The Real Deal New York

US can seize Iran-owned 650 Fifth

After nine-year battle, jury finds that charity was front for Iranian government
By Kathryn Brenzel | June 29, 2017 04:00PM

650 Fifth Avenue and Supreme Leader of Iran Ali Khamenei (Credit: 650 Fifth and Getty Images)

A federal jury on Thursday paved the way for authorities to seize the Alavi Foundation’s 650 Fifth Avenue, finding that the nonprofit violated U.S. sanctions against Iran.

The decision is the “largest civil forfeiture jury verdict and the largest terrorism-related civil forfeiture in U.S. history,” acting U.S. Attorney Joon Kim said in a statement Thursday. The jury found that the Alavi Foundation was controlled by the government of Iran, which handpicked its board members and ultimately benefited from income brought in by the nonprofit’s real estate holdings.

Kim said that the 395,000-square-foot, 36-story office tower, valued at more than $500 million, created “a gateway for millions of dollars to be funneled to Iran.”

John Gleeson, an attorney for the Alavi Foundation,  said the nonprofit is “disappointed” by the verdict and is considering its options. Bloomberg first broke the news of the decision earlier Thursday.

In a separate decision — delivered in a related bench trial — U.S. District Judge Katherine Forrest agreed that Alavi effectively operated as Iran’s alter-ego.

“Despite nominal adherence to corporate formalities, its independence has—in fact—been a fiction,” the order states. “The Government of Iran’s control will not manifest as an Iranian flag flying over the 650 Fifth Avenue building or any other subject property. But the evidence is there, it is clear, and it is dispositive.”

Alavi — then known as the Pahlavi Foundation, named for the last Shah of Iran, Mohammad Reza Pahlavi — purchased the property in 1974 and finished constructing the tower four years later, using a $42 million loan provided by the New York branch of Iran-controlled Bank Melli.

Federal authorities first tried to take control of the building in 2008. In 2014, they reached a deal to seize the tower based on financial sanctions imposed on Iran in 1995. But in July 2016, a federal appeals court found that prosecutors hadn’t proven that Alavi knowingly partnered with Iran.

SL Green Realty and Jeff Sutton’s Wharton Properties own the long-term leasehold for the retail portion of the property. In June, Nike inked a lease for more than 60,000 square feet there, in what was regarded as one of the city’s priciest-ever retail deals.

Officials plan to sell the office portion and direct the proceeds to victims of Iran-sponsored terrorism.