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Turkish gold trader testifies on bank exec's role in sham food sales

NEW YORK, Dec 1 (Reuters) - A Turkish-Iranian gold trader testifying for U.S. prosecutors in a New York court on Friday gave his most detailed account yet of how he claims an executive

of Turkey's state-owned Halkbank devised key parts of

a plan to launder money for Iran through fake food sales. The executive, Mehmet Hakan Atilla, is on trial on charges that he took part in a scheme to violate U.S sanctions against Iran. The gold trader, Reza Zarrab, pleaded guilty in the case and agreed to cooperate with the prosecutors. U.S. prosecutors have charged nine people, although only Zarrab, 34, and Atilla, 47, have been arrested by U.S. authorities. Victor Rocco, a lawyer for Atilla, told jurors in his opening statement on Tuesday that Atilla was innocent. On Friday, Zarrab testified that Atilla played an important role in a scheme to let Iran spend its oil and gas revenue abroad through gold trades and sham food sales. Zarrab said the scheme shifted from gold trades to purported food sales, in which no food was sent to Iran, after U.S. sanctions changed in 2013. Zarrab testified on Thursday that Atilla was initially not receptive to the food scheme, and did not understand that the food sales were fake. However, Zarrab said on Friday that Atilla eventually came up with some features of the food transactions himself, such as moving money from one of Zarrab's companies to another to conceal the link to Iran. Zarrab said Atilla later identified a "loophole" that allowed Iran to use gas revenue, but not oil revenue, to buy gold. Halkbank has said all of its transactions complied with national and international regulations. Over three days of testimony, Zarrab has implicated top Turkish politicians, including President Recep Tayyip Erdogan. Zarrab said on Thursday that Erdogan personally authorized two Turkish banks to join the scheme when he was prime minister.

A spokesman for Erdogan could not immediately be reached. Turkish Prime Minister Binali Yildirim said on Friday that the U.S. case was an attempt to undermine Turkey's economy.

After the jurors left on Friday, U.S. District Judge Richard Berman said he intended to dismiss one of the jurors who appeared to be "really sound asleep" through much of the testimony.

(Reporting By Brendan Pierson in New York; Editing by Alden Bentley and Bill Rigby)