September 7, 2016

WSJ, Covering $1.3B Paid to Iraq in Cash, Has No Tie-Back to January’s Serial Judgement Fund Payments

In early August, the Wall Street Journal reported that “The Obama administration secretly organized an airlift of $400 million worth of cash to Iran that coincided with the January release of four Americans detained in Tehran.” Two weeks later, the administration acknowledged that the cash “was used as ‘leverage’ to gain the release of American prisoners” — that is, in layman’s terms, the cash payment was ransom.

Make that “cash payments” — plural.

The Journal has now reported that there were “two more such shipments in the next 19 days, totaling another $1.3 billion.” That said, I believe that reporters Jay Solomon and Carol E. Lee, who clearly deserve props for the work they have done to date, are missing, or at the very least failing to highlight, an important point about the timing of these payments. It seems quite likely that Iran demanded proof that the process of creating the second and third payments had begun and could not be effectively stopped before it would release the hostages. If so, it would be almost impossible to argue that these were not also de facto ransom payments.

Here are key excerpts from the Journal’s Tuesday evening report (links are in original; bolds are mine throughout this post):

U.S. Transferred $1.3 Billion More in Cash to Iran After Initial Payment

First $400 million coincided with Iran’s release of American prisoners and was used as leverage, officials have acknowledged

The Obama administration followed up a planeload of $400 million in cash sent to Iran in January with two more such shipments in the next 19 days, totaling another $1.3 billion, according to congressional officials briefed by the U.S. State, Treasury and Justice departments.

The cash payments—made in Swiss francs, euros and other currencies—settled a decades-old dispute over a failed arms deal dating back to 1979. U.S. officials have acknowledged the payment of the first $400 million coincided with Iran’s release of American prisoners and was used as leverage to ensure they were flown out of Tehran’s Mehrabad on the morning of Jan. 17.

The Obama administration briefed lawmakers on Tuesday, telling them that two further portions of the $1.3 billion were transferred though Europe on Jan. 22 and Feb. 5. The payment(s) “flowed in the same manner” as the original $400 million that an Iranian cargo plane picked up in Geneva, Switzerland, according to a congressional aide who took part in the briefing.

The $400 million was converted into non-U.S. currencies by the Swiss and Dutch central banks, according to U.S. and European officials.

The Treasury Department confirmed late Tuesday that the subsequent payments were also made in cash.

“The form of those principal and interest payments—made in non-U.S. currency, in cash—was necessitated by the effectiveness of U.S. and international sanctions regimes over the last several years in isolating Iran from the international financial system,” Treasury spokeswoman Dawn Selak said.

The settlement resulted from a legal arbitration under way in the Netherlands since the early 1980s between the U.S. and Iran. At issue was a $400 million payment Tehran’s last monarch, Shah Mohammad Reza Pahlavi, made to a Pentagon trust fund just months before his government was toppled. The money was earmarked for airplane parts that were never delivered.

Obama administration officials have said they believed the U.S. was set to lose the court proceedings in The Hague and would end up being liable for as much as $10 billion because of accrued interest.

Yesterday’s Journal report confirms what yours truly contended concerning what was known about the $1.3 billion in payments out of the Treasury Department’s Judgement Fund back on August 25.

The $1.3 billion was structured, as seen here, as a series of 13 disbursements of $99,999,999.99, plus an extra payment of $10,390,236.28, so that they would be treated as “cash items” by the U.S. Federal Reserve, which will not afford such treatment to payments of $100 million or more:

…  Section 3.0 of the Fed’s Operating Circular No. 3 relates to “Items We Do Not Handle as Cash Items” (emphasis: “Not”). That section includes the following dollar threshold:

We reserve the right to charge back an item if in our discretion we judge that circumstances require that it should not be handled as a cash item. We reserve the right to return an item payable by, at or through a bank that has been reported closed. We do not handle an item in the amount of $100,000,000 or more, and we reserve the right to return items in amounts of less than $100,000,000 that in our judgment are intended to avoid the $100,000,000 limit. The Reserve Bank may reject a purported electronic item and reverse any provisional credit that may have been given for it.

Thus, the payments, all but one kept just under $100 million, were from all appearances deliberately structured to ensure that the Fed would treat them as “cash items.” Additionally, the supposedly “independent” Fed failed to reject the payments, even though they clearly were “intended to avoid” the $100 million limit.

