US court reverses judgment giving Iran building money to terror victims

Judge casts doubt on whether Tehran owns Manhattan tower, undoing record forfeiture for victims of bombings in Jerusalem and elsewhere

The aftermath of a suicide bombing at a Sbarro restaurant in Jerusalem in August 9, 2001, that killed 15 and wounded over 100 more. (Flash90)
The aftermath of a suicide bombing at a Sbarro restaurant in Jerusalem in August 9, 2001, that killed 15 and wounded over 100 more. (Flash90)

NEW YORK (AP) — A record terrorism-related forfeiture order benefiting families of some victims of Iran-sponsored attacks in Israel and elsewhere and others was reversed on appeal Wednesday, leaving in doubt what will happen to a $1 billion Manhattan office building at the center of the legal case.

The 2nd US Circuit Court of Appeals in Manhattan rejected a judge’s reasoning in ordering the sale of the 36-story office building and other properties to benefit family members of victims of terrorism attacks, including several attacks in Jerusalem.

The families and the US government had sued the Alavi Foundation and Assa Corp., the building’s partial owners. US Attorney Preet Bharara has said the sale of the buildings would constitute the largest ever terrorism-related forfeiture.

In 2013, Judge Katherine Forrest said revenue from the buildings passed through a state-owned Iranian bank, violating a US-trade embargo, and thus were eligible for forfeiture. They were to be sold by the US Marshals Service, with proceeds distributed among 19 holders of over $5 billion in terrorism-related judgments against the government of Iran.

The appeals court disagreed with Forrest, casting doubt on evidence that the properties were controlled by Iran.

The building at 650 5th Avenue in New York at the center of a case related to compensation for victims of Iran-sponsored terror. (Screen capture: Google street view)
The building at 650 5th Avenue in New York at the center of a case related to compensation for victims of Iran-sponsored terror. (Screen capture: Google street view)

The 2nd Circuit decision written by Circuit Judge Richard C. Wesley said the buildings do not qualify as being owned by Iran under the Foreign Sovereign Immunities Act but a three-judge appeals panel left it for the lower court to determine at trial if they could be considered an agency or instrumentality of Iran under the Terrorism Risk Insurance Act.

“Given the lack of evidence demonstrating Iran’s day-to-day control of Alavi, we conclude, as a matter of law, that defendants cannot be deemed Iran’s alter egos,” the appeals court said.

The 2nd Circuit noted that evidence showed Iran created Alavi in 1973 and supervised its board and controlled its affairs in the 1980s and 1990s. But it said the only recent evidence of Iran’s control consisted of a 2007 meeting between Alavi board members and Iran’s ambassador to the United Nations.

Lawyers for the families of terror victims did not immediately respond to requests for comment.

Bharara spokesman Nicholas Biase declined comment.

Daniel Ruzumna, attorney for Alavi and 650 Fifth Ave. Co., said: “We are very pleased by the rulings of the Court of Appeals. We look forward to vindicating our clients’ rights and interests at trial.”

The US government had said the Alavi Foundation’s sole partner in the ownership of the Manhattan building was a shell company fronting for a secret interest held by the state-owned bank of Iran, Bank Melli. The Iranian government had been designated by the US as a sponsor of international terrorism, an allegation it has repeatedly denied.

Khobar Towers after 1996 bombing that killed 19 US airmen. (Wikipedia/Public Domain)
Khobar Towers after 1996 bombing that killed 19 US airmen. (Wikipedia/Public Domain)

Creditors who stood to benefit from the sale of the buildings included families and estates of victims of the 1983 bombings of a US Marine barracks in Beirut, the 1996 bombing of the Khobar Towers in Saudi Arabia, the 2001 bombing of a Sbarro restaurant in Jerusalem and other attacks in Israel and elsewhere.

Buildings also were to be sold in New York’s Queens borough; Houston; Carmichael, California; Catharpin, Virginia; and Rockville, Maryland.

The Fifth Avenue building was built in the 1970s on property acquired by a not-for-profit corporation formed in New York by then Iranian leader Shah Mohammad Reza Pahlavi, who was overthrown in 1979. It was valued at $83 million in 1989.

Times of Israel staff contributed to this report

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