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NY District Attorney Morgenthau Fingers Iran’s Nuclear WMD Program Funded By the Chinese Through the Big New York Banks

Last night I had the great honor of interviewing legendary Manhattan district attorney Robert Morgenthau regarding his office’s role in uncovering a rogue Chinese operation charged with selling weapons of mass destruction to Iran.

As Mr. Morgenthau told me last night, "there are rogue companies that are selling weapons of mass destruction to Iran. And Iran is deadly serious about buying this equipment."

The 89-year old Morgenthau—who recently announced his retirement after 35 years in his current post—has led an impressive, storied, prosecutorial career brimming with achievement. His latest triumph in shining the light on this nefarious Iranian-Chinese operation is a fitting end to his remarkably successful tenure. We need more men like Mr. Morgenthau protecting our city on the hill.

I wish him all the very best.

LARRY KUDLOW: Here now—we are greatly honored—we have Manhattan District Attorney Robert Morgenthau. Mr. Morgenthau, I can’t thank you enough sir for coming on the show.

ROBERT MORGENTHAU:Well I appreciate the opportunity because I think this is a very important case.

KUDLOW: Yes it is.

MORGENTHAU:The selling of contraband, banned materials, used in atomic bombs and long-range missiles to Iran. And misusing the U.S. banking system to pay for these contraband matters.

KUDLOW: Let me go through this as simply as I can. The Chinese bad guys are laundering money through U.S. banks, maybe European banks as well for all I know, in order to get the dough to Iran so they can buy all these materials that will help build weapons of mass destruction. Can you describe the transaction if I’m even remotely correct in this?

MORGENTHAU:You’re absolutely right. They were selling things like gyroscopes and accelerometers, maraging steel which is a special hardened steel used in atomic weapons. They were selling, this Chinese company, selling this to Iran with money going through U.S. banks, New York banks, and that’s how we got jurisdiction. And so number one, they were selling banned materials; number two, they were deceiving the banks into thinking it was not Iranian money that was paying for it.

KUDLOW: So can I assume sir that Iran, this is like a trade financing if you will, that Iran is going to take the cash they got and use it to purchase the Chinese materials used for weapons of mass destruction. In other words, it’s an Iranian-China transaction with money being washed through these banks.

MORGENTHAU:That’s right. In other words, if the banks knew it was Iranian money, they would not honor that transaction. It would stop. In the indictment we spell out the Chinese warned their customers, ‘we can’t let anyone know who we are because the transactions won’t go through.’

KUDLOW: Now from the side of the banks sir, let me just look at that. You say they’re friendly; they’ve been helping you in this prosecution. Don’t they have technology that can pick up fraudulent accounts? Don’t they have some sort of filtering technology, which apparently broke down or didn’t work? What’s the role of the banks here?

MORGENTHAU:Well the banks have filters to stop transactions going to Iran, and transactions of banned materials. But since they changed the names and used dummy companies both from the selling side and the buying side, the banks were not aware that these were sales of material for atom bombs and long-range missiles.

KUDLOW: A few years ago, didn’t your office prosecute Lloyd’s Bank? And didn’t they actually know that they were washing that illegal money into Iran?

MORGENTHAU: That was a very different case. That was actually in January of this year. And we brought a case against Lloyd’s Bank, one of the largest British banks, and they were doing what is known as “stripping”. They were stripping the identification of the Iranian money from the wire transfers. So the money was coming into New York without any identification that it was Iranian money. But that was a British bank. I mean, they actually put out a manual telling their employees how to strip the identification. They were also handling Sudanese money, doing the same thing.

KUDLOW: Have those problems been solved with Lloyd’s Bank?

MORGENTHAU:Well yeah. They paid a fine of $350 million dollars to the United States; half of which went to federal authorities, half of which went to New York.

KUDLOW: Were any European banks complicit in this most recent Chinese laundering scam?

MORGENTHAU:No, but there are some European banks that are under investigation.

KUDLOW: And that is on an ongoing basis? That investigation?

MORGENTHAU:Stay tuned. We’re working on both sellers of banned material and banks that process them.

KUDLOW: Now can you find this guy Li Fang Wei if I’m pronouncing it right? One of his aliases is Karl Lee. Can you find him, bust him, throw him in jail?

MORGENTHAU: We’re going to give it our best try. It depends whether we get cooperation from the Chinese government. We don’t know yet whether we will, but we are hopeful that we will. I mean one thing about these transactions, they can’t stand daylight. And once they’re exposed, then the authorities in their own countries frequently will crack down on them.

I mean, what we want is transparency in the dealing of material that is banned. Once we have that we think the companies involved, and the countries involved, will back off. And that’s our hope here, to enforce sanctions and also to let the general public know that Iran is deadly serious about buying material for long-range missiles and atomic bombs.

KUDLOW: Just one last one, on the New York banks sir. You’ve got all the big bank names—it’s been a bad year for banks in general. Let me ask you, have they been entirely cooperative? Have they been entirely transparent to the best of your knowledge?

MORGENTHAU:Entirely, entirely cooperative. Fully cooperative.

KUDLOW: Let me come back to your other point. China is really the bad guy here. I mean, President Obama has been in Europe, and he’s trying to negotiate a deal to get Russian cooperation to stop Iran from making weapons of mass destruction. Okay, fine. But really, are we learning through these investigations and other suits that China is the main bad actor in this? In arming Iran?

MORGENTHAU:Well that’s right. In this case, all of the material for weapons of mass destruction was coming from China. But we hope that once the searchlight is put on these deals that the Chinese government will crack down on the sellers of this illegal material.

KUDLOW: If you turn off the money spigot, as you apparently are doing, turn off their water here in New York, will that go a long way toward stopping this Chinese assistance to Iran?

MORGENTHAU:It would. And we also think transparency, once it’s brought to the public attention that this is going on in China, that the Chinese government will crack down on this activity.

KUDLOW: Well Mr. Morgenthau once again, you have done us all a great service. And I just want to say sir it’s such an honor to have you on the show. Speaking as a New Yorker, I’ve lived here almost my entire adult life, your public service has been absolutely wonderful. I personally am sorry you are retiring. I guess the time has come. But I cannot thank you enough for that service.

MORGENTHAU:Well I appreciate that. And I appreciate your making the effort to bring these serious problems to the public so that they understand what’s happening. And that there are rogue companies that are selling weapons of mass destruction to Iran. And Iran is deadly serious about buying this equipment.

KUDLOW: All right, again many thanks to Robert Morgenthau. All the best.

Questions? Comments, send your emails to: lkudlow@kudlow.com

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