UPDATE 1-Judge finds owners of Iran-linked tower violate US laws

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By Bernard Vaughan

NEW YORK, Sept 11 (Reuters) - A federal judge ruled on Wednesday that the owners of a New York City skyscraper at the center of a long-running dispute violated U.S. laws against doing business with Iran.

The ruling, which is likely to be appealed, could result in the building, 650 Fifth Avenue, being seized by the U.S. government.

The ruling came just days before two parallel trials were to begin in federal court in New York in which the Justice Department and private plaintiffs were seeking to take control of the building.

"I understand the monkey wrench I'm throwing into things," U.S. District Judge Katherine Forrest said in a telephone conference with lawyers on Wednesday.

Forrest, granting a request by U.S. prosecutors to decide the case ahead of trial, said there was "no triable issue of fact."

Forrest found that the majority owner of the building, the Alavi Foundation, knew that two minority owners were fronts for Iran's Bank Melli, in violation of the International Emergency Economic Powers Act and U.S. money laundering laws.

Enacted in 1977, IEEPA empowers the president to deal with threats related to national emergencies. In 1995, President Bill Clinton issued an executive order banning the supply of most services from the United States to Iran.

Lawyers for the Alavi Foundation and the minority owners, Assa Corp and Assa Co Ltd, did not immediately respond to request for comment on Wednesday. A spokesman for Alavi declined to comment.

The 36-story, 382,500 square-foot building stands at the corner of Fifth Avenue and West 52nd Street, a short stroll from Rockefeller Center and St. Patrick's Cathedral. Tenants include fashion brand Juicy Couture, Citi Global Markets and chocolatier Godiva.

According to the U.S. government's lawsuit, the building was constructed in the 1970s by a foundation set up by the Shah of Iran. That foundation was eventually succeeded by the Alavi Foundation after the Iranian revolution. In 1989, Alavi and Bank Melli used the two Assa entities to disguise Bank Melli's involvement, the government said in its lawsuit.

Alavi and Assa provided services to Iran, such as transferring rental income to Bank Melli, in violation of IEEPA, according to the lawsuit. The building generated close to $39 million in rental income from 1999 through 2007, according to the lawsuit.

In court documents, Alavi's lawyers have argued that the building has not been controlled by Iran since 1995, when U.S. sanctions took effect.

Alavi is a non-profit organization that promotes Islamic culture and the Persian language. It donated more than $1.5 million in 2012 to recipients including Hartford Seminary, Harvard University and the Muslim Women's Institute for Research and Development, according to a website for 650 Fifth Avenue.

Private plaintiffs, victims of attacks that they contend were aided by Iran, filed their own lawsuit seeking to seize related assets.

Wednesday's ruling does not include seven properties that are in Alavi's name only, which the private plaintiffs will seek to seize in a non-jury trial, Forrest said.

The Manhattan U.S. Attorney's Office declined to comment. (Reporting by Bernard Vaughan; Editing by Cynthia Osterman)

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