Hiding in Plain Sight

How Iran built a skyscraper in the middle of New York City and held onto it for decades

September 17, 2013
Obsession
Borders
September 17, 2013

Give Iran credit for chutzpah: The rogue state has owned and operated a $760 million skyscraper in Manhattan for decades, thanks to front companies and offshore tax havens. Today, the US government finally seized it after a multi-year legal battle.

The story starts when Iran and the United States are on better terms, before the 1979 revolution. A charitable trust set up by the Shah of Iran built the 36-story building at 650 Fifth Avenue, just blocks from Rockefeller Center. If you’re wondering why a charitable group decided to construct an office building in one of the world’s most expensive cities, it’s because—then, as now—these government-run institutions, called bonyads in Iran, are often sources of patronage that disguise the state role in the economy.

After the Shah was ousted, the new Iranian theocracy smoothly assumed control of his foundation, switching out the directors and renaming it the Alavi Foundation. The building had been financed with a loan from Iran’s largest government-controlled financial institution, Bank Melli. In 1989, the government-controlled foundation, allegedly dodging taxes, transferred 40% of the building to a front company, Assa Corporation, in the UK’s Jersey Islands, and the loan was cancelled.

After the US enacted sanctions against working with the Iranian financial system, including Bank Melli, prosecutors successfully sued to seize Assa Corporation’s share of the building. They alleged that Iran disguised some $39 million in rental income through its front company. That money came from blue-chip tenants, including Met Life Insurance, Citibank, and Equity 1.

In the course of the investigation, the head of the Alavi Foundation was convicted of obstruction of justice. He attempted to destroy documents that revealed the foundation’s extensive knowledge of Bank Melli and the Iranian government’s control of the building and the foundation itself.

Barring a successful appeal, the feds reportedly plan to sell the building and give the proceeds to the victims of terrorist attacks connected to Iran.

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