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Last year, a U.S. District Court in Manhattan secretly froze $2 billion held in a Citigroup (C) account. The money was believed to have been held on behalf of Iran, through Luxembourg's Clearstream Banking S.A. In what the Wall Street Journal reports could be the largest seizure of Iranian assets abroad since the Islamic revolution of 1979, several parties are lining up to claim the cash. And, it looks like the battle is headed for trial.
The order to freeze the funds was executed 18 months ago by the U.S. District Court for the Southern District of New York and hasn't been made public. In issuing the legal order, the court used information from the U.S. Treasury Department. Though the money is frozen, the struggle is heating up.
The families of U.S. Marines who were killed or injured in a 1983 attack in Beirut were awarded $2.7 billion in compensation by a federal judge in 2003. The judge also ruled that Iran was responsible for the attacks -- and for paying the tab. Lawyers representing the families, supported by the Treasury Department information, are pushing to have the frozen funds used to chip away at this obligation. The account belongs to Clearstream, which is mostly a clearing house for trades. It is a wholly owned subsidiary of Deutsche Boerse AG and benefits from Luxembourg's secrecy laws.
Steve Perles, an attorney for the families, was shocked, according to the Wall Street Journal, saying, "I had no idea there was Iranian money of this size flowing through the United States." Citigroup, it seems, wasn't aware of this either. There isn't any indication that the bank knew it had funds that belong to Iran. Doing business with that country could leave a company exposed to hefty civil and criminal penalties.
Citigroup, Clearstream and the Iranian government wouldn't comment on the case, and Iran hasn't made any filings about this incident.
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