US terror victims sue Deutsche Börse group over Iran funds

Allegation could endanger takeover of NYSE.

Wall Street_311 (photo credit: Thinkstock/Imagebank)
Wall Street_311
(photo credit: Thinkstock/Imagebank)
BERLIN – A lawsuit filed in a US Federal court in Manhattan by roughly 1,000 victims of a joint Hezbollah and Iran 1983 attack on US soldiers in Beirut alleges that Clearstream Banking SA of Luxembourg, which is owned by the Deutsche Börse AG, illegally transferred $250,000 million of seized Iranian funds, according to a report in Tuesday’s Wall Street Journal.
Hezbollah, along with Tehran’s government, killed 241 US servicemen in an attack on the Marine Corps housing complex, prompting family members to initiate litigation. A US Federal Judge ruled in 2003 that Iran was responsible for the terror attack and ordered the Islamic Republic to pay $2.7 billion in compensation to the family members of the murdered service personnel.
ran rejects the charges of complicity in the single deadliest terror attack on US soldiers.
According to the Journal article, court documents from 2008 show that “Clearstream and a second financial institution helped Iran move the money out of accounts at Citigroup Inc.’s Citibank unit in New York after a federal court had ordered the funds frozen.”
A Judge from the Southern District of Manhattan court “ordered Citibank in June 2008 to freeze $2.25b. of Clearstream accounts that were allegedly controlled by Iran,” wrote the Journal.
The family victims argued that Clearstream furnished improper information to secure the release of the $250m. A second bank was also involved in transferring Iranian funds, but the name of that bank has been “redacted” from the court documents, noted the Journal.
The lawsuit against Deutsch Börse could throw a wrench in the negotiating process to control the NYSE, in which the Deutsche Börse seeks to take over NYSE Euronext Inc, which oversees the New York Stock Exchange. According to the Journal, US lawmakers have raised the Clearstream controversy as a reason to block the Deutsche Börse’s takeover attempt.
The Journal cites a question asked by US Congressional Representative Steve Austria (R.Ohio) to Treasury Secretary Timothy Geithner at a legislative hearing this year: “Are you concerned that the New York Stock Exchange is going to be owned by a company that’s allegedly – and I think is – conducting business with Iran?” The involvement of the Deutsche Börse in reportedly transferring Iran funds is another blow to Germany’s financial reputation. The Deutsche Bundesbank — with assistance from Germany’s Foreign Ministry – circumvented US sanctions earlier this year and funneled at least $1.5b.
euros to a US sanctioned bank, the European-Iranian trade bank (EIH), to help pay for Indian crude oil payments owed to Iran.
The US Treasury Department expressed alarm about Germany’s business relations with the EIH because the Iranian entity finances illicit nuclear proliferation and weapons activities.
After considerable US, French and British pressure, Germany agreed to place the EIH on the EU sanctions list.
The EIH, however, is still permitted to process previous financial transactions, which were commenced before the May EU sanctions targeting Iran.
German critics view Chancellor Angela Merkel’s failure to shut down pre-sanction EIH transactions as undercutting international efforts to stop Iran’s drive to obtain nuclear weapons and finance terror groups.
Germany remains Iran’s largest European trade partner, with an annual 2010 volume of combined export and import trade reaching over 4b.
German engineering firms play a key role in Iran’s infrastructure.
According to the Journal, Clearstream declined to comment on the US lawsuit. The Deutsch Börse wrote in its 2010 annual financial disclosure that Clearstream “intends to defend itself vigorously to the fullest extent.”