jeff Sessions.

“No one was trying to hide their involvement,” Brafman said.

Zarrab is accused of conspiring to conduct illegal transactions through U.S. banks on behalf of Iran’s government and other Iranian entities. Prosecutors said in a court filing last week that eight of those banks were clients of Giuliani or Mukasey’s firms, and that Giuliani’s firm is a registered agent of Turkey, raising potential conflicts.

Brafman said in a response the issue “quite frankly is none of the Government’s business.” But Berman said at Tuesday’s hearing that it was “unquestionably the business of the court.”

At the hearing, Brafman argued that Zarrab had an “absolute right” to meet with anyone he chose. If he had chosen to meet with another lawyer without telling anyone, there would be no issue, Brafman said.

“He’s interviewed half the lawyers in America, so that’s not so much of a hypothetical,” Brafman joked, alluding to Zarrab’s hiring of more than a dozen lawyers at major firms.

The dispute highlights the politically charged nature of the case, which expanded in scope last week with the arrest of an executive at a Turkish state-owned bank accused of conspiring with Zarrab. Turkish Foreign Minister Mevlut Cavusoglu criticized that arrest as “political.”

Zarrab, a dual national of Iran and Turkey, had previously been arrested in 2013 in a corruption probe of people tied to Erdogan, then prime minister of Turkey.

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