Still Paying

THERE WAS NO CEREMONY when Mahmoud Reza Banki *05 was released from prison after his conviction was overturned, no good-luck handshake, and certainly no apology. Perhaps the release was considered reward enough. Instead, prison guards simply opened the gate, handed the ex-convict his belongings, and sent him out into the wide world.

Banki emerged from the Taft Federal Correctional Institution near Bakersfield, Calif., Nov. 2, 2011, after 665 days behind bars. Ten days earlier, a federal appeals court had vacated his conviction for violating the Iran trade embargo, though convictions on two lesser charges stood. So there he was, blinking in the warm California sun, a free man.

He wore gray shorts and a gray T-shirt, both of which he had purchased with money earned from his 11-cents-per-hour job cleaning prison bathrooms, and carried a plastic bag crammed with legal papers and a few books. The clothes he was wearing when he was arrested had been mailed to his lawyer across the country, but Banki was in no mood to shop for replacements. Friends had driven up to meet him, and he wanted to put Taft behind him as quickly as possible.

“Let’s get going before they change their minds,” he said, only half in jest.

They stopped at an In-N-Out Burger on the two-hour drive back to Los Angeles, but the food, so heavy and greasy compared to prison fare, made Banki feel sick. For most of the trip he stared out the window and said little, his mind still on his arrest and conviction and what he believes was the injustice of it all.

Why had he spent nearly 22 months behind bars — half of that in high or maximum security — for receiving family money that he dutifully had reported to the government? At every step in the proceedings, he had thought the charges would be dropped, that someone finally would see the indictment as a huge misunderstanding, or would recognize that Reza Banki — a Ph.D. chemical engineer and an American citizen — did not belong in prison.

“I kept thinking, this is crazy,” he recalls. “Why did it take so long?”

But getting out of prison is just the beginning. Getting back on your feet and moving on can take much longer. For Banki, nearly four years later, that journey still is not over.

The criminal case against Banki began at 6:30 a.m. Jan. 7, 2010, when a dozen armed federal agents pounded on the door of his Greenwich Village condo and arrested him, but the story begins long before that.

Banki was born in Iran three years before the 1979 revolution that brought the ayatollah to power. His family still lives there and owns three power companies and a pharmaceutical company. He attended college in the United States, starting at Purdue University and finishing at the University of California, Berkeley, with a double major in mathematics and chemical engineering. While still in college, Banki became a U.S. citizen. In 2005, he earned his doctorate at Princeton.

Back in Iran, his mother’s family began to transfer money out of the country following her divorce in the mid-2000s. (Banki says on his website that the family was “deeply concerned about protecting a portion of the family assets for Reza’s mother and her sons.”) Most of the details of those transfers are not in dispute, but the legal characterization given to them formed the crux of the government’s case that sent Banki to prison.

If one wanted to send money from, say, France to the United States, one could simply go to a bank and make a wire transfer. But there are no direct economic contacts between the United States and the Islamic Republic of Iran, so private money transfers between the two countries usually are made using an informal network of money-changers known as hawala, which exists in much of the Middle East and South Asia.

Using this network, someone in Tehran who wants to send money to New York would find a hawala operator (a hawaladar) in Iran and give him a sum he wanted to transfer, plus a handling fee. The Iranian hawaladar would contact a hawaladar in the United States — perhaps operating out of a corner grocery or barber shop — who would arrange for one of his clients to deposit that amount into the intended recipient’s account in New York. Eventually, the American hawaladar would find a client who wished to transfer a similar amount of money to a recipient in Iran and the process would be repeated there, settling accounts between the two hawaladars. No money crosses international borders.

With his advanced degrees, his luxury apartment, and his family history, Banki is not your typical ex-con — but his dilemma is not uncommon, says Scott Welfel ’06, a staff attorney at the New Jersey Institute for Social Justice. 

Using this system, Banki’s family transferred nearly $3.4 million to Banki in 56 installments between May 2006 and September 2009, in amounts ranging from $2,600 to $199,971. Those deposits came from numerous individuals, as well as from companies based in the Philippines, Kuwait, Sweden, Russia, and Latvia, all clients of the American hawaladar. Banki did not know these depositors, and he reported the money he received on his tax returns and in response to three subpoenas he received in 2008 from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), which oversees economic sanctions against Iran. He used much of the money to buy a $2.4 million condominium in New York and to pay off credit cards.

But hours after Banki’s arrest, the government indicted him on three counts of violating the economic sanctions against Iran and running an unlicensed money-transmitting business, later adding two counts of lying about the source of the funds. (Banki told investigators that they came from his uncle and cousin; the government contended that they came from his father.) Banki was fired from his job as a senior associate for the consulting firm McKinsey & Co. later that day.

Transfers from Iran to the United States were not at issue; the government’s charge was that Banki had created a hawala network to transfer money back to Iran, which could put money into the hands of those who might threaten U.S. security. “Banki allegedly paid no heed to the dangers of breaking laws designed to protect our country’s citizens, moving and spending illicit millions,” U.S. Attorney Preet Bharara said in a press release about the indictment. “Today’s charges make clear that the Iran trade embargo will be strictly enforced.” Representing the prosecution was Assistant U.S. Attorney Anirudh Bansal ’90, who asserted in court that Banki operated as “an underground, unlicensed version of Western Union.” After a 15-day trial, a jury found him guilty on all counts.

