Tracing the Sadr-Karimi Bank Fraud Network: How Public Records Revealed More Than an Indictment

Tracing the Sadr-Karimi Bank Fraud Network- How Public Records Revealed More Than an Indictment

Written by Sayari

April 1, 2020

On Mar. 16, 2020, the Southern District of New York (SDNY) convicted Ali Sadr Hashemi Nejad, an Iranian national, on charges of bank fraud, conspiracy to commit bank fraud, money laundering, and conspiracy to defraud the United States. In the mid-2000s Sadr worked with other Iranian nationals and through his family business to defraud financial institutions in the United States, Turkey, and Switzerland, according to U.S. prosecutors. The group used international front companies to move more than $115 million from Venezuela to Iran, in order to skirt U.S. economic sanctions against Iran.

In connection to the case, on Jan. 31, 2020, the SDNY indicted Bahram Karimi, an Iranian national living in Canada, on charges of bank fraud, conspiracy to commit bank fraud, and making false statements.

Sayari has identified Sadr, Karimi, and other individuals as likely co-conspirators, despite the SDNY simply labeling all co-conspirators as ‘CC’ in their indictments.

Moreover, public records enabled us to trace companies linked to Sadr, Karimi, and their associates, while also pinpointing additional individuals and entities involved. These findings present a more complete picture of this global business network and deserve further scrutiny from public authorities and potential business partners.

Stratus Group and The Venezuela Project

Stratus Group, established in 1978, is an Iranian conglomerate controlled and operated by Sadr, his family members, and business associates. Stratus Group is a holding company for entities across major sectors of Iran’s economy including financial services, investment, insurance, real estate, general contracting, and industry and business services. Of the more than a dozen Stratus Group subsidiaries and affiliates, two are worth calling attention to in order to understand the Sadr-Karimi network:

  • Stratus International Contracting Company
  • Eghtesad Novin Bank (EN Bank)

Stratus International Contracting Company operates as a contractor for housing and urban development projects among other activities. The company has executed multiple high-value construction projects in Venezuela. In 2011, it worked on projects worth an estimated $2 billion and within two years planned to take on an additional $4 billion project.

Eghtesad Novin Bank, Iran’s first private bank, was valued at more than $20 billion in 2011 by Seyed Mohammad Sadr Hashemi Nejad, Sadr’s father, who was chairman of the bank at the time. Stratus Group held a minority stake in the bank and Eghtesad Novin Bankwas sanctioned by OFAC in 2012.

In addition to its connections as a subsidiary of the Stratus Group conglomerate, Stratus International Contracting Company itself is linked to 13 Iranian companies operating globally in various industries. These companies are engaged in infrastructure, construction, technical projects and engineering, banking, and finance.

According to Stratus International Contracting Company’s website, its projects have been acknowledged by the United Nations Industrial Development Organization, World Bank, African Development Bank, and Islamic Development Bank. The company operates or has previously operated in Iraq, Oman, Yemen, South Africa, Djibouti, Pakistan, the former Soviet states, in addition to Iran and Venezuela.

The Venezuela Connection

Public records also revealed a list of at least 37 Venezuelan subcontractors that have carried out work in Venezuela for one of Stratus Group’s companies, the Iranian International Housing Corporation (IIHC), established in 2006.

In 2007, IIHC was awarded a contract by Desarrollos Urbanos de la Costa Oriental del Lago (Ducolsa) S.A. (aka ‘Desarrollos Urbanos’), a subsidiary of the now-sanctioned Venezuelan state-owned energy company, Petróleos de Venezuela, S.A. (PDVSA). The contract was valued at close to $476 million and required IIHC to build 7,000 housing units in Venezuela. As of this writing, IIHC has delivered 65% of those units.

Sadr and Associates Create Network of Front Companies to Minimize Iran Connection

Around 2010, Sadr used a UAE address and a St. Kitts and Nevis passport obtained through the citizenship by investment program to establish two companies through which he, Karimi and their associates committed the alleged financial crimes: Switzerland-based Clarity Trade and Finance (aka ‘Clarity Trade’) and Turkey-based Stratus International Contracting (aka ‘Straturk’). The Swiss Commercial Gazette shows Sadr as the president of Clarity Trade, carrying a St. Kitts and Nevis passport and residing in Dubai. Meanwhile, Turkish records list Straturk as a company with foreign capital from the UAE.

