Fugitive banker handed over to Iran

The arrest of the former managing director of Bank Melli could boost Iranian President Hassan Rouhani’s campaign promise to reduce corruption.

al-monitor A photo illustration shows Iranian currency, April 11, 2011. Photo by BEHROUZ MEHRI/AFP/Getty Images.

Topics covered

sanctions, mahmoud ahmadinejad, iran, fraud, embezzlement, corruption, banking & finance

May 12, 2014

A fugitive accused of involvement in the “3,000 billion toman dossier” — the biggest embezzlement case in Iran since the 1979 revolution — was handed over to Iran this week.

"The detainee, identified as 'H.S.,' was arrested by Interpol in one of the Persian Gulf states and handed over to Iran on May 7," Col. Massoud Rezvani, head of the Interpol office of the Iranian police, announced in an interview with IRNA news agency.

The embezzlement — estimated at as much as $2.6 billion — was a fraud involving the use of bogus documents to obtain credit from eight Iranian banks to purchase state-owned companies in a manipulation of the government’s policy of privatization. The fraud reportedly extended over a four-year period, but became more serious in the months before the scandal broke in September 2011. A month later, 67 people had been interrogated and 31 arrested, but the architect of the scandal, Mahmoud Reza Khavari, resigned as the managing director of Bank Melli, Iran’s largest commercial bank, and flew to Canada where a $3 million home is registered in his name, on Sept. 27, 2011.

Khavari, who also holds Canadian citizenship, faces interrogation and possibly the death penalty if convicted of intentionally seeking to undermine the ruling Islamic system by damaging the economy. On Oct. 7, 2011, nine days after he flew to Canada, Khavari and his wife paid off the mortgage on their $3 million Toronto home and signed it over for a token $2 to their daughter, land registry documents show. This news shocked and angered the Iranian people, who were already dealing with the increasing inflation and unpredicted aftermath of so-called smart sanctions. This incident, labeled as the biggest monetary scandal in Iran’s contemporary history, took place during the second term of then-President Mahmoud Ahmadinejad, who won office vowing to fight against corruption and promised the Iranian middle class a fair and blooming economy with equal opportunity for all.

Iran’s several requests to Canada to extradite Khavari did not succeed during the presidency of Ahmadinejad due to the deterioration of bilateral ties. The relationship began to sour after the death in detention of Iranian-Canadian photographer Zahra Kazemi in 2003 and plummeted following 2009 elections in Iran, which were marred by fraud and massive human rights violations. The Canadian government withdrew its ambassador and imposed sanctions against Iran in 2013. This political distrust impeded Iran’s efforts to arrest the fugitive banker.

Despite various efforts by Iranian police and numerous requests from Interpol, Canada did not extradite Khavari. In January 2014, Ahmadreza Radan, deputy chief of Iranian police, announced that a special group of Iranian police officers would be assembled and sent to Canada to search for and arrest Khavari.

"Iranian police asked the Canadian police to arrest Khavari as soon as he's spotted, and return him to Iran, however Canadian officials said Khavari is not in Canada," Radan said in an interview with IRNA.

It is not clear what role Canada can play in the apprehension of Khavari, but his return to Iran could boost President Hassan Rouhani’s presidency at a very opportune time.

One of Rouhani’s mandates will certainly be to end corruption that took place under the previous administration. Babak Zanjani, a flamboyant entrepreneur who became wildly popular for flaunting his wealth on Facebook, was arrested by police in December 2013. Oil Minister Bijan Zanganeh was the first Iranian official to publicly accuse Zanjani of owing $2 billion to the government. Zanjani was entrusted with helping Iran sell oil and transfer the money back through banks his company was associated with.

However, most Iranians believe that Zanjani is just one figure of many who have used their access to the government for personal profit. Capturing Khavari would give Rouhani a stronger position domestically and might indirectly improve his ability to conclude a long-term nuclear agreement with the United States, the other permanent members of the UN Security Council plus Germany, the P5+1. The arrest showcases the president's expertise as a seasoned diplomat who knows how to make deals with less expenditure and risk than his predecessor.

Continue reading this article by registering at no cost and get unlimited access to:
  • Al-Monitor Archives
  • The Week in Review
  • Exclusive Events
  • Invitation-only Briefings

More from  Iran

Violent protests spread across Iran border province
Al-Monitor Staff | Human rights | Feb 25, 2021
Rouhani warns parliament not to aid ‘enemy’
Al-Monitor Staff | | Feb 24, 2021
Iran border town rattled as security forces kill fuel traders
Al-Monitor Staff | | Feb 23, 2021
Iran’s hard-liners decry new deal with IAEA
Al-Monitor Staff | Iran Deal | Feb 22, 2021