Bloomberg News

Iran Bank Chief Quits Over Fraud as Pressure on President Rises

September 28, 2011

Sept. 28 (Bloomberg) -- The head of Iran’s largest state- owned bank lost his job over the biggest fraud case in the country’s history that also creates problems for President Mahmoud Ahmadinejad, whose top aide has been implicated.

The managing director of Bank Melli, Mahmoud-Reza Khavari, quit yesterday over the $2.6 billion embezzlement and Economy and Finance Minister Shamseddin Hosseini accepted his resignation, according to the state-run Mehr news agency.

In his resignation letter, published by Mehr late yesterday, Khavari apologized to Iran’s Supreme Leader Ali Khamenei and to Iranians, saying he was stepping down “to respect public opinion.” He also accused Bank Saderat, another Iranian lender, of being “at the source” of the fraud.

Seven state-owned and private banks were linked to the case, which reportedly involved the forging of letters of credit from Bank Saderat by Iranian businessman Amir Mansour Khosravi to secure loans that were then used to purchase state-owned companies, Iranian state-run media have reported.

Ahmadinejad has come under pressure as his critics accuse his close aide and relative, Esfandiar Rahim Mashaei, of having ties to Khosravi. The government has denied any connections to the alleged fraud.

The scandal, which became public less than half a year before March parliamentary elections, adds to friction in recent months within Iran’s leadership. Ahmadinejad’s opponents have accused him of challenging the authority of Khamenei, Iran’s highest authority.

The fraud stems from “cliques” and “unhealthy relations” between certain directors and officials, parliamentary member Hamid-Reza Fouladgar said in a separate Mehr report yesterday.

Iranian Prosecutor-General Gholamhossein Mohseni-Ejei said two days ago that 22 people were detained in connection with the scam, according to the state-run Press TV news channel. He didn’t name anyone.

--Editors: Jennifer M. Freedman, Karl Maier

To contact the reporter on this story: Ladane Nasseri in Tehran at

To contact the editor responsible for this story: Andrew J. Barden at

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