Before sentencing, the trial judge received more than 120 letters urging leniency, including one from Nobel Peace Prize recipient Shirin Ebadi, a Banki family friend. Richard Newcomb, who served as OFAC director at the time the regulations at issue were instituted, wrote that the hawala system is a longstanding and necessary means of transmitting family money between Iran and the United States and that Banki did not deserve criminal prosecution.

“Mr. Banki’s actions,” Newcomb wrote, “caused little, if any, harm to the U.S. sanctions-program objectives against Iran. It did not confer an economic or other benefit on the government of Iran or any party known or alleged to be connected to the government on any actions supporting terrorism, disruption of the Middle East peace process, or proliferation of weapons of mass destruction.”

Nevertheless, Banki received a 30-month sentence. He had been held without bond in maximum- and high-security detention facilities while awaiting trial, but was transferred to Taft, a minimum-security prison, shortly after sentencing.

Banki’s lawyers appealed his conviction with support from a group of organizations ranging from the Asian Law Caucus to the Progressive Jewish Alliance. These groups filed an amicus curiae brief asserting that hawala transfers were indispensable to family remittances between Iran and the United States and that Banki’s case “is likely to cause confusion among Iranian Americans about what conduct carries the risk of criminal prosecution.” These families have few — if any — other options if they want to send money to needy family members or benefit from a family inheritance, supporters said.

In an opinion for the U.S. Court of Appeals, Judge Denny Chin ’75 threw out Banki’s conviction for violating the trade embargo, saying the sanctions regulations are ambiguous regarding the operation of hawala and that the trial judge had not properly instructed the jury that family remittances between Iran and the United States are permitted. Two false-statement charges were upheld, but they likely would have brought a sentence of only a few months — and Banki had already served far more time than that.

Although the government had the option of retrying Banki, it dropped the sanctions charges after he agreed to forfeit $710,000. At a hearing closing the case, Judge Paul Engelmayer called Banki “a talented man, even brilliant,” adding that “the damage to Mr. Banki’s life brought about by his lengthy incarceration ... cannot be measured only by the 22 months in which he lost his liberty and which he cannot get back.”

In that, the judge was right. At first glance, Banki’s story ends there, in victory. But because the two charges of making false statements stand, he remains a felon — a fact he must indicate on every employment, school, and housing application for the rest of his life.

After his release, Banki applied to 12 business schools, but despite an enviable résumé and high GMAT scores, only UCLA’s Anderson School of Management took a chance on him. Banki received his MBA last June and has applied for more than 200 jobs without success. The hurdles have become depressingly familiar: If he indicates in a background check that he has been convicted of a felony, firms won’t interview him; if he brings it up during an interview, the hiring process ends there.

With his advanced degrees, his luxury apartment, and his family history, Banki is not your typical ex-con — but his dilemma is not uncommon, says Scott Welfel ’06, a staff attorney at the New Jersey Institute for Social Justice. More than 70 million Americans have some sort of criminal record; Welfel says that reintegrating them into society is important if they are to become productive members. Understanding this, 15 states and more than 100 cities and counties have adopted so-called Fair Chance laws, which prohibit employers from asking about an applicant’s state criminal record until later in the hiring process. This does not help Banki, because his is a federal conviction.

Recently Banki has styled himself as an advocate for criminal-justice reform, setting forth his view of the facts of his case on his website, rezastory.com. In a TED talk, filmed last year at UCLA, Banki faults the U.S. criminal-justice system for giving too much discretion to overzealous prosecutors and too little attention to helping prisoners re-establish themselves after they have served their time. He fills his Twitter feed with tweets on mass incarceration and racial differences in sentencing along with those about his own experience; a couple of tweets picture him with former House speaker Newt Gingrich and former New York City police commissioner Bernard Kerik, who launched an organization on criminal-justice reform.

Banki remains in personal and professional limbo. Asked where he would like to be five years from now, he runs a hand through his black hair, which is beginning to show some wisps of gray and is pulled back in a short ponytail. “I’d like for this to be behind me, where I wouldn’t have to explain my story to every person I meet,” he says, staring hard at the table in front of him. “I’d like to have a stable professional career, something where I’m using my skill set, things that I’m trained in, where these two years don’t define me for the rest of my life.”

He also badly wants to clear his name, to persuade the world that he was wrongly prosecuted. “Have we become the unforgiving land of no second chances?” Banki asks.

This spring, frustrated by his long and fruitless job hunt, Banki spent several weeks looking for work in Europe. Though his relatives have urged him to leave, he insists that he wants to remain in the United States. He wants to get back on the path he was pulled away from more than five years ago.

“I am more American than I am anything else,” he says. “I’d love to stay ... I don’t want to believe that there isn’t a way.” 

Mark F. Bernstein ’83 is PAW’s senior writer.