Sadr and his associates used bank accounts in Switzerland held by Clarity Trade and Straturk to receive several payments in dollars from Desarrollos Urbanos for work done by IIHC on the Venezuela housing project. These payments were cleared through a New York bank account.

After receiving the payments in the Swiss bank accounts, Sadr and his associates then sent a majority of the funds to another company in St. Kitts and Nevis, while a smaller percentage was sent back to the United States to purchase property in California.

Finally, a company registered in the UAE was used to receive at least one payment totaling over 11 million euros from Desarrollos Urbanos for work done on the housing project.

Entities in Austria, Hong Kong Used to Obfuscate Beneficial Ownership

While Sadr’s indictment details how he and other co-conspirators created Clarity Trade and Straturk to defraud U.S. banks and evade sanctions, the indictment stops short of detailing other steps taken by Sadr to conceal his ownership of Straturk.

We found that Sadr concealed his ownership of Straturk through Austrian and Hong Kong front companies. This sheds more light on how the Sadr-Karimi network used multiple corporate tiers to further its illicit financial activities.

The Sadr-Karimi Network in Eurasia

No later than April 2013, the sole shareholder of Straturk during the key period of Sadr’s alleged criminal activity was an Austrian company that has not been named in the indictment or in media reports. Spanrise Holding GmbH was founded on Aug. 25, 2011, and listed two shareholders: Erich Baier and Susanna Gemeiner. Four months later, Gemeiner and Baier sold their shares to an individual named Robert Schneider. Schneider, in turn, sold his shares to a now-defunct Hong Kong company Brittstone Limited on Oct. 10, 2012.

Brittstone Limited in Hong Kong now owned Spanrise Holding in Austria, which, by at least April 2013, owned Straturk. This is where Sadr appears. Sadr was the founding director and shareholder of Brittstone Limited, incorporated in Hong Kong on Jul. 12, 2011, according to Hong Kong corporate records. Brittstone Limited remained the sole shareholder of Spanrise Holding until the latter’s dissolution on Dec. 10, 2016.

The registration dates of both Spanrise Holding and Brittstone Limited fall within the time frame described by U.S. prosecutors for payments made to Straturk and Clarity Trade by Desarrollos Urbanos, the PDVSA subsidiary.

Additionally, according to the indictment, an email sent to Sadr by a co-conspirator in May 2011 mentions the “restructuring of Stratus International Turkey.” The correspondence states: “1 Austrian company is not sufficient. 4 more persons or legal entities should be added to the new structure. Since we, [SIC] none of us want our individual names to be shown in the structure due to the reasons in Venezuela and Iran, we have to find 4 more legal entities or names for the minor shares.”

We believe Spanrise Holding and Brittstone Limited were created at least in part to obfuscate Sadr’s position as Straturk’s beneficial owner given the nature of Sadr and Karimi’s alleged crimes and the time frame in which Sadr was the beneficial owner of Brittstone Limited. Furthermore, these findings point to the possibility that Spanrise is the Austrian company mentioned in the email correspondence between the unnamed co-conspirator and Sadr.

Back in Dubai

On Oct. 7, 2015, Sadr transferred his directorship of Brittstone Limited to Turkish national Mustafa Volkan Morkaya. Volkan Morkaya lists himself on one of several LinkedIn pages as the manager of Cirrus Foreign Trade, the Dubai-based company that U.S. prosecutors say received payments from Desarrollos Urbanos as part of work done on the housing contract.

Volkan Morkaya’s connection to Brittstone Limited and Cirrus Foreign Trade in Dubai suggests that he, too, could be an unidentified co-conspirator listed in Sadr’s indictment. Additionally, his extensive relationship with Sadr and his network—via two entities in Hong Kong and Dubai—suggests that he could be high-risk for evading sanctions or committing bank fraud.

Conclusion

The Sadr-Karimi network, which has been used for purposes of bank fraud and sanctions evasion, is undoubtedly more extensive than what is portrayed in the indictments from the SDNY. Companies and individuals closely linked to Sadr and Karimi, some of which were mentioned above, warrant further scrutiny by public officials focusing on this network and by business partners who might find themselves operating in their trans-jurisdictional network.

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