… Thus, it appears that the full story of the ransom the Obama administration refuses to call a ransom went as follows:

  • Iran insisted that it would not free the hostages unless $400 million in cash arrived simultaneously, enabling its government to get a valuable photo-op to flex its muscles in front of its oppressed people and Islamic jihadists around the world.
  • The Iranians further insisted that the $1.31 billion remainder be sent as “cash items” to a foreign central bank of their choosing, the identity of which would be kept anonymous. …

At the time, the Associated Press’s Bradley Klapper wrote up an “oh well, nothing more to see here” dispatch, and in my view allowed an anonymous source to make what can now be seen as a clearly false statement:

There was no explanation for the Treasury Department keeping the individual transactions under $100 million.

Briefing reporters last week, a senior U.S. official involved in the negotiations said the interest payments were made to Iran in a “fairly above-board way,” using a foreign central bank.

Only in fantasyland would airlifting cargo planes full of currency three separate times be considered “fairly above board.” Your source burned you, Mr. Klapper.

As to the timing of the payments, the dates Solomon and Lee reported — January 22 and February 5 — are when the currency was actually delivered. What they haven’t reported, and what isn’t absolutely known, is when the progress of these payments reached the point of no return. The answer, though, is clearly well before those two dates.

The Treasury Department’s Judgement Fund indicates that the 14 disbursements involved have a “Payment Sent Date” of Tuesday, January 19. Monday, January 18 was a U.S. bank holiday. Sunday, January 17 is when the first planeload of cash arrived and when the hostages were freed.

The State Department almost certainly would have had to submit paperwork to Treasury to have these payments approved and processed. If State could show Iran that these requests were received and perhaps stamped as approved by Treasury on or before Friday, January 15, it could then have told them that the process to create the remaining $1.3 million in cash had been initiated and could not be stopped. (It’s also possible that the January 19 “Payment Sent Date” doesn’t correctly reflect when these transactions were actually done, as it’s very likely that the dates involved were manually entered.)

In other words, it’s quite plausible that the Iranians demanded proof that the other $1.3 billion over and above the $400 million that was already being airlifted would be paid in cash in the same manner, and that the process could not be stopped, before they would release the hostages — making the entire $1.7 million involved de facto immediate ransom.

What’s especially unnerving about all of this is that it is not clear that any of the money involved was really owed, or that the U.S. would suffer the court defeat in The Hague that the Obama administration is asking us to believe was virtually inevitable.

As I noted concerning this claim in a separate NewsBusters post on August 23, John B. Bellinger III, in a column at the Washington Post on October 22, 2009, noted that the tribunal set up to adjudicate claims arising from the Islamic fundamentalist takeover in Iran in 1979 had rejected a similar claim (it’s also possible that the $400 million involved was part of this claim):

In July, the tribunal dismissed, 5 to 4, Iran’s claim for $2.2 billion in compensation for military equipment that had been ordered by Shah Mohammad Reza Pahlavi but that the U.S. government had refused to allow U.S. companies to deliver after the hostage crisis.

At the LawFare blog on January 18, the day after the hostages’ release, Bellinger openly fretted about the perception of ransom — before the cash nature of the payments involved was known:

… yesterday’s announcement (by President Obama) makes it appear that it was ransom paid for yesterday’s release of five Americans.

I elaborated on what Bellinger, who has to my knowledge not responded to an email I sent in late August requesting clarification, had reported seven years earlier:

If there is any evidence that Iran’s ability to “relitigate aspects of this dispute” somehow had the potential to restore that $400 million exposure, I haven’t found it … Bellinger, in a 2014 Wall Street Journal op-ed advocating the Tribunal’s end, mentioned “large claims by the Iranian government against the U.S. government for allegedly blocking exports of billions of dollars in military equipment ordered by the shah of Iran during the 1970s,” but not the specific dispute the Tribunal dismissed in 2009. Though it may exist, I have also found no evidence that Tribunal decisions can be appealed to another international body.

If — emphasis if — that Tribunal’s decision still stood (addendum: without realistic potential of appeal) in January of this year, and if the $400 million cash-for-hostages payment was part of the $2.2 billion case Bellinger described in 2009, it would mean that on January 17, President Obama recognized the existence of a liability which a supposedly respected international body had previously dismissed. In other words, Obama decided to pay $400 million the U.S. had officially been relieved of ever being required to pay. This would make the $400 million payment even more obviously ransom than it already is.

Make that $1.7 billion.

To be fair to the Journal’s reporters, they may have more detail to come. Let’s hope so — especially because they’re about the only ones in the press who appear to have more than a perfunctory interest in the story.

Cross-posted at NewsBusters.org.

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