Rug Money

One of the more puzzling aspects of Paul Manafort's indictment for conspiracy, money laundering and other charges was the line items detailing the he epic sums he reported spending from Cyprus-based accounts on antique rugs in Northern Virginia. There's really no reasonable way, THE WEEKLY STANDARD learned at the time, to spend $1 million on antique carpets in Alexandria. But we have since learned, from Treasury and IRS agents, a geopolitical expert with family ties to the rug business, and two sources versed in the Iranian business world, that we were far from the first to give a second thought to the way money moves through rug shops.

An intelligence analyst and Middle East expert who recently approached TWS with his story grew up wondering exactly that: Michael Nayebi-Oskoui, a consultant for global businesses, talked candidly about his Persian-Jewish grandmother’s mysterious import-export business. “To this day, I can never tell you what my grandma's business actually was—moving goods through places, funds come back and forth,” he reflected.

And that, he believes, is where the rug merchants come in: “The intrinsic value of these rugs is bupkis,” he said. “There's no legal or functional tool for the IRS to judge their value.” Consequently, “if you needed someone to make a deal with you, to move some money around, this is a great way of doing it.”

None of this was news to Nayebi-Oskoui, but still the Manafort indictment—and THE WEEKLY STANDARD’s reporting—was something of a wake-up call for him. “Knowing what I do about the industry, this was a real WTF moment for me. With my familial, cultural ties to this broader community, I can tell you: Most of them are fronts to some extent.” They’re not drugs traffickers, not “complete criminals,” he clarified, but “they’re going to be playing fast and loose with pricing and the IRS.”

When I told Nayebi-Oskoui’s story to former Treasury Department special agent John Cassara—a counterterrorism expert and international authority on the type of money laundering that moves criminal proceeds through material goods—he told me there’s a word for what Nayebi-Oskoui described: “Hawala.”