Jazayeri-Arab was taken into custody in 2001, at the age of 29, for a long-list of criminal activities involving bribery, illegal exports, forgery and massive embezzlement of state money and assets. The cases of Jazayeri-Arab raised questions about the Iranian government's desire to deal seriously with corruption. Jazayeri-Arab was convicted in 2002 in a major corruption case involving 50 defendants, many of them sons of prominent clerics. In September 2004, his 27-year prison sentence was partially overturned, and he was occasionally released from prison on leave.
Jazayeri-Arab paid huge amounts of money to the former reformist held parliament members to influence their decisions. He has confessed to have paid about $600,000 to Hadi Khamenei, the Iran Supreme leader’s reformist brother, and about $400,000 to Mehdi Karroubi, former Majlis speaker. Reportedly, he was arrested after he sent a large check to Iran Supreme leader’s office. Jazayeri-Arab's asset, according to him, is more than 180 million dollars.
In 21 February 2007, Iran's Special Judicial Complex for economic affairs declared that Shahram Jazayeri-Arab has escaped, while being transferred to a court-assigned financial expert committee. Hossein Shariatmadari of Kayhan newspaper wrote an article supporting the theory that those clerics were trying to cover-up the case. Following the escape controversy, the head of Judiciary, Mahmoud Hashemi Shahroudi, fired a number of those responsible in the case, including the head of Evin prison and a few judges, and ordered an opening of a case in the military court for the judges. On March 19, 2007 Iran's head of intelligence agency confirmed that Jazayeri-Arab was arrested in an unnamed location in the Arabian Peninsula. His hiding location is said to be a remote village in Oman.
In February 2007, Jazayeri-Arab was sentenced to 61,861,200 US dollars and 14 years of prison.